Are Early Claimers Making a Mistake?

[SumDay]

This came across my desk today at work. Just like this board, there's a never ending discussion here about when to take Social Security. I have great respect for the Boston College Center for Retirement Research.

Are Early Claimers Making a Mistake? | Center for Retirement Research

There's a link at the bottom to download the full 32-page PDF, if you're so inclined.

Apologies if this has already been posted.

 

[COcheesehead]

So it sounds like most early claimers really need the funds.

 

[rodi]

Based on the abstract the key points are:

- early claimers are often unprepared for retirement. (which makes sense - get an income stream now, because you need it now).
- percentage of early claimers is increasing... I speculate that is because of fear that SS will be messed with/modified in some way that will negatively impact future claimers... so get it now, before they take it away.

 

[Pilot2013]

Well, so I have read on here at least several, if not many, times that lower earning spouse should take at 62, larger earning spouse at 70. Does that lower earning spouse lose? I don't think so, seems like a very astute move to me. Therefore I put it in our plan.

 

[HadEnuff]

I started taking it at 62. I wouldn't say I was unprepared for retirement. With SS, I can easily sustain my lifestyle with a 2.8% WR. I can't remember when exactly the so-called "break even" point is, but isn't it well into my 70s, not counting the time value of money?

I would put myself into rod's group who fears "that SS will be messed with/modified in some way that will negatively impact future claimers... so get it now, before they take it away."

 

[ShokWaveRider]

This is very subjective. I will be lucky if I live to 80, by then I will probably be happy with sitting at home eating my favorite foods and watching good content (Heck I almost am now). I plan on taking SS at 65 for no reason other than to kep my income lower till Medicare kicks in.

My home will "Still" be fully paid for and my living costs more than manageable.

 

[DrRoy]

I do not even count SS in my plans, and will wait until 70.

 

[dixonge]

We have some pretty decent non-cola'd pensions but not much in the way of a nest egg on the side. We've prepared a strategy to use about half of the pension payments and all the early-claim SS we can get our hands on to maximize the nest egg part of the equation. Projecting $300K or more in savings in 10 years, not counting market gains and dividends. Gives us lots of options...

 

[Pilot2013]

I do not even count SS in my plans, and will wait until 70.

That's great. But if you've had significant income, it leaves a lot out of the equation when your planning to see if ER is a possibility. I put 80% of what SS site says just as a small insurance of decreases or "class warfare" impacts. Have contributed max for quite a while, so it's not a small number.

 

[Big_Hitter]

Based on the abstract the key points are:

- early claimers are often unprepared for retirement. (which makes sense - get an income stream now, because you need it now).
- percentage of early claimers is increasing... I speculate that is because of fear that SS will be messed with/modified in some way that will negatively impact future claimers... so get it now, before they take it away.

it's not only that these are people in a 401k-only world - this is just the tip of the iceberg

 

[nash031]

I'm 23 years from even early claiming, but I think about this quite a bit. If you believe that spending decreases with age, and are in a situation where SS isn't going to be a major impact one way or the other, I don't see why you wouldn't take it early. More money at 62 to spend and/or less money drawing down earlier from your portfolio makes you a bit more secure later on (though not optimally like waiting until 70). But if you're only drawing down 3% or less of your portfolio anyway, why not have the extra money at 62 to enjoy while you're still young enough? If you're comfortable at 3% or less, SS isn't likely to make a big difference in your security later in life anyhow - you're probably set.

Dunno how this will work out for me, but even knowing that waiting is a smarter financial move, I hope to have the game won to the point where it doesn't matter, and if DW and I want $XX,XXX more money to spend while we're young, we can just take it and enjoy a few more years of travel, etc.

 

[athena53]

I read a "Rescue My Retirement" article- may have been in Money Magazine- profiling several people who were in their 50s and for various reasons were way behind in saving for retirement (e.g. realtors who had a tough time when the housing market collapsed). The financial advisors' recommendations always included working longer and delaying SS but I wonder how many just took it at 62 because they needed the money or the jobs just weren't there anymore.

 

[daylatedollarshort]

We're taking SS at 62 and preserving the portfolio, since we have more control over that and we can leave that to the kids / charity.

 

[gerntz]

I think everyone would be helped if minimum claim age was raised, say to 65.

 

[Dog]

DH will claim at 62. He had the lower income and is convinced he will a shorter lifespan due to VTAC.
I will take a wait & see attitude as to when to claim. I really do want to leave DD some inheritance considering she put up with our LBYM lifestyle.


Sent from my iPhone using Early Retirement Forum

 

[gayl]

I have a COLA'd pension so I don't need it. I'm also holding off until 70 to take IRA withdrawals. That's because I don't have long-term care insurance and I really would like to be a nice place if I need it

 

[Clone]

Parents on my wife's side: Many times they complained that they were talked into taking SS at 62 and it was a mistake. They would have had a larger payout if they would have waited.

The reality: They didn't really have a nickel to their name, their income stream had dwindled to near zero. They had borrowed money against equity in house and business, and were basically heading for a financial crash. SS was what they could live on. They went through a health crisis, ended up selling all of their holdings and moving into assisted living. Those costs emptied the account within 2 years.

I don't think either of them lived past 74, thus drawing at age 62 was mathematically the correct thing to do.

I think that a lot of folks who are 70 would like to have had the larger payment, but many of them did not have a path that would let them wait much past 62.

This board has many folks who are in a position where they do have a choice. They financially can afford to draw it later. Even with that choice, there is no clear 'correct' decision.

 

[Bestwifeever]

Most of our friends were double income with high paying jobs and no kids. Almost all of them took SS at 62. None live extravagantly so I can't imagine it was for financial necessity. I think they just figured it was part of the retirement income and wanted to start it as soon as they could.

 

[foxfirev5]

We're taking SS at 62 and preserving the portfolio, since we have more control over that and we can leave that to the kids / charity.

+1. After spending too much time analyzing the pros and cons I find it really doesn't make all that much difference. The unknowns far outweigh the results of a current calculation. With two years to go we're taking all we can out of the IRA's (6% w/d to max 15% tax bracket) and plan to take SS at 62. This allows a nice cash flow through our 60's (<3% w/d after 62) and smooth transition to RMD's at 70 1/2. Even with zero portfolio growth the RMD's should equal our current cash flow with a nice adjustment for inflation.

 

[HadEnuff]

I draw the conclusion that in some cases taking early SS is the result of poor planning, but in other cases is part of a well thought out plan.

No real surprises here.

 

[ShokWaveRider]

I draw the conclusion that in some cases taking early SS is the result of poor planning, but in other cases is part of a well thought out plan.

Very profound.

DW will take hers at 62, I will take mine at 65 (Not FTA) maybe earlier if the ACA goes pear shaped.

We calculated the extra we would get by waiting would make Zero impact on our lifestyle for the foreseeable future, or the next 30-35 years for that matter.

Waiting till 70 just because it is more money is a fruitless exercise. IOHO it is almost being a little greedy, if you do not need the extra income.

 

[FIREmenow]

Waiting till 70 just because it is more money is a fruitless exercise. IOHO it is almost being a little greedy, if you do not need the extra income.

"I made my charitable contribution to the country and did my part towards solving the debt crisis by taking Social Security early."

LOL! I love it! Perfect.

 

[dallas27]

Just asking, as a young guy, is there any benefit to delaying until 70 so you can be "poor on paper" between 62-70 and get much better government benefits or tax treatment?


Sent from my iPhone using Early Retirement Forum

 

[btdt22]

I started taking SS at age 69 and have absolutely no regrets. I pulled offsetting travel funds from age 65 on, out of my 401k given the 8% guaranteed interest SS was offering me.
My spouse was mostly stay at home, so when I die she will get $3k monthly from SS
I was also able to liquidate a significant portion of my capital gains taxes by staying within the 15% tax bracket during my run up to RMD, and the loss of my 15% tax bracket.
Bottom line- To each their own, and I can assure you there is life after age 60. We budget around $30k yearly for travel and are headed for two weeks on the NIle in October. We also plan to complete another portion of the Great Loop on our boat in March. I'm not bragging, I'm just reporting that many of us 'old-farts' are not couch potatoes in their 70's or 80's, and I think those in their 'younger' years should be planning for a very active lifestyle in their 'silver' years.

 

[Ticker]

I am taking it at 62. DW & I can almost live off of the SS payments. My strategy is to keep the portfolio as invested as possible, and the early SS payments will reduce the amount of money we would have to withdraw and minimize the risk associated with the sequencing of returns.