Scott Henneberry from TN posted over 8 years ago:

I really don't understand the seemingly unanimous chorus of advice to wait to take SS benefits. It makes no sense economically if you are no longer working. A simple NPV analysis shows the break-even point to be at around 3.5%. In other words, so long as you can get a greater return on investment than 3.5% it is economically better to take the lower monthly amount as soon as you qualify. And this doesn't take into account the possibility of early death or future benefits cuts (likely!). Am I wrong?

Jeff Spartz from MN posted over 8 years ago:

Every year you wait past 62 to claim gives you a return on your benefit of 8% + inflation. I would have put every dime I had available into a private investment with those results. I'm glad I was able to make 70 before I claimed. I don't worry about dying before I reach break-even vs. age 62. That will be the least of my worries. If I had collected at 62, I'd now be worrying about outliving my money. My financial plan has me solvent until a few years past 100. That wouldn't be the case if I had collected early. Fortunately, the system allows early or late collection which hopefully meets the needs of most participants.

Ken Owenby from GA posted over 8 years ago:

I agree with you Mr. Henneberry. I am always amused -- and annoyed -- by the endless advice to wait to claim because it's "getting a raise." If my employer were to come to me with an offer of a great raise in five years so long as I took no paychecks between now and then, I would hardly consider that a good deal. That is essentially the type of advice being endlessly offered by "experts" regarding social security. Also, the way in which waiting to file is compared to a compound rate of return is a total fallacy in my opinion. No one has an investment account with social security; the only thing you are ever due is your next payment (aside from survivor benefits, if any). The social security administration has very interesting verbiage on their site -- basically saying that all participants -- on average -- will receive the same amount of cumulative money regardless of the age when filing.

Tad Johnson from WI posted over 8 years ago:

It is kind of odd that nobody in the financial press talks about the break-even point. By my rough calculations the break-even age is 78yo. If you die before you reach 78 then you are better off taking SocSec as early as possible. If you live longer then you are better off delaying SS as long as possible. Now I just have to find someone who knows when I will die.

Scott Henneberry from TN posted over 8 years ago:

Hi Tad - you must have had to assume a "cost of money" interest rate in your calculation. What did you use? As mentioned I did an NPV calculation that shows a break-even of about 3.5%.

Scott Henneberry from TN posted over 8 years ago:

Oh - and I assumed death per the tables at age 82.

Victor Stankevich from NC posted over 8 years ago:

Delaying to 70 provides a sort of longevity insurance. Given there is always a finite probability of running out of money in one's lifetime, delaying to 70 gives you a much larger income stream should that unfortunate circumstance occur. But there is no one 'right' answer; it's a personal decision and other factors come into play; e.g., spousal benefit.

Tad Johnson from WI posted over 8 years ago:

Scott, I just did a rough back-of-the-envelope calculation. Yours sounds a bit more in-depth and is probably more accurate. I find it odd that everyone talks about delaying SocSec, but nobody talks about the break-even age. I guess most people do not like to think about death.

Joseph Conley from KY posted over 8 years ago:

Here is another twist. For anyone dealing with a Public Pension Offset, the answer is easy. My wife is a retired public school teacher who doesn't qualify for SS on her own record. She gets no survivor benefit on my record, so when I die our benefit expires. Better to take as soon as possible (or 66, if, as me, your are still working). If you don't need the money, which is given if you can afford to defer, take it at age 66, invest it for four years, and use that fund to supplement what you'd get a 70. With return on that four years, plus later on the declining balance, would take a long time (more that 82 or 83) to exhaust that fund. Think that would be true even if you don't have a PPO.

David Ingersoll from NV posted over 8 years ago:

There is another area that is not discussed enough. If you delay to get increased SSA payments you might increase your Medicare IRMA premium, because of your increased MAGI. And these income levels don't seem to correspond to federal income tax brackets. See AAII Journal, April 2018, Social Security and Medicare Can Raise Retirees' Tax Rates, page 11. Has any one paid for a Social Security Solutions, Inc. Analysis?

Jim Harris from FL posted over 8 years ago:

Joseph, The Windfall Elimination Provision (WEP) does not effect survivor benefits. See page 2 of the following document: https://www.ssa.gov/pubs/EN-05-10045.pdf

S Alexander from OH posted over 8 years ago:

How can investors be so innumerate? Yes, a delay can be financially advantageous. I just did a calculation assuming ... The person has a full-retirement age wrt Social Security of 66yr. You can only delay SS for 4 years at the linear (not compounded) 8% rate [so 32% more, not 36% more after 4yrs]. I've estimated the US LT inflation at 3.22% annually and the CPI-W used for SS COLA at 2.58% [based on the past 34-year history]. So your SS payments decline in value about 0.62% per year (the COLAs aren't quite large enough). If you just take your SS payments and put them under the mattress, then the zero year delay is the best strategy for value if you die at or before 80.1yo ... delay 0yr - die <80.1 yr delay 1yr - die 80.1 - 82.2yr delay 2yr - die 82.2 - 84.4 yr delay 3yr - die 84.4 - 86.3 yr delay 4yr - die >86.3 yr In the US someone who reaches 66yo has a 19.6yr actuarial lifespan (85.6yo)the best strategy is to delay ~3yrs which would net you an extra ~$22.2k (2019 dollars) over 19.6yrs, for a 4% boost in total inflation-adjusted income. But there is a catch - what if you used to SS payments for some better-than-inflation investment, or if it replaced spending from your investment assets? At the nominal market return (7% or 7-3.22 = 3.78% above inflation) - then ... You'd need to live to 85.5 to make a 1yr delay payoff. Live to 89 to make a 2yr delay useful, live to 92.5 for a 3yr delay, and live to 96.7 for the 4yr delay break-even. Note that no-delay, 19.6yr payout at $30k the first year has a total 2019-dollars value of $555k, while the value considering the investment income comes to $808k, a 45% boost if you don't live hand-to-mouth. That's a lot of "waiting for a train don't come" (to quote my favorite SciFi movie). My history and health give me good odds of dying before 82yo, and considerable odds of dying before 70yo! My best choice is to not delay. My wife's female & family genetics make the 4yr delay better for her.

S Alexander from OH posted over 8 years ago:

I should have considered Scott Henneberry's concise intelligent answer wrt NPV valuation. It makes a solid point but his analysis *appears* to contain some error https://www.investopedia.com/terms/n/npv.asp No matter what 'r' deflator (inflation rate) is chosen, the extra 8% payout eventually wins at sometime T. If NPV(0,T) is the FRB payout without delay, then the 1 year delay wins when (0.08/1.08)*NPV(0,T) > Ct/(1+r), and that is certain to eventually happen for any reasonable'r (inflation) given a sufficiently large T. IOW the stream of extra 8% payments eventually overwhelms the lost years of payment, including any gains but it may take a very long time. His 3.5% (after tax) investment return would push the break-even point to about 102 years of age for a 1yr delay ! == I missed two points in my note above, 1) delayed SS payments begin with a straight 8%/year linear increase in nominal payout,and do not additionally include intervening COLA adjustments to on-going amounts [if you are due $1000 as FRB, then a one year delay gets you $1080 regardless of COLA for that year] , 2) You receive a one-time DRP payment for COLAs only during the delay period. Incorporating these pushes the break-even point out beyond the actuarial lifespan for a 66yo. Item 1) suggests there is risk in delay if inflation causes an extraordinarily large COLA increase during the delay years! === Bottom line - the delay strategy is generally unwise. The tax consequences were not considered in this claim.