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Social Security Benefits: Is Waiting Just Plain Wrong?

Social Security gives you the choice of whether to take smaller benefits as early as age 62 or wait for larger benefits until as late as age 70. Even though countless analysts have shown that many people get more money in the long run by waiting longer before taking Social Security benefits, millions remain unconvinced and take them as early as they can.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the arguments for and against waiting to take Social Security benefits. Dan notes that even though you get a reduced benefit by taking Social Security early, you get the money at a time when it might have more value to you in terms of enriching your life. Moreover, with break-even dates in your late 70s or early 80s, many people simply don't believe the actuarial figures that suggest they could live a lot longer than they expect. Dan looks at data showing that 40% of retiree-age Social Security recipients are 75 or older, with one in eight 85 or older, and notes that the data doesn't include the impact that delaying Social Security can have on younger spouses and survivors. Dan concludes that you must take health issues and other personal information into account to make the best decision, with no hard-and-fast rule applying to every single individual.

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Have general questions about Social Security? Email them to SocialSecurity@fool.com, and they might be the subject of a future video!


Read/Post Comments (31) | Recommend This Article (38)

Comments from our Foolish Readers

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  • Report this Comment On April 27, 2014, at 9:33 AM, BlueAngel835 wrote:

    Where are the statistics? Someone, somewhere has determined how better off (or not) the earlier retirees are. In all of these articles no one shows us the numbers. Let's face it, life is a crap shoot. Do what makes you feel good. Once you make your choice, stop reading articles like this one.

  • Report this Comment On April 27, 2014, at 10:04 AM, stockingshorts wrote:

    My wife and I are 62 and within months of each other's birthdays. Both of us have worked hard throughout our lives and have saved a considerable amount. Our health could be better at 62 and that alone, is the reason we started taking our SS at 62. We have friends who are willing to wait for their SS at normal retirement age. Each has to determine what is best for them. We have plenty of regular cash coming in now through our investments and SS.

  • Report this Comment On April 27, 2014, at 10:14 AM, greyhound44 wrote:

    If one is single, has paid maximum (SS portion) of FICA for 35+ years; retired early at age 58.75; had no debt since 1991 when the last mortgage was retired; and had offshore real estate, one would be foolish to NOT take UN TAXABLE (in my case) SS retirement benefits from age 62 until age 70.5 when the IRA MRDs kick in.

    In my case, my SS RBs will become taxable early next year.

    This IDIOT so called financial adviser should be very lucky to have a net wealth of high 7's/low 8's and an IRA just under US$2MM in Dec 2013.

    Do you financial IDIOTS really listen to financial advisers??????????

  • Report this Comment On April 27, 2014, at 10:20 AM, fuckyou9999999 wrote:

    What "math"? Social Security is set up to pay you the same total amount of money no matter how many months it's paid out over. So if you retire early, you get less per month, but more months. If you retire later, you get more per month, but fewer months. When will the motley fool start putting out the truth instead of click bait?

  • Report this Comment On April 27, 2014, at 11:08 AM, edsink wrote:

    When I was coming up on 62 there were lots of reasons why retirement looked attractive, mostly working was just not enjoyable anymore. Using the benefits letter from SS I did "run the numbers". Using present value of the benefit stream to age 85 the present value was +- zip. With the average life span at 78 you must beat the odds by 7 years to win by waiting. The real question is, do you want to keep working? For me it was clear, I had better things to do in my life.

  • Report this Comment On April 27, 2014, at 11:55 AM, sabebrush6 wrote:

    It all depends on your personal situation. One size doesn't fit all. I took my retirement at 62 !/2 & with my pension it works out just fine. Perhaps for the next person, it wouldn't. My house and cars were all paid for so I only had utilities. Worked for me.

  • Report this Comment On April 27, 2014, at 12:01 PM, alwaystakessat62 wrote:

    You always take SS at 62 even if you don't need it. Throw it into a savings account. If you make it to 70 they give you the option to give them back the money and start anew collecting the higher monthly amount.

    If you don't live that long there is a lump sum in your savings account that is in your family otherwise the govt gets it.

  • Report this Comment On April 27, 2014, at 12:54 PM, Mikel00 wrote:

    It all assumes that you live to be 88 or so, but that is truly a fool's assumption. My brother passed unexpectedly at 62 1/2 years so at least he received 6 months of benefits.

  • Report this Comment On April 27, 2014, at 12:59 PM, toomuchgas wrote:

    If you take your SS early you can save it if you don't need it. Also, if your SS is higher later on it might force you into the Obamacare surtaxes which increase every year as well as the surtax on investment income as the government gives with one hand and takes with the other. This increase in tax rates is significant for anyone earning $200,000 from all sources.

  • Report this Comment On April 27, 2014, at 1:14 PM, yooperintx wrote:

    alwaystakessat62 - You only have 12 months after initial application for benefits to repay and later get higher amount. That is a recent change. Can only do it once in a lifetime.

  • Report this Comment On April 27, 2014, at 1:16 PM, yooperintx wrote:

    alwaystakessat62 - You only have 12 months after initial application for benefits to repay and later get higher amount. That is a recent change. Can only do it once in a lifetime.

  • Report this Comment On April 27, 2014, at 1:29 PM, tpault wrote:

    Many people can go most their lives treating their retirement plans like a cousin twice-removed. A quasi-familiar relationship that we can file under "solved" lets us remain comfortably numb during working years. We let our employer deduct a % for 401, we elect the fund, and it's a set it & forget it affair for many people. That is until a magical number called 62 approaches, at which time we'd better start paying a little more attention to our options. I use to preach to my then high school aged daughter that few times in life will the next 1 to 4 years matter as much for the rest of your life, than those immediately following graduation. But one of those few times, are the years immediately following age 62. Analysts and trusted advisors like the Foolish Dan Kaplinger leave no stone unturned regarding to-the-penny break even points, demographic data & trends, and mitigating factors. And so it is ironic that we can spend our entire careers looking forward to retirement, yet have this urge to put a rush priority onto collecting Social Security asap. We wait from ages 18 to 62, 44 years worth, to forsake it in favor of not waiting the last 3-ish. But I think there's a little more involved than cold numbers at the end of our careers. There's a little factor called fear, or, maybe rationality. What a waste, a terrible waste it would be, to successfully make it the first 62 years, decide to wait some more, then have a stroke or worse, die. Or other cataclysmic event. What's that they say? A bird in the hand is worth two in the bush. Options are usually a good thing, but when do options become a kind of blackmail? When we are pushing 65 years old, it isn't just the skin under our biceps that get looser. It's also our brains and confidence and fear of dying... no I'm not saying we are automatically weaker physically and mentally, but I am saying it takes more exercise to stay sharp. Meaning there is some comfort in the notion that one may be able to get an honorable yet early discharge from the capitalist realm we call work. An institution's worth of worry and pain and effort and doubt and fear and uncertainty, can be eliminated with two words at age 62: I retire! Granted one may be trading the relief from those things in as they relate to the rat race of employment, for the fear and doubt and uncertainty of retiring with less than a full tank. But that's where the weighing of things come in such as is the home paid for, do I have a decent newer ride, do I owe anyone, do I have more sources of income, can I work still, but now at something enjoyable? But back to the blackmail thing. There ought to be a law that lets folks know that the carrot dangling days are done. Uncle Sam ought not be allowed to say ok, hold off until your 99 years old and we'll give you a million dollars up front. Or on second thought, maybe there should be a law that mandates such an offer? Ohhhh, see what I mean? It's like playing a game of black jack with something one has worked hard for, like, forever. No amount of taxes and laws are optional, while working. No amount of effort is optional, while working... gas to get to work, specialized clothing, trudging back and fourth in blizzards, and well... 44 + years of paying Uncle Sam, and paying the Piper, just so we can work again, tomorrow, next week, and until we reach retirement age. And so it is with almost no appreciation that I witness the government playing Social Security tunes the likes of the game show Jeopardy, while withholding higher amounts if only I vow not to collect it, just yet. Credits await those who defer until as old as age 70, but, credits is really just another term for not having reached full benefit age. Now, who agrees with me that there should be a law that addresses just how close to life expectancy years (or put another way, just how close to death) that the government is allowed to tease us with? We work for going on 5 decades, falling under strict rules and laws that govern our earnings, but all of a sudden when it's time for Uncle Sam to potentially pay, there's all these murky "options" that conveniently let you defer collecting what's owed you, almost up until the day you die. And, well, so, maybe that's why some of us cash out asap. We want to fish, we want to take our grandkids on vacation, we want to sleep in, we want to read Motley Fool, before cataracts and diabetes and Uncle Sam, try to keep us in check until we finally make these things (diseases, Uncle Sam) happy by dying. I choose life, I choose SS asap. Of course, even that's another 6 years away for me, but those are 6 years which I will feel extremely blessed to survive. I choose not to hear Uncle Sam laughing all the way to the bank, should they witness me passing away before I ever collect that first check due to a combination of my, and their greed. Some things are worth waiting for, but some things are definitely worth "not" waiting for.

  • Report this Comment On April 27, 2014, at 1:31 PM, Riggerwo wrote:

    Like many things in life it is a crap shoot...its a lottery..how long will I live... I like to work..so I plan to work as long as possible and wait till 70 to take SSN.

  • Report this Comment On April 27, 2014, at 1:33 PM, KenLake wrote:

    There is an awful lot of incorrect information in these posts.

    1) Typical break even is around 78 to 80. Not sure where these people learned their math, but the breakeven is nearly the same for everyone

    2) edsink- Your life expectancy figure is not the right one to use. &8 is life expectancy for the entire population, but for a 62 year old, life expectancy is about 82 for males, 84 for females

    3) Alwaystakesat62- The option to give all the money back at age 70 and then claim at the higher benefit was eliminated about 4 or 5 years ago. Now you can only "change your mind" within 1 year of when you first start collecting. (It was a great strategy when it was available)

    4) Toomuchgas- It is highly unlikely that the higher benefit collected at age 70 will push you into the Obamacare surtaxes whereas getting the lower benefit would not. But even if it did, it is probably equally as likely that you will pay them even if you start collecting at 62, especially since the threshold to make SS taxable is so low.

    5) Mike100 - it does not assume you will live until 88. SS payouts are designed to pay the same amount regardless of when you start IF you live until average life expectancy. Live longer, you collect more, live shorter and you collect less.

    6) When doing the calculations, you must include the impact of COLA's, even though they may not be exactly equal to inflation. Waiting to collect not only increases your benefit by either 7 or 8%, but it also adds COLA's. Thus when comparing SS to investments, keep in mind either that you need to use investment return above cost of living, or use the entire return but then include COLA's when evaluating SS.

    The bottom line is that the answer depends on individual factors including, are you married? the age of your spouse? what are the benefits on her record? what is you state of heath? what is your family history on longevity? what resources do you have to rely on outside of social security? are you currently under FRA and still working( benefits may be reduced, although they are built back in once you reach FRA)? do you believe the SS program will be adjusted to meet the anticipated shortfalls in about 2033 and if so, what do you believe is the likely fix (and will existing benefit levels be grandfathered for hose already collecting or old enough to collect)?

    Once you get through those items, you can make a decision that's best for you, but its critical to apply correct information to the process.

  • Report this Comment On April 27, 2014, at 1:45 PM, yooperintx wrote:

    Another thing to consider is, will you keep working after age 62? If you do and make over the maximum amount, currently about $15k, you lose $1 of benefit for every $2 over the maximum until you reach full retirement age.

  • Report this Comment On April 27, 2014, at 2:46 PM, pfk93 wrote:

    There are objective and subjective reasons to claim SS benefits as soon as possible or wait as long as possible:

    OBJECTIVE: (Measurable)

    1) You gain about 8% per year from 62-70 which could be a good amount of money at 70

    2) It takes about 12 years from the time you start taking SS till you hit 65 to make up for the money collected early. For example if you start collecting at 62 you need to live till 74 before the amount you collected from 62-65 is less than the increased amount you would have collected from 65 to 74.

    2) The amount you could collect from 62-65 may be enough to actually allow you to retire

    SUBJECTIVE:

    1) You're quality of life after retiring at 62 may be better

    2) You may never reach your retirement age (death is very unpredictable)

    3) Working those extra years may add to wear0and-tear on body and mind

  • Report this Comment On April 27, 2014, at 4:29 PM, onisac wrote:

    The reason SS is becoming ineffective is simple. Which is to say, every time the ante is raised. Congress/Senate thinks it's there for them to spend.

    How simple is that to remember? The setting administration has no legal authority to spend money ear marked for SS. In fact to spend for anything other than SS.

  • Report this Comment On April 27, 2014, at 5:05 PM, johnc47 wrote:

    Great advice both from the video and the comments added here. I waited but one factor that helped was that I was able to collect on ex-spouse benefit, me being single and qualifying. You need to know all the rules cause the folks at SS gave me poor info and I was actually eligible for ex-spouse benefit -- then when I finally learned to go ahead and claim that benefit, it was several years later and the net effect was that I lost several thousand dollars from the late claim. Age 70 now and collecting max, but in the meantime they found prostate cancer -- so that impacts life tremendously -- don't count on living forever. My dad died at 88 but my health is throwing me a curve. Look at all angles as suggested above. Max amount sounds great, but not if you croak before your 80s or whatever the break even point is. I am in decent shape but nowhere what I was at 62 or even full retirement at 66. The crap they feed you about age 70 is the new age 50 -- it's just that, a load of crap.

  • Report this Comment On April 27, 2014, at 5:23 PM, kurtdabear wrote:

    I didn't see or hear anything about the government's role in the future of your Social Security planning. The government is the joker in this game. Every year, they raise the amount of your salary subject to the tax, and every few years they raise the contribution percentage. Because the system is actuarially unsound and recent high unemployment has caused a decline in revenues and a spike in claims, the system is approaching another one of its periodic crises. This leads to changes you hadn't planned on as SS unilaterally changes the rules of the game. During the last two decades that I worked, SS moved my "normal" retirement date out nearly a year and reduced the pay-out for early retirement by 5%. That convinced me to take early retirement because SS never wants to mess with beneficiaries' checks. The bird in the hand is better than the two in the bush especially when dealing with the government.

  • Report this Comment On April 27, 2014, at 7:11 PM, Gottamouthoff wrote:

    If you like your work and enjoy it I would defer to a later age. If you happen to have good insurance that is mostly paid by your company that would be a good reason to wait. In any case before taking early benefits be sure to have tests for cancer and other life changing disabilities ruled out. Should they be detected before you start retirement early you may have been able to collect the SS Disability by staying on your companies payroll while being treated and then when you get unable to work get the higher Disability.

  • Report this Comment On April 27, 2014, at 7:37 PM, cdd37 wrote:

    Rule #1: do all you can to get and stay fit and healthy (eat well, exercise, meditate)

    Rule #2: never break Rule #1

    With this in mind, the SS "conundrum" becomes an easily solved little problem.

  • Report this Comment On April 27, 2014, at 10:17 PM, Tichelb1 wrote:

    If you need to worry about waiting for a few extra $$$'s a month, you best wait. You are NOT ready to retire....

  • Report this Comment On April 27, 2014, at 11:12 PM, kennyhobo wrote:

    It is too complicated to figure out. The Democrats have created a massively complex tax law and are always threatening to increase taxes. So taking SS early means I bank the money while I am in a lower task bracket that my mandatory 401k withdrawals will destroy, i.e, I would lost my added SS benefit by waiting because it would add to my increased tax bracket.

  • Report this Comment On April 27, 2014, at 11:21 PM, cbmro98 wrote:

    Can anyone say "Net Present Value."

    Do the numbers, determine your own break even point (the age at which early claim vs later claim has the same Net Present Value.)

    Then ask yourself what are the odds that you and/or your spouse will live that long and will need the money, and then make your decision.

    Form me, breakeven between benefits at age 62 or 65 is age 83, not worth the risk, I'll take the money as soon as possible and if I don't need it, I will just withdraw less from my IRA's.

  • Report this Comment On April 28, 2014, at 12:02 AM, russgeo wrote:

    Let's not forget the life expectancy includes the number of years you may spend in a nursing home. Who do you think gets your check while your being cared for until you die in those places.

  • Report this Comment On April 28, 2014, at 12:03 AM, nittanyfan wrote:

    if you need the money , take it early. If you don't need it, wait until 70. The biggest risk most people will have is outliving their money so the higher benefit is a big plus if you do live into your 80's or 90's. And if you unfortunately die before 70 , think how you will feel then about not collecting SS early - hint - don't matter since you are not alive!

  • Report this Comment On April 28, 2014, at 1:15 AM, demonow wrote:

    So my dad took his SS at 62, took part of the money and bought a $250,000 life policy on he and my moms lives. He died 9 year later… He was preferred at 62, life changes. My mother had her SS and $250,000 tax free life benefit. She had 38,000 in her life policy, I have been paying her premium and when she passes I will receive $250,000 tax free for my retirement. It's amazing what SS cash flow did to change my mom's and my life. Thanks to my dad's understanding of life insurance. Oh, he had saved enough through life that the SS was extra cash flow. Of course this may not work for everyone.

  • Report this Comment On April 28, 2014, at 5:33 AM, fotoman1133406 wrote:

    Guys,

    Almost everything I've read/heard deals with those that make SIX(6) figure incomes. Even this article and the responders; it's still dealing with those of SIX(6) figure incomes.

    Sorry, what 'bout the REST of us? Those that CAN'T afford insurance? Those that HAD to take/be put on disability, from illness?

    Talk 'bout the poor, low income and lower middle class people(income $1050.00 a month- those that make UNDER "SIX"(6) figures???

  • Report this Comment On April 28, 2014, at 1:58 PM, justcantwait wrote:

    For me waiting is not an option. My husband and i both worked for a time. My husband passed 11 years ago & as a result i have to wait until 60 to draw his ss. Why not just draw my own you say? Because for about 18 of our married 29 years I was not in the workforce, part due to choice & partly due to having a disabled child. I did however return after the death of my child and husband. So you see my ss will never be as high as what i would receive from my spouse. And it is not like i can will uncollected benefits to my children. My dad retired from his job after working there for 48 years. He retired at 65 and died at 67. My mom only worked for a brief time. My mom collected partial ss payments then got full benefits after my dad's death at age 68. At age 74 my mom too had passed. I receive a pension from my spouses previous employer & with that and my ss payments which i intend to apply for as early as next year,God willing, I will enjoy my children and grand children for the rest of my days. And no we didn't have a six figure income. Good health, a loving family, peace and joy are better then money any day. Just so you know there were no dependent children so I couldn't draw at 50. All we can bank on was that last breath that we just took. Tomorrow is not promised to anyone.

  • Report this Comment On April 28, 2014, at 2:50 PM, ThePfo wrote:

    Their are numerous calculators out there, but generally if you expect to live beyond 85, take it later. You come out WAY ahead and you really don't want to take it early, live to be 95 and spend the last decade of your life completely broke and unable to work.

    SS really pays a pittance. It's barely livable, hopefully you have other investments and own a house by the time you hit this point in life.

  • Report this Comment On April 28, 2014, at 7:57 PM, richie54 wrote:

    Each day I delay retirement past age 62 is one less day of retirement I will have. Enough said.

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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