7 Reasons Why You Should Delay Taking Your Social Security Income

Hello everybody. My name is Ty Bernicke, and today I’m going to be going over seven reasons why you should delay taking your Social Security income.

Understanding the Break-Even Age

Before I get into this, I think it’s very important to understand what the break-even age is. The break-even age is essentially the age a recipient would have to live in order to benefit from delaying their Social Security income beyond the early start date of age 62, and there’s a whole bunch of different research that has been done on this.

One of the favorite articles that I’ve read on the subject was done by a former Social Security executive named Doug Lemons. Doug Lemons compared whether it’s better to take your Social Security at age 62 versus your full retirement age, which, depending on your date of birth, could be anywhere from 66 or 67 years old. Or is it even better to delay taking your Social Security to as late as age 70?

He basically looked at a variety of different variables. He looked at the tax implications of your decision, how inflation would impact your decision, and the rate of return on the investments that you have in your retirement portfolio. He found the break-even age to be somewhere between 81 and 87.1 years old, depending on all those variables.

So there isn’t one break-even age for everybody because it’s dependent on a variety of different variables. Essentially, what that means is if we knew for sure that you’re going to live to age 95, well, generally speaking, it’s better to delay taking your Social Security beyond the early start date of age 62. And if we knew that you were going to pass away before that age, generally speaking, all things equal, it’s better to have taken your Social Security earlier.

So that’s what the break-even age means.

Depending on a variety of different variables—which I have listed here—and others that can either move the needle towards making it make more sense to take your Social Security early or delay taking your Social Security until later.

Reason #1: Earning Income Above $23,400 Before Full Retirement Age

Reason number one why you should delay taking your Social Security income is if you will be earning income in excess of $23,400 prior to your full retirement age. For most of you watching this video, your full retirement age is going to be 67 years old. If you’re making more than that amount prior to your full retirement age, a portion of your Social Security will actually be withheld and eventually returned in the form of credits.

Generally speaking, if we know someone’s active income from a job—this doesn’t include pension income—but income from a job or net income from a business exceeds that level, we suggest delaying taking their Social Security income.

Reason #2: Confidence in Receiving Full Promised Benefits

Reason number two why it can make sense to delay taking your Social Security income is if you feel confident that Social Security will pay you 100% of your promised benefits in the future.

We all know that the Social Security Trust Fund (OASDI Trust Fund) is set to run out of money in 2033 if no changes are made. However, if you’re confident that the government will figure out a way to shore up the fund so that 100% of promised benefits can still be paid out in the future, this is another reason why delaying benefits might make sense for you.

Reason #3: Avoiding Higher Health Insurance Costs Before Age 65

Reason number three is if you believe taking Social Security early will limit your Affordable Care Act (ACA) health insurance tax credits. Depending on the state where you reside, there may be state-sponsored versions of ACA health insurance available for individuals retiring before Medicare eligibility at age 65.

The cost of ACA health insurance is partially determined by your modified adjusted gross income (MAGI), which includes Social Security income. If taking Social Security early increases your MAGI and raises health insurance costs before age 65, it might make sense to delay claiming benefits until after this period.

Reason #4: Longevity and Life Expectancy

Reason number four for delaying Social Security income applies if you’re single and believe you’ll live beyond the break-even age. If you expect to live until age 95 or longer, delaying benefits can result in significantly higher lifetime payouts.

Reason #5: Protecting Your Spouse’s Financial Future

Additionally, if you’re married and historically have been the household breadwinner while believing either you or your spouse will live beyond break-even ages, delaying benefits ensures higher survivor benefits for your spouse should they outlive you.

If you predecease your spouse and want them to receive higher survivor benefits, delaying Social Security makes sense. By doing so, even if you pass away earlier than expected, they will inherit a higher benefit amount for their lifetime while their lower benefit disappears.

This strategy builds financial security for them in case they live significantly longer than you do.

Reason #6: Good Health and Family Longevity

If you’re in excellent health or longevity runs in your family history, delaying Social Security can provide greater financial benefits over time. Living beyond break-even ages ensures you’ll maximize delayed retirement credits and receive larger monthly payments later in life.

Reason #7: Maximizing Delayed Retirement Credits

The seventh reason to delay taking Social Security is to maximize delayed retirement credits (DRCs). For every year you delay claiming benefits past full retirement age (up until age 70), your monthly benefit increases by approximately 8%. This guaranteed increase can provide significant financial advantages over time if you expect to live well into old age.

By waiting until age 70 to claim benefits, you’ll lock in a much higher monthly payment for life compared to claiming earlier. This strategy works particularly well for those who don’t need immediate income and want to ensure they have more financial security later in retirement.

Final Thoughts

When considering all these different variables—such as health status, financial needs before Medicare eligibility, or concerns about future benefit reductions—it becomes clear that there’s no one-size-fits-all answer for when to claim Social Security benefits.

Your unique circumstances and the collective impact of these factors will determine whether it makes sense for you to delay or claim benefits as early as age 62.