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        Investor's Insight - January 30, 2006           
          "A Digest of Investment Opinion From the 
             World's Leading Financial Advisers"

Comment The Post Below...


by Scott Burns

Married women should take Social Security benefits early. 

Married men and single women should take Social Security 
benefits late.

That's the conclusion of a recent study by economists 
Alicia Munnell and Mauricio Soto at the Center for Re-
tirement Research at Boston College. 

Needless to say, this isn't what most people do. More than 
50 percent of all men and women start taking benefits at 
62. By age 66, well over 90 percent of all men and women 
are taking benefits. Since only 3.3 percent of all men 
start taking benefits at 66 or later, we have to conclude 
that men are doing the wrong thing and women (as always) 
are doing the right thing.

Unfortunately, the mistake most men make won't be theirs 
alone. Since men tend to marry younger women and women tend 
to outlive men, married women will pay much of the price 
for husbands who take benefits too early.



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Then let's start with the basics of life, death and Social 
Security benefits. We'll use figures from Munnell's re-

What you receive in benefits depends on your earnings re-
cord and when you start taking benefits. Take them early, 
and your benefits will be lower than if you take them late.

The benefits will be quite a bit lower, in fact. 

For those turning 62 between 2005 and 2016, benefits at 
62 will be 75 percent of benefits at 66. Benefits at 70 
will be 132 percent of benefits at 66. Altogether, your 
benefits will rise a whopping 76 percent in the eight years 
from 62 to 70. That's a compound growth rate of 7.32 per-
cent. This rate of increase is the major reason I've writt-
en about the value of deferring benefits.

By Munnell's calculations, anyone who expects to live to 
age 80 or longer will enjoy a greater discounted present 
value in benefits by starting at age 66 than at age 62. Her 
calculations assume a real (inflation-adjusted) discount 
rate of 3 percent. This isn't a pushover rate. Many invest-
ors -- particularly retired investors -- would be happy to 
receive a secure 3 percent real return on their savings.

Munnell argues that since women, on average, will live long-
er than the 80- to 81-year break-even age and that one-third 
of all women will live into their 90s, taking benefits later 
is a good idea. 

In fact, that is what single women do. While only 48.9 per-
cent of single women take benefits at 62, 67.1 percent of 
married women take them at 62. Single women would benefit 
from further delay but they've got the basic idea.

Ironically, married women who take benefits early have the 
right idea, too.

How can it be right for single women to take benefits late 
and married women to take benefits early?

Simple. Married women have husbands. Single women don't.



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For married couples, how long Social Security benefits are 
received depends on their joint life expectancy, not their 
individual life expectancy. While an individual, at 65, may 
expect to live 18.2 more years, the joint expectancy of a 
65-year-old couple is 26.2 years -- one of them is likely 
to survive that long. That's well beyond the break-even 
point calculated by Munnell.

Now follow the probabilities a little further. Since married 
women will probably survive their husbands and then receive 
the greater of their benefit or their late husbands' benefit, 
it makes sense for them to take benefits early. Why? Because 
reduced early benefits are only temporary -- their benefits 
will increase later, when their husband dies.

Yes, I'm expecting a lot of readers are rolling their eyes 
at this lugubrious bit of analysis. But this is how it is. 

And Munnell has gone a bit further. She calculated the opt-
imum age for taking benefits for both husband and wife to 
maximize their joint benefits, adjusting for the age differ-
ence between spouses and relative earnings. 

Her finding? For most couples, the wife should take benefits 
at 62, while the husband should take them at 69. Couples that 
are close in age and earnings should favor taking benefits 
between age 66 and 68.

Bottom line: Many of us should take benefits later than we do.

(Investor's Insight reflects the opinions of experts. It does 
not recommend any specific investments, and no endorsement is 
implied or should be inferred. For more information, contact 
the individual firms cited).



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