On the other hand, Social Security is itself an annuity — one based on outdated estimates of American longevity, Professor Shoven says, making it a better deal than can be found on the commercial market. In a separate paper, “Leaving Big Money on the Table: Arbitrage Opportunities in Delaying Social Security,” the same scholars point out that you can profit from Social Security by deferring benefits even if you stop working. This is an “arbitrage opportunity,” the researchers say, especially for those wealthy enough to be able to get by until 70 without a paycheck or Social Security.
Most people really need Social Security to survive, but many will find that working longer isn’t appealing or even possible.
Do you hate your job? Is working even a minute longer utterly intolerable? Even if it isn’t quite that bad, maybe you have an overwhelming urge to leave work behind? The authors use bland economic jargon to describe that quandary: “The disutility of work would have to be very high” to outweigh work’s financial benefits.
But even if you want to work, you may not be able to find a suitable position in your 60s. And if your life expectancy is short — if you know you don’t have much time left — working longer may be foolish on multiple levels, the most mundane being that you won’t be around to collect much money.
If you don’t start benefits at “full retirement age” — say, 66 — and wait until 70, when the monthly payments are higher, how long will it take to make up for the lost money? Using my own estimates from Social Security, I determined the answer: My personal “break-even point” is 12 years.
That seems all right to me. Social Security says my life expectancy is 84 or 85 years. I’ll come out ahead financially if I live that long. And the kind of work I do seems worthwhile enough to try to continue doing it until at least age 70.
Plus, my wife may collect higher survivor benefits if she outlives me, and she probably will, the mortality tables say. It seems a good bet that at least one of us will live long enough to cash in.
There are many ways of looking at this. If you’re wealthy enough, these considerations may not matter. But I’m thinking my personal retirement plan should probably include working longer, if I possibly can.