Transcription
Here's exactly why I'm taking Social Security at 62. And I double dog dare you to find a flaw in this logic.
I'm Tyler. I'm a former financial adviser and portfolio manager. And now I make financial content for free so you don't have to pay for it. And if any of this is helpful, sign up for my free weekly newsletter by clicking the link in my bio. And each week I'll send you over another money playbook that actually works.
So here's what I did this morning. Instead of scrolling social media and questioning my life choices at 6 a.m. like a normal person, I went to ssa.gov, created an account for free, and looked up my projected Social Security benefits. It took me about 3 minutes and 20 seconds. It's worth every second because it's going to help inform one of the biggest decisions of my financial life.
And here's what I found. If I take Social Security at 62, earliest possible claiming age, I receive approximately $2,500 bucks a month. If I wait until 70, the latest age at which your benefits stop growing, I receive approximately $3,700 bucks a month. That's a difference of $1,200 bucks a month or $14,400 a year.
Now, the wait until 70 crowd would like me to stop this video right here and recommend that you wait as long as you can to take Social Security because someday in the future you'll get larger monthly benefits. Please, for the love of everything financial, do not stop this video right here because here are the five things the wait until 70 crowd is completely missing.
Number one, the break-even math. The break-even point is the age at which waiting until 70 finally outperforms taking the money at 62. It's the moment when the accumulated higher monthly payments from waiting finally exceed the eight additional years of extra income that you collected by starting early. For my numbers, receiving $2,500 bucks a month, starting at 62 versus $3,700 bucks a month waiting until 70, that break-even point is 79 years old. Let me say that again so it lands properly. I would need to live until 79 years old for the wait until 70 strategy to be worth it. Before 79, taking at 62 wins mathematically. After 79, waiting wins. The crossover is 79. And you can calculate your own break-even point by taking 5 minutes, going to ssa.gov and adding up two columns of numbers until they equal each other. Again, this took me about 3 minutes. Yes, I timed it. And you can do this math on a napkin at lunch and probably still have time to argue about politics, even though you know dang well you shouldn't have brought up politics at lunch.
Number two, now estimate your own lifespan. I know, I realize this isn't your typical Wednesday morning consideration, and it might be slightly morbid, but bear with me because it's extremely relevant to this conversation. Most of us have a vague notion of when we think we might die. And vague notions in personal finance are about as useful as that gym membership you signed up for on January 2nd and proceeded to forget about on January 8th. The most useful thing you can do for your personal finance self right now, is make an educated guess about when you think you're going to kick the old proverbial bucket. Personally, I used an actuarial life expectancy calculator, the same kind of tool the insurance companies use to figure out how long they have to pay you before they stop feeling bad about it. And based on my health, my background, and my general circumstances, I'm projected to live until approximately 83 years old. So now I have a final number, and we can do some math together. My break-even point, 79 years old. My projected death, 83 years old. That's only a 4-year window in which waiting until 70 outperforms taking at 62. 4 years in exchange for waiting eight years to start receiving a benefit that I've been paying into since my first job, which involved a name tag and a lot of manual labor for not a lot of money.
Number three, and here's the argument that nobody makes, but should. Let's even say that I was projected to die at 90. So instead of only four years of more aggregate money, I'd now have 11 more years of actual money. But have you ever stopped to ask yourself? And if you're waiting until 70 to take Social Security, I'm guessing you haven't. When will I enjoy a dollar's value more? At 62 or 85? Because, hear me when I say this, a dollar at 62 is worth a heck of a lot more than a dollar at 85. Not because of inflation, though that's true, too. But because of what economists call the time value of money and what humans call the fact that you're younger and healthier and more capable of actually doing something with money at 62 than at 85. And not just something, but something you'll actually remember and potentially now have decades to reexperience in the form of more lived experiences and more memories of those lived experiences.
Because at 62, you're entering what retirement researchers call the go-go years. That early retirement window where you're mobile, energetic, and capable of spending money on experiences that might require some more mobility and energy, travel, adventure, you know, the things you spent your whole working life telling yourself you were going to do someday. But at 79, you're entering what those same researchers diplomatically call the no-go years. This is not my phrase. It's academic literature. This is the period in which your expenditures naturally decline, not because you've become more financially disciplined, but because your options have simply narrowed. That trip you always told yourself you'd take. Well, maybe now your joints don't agree that it's such a fun idea after all. Or that house you wanted to rent with your friends. Well, maybe half your friends aren't actually around anymore to enjoy the experience with you.
So, when someone tells me to wait until 70 so I can maximize my monthly income starting at 70 and my aggregate income starting at 79, I want to simply ask them the following question. What am I maximizing it for exactly? Because the evidence on retirement spending is a little sobering. Retirees spend the most in their early retirement years and progressively less as they age. And that's regardless of income. So the money you have at 62 is not the same money you'll have at 79 as it has more places to go and more time to do it.
And here's the one thing I keep coming back to. Since the Stanford marshmallow experiment, we've been culturally conditioned to think that waiting is always the virtuous choice. One marshmallow now, two marshmallows later, delayed gratification as a moral position. And look, I bought it. I bought it completely. And I spent decades waiting. Waiting to finish school, waiting to pay off debt, waiting to hit that Coast FIRE number. Waiting for the right moment to finally stop waiting. And that thing we've all been waiting for, you know, retirement. That was supposed to be the moment where we finally got to eat the dang marshmallow. That was the deal. Work hard, delay, and one day you get two marshmallows. But now the wait until 70 crowd is standing at the door of the marshmallow room telling me now I've got to wait 18 more years until I'm 79 years old to really optimize my marshmallow collection. I've been waiting for this marshmallow my entire adult life. I'd like the marshmallow now, please. And frankly, I'm going to enjoy it more at 62 than I am at 79 when I can actually eat it with my own teeth.
Number four, and let me show you one more number because I find it clarifying. And this is for those of you who believe that the goal should simply be creating the highest number possible for as long into the future as possible. Let's say I agree with you and I simply want the most money down the road. Well, here's what I'd do. Instead of spending the money as I go and having my break-even point be 79 years old, I would simply invest the money instead. From age 62 to 70 with $2,500 bucks a month, I would collect $240,000 of Social Security income. Now, if you account for the opportunity cost of what that $240,000 could do, even if invested conservatively, it would now take closer to 200 months to hit my break-even point. That's 16 years and 8 months. So, starting at age 70, that puts my break-even closer to 86 or 87. And if I invested in a basic S&P 500 fund that's returned a 7% real return on average throughout its history, there would never be a break-even point. The taking at 62 would always win because of the additional eight years of compound interest. What the conventional break-even math ignores is the investment value of your money if collected early. When you include it, the math gets even more favorable for taking at 62 and much less favorable to the advice you've probably heard from every single financial adviser who's charging you 1% of your assets to be slightly wrong.
Now, I'm not saying waiting is always wrong. I'm saying the math and the philosophy is far more complicated than the wait until 70 crowd wants to acknowledge. But, and I won't even charge you 1% for this. Here's what would actually change my thinking. Two things. And I want to be honest about both of them because this is not a universal prescription and I'm aware that some of you are currently yelling at your screens for me to consider a spouse and if you're still working.
Number one, if I had a spouse, the Social Security consideration becomes a completely different calculation. The spouse will benefit, which allows the lower-earning spouse to receive up to 50% of the higher-earning spouse. Meaning the timing decision is no longer just about one person's life expectancy. It's about two. And more importantly, the survivor benefit. When one spouse dies, the surviving spouse receives the higher of the two benefits. Which means if the higher earner waits until 70 and dies at 73, the surviving spouse receives that benefit for the rest of their life. So the aggregate break-even, the point at which waiting until 70 benefits the entire household, not just the individual, is materially different from the individual break-even. And in many married households, it shifts the math significantly in favor of waiting.
And number two, the earnings test. If you take Social Security before your full retirement age, which for most people seeing this is about 67, and you're still working, the Social Security Administration will reduce your benefit if you earn above a certain threshold. In 2026, that threshold is $24,480 a year. And for every $2 you earn above that, Social Security withholds $1 of benefits. So, if you're 63, still working, and making $64,480 bucks a year, Social Security would withhold $20,000 of your annual benefit, which depending on your benefit amount, might mean you're collecting nothing. Anyway, the good news, and most people don't know this, those withheld benefits are not gone forever. They get added back to your benefits once you reach full retirement age. The less good news, it's a complicated recalculation. Most people find it confusing. And if you're earning well above the threshold, taking Social Security early while still working full-time is probably not the move, regardless of what the break-even math says. So, if you're still working at 62 and earning comfortably above $24,480, that earnings test alone could be a reason to wait.
The bottom line, here are your action steps for today. Regardless of where you fall down in this conversation, you need to go to ssa.gov. Create an account. Look up your projected benefits at 62, at full retirement age, and 70. Calculate your personal break-even point. Then look up your life expectancy using an actuarial calculator. Do the math with the opportunity cost of early collection calculated in, not just the monthly benefit difference. Then make your own decision. Not the decision that sounds most responsible. Not the decision your parents made because they were told to wait. But the decision that is actually supported by your numbers, your health, your household situation, and the honest question of what you're planning to do with the money and when.
For me, the answer is 62 because I don't plan on working after 62. And if I don't need the money, I'll just put it in an index fund, and it will be projected to outperform what I would have received by waiting.
As always, hope this gives you something useful to think about. And if any of this is helpful, sign up for my free weekly newsletter by clicking the link in my bio. And each week I'll send you over another money playbook that actually works.