Thoughts on Social Security Benefits

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More than half of retiring Americans today opt to take Social Security before their Normal Retirement Age, and less than three percent of filers wait until age 70. Many retirees must not realize Social Security benefits are approximately 75% higher if you wait until age 70 compared to taking it at age 62.

Let’s think about Social Security from a different perspective.

Social Security is a type of Social Insurance, therefore; the best way to frame any decisions regarding when to apply for Social Security is from a protection standpoint. For top earners, Social Security should be a backup plan to help protect against outliving your money. When you wait to take Social Security at age 70 instead of 66, your benefit is increased by around 32% for the rest of your life. If you are the primary (higher) wage earner and married, the survivor benefit increases too. This means waiting until age 70 can significantly increase the benefit over TWO lives (yours and your spouse).

Forget about mortality tables, breakeven analysis, and all of that stuff. If you think of Social Security as insurance none of the financial projections apply. We should insure against worst-case scenarios instead of trying to outguess the most probable outcome. For most nearing retirement, the largest financial risk is that of outliving your money. Therefore it makes sense to maximize any guaranteed income streams, especially if it has cost of living adjustment features.

For the first half of my career, the standard way of planning for Social Security was to not plan on it at all because very few clients had confidence in its solvency. Today, long term viability of the Social Security System is still in question, but the guaranteed income is too important to ignore. Needless to say, the system is very complicated so very few Americans are making smart and informed choices when it comes time to file.

If you are nearing retirement, I would encourage you to have your specific situation reviewed for recommendations. As always, I am available to answer questions and help in any way I can.