Clear article about when to take Social Security

[audreyh1]

SS will kick us into higher tax brackets. I’m using the time before 70 to reposition investments such that we hopefully have a lower tax torpedo.

 

[teejayevans]

Even if you think your lifespan is going to be less than average, I still think it’s better to wait (unless you think rules are going to change).
You’ll argue you don’t receive as much taking it later but with a shorter lifespan you don’t need the extra money either. Taking it later gives you the most money when you need it the most.

 

[Chuckanut]

Well, after many years of perusing seemingly hundreds of threads on the subject I'm incredibly happy that the age old question "SS 62 vs 70" has been finally answered (at least for single persons) and the answer is: 62 WINS (marginally) of course, I knew it all along yada, yada

Maybe 62 wins. Maybe not. It depends on one's overall situation.

If you're not interested in leaving an estate, admittedly a big IF for many of us, then 70 wins because you can spend more money each year, starting at 62. Period. No need to worry about breaking even or present value. More money to spend trumps all of them, IMHO.

This has been shown several times on this site and Bogleheads.
https://www.bogleheads.org/forum/viewtopic.php?t=102609

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any stupid 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.

Me? I want to leave to an estate, but I have are some reasons for me to take SS at 70 that may not apply to others.

 

[bada bing]

Besides all the math and statistics, there is a philosophical asymmetry between claiming at age 62 or 70. In order for 62 to be the highest value choice, you have to die earlier than average. If you choose 70 correctly, you get to gloat about it with every check you receive after beating the average life expectancy.

There is no causation of course, but I'm inclined to put my money on the choice that requires me to keep kicking in order to win. Betting on early demise (claiming at 62) seems rather pessimistic.

 

[joeea]

I think it is a big conspiracy theory.

The Gubment wants you to take it at 70

If the government wanted you to take it at 70, then you would be taking it at 70.

Instead, they offer you the option of getting less as early as 62 and let you figure out what's best. Some conspiracy.

, as the average life expectancy is low in the USA and could actually be getting lower compared to other civilized countries with proper healthcare, sensible diets, less drug use and lower obesity levels. So if it sponsors articles encouraging the later the better theorists, then, "they" will be better off. More

Sure. Life expectancy is "low" (huh?). But it could be getting better.

Thus it surely follows that there is a vast conspiracy to encourage you to delay. Because that way some unknown "they" will be better off.

The tin foil hats are strong here...

 

[joeea]

As best as I can tell, the benefit estimate given by the annual SS summary is the amount projected before the WEP reduction is applied.

That's correct.

 

[joeea]

The article also forgets to include any possible future actions by the Government that could alter the value of your future payments.

The possibilities are unlimited. It wouldn't make any sense for an article to try to include all possible future actions. The value could be more, it could be less, it could be unaltered.

 

[joeea]

The spousal benefit is the only reason I'd consider waiting to take SS at FRA. Open Source Social Security made that pretty clear. As long as portfolio performs well, it really doesn't matter, but that's not a guarantee. Even if SS takes a 25% haircut, that spousal benefit is something to consider.


Edit: The best spousal benefit is DH at 70. Not going to happen.

You may want to read up about Survivor Benefits.

 

[ShokWaveRider]

If the government wanted you to take it at 70, then you would be taking it at 70.

Instead, they offer you the option of getting less as early as 62 and let you figure out what's best. Some conspiracy.

LOL it was a joke, hence the whistling emoji.

 

[joeea]

another reason that we are not deferring is that to start SS would reduce the headroom that we have for low-cost tIRA withdrawals or Roth conversions from age 62 to FRA/70.

"not deferring" or "deferring"?

 

[pb4uski]

deferring

 

[Rianne]

I did mention my error previously, but you requested I read up on them again, joeea. I'll take that into consideration.

BTW, I did mean survivorship benefits. Thanks for correcting.

You may want to read up about Survivor Benefits.

 

[Chuckanut]

The choice of starting ages is a plus for SS, IMHO. We all don’t have the same needs.

 

[Markola]

I would like to thank the OP for posting this as it does give one the real numbers for different scenarios. That is valuable. Thank you! It is another piece of ammo in the arsenal of SS decision making.

You’re very welcome! I found it valuable, too. Not the final word, but valuable.

Just for kicks, another way that I think about all this is in portfolio equivalency terms. For example, I’m 53 and my projected payout at 70 is $44,804/year, according to opensocialsecurity.com. That equates to a $1,120,100 portfolio at a 4% SWR - at least while I’m on the right side of the green grass. After that, who cares? Add to that another chunk for my DW’s own SS, our actual portfolio, our house, and it starts to look like real money.

 

[Crabby Mike]

The choice of starting ages is a plus for SS, IMHO. We all don’t have the same needs.

+1,000

 

[drunarayan]

This press release from today from the SSA says that Social Security would be insolvent by 2035 if no action is taken !!!!

https://www.ssa.gov/news/press/releases/2019/#4-2019-1

I plan on taking one at 62 if this is the case. Something at 62 is better than -zero- at 70.

 

[samclem]

I plan on taking one at 62 if this is the case. Something at 62 is better than -zero- at 70.

As the Trustees report says, when the trust fund runs dry the system would still be able to pay 77% of the benefits due (the money comes from workers and employers who are still paying into SS). So, I don't know where the "zero" comes from. There are still a lot of twist and turns between now and then.

 

[HadEnuff]

I started pulling it on the first January after I turned 62. I had enough income in the year I turned 62 that it would have been taxed pretty heavily.

I am happy with that decision. One factor was that since I had some stash of money to live on for a few years before I had to start pulling IRA money out, the SS benefits were barely taxed at all. . They are never taxed by NY State, and by keeping my MAGI low enough for ACA for a few years, the Feds barely took any either.

I know there will be a trade-off date, but by then I can't imagine I'll be losing much sleep over it.

 

[camfused]

I plan on taking one at 62 if this is the case. Something at 62 is better than -zero- at 70.

Not zero, but 77% of what you would have in 2033. So, look at what SS says you will get when you are at say FRA or 70, add about 1.5%/year as a COLA from that year until 2034, then take 77% of the 2033 amount for 2034.

For me, I will get $59,260/year when I turn 70 in 2029, and $62,887 in 2033, but then $48,423 in 2034. You just need to have this haircut in your plan.

This is the worse case scenario, and what is schedule to happen. IFF law makers act, then it may be better than this.

 

[MichaelB]

There's already a discussion about SS trust fund solvency and issues, so please continue those thoughts there (here).

Let's keep this thread on strategies for when to begin SS.

 

[retire48in2018]

I can see the complexity with the seemingly simple question, and indiviudal/couple/family experiences/expectations is part of the evaluation.

Here's my generic question - with a few assumtions/givens -
1 - Retiring in 50s, and relying on a mix of traditional, Roth and brokerage accounts for retirement (let's say 1/3 of each, $3M total invested)
2 - Expected annual living expenditures is estimated to be $8k per year - (so 1/3 of that could be from traditional ($32k), 1/3 tax free Roths, and 1/3 - captial gains from brokerage account). Brokerage account has $20k in dividend payments per year.
3 - If electing to take SS at 62, would that then permit more investsment to remain invested - and therefore the opportunity cost is really expected annual rate of return of investments? Depending on tax sitation, the mix of traditional, capital gains (brokerage) and Roths vary...

Would that swing the decision heavily towards SS at 62?

 

[razztazz]

That's how I see it. If I spend "their money" or as someone earlier put it, "The House's Money" that's less of my money I need to spend. I am just as rich as before but spending the amount. Years from now when my "Coulda'/shoulda'" SS check would have been bigger I will be getting the lion's share of that money anyway plus all that money I would have spent is still there, plus "interest".

I can see the complexity with the seemingly simple question, and indiviudal/couple/family experiences/expectations is part of the evaluation.

Here's my generic question - with a few assumtions/givens -
1 - Retiring in 50s, and relying on a mix of traditional, Roth and brokerage accounts for retirement (let's say 1/3 of each, $3M total invested)
2 - Expected annual living expenditures is estimated to be $8k per year - (so 1/3 of that could be from traditional ($32k), 1/3 tax free Roths, and 1/3 - captial gains from brokerage account). Brokerage account has $20k in dividend payments per year.
3 - If electing to take SS at 62, would that then permit more investsment to remain invested - and therefore the opportunity cost is really expected annual rate of return of investments? Depending on tax sitation, the mix of traditional, capital gains (brokerage) and Roths vary...

Would that swing the decision heavily towards SS at 62?

 

[Rianne]

That's how I see it. If I spend "their money" or as someone earlier put it, "The House's Money" that's less of my money I need to spend. I am just as rich as before but spending the amount. Years from now when my "Coulda'/shoulda'" SS check would have been bigger I will be getting the lion's share of that money anyway plus all that money I would have spent is still there, plus "interest".

That makes sense BUT the major portion of DH tIRA is in bond funds. I'm thinking spend/pay taxes on those + some cash + some CD (stay under the 12% cliff) , keep the stock index funds until 70, which is the major part of after tax portfolio. That would easily get us to 70. Then, after tax stock index funds + Roth IRA + CD's + SS. Should be able to maintain the 12% tax bracket. Our combined SS will be > $50K. With the 25% haircut SS, still in good shape.

 

[RetMD21]

When to apply for SS is a personal decision for each person. Math and break even points don't really address the reasons some people file early, and some file later. Once you know the amount at different ages, I think most grown ups can decide when to apply. But then we have to throw in spousal benefits, survivor benefits, possible payment reductions in 2035..... What seems like
an easy decision gets complicated quickly. I would also like to know how many people who took the age 62 route actually invested the extra money without spending any of it. If it works for you, go for it.

I'm holding out for 70 for higher survivor benefits and since I wouldn't spend the money anyway. There is also the element of longevity insurance in case the portfolio tanks and I live far longer than is reasonable. My advice: if you need early ss for basic living expenses take it. If it can enhance your quality of life strongly consider taking it. If you don't need the money flip a coin.

 

[pb4uski]

I can see the complexity with the seemingly simple question, and indiviudal/couple/family experiences/expectations is part of the evaluation.

Here's my generic question - with a few assumtions/givens -
1 - Retiring in 50s, and relying on a mix of traditional, Roth and brokerage accounts for retirement (let's say 1/3 of each, $3M total invested)
2 - Expected annual living expenditures is estimated to be $8k per year - (so 1/3 of that could be from traditional ($32k), 1/3 tax free Roths, and 1/3 - captial gains from brokerage account). Brokerage account has $20k in dividend payments per year.
3 - If electing to take SS at 62, would that then permit more investsment to remain invested - and therefore the opportunity cost is really expected annual rate of return of investments? Depending on tax sitation, the mix of traditional, capital gains (brokerage) and Roths vary...

Would that swing the decision heavily towards SS at 62?

It depends on what tool you are using. With opensocialsecurity.com under the Advanced Options, you provide a discount rate which accounts for the opportunity cost. While the author suggests the rate of return on 20-year TIPs, I don't agree with his logic so I use a projected real rate of return of my retirement portfolio (IME 3%).

I boil the decision down to a decision as to whether or not to buy a COLA adjusted pension benefit.