What we are experiencing now between the markets and inflation brings home the importance of delaying Social Security until age 70. This past month's announcement of an 8.7 percent cost-of-living increase for 2023 underscores the true value that delaying brings to a retirement plan. It's not simply the income payments, but also the strong built-in inflation protection of these payments.
It is very hard to get this protection elsewhere. We have an allocation to Treasury Inflation-Protection Securities (inflation bonds) in client portfolios, but when the bond market has a historic collapse, we find that these securities are bonds first and inflation-protection second.
Stocks and real estate have historically proven to be long-term inflation hedges, but in the short to medium term, a sudden spike in inflation can have a serious negative effect on equity values, falling just as your expenses are increasing.
Social Security is not always about maximizing payments through one's lifetime. Sometimes it's used as a tool to minimize bad outcomes. While you get the inflation protection no matter what age you start collecting, by delaying, the cost of living adjustments are being applied to a higher base income. Even if health issues come into play, be aware that for a 65-year-old couple, there's a 50 percent probability that one of them reaches age 89. That fact isn't taken into consideration by most online calculators.