Sometimes waiting to take action or to start something new in life can yield valuable rewards. Consider a 65-year-old American who is eligible to collect $12,000 per year from Social Security. If he or she can wait five years until age 70, the annual Social Security benefit increases by 41.7% to $17,000, and that income has guaranteed cost-of-living increases year after year. When your earned income stops or declines due to retirement or semi-retirement, a 41% increase in your guaranteed retirement income can make an enormous difference in your financial security.
For a married couple, this increased benefit will also pass along to the surviving spouse. Social Security benefits generally increase by 8% per year, guaranteed, each year you wait to collect beyond your full retirement age. In this case, waiting itself is an investment, and it is impossible to find an 8% guaranteed annual return on an investment backed by anything as strong as the U.S. Government.
Just because you are eligible for Social Security at age 62, you need not take it then; it is very important to weigh the benefits of waiting. The data on life expectancy continues to increase, so the finish line keeps moving ahead of where it used to be. In response, we need to adjust our own perception of an appropriate retirement age.
Almost everyone I know has a relative living well into their 90’s, and some have relatives who are 100 years old or more. Retiring at 62 or even 67 does not make the same sense that it did before the finish line moved well up into the ninth decade. If you like your work and you find it satisfying, continuing to work becomes a virtue, with many personal and professional benefits, as well as a guaranteed 8% annual investment reward for your patience.
Only a very few of our fellow citizens are taking advantage of this reward. 1.4 million men and nearly 1.3 million women began collecting Social Security benefits in 2012. Only 1% of the men and approximately 2% of the women waited to age 70. Sometimes it literally pays to be an outlier.
Another good example of the virtue of waiting is provided by the stock market. When the U.S. market, as measured by the S&P 500 Index, fell from its peak above 1500 in July of 2007 to its nadir below 700 in March of 2009, it was easy to think that it would never recover. Ever since I began my career as a financial advisor in 1982, I have been able to say that the U.S. market always recovers and moves back above the highest point from which it fell. This has come true again. In 2009, it was hard to imagine that the S&P 500 would move from below 700 to above 1800 by the end of 2013. The outliers who waited, who stayed with the market, can rest now in the comfort of their increased financial security.
Is your impatience blinding you to the virtue of waiting?