SOCIAL SECURITY.

WHEN TO TAKE SOCIAL SECURITY.

MERRILL LYNCH:

Even for Americans who have invested diligently for retirement over the years, Social Security benefits matter. One of the first big decisions we’re faced with as we approach retirement is when to claim our benefits—and timing is important. While you can start as early as age 62, waiting a few years or until you reach your full retirement age can substantially increase the amount you receive over your lifetime. We recently sat down with David Laster, head of Retirement Strategies at Bank of America Merrill Lynch, to get the latest thinking on what’s important to consider as you make your decision.
Merrill Lynch: David, we’re all living longer. Does that change how and when we claim Social Security benefits?
David Laster: Considering that one of the biggest retirement concerns people have is outliving their money, waiting to collect Social Security benefits begins to make a lot more sense than it might have in the past. Waiting to claim benefits can be a way of gaining a measure of protection against your risk of longevity.
As most people know, the longer you wait to begin taking benefits, the greater the monthly amount you receive. But that’s especially significant in the event that you live a very long life. And because market interest rates are near historic lows today, letting the government keep your money longer could potentially provide a higher return than you could get from most fixed-income investments.
ML: Talk a little more about that. How might postponing your payments work to your benefit?
DL: Well, imagine that at age 66 you’re entitled to an annual Social Security benefit of $10,000. If you wait a year to claim it, you’ll forgo the $10,000 for the first year, but the following year, at age 67, you’ll receive an annual benefit of $10,800, or 8% more—an amount, by the way, that is adjusted for inflation each year for the rest of your life.
ML: Should women think of Social Security benefits differently?
DL: Women typically live longer than men, and those extra years can make it especially important to find ways to boost income. Waiting longer to claim Social Security benefits is one strategy that can help do that. Take, for instance, a single woman who, instead of claiming benefits at 62, waits until 70—the maximum age for boosting benefits—before claiming. Waiting those extra eight years increases the amount she’ll get in her lifetime by 18%, on average, according to research by Stanford economist John Shoven and Sita Slavov¹, of the American Enterprise Institute. For a high-income earner, this means about $70,000 of additional LIFETIME INCOME!