This week, AARP released a Social Security calculator, designed to demonstrate to the bevy of 50 and 60 somethings out there on the verge of retirement, that it is better to wait till age 66 to file for benefits, instead of taking a reduced monthly stipend at age 62.
This, of course, assumes there is a large group of people out there, who would otherwise work till age 65 or 67, but are simply lazy and waiting to take their Social Security benefits so they can put a bumper sticker on their car proclaiming “I’m Spending my Children’s Inheritance,” move to Leisure World and enjoy the senior vida loca.
This is a wrong assumption.
I’ve spent the past several weeks speaking with several of my former Los Angeles Times Money Makeover subjects for my book on the post-2008 world of personal finance. Many are now in their fifties and sixties, and several have indicated to me that they plan to take Social Security ages that AARP would no doubt deem less than optimum.
They are not slackers. They are people who, rather, are suffering from the vicissitudes of life in 2011. If they are unemployed, they are much less likely to find work than people younger than themselves. Others fear they won’t be able to keep up much longer. As economists know, our nation’s productivity gains have been made by longer hours – men in professional and managerial jobs often put in 50-hour workweeks. Contrary to the wishes of desk jockeys in Washington, DC, there really aren’t that many people in there sixties capable of putting in punishing hours on the job. Yes, we are living longer, but it isn’t clear we are living healthier. Sixty ain’t the new 40 or even the new 50, and no amount of wishing is going to make it so.
My Makeover people run the gamut. One told me he was concerned he would not be able to perform his job safely in another year or two. Another told me she wasn’t sure she could put in the hours much longer – and, even if she could, felt that technological changes in her industry might render her job non-essential in the near future. A third, who had continued to teach infant education classes on a part time basis into her seventies, finally had to stop when she physically could no longer pick up the children’s toys. Still others are part of that 50something cohort who simply can’t get hired to anything but the most piecemeal of piecemeal work. And, finally, another group finds themselves losing hours of work caring for sick parents or spouses, an increasing problem according to, yes, AARP, which is releasing a report Monday on the subject.
In other words, I doubt a Social Security calculator is going to do much for the vast majority of people who take their benefits before turning 66 except dump a heap of guilt on them for doing what they will really have no choice about doing. And that’s filing for Social Security before they turn 66.
The AARP site looks only at the monthly benefit. A more rational decision criterion (though much less certain to calculate) is total lifetime benefit. Before opting to take Social Security at the earliest age possible, I ran the numbers for my case and found I’d have to live to about 85 years old to receive a greater lifetime benefit by delaying my retirement until full retirement age (65). I think it’s unrealistic to expect the following three essential factors for a secure retired life will still obtain by 2035:
1. I will still be alive and kicking (50% chance, I reckon).
2. US social security benefits will continue at current levels (adjusted for inflation and without means-tested reductions).
3. The global environment will continue to sustain something resembling the current western lifestyle and economic regime.
Only takes losing one of the three to invalidate the AARP’s focus on monthly benefits. I’m taking what I can get while I can get it.
Bill
Bill, thanks for posting in. In the 1990s, it was pretty standard for financial planning types to tell people to take SS benefits at age 62 in order to maximize thier lifetime benefits, based on reason number one alone. My take now is that it is a very individual decision, based on numerous factors that a calculator cannot compute. What I do resent, however, is the implication that people taking SS at age 62 are just looking to exit the workforce. There is no evidence to support that belief.
Some of those factors spelled out:
First, the calculator they have doesn’t fit me, or for that matter anyone who has a job paying far more or less than most of their work life. The numbers you get from social security, even the estimated ones on their site, are more accurate.
Then there’s the matter of how long you live. You wait to 65 and get more, but have the misfortune to live only to your mid-70s, and you’ve lost money. You have to determine your breakeven age (when your total dollars gotten will be greater with the greater money) to make any determination based on money alone.
They also assume you don’t need money, that you’re comfy and have a nice secure job. Come on.