Social Security

Brief Analysis #625 - Double-Dipping Social Security

The current Social Security system allows individuals to claim reduced, early retirement benefits beginning at age 62.  Individuals who wait until the full retirement age to collect receive about 30 percent more in monthly benefits.  If they wait until age 70 to collect, their benefits will be about 60 percent larger than at age 62. So what choice should people make?

Assuming a normal life expectancy and using the interest rate on government bonds, the actuarial present value of lifetime benefits are the same for those taking early retirement as for those waiting to take benefits at a later age.  Of course, if one’s life expectancy is not normal (either because of illness or particularly good genes), one retirement age will look more attractive than another.  Fortunately, you can have the best of both worlds:  You can retire at age 62, then pay back and reapply for Social Security benefits at age 70 if you come to regret your earlier decision.