Social Security retirement benefits are primarily based on two factors: your average income over your working life and your age when you claim them. You get to decide when to start collecting benefits, within an eight-year window from age 62 to age 70. The longer you wait, the higher your monthly payment will be.

That means choosing when to file for Social Security is in part a decision between collecting a smaller benefit for a longer period and starting later but getting a bigger monthly payment. If you live long enough, the cumulative benefits from the later, higher start will eventually catch up with the sum of reduced payments you can start drawing earlier.

That catch-up moment is called the break-even age (or break-even point), at which the dollar value of claiming benefits later surpasses the value of taking them early. Determining your break-even point and weighing it alongside other factors such as your physical and financial health can help you decide when to start Social Security and get the most out of your benefits over your lifetime.

How age affects benefits

You become eligible to collect your full retirement benefit — 100 percent of the amount you’re entitled to receive based on your lifetime earnings history — at full retirement age (FRA), which is 66 and 4 months for those born in 1956 and will gradually rise to 67 for those born in 1960 and later.

The minimum age to begin benefits is 62, but Social Security reduces your monthly payment by a fraction of a percent for each month before the FRA that you claim. Someone born in 1960 who starts benefits in 2022 will get as little as 70 percent of their full monthly benefit. That reduction is permanent.

If you put off claiming benefits until after full retirement age, Social Security bumps up your prospective payment for each month of delay. That 1960 baby would get 124 percent of their full retirement benefit, for life, by waiting until their 70th birthday to start Social Security.

Calculating the cost of your decision

The break-even calculation is inexact; annual cost-of-living adjustments, and changes in your income if you’re still working, mean the amount of your monthly benefit can fluctuate even after you start collecting it. But you can still get a rough estimate of your break-even age.

Say you are closing in on 62 and considering your benefit options. You know, from checking your online My Social Security account or using AARP’s Social Security Calculator, that you are in line for an estimated $1,500 a month if you hold off claiming until your FRA of 67.

Starting at 62, your monthly payment would be 30 percent less — that’s $1,050 per month. So, between the ages of 62 and 67, you would receive approximately $63,000 in benefits ($1,050 for 60 months).

If you wait until you turn 67, you give up that initial $63,000 but would receive $450 more per month, or $5,400 more per year. At that rate, it would take about 140 months (11 years and eight months) to make up for the money you’d forgo by claiming benefits later. At around age 78 and 8 months, you reach the break-even point, when your cumulative benefits from claiming at 67 surpass those you’d get by taking retirement at 62.

You can use a similar calculation to determine the break-even age for taking your maximum benefit at age 70 — in this example, $1,860 a month.

Starting at 62, your benefits would come to $100,800 over the next eight years. Starting at 70, you’d get $810 more a month, or $9,720 more a year. It would take 10.4 years to break even, so you’d be 80 and change when claiming your maximum monthly benefit begins to pay off in terms of total dollars.

Other factors to consider

When planning for retirement, however, there’s more to consider than just dollars and cents. You could pocket the most money in the long term by waiting to start your benefits, but only if you live past the break-even point.

That’s where other factors such as your physical condition and family situation come into play. Suppose you reach claiming age in poor health. Do you expect to live long enough to make up for the payments you’d forgo by delaying? On the other hand, is your spouse going to be depending on your benefits after you die? The tradeoff for starting your payments early could be lower survivor benefits for your mate.

Other income, or assets such as a pension or IRA, might affect your claiming decision. Perhaps you like your job and want to keep working well into your 60s, or you can afford to live on your savings while you delay Social Security and boost your eventual benefit. On the flip side, if you’re unable to work and need the money, collecting Social Security benefits early could help you make ends meet.

A financial adviser can help you weigh the pros and cons to determine what option works best for you.

Keep in mind

  • You aren’t required to start collecting retirement benefits by age 70, but beyond that point there’s no benefit boost for delaying your claim.
  • While Social Security is, for most people, a guaranteed financial resource later in life, it is not designed to fully replace work income. Retirement benefits typically amount to about 40 percent of a worker’s career average earnings.
  • The AARP Retirement Calculator can help you develop a picture of your financial future, taking into account all sources of retirement income and estimating how much you’ll need to meet your needs.