When the Social Security Optimizer talks about Opportunity Cost, it’s really answering one question:

“What is the value of getting money now instead of later?”

A dollar today is worth more than a dollar in the future, that’s the time value of money. A dollar today can be used, enjoyed, or invested right away. A dollar you get years from now might not be as useful, or as valuable, by the time it arrives. Opportunity cost helps measure that difference.

Here’s what that means in everyday terms:
1. Health and Longevity
Money you receive today can be spent while you’re alive, active, and able to enjoy it.
 Money you receive much later might not be as meaningful if your health changes—or if you’re no longer here to use it.

2. Missed Investment Growth
Every Social Security dollar you receive early is one less dollar you need to pull from your savings.
 If that money stays invested, it could grow over time.
 Delaying Social Security means you may miss out on some of that growth.

3. Market Risk
If you delay Social Security, you may need to take more money out of your investments in the meantime.
 If the market drops during those years, withdrawing more can hurt your long‑term savings.
 Claiming earlier can reduce how much you need to pull from investments during bad markets.

4. Peace of Mind
For many people, getting a steady Social Security check simply feels better.
 It can make spending easier and less stressful compared to dipping into personal savings.

5. Emotional Return on Investment
Some retirees feel strongly that they’ve paid into Social Security for decades and want to start receiving benefits sooner rather than later.
 Waiting can feel frustrating or unfair, even if the math says it might pay off later.
 

Example of How Opportunity Cost Applies 

A client is age 67 and their benefit would be $3,000/month if they started today. Their benefit at 70 would be $3,720 (excluding inflation). Their preferred life expectancy assumption is age 85. For this client, Total lifetime benefits and break-even points would differ dramatically depending on whether a 0% or 5% opportunity cost (discount rate) is applied.

No Opportunity Cost

5% Opportunity Cost

Why the big difference? To see how opportunity cost works, here we have to look at how each year's benefits are counted toward total and cumulative benefits. Below we see how $36,000/year benefits start at age 6,7 and $44,640 benefits start at age 70 and repeat each year. These values exclude inflation, but they do not include any extra discounting. So, a dollar received in the future is worth the same as a dollar received today. You can see that total cumulative benefits for claiming at age 70 exceed total benefits from age 67 when the client is age 82.

No Discounting

However, if a 5% Opportunity Cost is applied, the value of future benefits is lower. (The actual Opportunity Cost rate you use, if any, is a matter of preference and judgment. It need not be as high as 5%. This was chosen only as an example.) For example, the benefits received at age 68 are, in today's dollars, $34,286, not $36,000 ($36,000 / $34,286 = 1.05). That reflects one year of the 5% rate. The benefits received at the end of the plan are worth not $36,000, but just $11,721. Because of this discounting, the benefits for claiming at age 70, although always higher than those received in the age 67 strategy, never catch up and there is no break-even point.

To summarize, adding an opportunity cost (discount rate) reduces the value of future benefits received and changes both the Total Lifetime Benefits and Break-Even Point for the strategies. 

Explaining to Clients

 Opportunity cost is just a way of comparing the value of getting Social Security now versus later.
 A dollar you get today can be used, enjoyed, or invested right away. A dollar you get years from now may not be as valuable.

Points you can share with a client:

• Your health matters. Money today can be spent while you’re active and able to enjoy it.
• Your investments matter. If you get Social Security earlier, you can leave more of your savings invested and growing.
• The market matters. Delaying benefits may mean taking more from your investments during bad markets.
• Your comfort matters. A steady Social Security check often feels safer than dipping into your own savings.
• Your emotions matter. Many people simply want to start receiving the benefits they’ve paid into for decades.