With baby boomers nearing or at retirement age, many expect social security to be one of their main sources of income, or at least a nice addition. If you were born between 1943 and 1954, the age for receiving the maximum amount of your earned benefits is 66. This age increases by two months for each year born until being born after 1959 when it plateaus at age 67. However, for all people that earned benefits, benefits can start being collected at 62, albeit with a 25% penalty in the monthly amount for people born between 1943 and 1954 and increasing up to 30% if you were born after 1959.

So which age should you start collecting at?

Let’s assume that full monthly benefits were earned at $1000/month and that you were born in 1950. The average life span for a male is 75 and at this age the retiree would have earned the exact same amount upon retiring at age 62 or 66, $144,000. Of course, at this point the present value of benefits is higher for the people that retired at age 62 since they started receiving money at an earlier date. When considering the present value of money, the break even point for this retiree would be age 81. Of course there are always taxes to worry about, even for social security earned, but these calculations get complicated depending on how much other income is earned.

The moral of this story is: if you expect to live past 81, you are better off postponing retirement until age 66.