Today’s Low Interest Rate Environment and Social
Security Claiming Decisions

Abstract

The Social Security Administration set the reduction in benefits for beginning benefits before full retirement age (FRA) and delayed retirement credits for delaying benefits until after FRA to be approximately actuarially fair for someone with an average life expectancy of 84 years, assuming a real risk-free rate of 3%. Consequently, given a 3% real rate and life expectancy of 84, the present values of Social Security benefits are approximately the same no matter what age benefits begin. Given today’s 0% real rate, the present values are approximately the same if a single individual lives to 80. Today, a single individual with average life expectancy of 84 will maximize the present value of benefits by delaying benefits until about 69. Furthermore, the authors explain why today’s low real rate should influence the starting date for each partner of a married couple.