Hopefully this is a simple question but I know with Social Security it isn't so simple sometimes.

If I delay taking Social Security until I'm 70, my benefit grows at 8% per year. But if I stop working, I'll need to withdraw from my retirement account to make my living expenses.

Which is the better way?

Is it so simple to say "If my investments make more than 8% I should take early Social Security and if they make less than 8% I should delay taking Social Security"?

(Of course know that you'll make more than 8% is difficult and the Social Security number is guaranteed. A guaranteed 8% may be difficult to get.)

Note: I have the required 35 years and continuing to work is really not an option.

  • Hmm, there are some interesting calculators at calculator.net/social-security-calculator.html. They take the COLA into account and it does seem to confirm that the simplistic statement above is at least approximately correct. Feb 16, 2022 at 12:07
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    The frustrating answer to this question is "depends on how long you are going to live".
    – Hilmar
    Feb 16, 2022 at 18:58
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    Another (over) complication that goes beyond how long an individual will live is the utility of the income over time. If the income is in addition to other retirement resources, will you be able to use the cash earlier in your retirement where you're presumably physically capable of putting it to use (hobbies, travel, etc.)? OR, will the cash be needed at later stages in life to supplement needed support services? The social security income can be used for so many things it's difficult to use a pure actuarial model to determine what gives your more cash. What gives you more utility?
    – Dave D
    Feb 16, 2022 at 23:50

2 Answers 2


Social Security is designed to be actuarily neutral. Actuarily speaking the increase in monthly benefits you get from waiting to start your benefit is expected to equal the amount you'd gain from getting more checks as an early benefit recipient. So the real question is whether you expect to outlive your actuarily expected lifetime. If you're retiring in reasonably good health and your parents lived into their 90s, you're better off waiting. On the other hand, if you expect to die early, you'd want to take the benefit as early as you can.

If you're going to plug numbers into a calculator, using the expected returns of an equity portfolio is problematic because you're comparing an essentially zero investment risk option against a risky option. The fair comparison would be something like treasury bonds that are also backed by the government (and which will yield a lot less than 8%).

It's also problematic to take into account the annual COLA adjustment like the calculator you linked to does. If you're comparing two different cash flows over time, you'd want to compare their present values which means that you have to discount cash received in the future to account for inflation-- $1 in your hand today is more valuable than $1 in your hand in 10 years. Since the COLA adjustment is designed to track inflation, if you inflate future payouts using the COLA, you'd have to discount them back with the inflation rate. Since COLA is supposed to equal inflation, though, the two terms cancel out and you should just consider the un-adjusted cash flows for a fair comparison.

That being said, while basing the decision on whether you expect to outlive actuarial projections does create some risks that aren't symmetrical. If you think you're going to die relatively young but you get lucky and live into your 90s, you'll lose out on a lot of Social Security cash. If that also means you outlive your other investments, that could be very problematic. On the other hand, if you think you're going to make it to 100 but get hit by a bus the day after you claim, you're not going to be around to mourn the loss of a few years of checks and your heirs probably won't care too much that you didn't have a pile of Social Security cash to pass on. Personally, that would make me lean toward assuming you'll outlive the projections and taking Social Security later unless you're really sure that you won't live to the breakeven point (which should be somewhere in your late 70's or early 80's). You could mitigate some of those asymmetric risks by using your other investments to buy an immediate annuity that would pay out however long you live in order to ensure that you weren't going to outlive your investments if you wanted to take Social Security somewhat early.

And, of course, all this assumes that you're single or that your partner would be claiming on their record rather than on your record. If your partner is going to use your record to claim her Social Security, then you'd need to consider the joint probability of dying to figure out the breakeven point. And it assumes that Social Security continues to pay out at the full rate even after the trust fund is exhausted which is projected to happen in 2032-2034 depending on the assumptions used.

Here's a good article on calculating the break-even point (though I do find it annoying that they say not to include COLA adjustments but don't attempt to explain why).

  • I know that SS is supposed to be actuarially neutral, but surely claimaints' risk of death doesn't go up by the exact same percentage per year, right? Or is it close enough to the same percentage that the 8% is a decent approximation?
    – stannius
    Feb 16, 2022 at 21:51
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    @stannius: "Actuarially" in this context implies that we're talking about averages over large populations. An individual person's risk of death is probably highly complex, difficult to calculate, and changes chaotically and unpredictably over time, but for the purposes of budgeting the entire Social Security program, the only thing that matters is the overall statistical trend, not the quirks of each individual claimant. This also implies that an individual can probably gain a significant financial advantage if they have better knowledge of their life expectancy than the government.
    – Kevin
    Feb 16, 2022 at 23:46
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    The short/working definition of "actuarialy neutral" is: based on how long an average American would be expected to live. So, the overly-simple but probably useful rule of thumb would be: if you're "upper middle-class" or higher and not in bad health, you'll collect more by waiting; if you're "middle-class" or lower and not in unusually good health, you'll collect more by starting right away.
    – Jeffiekins
    Feb 17, 2022 at 20:59
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    I found this article (that I'm sure I've read before) that says the statistics they're using are out of date: "Liz Weston: Why taking Social Security early costs too much " apnews.com/article/health-17b6763f8f18e11487e89bb9e39a6014
    – stannius
    Feb 18, 2022 at 0:14

In addition to Justin's excellent answer - There's also an interaction between your retirement income and SS for tax purposes.

Above a certain income, and SS is taxed, 85% of it, at your marginal rate. e.g. $1000 of SS income sees $850 taxed at say, 25%.

During the time you are drawing from your retirement accounts you might benefit by also converting some pretax money to Roth IRA as well. This might save you in extra medicare costs as well as SS taxation.

Besides searching for details on line, I'd suggest you run a scenario on this year's tax return to see how your potential SS payment is taxed.

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