The Payoff in Waiting to Collect Social Security
Publish November 15, 2013 by Tara Siegel Bernardhttp://www.nytimes.com/2013/11/16/your-money/the-payoff-in-waiting-to-collect-social-security.html?ref=socialsecurityus&_r=0
Summary:
Instead of collecting some of your social security benefits at age of 62 it actually pays to collect benefits at a later age. The extra money you earn you while working means you'll get more money in benefits later when you get social security. This means more income for retirement. Depending how long you delay receiving your benefits you can save 6% or more of the saving used to produce that income. You would get the income raising with inflation, for no risk. Delaying the benefits requires leaving a lot of money on the table, which for some people is too much to resist or they just need it to live. People with health problems though should start collecting right away. Consider this example, if a 65 year old man collects $12,000 but if he would wait until he is 66 to start collecting social security he would receive $12,860 instead. If he had to buy his extra $860 in income he would have to pay $22,500. This way he is guaranteed a 6.7% return on his "investment" by waiting a year to collect his benefits. Now if this same man could afford to wait until he is 70, those five years would generate $17,000, which is $5,000 more then if he collected right away. Waiting is even better for married couples because if one passes the other will get those benefits. So waiting to collect your social security if you can will be better in the long run.
Opinion:
I feel that waiting to collect social security is the smart thing to do if the returns are really that much higher. It really would be worth while. However I can see why people would want to collect right away, they feel if they paid into the system they want their money. Elderly people may not be able to save and wait to collect either though with health problems because medical expenses are very high. The cost of living is high as well so they may have to collect to live comfortably. But considering that couples have a larger payoff by waiting is a good point. The benefits for your loved ones would be much greater as well. I think that waiting to collect your benefits is a good thing as long as you can afford to do so. the opportunity costs must be weighed before the people choose what they would like to do because they may need the money or want if right away but if they wait they maximize income.
I completely agree with the idea of waiting to get the benefits but what I don't agree with is the fact that married individual can continue to collect his/her partners benefits after death. I know a man who was a teacher and married a teacher, and when she died he is recieving both his and her pension and social security all at the same time. The only reason I used him is because the government is paying him basically 3.5 times his salary which he used to support a family of 7 on, but now it is just him. I definitely think that the government needs to do some kind of analysis on this matter which would help cut down the amount of excess money being paid out. One pension should be enough and I would rather give individuals the choice to keep their pension or go on their spouse's pension than give them both.
ReplyDeleteThis sounds like a very good idea. This allows a person to decide, based on their health and other factors, when they start receiving their money. If a person believes that they will be capable of waiting longer to receive more money, they can. If not, they can still receive just as much money as they would have before and not have to sacrifice very much.
ReplyDeleteI realize that the benefits of waiting longer are significantly greater, and it would be in everyone's best mind to try and get the most out of it. But I also realize that today, whenever someone has the chance to get money, they will take it. They need to me sure they have enough money to support themselves if they decide to wait.
ReplyDeleteI agree that an example like the one Ben mentioned is absolutely unnecessary. It is scamming the country out of money that should not be getting paid to you. I do think that waiting can be beneficial and if a person is in the financial position to do so, they should. I do not agree with waiting for the wrong reasons, however.
ReplyDeleteThere are benefits to waiting if it is financially possible. However in today's society many are not in a position to wait. Taking the money as early as you can is not a smart move.
ReplyDelete