Individuals who delay retirement receive a higher Social Security benefit. Since Social Security benefits are paid for life, this means that a person who delays retirement is "purchasing" a large annuity from the government. This means the government takes on greater mortality risk. Does this make sense?
Writing in The Hill, Brenton Smith argues no:
When DRC was created in 1972, the annuity market may have forced the government to assume a monopoly role. The past is the past. Today, the government’s role is completely unnecessary. There is a robust annuity market today that could support retirees with an expanded range of choices.Click here to read the whole article.
The problem for Americans with this rule is risk. Annuities in the private sector are priced daily – every day. The government does not re-price the annuity daily, weekly, monthly, or even yearly. The last time that the government changed the pricing for the annuities issued by Social Security was in 1983. Pricing is a tri-decennial event.