Soc Sec

By Joel Dresang

Here’s a headline you’ll never see: “Don’t worry: Experts say no big deal.”

A year from now, I’ll be eligible for Social Security benefits at my full retirement age. I could’ve started getting monthly checks three and a half years ago, but I know this: It pays to delay.

I’ve done the math. Based on my personal Social Security records, I’d receive $1,100 more per month if I start taking my benefits next year, compared to what I’d be getting if I had applied at age 62. If I live to 88 (as old as my father when he died), I’ll receive $166,000 more from the delayed benefit than if I had locked in earlier on the lower amount.

I might not even apply for Social Security next year. If I wait until I’m 70, I’m eligible for an even bigger check — $1,000 a month more than if I started next year.

Of course, not everyone can wait till 70 to start receiving Social Security. Some can’t afford it because of health or employment deficiencies. Some (usually unbeknownst to them) won’t live long enough for the delay to pay off. I have lost three brothers who died young enough that the extra wait would have been a waste.

So, there are good reasons for taking Social Security earlier. But the reasons vary by individual, which makes it wise to consult a financial professional who knows your particular situation.

There also are bad reasons for taking Social Security early. Among them: Headlines.

A study from the Center for Retirement Research at Boston College has found that depending how alarmist they are, headlines can affect Americans’ understanding of – and plans for – Social Security.

Researchers tested adults with news articles on the projected depletion in the next decade of the trust fund that helps cover Social Security benefits.

The experiment found that the more dire the headline, the less workers expected to collect from Social Security when they retire. Panicky headlines even prompted workers to say they’d start taking Social Security earlier.

In other words, based on communications shorter than the average text message, people planned to leave thousands of dollars on the table that were supposed to support them and their families in retirement.

Other Money Talk articles from Joel Dresang

Researchers also noted that taking Social Security sooner limits how much workers earn and invest before retirement.

“If workers follow through with their stated intention to claim earlier, they will lock in lower monthly benefits without increased saving to make up the gap,” the researchers said.

National polls chronically reflect widespread angst over Social Security. A recent Harris poll for Nationwide Insurance found that 75% of adults over 50 worry that Social Security will run out of funding in their lifetime. That’s up from 66% in 2014.

Another recent survey found that although most non-retired investors understand that it pays to delay, only 10% plan to wait until 70 to claim benefits. The top reason: 44% said they were afraid Social Security payments would stop.

To be clear, no one worth listening to is predicting Social Security will run out of money.

By the administration’s own accounts, the trust fund is on schedule to be depleted by 2033. However, benefits are funded mostly by payroll taxes from workers and employers. Ever since 2021, retirees have been withdrawing more money from Social Security than taxes going in. Payouts have exceeded revenue.

But even with that imbalance, Social Security will keep paying retirement benefits. I’m counting on it.

As the chief actuary for Social Security explained in a recent podcast, even if Congress fails to address the shrinking trust fund before 2033, beneficiaries could still figure on receiving 80% of what they’re due. In my case, if I started collecting next year, I’d still be getting almost $2,800 a month when I’m 75. That doesn’t include annual cost-of-living adjustments.

By comparison, if I had let headlines scare me into claiming when I was 62, 80% of my monthly check would be less than $1,900.

I’ve always considered Social Security to be just part of our retirement income. It’s a part over which I have at least some control. I can try to earn more and work longer to build up my account. And I can set an optimal date to begin withdrawing, based on whenever suits me personally.

Here’s what you can do:

  • Stay (properly) informed. Scrutinize what you see or hear about the state of Social Security (especially from politicians in an election year). Diversify your news sources. Ignore or at least fat-check the more incendiary claims.
  • Be prudent. Don’t overreact to news – especially if it means disrupting long-held plans that affect your long-term finances.
  • Know your own situation. Set up or visit your secure personal account at Social Security to study the various projections for benefits. See how much more you can gain by claiming later. Weigh whether it’s worth the wait.
  • Get professional guidance. Talk with your advisor about how Social Security fits in your retirement plans. Strategize how to get the most out of your benefits.
  • Connect with your lawmaker. If people are as concerned about Social Security as the polls disclose, they should be sharing their informed opinions with their elected representatives in Congress.

Although I have some power over my Social Security benefits, I can’t control Congress. Congress can’t control Congress.

However, 40 years ago, Congress addressed trust fund shortfalls by gradually raising the full retirement age to 67 from 65. That history encourages me to believe that maybe – eventually – Congress can rise to the occasion again.

Meantime, I’m not letting lawmakers’ inaction – or headlines about the consequences – alter my plans.

Joel Dresang is vice president-communications at Landaas & Company.

Learn more
Moving the goal posts to full retirement, by Joel Dresang
Will Social Security Be There For Me? from the Social Security Administration
Knowing when to tap Social Securityby Joel Dresang
Working longer to fatten Social Security, A Money Talk Video with Lisa Lewitzke
When Should I …check my Social Security Statement?
7 lessons from my Social Security Statement, by Joel Dresang
Retirement insurance at 75, by Joel Dresang
(initially posted Nov. 30, 2023)

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