That headline – atop a recent Wall Street Journal column by Jack Hough, associate editor of SmartMoney.com – pretty much says it all.
Hough writes: “For an investment return that tops those offered by hedge funds, insurance firms or Wall Street banks, baby boomers should look to Social Security… All you need is a way to make ends meet while delaying the start of Social Security benefits from age 62 to as old as 70.”
As NASI made clear in a 2010 brief, there are major advantages to waiting – if you can – to start collecting Social Security benefits. Although workers can get benefits at age 62, if you can wait until you’re 70 your benefit will be about 76 percent higher than it would be if you had started collecting benefits at 62. It pays to delay even if you can’t wait until you’re 70.
To put these advantages in investment terms, Hough asked John Shoven, director of the Stanford Institute for Economic Policy Research, to run some numbers. Among his findings:
“Not just any bond, either,” Hough points out, noting that an equivalent private-sector bond would have to be both government-guaranteed and inflation-proof. But no such bond exists.
In the real world, the closest investments are Treasury Inflation-Protected Securities (TIPS), which are government-guaranteed. But 10-year TIPS are currently yielding 0.21 percent annually.
Working past 62 isn’t always possible, especially for workers in physically demanding jobs or with health problems. But for those who can keep working, or who have enough other retirement resources to allow them to postpone claiming Social Security benefit for a few years, the payoff is clearly rewarding.
What about media-stoked fears that at some future date Social Security will be unable to pay full benefits? We heard a fresh round of alarms this week, following release of the 2012 Trustees Report. But Hough quotes Stephen C. Goss, Social Security’s chief actuary, who notes that Social Security has sufficient reserves to pay 100 percent of scheduled benefits until 2033 and about 75 percent thereafter – and that Congress historically has always acted before a deadline for action arrives.
The bottom line, from Stanford’s John Shoven: “If you’re healthy enough to work at 62, you should probably wait as long as you can to collect.” And that’s especially true if Social Security is likely to be your main source of retirement income, as it is for about two-thirds of today’s retirees. Working longer, when feasible, is the single best way to get the best possible return from the safest investment you can make.
All Comments
— David Daniel on May 14, 2012
— Tom Bethell on May 17, 2012
and whose husband passed away in Dec 2015 and was 66.
He had various serious health ailments and died of ALS.
He was receiving disability since 2009.
Question is how does his DI affect the widow's decision on whether she should take his survivor benefit now and then delay taking hers until at least she reaches FRA at 66?
How do we analyze this problem ..what other info do we need? Would she have to pay back any benefits from him when she is 66 and starts her SS benefits?
thank you
Dave
— DAVID RESCH on February 10, 2016
— Peggy d. Harris on July 31, 2017
— admin on August 1, 2017
— Travis Roste on October 29, 2017
At 20 years, there are much better investment mixes to make/recommend. Sure 4% government bond is great if you're looking to invest in a bond. But over a 20 year horizon, the return of a low-cost investment in an S&P500 index fund or other efficient equity investment will outperform a vast majority of the time, no?
The ability to get an attractive yield on a bond doesn't mean you should invest in it.
— Rich S on November 29, 2017
Tom Bethel's reply in 2012 doesn't make sense to me and is contrary to my analysis. What am I missing?
— Rick on July 27, 2018
— Bob Mahler on December 12, 2019