JUST PLAIN TALK: Fewer new retirees claiming Social Security

Buz Livingston
Buz Livingston

Social Security planning used to be a lot of fun. With a now-extinct strategy, "file and suspend," married couples could game the system. In a nutshell, you could file for a spousal benefit while allowing your benefit to continue earning delayed retirement credits. It was good while it lasted, but it didn't last too long.

Unfortunately, the world's economy is still recovering from the pandemic, and it's affected how people look at work and perhaps Social Security benefits, too. People entitled to Social Security benefits can start receiving them at age 62, but benefits increase 8% annually until age 70. Nevertheless, married couples should still plan because, under certain circumstances, it's often more advantageous for a lower-earning spouse, like me, to start earlier than age 70. Marry well, my brothers, marry well.

From September 2020 through September 2021, retirement for people aged 65 to 69 shot up 5%, roughly doubling pre-pandemic trends. Astonishingly though, the number of people applying for Social Security benefits dropped 5%.

Historically, there is an increased reliance on Social Security during economic downturns, but not this time. One reason is many people could take advantage of stimulus programs and increased unemployment benefits. However, while the stimulus programs could act as incentives to delay Social Security benefits, stimulus payments were limited by income. Also, some states, Florida, for instance, had a cumbersome process to receive unemployment benefits. 

Additional government payments certainly gave retirees some cushion. More importantly, though, since the stock market collapse last year, stock values have soared. In addition, rising home values further sweeten the pot. Spending down your assets while delaying Social Security benefits is a sound strategy if you have sufficient resources. The run-up in 401k and home values may have changed the calculus for many. 

Most people don't know where their money goes, full stop. The nature of lockdowns forced people to look at their basic living expenses. Often people lump work-related costs into their overall cost of living. So when spending is limited, like during the pandemic, people may realize what is essential and what isn't.

I want to think that more people are learning the benefits of delaying Social Security. But, of course, many can't or shouldn't, each person's case is different. The financial services industry doesn't help. Any delay in benefits and spending down savings means fewer billable assets. It's like a doctor choosing a procedure where they benefit more than the patient. Delaying Social Security means an 8% increase annually. Please show me where you can get 8% guaranteed. I'll wait.

It's been a century since our nation has dealt with a pandemic like COVID-19. It could be that people decided life was too short to be stuck doing something they didn't want to do. Social scientists use the moniker "The Great Resignation" to describe the unprecedented number of retirees. But, unfortunately, the jolt from COVID-19 is far from over and will continue for a generation.

You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.