When Should You Take Your Social Security Benefits?

Daniel B. Eagan

Determining when to start receiving Social Security benefits can present a dilemma: Should you wait and receive higher annual benefits, or would you be better off receiving smaller payouts over a longer period?

The answer depends on two variables: how long you’ll live and how much of your lifetime spending your existing assets will cover, as my colleague Matthew Teich explained in a recent white paper.

Of course, most people don’t know the length of their remaining days, but average longevity keeps increasing. In the US, there’s now a 25% chance that one or both of a 65-year-old couple will make it beyond age 97.

A rigorous wealth-planning analysis can provide a good idea of how much money someone will need to meet his or her lifetime spending needs, even if capital-market returns are dismal. At AllianceBernstein, we call that figure “core capital.” Anything left over for extra spending or leaving to family, friends or philanthropy we call “excess capital.”

Our analysis shows that, for most people, the best course is not likely to be what they’d expect. For most people with sufficient core capital, starting to draw benefits at age 66 is likely to be the best course. For most people with too little core capital, waiting until age 70 offers significant upside potential.

But first, let’s review the basics.

Under current Social Security rules, “full retirement age” is 66 for people born between 1943 and 1959. You can begin taking benefits at age 62, garnering lower payouts but for a longer time period. Or you can wait until age 70, when distributions top out. If you wait until age 70, you’ll receive roughly 30% more per year.

For those who believe that they are not likely to live very long—perhaps because of illness—the best course is almost always what you would expect: take the money as soon as you can. More, but smaller payments are most likely to maximize your wealth.

The Displays below show why that’s not likely to be true for people who are more likely to have average longevity, by charting the expected wealth as a person ages, starting at age 62.

Adequate Core Capital? Not Enough Core Capital?

We estimate that the core capital for a 62-year-old who spends $50,000 annually, adjusted each year for inflation, to be about $1.5 million. That may seem high, but we’re trying to provide protection even if capital-market returns over the rest of his or her life are truly terrible—if only 1,000 out of 10,000 reasonable scenarios are worse. For someone who spends half as much, or $25,000 a year, the core capital required would be about half as much, or $750,000.

The three lines in each display show how much wealth an individual would likely have in the median case—if half of all projected results are better and half are worse.

For the woman with sufficient core capital, the expected median wealth is virtually the same whether she starts taking benefits at 62, 66 or 70. The three lines don’t diverge significantly until she’s well past 90. For most people with sufficient core capital, we conclude, there’s little benefit in waiting to start collecting Social Security benefits.

But for a woman with insufficient core capital there’s a compelling reason to wait until age 70 to start receiving benefits, even though there’s always the risk that she will die before beginning to receive benefits.

Why? The higher payout that comes from the delay allows you to build more wealth in your later years, when you’re likely to need it most. Waiting to take advantage of the higher Social Security benefits provides, in effect, low-cost longevity insurance, courtesy of the government.

Of course, many other factors may affect the answer. Most people would benefit from professional guidance.

The Bernstein Wealth Forecasting System, driven by the Capital Markets Engine, uses a Monte Carlo model that simulates 10,000 plausible paths of return for each asset class and inflation and produces a probability distribution of outcomes. The model does not draw randomly from a set of historical returns to produce estimates for the future. Instead, the forecasts (1) are based on the building blocks of asset returns, such as inflation, yields, yield spreads, stock earnings and price multiples; (2) incorporate the linkages that exist among the returns of various asset classes; (3) take into account current market conditions at the beginning of the analysis; and (4) factor in a reasonable degree of randomness and unpredictability.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.

Daniel B. Eagan is Head of the Wealth Management Group and Matt Teich is a senior investment planning analyst in the Wealth Management Group, both at AllianceBernstein.


  1. Bernard Armstrong

    This is not easy to understand. The simple question I have regarding SS is how does one calculate the age crossover point.

    If one retires at 62 vs 67 when will he reach a breakeven point.

    Could you direct me to a chart or calculator to determine that.

    i.e when does getting an earlier amount get washed out by the higher benefit of waiting until a later age.

    Thank you

    Bernard Armstrong

    • There are numerous calculators available online to help individuals estimate their benefits. The Social Security Administration itself provides several, some more detailed than another; one even allows you to input your Social Security earnings data.
      However, to determine the best option, it is necessary to consider benefits in the context of their overall investment plan. I cannot provide a single answer that will be true for all individuals.

  2. Barbara Wagner

    What is your opinion on the strategy to “file and Suspend” at the age of 62????

  3. Is there a calculator that will help show when you would break even from starting at 62 or waiting until age 66 or 70.
    thank you.

    • As I noted in a reply to another question, below, the Social Security Administration provides several useful online calculators.

  4. john Haran

    Dan, how does this analysis and recomendation change if the person has not yet retired at age 66 and plans to work until age 70 and is earning a much higher income than when the person retires lets say at age 70. At what tax rate is social security taxed?


  5. Mike Townsend

    For people not expecting to live long you state “Fewer but larger payments are most likely to maximize your wealth.”

    Don”t you mean fewer but earlier payments? Taking payments earlier means taking smaller payments, but the sum of payments received prior to death may be larger.

    • Matthew Teich

      You”re right! It should be more but smaller payments, not fewer but larger.
      I don”t know how we didn’t catch this error the first go round.
      Thanks for catching it for us, Mike. I will correct it in the article.

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