MML# 078: Social Security Is An Investment Decision

Before we get into it, a quick word on the day. It's the Fourth of July, and I hope you're enjoying it with the people you love. To the men and women who served, and the families who carried the weight alongside them: thank you. We don't say it enough.

Most people treat Social Security as a calendar question. When do I turn it on? 62? 67? Hold out until 70?

But the day you claim quietly reaches into your portfolio and rearranges things. So the timing question is really a money question wearing a different hat.

Let me walk you through why.

The basics, quickly

You can start Social Security as early as 62. Take it then and your check is permanently smaller.

Wait, and the benefit keeps climbing. It grows a little each year you hold off, and it tops out at age 70. After that, waiting earns you nothing extra.

So on paper, waiting looks like the obvious win. A bigger, guaranteed, inflation-adjusted check for the rest of your life. What's not to love?

Why waiting isn't a slam dunk

For most of the attorneys I work with, delaying Social Security doesn't mean the money just appears out of thin air. It means you have to cover those in-between years from somewhere. And that somewhere is usually your own portfolio.

So while you wait for a bigger check, you're drawing down your investments to pay the bills. Your future Social Security goes up. Your nest egg goes down.

That matters, because the dollars you spend early are the same dollars that would have been compounding for you over the next 20 or 30 years. You're trading growth you can't see for a guarantee you can.

Sometimes that's a great trade. Sometimes it isn't. It depends on you.

Three things worth weighing

Your health and family history. This one's uncomfortable, but it's honest. If your parents and grandparents lived well into their 90s and you're in good shape, a longer life tilts things toward waiting. More years of that bigger check add up. If your health history says otherwise, claiming earlier may serve you better.

How your portfolio handles a rough start. There's a real risk in retiring right before a stretch of poor market returns. Drawing down heavily in those early years, while also delaying Social Security, can dig a hole that's hard to climb out of. If your plan is built to absorb some bad years up front, delay looks safer. If it's not, that's worth a hard look before you commit.

What you want to leave behind. Keep this in mind: you can't pass your Social Security benefit to your kids. There's no "remaining balance" that transfers to your heirs when you're gone. But an IRA can pass along to them. So if leaving something to your family matters to you, spending down that IRA to delay Social Security deserves a second thought.

So it's an investment decision

When you decide when to claim, you're also deciding how hard your portfolio has to work, how much you draw down early, and what's left for the people you love.

That's what makes Social Security an investment decision. The date you pick reaches into your longevity odds, your market risk, and your estate, all at the same time. A quick "just wait until 70, it always wins" misses most of the picture.

I'll add my usual reminder here: this is my understanding of how the pieces fit together, and your exact answer depends on your numbers, so it's always worth confirming the tax and benefit specifics with your own professionals.

Where you fit

If you're within a few years of retirement and this Social Security question is sitting on your list, that's exactly the kind of decision I help attorneys work through.

I have a process that shows you where you stand today, where you're trying to go, and the specific steps to close the gap, with your Social Security timing weighed against your portfolio, your taxes, and your goals for what you leave behind. You'd see the real tradeoff for your own numbers.

If that sounds like something you'd want, schedule a call using the link below and we'll map it out together.

That's it for this week. Thanks for reading. Happy 4th 🇺🇲

Cheers, David