7 Steps To Find Your Social Security Break-Even Age (And Max out Benefits)

For those thinking about retiring early, a big issue holding them back is often Social Security benefits. While you may be able to retire early at 62, it reduces how much you receive in payments each month, which encourages people to work a bit longer.

However, once you learn your break-even age, there’s nothing to keep you from planning your retirement goals. You may still need to make extra money depending on your financial situation, but for people who want to retire but not give up a huge chunk of their payment for the rest of their lives, this method helps you beat the system.

Here’s what you need to know on how to beat the Social Security System and retire at 62.

You can begin taking your Social Security retirement benefit as early as the age of 62. If you wait longer, your benefit grows each year you delay. At age 70, when you must claim your benefits, your monthly benefit is at its peak.

If you begin receiving benefits at age 62, you’ll receive more Social Security income over your lifetime, assuming you live your expected lifespan.

For most people, the full retirement age is 66 or 67, but if you wait until age 70, your benefits could be as much as 132% higher. However, you won’t receive anything until then. Your break-even age is the point at which you come out ahead by delaying benefits.

But how do you know when that will be?

To know when your break-even point is, start by getting your estimated benefit amount from the Social Security website. You can do the math to calculate this or you can use a break-even calculator. Carroll Advisory Group offers a free calculator and you only need to provide your birth date and expected benefit amount.

As of May 2024, the average Social Security payment for someone retiring at the age of 62 is $1,298.26. This figure is about 30% lower than what you would receive if you reached your full retirement age (FRA). If you claim Social Security before your FRA, your payment shrinks.

You lost 5/9 of 1% for each month for 36 months by claiming early, or 6.67% a year, and 5/12 of 1% per month for each additional month after that 36 months, or 5% a year.

Typically, there is a cost-of-living adjustment (COLA) given each year in January, which is meant to pad that amount to match inflation for the previous year.

Retiring at 62 means you’ll spend more time in retirement and less time working your job. It also means more direct deposits into your bank account.

If, for example, you expect to live to age 80 and you start receiving benefits at 62, you’ll obviously receive far more than if you waited until age 70 to begin collecting. Ultimately, more payments mean you’re being paid more over time.

Retiring early and claiming lower benefits may not seem that bad if you’re meeting your financial obligations. If you’re not, you may want to continue working part-time to maximize your income for the year.

Social Security deducts $1 from your benefits payment for every $2 you earn above the annual limit. You can earn up to $22,320 before deductions kick in for 2024.

If you expect to live a long life, delaying your benefits until you reach at least FRA makes sense. You’ll be able to receive higher payments for the rest of your life. The other factor is you may not live as long as you expect.

If you don’t anticipate living beyond your late 70s for any reason, taking your retirement early may be the better decision. You will be receiving the benefits you’ve been accumulating during your working life. There’s little benefit to waiting until you’re 70 if you don’t expect to live long.

By starting a side hustle or perhaps switching to a consulting business in your industry instead of working full-time, you can start to receive your Social Security benefits and still meet your financial objectives. Some start their own business and keep their earnings under the cap to optimize their finances.

Just monitor the limitations on how much you can earn and how significantly it will cut into your benefits if you go over that annual limit.

Social Security is the benefit that you've earned by paying into the Social Security Administration throughout your working career.

If you need to take Social Security early because you cannot meet your financial obligations or you need to apply for Supplemental Social Security, you should do so. But if you can wait until age 70, you will have a higher benefit.

Only you know what’s best for your situation. You may have invested well throughout your life and can afford to delay. But if that 9-to-5 is no longer making life enjoyable or you have been laid off late in your career, taking a lower monthly payment before your full retirement age may make sense. You’ll be getting monthly payments for a longer period of time and you can retire stress-free.