Department of Government Efficiency causing confusion about when to claim Social Security
Service is deteriorating at the Social Security Administration.
Complaints are rising about worsening backlogs and delays at the understaffed agency, largely thanks to Elon Musk’s Department of Government Efficiency (DOGE). No one really knows what DOGE is doing with its access to the agency’s data, but the chaos is fueling worries when increasing numbers of the “Peak 65” generation — the large wave of Americans turning 65 between 2024 and 2027 — are filing for benefits.
The timing for claiming Social Security benefits is contentious. The earliest you can file is age 62, and the latest age is 70. Monthly benefits are about 77% larger in inflation-adjusted terms for those who wait until 70 compared to filing at 62. The returns to waiting are attractive, which is why it has become standard advice to hold off filing as long as practical. (Filing at 70 is better than 69; filing at 69 is better than 68; and so on.) Social Security is inflation-adjusted longevity insurance: You can’t outlive the benefit.
Yet there are good reasons to take benefits early. Among the most common are bad health, long-term unemployment and caregiving responsibilities. Mark Miller, journalist, author, and nationally recognized expert on retirement trends, was spot-on when he said in a recent webinar, “When to claim Social Security is very personal.”
That said, one reason for claiming early isn’t convincing and is too risky: Instead of looking at Social Security as longevity insurance, the benefit is treated as an investment opportunity. File early, invest the benefit and have more money in retirement.
Call me skeptical, a perspective reinforced when I read “Which Social Security Claiming Strategy Generates the Highest Legacy Value?” by Wade Pfau and Steve Parrish. The study is nuanced, uses historic data and illuminates with two case studies. They find the strategy wanting for multiple reasons.
Among them: the need to create a risky portfolio to generate the kind of returns that might outperform the tactic of delaying Social Security and the risk of ending up with insufficient funds to meet living expenses.
“Delaying Social Security can be framed as longevity insurance that helps support the increasing costs associated with a long life,” they wrote. “We do find evidence that it is uncommon for investment returns to beat the implied benefit of delaying Social Security for long-lived retirees, even with relatively aggressive asset-allocation strategies.”