If you’re trying to decide the best age to file for Social Security Benefits, using a Social Security break-even calculator can give you some important data to help you make the right decision. In this video, I’ll tell you how to use one of these calculators and how to access one for free.
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When it comes to planning for retirement, understanding the break-even point for Social Security benefits is crucial. The break-even point is the age at which the total amount of benefits received equals the total amount of benefits that would have been received if you had started collecting earlier. In other words, it’s the age at which you would have been better off waiting to start collecting benefits.
To calculate this break-even point, it’s important to have a reliable Social Security break-even calculator on hand. With so many options available, it can be overwhelming to choose the best one. So, let’s take a look at some of the top Social Security break-even calculators available.
1. Social Security Administration’s Online Calculator:
The official Social Security Administration website offers an online calculator that allows you to estimate your retirement, disability, and survivor benefits. This calculator is easy to use and provides accurate estimates based on your actual earnings. However, it doesn’t take into account other sources of income or savings, which can impact your overall retirement plan.
2. AARP’s Social Security Benefits Calculator:
AARP’s Social Security Benefits Calculator is another reliable tool that can help you determine your break-even point. It takes into account a wide range of factors, including your current age, estimated future earnings, and potential lifetime benefits. This calculator also provides personalized recommendations based on your specific financial situation.
3. Financial Planning Software:
There are also several financial planning software packages available that include Social Security break-even calculators as part of their overall retirement planning tools. These tools are typically more comprehensive and can provide a more detailed analysis of your Social Security benefits in the context of your overall retirement plan.
4. Maximize My Social Security:
Maximize My Social Security is a popular software program developed by Laurence Kotlikoff, an expert in retirement planning. This program uses sophisticated algorithms to help users maximize their Social Security benefits. It provides detailed analysis and recommendations, including the break-even point, to help users make informed decisions about when to start collecting benefits.
When choosing a Social Security break-even calculator, it’s important to consider factors such as ease of use, accuracy, and the level of detail provided. Ultimately, the best calculator for you will depend on your individual needs and preferences.
In conclusion, having a reliable Social Security break-even calculator is essential for anyone planning for retirement. By accurately estimating your break-even point, you can make informed decisions about when to start collecting benefits and optimize your overall retirement plan. Whether you choose to use an online calculator, a software program, or seek advice from a financial professional, taking the time to understand your Social Security benefits can make a significant impact on your financial future.
Access the calculator here https://www.socialsecurityintelligence.com/calculators/social-security-break-even-calculator/
Perhaps I’m missing something but don’t you also have to account for the missed payments between say… age 62 vs filing at say 67? If you start payments at age 67, don’t you have to put in a negative number for the five years of forgone payments between age 62 and 67?
Yes, these calculators never take into account the future value of early money as compared to the future value of later money. It’s as if these authors never heard of present value/future value/DCF/compounding. This is crucial or your analysis is bunk. In other words, if you invested 8 years of cumulative money collected since age 62 compounding at 7% annual returns (only an example) in the stock market with 2% COLA every year, AND THEN compared that cumulative compounded future value to the future value of payments starting at age 70 using the same investment returns and COLA, then find your break even. The hare and the tortoise need to start at the same starting point (age 70 start line). I had to create my own “calculator” to figure the “true” breakeven of taking my ss early or later.
I like your attitude toward denying that you may die soon. Have you ever considered working for the life insurance agencies? You could talk a lot of people out of buying pessimistic life insurance policies when they desperately need the premium money elsewhere. Perhaps even to use it to pay for activities that help them live longer, like finally being able to afford a gym membership. What's that? You say optimism doesn't apply in that case? Whatever!
I'm no longer working. If I delay benefits I will have to draw down my savings that are (currently at least) earning 5% for the years I delay. Loss of this (compounding) interest certainly affects the BE point, but not sure how much. It would be nice if that could be figured in. Also, I'm 68 and when I go into my SSA account I can see only current and future benefit amounts, but not back to the initial FRA, which I need to use the tool.
What about federal taxes on my benefits since my spouse will continue to work for about 5 years… I am 5 years older
I wish you could also plug in compound interest. If you aren't living off the social security for those 3 to 8 years you could be adding on quite a bit of compound interest if you have a lot of money already in the market to live off of.
what is missing is how much return you can get if you take the money early and invest it. without that the calculator is worthless.
Thank you. I are very helpful.
Can we add maybe using a nominal rate of return maybe like 6% when one invests the SS money for early and FRA. But excellent calculator.
Calculating your "break even point" is not complicated math. In fact it's grade school math. For most people, your break even point is around 80 years old. (79 years, 8 months for me) It's the prime reason I decided to start taking back my Social Security at age 62. 7 1/2 years in and I have zero regrets. The biggest thing you need to know is that more per month does not mean more total. The reason you get a smaller check at age 62 is because you are going to get more checks. 96 more than the person who waits until age 70. I took the bird in the hand approach because I've never really been much of a gambler.
Thank you Devin for the tutorial. I am 63, never married, in good health, but I have never earned more than $20,000/year. I don't see my earnings go up significantly in the future. Does it make sense to start taking advantage of ss now or wait till full retirement age? I don't see myself ever retiring. Thank you.
Devin, Thanks for this useful calculator. I would like to suggest the following enhancements:
– An option for spousal benefit computations – including starting spouse on their own SSA benefit and converting to spousal benefit later, when primary beneficiary files. This would need to consider that if the spouse files on their own early, it will forever impact all their future SSA benefits, so the spouse's birth date, SSA benefit estimate, and proposed start date(s) (which may be in the past) will be needed.
– Since this may be used to compute benefit for taking SSA benefits before actual retirement, need an option to specify a % or $ amount to invest at a specifiable (with reasonable default) interest rate between filing and actual retirement, which may be earlier or later than the comparison (later) filing date.
– Adding tax filing information (AGI and filing status), you could add a rudimentary/highly-generalized estimate of tax implications.
Granted, this could all become quite complex as a web-based tool, but being a software engineer, I am working on my own calculator (way too complex for general consumption) to help me plan my own situation and options. I started using Python, but I may change to C++ code due to the complexity of my situation. Your tool does give me a good quick-look at the break-even and is something I can probably use toward validation and verification (V&V) of my model. If you have any tips for me, as I dive into this project, I would greatly appreciate the advice.
V/r,
-James
Is there a calculator that you can put your past income in and future income in to calculate your Social Security Benefit amount?
Thanks for the calculator. My break even age will be way past , if I'm still alive, my ability to enjoy life. Time and quality is way more important to me than money.
Excellent analysis and sound advice. Subscribed. Thank you.
I couldn't care less about any "break even" point.
My concern is living more comfortably on a month to month basis. If that means delaying my SS
"payouts" then so be it.
The break even calculator is great, very easy to use with clear results provided. Thank you!
Hello Mr. Daven Carroll I will not plan to retire anytime soon It will after I turn 68 years of age about a month When I step down from working. Which will be the date of December 1st 2027.If collect any Social Security Retirement now it will be low around $1100.00 to 1200.00 .I feel it is better off waiting until I am past my full age retirement which will be August 2026 .If my health holds up to healthy enough to perform the work.
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I think you should take social security as early as possible. If you don't need the money invest it in a good stock so you can leave your loved ones something. If you wait till age 70 and die at 71 they get nothing. Investing the money will get you more in the long run compared to leaving it to the government.
Shouldn't you look at investing the money you receive early to more accurately calculate the break even. For instance
Year 1 you receive $24,000 ,5% return = 1,200$
Year 2 cumulative $48,000 return = $2,400
Year 3 cumulative $72,000 return = $3,600
Year 4 cumulative = $96,000 return = $4,800
Year 5 cumulative = $120,000 return = $6,000
Total earnings age 62 through 66 = $18,000
Total = $18,000+120,000 = $138,000 to earn 5% forever.
Even looking at it simplistically at 0%, this $138,000+5% ÷ excess social security received will raise the breakeven to over 100 in most cases.
The unknowns are the investment rate. Historically the SP500 has returned 9%, so this is a conservative number
BUT we spend less after age 80 therefore not necessarily needing significantly more money. Also, filing early in the Go Go years with extra cash could be nice. This is not the case for me though as I will file likely around 67 because of a pension and investments with dividends.
I have never seen one that figures in the time value of the money, if you take it at 62, and put it in the bank till 65, or whatever. I took mine early and haven't regretted it at all. I'll be FRA this year and have well over 60k in the bank drawing 3.5%. I don't need the money one way or another, but it's there if I do.
I was thinking about spending half of it on young women, a third on beer and just wasting the rest. But, I don't drink much anymore, and my wife won't let me date, so maybe I'll just buy a new truck…:)
The last thing I learned from my mom is, it doesn't make one bit of difference how much money you have, or don't have, once you enter assessed living. You are spending a grand a week to sit in a room and watch TV, or not a dime, to sit in a room and watch TV. Spend that money while you can and have fun with it !
can I cancel ss and give back money? then start over again at later age?
Judging when to draw Social Security benefits based on break-even considerations is perhaps the single worst factor to use. Unfortunately, it is also very popular and by promoting calculators like this is pointless.
How does income effect this decision? For example, what if someone is making $50,000 until age 70? Or, what if they're making $100,000 until full retirment age?
I am looking for a break-even calculator that also includes the ability to assume a rate of return (ROI) of the payments received cumulatively, e.g., assume an annual growth rate of 4% or 5% or some other percentage of all payments received, assuming all returns are reinvested during the years being used in the break-even assumption. So when I assume a 4% annual return of the payments cumulatively between age 62 and 67 or between age 62 and 70, so that I can account for the rate of growth of payments received versus deferring until later years to claim the benefit. Thank you.