Should You Delay Your Social Security Benefits?

There was an interesting comment from a reader, ToughMoneyLove, regarding the benefit of delaying your retirement because the Social Security Administration gives you 8% bump in benefits each year. Here’s that part of the comment:

For your Mom, she will get an 8% bump in benefits for each year she delays taking SS until age 70. Definitely consider that. Where else can you get a guaranteed 8% return?

Delaying Your Social Security Benefits is BAD

This may look good at first, but while you are delaying your Social Security benefits, you are receiving nothing. So you are giving up a whole year worth of Social Security income for an 8% increase next year. Let’s illustrate the point with this table:

If I stop working at 62, I get the reduced benefits of $18,156 for the rest of my life. That may sounds like a bad deal, but if I wait until my full retirement age (67 years old), it would take me 12 more years (to the age of 78) to catch up in the total Social Security benefits received. If I do not live to 78, I lose. The issue is even more pronounced if I wait until 70 — I would have to live to 82 to beat the system. With the average lifespan of American male being about 75, I am definitely NOT doing myself a favor by waiting.

Should I Start My Social Security Benefits Early If I Am Working?

If you receive benefits before reaching your full retirement age, your benefit amount will be reduced. Specifically,

  • In the years before you reach full retirement age, $1 in benefits will be deducted for each $2 you earn above the limit ($13,560 in 2008)
  • In the year you reach full retirement age, $1 in benefits will be deducted for each $3 you earn above the annual limit ($36,120 in 2008)
  • After your full retirement age, your benefits will not be reduced no matter how much you earn.

Let’s assume that we only get 50% benefits between 62-66 and 67% at 67, this is what the table will look like:

In this case, it doesn’t matter if we collect at 67 or 70 because the scenario stays the same as above. However, these penalties make early retirement less attractive if you continue to work. In the example above, it you’re planning to work past 62, it may be worthwhile to wait until full retirement age. Once you live past 72 years old, you’ll be ahead of the curve.

Key Counterpoints From Comments Below

  • You may want to delay taking your benefits so that your surviving spouse can enjoy a larger monthly payment.  This is even more important if your spouse is a younger female (since women live longer than men). — ToughMoneyLove
  • You need to understand the whole retirement funding picture because there are some advantages in drawing from your 401k and IRA early on, while delaying your Social Security benefits. — ToughMoneyLove
  • Life expectancy varies by when you were born and how old you currently are, so this dynamic needs to be considered carefully into the equation. — MITBeta
  • You may want to start collecting early if you have spouse and young children that are eligible for dependent care. — Zeke

For more information, please visit the Social Security Administration web site.

About the Author

By , on Aug 26, 2008
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (55 Comments)

  1. Richard says:

    Can I receive my ss benefits even tho I’m 50 and still working to add to my monthly income

  2. Dan says:

    You may have to pay taxes on your SS income if your earn too much while working. But you can work. There could also be a pretty severe penalty on your benefits if taking SS before full age of retirement.

    Look, these are complicated decisions and as my original article points out, it’s not just about the dollars you get today or this year–it’s about your full economy from the present through the possible age you might live to. These decisions are so important, I don’t see why people won’t spend $150 to get a program to figure this out and make the best decision. You have much more than that to lose by making a wrong decision. Just go to and purchase the $150 program.

  3. Carol says:

    can i keep working and get SS and will it grow because I will be putting money in it while I wotk

  4. Carol Wilson says:

    Iam now 65 , if I keep working and get my S.S. check will I be earning more on it . I will be paying taxes. I was told I would be locked into what ever I get now. That it will not go up because I am working. I can use the extra money now ,but I would like it to grow also. Should I wait another year or till Iam 70 Thanks Carol

  5. KC says:

    What I do not see being addressed here is about all the near sixty two year olds who don’t want to collect SS benefits but who can’t find employment! There are so many! Does anyone know if the benefit between 62 and 66 increases even if you can’t find gainful employment? I don’t think it does. In this now common place scenario any discussion is moot. Companies age discriminatory to the max but it is near impossible to prove.
    Anyone in the know, please advise.

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