Social Security Stupidity!

Robert Terson

Recently Nicki and I were invited to attend a program on Social Security put on by the Deerfield, Illinois office of Ameriprise Financial. My dear friend Stuart Pearl is one of their top representatives, so we’re fortunate to be invited to these events. As we were driving over Nicki told me that she was curious to see if I’d find out anything about Social Security that I didn’t already know, because she knows I’ve studied Social Security backwards, forwards, and sideways. So much so that many of our friends call me with their questions when they want to know something about the subject.

In our own case, I’ve opted to wait to take Social Security at 70 (five months to go, folks). This is because I was the higher earner out of the two of us, and because Nicki is seven years younger than me. The odds that she will survive me by quite a number of years is exceedingly high. By waiting until 70 to take Social Security, I’m not only maximizing the benefit for us while I’m alive, I’m also making sure Nicki will receive the maximum possible benefit available when I’m gone. It also means that all future cost-of-living adjustments (COLAs) will be based on the higher benefit.

During the course of the program I did discover something about Social Security that I hadn’t known, which astounded me. I’m going to tell you what that is, but before I do, let me give you some statistics:

Approximately 74% of people take Social Security before their Full Retirement Age (FRA), which for people born between 1943 and 1954 is 66. Approximately 66% take Social Security at 62 when they first become eligible. Their benefit is reduced by 25% if they take it at 62, 20% at 63, 13.33% at 64, and 6.67% at 65. The numbers, for example, for someone with a FRA benefit at 66 of $1,000 would have his/her monthly benefit reduced for life to:

$750 at 62

$800 at 63

$866 at 64

$933 at 65

An individual gets extra credit—called delayed retirement credits—by waiting to take Social Security after FRA. For someone born between 1943 and 1954, the Social Security benefit is increased by 8% per year between 66 (FRA) and 70. The numbers, for example, for someone with a FRA benefit of $1,000 would have his/her monthly benefit increased for life to:

$1,080 at 67

$1,160 at 68

$1,240 at 69

$1,320 at 70

There are a lot more statistics I could toss into this blog, but I’ll stop here, although I want to urge you to study the subject, learn all you can. The importance of Social Security as part of your retirement program is huge. It does not receive the proper attention it should, which, over a retirement-lifetime, winds up costing people sums that would take one’s breath away. Also, for you young people, don’t buy into the myth that Social Security won’t be there for you; trust me, it will. It’s going to have to be adjusted, tweaked with, but it’ll be there.

So, what did I learn that astounded me? The woman who conducted the program asked this question: What is the main reason most people take Social Security at 62? The answer: Because they can. That’s it, folks. Not because they’ve researched, run the numbers, and proven to themselves that taking it at 62 is the numerical right thing to do, uh-uh. No, it’s just because it’s there and available, and they can’t resist taking it now. No thoughts of delayed gratification to do what is in their long-term best interest; just give me the cash now!

Now, let me say this: If you need the money at 62, or anytime before your FRA, fine, take the money; but if you don’t “need” it, if you can get by without it, in most cases it will behoove you to wait as long as you can to file for the benefit. Do some research. Run the numbers. Think about your spouse and what you want her/his life to be like when you’re gone. Make an informed decision that is in your, your spouse’s, long-term best interest.

Don’t be Social-Security stupid!


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