Social Security Calculator – Breakeven and Monthly Income

By Justin Pritchard, CFP®

One of the most common goals of Social Security is to get as much income as possible. Deciding when to start taking retirement income depends, in part, on how long you’ll live and what else you can do with your money. Then, you decide if you want to start payments early or delay claiming for a bigger monthly payment. Finally, evaluate other factors that might impact when is best to take benefits. For instance, you might prefer to spend more now or keep money invested.

Scroll down for more information on Social Security breakeven analysis and details on how the calculator works.

Instructions

Start by entering your details.

Full Retirement Age (FRA): This is the age at which you can get unreduced benefits, and other interesting things happen at FRA. FRA is based on your year of birth, and for most people these days, it’s 67. You can find your FRA listed on your Social Security Statement, or use the SSA’s calculator to find out.

Monthly benefit at FRA: This is your “base” amount that you’d get if you claim at FRA. Also known as your Primary Insurance Amount (PIA). You can find this number on your Social Security Statement, or when you’re logged in to your account at SSA.gov. Your benefit at different ages—whether you claim early or delay—is based on your PIA. So, don’t enter the benefit for any other age. The calculator will adjust for you.

Life expectancy: Pick an age that you want to plan for. Note that most people underestimate how long they’ll live. Planning for a longer life is typically safest, but if you have known health issues, adjust accordingly.

Time-value factor: Most people skip this at first, but it’s a way to show a preference for spending sooner or keeping money invested. We’ll discuss more below.

Comparison ages: This is optional, but you can pick two specific claiming ages to compare. In the blue output section, you’ll see a breakeven age for those two claiming options.

Click Calculate, and see what you get.

This calculator helps you understand how your benefit changes at different ages, and what the breakeven point looks like for various scenarios. 

Want help with all of this? You can get it with a one-time meeting or an ongoing relationship. See Pricing options for more information.

A breakeven point is a popular way of thinking about this. The question is: How long would I need to live to make delaying worthwhile?

Understanding the Social Security Breakeven Calculator

Monthly Benefits by Claiming Age

The first thing you’ll see is a set of cards showing your monthly retirement benefit at different claiming ages. The longer you wait to start Social Security income, the more you get—until age 70, when those increases stop.

This gives you a quick glance at the impact of different claiming options.

After you reach FRA, you get delayed retirement credits (DRCs) that add up to 8% per year. However, you don’t have to wait for 12-month increments. The increases are applied to your benefit monthly, so you can claim in any month you want. But if you claim before age 70, be aware that you might not actually get those extra dollars in your payment until the January after you claim.

If you add a time-value factor, you’ll see additional information here, which we’ll discuss later.

Breakeven Chart

The chart shows your cumulative benefits at each age for different claiming strategies. This is a visual tool to help you understand how life expectancy interacts with a bigger or smaller payment.

The chart can be busy. Mouse over any year, and you’ll see the values for that year.

You can remove lines by clicking on the boxes above the chart. This may make it easier to read the chart and identify breakeven points.

Again, a time-value factor other than zero will change what you see here.

Breakeven Analysis

This section gives a specific age that you’d need to reach if you choose the later claiming option.

For instance, the first section is age 62 vs. FRA. If you choose to claim at FRA, you’d need to reach the age shown here to come out ahead. Living beyond that breakeven point means you’d come out ahead with the later claiming age. Dying before then means you would be better off with the earlier claiming age.

Note that the breakeven point makes it sound like you’ll “win” or “lose.” But in reality, the difference in lifetime benefits might be small.

Time-Value Factor

You have the option to enter a “discount rate,” if you choose to do so. This is a way to account for the time value of money, or the fact that a dollar you get today is worth more than a dollar you get in 10 years.

If you update this entry, you’ll see several changes.

In general, a higher discount rate tends to result in early claiming looking better. That’s because you might expect to earn more on savings and investments, and maybe you’d rather not spend down those assets if you can earn significant returns.

However, remember that Social Security benefits are guaranteed by the government, while investment results are not guaranteed. You might earn less than you expect—or lose money.

It’s also crucial to remember that Social Security is inflation-adjusted and tax-favored, which are difficult to model. See how much of your Social Security will be taxed.

The other result you’ll see with a time-value factor is the “present value” of benefits. Instead of cumulative benefits, the calculator shows an adjusted value of total benefits assuming you live to a certain age.

Warning: Entering a number here may result in the calculator suggesting that you claim early. But that ignores other factors, and you can’t make a decision like this in a vacuum. The higher the number you use, the more true this is. But do you remember the 1980s? Rates were quite high—but inflation was also high. So the “real” return (what you earn after inflation) wasn’t nearly as generous as it might seem. If you plug in a high discount rate today without accounting for future inflation, you risk undervaluing Social Security — which is one of the few inflation-adjusted income streams you can count on for life.

What Is a Breakeven Point?

Breaking even happens when two different claiming ages end up paying the same amount. It’s a point in time.

Before the breakeven point, one strategy is typically “winning” when you add up the total benefits paid from both choices and compare.

For example, let’s say you’re 71 years old. If you claimed at age 62 vs. age 70, the total payments from claiming at age 62 would be the highest when you’re 71. That’s because you’ve been getting payments for 9 years since age 62 vs. only one year of payments if you started at age 70.

Even though the payments are smaller, the age 62 strategy probably “wins” when you’re 71 years old. You have not yet reached a breakeven point.

Now, assume you’re 103 years old. In that case, it’s likely that the total payments you received over your life would be greatest if you claimed at age 70. Yes, you missed eight years of payments, but you got bigger payments. Over time, those bigger payments more than made up for the missing payments.

At some point in between age 71 and age 103, there would be a breakeven point. That’s an age when it doesn’t matter when you claimed—you end up with the same total benefits either way.

In many cases, that age is around 80 or so, but you need to run some numbers to figure out your own breakeven point.

If you live longer than that breakeven age, it’s typically best if you delayed claiming. Each additional month you live makes that strategy look even better. On the other hand, if you die before the breakeven age, it would be best to claim early because you’d get more dollars out of Social Security before your death.

The difference might not be huge, but if you’re keeping score, you’ll clearly see which strategy looks best at any given age.

Is Breakeven the Right Way to Decide?

Probably not. A breakeven analysis in a vacuum ignores several important aspects of retirement planning.

It’s reasonable to try to maximize your benefits. Figuring out when you would break even is a great start, and it’s even better if you account for the time value of money.

Still, the decision on when to start Social Security retirement income is complicated. Knowing the breakeven point is just one piece of a much larger puzzle.

Historically, the Social Security Administration (SSA) had a breakeven calculator on their site. It was removed under the assumption that people were making less-than-optimal decisions with the results.

To make an informed decision about when to take Social Security, you must look at the big picture. Consider the following factors, and more—but don’t just look at one factor in isolation.

Maximizing benefits: Which strategy pays the most? This might be solved with an analysis, but other factors also matter.

Tax strategy: Does it make sense to draw down pre-tax retirement accounts (while delaying claiming and allowing your benefit to grow)? Doing so might save you a significant amount in taxes, IRMAA surcharges, and more.

Time value of money: A dollar you get today is better than a dollar you get in the future. The higher your returns, the more sense it might make to claim early. Or, you might decide that you can’t beat the benefits of delaying Social Security (or you’re not interested in pursuing high returns at this stage in life).

Longevity: Social Security income is guaranteed for life, and possibly the life of a surviving spouse. If you expect a long life, you may want to delay. If you expect a short life, claiming early could make more sense. Be aware that people often underestimate how long they’ll live.

Survivor benefits: Do you need to plan for a surviving spouse living on just one Social Security payment after the first spouse dies? If so, that might point toward delaying to maximize that remaining payment.

Unlocking spousal benefits: A spousal benefit is only available after the higher-earning spouse claims. This essentially “unlocks” the spousal benefit. Run the numbers to see if it’s worth claiming a little early.

Investments: If you have significant assets, you have more flexibility. You might need to spend down in early years, but you might recoup everything later. Or, you might decide to start Social Security earlier than planned if markets crash and you’re experiencing “sequence of returns risk”.

Quality of life: Which claiming age gives you the best quality of life at ages that are important to you? If you’re unwilling to spend from your assets, maybe claiming earlier allows you to make the most of those “Go-Go” years while your health is at its best.

Important Information

It’s critical to mention that a break even analysis should only be one part of your decision. In some cases, it makes sense to pick an age that you won’t break even on. Be sure to evaluate how spousal benefits, tax considerations, survivorship planning, and other factors might impact your decision on when to claim.

Also, this is just a simple calculator. It may have errors, and it might fail to inform you of certain risks or opportunities. Speak with an expert who is familiar with your situation before you make any decisions.