When Should You Collect Social Security?

The answer depends on how long you think you’ll collect benefits, in other words, live. But … that’s the hard part because nobody really knows how long they’ll live.

The answer is easier for couples since it is likely that one of you will survive the other. Therefore, one of your benefits should be delayed in order to maximize the benefit. Who’s benefit should be delayed? The higher earner’s. Why? Because that benefit will be the highest … AND the highest benefit between the couple’s benefits is the benefit continued for the survivor (the lower benefit goes away).

Another area of confusion is the connection between retirement and Social Security. When you retire and when you begin Social Security benefits are two SEPARATE decisions. That is why you can choose WHEN you apply for benefits.

The article below talks about how long you think you might live. What you think is not really relevant since most people don’t really know. You can get an idea about expected longevity (the number of years where 50% live longer, and 50% don’t) by going right to the Social Security’s period life table. This is a better approach than guessing from family history (medicine is getting better and people are living longer … so it is likely you’ll live longer than your family history, even with the same medical conditions).

So, from the period life table (currently 2007) … 50% of the population at age 62 outlive male: 19.40 years (age 81.4); female: 22.31 years (age 84.31). Similarly, 50% of the population at age 70 outlive male: 13.73 years (age 83.73); female: 16.04 years (age 86.04).

Now notice the expected longevity for those who have continued to live and are now 80 years old … 50% of 80 year old males outlive age 87.9; and 50% of 80 year old females outlive age 89.43! Notice … that the older you get, the more likely you will outlive an even older age (because you are still among the living).

Moral of the story … you never reach that “expected longevity age,” or said differently, you will always have an expected longevity … the living always have the likelihood to continue to live … and 50% continue to outlive expectancy (that is by definition what expectancy means). That is why are there so many Centenarians and Super-Centenarians.

This continuing-to-age effect is why delaying Social Security benefits so you get a higher amount is important, even for singles. The higher amount from that source means you can take less from your portfolio assets to sustain the same given Standard of Individual Living.

My collaborators and I have portfolio drawdown research past the peer reviewed stage pending publication in the Journal of Financial Planning. I will post a comment and link when it is published (estimated December 2012). I bring it up now because past research on portfolio distributions has not adjusted for this continuing-to-live effect. Our research paper shows how to make a continuing-to-age adjustment.

The article below is a basic discussion. Keep in mind the dynamics of aging when you make retirement decisions because it is hard to unwind an ill-timed Social Security benefit decision.

 

Hint: View Full Screen to see the complete article correctly.

About Larry Frank, Sr.

Larry R Frank Sr., MBA, CFP®, is an experienced financial advisor and a published author on Retirement Planning Research. Have a financial question? Click Here to Ask Larry

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2 Responses to When Should You Collect Social Security?

  1. Larry Frank, Sr. January 2, 2013 at 8:45 pm #

    This is the link to the research paper that I refer to above (second to last paragraph in my comments) that my collaborators and I had published in December:

    http://www.fpanet.org/journal/transitionthrougholdage

  2. Larry Frank, Sr. November 2, 2015 at 8:56 am #

    The new law ” Bipartisan Budget Act of 2015 * ” has removed two prior strategies that couples used to have since 2000. “File and suspend” and “Restricting the application to spousal benefits” are no longer viable strategies. The two strategies above were removed by the new law as “low hanging fruit” (most obvious opportunities because they are readily achievable and do not require a lot of effort) on Congress’ efforts to save money in the Social Security trust fund structure.

    Strategies for the divorced or survivors are still viable, as are many other claiming strategies however … so all is not lost!

    *Subtitle C: Protecting Social Security Benefits. Sec. 831. Closure of unintended loopholes.

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