Q&A: Bad Social Security math

Dear Liz: Regarding when to begin receiving Social Security payments: I would think that people should begin taking payments as early as possible if they can invest it rather than spend it, as a lot of money is “left on the table” between ages, say, 62 and 70. Your thoughts?

Answer: That argument was more compelling a few decades ago when you could get a 7% or 8% return on an FDIC-insured certificate of deposit. These days, there’s no investment that offers a guaranteed return as high as what you’d get from delaying the start of Social Security.

The “take it early and invest” approach also ignores the longevity insurance aspect of Social Security benefits. Most people face a real risk of outliving their savings, which could leave them relying on Social Security for most if not all of their income. Maximizing Social Security benefits by delaying your application can help you live more comfortably, should that happen.

Also, starting early can cause harm to whichever spouse survives the other. When one spouse dies, one of the two Social Security checks the couple was receiving will stop. The remaining spouse will get only the larger of the two checks, which is known as a survivor’s benefit. Maximizing that benefit can help ease the shock of going from two checks to one, so financial planners generally recommend that the higher earner in a couple delay his or her application if possible.

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