Are Early Claimers Making a Mistake?

[athena53]

Quote:

Originally Posted by 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?

It's a two-edged sword and tax laws change, anyway. I'm 63 and planning to wait till age 70 but then I'll be hit with the double whammy of SS as well as required minimum distributions from my IRAs. In the meantime, our taxable income is low enough that we paid no Federal taxes in 2015 (even though DH gets SS). I don't think we'd qualify for any programs meant for the poor- Obamacare subsidies, food stamps, etc.- partly because we do have decent income, it's just that most is interest, dividends and long-term gains. Frankly, I'd feel bad applying for them anyway. If DH and my mother hadn't gotten seriously ill around the same time, DH and I would be getting onto a flight to Iceland about now- in Business Class. (We went last year and loved it, so don't feel too bad for us.) We are definitely not poor.

[Pscott2019]

I updated my Fidelity RIP information recently. I loaded the data with scenarios where I took SS at 62, 67 and 70. My score moved up 7 points when I changed from SS draw date from 67 to 62. I certainly did not expect that. I would have thought delaying SS would be the best choice to grow your score.


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[jazz4cash]

Quote:

Originally Posted by samclem I belong to the camp that believes if a decision was the right one based on all the information available at the time, then it was not a "mistake" no matter how things turn out.

This is spot on!


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[haha]

Looks like this time we finally got the definitive correct answer, doncha think?

Ha

[Dawg52]

Quote:

Originally Posted by haha Looks like this time we finally got the definitive correct answer, doncha think? Ha

Maybe.

[GravitySucks]

Quote:

Originally Posted by pb4uski Just reacting to the headline... for single people, if the discounts for age are actually actuarially neutral as we understand they are, how can it be a mistake to claim early?

Because for some reason they did not interview the people that took it at 62 but died at 70.
;-)

[rayinpenn]

Ok there's the math... Hit 75 or whatever and bam waiting would paid off
Then there's you'll spend more in the early years of retirement
Then there's the whole discipline think ..can you hold off

Finally there's karma the $2k a month I'll pay for 35 months until I'm 65.. Which will be offset by my SS. Me I'll go with the karma... And I won't sweat about it...



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[ejman]

Quote:

Originally Posted by haha Looks like this time we finally got the definitive correct answer, doncha think? Ha

Haha!

[UpAnchor]

Quote:

Originally Posted by samclem I belong to the camp that believes if a decision was the right one based on all the information available at the time, then it was not a "mistake" no matter how things turn out.

Wholeheartedly agree. I've often told the kids that such a decision is the "wise" decision irrespective of future variables which may cause the result to be an "unfortunate" one. Wisdom does not imply the ability to see into the future nor does it guarantee the desired result. But making "wise" decisions along the way certainly tips the odds in one's favor.

[daylatedollarshort]

Right or wrong claiming age depends on what your goals are and future expectations for SS benefits / taxes. We value diversified income streams, having the money in our estate for the kids if we die early, and not running down our own portfolio as that is money we control more than SS payments. We will probably claim at 62, but might delay depending on the hobby income.

[Sunset]

Quote:

Originally Posted by 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? .....

Yes.

You can drain your 401K and IRA's before RMD's have to start, while still staying in a low tax rate.
If you take SS early, then that is say 20K per year that cannot come out of IRA, but will come out at RMD time and the boost in income will make your SS partially taxable (possibly).

Also some folks go for ACA subsidies instead by living off money not in IRA/401K so they appear poor as very little of their income is taxable.

[brucethebroker]

Depends when you die. More money later won't mean much if you die before you collect or shortly there after.

DW had a very stressful job. I was unable to find another job after being destroyed by the housing crash (Yes, age discrimination does exist....). SS @62 allowed us to move into (very) part time employment, semi-retire and not touch our retirement savings. We have less stress and more time to travel due to SS. We have no plans on taking our savings until RMD.

I see both sides of the argument. But do I think I will second guess taking early benefits when (if) I live to 85? No. We are having too much fun because of it.

Personally, I say if early SS helps you to pull the retirement trigger, go for it.

[racy]

FWIW, Laurence Kotlikoff's MaximizeMySocialSecurity website & service uses 100 years as the default death age. Their view is that SS is longevity insurance. Here's what they say in their FAQs section:
"An analogy may help convey our position. Consider homeowners insurance. No one analyzes buying homeowners insurance from a breakeven perspective because we don't have thousands of homes over which to pool the risk of small and worst case losses, such as our house burning to the ground. Because we only have one house, we can't play the odds. We can't decide whether buying a homeowners policy will break even on average. If we made such a calculation we'd never buy homeowners insurance. Why? Because the cost of homeowners insurance always exceeds the expected payout on the policy we buy due to the insurance company needing to charge its fee.
What holds for homeowners insurance holds for longevity insurance. We only have one life to lose, not thousands, so we can't pool risk over when we will die. We will die just once and it may well be at 100 or whatever is our maximum age of life. This is why our software values Social Security benefits through one's maximum, not one's expected age of life. This is not just our company's policy. This is also precisely what the economics and financial theory of longevity risk tells us to do."

[eytonxav]

Quote:

Originally Posted by gerntz I think the wait till 70 side has a lot to do with having a spouse who could survive you & him/her getting a bigger payment for the rest of their years. Is there data that married folks wait more often than singles?

This is my plan as DW is five years younger and lower earner and I want her to have more should I go first. DW will probably claim her SS at her FRA. The only thing I really have not analyzed is how this might effect RMDs and taxes, that would be one area that might change the plan. Still have 3 yrs to go till 70 and DW has 4 yrs till FRA.

[ShokWaveRider]

One other thought I have not considered, I was enlightened by some of these posts. If I take my SS at 70, I will be taxed more because of my IRA(s) RMD. I just used one of the calculators. So taking it earlier may be even more justified.

[Which Roger]

Quote:

Originally Posted by ShokWaveRider One other thought I have not considered, I was enlightened by some of these posts. If I take my SS at 70, I will be taxed more because of my IRA(s) RMD. I just used one of the calculators. So taking it earlier may be even more justified.

Not necessarily, because if you wait until 70 to take SS, you will likely spend down your IRAs more prior to age 70 than if you had taken SS earlier.

[ShokWaveRider]

Quote:

Originally Posted by Which Roger Not necessarily, because if you wait until 70 to take SS, you will likely spend down your IRAs more prior to age 70 than if you had taken SS earlier.

Not in our case. At our current expense rate IRAs will last 36 years. Cash and cash equivalents will last another 36 years and that does not take into account SS or the return on the funds at all.

[SJ1_]

Quote:

Originally Posted by 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."

+1

plus I rather spend their money than mine

[ducky911]

My wife is three years younger and half of mine is a bit higher than all of hers. The optimum is.
1. For here to file for ss at 62
2. For me to file for spousal off of hers at 66
3. For me to file at 70 and her to go onto spousal at the time

[Pilot2013]

Quote:

Originally Posted by racy FWIW, Laurence Kotlikoff's MaximizeMySocialSecurity website & service uses 100 years as the default death age. Their view is that SS is longevity insurance. Here's what they say in their FAQs section: "An analogy may help convey our position. Consider homeowners insurance. No one analyzes buying homeowners insurance from a breakeven perspective because we don't have thousands of homes over which to pool the risk of small and worst case losses, such as our house burning to the ground. Because we only have one house, we can't play the odds. We can't decide whether buying a homeowners policy will break even on average. If we made such a calculation we'd never buy homeowners insurance. Why? Because the cost of homeowners insurance always exceeds the expected payout on the policy we buy due to the insurance company needing to charge its fee. What holds for homeowners insurance holds for longevity insurance. We only have one life to lose, not thousands, so we can't pool risk over when we will die. We will die just once and it may well be at 100 or whatever is our maximum age of life. This is why our software values Social Security benefits through one's maximum, not one's expected age of life. This is not just our company's policy. This is also precisely what the economics and financial theory of longevity risk tells us to do."

I think that's the way the government wants us to look at it, but most people on here, not so much. I certainly will not postpone both DW and my SS to 70 as Longevity Insurance. The only reason I will postpone mine to 70 is the survivor benefit. And that is all assuming there is not an overriding reason for me to make a change. After all, plans are made to be changed...