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You’re among the fortunate few — you have sufficient savings or enough predictable income during retirement that you don’t need your Social Security benefit to pay the bills.
Is it wise, then, to claim Social Security as early as possible (age 62) if you are eligible, accept the reduced benefit, and invest those funds to possibly generate returns? After all, putting your Social Security income to work sooner could potentially yield a bigger payoff down the road, depending on what you invest in and how those assets perform.
Or, because you can afford to wait, should you delay Social Security as long as possible to maximize the amount of your future benefit? Indeed, you can permanently increase your monthly Social Security check by waiting until after your full retirement age (FRA) to claim benefits. That’s a rare opportunity to give yourself a guaranteed raise in retirement, one that is also adjusted for inflation.
The answer is, not surprisingly — it depends.
While many financial professionals make a solid case for drawing Social Security as late as possible, given the uncertainties of life expectancy and future health care costs, there may be times (under very limited circumstances) when seniors could potentially build greater wealth by claiming early and investing the income. They just need to be clear on the risks involved — and what they’re giving up.
Your options may also be limited by whether you are still working or collecting earned income, said David Freitag, a financial planning consultant with MassMutual.
“The ability to claim early really depends on your work status and whether you receive earned income,” he said, noting the Social Security earnings test exists between ages 62 and 67. “If your income during those years exceeds the threshold number in 2026 of $24,480, then early benefits may be reduced or withheld temporarily due to the Social Security earnings test.”
If you're not working or all your income is unearned, claiming benefits at age 62 may be on the table. To determine which Social Security claiming strategy might work best for you, it is important to understand:
- How Social Security benefits work.
- When it might make sense to claim early and invest the income.
- The returns you need to make to offset the early claiming benefit reduction.
- Why waiting until age 70 to claim benefits can help protect against the biggest risk in retirement.
These factors, along with a careful analysis of your sources of retirement income, are critical for making a decision about your benefits.
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How Social Security benefits work
Social Security benefits are calculated by averaging your top, not consecutive, 35 years of earnings, adjusted for inflation. The benefit you receive, however, is also based on your age, the year you retire, and how much you have paid into the system. (Learn more: How much Social Security will you get? The 4 big drivers)
If you reach FRA in 2026, for example, the maximum Social Security benefit you might receive is $4,152. But that assumes you earned the taxable maximum in each year beginning at age 22 and that you start receiving benefits in 2026. Most Americans receive a smaller benefit.
You can collect the full benefit to which you are entitled by waiting until your FRA (age 67) to claim Social Security. This is called your primary insurance amount (PIA). Many financial professionals use this target benefit amount as a starting point to determine what choices to consider.
You can also potentially claim benefits at the earliest opportunity, age 62, but your monthly check will be permanently reduced by 30 percent to reflect the additional years you will collect Social Security.1 For some retirees, collecting early might make sense, especially if they need the income to cover their living expenses or they have a health condition that suggests they may not attain their full life expectancy.
On the other hand, you can permanently increase the size of your Social Security check by waiting to claim benefits until after your FRA. For each year you delay benefits beyond your FRA, your monthly benefit increases by 8 percent per year until you reach age 70, when delayed retirement credits cease to accrue.
That’s a 24 percent guaranteed return (8 percent x 3 = 24), which investors would be hard-pressed to beat. Remember that cost-of-living increases are based on these increased benefit amounts as well.
You could potentially build more wealth by claiming early — but there are risks
That said, you could potentially build greater wealth through the effects of compound growth by claiming Social Security at age 62 and investing the income in a stock portfolio — if you’re willing to accept the prospect that your portfolio balance might also decline. (Related: Why is it important to start saving for retirement early?)
A hypothetical example, while overly simplistic, may help to illustrate.
Let’s assume that you're receiving a $2,000 monthly Social Security benefit at FRA. You choose to invest that income in a stock portfolio with an average annual 7 percent return. Here’s how much it might be worth at age 92 based on when you began taking benefits — age 62, 67, or 70.
- If you claim Social Security at age 62, you would collect 70 percent ($1,400) of the $2,000 monthly benefit you would have received at FRA. You invest it over a 30-year period, which grows to roughly $1,580,000 before taxes.
- If you wait until your age 67, your FRA, to collect Social Security and invest your $2,000 monthly benefit for 25 years, your pretax account value would be closer to $1,518,000 before taxes.
- If you delay Social Security until age 70 when your monthly benefit climbs to $2,480 and you invest that income for 22 years, your account value would be worth about $1,220,000 before taxes.
Keep in mind that these calculations are merely a blunt instrument. They don't factor in the annual cost-of-living adjustments your Social Security benefit would receive. They also don't account for the fact that Social Security income is either partially or fully exempt from federal income tax, based on your retirement income, while long-term investment earnings are taxed up to 20 percent as a long-term capital gain.
Overconfidence can backfire
It is also important to reiterate that stocks involve market risk and overconfidence can backfire. Research shows that active investors are more likely to incur higher transaction costs, which chip away at real returns. They are also more likely to attempt market timing, which consistently leads to lower long-term returns.2 (Related: 3 tips to avoid locking in investment losses)
“The strategy of claiming benefits early and investing for growth may be a fit for someone with substantial assets, strong health, a long investment horizon, and the discipline to stay invested through market cycles,” said Alejandro Mendieta, president of Coastal Wealth Private Client Group in Coral Gables, Florida. “But it’s not just a numbers decision; it’s behavioral and strategic. That’s where working with a financial professional adds real value, helping bring certainty and structure to what can otherwise be complex, stressful decisions.”
Why most affluent retirees should delay Social Security
For the vast majority of retirees, deferring benefits to at least their FRA is the better strategic decision, Mendieta added.
“If someone genuinely doesn’t need the income, I usually lean toward maximizing the benefit,” he said. “A reliable lifetime income stream adds stability that markets alone can’t guarantee.”
Corey Schneider, a financial professional with Sentinel Solutions in New York, New York, agrees.
“When someone asks me whether they should claim Social Security early and invest the income with the goal of turning those dollars into a bigger pile of cash, the only thing I need them to tell me is what day they are going to die,” said Schneider. “If they can tell me that, I can tell them if it’s a good idea. If they can’t, I would normally say, don’t try it.”
Financial planning, he said, is designed to answer three fundamental questions:
- Can I maintain my lifestyle during retirement?
- Can I educate my kids?
- What if I live too long?
“Look how far medical technology has come and think about what artificial intelligence might do to lifespans,” said Schneider. “People are living longer. We need to protect our few guaranteed sources of income for retirement.”
Those who wish to claim Social Security early and invest should view the decision through the lens of “big risks” vs. “small risks,” he said.
“If you claim early and permanently reduce the size of your Social Security benefit, then live to age 100, that could be a very big risk depending on your assets,” he said. “You might not be able to maintain your lifestyle, especially if you end up needing long-term care.”
On the other hand, if you wait to age 70 to claim Social Security, “you might forgo the opportunity to have earned a little more money in the market by investing that income sooner, but that’s a relatively small risk,” said Schneider. “So maybe you didn’t extract as much value out of your Social Security benefit as you could have — big deal.”
Scheider noted that there is one scenario where drawing Social Security early could potentially help retirees safeguard their financial future and protect the legacy they hope to leave to their heirs.
“You could take Social Security early and use the income to buy a hybrid life insurance policy with long-term care benefits, if you don’t already have it,” he said, noting premiums typically climb as we age and health declines. “That might be a good use for that income. But there are no absolutes in this. It is really important that retirees make smart choices and seek guidance around Social Security benefits.”
Freitag points out that another good reason to take benefits early, if you don’t need the money, is to facilitate charitable giving using life insurance. The monthly income from your Social Security benefit can potentially pay the premium for a life insurance policy owned by the charity. The payment to the charity is a tax deduction to you and the death benefit to the charity is tax-free. “This is a win-win scenario,” he said.
Also for consideration in making the decision, possible changes to the program, as Social Security funding remains an ongoing issue for the government. (Learn more: Preparing for the Social Security funding dilemma)
Conclusion
The age at which you claim Social Security and whether you choose to save, spend, or invest that income can have a profound effect on your future financial security.
Generally, only those with assets that far exceed their projected need for retirement income should consider claiming benefits early to chase investment growth. And even then, they must be clear-eyed about the opportunity costs of a permanently reduced Social Security benefit and the market risks they will face.
“Social Security should be coordinated with other predictable income strategies,” said Mendieta. “Working with a financial professional helps ensure those pieces complement each other and create a sustainable retirement income plan.”
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FAQs about Social Security and retirement
Q. What is the full retirement age (FRA) for Social Security?
A. The FRA for Social Security varies depending on your birth year. For those born from 1943 to 1954, FRA is 66. For those born from 1955 to 1959, FRA gradually increases from 66 to 67. If you were born in 1960 or later, your FRA is 67.
Q. Can I claim Social Security benefits and continue working?
A. Yes, you can claim Social Security benefits and continue working. However, if you claim early and earn above a certain limit, your benefits may be temporarily reduced. Once you reach your Full Retirement Age, the earnings limit no longer applies, and your benefits will be recalculated to account for the reduced payments.
Q. What is the breakeven point for claiming Social Security?
A. The break-even point is the age at which the total benefits received from claiming early equal the total benefits received from waiting until your FRA or later. For example, if you claim at age 62 and receive a reduced benefit, the break-even point might be around age 78 or 79, depending on your specific benefit amounts and life expectancy.
Discover more from MassMutual…
Social Security spousal and survivor benefits: Different and not equal
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1 Social Security Administration, “Starting Your Retirement Benefits Early.”
2 Morningstar, “Don’t Let Bad Timing Decrease Your Fund Returns,” Oct. 24, 2024.
