File for SS at 62, Draw Until FRA and Suspend to get Delayed Retirement Credits

[Brett_Cameron]

This link: https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409100 Sections GN 02409.100 through .130 describe how the SS will administer this.

Describes how the SS administration will process a voluntary suspension of benefit payments, apply delayed retirement credits, and resume benefit payments at age 70.

Beginning in 01/00, a numberholder (BIC A only) who has attained full retirement age (FRA), but is not yet age 70, may elect to suspend his/her retirement benefit in order to earn delayed retirement credits (DRCs). This change is part of the Senior Citizens" Freedom to Work Act of 2000. This legislation eliminated the annual earnings test (AET) and the foreign work test (FWT) for those who have attained FRA. It allows beneficiaries to receive full retirement benefits regardless of earnings. Prior to 01/00 those benefits would have been subject to the AET or FWT and DRCs would have been earned for months subject to a full work deduction. Because those beneficiaries will no longer be subject to the AET or FWT, they are being given the opportunity to elect voluntary suspension of retirement benefits to earn DRCs.

This is my plan, start at 62 suspend at FRA and restart at age 70 allowing dependent benefits before they all get too old.

My estimate is that the reduction in benefit by taking SS at 62 will be offs et by the delayed retirement credits from FRA to 70 and I will end up at a ge 70 with a monthly benefit slightly more than what I would have gotten had I waited until FRA.

 

[explanade]

Bookmarking.

 

[Alan]

Bookmarking.

+1

I've added it to the FAQs

http://www.early-retirement.org/forums/f47/faq-archive-when-to-take-ss-69366.html

 

[padlin00]

What's the benefit as opposed to waiting till FRA to file, or file and suspend at FRA and wait till 70?

 

[Katsmeow]

I suspect the benefit to him is the same benefit that my DH would have. That is, my husband started benefits when he retired at 62 since we had 2 minor children and if he was drawing benefits they could draw benefits. If he had waited until 66 (his FRA which he is now), they would have lost the benefits in the interim.

DH hasn't suspended his benefits even though he just turned 66. In our case, we have high expenses the next few years (those same two children now in college). Also, in our case, my benefits are about the same as his (maybe a little higher) and I am several years younger than he is. I will probably take spousal benefits at 66, and then wait until 70 for my benefits (although I don't feel I have to decide until close to the time when I could collect).

 

[Brett_Cameron]

The benefit has to do with optimizing my financial situation that includes pension, 401k, and SS.

My goals are to maximize DW income after I die, self insure for LTC, balance dependence on SS and 401k performance and achieve satisfactory FIRECALC results while spending along my projected plan.

As Katsmeow stated, the dependent benefits are significant.

With my particular spending plan, delaying SS to FRA or 70 would deplete the 401k to unacceptably low levels.

YMMV

 

[NYEXPAT]

Brett,
Thanks for this! As my wife will be 34 and I will have a 10 y/o and 1 y/o, this is going to absolve a lot of past sins!

I have one question, what is a numberholder (BIC A only)?

 

[F4mandolin]

Wouldn't your yearly increase in SS be slightly higher after 66 as well?

 

[Brett_Cameron]

BIC is the Social Security Admin internal jargon for the social security number account. "A" stands for the primary insured. they have other letters for dependents, spouses and survivors that may receive benefits based on the account. The use of the term "BIC A only" means that only the primary insured retirement benefit can be suspended and earn delayed retirement credits, not dependents, spouses, or survivors benefits.

 

[Brett_Cameron]

Wouldn't your yearly increase in SS be slightly higher after 66 as well?

inflation adjustments to the reduced amount should continue as well.

 

[NYEXPAT]

BIC is the Social Security Admin internal jargon for the social security number account. "A" stands for the primary insured. they have other letters for dependents, spouses and survivors that may receive benefits based on the account. The use of the term "BIC A only" means that only the primary insured retirement benefit can be suspended and earn delayed retirement credits, not dependents, spouses, or survivors benefits.

Brett,
Thanks for the clarification. One further question. My family and I collect from age 62 to age 66, at 66 I suspend (paying back my primary benefit received) My family still collects at the reduced (my age 62 benefit) rate and my delayed retirement credits (from 66-70) will apply to increase my (age 62 benefit) as opposed to my FRA benefit?

 

[Brett_Cameron]

Brett,
Thanks for the clarification. One further question. My family and I collect from age 62 to age 66, at 66 I suspend (paying back my primary benefit received) My family still collects at the reduced (my age 62 benefit) rate and my delayed retirement credits (from 66-70) will apply to increase my (age 62 benefit) as opposed to my FRA benefit?

There are two things if you draw early and want to stop.
The first is a Do-Over. You can do it once. It must be within 12 months of when you started drawing. This requires Withdrawal of application and all spousal and dependent and your benefits have to be repaid. They now prohibit doing this at any time after 12 months from your start.

the second is what I am discussing here. It is a Suspension of benefits and applies only toward your retirement benefit. You can do this after you have reached FRA. Any spousal or dependent benefits being paid would not be suspended. In this case there is no payback to SSA and no withdrawal of application. DRCs would be applied to your previously reduced retirement benefit until you tell them to resume payments or you reach age 70.

 

[NYEXPAT]

the second is what I am discussing here. It is a Suspension of benefits and applies only toward your retirement benefit. You can do this after you have reached FRA. Any spousal or dependent benefits being paid would not be suspended. In this case there is no payback to SSA and no withdrawal of application. DRCs would be applied to your previously reduced retirement benefit until you tell them to resume payments or you reach age 70.

Brett,
Thank you so much for clearing that up! Up till now, my plan was not based on this option!

 

[harley]

There are two things if you draw early and want to stop.
The first is a Do-Over. You can do it once. It must be within 12 months of when you started drawing. This requires Withdrawal of application and all spousal and dependent and your benefits have to be repaid. They now prohibit doing this at any time after 12 months from your start.

the second is what I am discussing here. It is a Suspension of benefits and applies only toward your retirement benefit. You can do this after you have reached FRA. Any spousal or dependent benefits being paid would not be suspended. In this case there is no payback to SSA and no withdrawal of application. DRCs would be applied to your previously reduced retirement benefit until you tell them to resume payments or you reach age 70.

Nice! Of course, now that you've pointed all this out on the internet, they'll remove the capability just like they did with the do over.

 

[growing_older]

I don't understand the advantage here. By starting at 62 you get a reduced benefit. Then you suspend to get credits to raise the benefit back up. Why not just wait to FRA (or later) then you don't get the initial reduction, and if you wait long enough you get the credits as well.

 

[Katsmeow]

I don't understand the advantage here. By starting at 62 you get a reduced benefit. Then you suspend to get credits to raise the benefit back up. Why not just wait to FRA (or later) then you don't get the initial reduction, and if you wait long enough you get the credits as well.

Well, one thing is that you are ignoring dependent benefits.

When DH retired at 62 we had 2 children under 18. If he took SS they would each receive 1/2 of his full retirement benefit until, in their case, age 18 (this was somewhat limited by a family maximum for all benefits received by a family). To receive those benefits, he had to himself be receiving benefits. Had he waited until FRA to take SS, our son would have not received 2 years of benefits and our daughter would have foregone 3 years of benefits. Dependent benefits are very much use it or lose it. If you look at a sophisticated calculator to determine when to take SS benefits, the possibility of dependent children's benefits is one situation where it can be clearly better to take SS at 62 even with a permanently reduced benefit,

 

[Brett_Cameron]

I don't understand the advantage here. By starting at 62 you get a reduced benefit. Then you suspend to get credits to raise the benefit back up. Why not just wait to FRA (or later) then you don't get the initial reduction, and if you wait long enough you get the credits as well.

We do this not to maximize SS income but to maximize overall money while balancing dependence on SS and 401k performance.

With the double benefit of receiving dependent benefits and NOT spending my savings we will come out at my age 86, by my SWAG, about $250k ahead, PLUS DW's widow income stream (pension, SS and savings) being 99% of max.

 

[growing_older]

Ah, the dependent benefits make the puzzle pieces fit together. I understand now.

 

[RE2Boys]

the second is what I am discussing here. It is a Suspension of benefits and applies only toward your retirement benefit. You can do this after you have reached FRA. Any spousal or dependent benefits being paid would not be suspended. In this case there is no payback to SSA and no withdrawal of application. DRCs would be applied to your previously reduced retirement benefit until you tell them to resume payments or you reach age 70.

So if I understand correctly, at FRA I can suspend benefits without affecting my son's benefits and resume benefits at 70 with DRCs added in. That's good info that I had not considered as I took the benefits at 63 so my two minor sons could collect.

I'll have to think it through if I would suspend as my wife is entitled to way more SS benefits on her own record than she'd ever get on survivor benefits due to mine subject to WEP

 

[explanade]

How many people reaching 62 still have dependents?

 

[Brett_Cameron]

How many people reaching 62 still have dependents?

Not many.

 

[Katsmeow]

How many people reaching 62 still have dependents?

I would think that relatively few have children under 18. In our case I won't have any children under 18 when I reach 62, but DH had 2 ( am 6 1/2 years younger than DH which is what makes the difference).

On the other hand, I would guess there are lot of people reaching 62 who have a spouse at or near the age where the spouse could potentially be eligible for spousal benefits if the 62 year old spouse took benefits. (To me, the idea of there being a spouse who is better off taking spousal benefits than their own benefits seems strange and wouldn't be common since I've always worked, my mother worked - and I was born in the 1950s, and the vast majority of women that I know work. So from my standpoint, the idea of a female of my generation not having enough work history to make more from her own benefits just seems very uncommon to me. But, from this forum, I do often see people saying that a spouse will get more from spousal benefits).

 

[NYEXPAT]

How many people reaching 62 still have dependents?

Probably pretty small in the general population, but it is very high around the expat population here. I am only 60 and have an 8 year old and we are planning a second child in 2014-2015. In addition my wife (non US resident) will not have SS earnings, so the survivor benefit is important to HER retirement plan. I know many single retired guys that have moved to Peru,Colombia and Ecuador ended up getting married and are now starting families or adopting their wives young children. The most extreme example is a German friend who is 74 and has a 1 year old daughter.

 

[rescueme]

<snip...>So from my standpoint, the idea of a female of my generation not having enough work history to make more from her own benefits just seems very uncommon to me. But, from this forum, I do often see people saying that a spouse will get more from spousal benefits).

Well, here's a case where DW will be getting less in spousal benefits, but will still claim them starting next year.

We're the same age (within a few months) and we both reach FRA in 2014.

I'm going to file/suspend before my DW's FRA age, reached in May. That will allow her to get 50% of my FRA benefit (via a restricted application), which is a few hundred $$$ less than her FRA benefit.

However, in four years she will be claiming her SS age 70 benefit which will give her $600/mo. more than her FRA payment. Remember, she will be getting DRC's of 8%/year (32% more for a 4-year delay) plus any accumulated COLA's.

We're going for the long term view of total SS returns with a breakeven point of age 78 for both of us. Of course, we really don't believe in breakeven points. Money is for the living, not the dead. We're just trying to proceed with the best plan (for us) that will allow us to maximize SS, assuming one/both are still alive.

And if I die first? (probably will..); assuming we get to age 70 (in four + years), her survivor benefit will be just under $1k/month higher than her age 70 benefit, based upon my age 70 SS.

We're taking the course of "a little SS now, a lot more SS later" as suggested in a personal plan supplied by Social Security Solutions