Social Security Age: When is the Right Time?

There have been numerous articles in recent years touting the benefits of delaying taking Social Security until a certain age. Despite the overwhelming evidence that most people are better off delaying their benefit and receiving a larger, inflation-adjusted lifetime benefit, 41% of men and 46% of women take Social Security at the age of 62, when they are first eligible to take it. This decision may be a very costly mistake for many of those people.

As with most financial decisions, there is an element of math and science, but we often ignore that and make an emotional decision. We have a hard time processing that today's 62 year olds should expect to live into and beyond their 80's. We fear that if we die young we will have missed out on the opportunity to take from the program we have paid into our entire working lives.

The easy answer, but probably not the best one, is to draw the money early. This allows you to use less of your assets in the short-run and leave a larger estate should you die earlier than SSA's life expectancy. In all other scenarios, i.e. if you don't die prematurely, you are worse off, drawing more from your assets because you have a smaller ongoing benefit. Waiting until you turn 70 is the other extreme, if you live into your 90's as many of us can expect to, you used your own assets to fund the early years, but have had higher monthly payments for over 20 years to compensate for that. This is sometimes referred to as longevity insurance. 

While there is no simple answer to this question, there is a benefit to thinking it through and examining the options objectively and determining the tradeoff between short-term cash flow needs and the longevity insurance that higher social security payments provide.

One of the primary things we provide clients is the ability to live out their lives with dignity and independence. Delaying Social Security to your full retirement age or beyond is one of the lowest cost options for providing an inflation-adjusted lifetime income stream for that purpose. Please read further on the math behind our thought process on this.

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