: Eric Chan via
We have decided to take Social Security at age 62. We know
there are as many ways to consider this decision as there are
days in a year. And many experts advise against taking social
security "early" so that you get a bigger check at full
retirement age. It's hard to argue against that.
However, we have always lived an unconventional lifestyle, and
the fact that so many experts agree on waiting for payment gives
us pause for thought. Here is our logic.
First, the S&P 500 index has averaged returns of more than
8% per year, plus dividends, since we retired in 1991. If we take
Social Security early and invest it, we won't be losing the extra
8% in benefits we could get for every year we delayed receiving
them. Granted, the benefits of delaying Social Security are
guaranteed, while stock market returns are not. The markets could
go up, down, or sideways -- no one knows.
But we have lived off of our investments for the last 24
years, through good times and bad, and we could easily make it
another four if necessary, so investing the monthly check is
definitely an option. More likely, we will allow our cash to grow
while we look for opportunities to deploy it in the market. Plus
we would have control of the money, adding to our net worth.
Next let's look at some numbers
For easy math, say at 62 you are set to receive $1,000 per month
in benefits. If you wait until you are 66, your payment will be
$1,360. Sounds great, right? However, you would have missed
receiving $48,000 dollars in payments from the previous 48
months. How long is it before you make that money back? Using
this example, it would take 133 months, or a little over 11
years, meaning we wouldn't break even until age 77. In that time
frame, the Social Security we began receiving at age 62, plus our
investments, should grow enough to easily surpass the additional
money received by waiting.
For some people, deferring until their full retirement age --
or even later -- could make sense, especially if they do not have
the assets to support themselves, have difficulty handling money,
or are still working. However, this is not our situation, and
therefore we have decided to take the money and run.
It's really a question of who you think can handle your money
better -- you or Uncle Sam?
More from The Motley Fool:
Warren Buffett Tells You How to Turn $40 into
Why We're Taking Social Security at Age 62
originally appeared on Fool.com.
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