Social Security: When Should It Be Taken??

While Ukraine and other news items are grabbing the headlines, one long term problem that hits closer to home is that of Social Security. Although policy wonks are debating solutions to keeping Social Security solvent and political commentators are scaring people with specters of an insolvent Social Security system, a more pressing problem is when people should start taking it.

While one can argue (and some have) that Social Security won’t be there for them when they get there, the Social Security trustees are predicting that the system will be able to pay roughly 75% of promised benefits when the “trust fund” is exhausted sometime in the decade of the 2030’s. Although this not great news for those in my generation, it is not the same as looking at zero Social Security.

So, when should it be taken? Obviously, there is no right answer for everyone, as everyone faces different constraints and choices. But for most of those who can do it, the obvious answer is to wait until 70 to maximize the monthly payout. People who question the wisdom of this by bringing up objections such as “missing out on 8 years of Social Security payments that could be invested, etc., etc.” are, as many people do, mistaking the Social Security system for an investment program rather than an insurance program. The risk that most of us will face in retirement will be running out of money. As most of us don’t know how long we are going to live, it makes sense to go for the option that gives us that maximum cushion against that, which is the higher payout.

Sure, if you wait until 70 to take Social Security and then keel over at 72, you will be kicking yourself for the eight years that you missed out on. But seriously, if you go to the good place after you die, you likely won’t really care. And if you go to the bad place, you will have more pressing problems than missing out on 8 years of Social Security payments. And if it turns out that this life really is all that there is, then it doesn’t really matter because you will be just as dead and non-existent in either circumstance.

So go ahead and assume the best; that you will have many long years in retirement with your friends and loved ones. And do your best to make sure that you won’t be a burden on them by waiting until 70 to take Social Security.

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