Safety and Planning is a Snap! When to Claim Social Security

Social Security application

by Sally Pessin

I met with a client (“Rick”) who was a helicopter pilot.  He insisted that he would be better off taking his Social Security (“SS”) benefits before his full retirement age of 67.  He believed that if he claimed his benefit early, at age 62 and invested the money in the stock market, he would be better off.  I let him know that fewer than 10% of professional financial advisers and fund managers can beat the market (S&P 500 Index). Rick was unmoved.

Another client (“Charles”) wanted to start collecting his SS benefit when he reached his full retirement age of 67 in October 2021.  I told him that for each year of waiting to claim his benefit until age 70, he would receive an 8% increase in his benefit.  Charles decided to follow my advice.  By waiting, Charles also benefited from the SS COLA of 6% in 2022.  That is a 14% increase in one year; had Rick invested his benefit in the market during the same period, he would have lost over 11% and would have been behind Charles by 25%!

This coming year, the government is predicting a 9% COLA on Social Security benefits.  This 9% COLA along with another annual 8% “delaying credit” will increase Charles’ benefit by another 17%.  By waiting just two years, Charles has increased his benefit by 31%!  He will enjoy this increase for the rest of his life; if Charles is survived by his wife, she will also enjoy this increase for the remainder of her life as his benefit is higher than hers.  I’ll take a guaranteed return of 31% over two years any day, especially compared with the returns of today’s market!

Try this free and simple online calculator to see where you stand.