As we baby boomers age, the question of when to start collecting Social Security benefits is one that I encounter with increased frequency.  In many cases, having a spouse that is older/younger,  or is earning more/less means the search for the best answer is a bit more complex.

  

In a recent edition of my professional journal, "Journal Financial Planning",  a thorough analysis was presented.  

   

Executive Summary

•        Many factors affect the decision of when to file for Social Security benefits, including health, personal financial considerations, and employment status. If clients can be flexible in their decision, planners should help them assess the financial advantage of the options available. One method of assessing the financial advantage is to calculate the break-even age. Break-even is the age when total Social Security income from two retirement options is the same.
•        Using break-even calculations, we compare three basic options for when to start collecting Social Security benefits: (1) age 62, (2) full retirement age, which in our examples is assumed to be age 66, and (3) age 70. The calculations are highly dependent upon the numeric value of the variables used in the computations. These variables include the assumed rate of inflation, the return on investment, and marginal tax rates.
•         Based on statistical averages, if the worker is the only person entitled on the account and the earnings test is not involved, the rate of return must generally exceed the rate of inflation by 5 percent or more to justify taking benefits at age 62 rather than at full retirement age. At higher inflation rates and/or higher marginal tax rates, the rate of return may need to be even higher, perhaps in excess of 7 percent or 8 percent above inflation to justify taking benefits at age 62.
•         The rate of return needs to exceed the rate of inflation by a lesser amount to justify taking benefits at full retirement age rather than waiting until age 70. It may make sense for a man to start collecting benefits at full retirement age rather than waiting until age 70 if the rate of return exceeds the inflation rate by as little as 3 percent. For a woman whose life expectancy is longer, the rate of return would need to exceed inflation by 5 percent or 6 percent. At higher inflation rates and/or higher marginal tax rates, the rate of return may need to be higher.
•         The break-even calculation is also affected by the number of other beneficiaries entitled on the worker's record and/or whether the worker is entitled on multiple records.
•         Every client's situation is unique. The planner may use the information in this paper to assist clients in conducting break-even calculations tailored to individual circumstances.

 

 Here is the full article   When to Start Collecting Social Security Benefits: A Break-Even Analysis