What Mitt Romney Knows About Social Security That You May Not

Mitt Romney
Mitt Romney

Mitt Romney recently celebrated his 65th birthday.

But while this milestone spurs many Americans to retire and begin claiming Social Security benefits, Romney told Fox News host Neil Cavuto that he has no plans to sign up for his entitlement checks anytime soon.

It's not just because he hopes to be president. Romney's up to something else entirely here.

This Is Not Romney's Time

You see, as SmartMoney columnist Jack Hough recently wrote, "a savvy retiree can maximize benefits by choosing to begin payments at just the right time."

Citing a working paper written by economists John Shoven at Stanford University and Sita Nataraj at Occidental College, he elaborates, "Monthly payments are 76% greater for a retiree who waits until age 70 than for one who begins collecting at 62, adjusted for inflation."

Because life expectancy continues to rise and real interest rates are zero (and interest rates on "safe" bank accounts aren't much higher), it's clear that delaying the day when you apply for Social Security benefits is a move most Americans should make, not just Mitt.

We're talking here about a simple move that could mean the difference between pinching pennies in retirement and living out your golden years comfortably. And while Romney isn't quite in the same boat as the rest of us, you can bet this is why he's delaying taking Social Security benefits.

Are You Compounding Your Biggest Retirement Fears?

Unfortunately, most Americans aren't familiar enough with the system (or are confused by the complexity of the system's minutiae) to know just how important a decision delaying benefits could be. Most still begin taking Social Security payments at 62, or after stopping work.

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After working a job for 30 years or longer, hitting the eligible age for Social Security is a milestone that reminds most folks to slow down and enjoy the remainder of their life, living out lifelong dreams and spending time with their kids and grandkids.

But when you think about it, the two biggest "worries" folks nearing retirement have are:

1. Whether they will outlive the money they've saved.
2. Whether their savings will be eroded by inflation.

Delaying Social Security benefits will provide a hedge against both of these fears.

Paul Solman of PBS' NewsHour likens it to buying old-age insurance. As he says, "The cost: the foregone Social Security checks between ages 66 and 70. The benefit: If you live past your early 80s, you are receiving more in total than had you started collecting at 66."

Plus, with annual cost-of-living adjustments, your Social Security payout is protected from inflation.

This is exactly why most experts say perhaps the single most effective tactic for a wealthier retirement is to live off savings for a few years to lock in the benefits of a higher Social Security check that comes after delaying benefits.

That's what Mitt's doing. And now you know this strategy, too.

This article was written by Motley Fool analyst Adam J. Wiederman. Click here to read Adam's free report on how to ensure a wealthy retirement.

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