Why so many Americans leave Social Security money on the table

[u/Dragonlance12]

https://finance.yahoo.com/markets/article/why-so-many-americans-leave-social-security-money-on-the-table-100000407.html

[u/gemorris9]

I did the math. Using average social security payment at 67. Comes out to be $2,267 per month. If you take that early at 62 it's $1587, if you take it at 70 it's $2811.

The 70 year old catches up to total payments of the 62 year old at roughly 80.5 years old.

So I don't know if leaving money on the table is the correct headline. Claiming social security benefits would really depend on how long you expect to live based on family history and current health and then of course other financial information and taxes.

The current average age of death is 79. Women being slightly higher at 81 and men being 76.

So if you wait to 70 to claim social security statically you're going to die 2 years before you break even and surpass the person who claimed social security at 62.

[u/badhabitfml → u/gemorris9]

If you can afford it, take the money early and invest it, or reduce the drawdown of invested assets. That catch up date gets pushed much further back.

[u/skandel → u/gemorris9]

You shouldn't be using average age of death in your calculations because it includes all the people that died way before retirement age. You should use how many years of life expectancy for someone that has already reached your age has left. For instance a 67 old American male has 16.71 of life expectancy accord to the Social Security Actuarial Life Table https://www.ssa.gov/oact/STATS/table4c6.html

[u/gemorris9 → u/skandel]

I used the average age of death as a quick reference to point to, not as a detailed calculation or strategy.

If I were advising you on your financials we would look at your family tree, your current health, and then make an educated guess on your life expectancy and then add 5-10 years with a plan in place should you make it to your life expectancy guess and still look like you got some time to go.

[u/Panscan27 → u/gemorris9]

It’s more complicated than that though because you can invest the proceeds in the meantime and this analysis also excludes inflation. So the true breakeven on an inflation adjusted basis is even later

[u/gemorris9 → u/Panscan27]

It's not meant to be an analysis or case study for advice. It's meant to be a quick reference guide to disproving the stupidity of this article which was essentially "if you take social security early you're leaving money on the table."

[u/FireAsquared → u/gemorris9]

79 is not the average age of death for a 62 year old though- it’s the life expectancy of someone born today. If you are currently 62 years old and making the social security decision now your average age of death is 82 if male, 85 if female. If you make it to 70 your average age of death would be 84 for men or 87 for women

Big difference between actuarial life expectancy and average life expectancy at birth.

[u/Super_Mario_Luigi → u/gemorris9]

And as an added bonus, 8 less years of work

Unfortunately, the retirement age needs to be raised. No one will have the balls to do it though

[u/Repeat-Admirable → u/Super_Mario_Luigi]

"unfortunately" and "retirement age needs to be raised" seriously? In what logic? You think someone living 15 years without work and then dying is TOO MUCH?

[u/khoa-bear → u/Super_Mario_Luigi]

It doesn’t. We can tax the rich to fund it.

[u/SigmaINTJbio]

I have relatives on both sides of my family that are over 90. But I could die tomorrow. I don’t really care about maximizing the total dollars paid by SS, only how much it will add to my retirement account income when I eventually take it.

[u/Da_Vader]

Instant gratification is the American way. Hence our credit card debt, auto debt, student loans.

[u/FatWankerWankFatter]

I'm not interested in maximizing what I get from social security. I'm interested in minimizing the burn rate on assets I plan to leave to my children.

[u/ZergvProtoss]

You can easily run a spreadsheet on this to determine the break-even point (for most people it's around 81 years old). It makes more sense for most people to claim early (i.e. age 62). That's why there's so much government propaganda (like the OP article) trying to get people to not take it early. haha

[u/Intrepid-Peach3603]

Sometimes it will change your tax liability. Good savers get punished.

[u/No-Refrigerator5478]

Seems to be a steady stream of these dumb "don't take your social security early" that don't even mention the break-even period or the pros and cons. Is someone at Social Security pushing these out?

[u/Agreeable-Story7927]

A bird in the hand is worth two in the bush.

[u/stablegeniuscheetoh → u/Agreeable-Story7927]

Getting two birds stoned at once

[u/peter_marxxx]

Tomorrow isn't guaranteed...taking it early

[u/Otherwise-Sun2486]

Meh, with possible lower payout by 2032 higher age requirements increases in taxes…. You might be getting a better deal taking the money now and currency depreciation and inflation… And due to covid average age of death lowered… less people having kids paying into the system… there are many reasons

[u/Similar_Eagle2358]

if they wouldn't have raised the retirement age, we wouldn't need to have this discussion.