Off-Topic: What age to take Social Security?
I just happened to stumble on a little video on Yahoo Finance in which a young Talking Head was explaining to a young woman about how one “should always wait the maximum amount of time before taking Social Security.” She then described the reasons as saying that the advantages were “eye-popping” because if benefits at 65 are $1000 a month, at 62 they are only $750 a month, but if you wait until 70, they are $1320 a month! In fact the young woman listening to this seemed astonished by the advantages in waiting to 70.
If you start at age 62 with $750 a month you get $750 x 12 = $9,000 a year, or $72,000 by the time you are 70.
The person waiting gets $0 per year, and at age 70 has received $0 total.
After 70, the person waiting starts getting $1,320 per month, while the person who started at 62 is still only getting $750, so the person who waited catches up by 1320 minus 750, or $570, per month. This comes out to 570 times 12, or $6,840, per year, of catch-up!
BUT, and it’s a big BUT, they have that whole $72,000 of benefits to catch up, that the early starter has already received. That means that it will take them ten and a half years just to catch up with the early starter, to break even, by which time they will be 80 and a half years old and possibly chronically ill, in a nursing home, or even deceased, and certainly with less energy and less ability to enjoy their benefits than someone who started at 62. As someone well over 70 myself, I can guarantee you of that. Think of that! They were behind all the time until they were in their 80’s!!!
Note that I didn’t bother take into account that the person getting benefits from 62 had the potential of interest, or investment returns, on their benefits, so their total advantage was potentially even more than $72,000 by the time they were 70.
It’s also important to point out that if the person waiting until 70 should happen to die any time between 62 and 70 they will have received nothing at all from Social Security, and if they die any time before 80 and a half, they will have received less than the early starter, and they are only in the lead when they are over 80 and a half, when there isn’t that much pleasure to be had out of being in the lead.
Hope that this is of help to anyone facing this decision.