Social Security Income Crossover

“Should I take my SSI early or delayed?”

When should you start taking your Social Security income? Those of you facing this question (i.e., you were born between 1946 and 1954) have choices. You can take it:

  • • EARLY…                                          starting at age 62
  • • FRA (Full Retirement Age)…         starting at age 66
  • • DELAYED…                                   starting at age 70

Your choice determines your benefit, as illustrated in the chart below.

Obviously, if you take it early, you’ll get a lower benefit amount for the rest of your life, but you’ll start to draw the funds sooner. On the other hand, if you take a delayed payment, you’ll get paid at a higher rate but will have missed out on several years of payments. So what’s the right answer?

One valuable input to this question is the CROSSOVER point. This answers the question: When will the cumulative benefits of one choice surpass another?

In the chart above, we’ve looked at a couple who are both currently 62. In this case, the husband’s FRA benefit is $2,700/month; the wife’s $2,000/month. We assumed a cost-of-living adjustment (COLA) of 1.5% per year. The vertical orange dashed line shows that if they live past age 79, they’re better off with FRA than EARLY. And the black dashed line shows that if they live past age 84, they’re better off taking DELAYED than FRA. Then comes the tough question: What’s your best guess on your longevity?

Of course, this CROSSOVER calculation is only one input into your decision, but it’s an important one. Ask your financial advisor to construct a CROSSOVER chart for you. Other considerations might include your need for cash flow and your taxes. 

Robert A. “Rocky” Mills is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Westlake Village. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC or its affiliates.