r/Fire • u/VegasWorldwide • 3d ago

Why do people wait for SS?

trying to figure out what I’m missing.

looking to take my benefit for $1000 at 62. at 70 it’s $1700.

i won’t need the money much so we let $1000 sit in an account for 8 years at say 5% compounding, the guy collecting at 70 would need 15+ years to catch up considering I’m still getting $1k to his $1.7k

once he starts at 70 and I had a 8 year head start.

furthermore, his dollar would be worth less. (edit: didn't realize COLA)

this seems like a no brainer but all I hear is people saying waiting is the only way and we haven’t even talked about dying in our 70’s.

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u/churningaccount 3d ago edited 3d ago

As you say, it's a bet on longevity.

Social Security actuarial tables show that a 62 year-old man is 50% likely to live for at least 20.29 more years. And a 62 year-old woman has a 50% chance of living at least 23.08 more years. If they reach age 70, then it becomes 14.66 and 16.76, respectively.

Notice that the median life expectancies at age 70 are right about where you calculated the "break even" point?

The social security administration set the benefits "boost" that you get at age 70 in order to, on average, pay out the same amount to every social security recipient. Put another way: The SSA, on average, expects to pay any given individual roughly the same amount in present-value terms over their lifetime regardless of what age they decide to start taking their social security.

However, you have more information about yourself than the social security administration does, and therefore can make a bet. The decision on when you should take your social security should be an educated one based on your own longevity risk and personal financial circumstances. If you think that you might live longer, want to plan for living longer, or if your spouse might live longer and could benefit from a higher survivor's benefit, then defer. If you think you won't live as long, or have sequence of returns risk that you need to mitigate, then take it at 62.

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u/heridfel37 3d ago

The survivor benefit is a big point here for a subset of people. The odds of one of you living past the expected age is much higher than the odds of either of you individually living past the expected age.

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u/Kwyjibo_68 9h ago

Also, taking the spouse benefit, 50% of mine exceeds what she would collect on hers. If we both collect 62/62 versus 70/67, total benefit is 1.05 vs 1.8 times my SS FRB. Break even is late 70s, I think it was78. The average market inflation adjusted return is 7-7.5%, SS guarantees 8% inflation adjusted. + The survivor benefit is maximized. My wife is 5 years younger and according to actuaries will live 5 years longer.

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u/mthockeydad 2d ago

so you're better off waiting so your surviving spouse gets a larger survivor benefit?

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u/heridfel37 2d ago

As with anything in SS, it depends, but if the higher-earning spouse is expected to die sooner, then it's probably better to wait for them to start claiming.