When to claim the pension
Claim early and get more years of a smaller check; wait and get fewer years of a bigger one. The totals cross at an age, and the decision is a bet on living past it.
- Size the monthly benefit at an early and a late claiming age
- Compare cumulative totals by a given age
- Find the break-even age
- Say who should wait, and why the survivor benefit matters
The intuition
A client's full public pension at 67 would be $2,400 a month. Claim at 62 and it is $1,680 for life; wait to 70 and it is $2,976 for life. The early claimer banks eight years of checks before the late claimer gets one, about $161,000. From 70 on, the late claimer catches up by the difference in the checks, about $15,500 a year, so the head start is gone in a little over ten years. Past about 80, waiting won.
Framed that way, claiming is a bet on your own longevity. Because the delayed benefit is inflation-linked and lasts for life, it is also the cheapest longevity insurance most retirees can buy. And for a married higher earner it doubles as a larger survivor benefit: when the first spouse dies, the survivor keeps the larger check, so the relevant life expectancy is the couple's, which is longer than either individual's.
Under the simplified rules used here: benefit at age a below 67 = B × (1 − 6% × (67 − a)); above 67 = B × (1 + 8% × (a − 67)), up to 70. Cumulative by age T = 12 × monthly benefit × (T − claiming age). Break-even age = (b_late × a_late − b_early × a_early) ÷ (b_late − b_early).
Why it works
- The conventions here: a simplified public pension stated in every prompt so nobody mistakes it for the real schedule. Full benefit at 67; 6% off for each year claimed early; 8% on for each year delayed, to 70. Benefits are monthly, level in real terms, paid from the claiming birthday. Totals and break-even ages are undiscounted; no taxes or earnings test.
- The head start is the early claimer's advantage; the catch-up is the late claimer's. Head start = early check × 12 × the years between the two claiming ages; catch-up per year = the difference in checks × 12. Years to break even = head start ÷ catch-up, counted from the later age.
- Discounting pushes the break-even later by a couple of years at a modest real rate, because early dollars are worth more. It stays well inside a healthy retiree's life expectancy.
- Waiting is longevity insurance. The bigger check is inflation-linked and lasts for life; nobody else sells that at the same price.
- The survivor benefit is the married case. If the higher earner delays, the larger check lasts as long as either spouse lives.
- The case for claiming early is real too: poor health, no other income, or high-interest debt that the check would pay down. "I will invest the early checks" is the weakest reason, because it bets on beating an inflation-linked, guaranteed 8% a year.
| At 62: 5 years early, 30% off | $1,680 a month |
| At 70: 3 years late, 24% on | $2,976 a month |
| Head start by 70: $1,680 × 12 × 8 | $161,280 |
| Catch-up per year after 70: ($2,976 − $1,680) × 12 | $15,552 |
| Break-even age: 70 + 161,280 ÷ 15,552 | 80.4 |
| Totals by 85: $463,680 early against $535,680 late | waiting is $72,000 ahead |
Claiming at 67 instead overtakes 62 at about 78.7: a smaller head start, but a smaller catch-up too.
The formulas
Six percent off for each early year, under the simplified rules.
Eight percent on for each late year.
Checks times months collected.
Where the two cumulative totals cross.
Run backwards from a check already being paid.
Worked example
Size the two checks, then the early claimer's head start and the late claimer's catch-up per year. Head start over catch-up is the years to break even after the later age.
See it move
Same client. Change the full benefit, the early and late claiming ages, and the age you compare the totals at.
- Raise the age you compare at. The late claimer's lead grows every year by the difference in the checks times twelve; the break-even age does not move.
- Raise the full benefit. All three checks scale together and the break-even age does not move, because it depends only on the ratios.
- Delay the late claiming age. The late check grows; watch the break-even age, which depends on both the bigger check and the longer wait.
- Bring the early claiming age forward. The early check shrinks; watch the break-even age.
Run it backwards
A client already receiving a reduced check. Run the rule backwards to recover the full benefit, then forwards to the late one.
The early check is the full benefit times the share kept, 1 − 6% × the years early. Divide by that share to get the full benefit; multiply by 1 + 8% × the years late for the late check.
It matters for a client who has already claimed and is asking what they gave up, and for spouses comparing survivor outcomes.
Traps
Say it in the interview
“Should this client claim their pension at 62 or wait?”
Check yourself
4 fresh questions, with new numbers. Answer each one correctly to finish the chapter. Get one wrong and you will see the full working, then you can try it again with new numbers.
Answers within 1% are marked right. Type the number; $, %, x and M are fine. First tries count toward Learned: the topic is Learned once every chapter is done and 75% of first tries were right.
- Early: 6% off a year; late: 8% on a year to 70, under the simplified rules.
- Head start = early check × months waited; catch-up = the check difference × 12.
- Break-even = later age + head start ÷ catch-up; discounting pushes it later.
- Waiting is longevity insurance and, for a couple, a larger survivor benefit.