YOU DO THE MATH – When To Start Taking Social Security – There Is Too Much Bad Advice Out There

By July 10th, 2023

Blog No. 169
July 11, 2023

Fixing America – Idea 31

By Mack W. Borgen
2023 Listee – Who’s Who in America, University of California at Berkeley (Honors, Economics); Harvard Law School; National Award-Winning Author.

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“Fixing America” Series of Article

Over the last three years, I have presented a wide range of ideas for “resetting” and “fixing” America. This blog presents Idea 31 in this his “Fixing America” series of articles. 

You Do the Math

When To Start Taking Social Security

Background: There are four (4) separate reasons for addressing this subject in my Fixing America series: First, because the decision of when to start taking social security (at age 62 or at the full-retirement age or somewhere in between) is faced by all Americans; Second, because the cash flow coming from social security is critical for many Americans; Third, because many “advisors” (especially in our media- and meta-universe) are giving, in this author’s opinion, incomplete, misleading, or flawed advice; and Fourth, because a mistake in deciding when one should start taking social security can have very meaningful consequences. Whether to start drawing one’s social security payments, is entirely up to the individual, and, as will be explained in this article, there ARE good and valuable reasons to defer social security. However, this is an important decision, and too often some factors are not well explained and are too often overlooked.

For example, this article introduces the concept of the “break-even month.” This concept is too often forgotten or buried amidst the ramrod advice of supposed money advisors.

However, the place to begin is one’s projected life expectancy. This is a delicate and difficult subject and in a slightly better universe, it would be wonderful if we would be told how long we have to live. Especially for “planners,” like myself, this information would be wonderful. But mortality disclosure is not available. Thus, we must settle for (a) recognizing (as best we can) our own health condition and (b) placing some weight with actuarial tables relating to life expectancy.

But even “life expectancy” is rarely explained. In the media, “life expectancy” (when compared between nations, for example) is usually reported based upon newborns. As such, at least in the context of our social security decisions, this most common and oft-reported “newborn’s “calculation” of life expectancy is terribly misleading – and, to a degree, can be somewhat useless when people (usually in their 50s or 60s) start thinking about taking social security. Instead, age-adjusted life expectancies should be better explained — they are far more useful and relevant.

Set forth below are the “age-adjusted” life expectancies of Americans — in other words, the life expectancy of a person based upon their current age. These “age-adjusted” life expectancies are the numbers which should be used when evaluating one’s social security options.

One’s                   Life Expectancy-Male        Life Expectancy-Female                                     

Current Age      (All numbers rounded)        (All numbers rounded)

At birth in U.S.        76.0                             81.0        (the most common news-reported number)                                                                                                                                                             .

21                               77.0                              81.7

35                               78.2                             82.2

45                               79.1                              82.8

55                               80.5                             83.9

62                               82.1                             84.9

65                               82.9                             85.5

75                                86.2                            88.0

But actuarial tables are only estimates. They do not offer precision, and to the extent possible, each number must be “adjusted” based upon one’s general health. Nevertheless, for financial “when-to-start-taking-social-security” purposes, this may be the best place to start.

The General Problem

Too many financial advisers casually encourage people — “if possible” – to wait until age 67, their “full retirement age, or 70, the full-benefits age, before they start taking social security. However, this can be dangerous. This can be even absurdly for several reasons. For purposes of brevity, this article focuses only upon two of those reasons — first, the “alternative-insurance-uses-of-the-money” reason; and second, the advisability of calculating one’s “break-even month.”

The “Alternative-Insurance-Uses-of-the-Money” Considerations

When deciding when to start taking social security, it is also appropriate – indeed important – to determine whether one has adequate health, long-term care, and sometimes life insurance. Many people have their own health insurance or health insurance through their employment. In addition, Medicare becomes available at age 65 with “supplemental” and “prescription medicine” coverage as additional recommended “add-ons. However, long-term care and life insurance are not routinely or automatically available.

If one does not have either of these (or wishes to increase the levels of their existing policies), then this should be considered as possibly an advisable AGE 62 use of social security monies. There are several reasons for this. Though unlikely, a person may need it between the years 62 and the deferred age 67-70 ages. First, the cost of both types of policies increase substantially every year. Thus, it may be cheaper in the proverbial “long run” to take social security at age 62 and get these policies in place. Second, some non-fatal health event may occur after 62 which would preclude one’s ability to even obtain long-term care or life insurance. Third, though impossible to monetize, there is peace and comfort for both you and your loved one’s in having such insurance in place even at the age of 62. These are real financial matters, but they are too often forgotten in the context of the social security commencement decision.

The “Break-Even” Consideration

The “break-even” matter is the second item matter which is too often overlooked and which should always be considered.

Summarily explained, a person CAN get an enhanced social security monthly benefit if they defer drawing their social security to age 70. However, the “price” of getting that enhanced “full retirement age” benefit is having to forego years of monthly payments — i.e., the years of payments (albeit at a lower amount) which could have been obtained between (a) the age of 62 (the first age at which one could draw social security) and (b) the age when one actually DOES start taking social security.

It is true that your monthly checks will be higher if you wait, but all the monthly interim checks (between the age 62 and the year you start drawing social security) are forever “lost.” And it can be many, many years (or never!) before you “break-even.”

This may be better explained by using the following model.

Assume a person is now 62 years of age. They were born in 1961. They are trying to decide whether to start drawing social security in 2023 – the first year when they can start taking it albeit at a less-than-full-retirement-age amount.

NOTE: The following amounts use just one sample income amount etc. Each person should calculate their own monthly amounts and “losses.” 

      Assumed          Amount of        No of Months                Aggregate Amount           Adjusted            

          Start               Monthly        Between Start-Date         Received Between             “True” 

      Of Social         Soc Security       and Age 67                            Start-Date                     Amount

       Security              Check       (Full retirement Age)              and Age 67                    Received 

                                                                                                        (Full retirement age)          (Note 1)

62                 $2,127                                  60                                          $127,620                  $143,573

63                  $2,279                                 48                                          $109,392                  $120,331

64                  $2,431                                 36                                          $  87,516                  $  94,080

65                  $2,634                                 24                                          $  63,216                  $  66,377

66                  $2,836                                12                                           $  34,032                  $  34,883

67                  $3,039                                0

70                  $3,768  (Note 2)

Note 1. Calculation of Adjusted “True” Amount Received. This adjusted “true” amount assumes that the party receives some monetary return on their monies received (i) by investing their social security monies, (ii) by getting interest on the funds (e.g., by the use of certificate of deposit instruments), or (iii) by paying down existing debt (e.g., certainly any credit card debt, car loans, or via making additional principal paydowns on real property financing). The adjusted “true” value amount in the above chart assumes a modest 5% per annum ROI.

Note 2. The Confusing Phrase “Full Retirement Age.” This is one’s age-67 base “full” monthly retirement benefit. However, if you defer taking any social security until age 70, then your eventual social security monthly check will be increased for every month deferred until age 70 — at which time no further increases are permitted.

Note 3. Cautionary General Note. This article does NOT address several other aspects relating to one’s social security commencement decision. The other MAJOR aspect is normally whether one plans to be working during these years since only about $20,000 per year is allowed without lowering your social security check receipt. Also, this article does not address more unique factors such as foreign wives, continued spousal income, and supplemental social security benefits, etc. If these types of considerations may be applicable, then one should try (good luck) to meet with the social security or even have a social security attorney or financial advisor analyze your situation. The last major and somber consideration, though terribly speculative, is a projection of one’s personal life expectancy – are you gravely ill or in great health.

Therefore, in sum, concept of “break-even month” is how old you must become before the aggregate of your “full retirement payments” exceeds the aggregate of all those monthly checks you would have received by taking your social security before one’s full retirement age. It is a relatively simple calculation, but it is too often not calculated; too-often not considered by people making this potential “early-start” decision. This author recognizes that many writer’s and supposed financial advisors routinely encourage people to wait — but, as noted at the beginning of this article, that may NOT be a good idea.

            Adjusted “True”        Amount of                  Difference between           Break-Even       

          Amount Received   “Full Retirement Age”  Your Early Amount     Months          Years   

        If One Starts Taking    Monthly Check          and the FRA Amount

         Social Security at  

(See above chart)

Age 62         $143,573              $3,039                $3,039-$2,127 = $912     157 Months     13.1Yrs   (75.1)

Age 63         $ 120,331              $3,039               $3,039-$2,279 = $760     158 Months     13.2 Yrs (75.2)

Age 64         $  94, 080              $3,039               $3,039-$2,431 = $608     155 Months     12.9 Yrs (76.9)

Age 65         $   66,883              $3,039               $3,039-$2,634 = $405     165 Months     13.8 Yrs (78.8)

Age 66         $   34,883              $3,039               $3,039-$2,836 = $203     172 Months     14.3 Yrs (80.3)

Age 67         Full Retirement Age – $3,039  (and increases to age 70)

The proverbial bottom line: You theoretically may have made the “wrong” financial decision to start taking social security at age 62 if you live past age about 75 (or 78 if you can generate a higher than 5% annual return). This number is the raw calculation of Age 62 plus 13.1 recapture-of-money years, but then it is increased by about another 3 years because throughout most of these years it is presumed you made investments or paid down debts, etc.

Closing Questions.

You may not need to evaluate the above calculations, depending you’re your answers to the following questions.

Question 1. When do you wish to stop working? Will you be making substantially more than the allowed approximately $20,000 per year? If es, then deferral may be advisable.

Question 2. How is your general health? Although it is impossible to know one’s own mortality, this is – frustrating though it may be – relevant in assessing these considerations. If you think it even remotely likely that you may pass away in your mid-70s – or if you believe your living expenses in your late 70s and thereafter will be substantially less, then consider taking social security at once.

Question 3. Again, although not a true financial-based consideration, some people further assess whether they wish to have more money when they are “younger” i.e., ages 62 to 70 rather than being a wealthy mid-70-year-old. If that is the case, then you may wish to consider starting your social security early. My personal opinion is that this plan should be pursued only if you already have in place (and paid or budgeted for) your long-term care and life insurance needs.

The Bottom Line 

 In the humble opinion of this author, except in instances of post-62, fully-employed people, the standard-spoken “defer your social security” advice can be gravely wrong in many instances and for many people. Your “alternative-insurance-uses-of-the-money” should be considered. Your “break-even month” should be calculated. Then decide.

Indeed, social security is “your” money. Start taking it when and in a manner that suits your personal assessments, personal needs, and personal desires. Regrettably, it is not an easy decision, but for many Americans, it remains an important decision.

Recommended Well-Designed, Useful Sources. AARP Social Security Calculator. 

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Copyright 2023 by Mack W. Borgen. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, except in the case of brief quotations embedded in critical articles or reviews, without prior written permission by the author.

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