The Savage Truth: Social Security fact and fiction

Social Security decisions are among the most complex and fateful choices seniors must make.

The most critical decision revolves around when to take your benefit: as early as age 62, which will reduce your monthly benefit; at full retirement age (around 68 now); or sometime between FRA and age 70, when you must start taking your benefit.

Then throw in a “double decision” factor as spouses decide whose benefits should be taken first — and the impact of those decisions on the benefits awarded to a surviving spouse — and I promise you there’s a minimal chance that you’ll get it right. The wrong decision will be costly.

While I’ve written about these decisions before, the National Bureau of Economic Research just published a paper that puts numbers around the potential costs of making a wrong decision. The research paper, “How Much Lifetime Social Security Benefits Are Americans Leaving on the Table?,” gives a shocking answer: “Optimizing the claiming decision would produce a 10.4% increase in the typical worker’s lifetime spending capacity.”

Or put it another way: The research says that, for workers currently between the ages of 45 and 62, their “sub-optimal claiming decisions” will cost them in excess of $180,000 in the present value of household lifetime discretionary spending.

One of the authors of the study, famed economist Laurence Kotlikoff (who is also the author of the bestselling “Get What’s Yours: The Secrets to Maxing Out Your Social Security”), has been trying to