Now that the stock market has quieted down a bit and it appears that the world isn’t going to end any time soon, we can return to our series on when one should take Social Security. It’s usually better to wait as long as you can, but a few weeks back we listed several reasons you might want to take it sooner rather than later. Here are a few more for you to ponder.
Preserving your assets
Most retirees who delay taking Social Security are then forced to draw down their savings and investments to otherwise support themselves.
Since a primary fear among many retirees is that their money will run out before they die, spending a portion of your nest egg every month can cause anxiety among even the most serene seniors.
The fear is only heightened if the decline in assets is hastened by a fall in investment prices (for more information, see your most recent monthly statement).
Plus, every dollar of yours that is spent in lieu of taking Social Security is a dollar that you can’t ever get back again.
That means you will have less in liquid assets to spend on fun things (for instance, taking a trip), needed expenses (such as home improvement or a new car), or emergency costs (like uncovered medical expenses or helping a friend or family member in need).
Even if you already have these other potential expenses covered, spending your own money instead of taking Social Security means you’ll have less to invest if interest rates rise, or other investments decline enough in price to trigger a potential buying opportunity (for more information, see your most recent monthly statement).
Last but not least, after you’re gone your Social Security checks can generally only go to your surviving spouse. Any other family members or favorite charities can only inherit what’s left of your assets, which may have already gone to support you while you were alive.
How long are you going to live?
As a rule of thumb, it’s a good idea to wait to take Social Security if you live past the age of 80. And on paper, the numbers are in your favor.
According to the Social Security Administration, the median life expectancies for 65 year-olds today is 84.3 for men, and 86.6 for women. That means the SSA thinks half of today’s 65 year-old will live longer than those ages, and half won’t.
If you want an educated guess as to how long you might live, go to tinyurl.com/lifeexpec.
However, even if you think you’ll make it past 80, which makes waiting to take Social Security make sense, you’ve certainly been to funerals for people who didn’t live nearly that long.
And depending on the timing and manner of your demise, you might find out too late that you should have taken Social Security sooner.
Social Security’s future
Right now the SSA currently has about 2.8 trillion extra dollars on hand, and even brought in a surplus of about 25 million dollars in the calendar year of 2014.
However, the SSA also projects that the several-trillion-dollar surplus could be exhausted by the year 2034 (less than 20 years from now), at which time the taxes brought in will purportedly replace about 75% of the benefits required to be paid out. Changes to the program will likely be made before the surplus runs out, in attempt to increase the sustainability of the projected payments with as little pain as possible suffered by both workers and beneficiaries.
But benefits will certainly need to be reduced at some point. Taking Social Security today means they can’t take those dollars away from you in the future.
In other words, unless you think both you and Social Security are going to remain alive and well for the foreseeable future, you may want to take the proverbial bird in hand now, rather than leaving a slightly larger one in the bush.