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For many years I, and probably many of you, have been reading from the gospel that people, on average, will collect the same amount of money from Social Security without regard to the age that benefits begin.
The thing is, we have been preaching that gospel for as far back as I can remember. Actuaries calculated this decades ago, and over the years, life expectancy have increased. An exception was during COVID, still, the mortality tables have us living about 3 years longer than 30 years ago.
If I am correct, taking into consideration that we now live longer, the debate about when to claim Social Security would skew towards delaying benefits. That said, and before you all start yelling at me, I know that your reality might not match up with that of the soulless actuary. Many HumbleDollar contributors have laid out valid reasons and solid strategies for claiming early.
Still, longer life, the growth of delayed credits, as well as the increased cost of living credits that come with delayed credits, is a powerful argument for delaying.
For the young folk who have not yet signed up for Social Security, keep in mind that statistically, you might live longer than the folks that crunched the numbers for SS thought you would.
For this post, I asked AI the following question:
The actuaries say that over the long run, it doesn’t matter which age one begins taking Social Security. However, for as long as I can remember the calculations have not changed. With people living longer now than in the past, are those calculations still accurate?
AI supported my contention, citing data from the Financial Planning Association, The Bi-Partison Policy Center, AARP, Thrivent Financial, and Investopedia.
I like to view SS (and claiming later) as longevity insurance. It’s a gov’t guaranteed, lifetime, inflation adjusted annuity.
When my wife and I were planning our retirement, I bought software and no matter which assumptions I used the results were so similar it did not matter when we started SS. So, since we had similar earning histories, I collected at 67 and she delayed to 70. We were both born before 1954, so she was able to collect half of my benefit for three years and then upgrade to her own larger benefit at 70. It worked for us because my health deteriorated after I started collecting and I at least got those three extra years of payments. Bill Bernstein is correct; life throughs you knuckle balls sometimes.
Life sure does throw knuckle balls, Howard.
I was born in 1952, so also benefited from the spousal benefit while I let my benefit grow. That was nice.
Bill Bernstein and Edward McQuarrie recently shared a perspective on SS claiming age.