Staking Your Claim

Richard Quinn

WHEN SHOULD YOU claim Social Security? The optimum date for starting retirement benefits is the subject of much debate and analysis. For most people, however, it’s a simple matter of when they need the cash—and, indeed, many folks claim as soon as they’re age 62 and eligible. The experts can run models all they want. But when it comes to Social Security, it seems necessity and emotion rule.

One thing is clear, though: There’s no validity to taking your benefits as soon as possible, and thereby ending up with a permanently lower monthly benefit, simply because you believe Social Security won’t be there for you. Congress has failed to heed warnings from the program’s trustees for nearly 35 years. Still, Social Security isn’t going anywhere. Take a look at the conclusion on page five of the latest annual report: Even when its trust fund is depleted, Social Security will still be able to cover 77% of scheduled benefits.

I love this quote from a recent article: “If you’re healthy and expect to live a long time, you should maximize benefits received late in life by delaying” the start of Social Security benefits. The problem: How could you possibly know to expect a long life?

If you have the fortitude to look, you might try the handy life expectancy calculator on If not, consider the Social Security Administration’s actuarial tables: At age 62, the life expectancy for a male is 21.6 years, at age 65 it’s 17.9 years and at 70 it’s 14.4 years.  A female lives two to three years longer, on average.

But many Americans will beat those odds. “The 85 and over population is projected to more than double from 6.4 million in 2016 to 14.6 million in 2040,” says the Department of Health and Human Services. Remember, once retired, a stock market decline, falling bond prices and rising inflation aren’t your biggest problems. Instead, it’s longevity—and hence the risk you’ll outlive your money. A larger Social Security check helps protect against that risk.

The goal of Social Security is to provide a safety net, but not full salary replacement and certainly not sufficient income to maintain your preretirement lifestyle. In Franklin Roosevelt’s words from 1935, Social Security offers “some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”

Unfortunately, Social Security has become more than just a “measure of protection.” For far too many older Americans, it’s their major source of income. Among elderly Social Security beneficiaries, 48% of married couples and 69% of single individuals receive 50% or more of their income from Social Security. Meanwhile, 21% of married couples and 44% of single individuals rely on Social Security for 90% or more of their income.

Social Security is so complicated that no average person can navigate the benefit claiming choices. In fact, I suspect most people are unaware of their choices or even the questions to ask. Claiming strategies are most complicated when a spouse is involved. Should you both start at the same time? Should one delay until a later age? Can delaying the main breadwinner’s benefit increase a spouse’s benefit?

Several years ago, Boston College’s Center for Retirement Research published an interesting paper entitled, “Should You Buy an Annuity From Social Security?” Its analysis looked at using your savings to supplement income until age 70, thereby allowing your Social Security benefit to grow, with the cost of this “annuity” being the savings you depleted. This makes sense and the strategy may work for those with a healthy amount of savings. But given the data on retirees’ reliance on Social Security and the sorry state of America’s retirement savings, is it practical?

Arguably, we look at delaying Social Security benefits the wrong way. It’s not that we add benefits by waiting. Rather, it’s that we lose less. In other words, we should think of the full retirement age as 70. If you claim earlier, how large a cut are you willing to suffer?

Here are five pointers:

  1. Don’t go through your working life thinking Social Security will be enough for a comfortable retirement. Be sure to fund your 401(k) and IRA.
  2. Have a contingency plan in case your Social Security benefit is smaller than you had hoped. What if you’re unable to work because, say, you suffer a disability or lose your job—and that means a more modest Social Security check? You should still be in good shape for retirement, provided you start saving in your 20s.
  3. When in doubt, go for the larger Social Security benefit. Sketch out a strategy to meet this goal. That may involve working longer or following the Boston College approach.
  4. Consider survivor benefits in your plans. Typically, a surviving spouse will receive the deceased worker’s full benefit—which is a big incentive for the family’s main breadwinner to delay claiming Social Security.
  5. Investigate Social Security filing strategies several years before your planned retirement. As in all things to do with retirement, time is both your ally and your enemy.

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include What Do You MeanOpen Season and Straight Talk. Follow Dick on Twitter @QuinnsComments.

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