Social Security and Longevity

For most Americans, Social Security is a central pillar of retirement income. Nine out of ten Americans age 65 or older are receiving monthly benefits, and most of those started taking them as soon as they became eligible. There may be good reasons for starting early. But it also means missing out on the powerful longevity protection Social Security provides.

Longevity has increased

It’s no secret that people are generally living longer today. One out of four people retiring today will live past 90, and for highly educated, affluent people, the chances are even better. For couples, the average survivor will live 11 years past the death of his or her spouse.

Increased longevity is a blessing, but it also means your retirement income needs to last longer. For retirees drawing down their lifetime savings, this presents longevity risk: the risk of outliving your money. Longevity risk can be greatly reduced when you have dependable income that will last as long as you (and your spouse) do.

Social Security benefits and longevity protection

Social Security retirement benefits are based on your work history and on the age you and your spouse begin collecting benefits. A worker who retires at Full Retirement age can expect to receive a benefit payment based on the highest 35 years of their full work history. Spouses receive the greater of half the worker’s retirement benefit or the benefit based on their own work history.


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Workers who start before their Full Retirement Age will have their benefits reduced by about 6.7% for every year they start early. If you begin collecting at age 62, this works out to about a 25% reduction in benefits FOR LIFE. Thus, if you would be entitled to $2,000 per month at full retirement age, starting early could reduce that to as little as $1,500. That’s a $500 per month reduction for the rest of your life. If you live 30 more years, that amounts to at least $180,000 in lost income. Further complicating things, those benefits can get reduced even more if you are working, thanks to the earnings limit.

On the other hand, if you wait until age 70, your benefits will be increased by about 37%, which is $740 per month under the same example. What’s the difference between starting benefits at age 62 vs. waiting until age 70? $1,323 per month, for life, or almost double what you would get starting at age 62.

Of course, by waiting, you will also be giving up eight years of collecting benefits. But, if you and your spouse live until at least your early eighties, the higher benefit more than makes up for the income you didn’t receive in the early years. And if either of you live into your nineties, the higher benefit over those years will far exceed the benefits foregone.

Timing Social Security benefits to maximize longevity protection

For single workers, it is almost always better to wait until 70 to claim your benefits. The higher payments amount to a permanent increase in your annual income, with an annual inflation adjustment. Delaying Social Security basically amounts to longevity insurance, since it will pay benefits as long as you live.


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For couples, who tend to live (jointly) longer than single people, the benefits can be even greater. Most often, the high-income earner should delay taking benefits until age 70, while the lower income earner should start at Full Retirement Age (66 or 67). Using this strategy, when the higher earner passes away, the survivor will receive the greater of the higher earner’s benefit or his or her own. This permanently raises the survivor’s income by a very meaningful amount for the remaining years of his or her life.

Social Security planning is not one-size-fits-all

It’s clear that waiting to start retirement benefits can provide great longevity protection. But whether this is the right decision for you depends on a few factors. Do you have other resources to fund retirement spending between retirement and age 70? And how dependable are those resources? For example, an executive who will receive a guaranteed payout for several years is a great candidate for delaying retirement benefits.

When it comes to starting benefits before full retirement age, the research is quite clear: starting benefits early is almost always a poor strategy with very real long-term costs. For couples, the impact can be especially significant.

Make Longevity Protection part of your retirement income plan

A well-designed income plan should maximize the longevity protection of Social Security benefits. Not only will it help assure you can sustain a comfortable life throughout retirement, but it will reduce stress and give you peace of mind. At Blankinship & Foster, we specialize in helping retirees and near retirees gain confidence, clarity and direction in their finances. Contact us to discuss how we can help ensure your retirement planning is built to last for long life.

About Rick Brooks

Rick Brooks, CFA®, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Investment Officer. He is a lead advisor, counseling clients on all aspects of personal financial management. Rick serves on several boards. He is the Chairman of the Board of Girl Scouts San Diego, and also chairs the San Diego Foundation’s Professional Advisor Council. Rick and his family live in Mission Hills. Rick enjoys spending time with his family, theater, cooking, skiing, gaming and reading.

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