How to Calculate Your Social Security Break-Even Age Social Security Break-Even Age is the one of the Method use to maximize Social security Benefit Here on this article will show How to Calculate Your Social Security Break-Even Age.
As you think about your break-even age and Social Security, it can be helpful to go over the following:
- Understanding Social Security benefits.
- Calculating your Social Security break-even age.
- The impact of delaying Social Security benefits.
- Utilizing Social Security calculators.
- How to decide on the right time to claim Social Security benefits.
Life expectancy and breakeven ages
If you don’t need Social Security payments to pay for your everyday living expenses at age 62, it probably makes sense to hold out a little longer before beginning to receive benefits. Assuming the current Social Security parameters of early retirement at 62 at 70% benefit, full retirement at 67, and the 124% bonus by beginning payments at age 70, there are two breakeven points to consider:
- Age 78 years 8 months: If you live at least this long (but die before age 82 years 6 months), you will receive the maximum in benefits by waiting until age 67 to begin collecting Social Security.
- Age 82 years 6 months: If you live at least this long, you will receive maximum benefits by waiting until age 70 to begin collecting Social Security.
How to Calculate the Social Security Breakeven Age
Your Social Security breakeven age is the point in your life when the total of those lower benefit payments comes to equal the total of benefits that you would have received if you waited to take your benefits at FRA, or even later.
For example, if you were born in 1961, your FRA is 67. If you choose to begin receiving Social Security income at age 62 in 2023, then your FRA benefit will be reduced by 30%. Assuming that the full monthly benefit would be $1,000, you will be left with a monthly Social Security check of only $700.2
If a co-worker with the same birth date and similar earnings history elects to receive their benefit at FRA five years later, then their benefit will be $1,000 each month. For the first five years, you receive a total of $42,000 (or $8,400 per year), while your co-worker receives nothing, so you are ahead. Once your co-worker starts receiving benefits, however, they get $300 more each month or $3,600 more each year than you do. So when will your co-worker catch up to you in total benefits?
Let’s divide the amount by which you are ahead by the higher amount per year that your co-worker receives. The answer is when you are both 78 years and eight months, or 11.67 years ($42,000 ÷ $3,600), or 140 months after your FRA. After this point, your co-worker will earn more over their lifetime than you will.
How a Social Security Break-Even Point Calculator Works
Figuring out the right time to start taking Social Security benefits isn’t always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.
Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your FRA and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid age 62 or FRA.
Here’s a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. You’d receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.
The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount you’d receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits you’d receive if you started them at 62.
