When Should I Start Taking Social Security?
How Social Security Benefits Are Calculated
Social Security benefits are based on your Average Indexed Monthly Earnings (AIME), which is calculated from your career earnings.
Here’s how it works:
1. Indexing Earnings: Your past earnings are adjusted to reflect changes in average wages over time due to inflation.
2. Selecting Top 35 Years: The 35 years with the highest indexed earnings are used.
3. Calculating AIME: The total of those 35 years is divided by 420 (the number of months in 35 years).
4. Applying the Formula: AIME is plugged into a formula to determine your Primary Insurance Amount (PIA)—the monthly benefit you’d receive if you started drawing at 67.
When Can You Start Receiving Benefits?
You can start receiving Social Security retirement benefits as early as age 62 or as late as age 70. If you draw at:
• Age 62: You receive about 70% of your PIA.
• Age 67: You receive 100% of your PIA.
• Age 70: You receive about 124% of your PIA.
What’s the Best Age to Claim Social Security?
Let’s assume your PIA is $2,000. Here’s how much you’d receive in total benefits depending on when you start and how long you live:
| Start Age | Live to 75 | Live to 80 | Live to 85 | Live to 90 |
| 62 | $218,400 | $302,400 | $386,400 | $470,400 |
| 67 | $192,000 | $312,000 | $432,000 | $552,000 |
| 70 | $148,800 | $297,600 | $446,400 | $595,200 |
• If you die at the age of 78 or younger, then claiming early benefits at 62 yields the greatest total benefit.
• If you live to around 82 or beyond, waiting until 70 gives you the highest lifetime payout.
• 67 is a balanced choice if you’re unsure about longevity, although it only produces the greatest yield if you happen to die within the window of ages 78 to 82.
Choosing when to claim Social Security is a personal decision that depends on your health, financial needs, and life expectancy. While the math shows that waiting can pay off in the long run, early claiming might make sense if you need the income sooner or have health concerns.
Some people say a bird in the hand is worth two in the bush, while others say good things come to those who wait. I say I have paid into Social Security for my entire life, so I am going to make sure I maximize what I get back out of it.
