It pays (big) to wait, yet many are led astray.
Let’s say you’ve worked hard, saved as much as you can for retirement, and are counting on your Social Security benefit to supplement that.
Now, think about changing that. Stat. Nearly half of Americans taking their Social Security when they turn 62 instead of waiting for a much bigger payout at 66 or even 70, when they gain more benefits. Andy Landis, a former Social Security Administration claims administrator and author of Social Security: The Inside Story has been on the front lines for years urging people to wait.
Landis debunks five reasons people cite when taking Social Security that shouldn’t be part of their decision-making process. People should maximize your Social Security benefits instead.
“Taking it early is right for some people but not for 50 percent of us,” Landis says. “There are some good reasons for taking it early.” But for the rest of us, you’re making a mistake, Landis says. Here are the top wrong reasons to start taking Social Security at 62.
YOU GET MORE MONEY BY TAKING IT EARLY
“I hear that a lot,” Landis says. “All you have to do is live to an average life expectancy to get more money by filing late. So you’re betting on an early death [by taking it early], and I don’t know if you want to do that.”
Landis says if you count how much money you get from 62 or from 62 to 70, that’s a lot of money getting left on the table. For those who wait to 66 to get Social Security, they come out ahead at 78, Landis says. If you wait until 70, you come out ahead at 82 ½.
Social Security benefits increase 33 percent by waiting until 66 and 76 percent by waiting until 70, Landis says.
“That’s in simple dollars, and that’s the way to do it because Social Security automatically inflates as the same rate as inflation,” Landis says. “Some say, ‘I want the money earlier when I’m healthy and can do more stuff,’ and I kind of get that too. But the longer we live, we need to guarantee longevity insurance. Social Security does that well. I understand you want it up front to have fun with it, but in the long run you have health costs going up faster than inflation, so you have better have some hedge against that.”
MY FRIEND DIED BEFORE GETTING SOCIAL SECURITY
“If you tell me your death date, I can tell you exactly when to file for Social Security and get the most,” Landis says. “But since we don’t know that, we have to play the averages. My brother died at 57 and never married and never had kids. He’s one that paid into Social Security and never got a dime out of it. On the other hand, it’s like our house insurance and car insurance. You pay that money in case we need it, but we’re not hoping for a fire or a car wreck to get our money back in. Dying early is a real bummer because you paid into Social Security and didn’t get anything out of it, but dying late would be a bigger risk.”
YOU CAN’T STAND YOUR JOB
Landis says that’s a tough one. But it’s one thing to get laid off and not find another job. “But if you can’t stand your job, I would say replacing your Social security payment would take very little part-time work. The average payment is only $1,328 month. Take a part-time job in something you love. For me, I love cars, and I thought it would be fun to work in some car-related industry. Go ahead and make your plans before you bail. Some people quit their job too early before they know what’s next. Plan your landing before you jump out of the plane.”
Landis says he’s come across a lot of people who got laid off during the recession when they were 61 or 62 and needed the income, and they filed for Social Security. Within a few months many were able to get a good job again. You can withdraw your claim and pay it back within a year of starting, or you can shut off payments if you start working again and pick it up later with an increased benefit amount. Anyone can suspend their payments from 66 to 70, and every single month you don’t withdraw, you get more money when you start them up again, he says.
“If you really hate your job, I get that,” Landis says. “Some of them are downright toxic. Get a new job as fast as you can. If necessary, leave your job and take your Social Security, but find another job a year from now.”
DON’T WANT TO SPEND SAVINGS
Landis says he understands people don’t want to dip into their savings, but it can make sense. “If you look at how much Social Security you’re going to get from 62 to 66 and don’t want to hit your savings and take Social Security instead, figure out what that would be in dollar terms,” Landis says. “For me, my Social Security payments are low, only about $1,000 a month. If I wanted to replace 48 Social Security payments from 62 to 66, that would cost $48,000. If you have those kinds of assets, set those aside in a Money Market and draw a Social Security payment every month and then file for Social Security later. The urge is to take it from Social Security. I might rather have $48,000 less in savings but $300 more a month in Social for the rest of my life and the rest of my spouse’s life.”
SOCIAL SECURITY WILL GO BROKE
It’s won’t in the short run, and there’s no big rush to take it for that reason, Landis says. It’s foolish to say it’s going to go broke any day.
“I started working in Social Security in 1977, and I have been hearing this since 1977 some 38 years ago,” Landis says. “Stop with this going broke talk and get your head straight of what the funding is. It’s not going broke in your early retirement. I have high faith, not 100 percent, that Congress will fix it by 2034 (when it faces a shortfall).”