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What’s the “World’s Best Insurance Policy”? Delaying Social Security

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We know that many of you who read this, and many of those who listen to us on the radio, will have already started drawing Social Security well before age 70. The average age when benefits begin, say the experts, is 64, and many sign up for benefits as early as they can at 62.

Nevertheless, for those of you who haven’t yet started taking benefits, this article on the PBS Newshour website really caught our attention. It gives a long list of reasons why waiting those extra years until age 70 should be a highly important part of your financial plan. In fact, the author, business correspondent Paul Solman, calls the strategy of waiting until you’re 70 to start Social Security “the best insurance policy on Earth.”

Solman has a strong opinion, and no doubt some might take issue with his thinking, but his logic is tough to refute. As the author points out, the biggest fear most of us should have as we age is not dying too young but living too long and outliving our resources (something we advise our clients about continually). Delaying benefits from age 64 until age 70, for most retirees, increases eventual payments by about 50 percent. Those extra dollars will make an enormous difference in the years ahead. In spite of that fact, a growing number of seniors draw benefits well before age 70, some because they have to but others because they choose to.

The PBS piece says it’s wise to think of Social Security as insurance, not merely as a source of extra income. Once the average adult reaches 64, the average life expectancy for a man is about 82 ½ – for a woman, 85. Do the math and you’ll find that the average Social Security beneficiary will earn more by waiting until 70 to draw payments, even if he or she passes away in their early 80’s – and with life expectancy rising, the rationale for delay looks more and more compelling. When you wait until age 70, says author Solman, Social Security provides “a guaranteed, inflation-protected return for every year you wait that’s better than any alternative investment out there.”

Solman cautions against the notion that a smart amateur investor can draw benefits early, invest those funds and create a better fiscal outcome. He calls that strategy “self-delusion” – the tendency we all have of kidding ourselves into thinking we’re smarter and more disciplined investors than we really are. The reality, he says, is “if you’re still stubbornly tempted to take Social Security benefits at age 64 and invest them on your own, please consider that you’re not liable to beat even the average market rate of return.” In other words, you won’t equal the 8 percent annual increase Social Security guarantees to those who delay. The fact is, says PBS, during the 20 years from 1991-2011 (accounting for costs and inflation) the average American investor actually lost money, and that kind of downturn can always happen again.

The PBS Newshour article concludes that “the worst-case scenario is, to reiterate, living too long — living to your maximum possible age of life and, as a result, outliving your savings and income.” We say a hearty “Amen” to that statement. That’s precisely why, here at AgingOptions, we place so much of our focus on the process we call LifePlanning – helping our clients map out every aspect of their retirement plan, or LifePlan, to make certain their assets are protected and their wishes respected. Your LifePlan will answer key questions for you as you look ahead. Are my housing choices being considered? Do I have all my legal documents in place? Is my financial plan, including Social Security, sound and secure? Have I provided for my health care needs? And does my family, those closest to me, understand my hopes and wishes?

If a LifePlan like that sounds like something you want to explore, we have a no-obligation way to find out more. Register today to attend a free LifePlanning Seminar, held at locations throughout the Puget Sound region. For dates, times and locations, click on the Upcoming Events tab on our website and register online. These seminars fill up fast, so we encourage you to confirm your reservation and join us. It will be a pleasure working with you, no matter where you are on your journey to a secure and fruitful retirement.

(originally reported at

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