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Social Security -- when?

Ask the Fool

Published: July 9, 2024

Q. When should I start collecting my Social Security benefits -- on time, early or later? -- F.L., Paramus, New Jersey
A. Each of us has a "full retirement age" at which we can start collecting our full benefits -- the ones to which we're entitled based on our earnings history.
For those born in 1960 or later, it's 67. But you can start collecting as early as age 62. If you do so, your benefit checks will be smaller, but you'll receive many more of them in total. If you postpone starting to collect, your benefits will increase by about 8% for every year you wait beyond your full retirement age, up to age 70; delaying from 67 to 70 will result in benefits about 24% larger.
The system is actually designed to be a wash for those who live average-length lives, whether they start collecting early, on time or later. So think through your circumstances, considering how likely you are to live a relatively long or short life, and when you'll really need the income. Coordinate with your spouse, too, if you're married.
Social Security is likely to be critical to your future financial security, so read up on it and perhaps consult a financial adviser before deciding what to do. (You can find fee-only advisers at NAPFA.org and GarrettPlanningNetwork.com.) For much more retirement advice, check out our "Rule Your Retirement" service at Fool.com/premium.
Q. What's a "block trade"? -- W.V., Jackson, Wyoming
A. It's a purchase or sale of a large number of securities, often made by an institutional investor such as a pension fund or hedge fund and privately negotiated. Typically, it will involve at least 10,000 shares of stock or $200,000 worth of bonds.
Fool's School
Warren Buffett's Annual Meeting
In early May, the annual meeting of Warren Buffett's company, Berkshire Hathaway, was held in Omaha -- though this year it was without Buffett's longtime business partner Charlie Munger, who passed away in November at age 99. Buffett was there, as usual, answering questions from shareholders and others for many hours. Here are some notable thoughts he shared:
-- On cash: Berkshire Hathaway recently hit a record level of cash, at $189 billion. The fact that Buffett is letting so much cash pile up reflects his determination to "only swing at pitches we like." He has advised us all to be similarly selective in our investments. (And at the moment, he's earning solid returns on his cash, with Treasury bills recently yielding more than 5%.)
-- On becoming a great investor: Buffett agreed that someone starting with $1 million today could earn great returns, but "You have to be in love with the subject [investing] ... you can't just be in love with the money."
-- On artificial intelligence (AI): Buffett worried about unintended consequences, noting, "we let the genie out of the bottle when we developed nuclear weapons. ... And I don't know any way to get the genie back in the bottle, and AI is somewhat similar." He added that AI can make scamming people a growth industry.
-- On driverless vehicles: Buffett said that if driverless technology becomes mainstream and reduces collisions, it would be good for people, but potentially bad for insurers (like Berkshire). The company's insurance chief Ajit Jain added that the cost of collisions has been rising, so fewer but costlier collisions might be somewhat of a wash.
-- On S&P 500 index funds: Buffett noted that he hasn't changed his will's directions to invest 90% of his wife's inheritance in a low-fee S&P 500 index fund. He has recommended such index funds for most people.
-- On luck: "If you're lucky in life, make sure a bunch of other people are lucky, too."
My Dumbest Investment
Good for My Soul
My most regrettable financial move was spending too much on a high-performance car. It was bad for my finances, but good for the soul. -- E.M., online
The Fool responds: This will certainly seem like an ill-advised move to many of us. But in certain circumstances, it's not so bad to buy an expensive car. For example, if you're well into retirement with plenty of money beyond what you need to live on and you've always wanted a fancy car, you might just buy one. Or if you're 30- or 40-something with a relatively high income and a sizable nest egg already, and this would be a rare splurge, it's well worth considering.
But for most folks, it's probably best avoided. For one thing, most vehicles will fall in value over time, whereas long-term investments in, say, the stock market are likely to grow in value. Think about how much you want to drop into something that will depreciate.
Remember, too, that luxury cars often cost more than average cars to insure, maintain and repair. An alternative to consider is opting for a fully loaded trim of a standard, nonluxury vehicle. It might cost you less overall while offering much of what you're seeking.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish Trivia
Name That Company
I trace my roots back to the 1911 merging of three businesses that became the Computing-Tabulating-Recording Company. I changed my name in 1924, swapping C-R-T for three other letters. I started out making punch-card tabulators and expanded after buying the Electromatic Typewriters company. By the 1960s, I was producing 70% of the world's computers. (I sold my personal computer business to Lenovo in 2005.) I recently ranked 24th on Forbes' list of the world's most valuable brands. With a recent market value topping $155 billion, I'm now involved in consulting, cloud computing, artificial intelligence and more. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1921, only 13 years after the Model T Ford's debut, when four Navy veterans pooled $200 each and launched an auto accessories store in West Philadelphia. I later added bicycles and radio parts. I went public in 1945 and was taken private when Carl Icahn's Icahn Enterprises bought me for around $1 billion in 2016. I boast more than 850 locations across the U.S. (including Puerto Rico) and 8,000 service bays. In honor of Manny, Moe, Moe and Jack, I offer military vets a 5% discount. Who am I? (Answer: Pep Boys)
The Motley Fool Take
Meta Platforms, an AI Stock
Facebook parent Meta Platforms (Nasdaq: META) has been one of the best performing stocks on the market since the beginning of 2023. However, it dropped after the company posted strong first-quarter earnings (revenue up 27% year over year and net income up 117%) but warned of slower growth due to heavy investments in artificial intelligence (AI), among other things.
The company has touted the company's Meta AI technology, noting, "Thanks to our latest advances with Meta Llama 3, Meta AI is smarter, faster and more fun than ever before." Given that nearly half of the world's population uses a Meta product each month (Facebook, Instagram, WhatsApp), the company has relationships it can leverage as it seeks to build an audience, giving it a competitive advantage.
At its recent price, Meta seems likely to be a winner over the long term, as it still dominates social media advertising and has proven it's capable of controlling spending when needed. It may be volatile over the coming months, though. However, for long-term investors, the current sell-off looks like a buying opportunity. (Randi Zuckerberg, a former Facebook director and spokesperson and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and has recommended Meta Platforms.)