When to Claim Social Security as a High Earner: What Kestrel Bay Retirement Advisors Tells Early Retirees

The mistake: filing at 62 because the paychecks stopped

Leaving your job doesn't start any Social Security clock. The two are separate decisions, yet plenty of early retirees file the month they turn 62 because it feels odd to have income available and not take it. For anyone born in 1960 or later, that filing means a permanent 30% cut from the age-67 amount.

Put numbers on it. Say your benefit at 67 would be $4,000 a month (a made-up round figure). At 62 you'd get $2,800, which is $1,200 a month less, or $14,400 a year. Cost-of-living increases apply to both amounts, but the gap never closes.

The real driver is usually emotional. People want to feel they're getting something back after decades of payroll tax, and that feeling doesn't show up anywhere in the math. We'd rather you file because the numbers say so, since the cut can't be undone after the first year.

What do you get at 62, 67 and 70?

Claiming at 62 pays 70% of your full amount, claiming at 67 pays 100%, and claiming at 70 pays 124%, because delay earns 8% a year for three years. Nothing is added after 70. Full retirement age is 67 if you were born in 1960 or later, so the table below uses that as the base.

Look at the bottom row: waiting from 62 to 70 adds $25,920 a year on this example. Because the percentages apply to your own benefit, a high earner at the taxable maximum gains more dollars from each year of delay than someone with a smaller record.

One wrinkle for early retirees. Benefits use your highest 35 years of indexed earnings, so if you stopped at 55 after about 33 working years, two zero years get averaged in. That lowers the base amount a little. It does not change the 62, 67 and 70 percentages.

Why does the earnings test rarely matter once you've stopped working?

The earnings test only looks at wages and self-employment income, so a retiree living off a brokerage account is not touched by it. Before full retirement age the limit for 2026 is $24,480 a year, and $65,160 in the year you reach 67. Above the first limit, Social Security withholds $1 of benefits for every $2 you earn over it.

Stock sales, option exercises after you've left the employer, dividends and Roth conversions don't count as earnings for this purpose. A retired product director selling shares to cover living costs can ignore the test entirely.

Withheld benefits aren't gone, either. At full retirement age Social Security recalculates your benefit to credit the months it held back. The test bites only if you take a consulting or part-time job before 67 and also file early, and even then it's a delay of money, not a loss.

How the answer shifts with your age and savings

From 55 to 61 there's nothing to file yet, but the gap-year plan starts now. If you spend $100,000 a year and retire at 55 while aiming for 70, that's 15 years of paying for life from savings alone. We'd test that number before you give notice, not after.

From 62 to 66 the question is whether the portfolio can cover the shortfall without selling stock in a down year. If most of your wealth sits in one employer stock, diversify first, because that stock is the bridge you'd be leaning on. Our concentrated stock and equity compensation work covers that step.

At 67 and up, waiting to 70 means skipping 36 months of checks, $144,000 on a $4,000 benefit, in exchange for about $11,520 more a year ($960 a month). Divide $144,000 by $11,520 and you get 12.5 years, so the break-even sits around age 82 or 83.

For married couples, delay the higher earner's claim first, because the survivor keeps the larger of the two benefits. The lower earner can usually claim sooner. If you can't fund the gap without forced selling, claiming nearer 67 is a reasonable answer.

Four myths about claiming early, and what holds up

Myth one: file early and invest the checks, and you'll come out ahead. That only works if your investments beat the 8% a year that delay pays with certainty, and investing involves risk, including loss of principal.

Myth two: the earnings test permanently shrinks your benefit. It doesn't; withheld months are credited back when you reach full retirement age.

Myth three: with little other income, Social Security is tax-free. Up to 85% of it can be taxable, and what triggers that is other income, such as stock sale gains or IRA withdrawals. A big sale in one year can make the benefit taxable that year, which is why we count tax on the benefit and not just the gross check.

Myth four: benefits keep growing after 70. Delay credits stop at 70, so waiting longer only costs you checks.

Jonah and Mei compare 62 with 70

Hypothetical: Jonah, 46, expects to stop working at 55 and projects $4,000 a month at 67. Mei, 44, has a smaller benefit of her own. At 62 Jonah would receive 70%, or $2,800. At 70 he'd receive 124%, or $4,960. The gap is $4,960 − $2,800 = $2,160 a month, or $25,920 a year.

Claiming at 62 gives Jonah eight years of checks first: $2,800 × 12 × 8 = $268,800. Divide $268,800 by $25,920 and you get about 10.4 years, so the break-even is roughly age 80. This ignores cost-of-living increases, taxes and investment returns.

The survivor effect changes the picture. If Jonah dies first, Mei steps up to his larger benefit and keeps it for life. His delay can therefore matter most in the years Mei is alone, which could be well past 80.

How to decide, in five steps

Our rule of thumb: lean toward 70 for the higher earner when savings can pay living costs until then and either spouse is likely to live past about 82. If savings can't cover the gap without forced selling, claim nearer 67. Only the Social Security Administration can calculate your real benefit, and this article doesn't cover disability, divorced-spouse or survivor claims in detail.

• Log in at ssa.gov, download your statement, and check that every earning year is recorded. Fix missing years before you retire.
• Write down yearly spending after tax, subtract any pension or part-time pay, and what's left is the amount your portfolio must supply until you claim.
• Compare the break-evens (about 80 for 62 versus 70, about 82 or 83 for 67 versus 70) with a realistic planning age for both spouses.
• Estimate how much of the benefit would be taxable next to your withdrawals or sales that year.
• Choose the age, then set the withdrawal order for the gap years so you never have to sell concentrated stock at the wrong moment.

What to do this week and what to ask us

This week, create or log in to your my Social Security account, save the statement, and look for zero or missing earnings years. That takes about twenty minutes. Kestrel Bay Retirement Advisors can then model your household's options with the tax cost of each, and you can reach us through the request form on this site. We don't promise a result, but you'll see the trade-offs in dollars.

• What does our break-even age look like once survivor benefits and tax on the benefit are included?
• Can our savings carry us to 70 without selling employer stock at a poor price or creating a large tax year?
• How would claiming at 62, 67 and 70 change the tax on our withdrawals during the early retirement years?