Investing Reasons to Claim Social Security Retirement Benefits Early

Most financial experts preach against taking Social Security retirement benefits at age 62 because of the permanent damage it does to the benefit amount received by the retiree and that retiree’s surviving spouse. But there may be an investment-based reason to claim an early benefit.

< If a retiree owns investments that are providing consistently high returns, and if an early (albeit diminished) Social Security benefit would allow the retiree to keep those investments earning, it may make sense to use the early benefit strategy. In other words, the total dollars gained by keeping high-return investments working could exceed the dollars lost by claiming an early SS retirement benefit.

The problem in today’s economy is I doubt there are any reasonably safe investments that would provide the high returns needed to make the math work. Keep in mind that by waiting until age 66 to claim Social Security, your benefit will increase by 25%. That is a permanent increase, month after month and year after year. Moreover, the benefit difference is further compounded by cost-of living increases that are built into the system. If inflation strikes with a vengeance, those cost of living increases will be worth a lot more than a high yield investment that is suitable for a retiree.

It does give us something to think about when contemplating when to claim a SS benefit. For more reading on this topic, read this excellent article by Jane Bryant Quinn, courtesy of the AARP: Financially Speaking: Social Security, Longevity Insurance; When to Claim Benefits

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