Should you consider a break-even analysis?
The question many people wrestle with in trying to decide when to take Social Security is: When will I come out ahead?
The decision as to the "right" time to claim Social Security has often been based on a break-even analysis of a retiree's expected benefits, if claimed at different ages, versus his or her life expectancy. The break-even point is the age at which the benefit amounts intersect.
In other words, will the money you'll get by claiming early and getting smaller checks for potentially a longer period of time be more than what you'll get by waiting and getting larger checks for potentially a shorter period of time?
Case study
John is 61 and his full retirement age (FRA) is 66 and 6 months. He gets the following monthly estimates of his benefits by logging on to his account on ssa.gov:
- At age 62: $1,812.50.
- At age 66½: $2,500.
- At age 70: $3,200.
Here are his break-even points for claiming at various ages.
- Between ages 76 and 77 if John claims at age 62 versus FRA.
- Between ages 80 and 81 if John claims at age 62 versus age 70.
- Between ages 84 and 85 if John claims at FRA versus age 70.

Source: Vanguard calculation. Notes: Figure shows the cumulative net present value of expected benefits at various claiming ages using a 1% discount rate. Amounts are presented in real terms and don't include estimates of cost-of-living adjustments.
The limitations of break-even analysis
Simply looking at a lifetime lump sum ignores 2 key features of Social Security:
- Once you start receiving it, it's paid for the rest of your life, no matter how long you live.
- It's adjusted upward for inflation.
A big concern for most retirees is the risk of outliving their savings. In the case of our hypothetical 61-year-old, Social Security life expectancy tables show his median life expectancy is about equal to the break-even age if he claims Social Security at FRA versus 70.
So if you can afford to do so, deferring Social Security for a few years (even past your FRA to the maximum benefit at age 70) increases your lifetime monthly benefit. And that can help you bridge any income gap you may have in meeting your expenses.