How to Crunch the Numbers on When to Claim Social Security

What's the smartest way to claim benefits? Well, don't believe those who say you're stupid if you claim early or that age 70 is always the way to go. It depends on your own circumstances.

Many clients and friends ask my guidance about Social Security — particularly the question of whether they should claim their benefits early or late. I have crunched the numbers. And I have not come up with a one-size-fits-all answer — because there isn’t one.

It turns out the best way for you to get the most from Social Security may not be the best way for your neighbor, colleague, friend or even your spouse. Add Social Security to the list of topics you discuss with family over the holidays. You will find more opinions about when to start taking benefits than you do about qualities of the best dessert.

It’s not one or the other

If you do research on your own, you will quickly find articles that want to push you in one direction or the other. One will remind you that fewer than 5% of retirees wait until the maximum age of 70 to collect their benefits, when delayed retirement credits pump up their benefit to the max. Those who take benefits at or before their “full” retirement age leave trillions of dollars on the table, these articles say. The authors of those articles make you feel stupid if you claim “early.”

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Look for the opposite view, though, and others will explain that there are many instances when claiming as early as age 62 has the potential to push you ahead in the long run, especially if you have a spouse who earns more than you or you plan to work part-time. To illustrate that last point, before you reach full retirement age, in 2020 you may earn up to $18,240 before your Social Security benefits are reduced. (Social Security withholds $1 from benefits for each $2 over that amount.) However, you will eventually receive the withheld benefits after you reach full retirement, whether you continue to work or not.

With this complexity, it becomes a very personal decision. But the decision should be supported with an understanding of how your Social Security benefits are calculated.

Does waiting result in a fair return?

Putting off your benefits until age 70 is not a good idea unless you are going to get a fair return on the “investment” of your Social Security contributions. By delaying from age 66 to age 70, you get an additional 8% a year in annual income. The government is not actually paying all of that 8% from the return on the investments of “your” money. Some of it accumulates as a result of other people passing away before they can collect. According to our studies, once you factor out not having to pay the people who die before payments begin, the investment return that the government is actually paying is about 4% per year.

Within the current environment, where CD rates are hovering at well under 3%, a 4% return is fair. If interest rates rise dramatically, however, then we would do the math again, and the conclusion might be different. Overall, we were surprised how reasonable the rate was.

It’s similar to the analysis we do with income annuities, (see “Are Income Annuities Fair?”). In the same way, though, knowing that it’s fair doesn’t make the decision for you, since it’s a personal call.

Consider the big picture

As with each financial decision, think about Social Security in the context of an overall retirement plan based on income and circumstances. One acquaintance of mine would normally wait as long as possible to claim benefits. But he is 62, and he has a 14-year-old daughter. Under Social Security, a child under 18 is also eligible for benefits when a parent starts accepting payments. In addition, his 62-year-old wife is going to postpone payments until she is 70. So, for him, it makes sense to take a lower amount now. (He is going to deposit his daughter’s income into a bank account for her college fund.)

Each element of your income plan — Social Security, dividends, interest, annuity payments, withdrawals from savings — offers options.

So, if you want to retire at 62, analyze what that might look like. Which account would you spend down first? Which resources will help you bridge any potential income gaps? How will it affect your spouse? And most important: Will you have enough income for the rest of your life?

If it works for you, you can ignore the voices that clamor about “leaving money on the table” by taking your benefits early. And if your personal circumstances allow you to wait until 70 to claim Social Security without a strain, make that decision. Then you can stop listening to the arguments from either side and enjoy this and future holidays without worry.

One more thought about shoring up Social Security Trust Fund

Those retiring in the next 15 years are pretty much assured of getting the Social Security benefits you’ve been planning on, at least according to a report issued by the Social Security and Medicare Trustees. If you’re retiring after that, the possibility of lower benefits looms, unless Congress and one of the next few presidential administrations act.

I know there’s a solution and have, in fact, had my proposal published in The Hill. Two key drivers of a rescue have to do with your claiming date. One change would permit individuals to defer claiming after age 70, allowing a continuing boost to the annual benefit. The second would allow retirees to gradually claim their benefits, matching their gradual retirement. Both moves would save cash flow from being paid out of the Trust Fund. These two, plus other technical fixes, would put the system in better shape with one other proviso: We need young people to join the system, and that means immigration (in which case the situation moves from technical to political, making the solution more difficult to achieve.)

However, when I made these suggestions several years ago, I was considering enactment early in the Obama and now Trump administrations. As we continue to delay further, changing the claiming rules and relying on immigration may not be sufficient. We may have to increase payroll taxes even to get the revised system in shape.

For a free consultation about how the elements of your retirement plan can fit together, write to me at Ask Jerry.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Jerry Golden, Investment Adviser Representative
President, Golden Retirement Advisors Inc.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at, where consumers can explore all types of income annuity options, anonymously and at no cost.