The biggest 'investment' most Americans make isn't in their homes or 401k plans. It's in Social Security.

You laugh?

Well, get this. The value of lifetime Social Security benefits to an average wage two-earner couple that turned 65 in 2000 was $300,000.

Yes, you read that right: $300,000.

That's far more than most people--- even high-income earners--- have in their 401(k) plans. The figure comes from C. Eugene Steuerle, an economist for the Urban Institute in Washington, DC.   Dr. Steuerle has devoted the bulk of his career to Social Security and related issues. The figure is the present value, in 2002 dollars, of lifetime benefits. That means it's the amount of money you'd have to put aside, today, to produce the income retirees will enjoy between the day they retire and the day they die.

It's virtual capital--- wealth in an invisible bank. It's worth twice the value of the average house; it doesn't know what a bear market is; and it doesn't fluctuate with interest rates.

It's also the single largest retirement lever most Americans have.

So I have a suggestion: let's take a close look at how we can use it to make a more comfortable retirement.

First question: What determines the basic value of our benefits?

Answer: Our work record. We pay employment taxes as workers. Our future benefit depends on a formula that takes into account our earnings and the number of years we have worked.   According to the Social Security website, for instance, an average income worker who retires this year at age 62 can expect a starting monthly benefit of $936. A worker who has always earned at the Social Security wagebase maximum can expect a monthly benefit of $1,382.

Second question: Is there a way to increase the benefit?

Answer: Yes. The later you retire, the greater your monthly benefit. If you were born in 1940 and retired this year at age 62 your benefit would be 77.5 percent of what it would be at age 65  ½. (That's the full retirement age for those born in 1940.) Delay retirement to 66, and the benefit would be 103.5 percent of the benefit at 65  ½ and 133.5 percent of the benefit at 62.

The benefit, in other words, is 33.5 percent   higher if retirement is delayed by 4 years. A delay of 8 years, to age 70, is good for a retirement income increase of about 70 percent.

Exactly how much your benefit increases depends on the year of your birth. A complex formula adjusts for the fact that the full retirement age will rise from 65 (for those born as late as 1937) to 67 (for those born in 1960 or later).

Basically, anyone born in 1943 or later can expect their Social Security benefits to rise 76 to 77 percent, in real dollars, by postponing retirement from age 62 to age 70. Here's how the numbers work out for average and maximum income workers born in 1940 and turning 62 this year:

The Social Security Payoff for Delayed Retirement
This table shows the benefit for workers of two different incomes retiring at age 62 with a Social Security Administration table that indexes benefits to retirement age.
Retirement Age 62 65 66 67 70
Index 100 124.7 133.5 142.6 169.7
Avg. Income Worker $936 $1,167 $1,250 $1,335 $1,588
Max. Income Worker $1,382 $1,723 $1,845 $1,971 $2,345
Source: and author calculations

In addition to a major increase in real Social Security income, the extra years can also be used to pay off debts and build other retirement savings. Bottom line: A deferred retirement is a well rewarded.

Feeling cheated of your dreams of hitting the beach at 55?

Don't. When the plan for Social Security was passed in 1935, the retirement age was 65. The average retiree could expect to live 12.6 years. To have the same expectancy at retirement today, the official retirement age would have to be a bit over 72.

Any retirement before that is gravy.