For such a couple, collecting Social Security at 62 represents a $1.2 million asset. In other words, you’d need a nest egg of $1.2 million to produce the same amount of annual income that you’ll get from Social Security, assuming you could safely earn 2 percent a year above inflation on your investments.
Now, $1.2 million is more than many upper-middle-income retirees have saved by retirement age. The net worth of a typical household headed by someone aged 65 to 69 is only a fourth of this amount and much of it is in the value of their home. And all you have to do is stay alive and those Social Security payments will keep coming each and every month—payments guaranteed by the United States government and protected against inflation. That’s because every January, you get, by law, annual benefit raises that equal the prior year’s rate of inflation.1
Moreover, there is a huge amount of money at stake in maximizing one’s Social Security benefits. The $1.2 million valuation, large as it is, actually assumes our 60-year-old couple makes the wrong Social Security benefit collection decisions. It assumes they take their retirement benefits as early as possible and forgo cashing in on what are, to them, free spousal benefits like the one Paul took. If they make the right decisions, they can increase the value of their lifetime Social Security “asset” by more than $400,000, to $1.6 million!
