How a Trip to Enroll in Medicare Almost Cost Our Client $300,000 - And How to Choose the Right Social Security Claiming Strategy

Several weeks ago our client, “Joe,” walked into a Social Security office to enroll in Medicare. However, over the course of that appointment he was told by an employee, “it’s your money, you’d be silly not to start it.” That casual recommendation could’ve cost Joe roughly $300,000. When to take Social Security is among the most important personal finance decisions a retiree makes, and unfortunately, even some “experts” (inlcuding financial advisors) give poor advice.

Factors Impacting Your  Social Security Claiming Decision

Social Security representatives are helpful with enrollment steps, but they aren’t supposed to give claiming advice. We’ve heard financial advisors on the radio give claiming advice that inaccurately claims the crediting one gets for delaying Social Security. No one, no matter how qualified, should give Social Security advice without knowing your full financial picture.

Claiming strategies depend on many variables: your health, marital status, spouse’s age and earnings history, income needs, tax situation, and total wealth. Because those factors vary, there’s no universal best age to claim benefits. And your claiming decision should be reviewed periodically; life changes (health, spouse status, assets) can alter the optimal strategy.

The Guaranteed Return of Delaying Social Security

Here are the facts around optimizing your Social Security:

• If you can delay beyond age 62, your benefit grows roughly 6% per year up to full retirement age (FRA), which is age 67 for those born in 1960 or later.
• If you delay Social Security beyond FRA (age 67) your benefit increases  8% per year up to age 70.
• Benefits actually accure pro-rata monthly, so you can claim at age 68 1/2 with a slightly larger benefit than claiming at age 68.

That increase is effectively a guaranteed, inflation-adjusted return on the benefits you forgo by not claiming.

Some advisors run calculators assuming high investment returns (e.g., 10%) to justify claiming early. Remember: historical stock returns are averages, not guaranteed. Comparing a guaranteed 6–8% increase to an assumed 10% investment return requires careful scrutiny.

How We Helped Joe (and His Wife) Maximize Their  Social Security Benefit

Here's how we helped Joe. We looked at his specific life circumstances before making a recommendation. His situation had three key pillars that made delaying a "no-brainer":

• Good Health: Joe is healthy and has every reason to expect a long life.
• The Age Gap: His wife is five years younger. This is crucial because Social Security isn't just about Joe; it’s about the survivor benefits his wife will rely on later.
• Financial Cushion: The couple already has enough assets and income for a comfortable life style. They didn't need the check at 62 or 65, which gave them the luxury of choice.

Joe had a choice: start collecting at age 65 or wait until the maximum age of 70.

While taking the money at 65 provides immediate cash flow, waiting until 70 allows the benefit to grow by 8% per year in delayed retirement credits. For Joe, that five-year wait resulted in a cumulative benefit increase of over $300,000 across their projected lifespans.

This isn't just about a bigger monthly check for Joe. It’s about longevity insurance.

1. Lifetime Totals: Because Joe is healthy, he is likely to outlive the "break-even" point where the larger checks from age 70 surpass the total amount he would have received by starting early.
2. Spousal Protection: By locking in the highest possible benefit for himself, Joe is also ensuring that if he passes away first, his younger wife will inherit that maximum payment as a survivor benefit for the rest of her life.

Questions to Ask Any Advisor About Their Social Security Recommendation

• What investment return assumptions are you using? Remember the historical stock market average of ~10% isn't guaranteed! Ask yourself, are you better off with a guaranteed 6-8% return or a possible 10% return? If the "projected" 10% return actually becomes ZERO (or even a negative return) how will that impact your retirement plan?
• Did you model spousal and survivor benefits and different life expectancy scenarios?
• How does your recommended claiming strategy interact with my taxes, Medicare premiums, and planned Roth conversions?
• Will you revisit this analysis periodically as circumstances change?

Social Security claiming strategies aren’t one-size-fits-all. The right approach depends on health, spouse dynamics, taxes, cash flow needs, and longevity assumptions. At Ark Royal providing comprehensive Social Security analysis is what we do. If you need help assessing what's the best strategy for you, give us a call.