Deferring SS until 70

Today’s column in the Trib repeats the “common knowledge” about delaying SS until 70, but fails to answer all the questions I had, when I made my decision to take as soon as I became eligible. I am now 72.

1. How long will it take the enhanced benefit adder to make me whole for the foregone benefits from age 62+70?

In preparing for retirement I had an accountant prepare a chart showing the two accounts, assuming historical increases (1-2%) in SS and no investment interest on the age 62 withdrawals. Remarkably enough the two lines crossed right at the average (male’s + female’s÷2) age of actuarial death, around 81 years. That is, under both scenarios, the total disbursements were equal at age 82.

2. When do you believe one will be in need of and more able to enjoy disposable income, at 60 and still have a mortgage, other debt and an active lifestyle and a fully functional body and mind, or at 80 when, really, who knows?

My considered opinion was that I would be more in need of and better able to enjoy the disposable income in my sixties than I would be in my seventies. That has certainly proven true as my badly misspent youth is now starting to get it’s payback and generalized arthritis is beginning to slow me down but the last 10 years have been full speed ahead. In fact the added income from my SS benefit allowed me to prepay against the principal of my mortgage which, as noted above, is now paid off, tens years ahead of it’s scheduled amortization.

3. What would happen if a person were to take at 62 and begin investing the proceeds.

My Deferred Comp plan with the State yielded 8.5% over it’s life (I began deferring in 1991 and continued deferring at the max allowed until the day I retired in 2003, at the age of 53, and just had to begin taking mandatory distributions this year). My investment mix was 30/30/20/10 Large caps, Small caps, Foreign and Close term retirement funds (mostly bonds) rebalanced annually so it doesn’t necessarily take high risk investment to produce decent returns (rule of 72) as even the 3% compounding of my state retirement will have doubled my retirement annuity payout by 2027, if I live that long. I used to work for a company who’s slogan was “buy term and invest the difference.” What would happen to your advice if people were to “take early and invest the difference.”

Which brings me to

#3. While you simply discard the idea that the decision to take is not a race against the clock, it unfortunately is. None of us are guaranteed tomorrow and the old saw about a bird in the hand became old because it is a truth that has been recognized for millennia. In this case it is even more cogent, as anyone paying attention knows the SS Trust fund is nothing but a vault full of IOUs that the government can choose to pay or choose to ignore and my faith in the government is the same as my faith in those selling whole life policies as investments. And what about those who were 68-69 last year who took your advice and waited to take so they missed out on last year and this year’s historic SS increases but will end up taking next year as the country enters the coming recession, the impending collapse of interest rates and the coming decade of 0-1% increases.

In conclusion, I was happy withy decision to take upon qualifying 10 years ago, and I am happy with that decision today. I do wish you would provide both sides of the issue in any further discussion. Thanks for taking the time to read this. It is appreciated.