When to retire is a different question than when to take SS, if financially prepared. This thread is about when to take SS. The two are often done together, but if you have funds to take care of expenses outside of SS, you do not have to take it before 70, whether you are working or not.
IP
Personally I am having an entirely new second adulthood.
My auditory problem was troublesome for my career out of college etc…working for others. Now I have three different businesses. All of them or even one of them being successful changes the calculations very late in the game. I am 60 in April. My decision making is going to be very odd.
Slight quibble here. By delaying, you get 8%/year plus inflation, guaranteed. That’s pretty hard to beat.
Why does it matter who the employer is?
Fair enough. On the other hand, if you’ve saved enough to make Social Security benefits a footnote to your retirement finances, you are probably an above average investor. Also, I believe the long-run return from large cap stocks such as the S&P 500 is around that 8% figure. So even market average returns over a decent period of time would, on average, keep pace with the guaranteed return by delaying.
–Peter
The breakeven point(or optimal choice) depends on what discount rate you are using since a dollar today is worth more than a dollar ten years from now. A reasonable case can be made that the 20 year TIPS rate is a good discount rate to use when you are looking at Social Security benefits and it has changed from about -0.5% 18 months ago to around 1.5% now so over that time period your breakeven point would have changed a lot.
Here is a very good web site which will calculate your best claiming stragety.
https://opensocialsecurity.com/
Using your life expectancy can be a problem and that web site calculates the solution based on the chance that you will live to be 70,71,72, and so on. You can also change the mortality tables if you are in better or worse than average health.
Once nice thing is when it has calculated the optimal solution you can also compare that to the expected discounted lifetime value for other strategies and at the very bottom of the web page it shows a color graph with the percentage difference.
Often the percentage difference is just a couple of percent which is good to know since you may have other reasons for starting earlier or later than it suggests.
Working for other people can be very easy if the company adds a lot of structure. Working for other people can be a nightmare if not or if a bad boss and nowhere to turn.
Working for self in own business makes one an executive. If the company is successful that is a very different story.
Thank you for mentioning this. It is critical to account for this possibility. A friend of mine’s wife just died a few weeks ago at age 56. It is terribly sad, with 3 kids, one still in high school. But in addition to the loss of one’s wife and their kids mother, and one family income, there is also the much higher taxes that willl have to be accounted for in future years.
It’s more than just a possibility. It is a virtual certainty that one spouse will outlive the other and see higher taxes as a single filer.
Because of the still-dependent children, this particular person will get a little relief on his taxes. He will likely be a “qualified widow(er)” for tax purposes, which allows him to use the married filing joint tax rates for two years. If a child continues to be a dependent after that (quite possible if the high school student attends college) he would be a head of household filer, which uses tax rates somewhere between the joint and single rates.
—Peter
Totally agree.
My mother did this calculation many years ago, family history of everyone living to 90+, no health issues, etc., etc., didn’t need the money early, so opted for the bigger payouts later. Fast forward a couple decades and she has a bigger check but is now in assisted living working on puzzles. Maybe she would have traveled more when she could have. Maybe not.
I’ll probably take it as soon as possible. Won’t need the money now or later but would rather have it in my grubby little hands. I’m cynical enough to think the government will claw it back one way or another so I’m not counting on getting anything.
I used the simulator noted upthread. If you adjust the discount rate to 2.83% real return, the best case scenario is for both spouses to take ss at 62. The lowest nominal return in the stock market over any twenty year period, which tend to correspond with the 1.42% real return postulated without adjustment is 6.4%. If inflation is over 3.57% over the next twenty years, waiting is slightly better,but not enough to persuade me to wait. I would much rather have the money working to cushion any missteps or to ameliorate longevity risk than trust the government not to adjust social security payouts.
Jk
Sis and I had to wrestle Dad out of one self made catastrophe after another, as his impulse control disappeared with age and the start of Alzheimer’s. We were able to get him out of a lot, and happily he never ran out of money, but we were not able to keep him from losing hundreds of thousands of dollars, most due to an Allstate agent who got him into risky investments. As Dad’s abilities slipped, he became more aggressive in all he did in an effort to prove he still had it. He would barrel into something, realize he was in over his head, and ran back to us to save the day. We finally had his competence tested, which he passed with flying colors as he knew what year it was and who the POTUS was, but Mom was declared incompetent and Sis, not Dad, was awarded guardianship when it was determined he was putting her at risk.
Anyway, long story made very short, this is the basis for my understanding the need to protect ourselves from ourselves as we age, and why I will take SS in the manner that will maximize it’s benefit at the time I may very well need it most. Additionally we have our kids listed on our brokerage accounts for the company to contact if they see something off with the way our funds are being handled. More insurance. Am also considering going with a wealth manager, rather than continue to do our own investments. Yes, if I do things perfectly, I am likely to do very well on my own given his fee, or I could do like Dad and lose money hand over fist.
SS is insurance. Like all insurance, I very much hope I won’t actually need it, but if age depletes my competence and I lose a big part of our savings, I sure will appreciate the income.
IP
Given our income, savings and projected lifespan, our situation is such that I started SS 4 years ago at 62 and DW is retiring and starting SS this July when she hits a little over 65. She likes her job and her co-workers and wanted to work until 65. I couldn’t wait to get out of the IT rat race. It’ll certainly be different with both of us home… I wonder if one of us will get a Walmart greeter job? 
LOL. It certainly can be an adjustment! When DH retired I got us involved in pickleball and joined a gym. The organized schedule, (pre-covid,) helped give DH some form of structure with our scheduled classes and games. From time to time we get frustrated with each other, but I just remind myself that we got through raising two kids, with the teen years being a bit hairy at times. If we could make it through the teen years, then anything else should be a piece of cake.
IP,
who met DH by playing against him in an after work co-ed sports league, where I was the only female on all the teams
This is the thing. I have never been in the IT rat race.
I enter my own businesses in IT at the top…minus any money at first. Possibly minus any money only. 
Seriously and again working with other people has stresses that can be very hard or very easy. Most organizations have a harder time making that easier.
My personal organization for me in my businesses is very easy.
I would suggest that the decision on when to take social security is best decided by creating a strategy/financial plan that calculates AFTER TAX income, expenses and all account balances for each and every year during retirement. Variable Inflation rates and investment return rates over time must be accounted for in these projections.
The plan that results in the largest after tax account balances at the end of the projection period is the best plan.
Health care insurance costs were a big factor too. And, those expenses have a higher inflation rate than other expenses that needs to be accounted for.
For me, I projected over the first 10 years of retirement. Both of us retired at 62. And the conclusion was that both me and my wife would take SS as soon as we could (62).
SS income has certain unique tax features that make taking it sooner rather than later beneficial given my situation (no Roth). It wasn’t even close.
Getting all your money out of SS is not a goal or even a consideration in this exercise. Minimizing taxes is. Retiring as soon as possible or when desired is the thing too. Isn’t it? Having a sound plan saying which account do I draw from in a given year and over time that results in you not out-living your assets is what you need to know and that considers the likely range of key variables (inflation, interest rates, investment returns and taxes over time) to be experienced in retirement.
Rich
Taxes were absolutely front and center in our decision to wait until 70 for SS, along with risk mitigation provided by the larger SS benefit. While we did have Roth accounts, the bulk of our retirement funds were taxable and tax deferred, and would result in large taxable RMDs at high tax rates if no action was taken. By minimizing income through deferral of SS, we were able to do sizeable Roth Conversions, paying the taxes from our taxable funds on hand, which is tantamount to depositing those tax dollars in the Roth as their tax obligation was paid off without reducing the balance.
I have been strategizing early retirement since the age of 19, however, and have always lived below our means, allowing us in the last 15 or so years of our working life to sock away 50% of our gross pay, including maxing out 401ks and IRAs. The time to plan for retirement is not the day you quit.
IP
Mrs. Goofy’s father was in a retirement home, the deal was that if you exhausted your funds they would never kick you out, however they would take everything else you had coming in: social security, pension, etc. In that case delaying would have benefited the nursing home, not him.
As it turns out he exhausted his personal finances in December of that year, and he died on December 31st. Timing is everything, I guess. (True story.)
This is a strategy I wasn’t smart enough to think of at the time, which pains me now since I took early benefits (at the reduced rate) and didn’t roll over IRA funds as I might have to avoid the tax bite, so I lost twice. Ah well, history now. I did tell my younger brother about it, but don’t know if he followed through.
You can lead a horse to water…
I tried hard to get Sis not to take SS at 62, but I am the youngest in the family. She was adamant that she wanted the $ in her own hands to manage herself. Fast forward almost a decade and they are now running a vacation rental out of their basement apartment because they have to.
Those with the most toys do not necessarily have the most cash.
IP,
who was fortunate to marry a spouse who is as easily content as she, and not “thing” centered
That average return ignores sequence of return risk.
I see Hawkwin beat me to it, but I’ll type out my thoughts anyway. Portfolio survivability in retirement must contend with the Twin Angels of Death: Inflation and long periods of low stock market returns, especially in the early years. You might get that 8%, but you might get 0% too. That’s why the 4% SWR is 4%, not 8%.
I worked this out in cFIREsim for situations similar to mine and delaying blunts the sequence of returns risk enough that it raises the portfolio success rate by a non-trivial amount. In other words, delaying allows me to spend more money in the early years with the same level of risk.