I have a confession. I love free money.
Okay, Social Security isn't exactly "free." You paid into it your whole working life. But once you retire, it feels like a magical check that shows up in your bank account every month, rain or shine.
For many of us, Social Security is the safety net that lets us sleep at night. It’s the only income source that is guaranteed by the government and automatically adjusts for inflation. It’s a beautiful thing.
But here is the catch. The government gives you a choice on when to start that check. And if you choose wrong, you could leave tens of thousands of dollars on the table.
The Claiming Age Impact: The 8% Raise
You can claim Social Security as early as age 62.
You can wait as late as age 70.
Most people claim as soon as they can (62). "I want my money now!" they say. I get it. But patience pays. Literally.
Here is the math:
- Age 62 (The Early Bird): If you claim now, your monthly check is permanently reduced. You might only get 70% of what you were promised. It’s a haircut you take for the rest of your life.
- Full Retirement Age (The Baseline): This is usually 66 or 67. If you wait until now, you get 100% of your benefit.
- Age 70 (The Patient Investor): This is the sweet spot. For every year you wait past your full retirement age, the government gives you an 8% raise. Guaranteed. Where else can you get a guaranteed 8% return these days?
By age 70, your check could be 132% of your baseline amount. That is a massive difference.
The Breakeven Analysis: The "Bus Test"
"But wait," you say. "If I wait until 70, I miss out on 8 years of checks!"
You are absolutely right. This is the gamble.
If you claim at 62, you get smaller checks, but you get more of them.
If you claim at 70, you get bigger checks, but for fewer years.
So, when do you come out ahead?
The "breakeven point" is usually around age 80 or 81.
- If you think you will pass away before 80, claim early. Take the money and run.
- If you think you will live past 80 (and with modern medicine, many of us will live into our 90s), waiting is the smarter bet.
I call this the "Bus Test." If you are in poor health or have a family history of short lifespans, don't wait. But if you are healthy, delaying Social Security is the best longevity insurance you can buy.
Using the Simulator to Test Scenarios
Our Retirement Savings Simulator is perfect for testing this.
Let’s run a little experiment:
- Scenario A (The Impatient Route): Set your "Social Security Start Age" to 62. Lower the annual benefit amount (since you are claiming early). Look at your "Success Rate."
- Scenario B (The Patient Route): Set the age to 70. Raise the benefit amount by about 75% (to reflect that 8% annual growth).
You can find out your personalized estimated payments from the Social Security Administration website.
What you will often see is that Scenario B gives you a much higher success rate. Why? Because in your 80s and 90s—when your personal savings might be running low—that massive, inflation-adjusted Social Security check acts like a superhero swooping in to save the day.
Spousal Benefits: The Hidden Bonus
I won't bore you with all the complex rules (and there are hundreds), but if you are married, you have even more options.
Sometimes it makes sense for one spouse to claim early and the other to wait.
Sometimes a lower-earning spouse can claim benefits based on the higher earner's record.
It’s worth talking to a professional about this, because the difference can be huge.
Takeaway: It’s Not Just Math
Deciding when to claim isn't just a math problem. It’s a life problem.
If you lose your job at 63 and you have no savings, you have to claim. That’s what the safety net is for.
But if you have a choice? If you have enough savings to bridge the gap?
Think of delaying Social Security is buying a better annuity. You are spending your own savings now to buy a much larger, safer, inflation-proof income stream for your future self. Your 85-year-old self will thank you for it.