Q. I’m 66 years old. I’m considering the timing for taking Social Security. I am comfortable waiting until age 70. I understand my cash requirements going forward and I have the money assets outside of Social Security to support deferral.

But I have a concern. I looked at the impact of taking Social Security as it would affect my portfolio withdrawal rate. Here is how it would affect the coming year:

  • Without Social Security at age 66, my withdrawal rate for 2017 would be 4.0 percent.
  • With Social Security at age 66, the withdrawal rate for 2017 would be 2.6 percent.

I’m not sure if this is enough information for analysis, but I'd appreciate your comments. ---R.M., by email

A. That’s an interesting way to frame the question. What you are telling me is that Social Security would provide about 35 percent of your income if you took it immediately (1.4/4.0). This means you are better off than most people. Most count on Social Security for the bulk of their income.

But it also means that only 35 percent of your expected income comes from a guaranteed source. The other 65 percent is subject to market risk. So about 2/3rds of your standard of living is at risk, subject to major market moves. The more you increase the amount of guaranteed income, the better you’ll be able to sleep. More guaranteed income also means you’ll be able to give less attention to your investments because their impact on your life will be smaller.

While each year of deferral means you are using 1.4 percent of your personal savings, it also means you are increasing your guaranteed income when you finally take your benefits. So deferring Social Security is a highly rational choice.

Even if you defer 4 years to age 70, you won’t have made much of a dent in your personal savings. You’ll have traded about 5.6 percent of your savings (1.4 percent x 4) for a good life annuity. You’ll also have increased your guaranteed income from 35 percent of spending to roughly 46 percent of spending. (The actual amount will depend on how your investment portfolio performs during the period.)

But this isn’t a free lunch. When you defer Social Security by drawing down your personal savings, you are trading market risk for life risk— the inflation-adjusted additional income will die when you do. And it will take 12.5 years before you recoup the personal savings you spent to achieve the higher Social Security benefit. The life expectancy of a 70-year-old American male is about 14.3 years— meaning that 50 percent will die earlier, 50 percent will die later.

That makes deferral a pretty good bet, even without considering the fact that men with higher than average income and education tend to live longer. Also, if you were married, your spouse would receive your benefit if she survived you and the joint life expectancy of a couple is about 24 years. Deferring Social Security is the equivalent of buying a nice life insurance policy because it will also increase your widow’s guaranteed income.

Q. You seldom mention the upsides of retiring at 62. As you've pointed out in the past, the net financial benefit of working longer depends partly on the discount rate on net present value calculations and how long you expect to get it.

But you seem to minimize the Social Security income people receive and the additional employment tax contributions people make between 62 and whenever they retire. Most important, you don’t seem to value the golden years spent not working. Give us ‘early leavers’ a little credit. ---R.M., by email

A. Retiring at 62 is a great idea--- if you have the money to do it. It’s also a great idea if you have the will to do what it takes to live on the income you will have.

But most people are in limbo. Many don’t have the money needed. And few have the will to reduce their spending enough to make their savings last. My hat is off to you if you’ve found the right combination.

Enjoying a long life in retirement is something we should be celebrating. It’s terrible that we’ve allowed it to become a source of dread.