Social Security Questions

[DougB]

Hi. I'm a new user. I will be turning 62 toward the end of this year and am trying to decided whether or not to claim early, or wait until FRA, which for me is 66 and 4 months.

To kick things off, I'm strongly considering claiming at age 62, despite the fact that I continually read that this is a bad idea. I'm not a financial analyst, but according to my calculations, I wouldn't regret claiming early until the age of 82, at which point I would only be giving up an extra $5K in income annually for the rest of my life.

I was hoping that some of the users of this forum might be better steeped in these issues than me and willing to discuss.

Thanks,
Doug

 

[HI Bill]

Statistically, based on the IRS life expectancy tables, SS will pay the same amount of $ to a person with an average lifespan, whether they retire early (62), on time (FRA), or wait until up to age 70 (at an 8% premium per year), by the time they pass at their predicted year. If you live longer than your life expectancy, then you would get more by waiting.

1) The real question is, at what age will you die? If longevity is in your family, and you think you'll live longer than the tables predict, you may want to wait.
2) Will SS cut benefits in the future? If you think this is likely, you may want to claim early, for more years will 'full' benefits. Of course, this plan of action will mean that a 25%? haircut will be more painful when it occurs.
3) Do you need to take the $ early to meet your budget?

I shouldn't need the $ right away, and am planning to wait to 70 if I'm in reasonable health.

 

[Newventurer]

Excuse the cinematic excess...

Somewhat less sarcastically...the one poll that would be great to see on this forum is: Did you live as long as the date you input to FireCalc which gave you the confidence to retire?

We just don’t know, but I am with you, take it early, we are only promised today.

And this just in...

https://www.cnbc.com/2018/08/15/claiming-social-security-early-might-not-be-such-a-bad-idea.html

 

[ShokWaveRider]

I will probably take mine at FRA and DW will take hers at 62.

We used this calculator to give us an idea of the total costs of taking earlier.

https://opensocialsecurity.com/

 

[Red Badger]

I will probably take mine at FRA and DW will take hers at 62.

We used this calculator to give us an idea of the total costs of taking earlier.

https://opensocialsecurity.com/

+1 But in reverse. DW is older than me and was a SAHM. So we file when she is FRA and I'm just north of 62.

We're a fan of same calculator. Confirms our own number crunching.

 

[Crabby Mike]

Will SS cut benefits in the future? If you think this is likely, you may want to claim early, for more years will 'full' benefits. Of course, this plan of action will mean that a 25%? haircut will be more painful when it occurs.

We look at it the opposite way. Because we will have more-or-less "broken even" by 2034 or so (when some say benefit cuts could be mandated), we'd rather take a percentage cut from a higher number than a lower one. Sure, we'll "lose" more if that happens, but we'll also have more left.

 

[DougB]

Thanks, that make sense. I have another question. I have read that if I claim early at 62 and earn $100,000 a year in W2 income until full retirement, then I won't be paid by SSA. However, when I reach FRA, all of the money they withheld will be given back to me, amortized over my expected life span.

In other words, I'm scheduled now to receive 2,000 per month at age 62 and $2,500 per month at FRA. In this scenario, if I claimed early and was a high W2 earner between the ages of 62 and FRA, then at FRA my payment would be recalculated to higher than 2,000 per month.

Is this correct?

Statistically, based on the IRS life expectancy tables, SS will pay the same amount of $ to a person with an average lifespan, whether they retire early (62), on time (FRA), or wait until up to age 70 (at an 8% premium per year), by the time they pass at their predicted year. If you live longer than your life expectancy, then you would get more by waiting.

1) The real question is, at what age will you die? If longevity is in your family, and you think you'll live longer than the tables predict, you may want to wait.
2) Will SS cut benefits in the future? If you think this is likely, you may want to claim early, for more years will 'full' benefits. Of course, this plan of action will mean that a 25%? haircut will be more painful when it occurs.
3) Do you need to take the $ early to meet your budget?

I shouldn't need the $ right away, and am planning to wait to 70 if I'm in reasonable health.

 

[Canopybowstars]

Married or single? Your spouse may thank you later if you defer taking social security since they’ll receive the higher of their own benefit or yours after you pass. You may want to accelerate your burn rate now to defer and the replenish your savings (or at least slow the burn) when you do start taking payments. Have you FIRE’d already? Remember you’ll lose a portion of your benefit if you have a significant retirement earnings and take SS payments at 62 (>$17,040 for 2018).

 

[MissMolly]

Thanks, that make sense. I have another question. I have read that if I claim early at 62 and earn $100,000 a year in W2 income until full retirement, then I won't be paid by SSA. However, when I reach FRA, all of the money they withheld will be given back to me, amortized over my expected life span.

In other words, I'm scheduled now to receive 2,000 per month at age 62 and $2,500 per month at FRA. In this scenario, if I claimed early and was a high W2 earner between the ages of 62 and FRA, then at FRA my payment would be recalculated to higher than 2,000 per month.

Is this correct?

Why, in Heaven's name, would you claim SS at 62 if you are a high earner? Why would you not let it sit and accumulate more credits so once you retire from that high income job you will have a larger SS check to replace that income?

 

[gauss]

Why, in Heaven's name, would you claim SS at 62 if you are a high earner? Why would you not let it sit and accumulate more credits so once you retire from that high income job you will have a larger SS check to replace that income?

+1 It is almost as if many people (not necessarily OP), view SS as a "bank account" controlled by the government. -- ie. If I leave it in there the government might take it, but if I take it now they will not be able to get there hands on it.

Alternatively, if I die early, the government will take it but if I claim early they won't be able to take it.

The are only two rational reasons for claiming early IMHO:
- Not being able to work and not having sufficient other income/assets at age 62 to support yourself
- Having proprietary knowledge (ie terminal illness) in that you will die much younger than average.

A possible third reason, but not entirely rational, is that they want to leave their money for their kids.

-gauss

 

[Independent]

Hi. I'm a new user. I will be turning 62 toward the end of this year and am trying to decided whether or not to claim early, or wait until FRA, which for me is 66 and 4 months.

To kick things off, I'm strongly considering claiming at age 62, despite the fact that I continually read that this is a bad idea. I'm not a financial analyst, but according to my calculations, I wouldn't regret claiming early until the age of 82, at which point I would only be giving up an extra $5K in income annually for the rest of my life.

I was hoping that some of the users of this forum might be better steeped in these issues than me and willing to discuss.

Thanks,
Doug

This may be the single, most debated topic in this forum.

The good news is that it doesn't matter much to most people here because the difference between starting benefits earlier or later isn't that much. You say "only ... $5k ... annually for the rest of my life". On the other side, "only $__k annually for just the first four years".

The best argument for deferring is longevity insurance - it matches dollars to need.

Deferring shines when you really need the extra money - you live a long time and investment yields are lousy.
Deferring looks bad when you don't need the money so much - you die sooner, and/or investment returns are good.

Also, if you are married, the higher income spouse may defer due to survivor's benefits.

 

[pb4uski]

Why, in Heaven's name, would you claim SS at 62 if you are a high earner? Why would you not let it sit and accumulate more credits so once you retire from that high income job you will have a larger SS check to replace that income?

+1 That would be very unwise. Besides they reduce your benefits by $1 for every $2 that you earn over $17k os if OP earns $100k then I think that probably totally erases his SS.... silly idea.

 

[pb4uski]

+1 It is almost as if many people (not necessarily OP), view SS as a "bank account" controlled by the government. -- ie. If I leave it in there the government might take it, but if I take it now they will not be able to get there hands on it. ....

Yup... lot of ignorance out there.

 

[pb4uski]

..... To kick things off, I'm strongly considering claiming at age 62, despite the fact that I continually read that this is a bad idea. I'm not a financial analyst, but according to my calculations, I wouldn't regret claiming early until the age of 82, at which point I would only be giving up an extra $5K in income annually for the rest of my life. ...

You must be rich if giving up "only" COLA adjusted $5k a year is no big deal.... you could have a modest breakfast or lunch out every day for that $5k a year.

How long do you expect to live? What is your family longevity? Is your health good?

It is more likely than not that a 62 yo man will live past 82.... and if your health is good and you have family longevity then it is even more likely that you will live past 82... perhaps even long past.

While the discounts and premiums for taking SS before or after your FRA have not changed since the 1980's, because of medical advances longevity has changed significantly since then, so the smarter play is to wait until FRA or later unless one is in poor health or has poor family longevity.

 

[joeea]

the one poll that would be great to see on this forum is: Did you live as long as the date you input to FireCalc which gave you the confidence to retire?

That would indeed be a fun poll.

The choices should be:

1. Yes!

2. I'm dead so obviously not.

 

[joeea]

I'm not a financial analyst, but according to my calculations, I wouldn't regret claiming early until the age of 82, at which point I would only be giving up an extra $5K in income annually for the rest of my life.

What calculations did you use to determine this regret?

Are you married? Have you included your spouse's regrets in your calculations?

As part of your calculations, at what age have you assumed you will die?

Have you run your calculations using 70 as your benefit start?

Do you need the money early?

What are your goals in retirement?

(In my experience, hardly anyone ever regrets their choices anyway. So you probably don't need to calculate anything if "regret" is your measure of success - take it whenever you feel like taking it.)

 

[Newventurer]

That would indeed be a fun poll.

The choices should be:

1. Yes!

2. I'm dead so obviously not.

Yes! I guess if the community felt strongly enough about the value of said poll we could all make a pact to write it into our final wishes that our heirs were required to post the date of our death and the date used in FireCalc ‘for the good of the community’

 

[joeea]

Yes! I guess if the community felt strongly enough about the value of said poll we could all make a pact to write it into our final wishes that our heirs were required to post the date of our death and the date used in FireCalc ‘for the good of the community’

Yup. I'm sure that would work...

 

[DougB]

What calculations did you use to determine this regret?

Are you married? Have you included your spouse's regrets in your calculations?

As part of your calculations, at what age have you assumed you will die?

Have you run your calculations using 70 as your benefit start?

Do you need the money early?

What are your goals in retirement?

(In my experience, hardly anyone ever regrets their choices anyway. So you probably don't need to calculate anything if "regret" is your measure of success - take it whenever you feel like taking it.)

Well, I've got $24,000 a year coming to me at age 62. My FRA is 66 and 4 months. So, I receive $102,000 extra if I declare early. If I forgo the $102,000 and claim at FRA, then my benefit rises to $29,000 a year. If I divide 102,000 by the $5,000, that equals 20.4 years. So, at age 82.4 I start 'losing".

A couple of things I'm am leaving out: what taxes do I have to pay on the $24,000? And what investment income can I get out of the $102,000.

 

[W2R]

I ignored what the early-SS-people here on the forum recommended, and instead waited until age 70 to claim SS based on my own employment record. Meanwhile I was able to get 1/2 of my ex-husband's SS amount for the past 4 years, so that helped me to get by although I got a big "raise" this summer when I turned 70.

I just wanted to say that it was SO MUCH FUN to get a bigger SS deposit the past two months!!! What a rush. Delayed gratification paid off. I think just the two higher payments I have got so far made it worth waiting, for me.

My original reasons for delaying SS were that I have extreme longevity in my family, plus I am female, so statistically speaking I should live longer than most people (maybe?). Plus, for me it is basically old age insurance and if I have to put up with being old, having money ought to be at least some consolation.

To me it's not the total $$$ received from SS over one's lifetime that matters. What matters (to me) is when you get the SS $$, and how much it is worth to you at that point in life.

 

[MissMolly]

Well, I've got $24,000 a year coming to me at age 62. My FRA is 66 and 4 months. So, I receive $102,000 extra if I declare early. If I forgo the $102,000 and claim at FRA, then my benefit rises to $29,000 a year. If I divide 102,000 by the $5,000, that equals 20.4 years. So, at age 82.4 I start 'losing".

A couple of things I'm am leaving out: what taxes do I have to pay on the $24,000? And what investment income can I get out of the $102,000.

If you will be earning $100,000 a year, you will have zero coming to you at 62. It will all be pulled back. If you are going to continue working and earning a high W2 income, then you will need to wait until you are full retirement age before you can claim and not have any pulled back.

 

[DougB]

Why, in Heaven's name, would you claim SS at 62 if you are a high earner? Why would you not let it sit and accumulate more credits so once you retire from that high income job you will have a larger SS check to replace that income?

Because I don't have any job stability at my age in my profession. It gets harder and harder to keep jobs every year due to my age.

Also, I'm very close to maximum benefit, so a few more years of high income won't increase my FRA benefit.

I'm thinking of taking it early to have it as a backup in case I lose my job. If I earn too much and they take it back, it will be returned to me later when I reach FRA. Not in a lump sum, but over my expected life span. Sure, it won't be as much as if I had waited for FRA, but I'm not losing any money vis a vis the finanical situation I create when I lock in early.

Here is a quote from a legal advisory website call nolo.com

"The amounts of early retirement benefits you lose as a setoff against your earnings are not necessarily gone forever. When you reach full retirement age, Social Security will recalculate upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up only partially, however, a little bit each year. It will take up to 15 years to completely recoup your lost benefits. And remember, none of this readjustment will change the permanent percentage reduction in your benefits that was calculated when you claimed early retirement benefits (the early retirement penalty)."

 

[FI_RElater]

...take a closer look

I will probably take mine at FRA and DW will take hers at 62.

We used this calculator to give us an idea of the total costs of taking earlier.

https://opensocialsecurity.com/

ShokWave

you might want to take a closer look at when you actually get the credits applied; they actually don’t get credited until the January of the following year... so (as I’ve got in my IPS) one should start at the January of the year following their FRA , so that the credits apply immediately and the additional months waiting are also credited (every month adds a small amount).

{That’s if I don’t want to wait until 70; we’ve both got about the same values (mine just slightly lower) so there’s no absolute need for me to wait...hence the possibility of earlier claiming. Starting Roth conversions so early claim at 62 wouldn’t be good}

 

[Crabby Mike]

Because I don't have any job stability at my age in my profession. It gets harder and harder to keep jobs every year due to my age.

Also, I'm very close to maximum benefit, so a few more years of high income won't increase my FRA benefit.

I'm thinking of taking it early to have it as a backup in case I lose my job. If I earn too much and they take it back, it will be returned to me later when I reach FRA. Not in a lump sum, but over my expected life span. Sure, it won't be as much as if I had waited for FRA, but I'm not losing any money vis a vis the finanical situation I create when I lock in early.

Here is a quote from a legal advisory website call nolo.com

"The amounts of early retirement benefits you lose as a setoff against your earnings are not necessarily gone forever. When you reach full retirement age, Social Security will recalculate upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up only partially, however, a little bit each year. It will take up to 15 years to completely recoup your lost benefits. And remember, none of this readjustment will change the permanent percentage reduction in your benefits that was calculated when you claimed early retirement benefits (the early retirement penalty)."

Seems like you're ignoring the last sentence. You would incur two penalties by claiming before FRA and while still working, and only the latter would be offset by a later adjustment. And for what? If your main concern is job security, you can wait, and claim only if you lose your job.

 

[Offgrid Organic Farmer]

I have no idea of how old I will live to be.

I am already on a pension, and I make more than what I spend. So while living on pension I am able to save and invest now.

SS sends me a letter every year, and I see their projection of how much my benefits will be whenever I claim them.

No matter how long I wait, it will be more than how much I need to support my family.