A Proposal to Fill Your Retirement Gap

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David and Debra S. both had successful careers. In analyzing their retirement finances, the couple agreed that he should wait until age 70 to start his Social Security in order to get the largest monthly benefit.

But he wanted to sell his business at age 69 and retire then, so the North Carolina couple used their savings to cover some expenses over the next year.

Waiting until 70 – the latest claiming age under Social Security’s rules – accomplished two things. In addition to ensuring David gets the maximum benefit, waiting guaranteed that Debra, who retired a few years ago, at 62, would receive the maximum survivor benefit if David were to die first.

Other baby boomers might want to consider using this strategy.  As this blog frequently reminds readers, each additional year that someone waits to sign up for Social Security adds an average 7 percent to 8 percent to their annual benefit – and these yearly increments spill over into the survivor benefit.

Delaying Social Security is “the best deal in town,” said Steve Sass at the Center for Retirement Research, in a report that proposes baby boomers use the strategy to improve their retirement finances.

Here’s the rationale. Say, an individual wants a larger benefit. Instead of collecting $12,000 a year at age 65, he can wait until 66, which would increase his Social Security income to $12,860 a year, adjusted for inflation, with the increase passed along to his wife after his death (if his benefit is larger than his working wife’s own benefit). The cost of that additional Social Security income is the $12,000 the couple would have to withdraw from savings to pay their expenses while they delayed for that one year.

Social Security is essentially an annuity with inflation protection – and the payments last as long as a retiree does. So the $12,000 cost of increasing his Social Security benefit can be compared with cost of purchasing an equivalent, inflation-indexed annuity in the private insurance market. An equivalent insurance company annuity for a 65-year-old man, which begins paying immediately and includes a survivor benefit, would cost about $13,500.

The bottom line: delaying Social Security is cheaper than buying an insurance annuity.

David and Debra’s strategy of delay would also help couples who are concerned they won’t be able to retire comfortably.

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Chuck Miller

Delaying SS benefits can help your retirement income. It lasts the rest of your life. Annuities can be viable option for some or all of your retirement savings, especially for those who either can’t or won’t manage an investment portfolio.

James K Leis

Although your monthly benefit is increased, you pass up benefits which you could have received had you applied. You in essence “pay back” this lost income with the additional amount you received by deferring. This payback time provides you with a “break even” point. In the example about, the $12K not collected needs to be “paid back” at $860 per year: ballpark 14 years. Other factors make it a tad more complex, but it bears doing some investigation and calculation before just jumping on the deferral bandwagon.

    Aaron Smith

    Absolutely correct. It’s like these “expert” advisors can’t do simple math. It bears repeating: in the example in this article, you’re down $12K by waiting a year. It will take 14 years to make it up. At that point you’ll be getting ahead — $860 each year. Sorry, but I’ll take the $12K when I’m in my early 60s and can actually enjoy it, then an extra $860 a year when I’m in my late-70s. Ridiculous of this article to suggest delaying is a no-brainer decision — “the best deal in town.” The worst advice in town.


      Depending on the cost of living increase that could theoretically be applied to the additional $860, it wouldn’t take quite as long to break even. Breakeven would probably happen around year 12-13.

      In your late 70’s the benefit of waiting an extra year, due to compounding, would be worth around an extra $1,100 a month rather than $860. Assuming, of course if the individual is around to enjoy it.

      There are also benefits such as the potential survivor benefit. There isn’t a definitive right or wrong answer. It depends on everybody’s personal situation.

    Mike Roberts

    I tend to agree with this as well. If you don’t need the money (which you probably don’t if you can afford to wait for a higher payout later), then maybe save and invest the money? If you wait till 70, sure, your get a much higher monthly check, but you’ve missed out on all the income that you could have gotten had you not waited. Add in the fact that there’s no guarantee you’ll live to 70 anyway and it seems to make sense to take Social Security earlier rather than later.


I don’t know if couples have considered Social Security maximization sites, but they can be handy in getting the most out of your Social Security benefits.
One that I like is Open Social Security. This is free and I have found it helpful in determining when to file for benefits.


I don’t know if couples have considered Social Security maximization sites, but they can be handy in getting the most out of your Social Security benefits.
One that I like is Open Social Security. This is free and I have found it helpful in determining when to file for benefits.

    Dave G

    Nice tip! Thank you…just ran my own scenario that confirmed my own decision. My wife and I are similar age and she has a much lower PIA. She filed for her benefits at 65 and I filed a restricted application for spouse only at my age 66. When I’m ready to draw my own benefit, she switches to her spouse benefit for a significant bump.
    The “breakeven” analysis alone overlooks unique filing opportunities for spouses and impact of joint life expectancy for the survivor.

Mary Robertson

We are planning on delaying our SS benefits. But we are also planning on buying an annuity with part of our retirement savings to insure that the income to supplement our Social Security payments lasts for the rest of our lives.

Kim Blanton Squared Away blogger

Thanks for the comments everyone!

I’d like to say something about the idea that you are “giving up” money when you delay Social Security. The issue for many many older people is that they won’t have the income coming in that they need every month. Delaying Social Security helps with that.
Kim (blogger)


We go through the same discussions as this hypothetical couple.

My wife and I both had successful careers; our finances are well in order; we’re already retired (for 9 years); both 64y now; we haven’t claimed SS yet. Our earnings history is about the same, so spousal benefits aren’t a factor.

I want to wait until 70y to get the maximum SS payout; She argues why? We have enough money. Her argument is that if we take SS now – not knowing how long we’re going to live – we can preserve our other assets for our grandkids. If we wait to claim SS, and something happens to one, or the other, or both of us, the grandkids get nothing from SS, while we’ve used up our assets that they could’ve had.

(Yes, SS grows at 7%-8% annually, but we spend more from our investments each year than the dollar amount that SS grows. It’s the $ amount of growth that matters, not the % growth.)

As for the survivor benefit, should either of us die, the survivor benefit is a small number compared to the deceased spouse’s investments that would be assumed by the surviving spouse.

So, we’ve basically put that matter aside and settled that she’ll claim SS at FRA; I’ll claim sometime later (not quite sure when). With no strong rationale on either side.

Dave G

A key point is spousal financial security, especially how early retirement impacts women. A common scenario is the higher-earning husband who draws Soc. Sec. retirement benefits early, leaving a reduced survivor benefit to the wife. The probability of at least one beneficiary living to age 90 or more increases significantly. A decision using just a “breakeven”point alone considers just half the equation. Survivor benefits are even more significant for couples with a large age difference. So you need to consider their joint life expectancy, not just that of the claimant.

Ken Pidcock

So why should delaying the Social Security retirement benefit be so much a better deal than purchasing an annuity in the private insurance market? The actuaries at SSA are working with the same life tables as private insurers, and a similar degree of adverse selection applies. I recently read a piece (in MarketWatch, I think) suggesting that the explanation involves SSA formulae assuming significantly higher interest than prevails today and in the foreseeable future. By this reasoning, the delayed retirement credits should be less generous. Of course, it also means that, by delaying, you might be getting one over on the system. That might increase interest in the practice!

Mike Mas.

Here are a few questions my wife and I used to approach this issue: 1) How long do you expect to live? The math is easy to figure in the sense that in my case the break even point (the time at which my higher payments starting at 70 make up for 8 years of no payments) is age 80 1/2. I have health issues, I might not last that long. 2) Do you think you can invest the payments to match or beat 8% per year? Remember, those payments at 62 will have a while to compound. 3) Do you have children, grandchildren, or a charity you would like to leave the money to? In spite of spousal benefits, there is no way you can bequeath missed payments (if you pass) to any of the above. On the other hand, once you get that check, it’s yours to so with as you wish.

Just some additional food for thought, as I don’t believe this complex issue has a “one size fits all” solution.

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