If you invest your Social Security checks in the total stock market, math told me it is always best to collect at age 62

by KillingTime56

Yes, there has been a hundred posts about the advantages and disadvantages of collecting Social Security at 62 vs 70. I want to bring a new perspective into the discussion. This is not the time to bring up all the old and tired arguments about when to collect Social Security. Instead, lets just narrow it down to this question:

IF you are going to invest all your Social Security in a Total Stock Market Fund- going back a wide variety of date comparisons going back to 1972, would it be better to collect at age 62 or 70?

I set up a chart and did the math using two options.

Option One is to collect $1000 a month starting January 1st of 1972 and then repeat the analysis until 1992. The $1000 figure would increase with the official inflation rate- just like Social Security. Using the website linked below, I determined how much someone would have today if they invested a monthly $1000 inflation adjusted SS check every month- in a total stock market Mutual Fund- each year from 1972 to 1992. (Adjusted to inflation)

Option Two is to do the exact same thing except wait 8 years to collect Social Security. I doubled the “collect at 62 figure” to $2000 which would be a good estimate of the amount a person would get with the delayed benefit and inflation adjustments at age 70. Again, using the website linked below, I determined how much someone would have today if they invested a $2000 inflation adjusted SS check every month at the start of each year and ending today- in a total stock market Mutual Fund- each year from 1980-2000. (Adjusted to inflation) (I started in 1980 because it is 8 years from 1972 the age the start SS at 62 would start their benefits and investments.)

My findings: In every situation the person who collected $1000 in early Social Security at age 62 and had an 8 year jump start putting money in the Total Stock Market Mutual Fund comes out an average of 35% ahead in 2018 than someone who waited 8 years but got a Social Security checks even though the person who waited had an inflation adjusted $2000 check. ($2000 a month then adjusted to inflation- to invest.)

What do you think? Here is the website I used:

www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults

 

Disclaimer: This content does not necessarily represent the views of IWB.

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