What is the Breakeven point for taking Social Security – At Age 62 or at 70?

Should you take Social Security at 62? Or should you take Social Security later at age 70? Depending on what you read and where you read it, you’re probably going to get a different answer to that question. In this video, we’re going to look at retirement income planning strategies with Social Security as the focal point and determine when is the break-even point for most people with that decision on whether to take it early, or to take it late.

Hi, I’m Troy Sharpe, CEO of Oak Harvest Financial Group, CERTIFIED FINANCIAL PLANNER™ Professional (CFP®) and host of the Retirement Income Show.

I feel like I’ve lived through my 60s, my 70s and my 80s thousands of times, and that’s because I’ve sat with families just like you thousands of times, helping them make these retirement income planning decisions. And there’s no area where I see people make more mistakes than Social Security planning.

And the problem is, we tend to look at Social Security in a vacuum, we don’t look at Social Security as just one part of a bigger plan. It’s nothing more than a spoke in the wheel. So we have to look at it with respect to our objectives, our risk tolerance, our other assets, our goals, and through the lens of looking at your Social Security decision. Through that lens, you’re able to make a better decision, a more customized solution to your retirement, which can hopefully provide a better outcome.

What we have here is a Social Security analysis looking at a 62 year old male, a 60 year old female, comparing if they delay Social Security until age 70 versus taking it early. This far right column is the difference in total benefits received, comparing those two scenarios.

So if they take it early at 62, by the time the husband reaches age 70, they will have received about $270,000, from Social Security, taking it early as opposed to if they delayed until age 70.

So now, what we want to do is look at the breakeven point, so how long will they have to live in order for the age 70 benefits to cross over or to have paid them more than if they had taken it at 62?

So here we see the crossover point. Remember this far right column is the difference in total benefits received when comparing delaying it to taking it early. So over here, it’s about age 80 to 81, the husband’s age, before they actually physically receive more dollars from Social Security by delaying than if they would have taken it at 62.

But that’s not the only part of the equation that we have to look at. If they had received this money, how much did they receive from 62 to 70 before they would have turned it on if they delayed it, and then we have to consider what would this couple have done with the money? What was their risk tolerance? Would it have been invested in stocks, in fixed annuities, in bonds, in real estate?

We have to look at the opportunity cost of that money to really determine the impact of the right or wrong decision.

Not only that, but we also have to look at their goals. For example, if they want to make sure they leave more money to their children or grandchildren, well, possibly taking it early could make more sense, or tilt the scales at least in that direction, because they will have more money leftover in their portfolio theoretically, because that money that they received early has been investing and compounding and should provide quite a big difference.

So if we look at the total amount of money received, by the time. So this is looking at taking it early, so monthly benefits, husband and wife, accumulative benefits. By the time he turned 70 years old, about $300,000 in cumulative benefits received. So it’s right in between that 275 to $300,000 range, the months may make a difference here. But right around age 70, by the time he would turn it on, they’ve received a cumulative of about, let’s call it 275 to $300,000.

So if they could invest that and earn a 7% rate of return over that time, that 300,000 over a 10 year period would double to 600,000. Over a 20 year period, it would be about 1.2 million. So by taking Social Security early, if these people are comfortable with risk, they would preserve the amount of money in their portfolio equivalent to the amount they had received from Social Security, roughly, and if that money was invested, it could result in a lot more positive impact on the portfolio over time.

So as you can see, it’s not quite black or white as to the break-even point for taking Social Security, we have to take so much else into consideration when making these decisions for clients. In this analysis, this is what we do for clients, looking at these with respect to a customized plan every single day here at Oak Harvest Financial Group, so make sure to find someone who can run this analysis, who can look at it holistically and can help you make the best decision with your Social Security, not just in a vacuum of when will you receive more dollars or breakeven, but which one puts you on the path to having a more secure retirement.

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