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#74 - Social Security Claiming Strategies: Beyond the Breakeven Calculator
In this episode of The Simply Retirement Podcast, Eric Blake, CFP®, discusses one of the most common retirement questions: Should you start Social Security early and invest the benefits, or delay for a larger guaranteed income later? Eric explains why this decision goes far beyond simple breakeven math, covering factors such as life expectancy, risk tolerance, survivor benefits, and tax law changes that can impact your long-term plan.
Introduction
Eric Blake: On today’s show, we are going to talk about a very common question: Should you start Social Security early and invest those benefits, or should you wait and delay for a larger guaranteed income later? It’s a decision that goes way beyond just the breakeven math. Today, we are going to unpack the real trade-offs you need to consider.
Welcome to another episode of The Simply Retirement Podcast, where we want to empower and educate women to live your retirement on your terms. I’m your host, Eric Blake, practicing retirement planner with over 25 years of experience and founder of Blake Wealth Management. I would not be the man I am today without the women in my life.
When individuals and couples start thinking about their Social Security decision, it often comes down to a math equation—or a guessing game. The problem is that most breakeven calculators don’t give you the full story. We are going to share why that is and, more importantly, some of the other factors you need to think about—especially if you are considering starting your benefits early so that you can invest those benefits for the future.
Joining me once again is Wendy McConnell. Wendy, how are you?
Wendy McConnell: I’m good. How are you?
Eric Blake: I am doing well.
Wendy McConnell: Good.
Eric Blake: We’ve got a little cooler weather here, so it’s nice not to be 95 degrees.
Wendy McConnell: Wow. That’s like super cool for you guys, right?
Eric Blake: Well, we’ve only had, I think, about four days over 100 this summer, which is much lower than expected.
Wendy McConnell: Well, enjoy it.
Eric Blake: Yes. Next week we’re supposed to be in the eighties and nineties, so we’ve got a little cold front coming through.
Wendy McConnell: Whoa, cool front!
Listener Question
Eric Blake: All right, so I’ve got a question. What would you consider the biggest question to answer when it comes to deciding when to start Social Security?
Wendy McConnell: Well, I guess it would be: if I start taking it early, does that make up for the benefits I’m giving up that increase every year that I wait? Does it break even?
Eric Blake: Great question. The real answer is life expectancy. If we knew when you were going to die, we would know the answer to all these questions.
Wendy McConnell: True.
Eric Blake: We don’t know that, but it’s still the biggest question.
Before I forget, make sure to visit thesimplyretirementpodcast.com for all the links and resources mentioned in this episode. And if you have a question about Social Security or any other retirement planning topic, visit thesimplyretirementpodcast.com/ask.
All right, let’s talk about the problem with breakeven analysis.
Problem with Breakeven Analysis
Eric Blake: When you go online and search “Social Security breakeven calculator,” you’ll find a bunch of different versions. Most of them, though, are only looking at breakeven in the simplest sense—meaning, at what point (what age) do I need to reach before the benefits I would receive by delaying surpass the benefits I would receive by starting early?
That’s it. There’s nothing else those calculators look at.
Now, one of the tricks I always point out is this: if you are going to use one of those calculators, the first thing you want to look at is whether it includes any inflation factor or cost-of-living increases. Even just assuming a 2 percent inflation rate can change those breakeven ages by a year or two. That might not seem significant, but it can be when you’re trying to make the right decision.
Let’s walk through an example of some things to consider and where these breakeven ages typically fall. Generally, they tend to fall somewhere between ages 77 and 82, regardless of your situation.
Just for example: let’s say we’ve got an individual born in 1960 or later, which means their full retirement age is 67.
Wendy McConnell: Mm-hmm.
Eric Blake: For easy math, let’s assume their full retirement benefit is $3,000 per month.
At age 62, that means they’d receive about $2,100 a month.At age 65, about $2,500 a month.If they wait until age 70, that benefit would grow to around $3,700 a month.
That’s a pretty wide range—about $1,600 per month between age 62 and 70.
Wendy McConnell: Right.
Eric Blake: The argument most people make is, “The earlier I start, the more income I’ll have early on.” That’s true, but that’s where life expectancy really comes into play.
For example, if you start at 62 instead of waiting until 70, your breakeven age is around 80.
Wendy McConnell: Okay.
Eric Blake: So, you’d have to live past 80 for delaying until 70 to make sense.
Wendy McConnell: Fingers crossed!
Eric Blake: Exactly. And that’s a big factor. Many people make false assumptions about life expectancy, and we’ll cover that shortly.
But going back to the breakeven math: if you start at 65 with $2,500 a month versus $3,700 at 70, the breakeven is around age 81. If you compare 62 to 70, it’s still in the early 80s, around 82 or so.
Wendy McConnell: Okay.
Eric Blake: You’re basically getting eight years of smaller income early on, so life expectancy plays a major role in this equation.
Social Security Benefit Options
Eric Blake: Now, back to the original question of the episode: what if I start early and invest those benefits?
Number one, there are very few breakeven calculators that will actually show you what that would look like. Quite honestly, you’re probably better off sitting down with a financial advisor—someone who has the tools to help you evaluate the full picture.
Let’s say you start at 62 versus 70. The breakeven age, just based on the basic math, is around 82. What if you invested that $2,100 a month into a Roth IRA, a brokerage account, or another investment vehicle? That money would grow, and that changes the math pretty significantly.
So, if you were to make that decision, here are the considerations you need to think about regarding how you would invest those proceeds:
Understand your investment vehicle.You don’t want to simply take that money and put it into a CD or savings account. Even though interest rates are higher now and 3–4 percent might sound appealing, you would be missing out on the guaranteed 8 percent annual increase Social Security gives you by waiting. That’s a big hurdle to overcome.
Compare guaranteed growth vs. market returns.If I could tell you that just by doing nothing—simply waiting to file—your $2,100 benefit at 62 would become $3,700 by age 70, that’s a substantial guaranteed increase.
Wendy McConnell: Okay, but you’re also getting the money earlier.
Eric Blake: True. But remember, you’re also giving up that 8 percent per year guaranteed increase by taking it sooner. So, while investing may make sense for some people, the question becomes: how much risk are you willing to take on to potentially outperform that guaranteed return?
Assess your risk tolerance.This decision heavily depends on whether you’re a conservative or aggressive investor. The more aggressive you are, the higher the potential return—but also the greater the market risk. If you are conservative, you’re more likely to come out ahead by simply delaying your Social Security and capturing that guaranteed 8 percent annual increase instead of exposing your money to market fluctuations.
Coordinating Benefits Between Spouses
Eric Blake: I want to share a real scenario we went through with a client not long ago because this is where strategic planning really makes a difference.
If you’re a couple, there’s often a higher earner and a lower earner. One of the key factors to consider is the survivor benefit, which allows the surviving spouse to continue receiving the higher of the two benefits after one spouse passes away.
In this case, she had retired earlier, while he planned to continue working. Since she was the lower earner, we decided she could start her benefits and use them to fund a Roth IRA.
Wendy McConnell: So she’s receiving her benefits and putting them into a Roth IRA?
Eric Blake: Exactly. She could make that contribution directly. Meanwhile, he delayed claiming his benefit because he was still working full-time and would have been subject to the earnings test if he started early.
By waiting, his benefit continued to grow—more importantly, his survivor benefit grew as well. We know that based on longevity statistics, family history, and income levels, the higher earner’s benefit often becomes the survivor benefit.
So, this approach allowed them to:
Build tax-free assets through the Roth IRA.
Increase the higher earner’s future benefit (and therefore the survivor benefit).
Keep flexibility in case their income or health circumstances changed.
That’s why breakeven calculators fall short—they don’t account for these real-life variables.
This is the difference between maximizing your Social Security benefit and optimizing it.
Maximizing is simply trying to get the largest number possible.
Optimizing means coordinating benefits, taxes, and longevity so the overall plan works best for your household.
Wendy McConnell: All right. I just don’t want to leave any money on the table. I want to take advantage of everything I have coming to me.
Eric Blake: And I completely understand that. But when you’re 85 and have 35 percent less guaranteed income than you could have had by waiting, that decision can feel very different.
That’s why it’s important to think long-term. How will your income look not just today, but 20 or 25 years from now?
Life Expectancy and Planning Horizons
Eric Blake: Let’s circle back to life expectancy, because this is one of the most misunderstood parts of Social Security planning.
We often hear that the average life expectancy in the U.S. has declined in recent years—according to the CDC, it’s currently 78.4 years overall, 75.8 for men, and 81.1 for women.
But here’s what most people don’t realize:
Once you reach age 62 or 65, your life expectancy actually increases. In other words, if you’ve already reached those ages, you’re statistically likely to live longer than the average.
According to a study from Stanford’s Center on Longevity, a healthy, non-smoking couple age 62 has:
A 50% chance that at least one spouse will live another 30 years, to age 92.
A 25% chance that one spouse will live to 97.
That means when we build retirement plans, we often project out to age 95 or even 100—not because we expect everyone to live that long, but because we want the plan to succeed even if they do.
Wendy McConnell: Well, you know, it’s funny because I have two sets of grandparents—one side lived really long, and the other side didn’t. So which one am I?
Eric Blake: Exactly! That’s what makes this so difficult. Even jokingly, when you say, “I’ll call it at 90,” you’re still well past those breakeven points.
So, if someone says, “I just want to start at 62 and take it as soon as possible,” that’s fine—as long as you understand what you’re giving up in guaranteed income later.
You just need to be comfortable with that trade-off, because you can’t go back and change it later.
Earnings Test and Income Coordination
Wendy McConnell: Let me throw this scenario at you. Okay, I’m 64—not yet at full retirement age—but I am retired. I’m trying to decide whether to start taking Social Security because I want to travel. I want to travel for the next five to ten years. So when I’m older, that lower income you’re talking about—well, I’ll just be sitting in my rocking chair or playing pickleball every day. So at that point, what’s wrong with starting early? I don’t need as much money later.
Eric Blake: That’s a great question, and it’s really where planning comes in.
If you’re retiring at 64 and Social Security is going to be part of that plan, most likely it’s not your only income source. You probably have investment assets, IRA or 401(k) accounts, and other savings.
So the question becomes:
Do you have enough other income sources to cover your needs from 64 to 67—or even to 70—so that you can allow your Social Security benefit to continue growing?
Wendy McConnell: Okay, so you’re saying if you have other options, use the other options because it’s more beneficial.
Eric Blake: Exactly. If Social Security is your only income source, then you don’t really have a choice. You’ll need to start it when you stop working.
But if you can bridge the gap with other income—whether from investments, part-time work, or a pension—you can delay claiming your benefit and lock in those higher guaranteed payments later on.
I think one misconception is that retirement is always about choosing when to stop working. But for many people, there comes a time when you have to retire, whether due to health, job changes, or personal reasons. If that happens and Social Security is your only source of income, then you make the best decision you can based on your circumstances.
However, if you have flexibility—other assets or income streams—then delaying your Social Security gives you more long-term financial security.
Tax Considerations and the 65+ Deduction
Eric Blake: This also leads us to another factor—taxes.
For the next few years, we’re operating under new tax laws that include an additional $6,000 deduction per individual age 65 and older.
That can have a significant impact on your decision about when to start benefits.
Here’s why:
If that deduction reduces your taxable income, it may lower how much of your Social Security is subject to tax.
According to the Social Security Administration, up to 90% of retirees will not pay tax on their benefits—not because Social Security is tax-free, but because this new deduction shields a portion of their income.
So for some, that makes starting benefits in this lower-tax environment more attractive.
But for others—especially those with IRAs or 401(k)s—it can present a tax-planning opportunity to delay Social Security. You could instead draw income strategically from pre-tax accounts in the short term, converting some to Roth accounts or taking advantage of lower brackets, while your Social Security benefit continues to grow.
Wendy McConnell: And that’s while this benefit is available, right? It’s not going to last forever.
Eric Blake: Correct. And that’s an important point.
If you retire before age 65, you’re not eligible for that deduction yet, and you may not be on Medicare. So planning where your income will come from—between your mid-60s and when those benefits start—is critical.
Your Social Security strategy and tax strategy really need to work together. For example:
You could use early retirement years (before claiming Social Security) to complete Roth conversions at lower tax rates.
You could reduce future Required Minimum Distributions (RMDs) by drawing down pre-tax accounts strategically.
All of that can help control your tax bill later—when you’re also receiving Social Security and potentially paying higher Medicare premiums.
That’s why this period between your early sixties and age 70 is so valuable for proactive tax and retirement income planning.
Emotional Factors and Risk Tolerance
Eric Blake: The last piece I want to mention is the emotional side of this decision.
Some people value the peace of mind of guaranteed income more than potential investment gains. For them, starting earlier might feel better, even if the math says otherwise.
Others are comfortable with risk and would rather delay benefits or invest early proceeds for the long-term potential upside.
Neither answer is wrong. What matters is understanding your trade-offs:
If you’re going to invest those early benefits, make sure your returns actually exceed the 8 percent you’re giving up by delaying.
If you prefer certainty and want to minimize market exposure, delaying benefits might be the smarter choice.
Wendy McConnell: Don’t miss out on 8 percent to make 5 percent!
Eric Blake: Exactly! That’s a perfect way to put it.
Ultimately, your Social Security decision is not just about math—it’s about balancing risk, longevity, and lifestyle priorities.
Future Legislative Changes and Cost-of-Living Adjustments
Wendy McConnell: Will that 8 percent increase ever change? Like, could it be a different number 10 years from now?
Eric Blake: Anything is possible. I assume you’re referring to the annual delayed retirement credits—the 8 percent increase you get each year you wait past full retirement age until 70.
Now, could that number change in the future? Technically, yes. But I really don’t think it’s likely to be the first thing Congress touches if reforms happen.
The last major change to the Social Security system was in 1983, when the full retirement age was gradually increased from 65 to 67. That transition took about 40 years to fully implement—incrementally raising the age based on birth year.
If adjustments happen again, it will probably look similar. Maybe the full retirement age moves from 67 to 70 for younger generations. But it’s unlikely they’ll change the 8 percent delayed credit anytime soon, since there are other levers they can pull first.
They could, for instance:
Adjust how cost-of-living increases (COLAs) are calculated.
Limit COLAs for higher-income retirees while maintaining full adjustments for those more dependent on Social Security.
Gradually raise the full retirement age for younger workers.
These would be more politically viable than changing the delayed credit formula.
Wendy McConnell: So, if I’m already collecting Social Security, those cost-of-living increases are based on the current economy?
Eric Blake: Exactly. The COLA is tied to inflation, so whatever the inflation factor was for the prior year determines the adjustment for the next year.
For example, inflation in 2024 was roughly 2.5 percent, so everyone receiving Social Security saw a 2.5 percent increase in their benefit for 2025.
A few years ago, when inflation spiked, the COLA was 8.7 percent—and everyone got that increase.
The question is whether future changes might make COLAs income-based, meaning higher earners receive a smaller increase. That’s one potential way to strengthen Social Security’s long-term funding without reducing benefits for those who rely on it most.
Wendy McConnell: Got it. That makes sense now. I was confused before, but now I understand the difference between the annual cost-of-living increase and the 8 percent delayed credits.
Eric Blake: Right. The delayed credits are the 8 percent annual increase you earn by waiting to claim, while the cost-of-living adjustments apply to everyone already receiving benefits.
So when we think about possible reforms—whether it’s adjusting COLAs, raising the retirement age, or modifying payroll taxes—these are the levers policymakers are likely to explore over the next decade.
Preparing for a Secure Retirement
Eric Blake: Before we close out, I want to mention one more thing.
If you are considering investing your Social Security benefits or just want to improve your overall retirement plan, we have a free resource called Preparing for Retirement: Seven Essential Strategies for Successful Investing in Retirement.
It’s a helpful guide that walks you through key principles for investing, managing risk, and making smarter financial decisions in retirement. You can find the link in the episode summary or at thesimplyretirementpodcast.com.
As always, thank you for listening, and thank you, Wendy, for joining me again.
Wendy McConnell: Thank you! I was very confused at the beginning of this conversation, and now I’m not—so thank you for clearing that up.
Eric Blake: That’s what we’re here for! And thank you to everyone for tuning in.
For all the links and resources mentioned today, visit thesimplyretirementpodcast.com. Please don’t forget to like, follow, and share our show.
Until next time, remember: retirement is not the end of the road—it’s the start of a new journey.
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