Delay Collecting Social Security and Your Finances Will Win Big

Money Spent to Delay Social Security Beats Buying Real Estate

There are a number of things people buy that they consider investments. However, some are difficult to sell. Others are so dependent on market conditions that when you want or need to liquidate, it’s hard to consider them investments. And some are bookkeeping headaches.

For many, using your savings for support – while you delay collecting Social Security a few years –  may be a much better use of savings.

Problems with Raw Land

While some types of real estate are poor retirement investments, they are not quite as bad as lottery tickets.

Raw land is particularly bad. My first lesson was buying raw land with a partner who was a local commercial real estate agent. It was next to a mall, and we had hopes of getting it rezoned. After many years of spending lots of money for architectural and engineering support, we still couldn’t get the town council to approve of the rezoning.

You have to be extraordinarily patient or lucky to make good money on raw land; a simple mix of stocks and bonds would have done much better over the same time period.

Problems with Commercial and Rental Properties

My next lesson was getting into partnerships for commercial and rental properties: Most of them were complete flops. Unless you are the general partner, you have no control over when the property will be sold (and it’s very difficult to find someone to buy your share). I still have one real estate partnership left (which I bought into about 30 years ago). My attempts to get the general partner to sell have been fruitless. It makes a reasonable return, but we’re trying to leave a liquid estate to our heirs and reduce the work that will be required by the executor of our will.

Problems with Vacation Homes

We did buy a vacation condo. Our early experience with renting during the time we were not using it turned out bad – because of low occupancy, damages by renters, and too much bookkeeping. So we stopped renting it out and now consider it a lifestyle cost, not an investment. The same is true of timeshares; they are notorious for almost assured losses. You also need to plan your vacations for a very long time in advance. If you are enticed with the prospect of owning a vacation timeshare, carefully consider the price you will get when the time comes that you want to escape the homeowners’ fees and property taxes.

Real Estate Investment Trusts (REITs)

We do like real estate investment trusts (REITs) when in a low-cost index fund. Such funds are easily sold and offer good returns. That said, the principal could fall appreciably in another real estate market crash.

Delay Collecting Social Security

So, after all of these years, I’ve come to believe that the best investments are easily-marketable index funds based on stocks and REITs, bonds, and delaying collecting Social Security benefits.

The latter brings a large increase in primary and spousal benefits, particularly at the time of death of the primary earner. The odds of Social Security trust failure, and subsequent reduced payments, are very low for middle and lower-income people.

Higher-income people may experience higher income taxes on Social Security, larger Medicare premiums – and in a number of years, perhaps a reduction in the basic benefit. It’s likely that delaying Social Security will still be the best investment, particularly for those with a younger spouse with low wage records.