Delay Social Security? Here’s how long it will take to break even

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Delaying a claim for Social Security benefits is often advisable because waiting to receive your first check can significantly increase your monthly payment. In fact, you can earn hundreds of dollars more per month if you delay long enough.

But while it might make sense for some people to wait, it’s not the right choice for all seniors. Postponing a claim for benefits obviously means giving up the possibility of getting checks for months or even years. For the late deposit to make sense, you need to make sure you break even for that missed money. Take this into account in your decision.

Average retiree takes years to catch up on missed Social Security payments

You become eligible for Social Security benefits at age 62, but retirees are often encouraged to wait to claim benefits because early filing reduces monthly income.

Each retiree is entitled to a standard benefit based on their work history, but they only receive this amount if they start paying at full retirement age. Claiming before that will result in smaller monthly payments, but more checks over time. A claim after that will result in the reverse, with retirees receiving fewer payments, but larger payments, over time.

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If you delay a claim for benefits, you’ll trade in money you could get now for higher payments in future years. That’s why it’s so important to do the math and figure out how many of those higher payments need to come to you to make up for the missed income. In many cases, you’ll find that it takes a surprisingly long time for future big checks to make up for all the income you’ve lost.

In 2022, for example, the average Social Security benefit is $1,661. If your Full Retirement Age (FRA) is 67, which is the case for anyone born in 1960 or later, you reduce your check by 30% if you claim it at age 62 instead of FRA. Therefore, an average benefit of $1,661 would drop to about $1,163 per month if you claimed at age 62 instead of 67. In contrast, the average benefit of $1,661 would drop to about $2,060 per month if you claimed at 70 instead of 67.

Obviously, payments of $2,060 per month seem more attractive. But, there is a big caveat. You will have missed eight years of monthly payments. Passing 96 checks for $1,163 means giving up $111,648. Since you end up getting an extra $897 per month starting at age 70, you would need about 124.5 monthly Social Security payments for the extra $897 each month to make up for the missed $111,648.

This means that if you were on track to reach the average benefit and claiming payments at 70 instead of 62, you will not break even until you have been receiving payments for approximately 10.4 years. . One would have to live at least until 81 years.

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Does it make sense for you to wait to claim your benefits?

If you think you’ll survive to the point where you’ll get enough extra money to cover all the income you gave up with a delayed Social Security application, it makes sense to wait as long as possible to start Social Security. But if you’re in doubt about your health, a deferred application could leave you with less income for life and you’re better off starting checks sooner, even if it means you receive less money. each month.

It all depends on your projections for your future. But it’s important to note how long the typical retiree might take to break even, because you’ll likely be well into your 80s before you find yourself better off for filing for Social Security late.

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