The author of the article is a 67-year-old individual who is still working full-time and has not yet applied for Social Security. They are considering whether to wait until they retire or reach age 70 to start collecting Social Security, as their monthly benefit will be greater at that time. While a friend suggests starting to collect Social Security now and investing those funds, the author is unsure which option is the best move. The Social Security Administration encourages people to delay taking Social Security benefits by offering a bump in payments if they wait. Factors such as longevity, income, marital status, and predictions for cost-of-living adjustments should be considered when making this decision. The article highlights that Social Security should be seen as insurance against a long life, and the best time to start taking benefits is when an individual stops working and needs it the most. The author concludes that it is probably better to wait until age 70 to begin collecting Social Security, as it provides an inflation-adjusted annuity for the rest of one’s life.
Interestingly, the article points out that if the author were to start collecting Social Security benefits at 67 while still working, they would receive lower monthly payments, continue paying Social Security tax on their earnings, and have their benefits taxed at a higher rate. The “break-even point” between retiring at age 67 and waiting until age 70 to collect benefits is just over a decade. However, it’s important to factor in the cost-of-living adjustment (COLA) when making this decision. While the current COLA is 8.7%, it is expected to be closer to 3.2% next year. Therefore, delaying benefits not only avoids income taxes on those benefits, but also lowers modified adjusted gross income, potentially helping individuals in other areas, such as avoiding Medicare income-related monthly adjustments.
In terms of financial advice, the article suggests that waiting until age 70 to collect Social Security is the smartest move for those who are healthy and can afford to do so. By waiting, individuals can receive the highest possible benefit amount, especially if they have a healthy income stream and other retirement savings accounts. Social Security is portrayed as an inflation-adjusted annuity that provides security for individuals who anticipate living a long life. Ultimately, the author has the luxury of being in a comfortable financial position regardless of their decision.
