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An 8% Simple Return for Eight Years

An 8% Simple Return for Eight Years

| May 22, 2018

Most people take social security early, and I understand many of the reasons why.  People don’t think it’s going to be around, short life expectancy expectations, everyone else is doing it, etc.  

However, I was recently talking to a head of finance (good with numbers) for an organization nearby, and they thought they had it all figured out.  Since they were frugal, they could live off a reduced early Social Security payment and retire! 

I then asked, “If they could honestly assume an about 8% annual return on their investments for the eight years between 62 and 70?”

And waited… and waited… aha, there is the lightbulb above their head!  Ding ding ding!

We now have another person with long life expectancy expectations waiting to get their Social Security, and spending some of their retirement savings in the interim.  This is a trade-off between a guaranteed 8% increase in lifetime benefits each year, and a “hope to make 8%+” in the markets.  They are now conscientiously maximizing their total expected value from social security.  Yes, there is still the danger of dying early and missing out (so morbid I know), but if you die early, you don’t have a money problem right? 

Please don't take this decision lightly.  There are over 2,700 rules to how Social Security works.  If you think you're possibly going to live a long time, it's one of the biggest no-brainers that you can make, and we can help with your specific break-even math. 

Thanks for taking a look!


Tom Gartner, MSAPM, CFP®


This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.