It Still Pays to Wait to Claim Social Security

Despite dire headlines about the Social Security trust fund, you will be better off waiting to collect benefits.

photo of Laurence Kotlikoff
Laurence Kotlikoff
(Image credit: Photo by Brigit Jourgensen)

Laurence Kotlikoff is a professor of economics at Boston University and author of Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life. He also developed MaxiFi Planner and Maximize My Social Security—software programs designed to help users raise their living standards by getting the most out of their Social Security benefits.

In its most recent annual report, the Social Security Board of Trustees said that if nothing is done, the trust fund will be depleted by 2033, which would mean Social Security would be able to pay out only 76% of promised benefits. What do you say to people who plan to file at age 62—which results in about a 25% cut in benefits—because they’re afraid the program will run out of money? I have run through our software a benefit cut starting in 2031, and you still see a very major gain from waiting to collect. But I don’t see the politicians cutting benefits directly. I think they’re going to raise taxes on the rich. Congress could also use general revenue to finance Social Security, or they could partially index benefits for the rich. Historically, they phase in changes, so anybody who is close to retirement is quite safe—and by close I mean 55 and older.

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Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.