Delaying Social Security Benefits? Here's How Long It Will Take for It to Pay Off

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You can claim Social Security benefits at the age of 62 -- but should you? Many people -- including experts from Stanford -- argue for delaying as long as possible because benefits go up the longer you wait. And there are indeed plenty of good reasons to delay. Social Security provides a guaranteed source of income for life, so waiting a little longer to maximize benefits can make sense.

But while waiting entitles you to earn delayed retirement credits, it also means you miss out on years of money you'd otherwise have received. You'll need a higher monthly income for many years to make up for all those missed benefits and reach your breakeven point.

To decide whether it makes sense to delay, it's helpful to know how to calculate your breakeven point and get a good idea of how long it might take for delaying benefits to pay off for you.

How long does it take for delaying Social Security benefits to pay off?

The Social Security Administration uses a formula to calculate your standard benefit amount based on your average wages over 35 years, adjusted for inflation. You'll receive this standard benefit if you retire at full retirement age, which is 67 if you were born after 1960.

If you retire before, benefits are reduced by 5/9 of 1% per month for the first 36 months prior to FRA and by an additional 5/12 of 1% for each of the months before that. If you retire after FRA, benefits are increased by 2/3 of 1% for each month you delay until age 70.

To figure out how long it takes for you to break even by delaying Social Security benefits, calculate how much money you'd receive over the years if you claimed early, then divide this amount by higher monthly benefits you'll receive if you delayed.

The math differs depending on your specific benefits and how early you claim or how long you delay. The chart below provides an estimate of when you'd hit your breakeven point at different ages, assuming a \$1,500 benefit at a full retirement age of 67.

The annual benefits forgone don't take cost-of-living adjustments into account. However, it provides an accurate estimate of years to break even, because your COLA is based on a percentage of your initial benefit amount. This means your cost-of-living raise (if one is given) is proportionately lower if you start with a lower benefit.

Age at Which You Claim Benefits

Total Benefits Forgone by Waiting Beyond 62

Increase in Annual Income Due to Delaying Benefits Claim

Years to Break Even

62

\$0

\$0

NM

63

\$12,600

\$900

14.0

64

\$25,200

\$1,800

14.0

65

\$37,800

\$3,000

12.6

66

\$50,400

\$4,200

12.0

67

\$63,000

\$5,400

11.7

68

\$75,600

\$6,840

11.1

69

\$88,200

\$8,280

10.7

70

\$100,800

\$9,740

10.3

Should you delay claiming benefits?

Ultimately, a lot of factors go into whether you should wait to claim Social Security. But before you decide, determine how long it will take you to break even. If you don't think you'll live long enough to recoup money you missed by delaying your claim, taking Social Security early could be the smartest way to maximize the total benefits received during retirement.

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