Yahoo Finance ran an article titled How To Delay Taking Social Security Benefits Until You Absolutely Have To. This sort of thing is always of interest and the article had a couple of interesting even if not original ideas.
The starting point is the author’s belief that waiting to take Social Security until age 70 (or FRA for someone taking spousal benefits) is the best thing to do because waiting until age 70 results in a larger payout. This line of thinking always brings out the conspiracy people that believe that the media supports the government’s desire for people to wait longer to stave off insolvency or otherwise save the government money.
That aside, there are plenty of valid points to support taking it early and plenty of valid points to support waiting until 70. The number of variables is endless. Influences here include expectations for longevity, health issues and financial situation. The potential insolvency of the program itself is another issue. If someone is convinced that it will fail in 2030 and is eligible in 2020, they might want to start taking it in 2020.
It is also important to understand the relevant breakeven number. Starting benefits at 62 (versus 70) means taking in eight years of reduced payments versus waiting for the higher payout at 70. How long does it take for the eight year wait to pay off? For most people it is eight-ten years. Not to mention the myriad of spousal strategies that we can discuss in a subsequent post.
My own belief has been to let it max out. To my way of thinking an investor is beholden to market returns for a shorter period of time, the amount of time they are retired in their 60’s. I view this as being more conservative as opposed to having to get x% per year from age 70 until whenever. If the combined benefit at 70 is $4000 (in today’s dollars) then the portfolio probably needs to do a whole lot less than for a reduced benefit of, say, $2700.
I cannot refute any argument to take it early, my preference as of now is to wait and of course views on these things could easily change between ages 45 or 50 and age 65.
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