In the documentary, Meru, co-director and climber Jimmy Chin half-joked about eating his boots after he, Conrad Ankor, and Renan Ozturk ran out of food during their harrowing 2008 attempt at a ‘first ascent’ of the Shark Fin. The team carried an insufficient food supply to complete the endeavor due to a duration misjudgment. A 2021 Capital Group blogpost revealed Americans on average were underestimating lifespan by five years, and the numbers were trending down. Since Longevity Risk, or the risk you’ll live longer than you expect and have trouble funding those extra years with deflated income dollars, is one of the Seven Derailing Retirement Income Plan Risks, let’s consider how the optimal Social Security election can help to mitigate it.1
- Provides guaranteed lifetime income: Social Security benefits continue for life, ensuring income does not run out regardless of how long the retiree lives.
- Helps Protects against longevity risk: Delaying benefits (when appropriate) increases the guaranteed monthly payment, providing greater financial security in advanced age when personal savings may be depleted.
- Creates a higher “floor” of retirement income: Larger Social Security benefits reduce reliance on investment withdrawals during later retirement years, helping preserve portfolio assets.
- Provides inflation protection: Benefits receive annual cost-of-living adjustments (COLAs), helping purchasing power keep pace with inflation over a potentially long retirement.
- Enhances survivor protection: Optimizing claiming strategies can maximize survivor benefits, providing the surviving spouse with a larger lifetime income stream.
- Improves retirement spending confidence: Knowing a larger portion of essential expenses is covered by guaranteed lifetime income allows retirees to spend with greater confidence without fear of outliving their assets.
- Offers an attractive “return” for healthy retirees: Individuals with longer life expectancies often receive substantially more lifetime benefits by delaying claiming, making optimization especially valuable.
- Reduces dependence on long-term care of family or government assistance: Higher lifetime guaranteed income can help cover increasing expenses later in life, reducing financial strain if longevity exceeds expectations.
- Functions like longevity insurance: An optimal Social Security claiming decision effectively transfers part of the financial risk of living much longer than expected from the retiree to the Social Security system.
Social Security income is the foundation of the Flooring Strategy, which seeks to match lifetime income sources to fixed expenses, and income dependent on market forces to discretionary expenses. It’s an approach which may lower the probability we’ll have to consider eating our boots. Think about it, and may God bless your retirement income planning efforts! Shaun
“My son, do not forget my teaching, but let your heart keep my commandments, for length of days and years of life and peace they will add to you” ~Proverbs 3:1-2
1 Insurance Newsnet, Advisor News, “Your Clients Are Likely Underestimating Their Lifespan By 5 Years”, July 19, 2021
Disclosure(s): Old Forge Wealth Management, LLC is a state-registered investment adviser. Registration does not imply a certain level of skill or training. The information contained in this article is provided for informational and educational purposes only and should not be construed as investment, tax, legal, or accounting advice, or as a recommendation that any particular Social Security claiming strategy or retirement planning strategy is appropriate for every individual. Social Security claiming decisions should be based on an individual’s unique financial circumstances, objectives, health, and retirement goals. Please consult your financial, tax, and legal professionals before making financial decisions. Past performance is not indicative of future results, and all investments involve risk, including the possible loss of principal.