Q & A

Should I Claim Early and Invest in the Market?

Full Question: Thanks for your most informative book. I’m 60 now and have been studying the file and suspend until 70 approach. During an office discussion with a colleague, he explained the “file at 62 and invest what you receive from social security”; the idea being that the investment growth over time more than compensates for waiting until 70. I recognize that 1) your financial situation must afford you the ability to do this, 2) you must have the discipline to do so and 3) there is some level of risk in relation to the return on investment. My question is, what are your thoughts on this approach? I realized while we were talking that I did not recall seeing this method as part of your trade off analysis and discussion vis a vis filing and suspending until 70. Thanks very much again for all your advice and efforts to make this challenge understandable.

Answer: As we point out in the book, Social Security can’t be considered as an investment. It’s an insurance policy — a unique insurance policy, which protects you against one of life’s biggest risks, namely, living. By this I mean living too long. If we die, we’re off to heaven and not to worry. It’s living and having to support yourself year after relentless year that makes living so tragic. ( Yes, this is a bit tongue in cheek.) I realize that this point may not get your colleague to change his thinking. He may insist on comparing what he can make on the stock market from taking benefits early with what he’ll be able to get from Social Security in the form of higher benefits by waiting to collect. Read more…

SourceLaurence Kotlikoff, via www.forbes.com)

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