When should you collect social security benefits?

Let’s remember that you don’t receive more in total benefits by waiting until you reach your average life expectancy, (currently approximately 81 for women and 76 for men). What happens if Client A did not live to their statistical average and were to pass away at age 70? Remember that the survivor benefit to the spouse is the higher of the two benefits, but they lose the smaller benefit. In such a case the surviving spouse would lose not only the smaller income (which is at least 50% of the larger income), but the benefit of inheriting the $297,630 that was never realized because the assets were spent down rather than saved and grown via an investment portfolio during the 8 year period while waiting to collect the higher benefits. The result of the combined loss in many cases can be dramatically impactful, if not financially catastrophic on many surviving spouses.

It is sometimes argued and entirely possible to insure this risk by buying a term life insurance policy on the amount of the lost savings. However, term insurance typically ends at age 80. In the event the insured died at age 81, the surviving spouse never receives the death benefit, nor do they have the accumulated additional dollars saved by collecting earlier. Additionally, they lost the cost of the life insurance premiums they paid for 18 years, which negates some of the benefit of having just barely passed the breakeven point at their average life expectancy. This strategy also presumes the individual is in fact insurable, which is not always the case depending on their past medical history.

Joe Favorito

Joe Favorito

Joseph Favorito is a Certified Financial Planner™ who began his career in the financial services field in 1997. Over the past two decades Joseph has worked for several New York stock exchange members. In 2011 he founded Landmark Wealth Management, LLC , a Long Island-based Securities Exchange Commission registered investment advisory firm.

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