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Social Security

Should you start collecting Social Security at age 62 or wait until 70? You can start collecting Social Security as early as 62, albeit at a reduced rate from your full retirement age of 67. Each year you delay increases your benefit by about 8%. You can take advantage of this 8% increase until you reach age 70. The best time to start collecting Social Security benefits is based on your individual preferences and circumstances. If you knew how long you would live, it would be easy to determine the best time to start collecting Social Security in order to maximize your benefits. (spoiler alert: if you have a short life expectancy it is probably a good idea to start collecting benefits sooner.) Social Security is designed to pay around the same amount of money over your lifetime based on your life expectancy regardless of when you start collecting. This tool helps you visualize the break-even point between collecting Social Security benefits sooner versus later.

If you don't need the money to live from and decide to invest your Social Security payment, it opens up some possibilities. If you start collecting Social Security at age 62 and invest it at an average return of 6% per year, you will accumulate more money than if you wait to start collecting Social Security at 70, unless you live into your mid-90's. If you die before needing the money, you can bequeath it to your heirs. With an average 7% return, your breakeven point is over 100 years old.

Time in the market is more important than timing the market.

You can compare the impact of investing your monthly Social Security benefit at different starting ages using the tool below. This tool assumes you have a $1,000 monthly benefit at full retirement age of 67. To get a personalized estimate of your total benefit you will need your estimated Social Security benefit available from my Social Security on ssa.gov. Your personalized estimate is not required to compare the impact of different starting ages for collecting Social Security. When you enter your birth year, your life expectancy is calculated based on Appendix B - Table I found in IRS Publication 590. You can adjust your life expectancy using the slider. Calculations can take into account taxes based on the 2021 tax table, and it doesn't drastically change the results. Calculations do not include cost of living adjustments (COLA) or consider spousal benefits. If you would like to consider these scenarios as part of your claiming strategy, see Open Social Security for help.