Should I Take Social Security Now and Invest It, or Wait Until I’m 70?

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

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Today’s question is about Social Security; specifically, whether you’re better off taking Social Security at full retirement age and investing it, or simply waiting to take it at age 70.

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Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

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For more information, check out “A Simple Way to Maximize Your Social Security” and “7 Social Security Blunders That Can Ruin Your Retirement.” You can also go to the search at the top of this page, put in the words “Social Security” and find plenty of information on just about everything relating to this topic.

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Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Anonymous:

“I’m in good health, enjoying my work in real estate, and I have no interest in retiring. So, I can choose NOT to take Social Security at 66 and wait until 70. But is that financially wise? Instead, I could take my retirement at 66 and invest that money in any number of stocks that pay high dividends.”

It’s not the usual blah, blah, blah. Click here to sign up for our free newsletter.

OK, Anonymous, let’s discuss.

Take it early, or wait?

Let’s start with a quick review of how Social Security works.

The earliest you can start Social Security is age 62: about one-quarter of Americans start taking it at that age. Most people, however, take it at their full retirement age, which is between 65 and 67, depending on when you were born. And some people wait until the last possible moment, age 70, to take it.

When you take it early, at age 62, you’ll get about 25% less per month for life than you would by waiting until your full retirement age. When you wait until 70, your monthly checks will be about one-third bigger for life.

Since Social Security provides monthly checks for life, you’ll get more checks over your lifetime if you start early and fewer if you start at 70, which makes sense. The system is designed so that theoretically, you’ll get the same total amount whether you start early, on time or later.

But that’s theoretically. If you live longer than the average life expectancy, you’re better off taking it late. If you live a shorter life, you’ll be better off taking it early.

Other things also matter. For example:

• Do you hate your job? Take Social Security early and quit.
• Do you love your job? Work until 70 and get a fatter check.
• Do you need the money? Take Social Security early.
• Don’t need the money? Wait.

Take it and invest it?

As you can see, the early versus late argument isn’t black and white. Which brings us back to today’s question: If you won’t need the income until you’re 70, should you take Social Security at your full retirement age and invest it? Or, are you better off simply waiting for a bigger check at age 70? 

Here’s the deal, Anonymous: For every year you wait after your full retirement age, your monthly Social Security check will go up by about 8%. So, that’s the return you’ll have to beat if you take your benefits and invest them.  

That’s not compounded, however. If you invest and compound, you won’t have to earn quite that much to beat Social Security’s automatic increase.

Getting a return anywhere close to 8% annually isn’t easy, and nearly impossible without risk. Also, because we’re people and not robots, it’s possible we may spend a couple of those monthly checks and not invest them.  

Waiting until 70 will also provide a bigger survivor’s benefit for your spouse when you die, since upon your death, your spouse is entitled to the greater of his or her own benefit or 100% of yours.  

Then there’s the cost-of-living adjustment, or COLA. Since this increase is a percentage of monthly checks, the bigger the check, the bigger the increase.

Finally, Social Security not only provides a stable, predictable benefit increase as you wait, but it also does it without risk, knowledge, study or luck. Beating 8% in the market may require all that stuff.

There are other factors as well, like…