Social Security: Is It Truly Advantageous To Delay Benefits In Today’s Economy? Experts Weigh In
Written by
Vance Cariaga
Edited by
Nicholas Morine
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There’s a lot to consider in deciding when to apply for Social Security benefits, ranging from your personal wealth and financial needs to your health and life expectancy. Most financial experts recommend waiting as long as possible to apply so you can get a bigger monthly payment, but that doesn’t apply to everyone — or even to every economy.
The current economy of high inflation and rising interest rates might make it tempting for many seniors to apply for Social Security early, before they reach full retirement age. Although doing so would reduce your monthly payment, having the money handy can help pay the bills for those who are struggling with high costs. Applying now gives you the added bonus of an 8.7% cost-of-living adjustment (COLA) for 2023 — the largest COLA in more than 40 years.
Even seniors who aren’t struggling financially might decide to take advantage of today’s high savings rates by applying for Social Security and sticking their payments directly into accounts where the money can grow.
But again, your personal strategy depends on your personal financial situation.
Experts Weigh In on Delaying Social Security Benefits
“The fact that real interest rates have increased significantly over the last year does push the math in the direction of filing earlier,” Mike Piper, author of “Social Security Made Simple,” told Forbes in a recent interview. “But the push isn’t large enough for most people.”
He said that for unmarried people, it is “still slightly advantageous” to delay filing for benefits, though not as much as a few years ago. It is also best to delay for higher earners in a married couple — ideally all the way to age 70, after which there is no benefit to delaying.
“For the lower earner in a married couple, it’s usually not advantageous to delay,” Piper added.
Wade Pfau, author of “The Retirement Planning Guidebook,” offered a similar assessment.
“While the case for delaying Social Security weakens as interest rates rise, it is still quite strong,” Pfau told Forbes.
Both experts noted that interest rates are only one thing to consider. You should also think about the financial protection you get from Social Security in terms of your expected lifespan. The longer you delay filing for benefits, the higher your monthly payment. This could prove crucial for seniors who live another 30 years or longer after retirement.
As GOBankingRates previously reported, one recent study found that waiting until age 70 to claim Social Security would boost recipients’ lifetime discretionary spending by a median $182,370 in today’s dollars.
That study was conducted by David Altig of the Federal Reserve Bank of Atlanta, Laurence Kotlikoff of Boston University and Victor Yifan Ye, a research scientist at Opendoor Technologies. It was based on data from the Federal Reserve’s 2019 Survey of Consumer Finances along with a Social Security maximization tool developed by Economic Security Planning.
Seniors today have much longer expected lifespans than they did when Social Security was first implemented, meaning that higher monthly payments can pay huge dividends later in life.
“Delaying benefits has the important effect of reducing longevity risk,” Piper said. “That is, delaying filing reduces the risk of outliving your money, because delaying works out well in the live-a-long-time scenarios.”
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