Delaying SS is the cheapest inflation-adjusted annuity that you could ever buy .
Yes. But there are some big caveats.
It's not just like any regular annuity. There is no flexibility. The terms -- timings and monthly annuity amount -- are set by the SSA and you have no ability to change them. Your only real choice is to take it or not.
For example, consider an (above average) FRA amount of $1,900/mo. Early at 62 is $1,350 and delayed at 70 is $2,376.
By delaying, you'd get an extra $1,026/mo. But it cost $129,600 (8 * 12 * $1350) to get that. So you are buying an annuity paying $1,026/mo for $129,600.
(The up-side is that you aren't paying the $129K as a lump sum, but as $1350 a month. The down-side is that if you die before 70, none of that is returned to your estate.)
$1,350/mo for 8 years gets you $1,026/mo for the rest of your life.
In the first 126 months (129,600 / 1026) after you hit 70, you are just getting your own money back. You don't see any net benefit until after you are 80.
To make a comparison, pull up a commercial quote for an SPIA for a 70 year old with a purchase price of $129,600. I got these quotes from Fidelity:
With no COLA increase:
$114,400 buys $1,026/mo
$129,600 buys $1,162/mo
With 2% annual increase:
$141,500 buys $1,026/mo
$129,600 buys $940/mo.
To compare like-to-like:
The (delayed) SS annuity $1,026/mo vs. $940/mo, for the same cost of $129,600.
An SPIA that pays initially $1,026/mo costs $141,500 vs. $129,600.
The annuity from SS pays you $86 more a month. To buy the same monthly payout costs $11,900 less.
So, yeah, the (delayed) SS annuity is cheaper than a commercial annuity. But not a whole lot cheaper, just a little bit.
If $1,026/mo isn't what you want, if you want $2,000? Tough, you can't get that. If your FRA benefit isn't $1,900/mo but is only $1,500/mo? Too bad, you can't get $1,026 you get $855. Have a nice day.
But what if we did it another way. What if instead of deferrring the SS we collect it at 62 and put it into a savings account (or bonds, or whatever) where it earns 2% after taxes. In 8 years it will grow to $140,400. Which is almost exactly enough to buy an SPIA that pays $1,026/mo.
Delaying SS as longevity insurance. fine. But you're not really getting much better than you could get with an SPIA. Plus a commercial SPIA won't cut your monthly payment when/if the SS trust fund runs dry.