I crunched the numbers on the question of deferring Social Security for a year to increase the payment by 8%, for each year it is deferred to age 70.  Most advice seems to favor deferral, unless health is an issue.

My numbers do not necessarily support that conclusion.  While the 8% increase can be viewed as a compelling guaranteed return, it also comes with a long payback.  The breakeven of deferring, if the safe investment rate is 3%, is about 17 years.  This may be the best case for waiting.

On the other hand, recipients with other sources of income might be able to invest their social security payments at a rate competitive with the 8% Social Security escalator.  In this case, there is little benefit for deferring.

In summary, if the first year’s SS payment is invested and earns 8%, then it is equal to the first payment if deferral is elected.  This process repeats for all payments, so the payment streams are equal.  When we consider a safe money reinvestment rate, there is a small benefit to deferral, but the payback period is long.  The decision is not as clear as I’d assumed.

My spreadsheet (in PDF format, so no formulas) is here, https://www.daltonfin.com/wp-content/uploads/2015/06/Take-or-Defer-Spreadsheet-Analysis.pdf.