Dear Liz: My husband (who will retire in January) just turned 67, but still wants to wait to collect Social Security until he turns 70 to maximize his benefit.
Should he apply for Social Security now, and immediately suspend benefits? Or, should he simply wait until he turns 70 years old to apply? Is there a difference?
Answer: There’s no need for your husband to file for benefits now. He will accrue delayed retirement credits for each month he delays filing, and those credits will add 8% a year to his benefit. Not only will that result in a larger check for him, but that could mean a larger survivor’s check for you should you outlive him.
I disagree with your response that waiting for Social Security pays off, as it seems to be a “yes or no” response. It does not take into consideration the present value of the payments. Assuming the couple doesn’t need the money to live on, which is a reasonable assumption if the other choice is to not take benefits until 70, it could be invested and accumulated. Additionally, if my understanding is correct, investment income does not affect benefit amounts. I did a similar analysis after turning 65 and found that with a reasonable discount/earnings rate, it would take over 20 years before the added benefits taken at 70 would make up for the forgone moneys and investment earnings. I’d have to live well into my 90’s before taking the money earlier would be less financially wise. Of course, this approach requires a good knowledge of investing or a good investment adviser and a good investment plan, but I believe it is an important adjunct to your advice.