Social Security – Delay of start, waiting until 70 is not a good option for those near SS activation
© Donald Reinhardt, April 29, 2012; updated September 15, 2012
To wait and delay or not to wait and delay for Social Security (SS) benefits – that is the question. Two recent articles, one from the Wall Street Journal and another by Don Taylor at bankrate.com, each suggested that waiting until 70 years of age to activate Social Security signup for benefits might be a good option that would add about 8% per year delayed or 32% at the end of 4 years to the SS retirement benefit financial benefit. This delay of signing up for Social Security benefits MAY NOT be the best plan for you or many others.
Problems with delay of Social Security benefits
There are a few basic problems with the Social Security delay strategy, if you simply remember and consider the simple phrase (based on everything else you already know about life) that “a bird in hand is worth two in the bush.” Here are important facts to remember:
If someone dies before Social Security benefits kick in, those benefits are not retroactive and do not immediately pass on until a claim is made by an eligible, surviving beneficiary. In other words, prior to activation of Social Security benefits there are no immediate payments made to the survivor beneficiaries until a claim is filed by the spouse or the surviving children.
The Social Security Administration explains this beneficiary process as follows:
"Social Security uses the deceased worker’s basic benefit amount and calculates what percentage survivors are entitled to. The percentage depends on the survivors’ ages and relationship to the worker. If the person who died was receiving reduced benefits, your survivor’s benefit is based on that amount. Here are the most typical situations:
- A widow or widower, at full retirement age or older, generally receives 100 percent of the worker’s basic benefit amount;
- A widow or widower, age 60 or older, but under full retirement age, receives about 71-99 percent of the worker’s basic benefit amount; or
- A widow or widower, any age, with a child younger than age 16, receives 75 percent of the worker’s benefit amount.
- Children receive 75 percent of the worker’s benefit amount."
(Quoted source: Social Security Administration)
Social Security with no eligible beneficiaries – what does this mean?
If an individual waits until age 70 with no eligible beneficiaries, there is another obvious disadvantage. Someone may have started working at 20, worked continuously for 50 years to the age of 70 and die just prior to activation of that benefit. What happened to all that money? Yes, the government has put it to work somewhere else. That money is lost and gone. However, if that person started receiving Social Security at 66 for four years and had received $2000 month for the years prior to death at 70, then that sum of after tax income would amount to almost $100,000. What does this mean to the person who took early benefits? Simply this, that accumulated and paid out Social Security money could be willed by the deceased to a charity, special trust or scholarship fund, designated relatives or any combination that the deceased desired and designated in the Last Will and Testament.
Except for the spousal and children benefits that accrue upon the death of a higher earning Social Security spouse, the owner of the benefit is the only other beneficiary. Therefore, a wife receiving a SS payment of $600 and a husband $1500 both share a $2100 total income. If the husband dies his higher SS benefit accrues directly to his wife, but her $600 payment goes away and is not combined with here spouse's benefits. If the wife dies before the husband in the previous income setting, there is no increase or financial benefit because his Social Security benefit remains for him and his wife’s portion stops and is not passed to him. For a case where the wife earns more than the husband and she dies first, then her SS benefit would accrue to his benefit.
Social Security – the U.S. economy and government debt reminds and warns us to be wary of future promises for SS, Medicare and other government benefits
Consider that currently the average person who has worked 30, 40 or 50 years has contributed upwards of $100,000 or more into Social Security and the employer has matched this $100,000. That’s a pool of $200,000 that went to the federal government – the US Federal Government. BUT all of that money has already been spent by the U.S. government and that money is not there because there is no Trust Fund with real money in it – contrary to what everyone has been told to all. The Social Security trust fund, such as it is, is simply a very large box filled with IOUs to all who have paid in. The U.S. government tells us it owes us and will pays us – that is the good faith statement of the government which has already spent all that money and needs much more to keep going. Hence, the US Federal debt is racing towrd 17 trillion dollars as we turn into the year 2013.
How Social Security is currently funded
Currently, the U.S. government pays retirees with money received from working people, many who think they also have a protected, trust fund (which you now know is untrue). In essence, Social Security is an unfunded liability which many legislators refused to tell you about and which Rick Perry, the Governor of Texas, aptly compared to a “Ponzi scheme” during his run for the Presidency in the 2012 Republican primaries. Further, because the income to SS is below expectations and the outgo of money is higher money is being borrowed (added to the debt) to pay for SS benefits.
In summary, the federal legislators and caretakers of your Social Security money have been negligent and remiss in the management of SS Trust funds and this applies to both parties historically. As much as people complain about big business abuses, big government abuses have matched them and exceeded them by trillions of dollars – trillions and trillions of wasted dollars.
The issue of Social Security and other government fraud
Furthermore, Social Security fraud is rampant with fabricated and false claims for certain disabilities. Fraud is common also in Medicare and the Food Stamp, rent and fuel subsidy programs. The U.S. government is a giant sieve of wasted, free-flowing, mismanaged and poorly-channeled money. The bigger the government, the larger the waste.
Therefore, the biggest problem with any plan or philosophy of waiting to 70 to get Social Security is that if the US government continues to spend and add more taxes and debt to the economy, the U.S. economy may devolve into further financial debt, bedlam, chaos and financial decline.
With unchecked spending and decreased government income, the United States will be totally and irretrievably bankrupt in 7 to 8 years or less. So, for those who are enterprising enough to want more SS benefits and wait, I say don't be greedy and reconsider that option. The best and most honest bet is to take Social Security at the earliest age possible say 62 or 65, 66 or 67. Yes, why not eat, live and be merry because there are no true U.S. guarantees for tomorrow.
Political leadership, Social Security, cutting spending and balancing the budget
In the United States as of this December of 2012 and beyond we are witnessing a political circus for sure. This is not a time for political games. There is a real need for budget cuts as bad as that may sound.
If you are an American citizen and voter you should determine what is true and what is false about this current economy and budget problem and what is the best course of action for the nation to take in our current debt and budget crisis.
There is no more money to waste, lose or to spend on foolishness. Lies, half truth and distortions really don't change the financial picture or the inevitable consequences of fiscal mismanagement. Individuals go bankrupt and nations can become bankrupt also.
We used to have political leaders with backbone, vision, common sense and wisdom. Those days seem long gone since the majority of today's leaders lack backbone, vision, common sense and wisdom. Instead these politicians say re-elect me and they promise more money, benefits and things to give people as they load up the national credit card. They promise to find and get stored-away money and obtain more money from those who are making more money than the average citizen.
Class warfare between those with little money and those with more abundant resources is a cheap and shoddy game that promotes jealously, envy and hatred of many who have simply worked hard and prospered along the way.
Giving financial freebies to laggards and slothful people does not work and will not stimulate the economy or save financially-overburdened social systems (i.e., entitlements). In Plymouth Colony in the 1600s Governor Bradford and others identified certain Pilgrims who were using the common stores and did not contribute anything to the general welfare and the common storage goods for of all. Bradford changed those ways of slothful and parasitic living and thinking and he improved the whole colony at Massachusetts.
We see foolish leadership in so many places today. America was built on entrepreneurship, freedom, life, liberty and the pursuit of happiness. These are things that the government was instructed by the founders to promote. Now people expect the government to find and give them as many "free" things and benefits as possible and in the process these individuals and others begin to lose personal liberty and the ability to pursue happiness as dependence on the government increases.
Yes, I say, eat, live and be merry because going to college, being bright, having great skills won’t matter without a good and vibrant economy and growing opportunities for jobs and good employment.
And just think of this, if we shut down all the carbon-fueled economic demons of oil, coal and gas (which we have abundant supplies within the U.S.) we can all sip a cool beverage of our liking as we watch the windmill blades turn and try to guess when and where those blades will stop or start again in their unique, defined and narrow spinning circles. And just as the wind comes and goes as it does each time, and sometimes ceases totally, that is the kind of freedom we will long for once again.
Yes, someday soon there will be no global warming, no panic, no alarms about this heated-planet and related theories and that will be good, but it certainly may be expensive to heat our houses and apartments in the winter once that new global cooling cycle has started. You see, I believe, things tend to move in cycles such as: boom and bust, heating and cooling, slavery and freedom, up and down, inside and outside and others you may care to add. And you can bet these cycles are very real and quite regular – if you simply open and read a few good history books and true stories they will affirm those points!
Yes, there are lots of new games like this to play with our minds and our money and who can determine what will remain of mind or money or both in 7 or 10 years? Here’s to you and I wish you the very best. Salute!
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