3 Things 5-5-25

Thing One

To Delay Or Not To Delay Your Social Security Benefits, That Is The Question

The recent turmoil in the stock market along with shakier job prospects, longevity concerns, and fears of benefits cuts have many older Americans taking social security sooner than they might have otherwise.  Below is an excerpt from a Yahoo Finance written by Kerry Hannon, that can serve as a primer on the topic:

“…In my planning with clients, I try to keep emotion, political posturing, and media hype out of the conversation and utilize software and resources to educate our folks as to how Social Security works,” Danielle Howard, a certified financial planner with Wealth By Design in Glenwood Springs, Colo., told Yahoo Finance.

To recap: You can start receiving your Social Security retirement benefits at age 62. However, you’re entitled to full benefits only when you reach your full retirement age, or FRA. For example, if you turn 62 in 2025, your benefit would be roughly 30% lower than it would be at your full retirement age of 67.

If you delay benefits from your FRA until age 70, you earn delayed retirement credits. Those come to roughly an 8% increase for each year until you hit 70, when the credits stop accruing.

Most people, however, claim earlier, according to the SSA data. Nearly 30% of new Social Security beneficiaries claim benefits at age 62. Around 32% claim benefits after age 62 but before their FRA…”

As to whether you should delay until 70, it’s really a simple question:  If you can afford it, you should wait as 8% compounded annually from age 62 to age 70 would amount to an 85% increase in your monthly benefit.  So, for example, if you were due to get $3,000/month at 62 and you waited until age 70, you’d get $5550/month.  Now, for those who would argue that they’re not sure they’ll live that long, that’s obviously a fair point, but again, the argument for postponing only applies to those who can afford it.  In addition to that, the corollary to the concern about dying to soon is living too long.  Having a super enhanced SS benefit would be a nice offset in that case.

Thing Two

The Danger of Certitude

Financial reporter, Jason Zweig, made some observations and offered some sage advice to investors a few years ago in the Wall Street Journal that are worth another look.  See below:

........

“…One of Wall Street’s favorite sayings is that investors hate uncertainty. What they should hate, instead, is certainty.

Just think of all the other things markets have been certain about lately.

As recently as late July, market participants were sure that the Federal Reserve, after cranking up interest rates this year, was bound to cut them sharply in 2023. Just about nobody expects that anymore.

Last December, Tesla Inc.’s market value rose nearly $200 billion in four days, more than the market value of Ford Motor Co. and General Motors Co. combined, all on the belief that the electric-car maker’s growth couldn’t possibly stall. Tesla is down 36% so far this year, a wipeout nearly twice the size of that year-end rise.

In January, in a consensus almost as tight as a chorus line, market strategists were forecasting that stocks would gain between 6% and 11% this year. The S&P 500 has lost nearly 20% so far in 2022…

when you pursue the illusion of certainty…you chase the next short-term gain and adrenaline surges through your bloodstream, to imagine that you know what’s coming next.

Markets don’t work like that, though. They don’t permit any one of us, no matter how smart or foresighted, to know exactly what will happen.

Self-control is a key to investing success, but so is fending off self-delusion.”

 .......

Thing Three

Just A Thought 

Voltaire: "Doubt is not a pleasant condition, but certainty is absurd." - Voltaire