The blogger Physician on Fire has a recent article on Social Security timing of benefits (https://www.physicianonfire.com/?s=social+security). As with virtually every article on the subject that I’ve seen, he concludes:
At full retirement age, I get 100% of my calculated benefit. But each year that I hold off nets me an additional 8% per month for life. Unless I find myself in poor health, the smart money’s on the most money. I plan to delay my benefit until age 70.
I think this blanket recommendation that is parroted throughout the financial press may be very wrong. Waiting until age 70 to maximize lifetime social security benefits is predicated on several factors:
- You live long enough (at least to your early 80’s) in order to recover the lost benefits -say between age 66 and 70.
- You don’t need the money
- That the payments promised, and the taxation of those benefits don’t change from the present.
It is number three that is ignored by this and just about every other article and Social Security calculator I’ve ever seen. Social Security is rapidly depleting the “trust fund” that really exists only on paper. Within 15 years, benefits are designed to drop by up to 30% unless something changes. Guess what-that change will be higher payroll taxes, probably higher taxation of benefits (currently 85% of benefits for most people with any outside income are taxable-it will be easy to raise that to 100%), and possibly a reduction in benefits for those with “means.” Some of these changes would make all the current calculations wrong, and suggests that waiting to get the maximum benefit may be a bad choice.
I’m a financial planner and plan to take benefits at Normal Retirement Age (66 and 4 months for me) instead of waiting till age 70. If I was not still making an income before NRA (as there is a penalty for taking benefits then), then I’d consider taking benefits even earlier. Give that some thought.