Why Even Wealthy Clients Should Delay Social Security: Jamie Hopkins

“Basically, to really ensure you are going to get this better outcome when claiming early, you need to have a higher amount of wealth, somewhere the realm of $2.5 million or above,” Hopkins notes. “Further, you need to have higher allocations to equities versus bonds, perhaps 75% or more in equities.”

Even in those cases, Hopkins says, between 50% and 60% of the time, this investor will still fall short in terms of maximizing their legacy amount versus the approach based on delaying Social Security. In other words, investors have to be lucky to benefit from claiming early.

“Overall, delaying from 62 to 70 provided a larger net legacy wealth amount at age 95 in 76.3% of historical periods considered,” Hopkins emphasizes. “That’s basically saying that, three out of four times, you’re going to be better off delaying and favoring the spending down of your private assets early on in that retirement period.”

An Underutilized Approach

Unfortunately, as Hopkins points out, the benefits of delayed claiming appear to be lost on many Americans. That is, delaying is not the expected outcome when investors are left to their own devices.

As Pfau and Parrish write, there are significant and easily understood benefits to delaying Social Security. For example, monthly benefits will be as much as 77% larger in inflation-adjusted terms for those who claim at 70 instead of 62.

Still, many individuals decide to claim earlier for a variety of reasons. In some cases, Pfau and Parrish write, these early benefits selections are related to the individual’s personal situation. Some may feel they need the income to support their spending needs, or they have a medical condition that is expected to shorten their life expectancy.