When to collect Social Security, Back of the Envelope Calculations

I am approaching the time when I will have to make the big decision. When to retire and start collecting Social Security.

Everywhere I turn I read statements and warnings like the following: If you decide to collect Social Security benefits at sixty two(which is the youngest age you can start collecting), your monthly payments may be approximately 25% lower than if you start to collect at age sixty six (the full retirement age). Furthermore if you can stick it out until age seventy (the oldest age at which a higher payment will be made by the Social Security Administration) your payments may be 75% higher than those collected if you started at 62.

So I decided to check various sites and do a back of the envelope calculation of where the break even point would. I based this on simple straight forward calculations ( no tax implications, inflation or annual adjustments, etc.)

So here it is:

If the full retirement age is 66 and the payment at that age would be $1000/month then at 62 the payment will be approximately $750/month and at age 70 the approximate payment will be $1300/month.

If someone retires at 62, by the age of 66 they would collect $36,000 and by age 70 they would collect $72,000.

If that person retires at 66 they would collect $12,000/yr and by age 70 would collect $48,000.

A person retiring at 62 can collect for approximately 15.5 years (the age of seventy seven and a half) before a person retiring at 66 catches up in payments.

A person retiring at 62 can collect for approximately 19 years or until the age of 81 before a person retiring at age 70 catches up in payments. A person retiring at 66 can collect for approximately 17 years (age of 83) before a person retiring at age 70 catches up in payments.

According to a study by the Centers for Disease Control and Prevention if you live past the age of 65 the life expectancy is 83.4

So there it is. Sounds to me like 62 is a pretty good number. More time for all those things I wanted to do my whole life 🙂

1 Comment

  1. Makes sense, but should also consider these:

    1- If you’re not then average and live well past 83.4 then you’re going to live on the smaller number forever. And the COLAs will be based on smaller numbers too.

    2- If you’re married, the higher benefit would be available to the spouse forever if you kick the bucket. If you have a spouse who is eligible for SS on their own, there are more complex calculations to go through before saying 62 is best.

    3- Also, if married, look into spousal benefit for one spouse while deferring filing on your own. If close to same age, works best – but worth a look.

    Please do all your homework before signing up at 62 – it’s a one time decision – and you don’t want to get it wrong!!

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