I just started reading a book about planning for retirement.
Early on, the author explains that it is best to delay taking Social Security as long as possible, even waiting until after you have been retired for a fairly long period before receiving SS.
He does provide a couple of strategies for weathering this period - work part time, or set up a “bridge” payment fund from your existing 401k.
Sounds reasonable so far. But then he gives an example to illustrate why delaying SS benefits is a no-brainer. The example left me scratching my head.
In very simple terms:
“Bob” decides to retire at 65 but not receive SS until age 70. If Bob elected to receive SS at 65, he would receive $25,000 per year. Waiting until 70 will give him $35,000. Therefore, Bob is gaining an extra 10k per year.
What the author totally ignores, though, is the 125k Bob would have received over those 5 years.
To my mind, delaying until age 70 would only pay off if Bob lives until at least 82.5 years of age, at which point he would “break even”.
- Is my math correct?
- Shouldn’t the author have raised this point?
I am not necessarily saying this is not the best strategy; just that it’s not as cut-and-dried as it is being presented.