Whenever I write about reasons not to take Social Security early, I get responses from readers that are similar to this one:
I just read your article on holding off taking Social Security when one reaches age 62. Some people say this is a government conspiracy to keep people from taking a piece of what they and their employers have paid into the system. I believe that a person who starts collecting at 62 will receive MORE money overall. I personally want the extra dollars to do things that I may not be able to do later.
I ran this note and other similar ones past Steve Vernon, an actuary and research scholar at the Stanford Center on Longevity. He recently studied issues surrounding Social Security for Mercer Human Resources Consulting. His study looked at ways that firms could help retiring employees get the most from Social Security. During the time he spent on this project and because of his side job, writing a retirement column for CBS MarketWatch, Vernon encountered some of the same arguments raised above -- and many others -- against delaying claiming Social Security.
Here's how Vernon responds to what he says are "very emotional -- rarely logical -- arguments for taking Social Security sooner rather than later."
Social Security will disappear. Fear mongers raise the specter that Social Security will be eliminated or seriously cut back, leaving recipients who delay claiming with significantly less -- or nothing. "That's not a risk," Vernon says. "Politicians are very, very worried about reducing Social Security. Social Security needs to be changed, but it's not going to go away and politicians are very reluctant to even reduce benefits."
I'll die before I get my share. "You never know when you'll die. Do you really think that you are going to be up in heaven saying, 'Dang, I wish I had taken my Social Security early.' If you delay, you'll be better off financially -- and better able to enjoy your life. Plus, I'm seeing lots of evidence from research at Stanford that people who work into their later years are healthier and keep their wits longer."
I'll be ahead by taking Social Security early and investing it. "If you live the average lifespan, you have to earn 8 percent a year to make taking Social Security early and investing a good move. Making that isn't impossible, but you'll only make that much if you invest in the stock market, and that has risk. If you decide to invest, you have to cross your fingers and hope the stock market does well. Social Security is risk free."
Delaying doesn't consider the time value of money. The time value of money theory says that money available at the present time is worth more than the same amount in the future because of inflation and earning potential. Vernon dismisses it. "The annual COLA (cost of living adjustment) mostly cancels out the time value of money."
Vernon, 61, thinks his own path to retirement is the better way. Eight years ago, he retired from Watson Wyatt where for 25 years, he designed retirement plans for Fortune 500 companies. He's still working, but much less than he used to. "Once the kids were launched and off the payroll, I could afford to make less money," he says.
He plans to continue working and delay taking Social Security until he is 70. He's happy, and he advises others to consider this path. "Find work you like doing. Cut back your hours. Reduce your expenses. Don't burn out. It's a better life," he says.