What Discount Rate Belongs on Social Security?

Every argument about when to claim Social Security is really an argument about one number that almost nobody states out loud. Claiming at 62 gives you 70% of your full benefit for more years. Waiting until 70 gives you 124% for fewer. Comparing those two streams means discounting future dollars back to today, and the rate you pick decides the answer before any other fact about your life gets a vote.

The rate is the decision. Most arguments about claiming age never name it.

The short version

Social Security is a government-guaranteed, inflation-indexed payment that lasts as long as you do. Discounting it at an expected stock return prices it as though it carried stock risk. On our model of SSA’s statutory factors and its 2023 period life table, delaying to 70 produces the highest present value at any real rate below 2.27% for a man and 3.39% for a woman. Long-term inflation-protected Treasuries have recently yielded around 2%, which puts the decision close to a tie and hands it to the things a spreadsheet cannot settle: whether you are the higher earner in a couple, whether you are still working, your health, and whether you need the money now.

What the statute gives you

The trade-off is fixed in law, not set by a market. For anyone born in 1960 or later, full retirement age is 67. Claiming early costs 5/9 of 1% a month for the first 36 months and 5/12 of 1% a month beyond that, so claiming at 62 means a 30% reduction. Delaying past full retirement age earns 2/3 of 1% a month, or 8% a year, until it stops at 70.¹ That leaves three reference points: 70% of the full benefit at 62, 100% at 67, and 124% at 70.

One caveat that gets flattened constantly: the 5/9 of 1% formula is the retired-worker rate. Spousal benefits are reduced by 25/36 of 1% for the first 36 months instead, and they earn no delayed retirement credit at all.¹

Why the rate decides it

Social Security pays a federally guaranteed amount, adjusted for inflation every year, for as long as you live. A Congressional Research Service report on the claiming adjustment describes the standard treatment of a cash flow with those properties: “Many researchers agree that the government-guaranteed, tax preferred, inflation-indexed nature of the Social Security benefit warrants a low discount rate.”²

An article published in SSA’s own Social Security Bulletin states the mechanism and the consequence. On the mechanism: the studies it reviews share the view that “the single discount rate should be related to the yield on long-term inflation-indexed government bonds because Social Security benefits are also inflation-adjusted financial obligations of the U.S. government and should thus be valued similarly.” On the consequence: “Viewed prospectively, the optimal claiming age is older at lower discount rates and younger at higher rates.”³

The numbers, with real mortality

Here is the present value at age 62 of each claiming strategy, per dollar of full retirement age benefit, with every future year weighted by the probability of being alive to collect it. Mortality comes from SSA’s 2023 period life table as used in the 2026 Trustees Report, so no fixed death age is assumed.

Real rate	Claim 62	Claim 67	Claim 70	Highest
0%	14.55	15.93	16.38	70
1%	12.96	13.75	13.86	70
2%	11.63	11.94	11.80	67
3%	10.51	10.43	10.10	62
4%	9.57	9.17	8.69	62
6%	8.07	7.19	6.53	62

Male mortality, present value at 62 per $1 of annual full retirement age benefit. Our calculation, reproducible with scripts/ss_claiming_pv.py.

Women live longer, so the same table moves. At 2% real, the ranking flips back to delaying:

Real rate	Claim 62	Claim 67	Claim 70	Highest
0%	16.51	18.67	19.64	70
2%	12.92	13.73	13.92	70
3%	11.58	11.90	11.82	67
4%	10.45	10.38	10.10	62
6%	8.70	8.04	7.49	62

The single number worth remembering from both tables is the crossover: the highest real rate at which delaying to 70 still produces the largest present value. It is 2.27% for a man and 3.39% for a woman on this model. Below that, patience wins on the arithmetic. Above it, claiming early does.

Shoven and Slavov reached the same place from the other direction, finding that delay is actuarially advantageous for a large subset of people “particularly for real interest rates of 3.5 percent or below.”⁴ Their companion paper adds the detail that matters most for couples: the gains from deferring are larger for the primary earner in a two-earner household than for the secondary earner.⁵

Move the rate yourself

The calculator starts at 6% real. Drag it down toward what an inflation-protected Treasury yields today and watch the ranking change.

How this goes wrong in public

A well-read example arrived in April 2026, when Mr. Money Mustache published an analysis of Social Security for early retirees. The observation behind it is good: people who retire at 40 systematically undercount a benefit that starts arriving at 62, and it does have value today. The problem is the price he puts on it.

The rate appears once, in an assumption list, and is never revisited or tested: “A compounding rate for investments of about 6% after inflation.” From there the conclusion is quick. “By the time your more patient friends started drawing $2796 payments five years later, you’d already have over $137,000. It’s such a big lead that the 67-year-old will never catch up.”⁶ At 6% real, that is exactly what the arithmetic says. The tables above show why, and they show that the result belongs to the assumption rather than to Social Security.

Two further problems are worth naming because they generalize. The first is that “never catch up” measures an account balance. The person who waited holds a smaller balance and a larger inflation-indexed annuity that pays for life, and only the balance appears in the comparison. The whole value of delay sits in the right tail of the longevity distribution, and a high discount rate is the operation that erases the right tail.

The second is a double count. The article derives the present value of the benefit by asking what lump sum would replicate it: “if they invested $834,000 into a fund that paid out 6% per year for 30 years before running dry, they’d get that exact same $5000 monthly income.” That figure assumes the principal is fully consumed. The same figure is then added to the portfolio and run through a perpetual rule: “If you take this total amount ($460,000) and apply my other shockingly simple math number, the 4% rule, you end up with $18,400.”⁶ A rule that assumes the principal survives is applied to a number that already assumes it is gone.

Four things the article never mentions are each material to its own recommendation: longevity risk, spousal and survivor benefits, taxation of benefits, and the retirement earnings test. The last is the sharpest, because the advice is to claim at 62 while continuing to earn, and earnings before full retirement age can cause benefits to be withheld. The broader audit of that post is in Fact-Checking Mr. Money Mustache.

When a higher personal rate is defensible

The case above is about computing the expected present value of a benefit stream. It is not a rule that every person must apply a Treasury yield to their own decision, and the SSA-published article is explicit about this. Alleva notes that while some experts hold that the only appropriate rate is the long-term government bond yield, “a more appropriate rate choice would reflect the particular needs of a given individual.”³ Someone servicing expensive debt, or facing a real liquidity constraint at 62, is rationally impatient, and impatience is a high discount rate.

There is also a fair reading in which the whole exercise matters less than it appears. Alicia Munnell’s work at Boston College concludes that because the delayed retirement credit has grown, “lifetime benefits are roughly equal for any claiming age between 62 and 70, and the highest monthly benefits are available at 70.”⁷ Our tables agree at realistic rates: at 2% real the three present values sit within a few percent of each other. The case for delay at that point rests on insurance rather than arbitrage. You are buying a larger inflation-protected income for the years in which running out of money would hurt most.

What we recommend

Price the benefit at a rate that matches its risk, which means something near a long-term inflation-protected Treasury yield rather than an equity return. Do that first, before any argument about investing the early payments, because the discount rate is the assumption that decides the outcome.

Then treat the result as close and let the non-arithmetic factors break the tie. Delay looks strongest for the higher earner in a couple, because that benefit becomes the survivor benefit. It looks weakest for someone in poor health, someone with no other assets to bridge the gap, and someone still working before full retirement age. If you want the break-even framing and the taxation of benefits in full, that is in When to Claim Social Security.

Frequently asked questions

What discount rate should I use for Social Security?

For computing the present value of the benefit itself, a real rate close to a long-term inflation-protected Treasury yield, because that is the instrument whose risk most resembles the benefit. Recently that has been around 2%. A higher personal rate can be defensible if you are genuinely liquidity-constrained, but it is a statement about your circumstances rather than about the asset.

Does claiming at 62 and investing the money beat waiting?

Only if you discount at a rate above the crossover, which on our model is 2.27% real for a man and 3.39% for a woman. The argument for it usually assumes the early payments earn an equity return with certainty, which substitutes a risky return for a guaranteed one without pricing the difference.

Is Social Security a bond or an annuity?

It behaves like an inflation-indexed life annuity issued by the federal government, which is why a real government bond yield is the natural starting point for valuing it. How that should change the rest of your portfolio is a separate question, covered in Should Retirees With Social Security or a Pension Hold More Stocks?

Do these tables apply to spousal benefits?

No. They model retired-worker benefits. Spousal benefits use a different reduction factor, 25/36 of 1% a month for the first 36 months, and earn no delayed retirement credit, so waiting past full retirement age adds nothing to a spousal benefit.

What about future benefit cuts?

Not modelled here, and worth holding as a real uncertainty rather than a reason to claim early by reflex. A cut that applied proportionally to all claiming ages would scale every column in the tables equally and would not change which one is highest.

Key takeaways

The discount rate decides the claiming answer. Pick it before you argue about anything else, because on these tables it determines the ranking on its own.
On our model of SSA’s factors and 2023 life table, the crossover is 2.27% real for a man and 3.39% for a woman. Below that, delaying to 70 produces the highest present value.
Match the rate to the risk of the cash flow. Social Security is a government-guaranteed, inflation-indexed life annuity, so a real Treasury yield is the natural comparison and an equity return is not.
At realistic rates the three options are close. Munnell finds lifetime benefits roughly equal across 62 to 70, which moves the decision onto survivor benefits, health, employment and liquidity.
The statutory factors are not symmetric across benefit types. Spousal benefits use a different reduction and earn no delayed credit.

Related guides

When to Claim Social Security the break-even math, three case studies, and why up to 85% of benefits can be taxable.
Should Retirees With Social Security or a Pension Hold More Stocks? what a guaranteed income stream does to the rest of the portfolio.
Fact-Checking Mr. Money Mustache the wider audit that this analysis came out of.
How Much of Your Retirement Should Be a Guaranteed Income Floor? where a delayed benefit fits in a floor-and-upside plan.

Author disclosure

Summitward sells a personal finance product and publishes a retirement planner, so we have an interest in readers believing this decision is worth modelling carefully. We have tried to state the case against our own conclusion as clearly as the case for it, including the finding that at realistic rates the three claiming ages are nearly tied. Nothing here is personalized financial advice.

Sources

20 C.F.R. §§ 404.313 (delayed retirement credit, 2/3 of 1% per month for those born after January 1, 1943), 404.409 (full retirement age table; 67 for those born January 2, 1960 and later) and 404.410 (reduction of 5/9 of 1% for the first 36 months and 5/12 of 1% beyond, with 25/36 of 1% for spouses). ecfr.gov
Congressional Research Service, Report R47151, Social Security: Adjustment Factors for Early or Delayed Benefit Claiming. everycrsreport.com
Alleva, B.J. (2016). “Discount Rate Specification and the Social Security Claiming Decision.” Social Security Bulletin 76(2). Office of Retirement Policy, Social Security Administration. Alleva argues against treating a bond yield as the only admissible rate, while confirming the direction of the dependence. ssa.gov
Shoven, J.B. and Slavov, S.N. (2012). “The Decision to Delay Social Security Benefits: Theory and Evidence.” NBER Working Paper 17866. Published with its companion as “Does it pay to delay social security?” Journal of Pension Economics & Finance 13(2), 2014, 121–144. nber.org
Shoven, J.B. and Slavov, S.N. (2012). “When Does It Pay to Delay Social Security? The Impact of Mortality, Interest Rates, and Program Rules.” NBER Working Paper 18210. Source of the primary-earner finding. nber.org
Mr. Money Mustache, “The Shockingly Simple Math Behind Social Security,” April 16, 2026. Read September 14, 2026; no correction or update appears on the post. mrmoneymustache.com
Munnell, A.H. (2013). “Social Security’s Real Retirement Age Is 70.” Center for Retirement Research at Boston College, Issue in Brief 13-15. crr.bc.edu
Social Security Administration, Office of the Chief Actuary, period life table for 2023 as used in the 2026 Trustees Report. ssa.gov

Editor’s note

Educational content, not financial advice. The present values here are outputs of our own model, published as scripts/ss_claiming_pv.py, applied to the statutory benefit factors and SSA’s 2023 period life table. They assume benefits are fully inflation-indexed and paid once a year, and they exclude taxation of benefits, spousal and survivor benefits, the retirement earnings test, and any future change to the benefit formula. A period life table describes mortality in one year rather than the cohort experience of someone alive today, which if anything understates how long a 62-year-old will live and therefore understates the case for delay. Quotations from mrmoneymustache.com were read on September 14, 2026.