Social Security benefits: When does it pay to delay?

Doug May
Doug May

Retirees can start taking Social Security benefits at any time between the ages of 62 and 70. While many people start taking benefits as soon as possible, today’s low interest rate environment has changed the calculus enough that for many folks, that’s the wrong decision. 

It almost takes a doctoral degree in economics to calculate when to file for benefits. Fortunately, a Stanford University Ph.D. recently studied how low interest rates and increasing life expectancies affect this decision.

Retirees who file too soon receive lower benefits that, over a long lifespan, result in significantly lower monthly income late in life.  Because interest rates are low, many retirees should use savings during their early years of retirement and let benefit levels increase (risk free) so less savings is required during later years.

Marriage, divorce, part-time work in retirement and other retirement income benefits all complicate the calculation, making it impossible to generalize. A recent National Bureau of Economic Research study offered some interesting general findings, however.

Professors Sita Nataraj Slavov and John Shoven concluded that delaying benefits is actuarially advantageous for a large subset of people, particularly for primary earners in married couples.

Many people start taking benefits right away, afraid something will happen to them before they can get their money back out of the system. But the study  found that most households — even those with mortality rates twice the average — need to think about delaying benefits. 

Determining when to start taking benefits is the cornerstone of most retirees’ retirement income plans. Without an income plan, people have a difficult time knowing how to allocate between “safe money” and long-term investments.

But with the calculus so overwhelming it takes an econometrician to run the numbers, many retirees give up at the outset, abandoning planning and just accepting the anxiety that comes with not having a detailed plan for how to best tap resources during their retirement years.

One solution is to tap into sophisticated planning resources that enable the evaluation of results from various options. It’s possible to adjust when spouses file to claim their resources as well as adjust whether they claim their own retirement benefits or tap into “spousal benefits” instead.

For more complicated scenarios, a social study analyzer program helps evaluate more complex situations, including 81 different filing options, among them file and immediately suspend benefits. Planning software doesn’t make decisions for people, but does make it easier to analyze alternatives.

Having a plan for retirement years is a key strategy in enjoying a successful retirement. While having a plan isn’t required, it’s one of the key traits that separate successful retirees from those who fail to fully enjoy the retirement season of life. 

Looking at the numbers won’t necessarily change them, of course. Folks who fail to plan for retirement and go into it with inadequate resources won’t suddenly discover new streams of income. 

For those who have saved — but remain anxious about whether they’ve saved enough — a thorough planning effort brings peace of mind and enjoyment others who have failed to plan rarely enjoy.

For those who want to read the full study— titled “When Does It Pay to Delay Social Security? The Impact of Mortality, Interest Rates and Program Rules”— send an e-mail to me at and I’d be happy to forward a copy to you. And if you want to talk turkey about retirement income or how to allocate investments between stocks, bonds, real estate and cash during your retirement years, call to schedule a free introductory meeting.