Virginia P. Reno, National Academy of Social Insurance
The National Academy of Social Insurance joins more than 1,000 organizations nationwide during America Saves Week, February 24-28, with a public education initiative to help Americans boost their financial security.
The Academy’s new toolkit, When to Take Social Security: It Pays to Wait, explains how waiting to take Social Security retirement benefits, if you can, will increase your monthly benefit by as much as 76 percent. Key messages are:
If you need Social Security to make ends meet, take it – you’ve earned it.
But if you can wait, even a year or two, your monthly benefit will be higher – for the rest of your life.
If you’re married, you have two lives to plan for – and chances are, either you or your spouse will live past age 85 or 90. If you are the higher earner, waiting to take Social Security means providing a higher survivor benefit for your spouse if she or he outlives you.
While Social Security retirement benefits are modest – an average of $1,296 a month in January 2014 – they are the most important retirement asset most Americans have. Many pre-retirees have limited personal savings. For example, the latest Survey of Consumer Finances finds that 7 in 10 householders age 55 to 64 had less than $100,000 in retirement accounts in 2010. They include 4 in 10 who had no retirement accounts and 3 in 10 whose account balances were less than $100,000.
The importance of Social Security becomes clear when we estimate what it would cost a 65-year-old to buy a guaranteed monthly income equal to the average Social Security benefit. To buy an annuity – a private insurance policy that would pay $1,296 a month starting at 65 for the rest of your life – you would need to pay the insurance company about $219,000 in cash up front. If you wanted partial protection against inflation – a guarantee that your payment would increase by up to 3 percent per year for the rest of your life – the up-front price would increase to $308,000. If you also wanted to ensure that payments would continue for your 65-year-old spouse after you die, for as long as your spouse lives, the up-front price would rise to $388,000.
These dollar figures – which far exceed the retirement savings of most Americans – indicate the value of the retirement income protection that Social Security provides for a typical retiree. When you think of Social Security as your most important retirement asset, you may want to think carefully about increasing it by delaying when you start benefits, if you can.