I just read an article telling people that they should wait until they are 70 years old to collect social security. It tells that if you every year you wait past 62 1/2 your benefits received will be 8% greater. If you wait until 66, you see a 32% increase; and if you wait until 70, you will see a 64% increase. Great I thought, now all I have to do is gamble that I will reach 66 or 70. The article touts how it is best if you wait until you are 70. Of course in my family the men don’t normally last that long.
The very next paragraph says that with baby boomers retiring, there will be a great strain on the Social Security fund and it will be out of money by 2033. So, if I start collecting at 70, and my benefits end at 76, how exactly is that better for me? To figure this out, I went back to the last statement the Social Security Administration sent me. If I retire at 62 1/2 I will get $902 per month; if I wait to 66, I will get $1,088; and if I wait until I reach 70, the number jumps to $1,233.
The difference between $902 and $1,088 divided over a four year period is 5%. The difference between $1,088 and $1,233 divided over a four year period is 3%. Oops, something in their math is wrong! I need to try it another way. I’ll try three different methods to see which benefits me the most.
My father died when he was 67. My grandfather died when he was 67. My great grandfather died when he was 65. My 2nd generation great grandfather died when he was 78. The mean is 69, the median is 67, and the mode is 67. So, let’s be optimistic and go with 68. If I live to be 68 and I start collecting at 62 1/2, I will have received a gross sum of $37,884 over that period. If I start collecting at 66, I will have received a gross total of $26,112. If I was waiting for 70 years old to collect, I would have received $0. So here it is best to start at 62 1/2.
The other way to view this is how long do I have to live to receive more at 70 than 66; 66 than 62 1/2? If I start collecting at 62 1/2 years old, it would take until my 83rd birthday for it to make up the difference between 62.5 and waiting until my 66th birthday. If I waited until I was 70 to start, it would not make a difference over starting at 66 until my 100th birthday. So, waiting until 66 or 70 is only better for me if I live to be 83 or 100.
But the report says Social Security will be bankrupt in 2033. In 2033, if I am still here, I’ll be 76 years old. If I start at 62 1/2 and live until January 2033, I will have collected $140,712 during that time. If I start at 66 and live until January 2033, I will have collected $124,032. If I start at 70 years old, I will have collected $81,378. So, even in this method, starting at 62 1/2 is most beneficial to me.
After looking at this from three directions it is most beneficial to me to start at 62 and half years old. This makes me wonder why this report would say otherwise. The only thing that makes sense is it is beneficial to the government to convince me to wait in the hopes that I kick the bucket before collecting a penny of what I put in.
I guess I know when I am going to start collecting no matter what the government says!