Social Security, What's the REAL Best Age to Begin Receiving Income Benefits?

What if everything you've been told about Social Security timing is wrong?

The financial world has been singing the same tune for years: delay Social Security until age 70 for maximum benefits. But host Brandon Roberts is here to challenge that conventional wisdom with a reality check that might change how you think about your retirement strategy.

The Uncomfortable Truth About "Optimal" Planning

Sure, waiting until 70 gives you a guaranteed 8% annual increase in benefits. The math looks great on paper. But here's what those calculations don't account for: life doesn't follow spreadsheet formulas.

While you're busy optimizing for maximum monthly payments, you might be missing out on years of actual living. Brandon breaks down why the "perfect" financial strategy might not be so perfect after all.

What You'll Discover in This Episode:

The Real Breakeven Analysis - Why it takes 11.5 years to recover the income you forfeit by waiting, and what that means when the average nursing home entry age is 83.

The Retirement Spending "Smile" - Why Americans spend the most money at the beginning and end of retirement, and how this pattern should influence your Social Security strategy.

The Physical Reality Factor - What happens when your body and mind start declining just as your "optimized" higher benefits kick in? (Spoiler: money doesn't spend itself.)

Spousal Strategy Complications - For married couples, the decision becomes even more complex. Learn why the lower-earning spouse might be throwing money away by waiting, and how spousal benefits can completely change the equation.

The Intuition vs. Data Dilemma - Why most Americans instinctively avoid waiting until 70, despite what the experts say. (Hint: they might be onto something.)

The Bottom Line

This isn't just another Social Security explainer. It's a wake-up call about the difference between theoretical optimization and real-world living. Brandon challenges the one-size-fits-all approach and gives you permission to think differently about your retirement timeline.

Because at the end of the day, the "correct" age to start Social Security isn't necessarily the one that maximizes your total lifetime benefits—it's the one that maximizes your total lifetime satisfaction.

Ready to rethink everything you thought you knew about Social Security timing? This episode will give you the tools to make a decision that works for your actual life, not just your spreadsheet.

Transcript

00;00;00;00 - 00;00;45;25
Brandon
You are listening to the Yield to Reason podcast, where we strive to help you build the most important part of your retirement strategy. Because a retirement plan built with robust income sources is a retirement plan built for success. I am Brandon Roberts. This is episode number seven. And today we're talking about the largest source of guaranteed income for Americans Social Security.

00;00;45;27 - 00;01;12;27
Brandon
What's the best age to begin receiving benefits? Conventional wisdom might be grossly overlooking something. It's time to get serious about life expectancy and income maximization. As we set off on a journey to help you build the retirement you deserve and the one you actually want. So the rules for Social Security have simplified a good bit over the last couple of years.

00;01;12;27 - 00;01;51;19
Brandon
We we used to have a number of different full retirement ages that were based on the year you were born. Those are gone for the most part now. And everybody's basically moving forward, going to reach their full retirement age at age 67, prior to 67. If you enroll in Social Security, you will take a reduced benefit. You can do that as early as age 62, and there's a sliding scale for the reduction in Social Security that you will receive by age or actually even month if you start your enrollment sooner.

00;01;51;19 - 00;02;16;27
Brandon
So at age 62, for example, your Social Security income benefit is reduced 30%. So whatever your normal benefit amount is would be reduced 30%. I did say at age 63, it's 25 to 25% reduction at age 64 is a 20% reduction. And it scales down until you get to age 67, where there is no reduction, that your full retirement age and you start to receive your full benefit.

00;02;16;27 - 00;02;39;10
Brandon
If you enroll, then in addition to that, if you enroll prior to your full retirement age, you have an earnings cap. So there is a limit on the amount of money you can go out in, earn in wages. And if you go beyond that threshold, you start to reduce your social Security benefit, and you could theoretically reduce it all the way down to zero if you earned too much.

00;02;39;12 - 00;03;06;26
Brandon
So there is some additional strings attached to taking the early benefit, in addition to just receiving a lesser amount versus what you would get at age 67. Now, on the flip side of that, you can also delay Social Security for a few years. You can delay it up to age 70. And if you do, you will receive what effectively comes out to an 8% compounding raise each year.

00;03;07;01 - 00;03;39;23
Brandon
You defer Social Security up to age 70 being the last year that it would make any sense. So deferring beyond age 70 doesn't doesn't bring any additional value to the table for you. Now, this deferral and this enhanced benefit that you get for waiting beyond your full retirement age is something that a number of financial advisors and academics in the world of retirement study have long advocated as the single best decision you can make when it comes to retirement planning.

00;03;39;25 - 00;04;23;21
Brandon
It's an easy and guaranteed way to maximize your income through Social Security, and there are really few, if any, other options out there that you can use in quite the same way. Deferring for a certain number of years and knowing that there's a guaranteed increase of 8% basically per year that you would get on the income benefit. So it's for that reason that many, many financial types, be they financial advisors, be they financial media people, or be they academics who research the subject of retirement, they all tend to be in agreement on this, that waiting until age 70 is the smartest decision you can make when it comes to enrolling in Social Security.

00;04;23;23 - 00;05;15;10
Brandon
But is it the smartest decision you can make? That's that's something we need to explore today because I, I understand the extremely numerically logical argument that these people are making, but there is some additional stuff that I really think we're overlooking in this conversation that is critical when it comes to maximizing your retirement, because frankly, I believe retirement optimization is just as much about figuring out enjoyment or satisfaction or utility or optimization maximization as it is financial optimization.

00;05;15;13 - 00;05;58;02
Brandon
And while oftentimes the two are very tightly wedded to one another, I do do think from the years I've spent working in this industry that sometimes the most hard math logical solution frequently casts aside far too many less easily quantifiable elements that most people deeply care about. Let's start by going over the numbers right now. The average Social Security benefit at age 67, full retirement age is $2,102 per month.

00;05;58;05 - 00;06;32;10
Brandon
If we wait until age 70, that means the benefit at age 70 would be $2,647 a month. That's that's a good amount more per month that you would receive. $546 would be the difference that you would receive every single month for the rest of your life. If you delayed taking Social Security to age 70. And it's for that reason so many people in the retirement space have advocated for waiting to age 72, start enrollment in Social Security.

00;06;32;13 - 00;06;59;23
Brandon
But let's think about it this way. If you took that $2,100 per month starting at age 67, you will have received by the time you reach age 70, a combined payments from Social Security social security system of $75,672. Now, we already covered that the difference in income at full retirement age versus delaying to the maximum age of 70 is 546 bucks.

00;06;59;25 - 00;07;23;06
Brandon
That means it's going to take 11.5 years before you effectively break even on the income difference that you are collecting from Social Security. Now, I'm using nominal terms here, and there are some people who may take issue with that. But keep in mind that the index for inflation is going to affect your Social Security payment. Whether you waited or didn't wait.

00;07;23;09 - 00;07;54;04
Brandon
So I'm going to overlook the inflation discussion. Just talk about it in terms of nominal numbers and point out 11.5 years is the point where you will start to now collect in total payments from waiting versus had you just started collecting Social Security at age 67? Now think about this average life expectancy for a 70 year old male in the United States right now is age 83.

00;07;54;06 - 00;08;18;28
Brandon
Average life expectancy for a 70 year old female in the United States right now is age 85. So you need 11.5 years to make. Waiting to age 70 net you more money. And the average male in the United States is only going to live for a year and a half longer than that. Females slightly longer, superficially. This this looks like.

00;08;18;28 - 00;08;35;16
Brandon
Okay, great. The numbers are in our favor because most people are going to live at least long enough to get all of the money that they essentially deferred back. And then maybe live a year and a half longer. And there's always going to be those who live slightly longer than that. So that's, that's that's great. But here's my contention.

00;08;35;18 - 00;09;18;17
Brandon
Most people most people don't just drop dead one day. And as we age, our ability physically speaking, tends to decline. So the more we delay doing certain things, the more potential problems we may run into with respect to actually doing them. Because as we get older, it gets harder to simply do them. Taking income earlier, age 67, for example, gives us a higher probability of having some funds on hand to go out and do the things we want to do versus constantly delay.

00;09;18;20 - 00;09;49;05
Brandon
Now, the academic and the financial planning circles have often some. I address this issue basically by saying, well, if you think you're going to live for a long time, you should delay your Social Security benefit until age 70. And if you don't think you're gonna live a long time, well then don't do that. Start taking it earlier. The problem from my perspective, having done this for a little while, is it's it's sometimes difficult to necessarily know you're going to live for a long time or you're not going to live for a long time.

00;09;49;08 - 00;10;22;12
Brandon
Yeah, sure. There are some people who have an array of health issues from an early age that would probably suggest they're not going to make it to normal life expectancy. Sometimes they're right about that, sometimes they're wrong. But there are plenty of otherwise healthy people who end up dying at, or even possibly a little before life expectancy. In fact, my paternal grandfather was physically very capable and healthy his entire life up until about the last three months.

00;10;22;15 - 00;10;43;09
Brandon
He was physically fit did not appear to be in any sort of physical duress or lack of physical capacity as he aged. In fact, a year and a half before he died, he decided he had a tree in his yard that needed to be pruned. So he got out a ladder and a chainsaw, and he climbed up into the tree and trim the limbs.

00;10;43;09 - 00;11;04;21
Brandon
Much too many of us, being somewhat mortified by it. But he did it because he could. And then sadly, like 2 or 3 months before his 80th birthday, he started to not feel well. And found out he had pancreatic cancer. And, then sadly, a month or two after his 80th birthday, he succumbed to the illness.

00;11;04;21 - 00;11;34;25
Brandon
That's just the way it goes. If we were to speculate on his 79th birthday, how much longer he was going to live, most of us would never have guessed about another year. So it's difficult. It's very difficult to to make these sorts of estimations and a little bit foolish in a lot of cases. Now, the other thing is that most people don't just drop dead as they get older, they go through decline.

00;11;34;27 - 00;12;10;16
Brandon
And we don't have any really reliable data that tells us the average age in American faces a significant decline in physical capability. But we do have data on when Americans, on average, enter nursing homes. And that happens to be early 80s. So we do know that right at the end of this 11.5 year period, that you need to break even, most people are starting to head into nursing homes, and most people don't wake up one day and decide, oh, I can't live alone, so I'm going to have to go to the nursing home tomorrow.

00;12;10;24 - 00;12;40;29
Brandon
It's it's generally a gradual process that spans a couple of years in a lot of cases. So my point is simply that if you delay income from Social Security to increase the income benefit that you're getting from it, you're giving up right now with respect to full retirement account numbers, three years that you could be collecting income and you could be using that income to live the life you want to live.

00;12;41;02 - 00;13;12;18
Brandon
And while some people may delay those three years, get to 70 and start living it up, it's not always necessarily the case. And, I know just stylistically that the earlier we start to use our income capacity for the things we want to do, generally speaking, the more time we have to go do them and enjoy life, there's only so much you can cram into a year.

00;13;12;18 - 00;13;34;15
Brandon
If you do wait the three years to maximize the Social Security benefit. Now, there are some people who are absolutely going to be in a position where it's not going to make any difference if they delay income or Social Security income for three years and then start taking a higher benefit amount at 70, because they already have other things in place that are going to allow them to live the life they want to live.

00;13;34;18 - 00;14;02;00
Brandon
I'm not talking to those people with one critical exception, because I think even if you have the assets that give you the capacity to create the income, you need to go live every bit of life you want to live at age 67 or 68. There may be a really logical argument behind starting Social Security early and using that income to go do things and taking your assets that you have accumulating and leaving them alone.

00;14;02;02 - 00;14;24;19
Brandon
So we know stylistically that American spending in retirement is U-shaped. We often refer to it as the retirement smile, because spending expenditures, they tend to be somewhat ramped up in the very early years of retirement, brought about by a kind of pent up demand to go do things you want to do, and a whole lot of free time you didn't have beforehand.

00;14;24;22 - 00;14;46;09
Brandon
We call them the go go years. So retirees often enter retirement with cash on hand, a whole lot of free time and a desire to go out and do the things they've been deferring for a little while. Then they kind of settle into a much more, moderate routine. That's a bit more boring, I suppose, in a lot of respects.

00;14;46;14 - 00;15;12;00
Brandon
And then expenses ramp up towards the end of life, largely due to health care costs, things related to long term care and such. Now, taking Social Security later, I don't see it contributing a whole lot to the end of life ramp up in the retirement smile. It's just not enough to to make enough of a difference in most cases.

00;15;12;02 - 00;15;45;20
Brandon
But if you can delay the process of of using certain assets for income, you might make a much more meaningful increase in cash on hand to deal with those longer term nearing end of life expenses. So using Social Security instead of assets may be a way to attack the rising costs that are associated more with end of life versus spending assets earlier, and trying to get a higher Social Security benefit.

00;15;45;23 - 00;16;37;10
Brandon
But all of this being said, there is another element here that significantly complicates the decision to delay taking Social Security. And again, it's one where a number of times there's advocacy for starting Social Security earlier. And that is the consideration of spousal Social Security benefits. So if you are married, you have the ability to use the spousal supplemental Social Security feature, which means lower income earning spouse has the ability to receive Social Security payments that are equal to one half of the higher earning spouse's social Security benefit.

00;16;37;12 - 00;17;09;07
Brandon
Of course, if you're married and you and your spouse earn basically the same amount, this doesn't matter as much. But if there is disparity between the spouses enough so the spousal supplemental benefit comes into play, that now complicates the decision on when makes the most amount of sense to start enrollment in Social Security. Let me walk through a couple of examples where I don't think delaying income makes a whole lot of sense.

00;17;09;10 - 00;17;47;11
Brandon
First, we have a higher earning spouse who is younger and an older lower earning spouse. So the older lower earning spouse can receive the spousal supplemental benefit. But the higher earning spouse must be enrolled in Social Security for that benefit to become available. Now, to be clear about something the lower earning spouse can enroll in, Social Security can receive their normal Social Security benefit, and then receive the supplemental benefit once the higher earning spouse is enrolled.

00;17;47;11 - 00;18;15;14
Brandon
But that is a key piece. The higher earnings spouse must be enrolled. So in that situation, it can definitely be argued that the higher earning spouse should forfeit the additional benefit of waiting to age 70 because you can turn on the spousal supplemental benefit sooner by three years, and the break even point is going to be the same in terms of the delayed income amount.

00;18;15;17 - 00;18;44;14
Brandon
But with an older spouse who is the lower earning spouse, you now need them to drive even further into your past life expectancy in order for this to make sense, to defer income, whereas turning on that spousal supplemental benefit may be a significant enough boost to completely wipe out really any attractiveness of waiting for that higher benefit amount at age 70.

00;18;44;16 - 00;19;08;11
Brandon
Now, what if the higher earning spouse is the older of the two? And really here the answer is far more dependent on how much older the higher earning spouse is, if older enough so that the younger lower earning spouse hasn't even reached age 62, then we could totally argue that perhaps waiting to age 70 does make some sense.

00;19;08;13 - 00;19;44;03
Brandon
And perhaps even if the younger earning spouse would be enrolling in Social Security at an age where there would be a reduced benefit. So prior to age 67, because enrolling younger prior to age 67 means that that reduction to the lower earning spouse social Security benefit applies to their benefit, plus that spousal supplemental benefit. So, for example, if if the spousal supplemental benefit brought the total social Security benefit to $1,500 as an example, and the younger lower earning spouse enrolled at 62, there's going to be a 30% reduction in that.

00;19;44;03 - 00;20;18;03
Brandon
So now the benefits going to be $1,050 per month. So at that point, it may make more sense for the higher earning spouse to defer income to age 70 if they want to do that. I see it as being far less pressure, so to speak, on starting income when you have a higher earning younger spouse, because in order for everything to work out in a way that truly optimizes income, again, we have this 11.5 year period that we would need to cross, and we have an older spouse now who's getting that benefit, which means 11.5 years may push them well.

00;20;18;03 - 00;20;42;25
Brandon
Past life expectancy. But now we're just dealing with with the probability aspect of we need two people to live in order for this to work out. And when we're we're dependent on that, there's a higher probability that it doesn't work out because we need both people to live for 11.5 years for this to be a good idea, or ideally longer than that, and the probability that one of them dies is higher than the probability of just one person dying.

00;20;43;02 - 00;21;04;16
Brandon
So we we do face more risk of things not working out in our favor if we choose to go that route with it. At one time, there was an option for the higher earning spouse to effectively enroll, but then not take the income benefit and allow the lower earning spouse to enroll and receive the supplemental benefit. But that's that's gone.

00;21;04;16 - 00;21;38;27
Brandon
That's that's no longer an option for anybody who is not now enrolled in Social Security. But, you know, going through all of this, I think observationally and looking at the data for Social Security enrollment, most Americans already intuitively understand everything I'm saying. I don't know that they can necessarily articulate the notion in the same numerical sense all of the time, some of them totally can.

00;21;38;29 - 00;22;10;29
Brandon
But I think that there is an intuition that a lot of people have, or at least pick up throughout their life that pushes them in the same direction that I'm coming from. As I talk about this subject today, most people, especially people as they get into their 60s, are aware of the march towards death we're all facing and certainly the march towards diminished physical capacity.

00;22;11;01 - 00;22;31;28
Brandon
They have seen it happen to their friends, their family that have probably seen it to happen to their parents. They know this is coming, and it's for this reason that the average age to enroll in Social Security is not age 70. Yeah, I know there's there's people out there who enroll earlier because they, they they do it out of necessity.

00;22;32;00 - 00;23;14;05
Brandon
They're having a hard time, meeting the bills. And so they enroll in Social Security for additional income. I get that totally. But I also think that there is an equally large number of people who are enrolling prior to age 70 because they themselves are aware of the fact that there is a gamble they're going to take to wait to age 70 and maximize the benefit, even if they are fairly convinced they're going to live beyond age 70, by the way, because they look at it and go, well, all right, I do think I'm going to make it that far, but I don't know how much further I'm going to make it.

00;23;14;07 - 00;23;39;03
Brandon
And I also don't know how much further I'm going to make it in the physicalness that I want to be able to live life. So if I can take income now and go into retirement, that puts me in a much happier place. Then constantly delaying and stepping back from the Social Security discussion for just a minute or two.

00;23;39;05 - 00;24;01;20
Brandon
There are plenty of people out there who retire a few years earlier than they ever thought they were going to, because they two get to a point where they realize, you know what? I don't have everything exactly the way I perfectly wanted to, to be sitting at this point, but I think I'm good enough to get where I'm trying to go.

00;24;01;22 - 00;24;31;01
Brandon
Yeah, okay. I could roll and roll in Social Security and yeah, my benefit won't be as high as perhaps I thought it was going to be ten years ago. And I was looking at my statement and sort of trying to model out my my retirement plan. But, you know, work has gotten a lot more nerve racking. The stress is is at a point where I don't really want to deal with it anymore or just the the routine in the, in the mundane ness of, of the commute, or whatever it is.

00;24;31;04 - 00;24;56;07
Brandon
There's there are a lot of people who look out into the future sitting at their career at a younger age. Maybe it's 40, maybe it's 50, maybe it's 30. And they think to themselves, I don't know if I'll ever retire because this doesn't seem that bad. So I'm just going to keep doing it and do it as long as I can to get as much money out of it as I can and not be in a precarious retirement situation.

00;24;56;10 - 00;25;23;19
Brandon
That's easy to say when you're not 64 and dealing with the potential aches and pains or the stress of something you've had to tolerate for a long, long time that didn't used to bother you. But now it kind of is. And that for a lot of people starts to become a moment of thinking, you know, I don't know that I really need to put up with this anymore.

00;25;23;22 - 00;25;49;07
Brandon
And it's not the most perfect time to decide. I'm going to stop, but it's probably not going to be my entire financial undoing if I do that. And yep, it would be very nice if I worked a few more years delayed Social Security a little bit longer, had a few more things going in my favor that were optimizing income and Social Security.

00;25;49;10 - 00;26;41;08
Brandon
That would all be excellent, but there's a certain amount of life that I want to hurry up and get living. And this is this staying, doing this, that's not going to get me there. So why don't I? I move in the opposite direction of this thought process and start a little bit earlier. And a lot of the advocacy here at the altruism podcast is building income from the beginning, because if you have an income plan from the beginning, you do give yourself considerable flexibility to make that decision even before age 62 and in some cases, and if you have built a decent retirement income plan or just financial independence income plan, then that does buy

00;26;41;08 - 00;27;03;07
Brandon
you some additional flexibility when it comes to making a decision about Social Security. There is never going to be one right answer. For some people, the right answer for income optimization is going to be let's start at 67 and go out and do the things we want to do now. And adding that additional guaranteed income from Social Security, that's that's what we need to do for others.

00;27;03;10 - 00;27;26;22
Brandon
It will look something like, well, I already have all of the passive income that I need to do what I want to do, and I don't need to work to do it. So I could just retire and I don't need to take Social Security now. I'll wait till 70 and I'll maximize the benefit either way. But I do think there are some additional considerations, especially the spousal ones, that shouldn't necessarily be overlooked.

00;27;26;25 - 00;27;58;11
Brandon
That may may make more sense to start the income benefit sooner than you thought. Even if you have the the assets and the income capacity to cover your expense needs, you may still decide based on, again, spousal differences, that it makes sense to start Social Security to get the spouse supplemental benefit, and to to start optimizing that again, especially in a situation where the higher earning benefit of the individual is the younger of the two.

00;27;58;13 - 00;28;32;29
Brandon
So there is not a single right answer. But I think there's way, way, way too much emphasis put on what you get from waiting to age 70. And there's, shall I say, a lot of chaos to life modeling that the, the modeling that goes into age 70 is the right time because that's when the numbers the biggest as far as the income figure that is overlooking so much of that chaos, that is extremely meaningful.

00;28;33;01 - 00;29;03;02
Brandon
It's delaying three years of doing things with the grandkids. It's delaying three years of going and potentially doing the vacations you want to do. And I really can't emphasize enough that there are certainly going to be people who delay and find out that something is failing health wise. Maybe it's not at age 70, maybe it's not age 71, but maybe it's age 75.

00;29;03;05 - 00;29;28;04
Brandon
The good news is you got five years of the higher Social Security benefit to go and do things, but you could have had eight and that that might, might have been meaningful. It certainly is to a number of people out there. So age 70 does give you a higher monthly benefit, the highest monthly benefit you can possibly get on an individualized basis.

00;29;28;07 - 00;29;55;03
Brandon
But there is something you're giving up to get there. And I'm not always super convinced it's worth giving it up in. I would even say most cases. That's it for me today. But don't worry as always, I'll be back next week with more tips and tricks to help you build a rock solid income plan for your retirement and financial independence.

00;29;55;06 - 00;30;09;29
Brandon
Until then, please remember real wealth doesn't just add up, it writes, checks.