The Social Security Trap: When Waiting Until 70 Becomes a Huge Mistake

Doesn't matter for me - whatever choice I make will be the wrong one. This conclusion is from many years of research that I have painstakingly participated in. Whenever I go to check out at the grocery store I always pick the wrong line.

A huge cost that was not discussed is medical insurance and most folks cannot afford or don't want to pay 12K or more a year for medical coverage until 65 when Medicare kicks in. In fact medical expenses will be the biggest expense one will have in retirement.

My parents retired at 62. The activities and travel they did between 62-70 couldn't be replicated over the age 70. They slowed down a lot. My Father worked in a factory and stood on his feet all day. He did get a small pension as well as social security. They had no debt, car and house paid for.

l retired at 62 and am now 82. No regrets. The last 20 years have been fantastic. So many of my fellow factory workers never made it to 65 and many that did died soon afterwards. How much is a year of one's life worth? Prepare for retirement in your earlier years and stay out of debt as much as possible. That's what I did and I'll probably die with more than I'll need.

THROW AWAY all the financial spreadsheets to start with. Then make a QUALITY OF LIFE spreadsheet. List WHAT you plan to do at each age from 62 to 95. Then step back and take a realistic look at it - International travel in your 70’s - maybe, but don’t count on it. Visiting your grandkids in another state in your 80’s, maybe, but probably not. I have 8 brothers and sisters in their late 70’s and 80’s and NONE of them travel anymore, either by choice or due to physical limitations. Front load your spending in your 60’s and early 70’s. After that its a downhill slide and all the money in the world won’t make it any better.

It is easy to see that a 8.8% return per year on social security that is invested beats an approximate 7% loss in benefit per year by waiting. Now show me where I can get a guaranteed 8.8% return for the duration of the social security deferral period and I’ll start collecting tomorrow. Another consideration in waiting to collect is the ability to convert more IRA balances to Roth at a lower tax rate before social security kicks in.

I’m glad as hell i waited to 70.

I think the problem with this scenario is the assumed 8% return. Since they will be withdrawing some, you have to at least account for Sequence Risk. Another strategy that hedges a little more is having one spouse take early and one late especially if they both have reasonable benefits. My wife took at 63, I’m waiting till 70. That way we decrease portfolio withdrawals and maximize one survivor benefit at $4500. Both taking early with longevity creates a “must have portfolio” in old age, whereas an inflation adjusted $4500 will cover almost all basic needs when very old.

Every case is different. My assets were similar to the couple here at age 62 and I initially went with taking SS benefits at 62 until both my accountant and financial planner talked me into returning the SS and waiting until 70. I'm now 74 and it has worked out great. The gain in benefits by delaying is substantial. Good luck to everyone.

You have only so much priceless time, and you can't know what tomorrow will bring. Things to keep in mind.

I can tell you my goal is not to die with as much money as possible. It is much more important for me to ensure that I never get to zero. Your second "SSA AT 70" scenerio shows a big surplus at age 95, but also shows a lower low point than the "SSA AT 62" scenerio while in their late 60's. That's what I focused on.

I retired at 65. I loved my job but it hated my health - I was on call 24/7/365 for 34 years. On my last weekend of work, the Saturday before Christmas, I took a 5 a.m. call. Within a couple months my blood pressure meds were cut in half.

Kudos on not just a - typical for you, clearly and concisely explained plan - but just as importantly, showing a real world plan evolution I have not seen in a sea of pretty good Retirement Planning YT channels. Most content providers go over-simplistic, showing only for a given retiree they should or should not pull SS early. Without overwhelming, you showed the scenarios for the same couple where they should and should not pull early… and explained why it can be counterintuitive! Masterful. And still in under 20 minutes.

As a retired friend of mine advised me about saving: " I have scrimped and saved all my life, and now I am too old to enjoy it".

I'm 67 and plan to keep working full time till I'm 70. Not claimed my SS yet since I am in a higher tax bracket right now.

I'm waiting for SS until age 70 because I view SS as an insurance and my goal is primarily security rather than to end up with the largest portfolio when I die.

Currently retired at 62 and 2 months. No rush to collect Social Security but will do so when it feels right. Great video.

Cash flow, cash flow, cash flow. For most people whether you’re retired or not, it is about cash flow. Currently I’m 69, still working, and about 11 months out from retirement. Because I waited until 70, my monthly net cash flow will actually increase by about $1500 a month. In other words when I retire, I will receive a $1500 a month pay raise. Very helpful in a high inflationary world. Obviously, there’s no advantage to waiting any longer than 70, but if you’re in good health, the advice I received from another retiree was to work as long as you can. I’m glad I listened to his advice. This will also greatly benefit my wife, if she survives me. Just don’t quit too soon, because you or your spouse may accidentally live till 90. 😊

What James left out is that NO ONE knows the future return rate of this investments. Could be 9%, could be 4%. Taking SS later is insurance against the risk of a low future return on your other investments.

If you retire at 62 and take SS, you are stuck with it. If you retire at 62 and your current plan includes taking SS at 70, you still have the choice to take it sooner, if your plan changes and it makes sense. I like to maintain my options and my current plan works best at 70.