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Nationally-Known Economist Laurence Kotlikoff Tells Why Seniors Should Delay Social Security and Pay Off Their Mortgages

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Most Americans who follow economic policy even a little have likely heard the name Laurence Kotlikoff. With degrees from the University of Pennsylvania and Harvard, and a long list of books, articles and interviews under his belt, Kotlikoff, now a university professor, has a history as a plain-talking advocate for common-sense reform covering everything from banking to Social Security to healthcare. (You can read more about Kotlikoff here on his website.)

Perhaps not surprisingly, as this article just published in Barron’s reveals, Laurence Kotlikoff also has his detractors, especially those who take issue with his stance on people paying off their mortgage as fast as possible (he’s for it) and people taking early Social Security (he’s against it). Because these are two topics of paramount interest to most retirees, let’s take a look at the Barron’s article, by reporter Neal Templin, in which Kotlikoff explains and defends his views.

Critics of Kotlikoff Fear for the Future of Social Security

“Economist Laurence Kotlikoff has spent the past 28 years urging most Americans to wait as long as possible to claim Social Security,” Templin writes in the Barron’s article. But for some critics, that conviction “puts him in the crosshairs of those who think the government program will run out of money.”

Nevertheless, Kotlikoff, now a Boston University professor, remains resolute. “For starters, he doesn’t believe Social Security will be cut because seniors are such a strong political force,” the article explains. “And even if Social Security were cut, say by 25 percent, Kotlikoff says the numbers still support waiting to collect.” 

Kotlikoff, who has served on the President’s Council of Economic Advisers and consulted with the World Bank and the International Monetary Fund, argues that, even if the program faces cuts, “The gain in lifetime benefits by waiting might decline to 25 percent from 40 percent, but it’s still a significant gain.”

Critics Also Accuse Kotlikoff of Making Poor Financial Decisions

The Barron’s article refers to an earlier interview (here’s the link) in which Kotlikoff shared his views and opinions in some detail. “[He] attacked the approach of traditional financial planners,” Templin explains, “saying they are too focused on building up investment portfolios whereas their primary goal should be ensuring that clients have constant income throughout their life.”  Needless to say, his critical comments weren’t too well received, generating more than 200 responses, many of them negative.

One statement that drew a derisive reaction was the economist’s admission (as Barron’s describes it) “that he pulled out of the stock market at the beginning of the pandemic last year, missing the dramatic rebound in equity prices that occurred after the federal government pumped trillions into the economy.”

Still, Kotlikoff defended his cautious view. “What finance theory says, and all these critics should know this, as your risk goes up, you should invest less in risky assets,” he says. “I’m an economist, and I had never seen an economy locked down before the pandemic.” He has since begun reinvesting, but cautiously and conservatively, he says.

Does Paying Off a Low-Interest Mortgage Make Sense?

Kotlikoff’s advocacy for paying off one’s mortgage also attracted critics. “[They] disagreed with Kotlikoff’s assertion that it makes sense for many people to take money from their individual retirement account to pay off housing debt in a time of record-low mortgage rates,” says Barron’s. “Readers noted the stock market has been notching double-digit gains, earning them way more than they would save by paying off their mortgages.”

But Kotlikoff remains undeterred. While the market has done well over the last decade or so, he admits, continued gains are not guaranteed. Besides, he points out, “the decision to pay off a mortgage depends heavily on personal factors.”  He believes higher-interest debt such as credit cards should be attacked first, and that keeping emergency funds on hand is essential.

As for mortgage rates, while those in the “ultralow” category (2 percent or so) may have less incentive to pay off their mortgage, “for homeowners still paying mortgage rates of 3 percent or 3.5 percent in an era when Treasuries yield less than 2 percent, Kotlikoff says, ‘there’s a pure arbitrage opportunity there.’”

Burdensome College Loans May Not Be Worth It

“Some readers questioned Kotlikoff’s view that no one should take on debt to pay for college,” says Templin, again referring to one of the economist’s lightning rod opinions. “Without debt, one reader noted, many Americans can’t go to college.” 

College is a good investment for many, Kotlikoff responds. “But,” says the Barron’s profile, “he is troubled that a great number of Americans start college, take on heavy debt, and don’t finish it.”  He strongly suggests shopping for the best education at a reasonable cost.  He also cited one study done some years ago by the National Bureau of Economic Research that found little correlation between attending a high-priced elite university and eventual career earnings.

Views on Social Security Draw Loudest Criticism

According to Templin’s article in Barron’s, the issue that got Kotlikoff’s critics the most riled up was what Templin calls “[Kotlikoff’s] full-throated support of Social Security.”  Asked to explain the vital importance of Social Security, Kotlikoff replied: “I believe people need to be compelled to save.”

Kotlikoff, who once helped author a proposal to introduce a pension system that would have replaced Social Security, believes that the current program is the best deal around for retirees. As Templin puts it, “Social Security is inflation-adjusted and is priced more generously than private annuities. Benefits rise 8 percent for each year workers wait beyond their full retirement age to claim Social Security.”  All this adds up to a clear winner, even if the program is mired in politics.

“This is a safe, huge retirement that the government is offering,” Kotlikoff told Barron’s. “It’s like a bag of gold coins delivered to the front door. This is really a no-brainer.”

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(originally reported at

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