When to Collect Social Security Depends on Your Life Expectancy

One of the decisions one must make as one ages is when to collect a pension, such as Social Security in the U.S. Since we’re all about anti-aging and lifespan here at Rogue Health and Fitness, I thought it would be of interest to look at this topic, since I’m faced with the choice soon and I’ve been looking into it. When to collect Social Security depends on your life expectancy. (Among other things.)

Social Security

The U.S. has the Social Security system, and this discussion will be about that, since other countries may have systems with different rules.

With Social Security, the amount you get per month varies widely depending on when you begin to collect it, hence the importance of the decision as to when to start. The earlier you begin to collect, the smaller the amount of money you get per month.

The longer you live, the greater the total amount of money you collect, since benefits last until death. (In theory, although there’s a wrinkle to that as we’ll discuss.)

The earliest retirement age is 62, and a large number of people begin to collect at that age, about one third, and only 4% of people wait until they’re 70, the age at which benefits no longer increase. This tells me several things about this large number of Americans:

  • they dislike their jobs and can’t wait to retire
  • they work physically demanding jobs that they’re too old to do anymore
  • they’re broke and can’t wait any longer to start collecting
  • they’re in ill health and/or don’t expect to live very long
  • they have high time preference, i.e. less ability to delay gratification
  • they believe the Social Security system won’t last
  • some combination of the above.

The maximum Social Security benefit for a retirement at age 62 is $2153 per month, at full retirement age, $2687, and at age 70, $3538. That’s 64% more money per month for the highest retirement age vs the lowest.

The maximum benefit at age 70, if calculated using the current 10-year Treasury bond rate, is like getting the interest payments on a bond worth $1.8 million, or $1.18 million if using the current AAA corporate bond rate.

Full retirement age varies; formerly 65, it now depends on when you were born. For me, for example, it’s 66. Full retirement age is arbitrary however, since you can begin to collect your pension at any age between 62 and 70. There’s no point to waiting past 70, since you get no more money for doing so, and you can only lose money.

For every year you delay collecting Social Security, your benefit increases by 8%.

The question as to when to collect obviously revolves around many factors, including personal circumstances, but what we want to figure out here is how to collect the maximum amount in your lifetime. That depends on when you start to collect, and how long you’ll live.

Higher mortality with early retirement

Men who begin to collect Social Security at age 62 have a 2% increase in mortality immediately following. The study that found this also suggests the increase is due to “lifestyle changes”, i.e. not working, and not due to unhealthy men retiring earlier. Indeed, retirement is not healthy.

So, there’s one reason not to collect early: it might kill you.

At around age 80, someone who starts collecting from age 70 will have caught up in lifetime benefits with those who started earlier, and from that age on will begin to surpass them in lifetime benefits. If you think you’ll live to be 100, then you will have collected about $300,000 more if you wait until age 70 to begin, based on the maximum Social Security payout per month. Also, annual cost of living increases in Social Security are a percentage of the amount you collect, so the absolute dollar cost of living adjustments are greater if you wait.

I believe I’ll live past 80, so I should wait to collect, if maximizing my lifetime amount is my goal.

However, if you believe that having more money earlier in your life is better than having it later – and it is, according to both standard financial theory and human psychology – then that introduces yet another variable.

Or, maybe you don’t think the Social Security system will last, in which case the earlier you start collecting, the better. Maybe you have enough money even without Social Security, in which case it’s better to wait to collect.

As you can see, the decision as to when to collect Social Security is not easily made. If you do an internet search for this, you get answers that are all over the place.

Lifetime earnings are not the only factor to consider. However, I believe I’ll live at least into my 90s (knock on wood) and possibly longer. I believe I’ll be lifting weights in my 80s, and if I ever become frail due to age, it will be at an age much older than most people become frail.

As someone gets very old, medical expenses can be expected to be higher, and there might be a need for special care, so those are reasons why someone might want or need more money per month than when younger. On the other hand, an older person might not be spending much on other things, such as vacations or fancy cars.

Normally, it would always be a good thing to delay gratification in order to collect a higher amount of money. This is what anyone who invests their money does: by foregoing current spending, they invest their money in the hope of having a larger amount of money later.

But in the case of Social Security, we’re dealing literally with matters of life and death. Can you really or fully apply financial principles to your own life and death? Nevertheless, we’re forced to try.

Even with my belief that I’ll live at least into my 90s, that’s a long way away, and making the leap of imagining myself at that age is difficult. The uncertainty of life accelerates with aging. My default presumption is to wait until I start collecting, but the more I look into it, the less certain I am.

Conclusion

The standard answer to whether to wait past the age of 62 to collect Social Security depends on whether maximizing lifetime income is the goal.

That may not be the case for many people. Having the money to spend when (somewhat) younger may make more sense.

Ultimately, the decision is a highly individual one.

PS: To increase your lifetime Social Security income, follow the practices in my book, Stop the Clock.

PPS: Check out my Supplements Buying Guide for Men.

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Leave a Comment:

16 comments
James Johnson says December 31, 2017

I am 70.8 YO. I collect SS now. My wife is 64 so we are researching her/our options carefully right now. may I suggest two books: Get What’s Yours (Soc Sec) by Kotlikoff, Moeller, Solman; and Get What’s Yours for Medicare by Moeller. excellent and up to date. They have a website that provides a $40/year calculator that compares your situation (single, married) to thousands of options in terms of when, how to take SS payments. I have no connection with them but I am sure they saved us thousands. but read them before you file for SS. Once in, options close.

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Mark Cancellieri says December 31, 2017

Great article.

Another thing to consider is potential investment returns foregone by waiting until you are 70. You could start collecting at 62 and invest that money until you are 70. I doubt that you would do as well financially as waiting until 70 to collect (especially considering that you would have to pay tax on your SS income), but the foregone investment returns are clearly an opportunity cost of waiting.

Another issue is that by collecting at 62 and investing, if you die in the meantime, your heirs can inherit your investments.

Anyway, it’s all food for thought.

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    P. D. Mangan says December 31, 2017

    Thanks, Mark. Interesting article in the NY Times shows how waiting for SS until age 70 is far better than any annuity you can buy. Basically, by waiting longer, you forego income, but the amount you get ultimately is more than an annuity for an equivalent amount would get you. Sounds confusing, but the article explains it well. of course, if you can invest well, you might get better returns than from an annuity, but few of us are in that league I think.

    By the way, that NYT article puts the number of people who wait until age 70 to collect at ~1.5% – 1% of men and 2% of women – far lower than my figure above of 4% (source I can’t remember).

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Rob says December 31, 2017

For people (like you) that are healthy in their early 60s and lead a very healthy lifestyle, it probably does make sense to wait at least a few years (past age 62) to start collecting SS. But as you say, the older we all get, the less likely we are to spend money on active pursuits. So if you need/want the extra income to live the kind of (active) life you want to live, while you are still in your 60s, then it might make sense to start collecting SS a few years before 70. As you say, it is a very individual decision for each of us.

As for “retirement” – I think the word is being defined in different ways by different people, which is why the studies about health and retirement are not consistent. I “retired” from my job in my mid-50s, and it was probably the best decision I ever made. But I don’t sit on the couch in retirement – I’m actually far more active than I was when I was working, and the things I’m doing now are all enjoyable pursuits that keep my body in good shape, and my mind sharp. The last several years I was working, I did not enjoy my job that much, and the work was mostly sedentary, neither of which were good for my health. So, I agree that everyone needs to stay active and engaged throughout our lifetimes, but for many of us, that doesn’t mean staying in a job that doesn’t allow us to live that way. Retirement (for me) allowed me to have much more control over what I do and when I do it, which I have no doubt will help me live a longer, healthier life.

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    P. D. Mangan says December 31, 2017

    Rob: I completely agree with your comments on retirement. It can be done right, and I plan to be active until I no longer can. For most people, however, it means going from a cubicle to a TV, neither of which are good.

    Reply
Drifter says December 31, 2017

Another factor to consider here is the possible feedback loop between the timing of money and greater healthspan/lifespan. Many people have to be or prefer to be fairly frugal on their health spending, and if money received sooner allows them to spend more on meaningful but discretionary health improvements (e.g. testing, supplements, “concierge” services) that may well extend their life. Additionally, stress reduction seems very underrated (Dr. Kendrick has been focused on this recently) and if receiving money sooner results in a significant reduction in stress, that will likely be one of the most impactful health-promoting things one could do.

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Mike says December 31, 2017

I’m not concerned about maximizing my return on social security other than living longer to collect more. My plan is based on having enough to cover 35 years of expenses (rolling 3 year average until I retire) with social security being included in that estimate. I can’t control increases in income to save more and I can’t control future earnings on investments, but what I can control are my expenses (to a point). My wife and I have worked very hard to minimize our expenses and hopefully replace some of our current expenses (daily commuting, mortgage, etc.) for travel and fun when I retire. Right now this puts me into retirement at about 63. I will buy the two books recommended, thanks..

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Shaq says December 31, 2017

Not a new article, but the author is considered a “guru” in the financial planning world:

https://www.kitces.com/blog/how-delaying-social-security-can-be-the-best-long-term-investment-or-annuity-money-can-buy/

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Steve says December 31, 2017

I studied this a few years ago and at that time you could take early disbursement but then change your mind and pay it back to get higher disbursements later. I don’t know if this has changed but this option could provide the best of both. Take the money, save it and invest then if you are in good health pay it back and get the higher payments. If you pass on then at least you have something.

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paul rivas md says January 2, 2018

All interesting and practical information. I came to a crossroads at 60y/o about whether to work full steam ahead until 65 and then hang it up, or go to a 20 hr. week with frequent vacations and work until my 80’s, and I decided on the latter approach. That way I’ll still have some income, get SS at 70, do my traveling now instead of waiting, and get out of the house some every day ( per my wife’s request).
The option of drawing at 62 and investing may also work and here’s how: whenever I buy a stock it instantly drops about 25% and then agonizingly makes it way down about 50% over the next month or so, so I’ll notify everyone on this site exactly which stocks I’m about to purchase so that you can quickly short them, and then you won’t ever need SS to begin with!

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pzo says January 2, 2018

And then there are the life exigencies no one can plan for. I was in a good job, thought I’d be there until 70. Job crashed concurrent with cancer diagnosis of my father further concurrent with The Second Republican Great Depression. Dad died, Mom and I needed income, I cashed in my SS chips at age 63,

I’m 71.something; my genetics assure a long life. So, sure, I could have delayed SS until 70, but the money was needed.

Per the old saw, “Man plans, God laughs.”

And then in my own mix, a 20 year younger beautiful fiance’. Oh, yeah, baby..All bets off of the table.

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Panda says April 8, 2018

Certainly the calculus for maximizing SS benefits is changing. Restricted claiming strategies are still available for only the next couple of years. Surely getting paid a nice benefit while you wait tilts in favor of waiting. Removing it changes it towards claiming early. Adding in the looming, and seemingly more likely every year, benefit cut will certainly push the calculus towards claiming early.

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John W. says April 26, 2018

I have done the math. if you take SSN early the break even point is literally a decade for you to break even. Therefore IF you live into your mid 70’s then you will hit the break even point. I also did not consider investing that money for that decade (unlike letting SSN KEEP it!) and the return it brings making the break even point push close to the 80’s So it is smarter to take the money ASAP and invest it rather than use the government as a NO INEREST savings account, even if not using it. The TOTAL pay off is better.

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    P. D. Mangan says April 26, 2018

    You should read Kotlikoff’s book. I plan on living well past my 70s, and break even point is around age 80, after which you get a lot more money. If I wait until 70 to start collecting, and live to 100, the difference in total payout is hundreds of thousands of dollars. Also, how much are you planning to get from your investments? You’ll be lucky to get low single digit returns from stocks and bonds over the next couple decades.

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Gavrick says May 13, 2018

Better take it before the government’s penury becomes common knowledge.

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