Personal Finance

The Hidden Social Security Benefit You Probably Didn’t Expect

We all know Social Security is a key component to a financially successful retirement. And while the program isn't designed to replace all of your pre-retirement income (more like 40% for the average wage earner), it's definitely an important part of the equation.

But what if I told you that Social Security has another big benefit for your retirement, and one which doesn't come with a dollar sign attached?

It turns out, according to a recent study (link opens PDF) by Professor Padmaja Ayyagari published by the Center for Retirement Research at Boston College, that Social Security income may have health benefits, too.

Here's how we know

The study analyzed data on retirees' health by examining a number of health measures for people born between 1901 and 1930, with particular attention paid to folks born between 1915 and 1917. That's because there's an interesting quirk in Social Security's history: Between 1972 and 1977, Social Security was overpaying on benefits (specifically, the formula for cost-of-living adjustments was more aggressive than inflation, meaning people were receiving more than was intended). But when Congress corrected the error in 1977, they chose to lock in a higher level of benefits for certain age cohorts that were close to retirement -- meaning that folks born between 1915 and 1917 earned on average $1,160 more per year from Social Security than other age groups with similar work histories.

The study compared the health of those born between 1915 and 1917 to other Social Security beneficiaries, on the thesis that those receiving more benefits -- while otherwise resembling surrounding age groups -- might have different health results. The study analyzed health results across a number of different surveys and measures. For example, Activities of Daily Living (or ADLs) and Instrumental Activities of Daily Living (IADLs) measure how difficult it is for the elderly to perform normal daily tasks. To quote the study:

For ADLs, the survey asks about difficulty walking across a room, dressing, bathing, eating, getting in and out of bed, and using the toilet. For IADLS, the survey asks about difficulty using the phone, taking medication, managing money, and shopping for groceries or preparing meals.

The goal, then, was to see whether there was a difference in cognitive function, in ADLs and IADLs, in self-reported health, or in signs of depression between the 1915-1917 group and other retirees.

And boy, was there.

A huge health benefit

The higher-income group experienced a 15.8% reduction in ADL limitations and a 15.7% reduction in IADL limitations.

And for those households led by someone with less than a high school education, $1,000 in extra benefits resulted in an 18.5% drop in the likelihood of three or more depressive symptoms.

So, you take similar people, pay them more in retirement, and in many cases they are healthier and happier. It makes sense. After all, we know that financial stress and depression are often linked. And we also know that depression and cognitive impairment are linked; there is even some evidence that depression could be a risk factor for some forms of dementia.

It's also well-known that lower incomes tend to correlate with less use of preventative medicine, even after controlling for insurance status. If you have less money, you're less likely to spend money on a condition that isn't immediately life-threatening. And chronic diseases, left undetected or untreated in early stages, can change your life -- particularly when you're elderly -- and ultimately affect your ADLs and IADLs.

What does this mean for us?

Unfortunately, Congress doesn't seem too likely to increase Social Security benefits for us any time soon.

But there are things you can do to increase your Social Security income in retirement. Working longer is a powerful option: You will be able to count those (hopefully high-earning) years toward your Social Security calculation, knocking off the first years of your career in which you were likely earning less (Social Security counts your top 35 wage-earning years toward your payout). It's a nice chance to bump your benefits.

Working longer has two other benefits, one financial and one health-related. The extra income will also make it easier to delay taking Social Security benefits until you're 70 (thereby locking in extra Social Security income for you, as the government increases your benefits by around 8% for each year you delay taking benefits between ages 62 and 70). There's also plenty of evidence that working later in life grants additional health benefits. That's a solid opportunity to improve your physical and financial health so you can best enjoy the retirement you've been planning for.

The $15,978 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.

The article The Hidden Social Security Benefit You Probably Didn't Expect originally appeared on

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