If Joe continues working, he could file and immediately suspend benefits at age 66. Lucy could then choose the higher of either her regular benefit or her spousal benefit. Meanwhile, by not claiming until age 70, Joe will receive as much as a 32% greater benefit.
Breakeven Analysis
The chart below is a simple breakeven analysis we recently prepared for a client to help decide when to take benefits. Bob is turning age 62. If he claims his SS benefit immediately, he will receive $1,834 monthly. If he can wait until age 70, he will receive $3,861 monthly (including an estimated 2.8% COLA). Bob's breakeven age is 78, which means if he lives to the average age of 83, taking early benefits will have cost him $124,000.
|
Simple Breakeven Analysis |
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|
Earliest age benefits may be claimed |
62 |
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|
Corresponding monthly benefit amount |
$1,834 |
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|
Latest age benefits may be claimed |
70 |
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|
Corresponding monthly benefit amount |
$3,861 |
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|
COLA% (Annual cost-of-living adjustment) |
2.80% |
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|
|
|
|
|
|
|
|
|
Age |
Monthly benefit if start at earlier age |
Annual benefit if start at earlier age |
Cumulative benefit if start at earlier age |
Monthly benefit if start at later age |
Annual benefit if start at later age |
Cumulative benefit if start at later age |
|
62 |
$1,834 |
$22,008 |
$22,008 |
$0 |
$0 |
$0 |
|
63 |
1,885 |
22,624 |
44,632 |
0 |
0 |
0 |
|
64 |
1,938 |
23,258 |
67,890 |
0 |
0 |
0 |
|
65 |
1,992 |
23,909 |
91,799 |
0 |
0 |
0 |
|
66 |
2,048 |
24,578 |
116,377 |
0 |
0 |
0 |
|
67 |
2,106 |
25,267 |
141,644 |
0 |
0 |
0 |
|
68 |
2,165 |
25,974 |
167,618 |
0 |
0 |
0 |
|
69 |
2,225 |
26,701 |
194,319 |
0 |
0 |
0 |
|
70 |
2,287 |
27,449 |
221,768 |
3,861 |
46,332 |
46,332 |
|
75 |
2,626 |
31,513 |
370,981 |
4,433 |
53,192 |
298,193 |
|
80 |
3,015 |
36,179 |
542,286 |
5,089 |
61,068 |
587,346 |
|
83 |
3,275 |
39,304 |
657,016 |
5,529 |
66,342 |
781,002 |
|
85 |
3,461 |
41,536 |
738,956 |
5,842 |
70,110 |
919,311 |
|
90 |
3,974 |
47,686 |
964,745 |
6,708 |
80,490 |
1,300,428 |
Copyright 2009 by Horsesmouth, LLC. All rights reserved.
While many are tempted to take SS benefits as early as possible, the more immediate concern should be that of living too long. Taking early benefits for someone who survives to the average life expectancy is a losing proposition.
Fred Livingston, CFP, AIF, is founder of Planmark Capital Management LLC, Alpharetta, Ga. A registered principal with and securities offered through LPL Financial, he can be reached at 770.410.4088 or [email protected].