When Should I File For Social Security? Part 1
Social Security benefits increase up until the age of 70 for those individuals who delay filing. The general increase is approximately 8% per year. Is the extra benefit worth the delay? How many years will it take to make up the difference?
Here is a plot of the total social security benefit vs age for different filing ages.
If you live long enough, the total benefit received will always be greater at some point if you delay filing. The total benefit for filing at age 70 is equal or greater than the total benefit for filing at age 62 by age 79. If you live beyond age 81, the total benefit of filing at any later age exceeds the total benefit from filing at an earlier age.
The current life expectancy at age 65 is 21.6 years for females and 19.3 for males. This corresponds with an age 65 filer expecting to live to age 86.6 if female and age 84.3 if male. The life expectancy for both men and woman both exceed the point where it pays to delay filing for social security. The conclusion is that in terms of total benefit, it pays to delay filing as long as possible unless poor health makes it likely that you will not exceed 81 years of age. Of course, this ignores the time value of money - the fact that your social security benefit can be invested and realize a positive return.
We will look at the effect of the time value of money in part 2.
The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.
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