For most clients of financial advisors, the delayed claiming benefit isn’t actuarially fair. It is a gift. Higher income Americans have made significant improvements in longevity over recent decades. For example, a Brookings study finds that men in the top 10th percentile of income gained six years in longevity in just 20 years. Average Americans have a 1 in 5 chance of living to the age of 95, while among highest-income healthy Americans the probably is about 1 in 2. The average financial planning client will receive their Social Security benefits for more years than the average American. The Social Security formula also assumes a positive real discount rate on future earnings. Interest rates today are at historical lows, and discount rates for the inflation-protected income provided through Social Security are even lower. Increasing longevity and lower discount rates on after-inflation income mean that advisors need to work even harder to persuade clients to delay claiming.
Read more here.