Professor Peter Martin, the Jane M.G. Foster Professor of Law at Cornell University Law School, presents “When Should I Apply for Social Security and Will the Money Still Be There?”
On February 15, 2010, the Center for Tax Law and Employee Benefits’ Distinguished Lecture Series featured Professor Peter Martin’s presentation “When Should I Apply for Social Security and Will the Money Still Be There?” Professor Martin, the Jane M.G. Foster Professor of Law at Cornell University Law School, is an expert on Social Security law and authored a CD-ROM treatise on the subject. The first part of Martin’s presentation discussed the calculation and overall value of Social Security benefits, noting that an annuity with the same benefits promised by Social Security would be quite expensive if purchased directly by an insurance company.
Martin explained that the age to receive Social Security retirement benefits has increased from age 65, for persons born prior to 1937, to age 67, for persons born in 1960 or later. Reduced benefits are available at age 62, but in the case of early retirement, benefits are reduced five-ninths of one percent for each month, up to 36 months, before the standard retirement age. If retirement is taken more than 36 months early, benefits are further reduced five- twelfths of one percent per month. Benefits would increase if retirement is delayed beyond the normal retirement age, up to age 70. In the case of later retirement, benefits are increased eight percent per year for each year beyond the normal retirement age; no additional increase is given after age 70.
“If an individual waits until 70 to access Social Security benefits, the individual receives less money overall.”
Martin said that the increase provided by Social Security exceeds the actuarial value of the same, which makes waiting as long as possible to take retirement benefits the best bargain.
Martin noted that waiting to collect benefits may not be the best choice if an individual has
- a reduced life expectancy due to family history or illness;
- family benefits (spouse or child) that would be lost with delay;
- the ability to invest the money and earn more than the benefits would increase;
- other economic reasons (i.e., you have been laid off and/or need the money immediately).
By Dorothy A. Voigt, Esq. LLM in Employee Benefits candidate
However, if an individual waits until 70 to access Social Security benefits, while the amount of monthly benefits increases, the individual receives less money overall. In fact, it would take approximately 12 years to obtain the sum not paid by taking the benefits earlier.
After discussing Social Security benefits under current law, Martin opined on whether or not money will be available to continue paying benefits in the future. The Social Security Budget for years, and there isn’t money set aside elsewhere to pay Social Security obligations. There is only a bunch of IOU’s from the federal government. Martin stated that the Social Security obligations must be paid from the federal government’s general revenues.
No final conclusion was reached as to whether the money will still be there, but since a substantial number of Americans depend upon Social Security benefits, something will need to be done to continue funding the program.