The Social Security Tradeoff Most Retirees Don't Calculate

So, you know, it's one of those, it's, it's a very situational answer.

You know, the, the, the long-term answer, the easy answer is the longer you wait to delay social security, the greater the benefit becomes, you know, every year between age 62 to your full retirement age, which for most people now is age 67, your benefits going to grow at about 6% per year.

And then every year from 67 to 70, that benefit's going to grow at about 8% per year.

And so it's one of those things that people always ask when they come in is, when should I collect Social Security? And then my immediate answer to that is, when are you going to die? Because if you can tell me exactly when you're going to die, I can tell you the exact time you should claim Social Security.

So you get the maximum benefit.

Because, you know, if you claim it early at 62, if you live past age 73, you should have waited until age 67, your full retirement age.

If you claim it at your full retirement age and you live past age 82, you should have waited until, you know, age 70.

That's kind of how the numbers work.

I might be off a year or two because it's been a number of years since I've read the actual that particular study.

But, you know, at the end of the day, to me, it comes down to number one, quality of life.

Number two, what your retirement income is going to look like.

And then number three, what assets do you have that could help replicate that social security income you're looking at? You know, if we think of it from that quality of life aspect you know most people when they retire they want to go out and they want to do the fun things they want to go out and travel they want to buy the rv drive across the country they want to buy the boat they want to go fly see the grandkids they want to go they want to go do all those fun things you know can you do that on the income you have coming in without social security if the answer is yes i can do that i can survive on that income well then yeah you can delay taking social security But if it's going to restrict that quality of life in those first couple years of retirement where you can't go do those fun things, the things that you've always wanted to do, well, maybe you should claim Social Security earlier because you didn't spend – the last 30, 40, 50 years of your life working and saving to all of a sudden be counting your pennies or living paycheck to paycheck essentially for those first couple years of retirement.

Early on in retirement is when you're young and hopefully healthy.

towards those later years of retirement, if you're waiting till age 67, you're waiting till age 70 to do those fun things, well, you might not be able to do all the traveling you want to do.

You might not be able to sit in the car for long periods of time while you're driving that RV across country.

You might not be able to walk up and down the many, many hills that are in Portugal to You know, I know I was just there.

You know, you might not be able to do all those fun things.

So, you know, that quality of life aspect is a big part of it.

You know, number two, you know, what does your portfolio look like? You know, do you have enough assets to replicate that income stream? If you're foregoing claiming Social Security earlier and it was going to give you $22,000, $24,000 a year, If there's two of you, almost $50,000 a year at $48,000, do you have enough money to support yourself from age 62 to 67 for that time period? Do you have enough money? And the flip side to that is do you want to be constantly thinking about that? Do I have enough money this month? Do you want to constantly be thinking about what happens if the stock market drops 10%? What happens if the stock market drops 20%? Where am I going to come from? So it's the peace of mind of knowing of where your income is coming from.

And that really is the importance of... of having a plan in retirement, knowing exactly where your income is going to come from.

And it is a cost-benefit analysis that we go over with clients.

If you claim Social Security at age 62, here's what retirement income is going to look like for you.

Here's how we have to allocate your assets.

If you wait until 65, here's what happens, 67, so on and so forth.

And I just had... meetings with some clients.