Q&A: Taking Social Security early

Dear Liz: My wife will be 62 in November and does not work. I am 55 and have a 401(k) for our retirement. I know you preach waiting to take Social Security. But what about if my wife takes it early and we invest all of the money? Would it then make sense to take early?

Answer: You would need to get returns well in excess of 7% to beat the guaranteed annual return you get from waiting to take Social Security. In today’s volatile markets, that would be quite a feat.

You can run the numbers yourself at a Social Security claiming calculator. AARP offers a free one, or you can pay $40 to use one of the more sophisticated options such as MaximizeMySocialSecurity.com.

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  1. Your faithful friend says

    SocSec statement not true. You don’t need 7%. Plus you only see improvement by waiting after age 84. Only half of people outlive their life expectancy at every age. Therefore it is inadvisable to advise waiting/deferring for half the people. Who can actually afford to wait?( a small %age of people).

    • Liz Weston says

      Every statement you made is unfortunately incorrect, which reflects how much confusion there is about Social Security. The so-called break-even point is actually in your late 70s, and most people live past that point. The benefits of delaying are so great that financial planners have started advising people to tap other assets first, such as retirement funds, if that’s the only way they can put off filing. The larger checks from delaying are especially important late in life, when people are likely to have outlived their other assets, and are particularly important for women, who may survive years and even decades past their husbands. You can learn more about Social Security on my site, by reading Larry Kotlikoff’s book “Get What’s Yours,” Jonathan Peters’ “Social Security for Dummies” or by visiting AARP’s page about maximizing Social Security: http://www.aarp.org/work/social-security/info-2015/maximize-social-security-benefits.html