According to Stanford University Center for Longevity researchers, Social Security meets more retirement planning goals than any other retirement income generator (RIG).
Social Security earned that label from the Stanford actuaries because it helps maximize retirement income through a “thoughtful optimization strategy.” They commented in a research paper called “How to ‘Pensionize’ Any IRA or 401(k) Plan.”
To develop such a strategy, you must first assess your current financial situation, determine your desired lifestyle in retirement, and create a plan that includes maximizing contributions to retirement accounts and strategically claiming Social Security benefits.
Related: Suze Orman has candid words on delaying Social Security until 70
The best way to maximize Social Security benefits is to wait to claim them for as long as possible. For most people, that means age 70.
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Social Security benefits have three unique protections
Social Security is the foundation of retirement income for most middle-income retirees, explains Steve Vernon, FSA, the author of the Stanford research and several books about retirement financial planning.
He says Social Security provides anywhere from half to more than three-fourths of total retirement income for many Americans. Even more important, it protects against the most common risks associated with retirement income: outliving one’s money, making poor investments, and inflation.
First, you cannot outlive your social security benefit. As long as you are alive, you will receive your monthly benefits. Second, unlike other investments, a Social Security benefit does not lose value when the stock market decreases. Third, Social Security benefits are indexed for inflation. While it’s true that any annual increase might not be enough to cover what retirees face, there is nevertheless an increase each year. (In 2025, the cost of living adjustment will increase by 2.5%, a relatively average number.)
“No other source of retirement income will protect against all three of those issues,” Vernon says.
Making Social Security even more valuable is that part or all of the income is exempt from federal income tax, and the benefits are paid automatically (usually electronically), reducing the risk of fraud.
Suze Orman is one of many personal finance experts who recommends delaying Social Security benefits for as long as possible.
Suze Orman says when it comes to retirement age, 70 is the new 65
Because of its status as an ideal form of RIG, Vernon and his colleagues urge people to maximize the value of this essential benefit by delaying the age at which Social Security benefits start.
Suze Orman agrees with Stanford’s research, writing, “When you wait to claim Social Security, you are promised a bigger payout. A much bigger payout.“
“The goal for retirees should be to generate a stream of retirement paychecks,” says Vernon, who also serves on the Society of Actuaries Committee for Post-Retirement Needs and Risks.
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“Instead of looking at a lump sum, you want to look for paychecks. Social security is one such paycheck,” he explained in an exclusive interview with TheStreet. In fact, “for most people, it’s the biggest one.”
Related: Dave Ramsey warns Americans on a growing Social Security problem
While many financial advisors advise delaying benefits at least until Full Retirement Age (FRA), which is 67 for people born after 1960, it’s not a one-size-fits-all recommendation.
For example, for married couples, delaying the start of benefits for the primary wage earner may make sense, allowing the secondary wage earner to collect at an earlier point. Of course, this decision depends on your unique circumstances, so Vernon and his Stanford colleagues advise consulting with a financial advisor who specializes in Social Security optimization.
Plenty of financial advisors and longevity researchers agree that delaying Social Security benefits is the best strategy. Generally, studies look at Social Security benefits only and do not consider income from other sources such as pensions or 401(k) plans.
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