Financial Strategies Group

FINANCIAL STRATEGIES GROUP 18 CHAPTER 3 SOCIAL SECURITY To understand what this equates to in dollars see the chart below. The Importance of Longevity! As you can see, your benefits increase substantially by delaying. This is only half of the story, though. Let's say you decide to delay your benefits to 70 rather than taking them at 62; then you pass away at 72. Was it a good decision to delay benefits for eight years (62 to 70) to get two years of higher benefits? The answer is, of course, "No!" On the other hand, if you live to 90 or 95, you will have received 20 or 25 years of significantly higher payments. You could make a strong case for delaying benefits in this situation. A comment I often get to the previous scenario is, "Well, none of us know when we are going to die." That is true, but it is important to remember the fundamentals of good decision-making. It is all about putting the odds in your favor. When faced with the decision to claim or delay benefits, I would encourage you to take a hard and objective look at your health, lifestyle, and longevity in your family. If you are in great health and have had several family members live into their late 80s and beyond, you should probably lean towards delaying benefits. If, on the other hand, you are in poor health and/ or have poor longevity in your family, you may want to consider claiming early. "Cost of Living Adjustments" are another reason to consider delaying benefits. In a typical year, your Social Security benefits are increased by the approximate inflation rate for the previous year. This is called a "Cost of Living Adjustment" (COLA) increase. You can see the historical COLA in the graph on the next page. A COLA increase of 2 or 3% may not seem that significant, but if you compound those increases over a 20 or 30- year period, they become very significant. The reason I say that COLA is another reason to consider delaying benefits is because a 3% increase on $1,320 over 20 years is

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