Age of First Claim for Social Security!

[Midpack]

Something like this must have been posted before, but I don't remember seeing it (so maybe it's been a while). Another thread on average retirement age made me look into it, and this ties in with that thread.

The 'peaks' at 62 and 66 (FRA for many) don't surprise me. Though I did expect the % of first claims at age 70 to be less than age 62 or FRA, I never would have guessed so few wait until age 70! With so many here planning to wait until age 70 this chart surprises me - yes, we all realize ER.org members are a small and unrepresentative minority, and plan may differ from actual. I guess the chart may be more evidence of how unusual the ER.org members are.

Bruce Bartlett: One Recession Cost Is Lower Social Security Benefits - NYTimes.com

 

[F4mandolin]

Social Security is still something I need to figure out. Figured I would take it at 62. Wife will only get a spousal % of mine. The longer I wait....the more she would get. But it's the ol' argument then of pulling more money out of your savings....and whether SS gets a big hit before I get to it (turning 56 in 6 weeks). But your right....the chart isn't what I expected, the first part was..

 

[Midpack]

Social Security is still something I need to figure out. Figured I would take it at 62. Wife will only get a spousal % of mine. The longer I wait....the more she would get. But it's the ol' argument then of pulling more money out of your savings....and whether SS gets a big hit before I get to it (turning 56 in 6 weeks). But your right....the chart isn't what I expected, the first part was..

This shapes many people's age of first claim decisions FWIW. There are many charts online, the breakeven seems to occur out at about age 78-80, so you apply your own best guess...

 

[F4mandolin]

Yep, I am aware of the "around" 78 time. Haven't tried yet to figure out if that same time structure works when you include both of our totals in....since she is tied directly to when I take mine. She is 3 years younger than me (and British) so if I waited one year (63) mine would be the approx 7-8% higher and her 50% would that little bit higher as well.

 

[RE2Boys]

I really, really struggled with this decision. I don't really need SS at this time, my pension & part-year employment pretty well covers day-to-day expenses. Anything major means dipping into savings. But I just applied for SS two weeks ago at age 63 years, 4 months. Factors that made it much harder to decide were:
1. Subject to WEP provisions and a lot of zero years in my SS record. Will get only $377 per month. We aren't talking a big $$ difference by waiting, even if the percentages look compelling.
2. For no extra cost or benefit impact to me, my two minor sons are entitled to benefits also. About $100 per month each. It's like getting a temporary raise in benefits for the next four years for free. Haven't updated my spreadsheet, but this pushes out the family breakeven to somewhere around 81.
3. Survivor benefits for spouse? She'll collect way more on her own SS record than she would ever be entitled to under mine so it's a mute point.
4. Running a SWR now of less than 1.5%, will go way up with colleges so lots of flexibility for future.

Haven't researched it, but it'd be great if the boys could collect benefits without me collecting at same time, but don't think that's possible. Have an appt with SSA next week & it's one of my questions.

 

[heeyy_joe]

I hope people don't think they can take it at 62, invest it, then pay the benefits back at FRA and switch to a full benefit.

 

[timo2]

Yep, I am aware of the "around" 78 time. Haven't tried yet to figure out if that same time structure works when you include both of our totals in....since she is tied directly to when I take mine. She is 3 years younger than me (and British) so if I waited one year (63) mine would be the approx 7-8% higher and her 50% would that little bit higher as well.

My DW, 5 yrs younger than me, doesn't get her own social security either. So I look at my social security as something to leave her that is inflation adjusted and will not expire, should I pass first. To me it is irrelevant what MY breakeven point is, as the intention is to leave her as large a SS payment as possible. So 66 is the earliest I would consider taking SS, an if I can manage 70, that would be better. It depends how long my savings will last before I have to file for SS.

Also, with inflation higher than interest rates, I'll be using my savings before they can be overly affected by inflation, leaving the CPI adjusted SS until later. The chained CPI probablility has me leaving some extra savings to cover that later on.

 

[ejman]

This shapes many people's age of first claim decisions FWIW. There are many charts online, the breakeven seems to occur out at about age 78-80, so you apply your own best guess...

I think the breakeven analysis is very limited at best if it only includes SS payouts because it ignores the return on the investments that were not withdrawn by those early retirees that do not have a pension or other sources of income to cover the age 62-70 gap. The simple attached spreadsheet shows that there is effectively no break-even point with returns in the 5-7% range. (it ignores effects of taxes)

 

[mf15]

Nice analysis Ejman: I took it at 62,monthly cash flow with, SS, wifes SS and my pension,enables me to not withdraw from IRA. Also figured would not make it to 78 or so,get it back now,especially what I put in since 1966 or so.
Old Mike

 

[W2R]

I plan to be one of those who waits until 70. I don't really need it now, to tell the truth, and it will be like an annuity for me if I should live to be very old. It helps that I am single with a paid off home because my living expenses are not very much. With my tiny pension, monthly pension-like payment from the TSP "G Fund", and SS all being automatically deposited in my checking account every month, I will not really care what does or doesn't happen to the market after 2017. I like that.

I thought of taking it now, so that my Medicare Part B (starting in 2 weeks) could be subtracted from it and I wouldn't have to bother with writing checks to Medicare. But now, I have Medicare Part B payments set up for automatic payment through their "Easy Pay" system, so hopefully that is not going to be an issue.

 

[martyb]

I really, really struggled with this decision. I don't really need SS at this time, my pension & part-year employment pretty well covers day-to-day expenses. Anything major means dipping into savings. But I just applied for SS two weeks ago at age 63 years, 4 months. Factors that made it much harder to decide were:
1. Subject to WEP provisions and a lot of zero years in my SS record. Will get only $377 per month. We aren't talking a big $$ difference by waiting, even if the percentages look compelling.
2. For no extra cost or benefit impact to me, my two minor sons are entitled to benefits also. About $100 per month each. It's like getting a temporary raise in benefits for the next four years for free. Haven't updated my spreadsheet, but this pushes out the family breakeven to somewhere around 81.
3. Survivor benefits for spouse? She'll collect way more on her own SS record than she would ever be entitled to under mine so it's a mute point.
4. Running a SWR now of less than 1.5%, will go way up with colleges so lots of flexibility for future.

Haven't researched it, but it'd be great if the boys could collect benefits without me collecting at same time, but don't think that's possible. Have an appt with SSA next week & it's one of my questions.

I'm a WEP'er too, and my SS won't even be as much as yours. I'm expecting somewhere around $250 if I take it at 62. That's probably what I'll do. That's 6 1/2 yrs away, though so I could change my mind. Probably not. Like you said, delaying doesn't add much to the total.

I don't have more than 3 "zero years" on the books right now, since I did pay in some $$ during the years 1981 - 2010 from income from my Air Force Reserves career. However, the gubmint says that wasn't enough to break the Substantial Earnings threshold, so I get nada for that contribution. I don't see that as fair. For any years I paid in zero, I don't mind not getting credit, but if I paid in, I should get something in return. As much as I don't agree with things the gubmint does, it's hard to believe I've worked 36 years as a federal employee and 33 years as a military member. Kinda ironic.

 

[RE2Boys]

I don't have more than 3 "zero years" on the books right now, since I did pay in some $$ during the years 1981 - 2010 from income from my Air Force Reserves career. However, the gubmint says that wasn't enough to break the Substantial Earnings threshold, so I get nada for that contribution. I don't see that as fair. For any years I paid in zero, I don't mind not getting credit, but if I paid in, I should get something in return. As much as I don't agree with things the gubmint does, it's hard to believe I've worked 36 years as a federal employee and 33 years as a military member. Kinda ironic.

You still get credit for the earnings you had for those years in the Air Force reserves, they just don't count in reducing the effect of the WEP calculation. To reduce the WEP hit, you need over 20 years of substantial earnings. At 30 years of substantial earnings, WEP is completely eliminated.

But the AF reserve earning go into the calculation of your average monthly income that is used as the basis for applying the SS formula. Since ER, I've replaced a lot of zero years with years with only $6-8K of earnings but they do count in the average. Not much but better than zero.

 

[Tom52]

Our plan is for both of us to take SS at FRA, 6 and 7 years down the road. No plans to wait until 70 as it would deplete the portfolio too much spending down my assets for 4 additional years. Taking SS at 62 seems out of the question as we plan to manipulate our taxable income prior to SS for the supposed advantages of TIRA to Roth IRA rollovers and Obamacare.

 

[Greg V]

My plan for now is to wait until 70; still working through when DW should start her Social Security. The major reasons for me:

1. Maximize the COLA'd SS pension I have coming in if I am fortunate enough to live to a ripe old age (longevity insurance)

2. Maximize the COLA'd SS survivor's pension my spouse would get if I'm the first to die.

Even if we have to draw some extra from our retirement accounts prior to me reaching 70, a good foundation of COLA'd income after 70 would not be dependent on market conditions and/or the performance of our retirement portfolio. That's an important risk reduction item for me.

Since we all have a unique set of conditions, it's nice that we have a range of options from which to choose for taking Social Security...allows the program to fit each of us a little bit better.

 

[Andre1969]

Right now, my plan is to take SS at age 62. However, I'll know more as I get closer to that age. I'm 43 now, and plan to work for another 0-7 years, depending on how quick the BS buckets fill up, what the stock market does, etc.

One thing I've noticed is that there's a diminishing return for each extra year I work, up until age 62, with respect to SS benefits. For example, retiring in 2014 versus now, my SS benefit at age 62 would be 3.86% higher. That keeps trending downward to a 2.2% increase of retiring in 2025 instead of 2024 (age 55 instead of 54). The following year it drops to 1.2%, then 0.5%. And my SS benefit would be the same if I quit working at 61, versus 62.

But then, holding out til age 63, it goes up about 7.5%. Holding out til 64 bumps it up another 7.1%. Now, I'm not sure how much of that boost is from working one extra year, versus delaying retirement one extra year. My guess is that the delay accounts for much more of it than the extra year of taxable wages. I just used the quick calculator at the SS website, so it doesn't give you a whole lot of options.

 

[Calico]

My paternal grandmother lived to 89; my paternal grandfather lived to 88; my paternal great-aunts lived to 91 and 105 (!); my paternal great-uncle lived to 92. I take after my father's family in every way imaginable - I share almost no characteristics with my mother's family, which has shorter lifespans. I won't need social security before 70 (I'll have a pension) so I'll wait as close to 70 as I can - I consider it longevity insurance.

 

[Katsmeow]

This shapes many people's age of first claim decisions FWIW. There are many charts online, the breakeven seems to occur out at about age 78-80, so you apply your own best guess...

Does this breakeven point include investment returns on the amount of money received from say age 62 to age 70?

If it doesn't then it seems fairly well useless.

 

[Midpack]

I think the breakeven analysis is very limited at best if it only includes SS payouts because it ignores the return on the investments that were not withdrawn by those early retirees that do not have a pension or other sources of income to cover the age 62-70 gap. The simple attached spreadsheet shows that there is effectively no break-even point with returns in the 5-7% range. (it ignores effects of taxes)

Does this breakeven point include investment returns on the amount of money received from say age 62 to age 70?

If it doesn't then it seems fairly well useless.

This thread got highjacked in record time, but of course there's no universal answer...

When to Start Collecting Social Security Benefits: A Break-Even Analysis

 

[F4mandolin]

There is a good point made where delaying SS til later would possibly provide a higher SS for your wife/husband if you go first (especially for me with a 50% benefit for my wife unless I go first). But if you draw down the savings getting to that point.....well, it's my money...but I wouldn't mind having a little extra when I'm gone to give to family. I didn't get much from my mother, but it sure was appreciated.

 

[ejman]

This thread got highjacked in record time, but of course there's no universal answer...

When to Start Collecting Social Security Benefits: A Break-Even Analysis

Since I don't know how those tables were constructed I hope HIS spreadsheet didn't have a major bomb embedded somewhere... I didn't see a comparison of 62 vs 70 in the original article - too bad since I would guess that is what most people contemplating the problem would want to see. Apologies with the hijack. I be done.

 

[gozer]

I think the breakeven analysis is very limited at best if it only includes SS payouts because it ignores the return on the investments that were not withdrawn by those early retirees that do not have a pension or other sources of income to cover the age 62-70 gap. The simple attached spreadsheet shows that there is effectively no break-even point with returns in the 5-7% range. (it ignores effects of taxes)

This is what I came up with when I did a less exhaustive look at SS payouts. Because of this, I am most likely to take SS at 62.

This spreadsheet will be useful in discussing this with my wife. Thanks.

 

[Midpack]

Since I don't know how those tables were constructed I hope HIS spreadsheet didn't have a major bomb embedded somewhere... I didn't see a comparison of 62 vs 70 in the original article - too bad since I would guess that is what most people contemplating the problem would want to see. Apologies with the hijack. I be done.

OTOH, it's not as simple as your spreadsheet that ignores taxes either. Here's another current source/author who shows results that seem to match the fpanet article I linked to. I plan to hold off until age 70 based on my 91 yo still living independent, drivers license holding Mom & Dad, YMMV.

Besides future rates of inflation and investment returns, Lemons also looks at claimants' federal income-tax brackets and at the percentage of their Social Security benefits that are subject to federal income taxes. This varies from zero for people in the lowest 10 percent federal tax bracket, to 50 percent for those in the 15 percent bracket, to 85 percent for people in all higher tax brackets. No more than 85 percent of Social Security benefits are taxable, regardless of income levels.

Lemons then compares two sets of claiming ages—62 versus 66, and 66 versus 70. As he stresses, making any comparisons here is very complicated. First, the calculations depend on many unknowns, beginning with future rates of inflation and investment returns. Vary either of these projections by even a little, and the calculations can change a lot.

When the dust has cleared from Lemons's calculations, a person claiming early benefits in March 2011 and one not claiming until age 66 in March 2015 would have the same amounts of money 16 years and eight months after the 66-year-old's benefits began. That amounts to age 82 and eight months for both claimants; before this age, the 62-year-old claimant comes out "ahead" by filing early. At older ages, the person who waits until full retirement age to claim would come out ahead.

This is an average. Depending on taxes, inflation, and investment returns, the range of break-even ages goes from 81 to 86 1/2. There is a similar range of break-even ages in the comparison of benefits begun at age 66 to age 70—from the age of 84 to nearly 87.

What's Your Social Security Break-Even Age? - The Best Life (usnews.com)

 

[Katsmeow]

This thread got highjacked in record time, but of course there's no universal answer...

When to Start Collecting Social Security Benefits: A Break-Even Analysis

That is interesting. I read the article and was glad to see that it considered the scenario that my DH faced which is fairly unusual and supported his decision to take SS when he retired at about 62 1/2.

That is, we had 2 children under the age of 18 at the time so if it took SS they would receive considerable benefits until the age of 18. In the scenario in the article (which I think was one 14 year old child) delaying SS would have a break even point of 89. In our case we had a 13 year old and a 16 year old so his break even point would have been considerably later than that. So he took SS at that time. In my case (I'm 59 now) I haven't decided and will look at it again when I'm 62.

 

[ejman]

OTOH, it's not as simple as your spreadsheet that ignores taxes either. Here's another current source/author who shows results that seem to match the fpanet article I linked to. I plan to hold off until age 70 based on my 91 yo still living independent, drivers license holding Mom & Dad, YMMV.


What's Your Social Security Break-Even Age? - The Best Life (usnews.com)

I agree that taxes is a biggie. Now what bothers me about the SS projections that include taxes is this: Who the he** knows what taxes are going to be 20 -30 years from now? For all I know we'll have a VAT tax and no income taxes. I thought about complicating the hell out of my little simple spreadsheet by including some sort of tax estimation and promptly realized I'm not smart enough to do it.

I apologize again. I'm really done with the hijack now.

 

[RS53576GG]

I used Firecalc to evaluate the effect of starting social security at 62, 66 and 70 with various portfolio allocations to see which combination resulted in the highest safe withdrawal rate. I was a little surprised that for my situation starting social security payments at age 66 would allow for a slightly higher safe withdrawal rate than starting it at age 62 or 70. As I get closer to age 62 I'll take a more detailed look at things. It's likely that the best result occurs for an age other than 62, 66 or 70. Maybe begin by looking at it in one year increments and then home in on which starting month is best.