Social Security retirement benefits (hereinafter “SSRB”) are available to most workers in the United States. Social Security is a government program that collects payroll taxes during a worker’s career and distributes benefits during retirement. For many individuals, SSRB is an important component of a comprehensive retirement plan. The governing Social Security rules discussed herein are found in 42 U.S. Code Section 402, et seq.

To qualify for benefits, a worker generally must earn forty credits. To earn a credit, a minimum level of income must be achieved within a calendar quarter (adjusted annually for inflation). In 2026, one credit is earned for every $1,890 of income, with the possibility of earning four credits per year. In practical terms, this means that after ten years of work, a person may qualify for SSRB.

Importantly, “retirement” for Social Security purposes does not necessarily mean stopping work. Instead, it refers to reaching “full retirement age” (hereinafter “FRA”), which is defined by law. While FRA was once age 65, it has gradually increased. For individuals born in 1960 or later, FRA is age 67.

GENERAL CLAIMING RULES

A worker’s SSRB is based on their average indexed monthly earnings over their thirty-five highest-earning years, as well as the age at which they begin claiming benefits. There is a cap on the amount of earnings used in the average indexed monthly earnings calculation. As a result, the maximum standard retirement benefit available at FRA translates to just over $4,000 per month for the 2026 calendar year.

Workers may claim benefits as early as age 62, however, the timing of the claim significantly affects the benefit amount:

• Before FRA: Benefits are reduced.
• At FRA: The worker receives the full standard benefit.
• After FRA up to age 70: Benefits increase.

If claimed at age 62, benefits are reduced to 70% of the FRA amount. Claims made between age 62 and FRA are reduced on a proportionate monthly basis.

Conversely, delaying benefits increases the monthly payment. If benefits are claimed at age 70, a worker will receive 124% of the FRA amount, an increase of 8% per year after FRA. Claims made between FRA and age 70 are increased on a proportionate monthly basis. There is no additional increase for delaying beyond age 70.

Workers who claim benefits before FRA and continue to earn income over an annually inflation adjusted amount may see their benefits temporarily reduced. In 2026:

• Benefits are reduced by $1 for every $2 earned above $24,480.
• Benefits are further reduced by $1 for every $3 earned above $65,160.

After reaching FRA, there is no reduction in SSRB based on earned income. Any benefits withheld prior to FRA due to excess earnings are later added back into the benefit calculation.

Finally, all SSRB payments are adjusted annually for inflation. For example, a $2,000 monthly benefit would increase to $2,060 in the next calendar year with a 3% cost-of-living adjustment.

SPECIAL CONSIDERATIONS

Once claimed, SSRB typically continues based on the initial benefit for the lifetime of the worker. As a result, the decision of when to claim benefits is often analyzed using life expectancy. Because no one knows their actual lifespan, general life expectancy tables are commonly used. However, individuals in poor health or with shorter expected lifespans may benefit from claiming earlier. This article focuses primarily on individuals with average life expectancy.

THE MYTH ABOUT DELAYING BENEFITS

Many advisors and articles emphasize the advantage of delaying SSRB until age 70, sometimes even citing the 8% annual increase as equivalent to a greater investment return. This comparison is misleading. While it is true that delaying increases the monthly benefit, it ignores a critical factor: the benefit payments forgone during the years when benefits are not collected.

THE REAL ANALYSIS: BREAKEVEN POINT

A more accurate way to evaluate the decision is through a breakeven analysis, determining how long it takes for the higher monthly benefit, from delaying, to offset the payments forgone.

EXAMPLE OF A BREAKEVEN ANALYSIS

Assume a worker has an FRA of 67 and a monthly benefit of $3,000 at that age.

• If the worker delays until age 70, assume the benefit increases to $3,720 per month.
• The worker forgoes $3,000 per month for 36 months, totaling $108,000.
• The increased monthly benefit is $720.

Dividing $108,000 by $720 results in 150 months (12.5 years). Therefore, the breakeven age is 82½. If the worker lives beyond this age, then the delay in claiming benefits to age 70 results in a higher total lifetime benefit. If not, claiming earlier would have been more advantageous.

ADDITIONAL FACTORS

The Social Security Administration publishes actuarial life expectancy tables which include remaining life expectancy at each age. These tables indicate that the average life expectancy for a 67-year-old American is about age 85. At first glance, for a 67-year-old American, delaying may appear beneficial. However, this simplified analysis overlooks two key factors:

1. Inflation Adjustments

Including a modest annual inflation adjustment (2–3%) lowers the breakeven age to approximately age 80.

2. Investment Returns

Investment returns can have a much greater impact.

If a worker claims benefits earlier, those funds can either:

• Be invested, or
• Reduce withdrawals from an existing portfolio.

Either way, earlier benefits increase the amount invested over time, potentially generating additional returns. An investment return equal to the inflation factor brings the breakeven analysis back to approximately age 82 ½. A more aggressive portfolio allocation may push the breakeven age significantly later, possibly into the 90s. For individuals with investment portfolios, this factor alone can outweigh the advantage of delayed benefits.

OTHER REASONS TO CLAIM EARLY

Even if the breakeven age aligns with life expectancy, there are valid reasons to claim benefits earlier:

• Mortality risk: If the worker dies before reaching breakeven, early claiming yields a higher total benefit.
• Policy risk: Future changes to Social Security could reduce benefits.
• Certainty preference: Receiving benefits sooner provides financial flexibility and peace of mind.

CONCLUSION

For individuals with a longer life expectancy or strong family longevity, delaying benefits may still be the right choice. However, the decision is highly individual and should consider more than just an increased monthly payment. Ultimately, if someone lives well beyond their breakeven age, the financial outcome may favor delaying. But even then, the difference may be less important than overall quality of life.

*Lawrence J. (Larry) Macklin, CPA, JD, AEP®, is a financial planning consultant with 44 years of financial and tax experience and a past president of the National Association of Estate Planners and Councils.

© 2026 Larry Macklin. To contact Larry, LarryMacklin13@gmail.com; 410-960-0425

Opinions expressed in this paper are mine and only mine. Any examples presented are hypothetical and do not reflect specific strategies for actual clients. They are for illustrative purposes only. The availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. This material is current as of the date specified and is for informational purposes only. While the information contained herein is believed to be reliable, I cannot guarantee its accuracy or completeness. Information in this article is not intended to constitute legal, tax, or investment advice. Consult your legal, tax and financial advisors before making any financial decisions.