Dear Liz: The standard advice is to delay taking Social Security as long as you can. But if I plug my expected benefits into an Excel spreadsheet, I find that my total benefit if I retire at 67 doesn’t pass my total benefits if I retire at 62 until I turn 77. Retiring at 70 seems like it only pays off, in the long run, once I am 79.
Answer: A spreadsheet is not the best way to determine when to take Social Security, since it can’t capture many of the important factors that should go into the decision.
A key one is survivor benefits. If you’re married and the higher earner, your benefit determines what the survivor gets after one of you dies. Applying early could mean locking the survivor into an inadequate income for the rest of their life.
Another factor is longevity risk, which is often poorly understood. Many people underestimate their life expectancy and the possibility of outliving their savings. Maximizing a Social Security benefit gives you some insurance against that risk.
A free Social Security claiming calculator, such as the one offered by AARP, is a much better place to start. You can learn even more from a paid version, such as the ones offered by Maximize My Social Security and Social Security Solutions.