Searching for When

DURING MY FINAL NINE years with the Coast Guard, I was involved in decisions regarding search-and-rescue operations. We were almost always working with imperfect information. For three of those nine years, I was responsible for all missions in one section of the Great Lakes and, in my last year, I made the final decision on when to suspend search-and-rescue operations in an even larger area.

To lower risk, we often assumed the worst, and threw copious operational resources at the situation. But paradoxically, this also increased risk: Actions taken to improve a mission’s chances of success also meant greater risk for the air and boat crews involved. Such decisions are best made by people with gray hair who know what it’s like to have skin in the game.

That brings me to my decision on when to take Social Security retirement benefits. This may not have life-and-death consequences. But arguably, it’s one of the most important financial decisions that Americans make—and, like the search-and-rescue missions I helped oversee, it must be made with imperfect information. Even with skin in this game and a lot of gray hair, I wish I had answers to these questions before making my decision:

How long will my spouse and I live?
What unusual or critical financial needs will befall us later in life?
Will we enjoy good health later in life?
What level of activity will we be able to sustain?
How will our investments perform?
How will our Social Security claiming decision affect the surviving spouse?
Might I opt to return to work after electing early, causing my benefits to be taxed?

I can make educated guesses on some of these questions, and I have a solid idea of our cost of living and the financial resources available to us in retirement. Even so, when to claim benefits boils down to a very personal decision, one that’s heavily dependent on each retiree’s circumstances, desires and best guesses. I won’t bore you with all the pros and cons you might ponder. But at almost age 63, I’ll mention the factors that I’m considering, but with one caveat—I reserve the right to be slightly irrational.

My wife and I currently live on my military pension, our interest income, my wife’s Social Security (she’s older than me and claimed benefits early) and my wife’s modest part-time earnings. Our house and cars are paid for, and we live in Alabama, which is a low-tax state. Every month, I’m able to sock away $1,000 to $2,000, depending on how much we travel. Our IRAs remain untapped. Over the years, I’ve made a concerted effort to keep our fixed costs down: no big house, costly cars or keeping up with the Joneses. In short, we can get by without me claiming Social Security benefits early, but the cash sure would be nice.

Here are the pros of taking benefits early:

Receive $110,000 before my full Social Security retirement age of 67. I’m not waiting any longer than that. I know I’ll save a portion of those benefits based on my history.
My wife will be able to swap from benefits based on her earnings record to spousal benefits based on my lifetime earnings, which will mean a larger monthly check for her.
Provide funds for more expensive trips than we otherwise might take.
Extra money for unexpected expenses.
Extra money for unexpected opportunities.

Meanwhile, here are the cons:

Possibly less money over my lifetime.
A reduced survivor benefit for my spouse should she outlive me.
Less money available later in life, when our expenses might prove higher than expected.

If I claim benefits at full retirement age, rather than now, I figure the breakeven age is around 78, meaning that thereafter I’ll be better off if I waited until 67. As it happens, at 78, my military survivor benefit plan becomes paid up, meaning an increase in my pension because the monthly deduction that’s involved goes away. This is where I choose to be a little irrational. Yes, if I claim now and live to 78 and beyond, I’d be forgoing the difference between the early and full benefit. But the bump up in my pension would take some of the sting out of that—at least in my mind.

As of now, I’m leaning toward taking Social Security at age 63. I have arthritis hitting various points of my body—lower back discs, wrists—and I’ve had one hip replaced, with the other needing replacement eventually. I probably have another 10 years of good physical activity. The extra money would come in handy for travel while I can still get around relatively easily. At the rate I’m going, by my early 70s, I’m going to be a stiff old grump.

I’m aware that conventional wisdom says to forgo early election if you don’t really need the money. Yet friends I’ve spoken to, who claimed early, don’t seem to have any regrets. I take that with a grain of salt, however, because few will ever admit to serious mistakes handling their money, plus these friends haven’t reached their later years, when the consequences of their decision may hit home. I have the Veterans Affairs as a resource later in life if I get into real trouble—many don’t have that.

And so I sit and think, the pros and cons dancing in my head. Some things never change: I must make yet another decision with imperfect information. Maybe, just maybe, if I wait long enough, the future will become clearer and I’ll make the right decision. But unfortunately, the world often doesn’t work that way.

Patrick Brennan is a retired Coast Guard officer and aviator currently residing with his wife of 34 years in Mobile, Alabama. He earned a bachelor's degree in government studies from the U.S. Coast Guard Academy and an MBA from Spring Hill College. Besides an interest in finance, Pat enjoys traveling to visit family and friends, and especially enjoys visiting our National Parks. His previous article was Why We Get Fooled.

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