Calculating Break-Even Ages for Delaying Social Security Beyond Normal Retirement Age

Document Type



Published by The Financial Planning Association in Journal of Financial Planning, volume 19 issue 3, March 2006, pages 70-81.
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Financial planners, Social security, Retirement planning, Age, Retirement benefits, Tax benefits


Planners must frequently advise clients on the future economic effects of the timing of collecting Social Security benefits. The paper looks at three options for a worker who decides to continue working past normal retirement age, or has other adequate sources for retirement income, but takes the benefit at the normal retirement age: 1. always spend the after-tax amount, 2. always invest the after-tax amount, or 3. invest the after-tax benefits until age 70 and then make monthly withdrawals from the accumulated fund. Under the first option, most workers with normal life expectancy would be better off financially to delay taking the benefits. The second option of investing the money is investigated under different after-tax-return scenarios. Under the third option, building an accumulating fund until age 70, then to be depleted monthly, will produce a shortfall if the worker lives beyond the break-even age.