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Should Retirees Delay Claiming Social Security?

Should they? It depends, according to a recent blog entry.

In The Retirement Café, Dirk Cotton argues that there is no pat, uniform answer. It depends in part, he contends, on longevity. To wit: those who live longer to a ripe old age may receive a larger benefit by delaying; those who reach the median life expectancy may not, and those whose lifespan is shorter than that could benefit by not delaying at all.

Cotton suggests that retirees may consider not delaying their claim for Social Security benefits if they:

  • have “over-saved”;

  • need income immediately;

  • have a spouse who had a low income;

  • are in poor health; or

  • are convinced that Social Security itself will not last.

There are some important caveats, Cotton points out.

For instance, how one defines “over saved” can vary. Cotton argues that while retirees who have saved a large sum generally should not worry about delaying Social Security benefits, “the risk for people who have ‘over-saved’ is that some people aren't as over-saved as they believe.”

Also, even with a family history regarding longevity, there are no guarantees as to how long an individual’s lifespan will be. “Retirees who have good reason to believe they will not live beyond median life expectancy for a healthy person of their age and gender might consider claiming benefits earlier,” says Cotton, adding, “like retirees on the borderline of "over-saved," however, guessing how long you will live is risky.”

Cotton also reminds that “there are precious few meaningful retirement finance strategies that every retiree should implement.”