Delaying Social Security benefits can be considered bad or disadvantageous for some people due to several key reasons:
- Social Security is designed as a safety net to provide basic retirement income, not necessarily to maximize wealth. For those with limited savings or income, delaying benefits reduces their available income when they might need it most.
- Life expectancy is crucial. If someone expects a shorter-than-average life span, delaying benefits could mean missing out on income they might never collect.
- Inflation and taxes can erode the value of delayed benefits. Although benefits increase with delay, the cost-of-living adjustments might not keep pace with inflation, and taxes on delayed benefits might be higher.
- The opportunity cost of delaying benefits is significant. By postponing, retirees forgo income for several years and might need to withdraw more from savings, which could reduce their financial security.
- Health concerns and the fear of sudden death may make delaying risky, as people might not live long enough to benefit from the increased payments.
- Delaying benefits might cause unneeded underspending in retirement, potentially lowering quality of life.
In summary, delaying Social Security is not inherently bad but can be disadvantageous or risky depending on individual circumstances such as savings, health, life expectancy, income needs, tax situation, and retirement spending plans. For some, it is better to claim earlier to ensure steady income when needed.