Expert insight

Inflation shouldn’t blow up your Social Security strategies

November 15, 2022

The right claiming strategy makes a big difference
Chart showing the median bequest and median annual Social Security income based on comparing the best Social Security claiming strategy of age 70 for male and 67 for female with the worst strategy of age 62 for male and 62 for female. The best strategy resulted in $70,364 more in bequest ($155,451, compared with $87,087 with the worst strategy). The median annual Social Security income was $45,455 for the best claiming strategy and $38,926 for the worst, a difference of $6,529.
Testing optimal claiming strategies
Claiming ages (male/female)
Study 1: Expected inflation
Study 2: Unexpected inflation
Only extreme unexpected inflation alters the optimal claiming strategy
Table ranking the nine Social Security claiming strategies for three different rates of inflation. The table shows that the optimal strategies change only in the most extreme unexpected inflation. Column one ranks the strategies for an expected inflation rate of 2.5% from best to worst as: 70/67, 67/67, 70/62, 67/70, 70/70, 67/62, 62/70, 62/67, and 62/62. Column two ranks strategies for a 90th percentile expected inflation rate of 6.4%, with the strategies ranked best to worst as 70/67, 67/67, 70/62, 70/70, 67/70, 62/70, 62/67, 62/62. The third column ranks the strategies with a 99.5 percentile expected inflation rate of 11.4% from best to worst as: 67/67, 70/67,70/62, 67/62, 67/70, 62/70, 62/67, 70/70, 62/62. Within column two, the 67/62 and 70/70 strategies are represented in bold font, as are all the strategies in column three except 70/62, indicating a change in ranking compared with the best strategies.
Personal factors influence claiming decisions
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Contributor:

Boris Wong, Ph.D.
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