Collect at 62 or 65

[Luke]

Does it make sence and why to start collecting an annuity and social security that will amout to 40K a year at age 62 or wait until you are 65. I will be retired in 1 year at age 60 and will need about 80K a year income.

 

[Spanky]

I plan to collect mine at 62 since you never know how much longer you will live and if SS will still exist when you turn 65.

 

[Janie]

Usually the penalty is 5% per year for both pensions and SS, so your pension and SS payments will be 3 years x 5% = 15% lower (forever) if you start collecting at age 62.

So, for the sake of example, if you were expecting $10,000/ year at age 65, you would receive $8500 at age 62, a $1500 penalty. From age 62-65, you would collect a total of 3 x $8500 = $25,500. $25,500/ $1500 = 16.7 years-- it takes this long to come out ahead taking the payments at age 65.

 

[retire@40]

This is a no-brainer. 62 (if you can swing the health insurance costs until age 65).

What if you wait until 65 and you die at 64?

You sacrificed enough by age 62 and as Frank Sinatra would say, you're in the autumn of your years.

 

[cute fuzzy bunny]

Theres a paper out there that looked at this. The payback of waiting until later isnt met until you're in your 80's.

Unless there are further improvements in medical care, most of us wont make it that far.

Hence there is almost no reason to wait. Even if you really, really dont need the money, take it and sock it into a conservative fund.

 

[Eagle43]

With glee I can truthfully state, I applied on-line today. I'm 62 in May. I've heard the argument for years that it takes soooo long to catch up that it's silly not to go at 62, particularly if you have good medical insurance.

Wait till 65 if you're working; Otherwise, 62 is the way to go.

 

[Jarhead*]

With glee I can truthfully state, I applied on-line today.  I'm 62 in May.    I've heard the argument for years that it takes soooo long to catch up that it's silly not to go at 62, particularly if you have good medical insurance.

Wait till 65 if you're working; Otherwise, 62 is the way to go.  

Eagle43: I'm starting on my 6th. year. Trust me, I'm not bragging
My wife was 62 the 16th. of Feb. and gets her first check the latter part of April. Last time she worked was about 40 years ago, so she gets a check about half of mine. (Not bad).
Nice feeling for us. Last check from any source other than investments was 1987.
Here's hoping you collect 40 years worth.
Jarhead

 

[JOhn Galt]

Hello Jarhead and all. As time goes by in ER more things become clear to me, even without thinking
them to death which is a habit of mine.

I never considered I would attain my ripe age without
tapping my IRA, yet here I am. I never thought at all
about my DW's SS benefits, but (like Jarhead) they will
be significant and now are only 6 years away. And..........while I still believe that taking your SS at 62
is a "no brainer", I can even see that I probably could stand to wait past 62 to begin. I won't, but I could.
All of these were revelations and absolutely
unthinkable 10 years ago.

JG

 

[unclemick]

We beat this sucker to death a while back on this forum.

Here's my current two cents:

In the old days(1998) when I showed up at age 55 to collect my early pension, a popular option taken by some of my buddies at the plant went along the lines of: take a higher pension payout early(non cola) which drops at 65 or 66 when SS kicks in. ER version would be to spend taxable up front until full SS. Sans the numbers some version of that is an option.

Part two - heh, heh - male and biological - take the money early - try to beat the spread (the 30% ?? jump) between 62 and 66. Or take it early and spend it while you are young and springy.

Paradox - as a liberal Democrat(getting crustier by the year) I'll do my own Bush - take it early, DCA invest and try to beat the spread - individual DRIP stocks for now - although I wish TH would quit mentioning Wellesley - owned it in the the past for many years and it did well.

? Without looking it up - wasn't the bogey to beat around 7% a year if you took SS early

Anywise - for me - the operative phrase is - it's male and biological - gotta putz.

 

[WilliamG]

Seems like a no-brainer to me as well.  Heard just this morning more talk of "means testing" as part of social security reform.  Looking forward to going ahead and getting on the rolls so hopefully negative change to benefits may be less likely.

Also: most often mentioned benefit of taking later is less likelihood of running out of money later in life.  I figure that what I take earlier from SS allows portfolio to grow more during that time.  Becomes a better source of self insurance later on (e.g., long term care) or something left for beneficiaries.  Don't have a target for what we want to leave, but would rather have daughters and grand children have it than for it to evaporate (although we are doing what we can to practice what I read on another thread: "giving with a warm hand"!)... bill

 

[Eagle43]

Eagle43:  I'm starting on my 6th. year.  Trust me, I'm not bragging
My wife was 62 the 16th. of Feb. and gets her first check the latter part of April. Last time she worked was about 40 years ago, so she gets a check about half of mine.  (Not bad).
Nice feeling for us.  Last check from any source other than investments was 1987.
Here's hoping you collect 40 years worth.  
Jarhead

Way to go. Tell me this. I haven't looked into this too much, but my wife is similar in that she has not earned much income. She's about 5 months older than I, so she's gonna get a check 1 march of about $425 or so. But, I hear that once I apply, she can get half of mine. Does that mean that my check is reduced? I was gonna ask SS, but you might know already.
Thanks

 

[Newell]

As was stated earlier, we beat this sucker to death a while back on this forum. However, I remain convinced that the social security actuaries have based their payout statistics (life expectancy, present value calculations, etc) on an outdated family model. Remember that when social security was implemented, most families consisted of a single wage earner, single recipient and a spouse with spousal benefits (1/2 of the benefits of the working spouse).

I do not believe the calculations correctly take into consideration the more typical, current family where there may be two wage earners in a family, both eligible for social security. In this case, both collect their respective social security benefits (assuming they are both larger than the spousal benefit option) until one of them dies. One of the benefit streams ends. The survivor then receives the larger of the two benefits for the remainder of their life.

In this example I believe it is statistically beneficial to take the smaller of the two benefits as early as possible and the larger of the two benefits at about age 70. This can be mathematically demonstrated but is also somewhat intuitive. The larger benefit will be collected until both spouses die (a much longer life expectancy than for an individual) and the smaller benefit will end when either of the spouses dies (a much shorter life expectancy than for an individual).

I promise to never bring this up again!

 

[Jarhead*]

Way to go.  Tell me this.  I haven't looked into this too much, but my wife is similar in that she has not earned much income.  She's about 5 months older than I, so she's gonna get a check 1 march of about $425 or so.  But, I hear that once I apply, she can get half of mine.  Does that mean that my check is reduced?  I was gonna ask SS, but you might know already.
Thanks

Eagle 43: Yep. When you apply your wife will be eligable to receive half of your benefit. No effect on your amount. If your wife outlives you, she would be eligable to use your benefit at that point.

 

[Eagle43]

Thanks, and we'll be doing just that!

 

[sgeeeee]

. . . I do not believe the calculations correctly take into consideration the more typical, current family where there may be two wage earners in a family, both eligible for social security. In this case, both collect their respective social security benefits (assuming they are both larger than the spousal benefit option) until one of them dies. One of the benefit streams ends. The survivor then receives the larger of the two benefits for the remainder of their life.

In this example I believe it is statistically beneficial to take the smaller of the two benefits as early as possible and the larger of the two benefits at about age 70. This can be mathematically demonstrated but is also somewhat intuitive. The larger benefit will be collected until both spouses die (a much longer life expectancy than for an individual) and the smaller benefit will end when either of the spouses dies (a much shorter life expectancy than for an individual).

I promise to never bring this up again!

Don't promise that, Newell. I think you're on to something. I remember the discussion several months back and your ideas almost got lost in the posts. But I listened and have thought it through. I've changed my opinion about the optimum strategy. It just takes people a while to think through new ideas and change their mind.

I used to be in the "take it early, regardless" camp. But now I'm in the "wait till I'm 62 and review the decision" camp. To me the important risks of waiting are the risk that benefits will be cut in the future and that you will live a short life and fail to collect. But if you are healthy and outlive the statistics, higher social security (with COLA) is more valuable than any other investment. So when I reach age 62, if my DW and I are still healthy active and vital, and my finances are still healthy, I'm inclined to use the strategy you describe. Thanks for the analysis and your posts.

 

[cute fuzzy bunny]

The idea does bear merit. Besides a pure numbers calc though, I think you can add into the mix some thinking around what you might do with that extra $$$ between 62 and 70 vs 70+.

 

[Hyperborea]

I used to be in the "take it early, regardless" camp.  But now I'm in the "wait till I'm 62 and review the decision" camp.

It might make sense to wait as "insurance" if you don't need the income at 62. It may cost you in expected return - most of the time you would get more dollars taking the money early. However, if things turn out bad then having a higher "guaranteed" COLA-adjusted income stream could keep you from living under the bridge. I'm not sure about the answer myself but a lot will depend on what the situation (for SS and personally) is like in 20+ years.

 

[cute fuzzy bunny]

Yeah, we've already got one guy on the forum that lives under a bridge...

Dang, aint I *minxy* today

 

[MJ]

Re: Collect at 62 or 66

I used to be in the "take it early, regardless" camp. But now I'm in the "wait till I'm 62 and review the decision" camp. To me the important risks of waiting are the risk that benefits will be cut in the future and that you will live a short life and fail to collect. But if you are healthy and outlive the statistics, higher social security (with COLA) is more valuable than any other investment. So when I reach age 62, if my DW and I are still healthy active and vital, and my finances are still healthy, I'm inclined to use the strategy you describe.

SG, at the present time this is my strategy. On principal, I would love to get all the money I "invested" in SSA sooner than later but is more important to me to have the future COLA protection that SS will "hopefully" still have. My father has been collecting SS for the past 29 years. He certainly has beaten the odds big time. I have 5 more years before I reach 62 and my 1st initial decision whether to start collecting SS payments.

Besides I don't have anyone to leave my left over "millions" to (no volunteers please) so I want to leave just enough for my funeral and a small chunk for charity when I die at the ripe old age of 150.

MJ

 

[Spanky]

MJ,

I have two kids but have no plan to leave them a fortune when I die.

Spanky

 

[azanon]

In this example I believe it is statistically beneficial to take the smaller of the two benefits as early as possible and the larger of the two benefits at about age 70. This can be mathematically demonstrated but is also somewhat intuitive. The larger benefit will be collected until both spouses die (a much longer life expectancy than for an individual) and the smaller benefit will end when either of the spouses dies (a much shorter life expectancy than for an individual).

My only problem with those numbers is I think of retirement someday as being a time i'll spend with my wife. At 33, my "life" for the most part, centers around my wife and my son. The day I lose my wife, I don't think i'll have much life left in me, figuratively speaking. My wife is my "buddy", and i'd just assume think the day she isn't here is never going to come. With that thought, i'd prefer to live that way too. That means taking both checks at 62.

I guess said another way, I dont see either her or I "strategizing" how things are going to be when one of us dies. We're just too optimistic to even go there. There'll be enough when that happens. That's all that matters.

Azanon

 

[Dawg52]

God I hope the 62 option will still be available 12 years from now. :-/

 

[haha]

I have two kids but have no plan to leave them a fortune when I die.Spanky

I assume your love is mutual?

Mikey

 

[Eagle43]

Wanna have some fun? Apply for Social Security. I did, online this Sunday. Of course, they need backup documents, like birth certificates, DD214s, etc. I was given an address to mail them too, but since they're so important and the office was so close, I drove over there. There was a 2 1/2 hours waiting time, so I took a number and went to the gym. Returned in 2 hrs 15 mins, and there was still a 2 hour waiting period. Plus, the "nice" bureaucrat decided to close one of the windows for lunch.

I'm mailing it.