More than ever, due to today’s rate environment, it pays to delay taking social security, according to research by the Boston College Center for Retirement Research and findings of the American Enterprise Institute.
Contrary to the common thought that regardless of filing age, the same amount will be paid out during retirement, this finding actually shows how today’s low interest rate environment makes it increasingly prudent to delay claiming social security—and it can make a difference of more than $125,000 for married couples.
The Center for Retirement Research writes about the phenomenon in a blog post this week, sharing data from the American Enterprise Institute that shows a single man will receive the maximum benefit today by filing at age 69. For a single woman, that age is 70, which will result in nearly $60,000 more over the course of her retirement.
And yet, the average age for starting to claim Social Security is 62, despite the increase presented by waiting. For couples, the discrepancy grows.
“The two-earner couple gains the most if the husband starts his benefits at age 70 and the wife claims a spousal benefit – based on her husband’s earnings – at age 66 and then, at age 70, claims the benefit from her own employment. Doing so would generate $124,342 more income than if both spouses had claimed Social Security at age 62.”
The explanation has to do with the current interest rate as well as inflation over time.
“With inflation-adjusted rates currently running at 0 percent – as [the researchers] assumed in their estimates – the dollar next year is worth roughly what it is today,” the CRR writes. “In short, it pays to delay and collect the larger check later, because every dollar in that check has held its value.”
Written by Elizabeth Ecker