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September 9, 2020 74 views
- Owner of Sunpath Financial, 15-years experience in finances, ten years in individual and corporate tax, Author or "The Ultimate Guide to Retirement", Forbes award winner for top 25 Retirement Articles 2019.
- Opinions expressed by Sunpath Contributors are their own.
If I offered you $.75 for a $1, would you accept?
A silly analogy, but one the majority of American’s agree to when starting their benefits early at the age of 62.
The truth is, most retirees take early because they fear the long-term sustainability of the system, as though a “bird in hand is better than two in the bush”.
“They’ve made a lot of adjustments over the years…filing early would only increase the lifetime value of my benefit, and although I’ll get less, I’ll receive more checks over my lifetime.”
The other side of the argument, is although you’ll receive fewer checks, your monthly benefit will be higher, and likely to be needed with the rising cost of goods, services, and taxes.
The final argument is mortality neutrality, which states that it does not matter when you begin your benefits, because the breakeven age for delaying is 11 – 13 years, placing a 66 year old close to the average age of death, so they really didn’t have much time, if any, with the increased monthly benefit.
Where do we stand?
Healthier Social Security System: the sustainability of the system is a simple function of how much is coming in, and how much is going out.
More workers paying in, and the fewer beneficiaries taking from the system is ideal. So the longer an individual waits to take their benefit, the more sustainable the system, especially if they continue to work.
You’ll need it down the road: Mortality is just an average, 50% will die earlier, but 50% will die later, but it’s better to error on the side of caution, and be conservative (that goes for all things retirement).
Those who live longer are likely to need the increased benefit to sustain the rising cost of goods and services over a 20 to 25 year retirement.
Enjoy your retirement: with an increased benefit, those who delay are able to spend a little more than the average, they experience overall less stress due to increased financial stability, and as we know, lower levels of stress typically convert to increase health.
