You have reached your limit of free articles this month.

Enjoy unlimited access to myStatesman.com

Starting at just 99¢ for 8 weeks.

GREAT REASONS TO SUBSCRIBE TODAY!

  • IN-DEPTH REPORTING
  • INTERACTIVE STORYTELLING
  • NEW TOPICS & COVERAGE
  • ePAPER
X

You have read of premium articles.

Get unlimited access to all of our breaking news, in-depth coverage and bonus content- exclusively for subscribers. Starting at just 99¢ for 8 weeks

X

Welcome to myStatesman.com

This subscriber-only site gives you exclusive access to breaking news, in-depth coverage, exclusive interactives and bonus content.

You can read free articles of your choice a month that are only available on myStatesman.com.

Why far too many take Social Security far too early


I just visited my mother. She’s 97. The trip over was short; she’s in an assisted-living facility right across the street.

Today’s report: “Couldn’t hear the people at dinner, couldn’t hear the TV, eyes hurt from reading …”

“Why am I still alive?” she asked. “I never expected to live this long.”

“You’re 97, but you look 79 … well, 89.” I said. “There are plenty of people even older. Worldwide, we’re talking a half-million centenarians. In 30 years they’ll number 3 million.”

“Well, good for them. I’d rather be dead.”

“I’m taking you to dinner tomorrow. You need cheering up.”

It was a bad day. But the last two were good, with jokes and laughter.

That’s life. We can’t count on dying on time, but almost all of us do. Consequently, far too many of us take Social Security far too early. More than two-fifths of us take retirement benefits at 62 and pass up 76 percent higher benefits (inflation-adjusted) if we wait until 70. That’s a huge differential. But only 2 percent wait until 70.

How come?

First, lots of people — about one-fifth — are out of money and simply have to collect.

Second, Social Security tells us it doesn’t matter if we collect less early or more late — on average we’ll end up with the same. “So,” its staff says, “you might as well collect early.”

Third, we’re superstitious. Surely just contemplating long life will produce instant death.

Those in the first bucket have no choice. Those in the second bucket, who act on Social Security’s “on average” advice, are being badly misled. When it comes to our finances, we can’t play the averages. Instead, we hedge downside risk by diversifying our investments and buying insurance.

Social Security doesn’t understand this, but none of us is living a version of the movie “Groundhog Day,” where we get to die over and over again and, on average, die at our life expectancy. No, we get to die just once. And that once can be at 97 or later. My proof’s across the street.

Social Security also doesn’t realize that in giving us initial collection date choices, it’s selling Methuselah insurance — insurance against living a long, long time. When we forgo eight years of benefits to get much higher benefits as long as we live, those forgone benefits represent the premium Social Security is charging to provide us more money if and when we need it in old and very old age.

Dying is cheap. You die, the bills stop. Living, now that’s expensive. Each year is another year of housing, clothing and feeding yourself, not to mention medical expenses. And, trust me, when you’re really old you need money, lots of it — for the hearing aids, the dentures, the special glasses, the home health aides — none of which is covered by Medicare.

So we can’t play the averages when it comes to insuring against life-span risk, any more than we can play the averages when it comes to buying homeowners insurance. We have to focus on the worst-case scenarios — living too long and the house burning down.

What about those in bucket three, who are too scared to wish their wishes? There are lots of these folks. “My parents died young. I’ve got their genes. No way I’ll outlive them. The money’s right there for the taking. And I’m going to take it now while I still can.”

Here’s my advice to those in bucket two. Social Security is the last place to go to learn about Social Security. Its 40,000 well-meaning, but severely undertrained staff members are administering a system with literally hundreds of thousands of rules — perhaps the most complex institution bureaucrats have yet devised. And none of these 40,000 people have been told that they are selling Methuselah (aka longevity) insurance.

As for those in bucket three, please realize that, financially speaking, early death is salvation. Late death is penury. So believing you will die young and acting on that belief when it comes to collecting Social Security is jinxing yourself for sure.



Reader Comments ...


Next Up in Business

Have a great workplace? Let us know
Have a great workplace? Let us know

Help us spread the word about the best places to work in Austin. Nominations are now open for the American-Statesman’s 2017 Top Workplaces of Greater Austin project. The project recognizes employers that stand for the best in leadership, vision, an employee-centered culture and other qualities. Any employer is eligible — private company...
Up the Ladder

Biomedical Aeglea BioTherapeutics has named Anthony Quinn interim chief medical officer. Health care St. David’s HealthCare has named Diana Kraus assistant vice president of trauma. Professional honors Sandra D. Gonzalez of Greenberg Traurig has been elected to the Fellows of the Texas Bar Foundation.
Top Local Business Stories of the Week
Top Local Business Stories of the Week

WHOLE FOODS TAKEOVER? Report says Albertsons considering takeover bid for Whole Foods: Supermarket chain Albertsons is exploring a possible takeover of Austin-based Whole Foods Market, the Financial Times reported last week, citing unnamed sources. Albertsons, which operates about 2,200 stores, is controlled by buyout group Cerberus Capital Management...
House tax plan has surprising implications

Last June, Republicans in the House Ways and Means Committee rolled out their “Better Way” tax reform plan. It proposes big changes to business and personal taxation. Critics say it’s regressive and will likely decrease revenues because of the cut in personal rates. But a closer look suggests neither is true. Moreover, the business...
Business Digest: Germany-based group buys Austin office building

COMMERCIAL REAL ESTATE Germany-based group buys Austin office building The Capital Ridge office building in Southwest Austin has a new owner. GLL Real Estate Partners, a real estate fund management group based in Munich, Germany, recently purchased the building from Capital Ridge-RE LP, according to Travis County deed records. The purchase price was...
More Stories