Collecting Social Security Benefits Later Means Greater Income
Posted on:7/8/2009
Written By: Chris Robideaux
| This article outlines the issue surrounding millions of prospective retirees and the failing Social Security lifeline where regards timing one's retirement. |
If you are retiring this year, or in the next few years, it might behoove you to re-think your retirement strategy. If it can be put off at all, it will only increase the amount you can claim in Social Security benefits monthly. Your Social Security benefit increases by approximately 7 percent each year you delay taking it from age 62 to 66 and by 8 percent a year until age 70, Laurence Kotlikoff, an economics professor at Boston University, found. That could be a better return than retirees are getting on their investments. "You have to compare that with what your pension is giving you," says Hugo Benitez-Silva, an associate professor of economics at SUNY-Stony Brook. So, if your 401(k) or IRA is not giving you a higher return than that, you might want to start delaying Social Security and drawing down your other assets first, Benitez-Silva says.
Olivia Mitchell, a professor of insurance and risk management at the University of Pennsylvania's Wharton School, agrees. "Delaying is better if you can afford to wait," she says. "What you should do is save more of your money upfront and use that savings to finance your early retirement and then use the [Social Security] benefit later."
So, for example, a boomer with a final salary of $75,000 might receive a $1,320 monthly Social Security check if he collects at age 62, according to a University of Pennsylvania Pension Research Council Working Paper by James Mahaney and Peter Carlson. If the same boomer were to delay until age 70, he would get $2,884 monthly, more than twice as much. Even after counting cost-of-living increases, the boomer who began to collect at age 62 would by age 70 probably receive only $1,637 a month.