New Social Security study on claiming it too early

[explanade]

So a "money management firm" for retirees generated a report finding that retirees missed out on additional money by taking it too early:

The report is based on about 2,000 households that participated in a long-running University of Michigan study. To calculate ideal filing years, United Income estimated retirees’ spending and longevity and ran about 500,000 possible scenarios for each participant, including various market conditions, for a total of about 1.1 billion simulations.

Only 4% of U.S. retirees are waiting until age 70 to claim Social Security; some 57% should be doing so, the report calculated. Meanwhile, more than 70% start taking checks before turning 64, a time when—ideally—only 6.5% of retirees should be cashing checks. The lost income from these less-than-optimal decisions amounts to about $111,000 per household, the researchers estimate.

The United Income analysis finds little rhyme or reason in Americans’ claiming decisions. If you’re healthy and expect to live a long time, you should maximize benefits received late in life by delaying. But the report finds that people don’t do this: Those who ended up dying before 75 were just as likely to have claimed early as those who died after 85. (There is a way to claim benefits, then suspend them until later, but it’s kind of complicated.)

https://www.bloomberg.com/news/arti...paign=news&utm_medium=bd&utm_source=applenews

No mention of balancing longevity risks or opportunity cost from not claiming earlier, which would require having other financial resources to pay for living expenses before claiming at age 70.

Specifically, how are you suppose to determine the bolded?

But 2000 households took part in a long Univ. of Michigan study!

 

[jebmke]

There are no guarantees of course. If you have no major health issues and longevity runs in the family, those would be my indicators.

 

[CardsFan]

Did you catch this "recommendation". Looks like Big Brother should help.

One way to solve the problem of retirees pulling the trigger too early, the researchers say, is legislation.

“Early claiming should be made an exception, and reserved for those who have a demonstrable need to claim benefits before the full retirement age,” the report concludes.

 

[Red Badger]

For some of us, its not about milking the last dime. DW, who is older than me, will file at FRA. I will file early. We want to grab that cash and p!ss away a lot of our portfolio in our go-go years. SS, pensions, and great health care will be enough when were at go-slow, no-go, and sliding closer to the 6 foot ditch. We'd like to leave a little of our egg behind, but its not a priority.

 

[SecondCor521]

There are no guarantees of course. If you have no major health issues and longevity runs in the family, those would be my indicators.

Also, statistically there are correlations between wealth, educational attainment, and longevity.

In addition to your actual current health, your health practices would come into play. Healthy individual 1 who doesn't go to the doctor, doesn't get preventative screenings, and doesn't eat well won't last as long as healthy individual 2 who goes for annual checkups, gets screenings and vaccines, eats well, exercises, etc. (Of course both individuals if they're healthy at SS claiming age are likely doing a lot right already, or are just lucky gene pool winners.)

I'm single and planning on 70.

 

[explanade]

Yeah I wonder if that firm is telling their clients to work until 70.

Including those who may be able to retire by taking their SS earlier.

 

[jebmke]

If you need to take it to make the numbers work, it doesn't make sense to delay. The delay game is for those who can afford to bridge the gap.


We are doing the "optimized" strategy. Spouse will take benefit at FRA (hers is lower than mine) and i will take spousal until 70 then start mine.


If I don't live long enough to make up for the delay, money is the least of my worries at that point.

 

[CardsFan]

If you need to take it to make the numbers work, it doesn't make sense to delay. The delay game is for those who can afford to bridge the gap.


We are doing the "optimized" strategy. Spouse will take benefit at FRA (hers is lower than mine) and i will take spousal until 70 then start mine.


If I don't live long enough to make up for the delay, money is the least of my worries at that point.

I don't know your ages, but that loophole has closed for anyone born after Jan.1 1954.

 

[davebarnes]

Specifically, how are you suppose to determine the bolded?

Well, my parents both died at 90.5.
My father was relatively healthy up to 94+. And, he read the Wall Street Journal every day and bought/sold individual stocks up until 95.3 (his 2017 return was better than the S&P).
My mother had dementia beginning at 90. And was relatively healthy.
So, I am planning on 95.

 

[CardsFan]

Well, my parents both died at 90.5.
My father was relatively healthy up to 94+. And, he read the Wall Street Journal every day and bought/sold individual stocks up until 95.3 (his 2017 return was better than the S&P).
My mother had dementia beginning at 90. And was relatively healthy.
So, I am planning on 95.

Typo?

 

[Animorph]

There are a few life expectancy calculators that try to include a few important factors. One that has been mentioned on E-R is:

https://livingto100.com/

All you need is an average or better life expectancy to make it reasonable to delay SS. Pretty easy if it wasn't for opportunity cost or some of the other oddball features.

 

[Dtail]

No exact correct answer, but at the very least if one delays to 70 as one example, one should at least be able to substitute other monies to live on between 62 and 70 and not cut down on the lifestyle without of course not draining too much of the other investments.

The other popular choice of taking it at 62 for example to help support a higher cost lifestyle in the go go years is a more difficult choice at least for me.

 

[LRDave]

To us, GPO is a game changer. DW will get NO survivor benefits. The way I read this, we are better off with me taking early the preserve to nest egg as much as possible.

 

[jebmke]

I don't know your ages, but that loophole has closed for anyone born after Jan.1 1954.

1953. We just made it in under the wire.

 

[MarieIG]

Only 4% of U.S. retirees are waiting until age 70 to claim Social Security; some 57% should be doing so, the report calculated. Meanwhile, more than 70% start taking checks before turning 64, a time when—ideally—only 6.5% of retirees should be cashing checks. The lost income from these less-than-optimal decisions amounts to about $111,000 per household, the researchers estimate.

The United Income analysis finds little rhyme or reason in Americans’ claiming decisions. If you’re healthy and expect to live a long time, you should maximize benefits received late in life by delaying. But the report finds that people don’t do this: Those who ended up dying before 75 were just as likely to have claimed early as those who died after 85. (There is a way to claim benefits, then suspend them until later, but it’s kind of complicated.)

This doesn't address the H&W scenario, when it is recommended that the lower earner claim at 62 and the higher at 70.

As the second statement about file and suspend. Why just post "it's complicated." That is not informative - it is lazy.

 

[CardsFan]

1953. We just made it in under the wire.

Good for you. I'm jealous.

 

[FIREchief]

While "If you’re healthy and expect to live a long time" is kind of silly; the opposite is not. There are unfortunate folks out there with chronic health conditions that are fairly certain that they will not make it to the actuarial break even point for early claiming. If maximizing a survivor benefit is not part of the equation, some of them can easily justify claiming at the earliest age possible.

 

[joeea]

If you need to take it to make the numbers work, it doesn't make sense to delay. The delay game is for those who can afford to bridge the gap.

Or if you need it, work longer and delay. That way, there will be no gap.

For many, that is the best strategy.

 

[footenote]

Asked my oncologist if my "aggressive" Stage 2 cancer* will impact my longevity. She said no. (This seems counter-intuitive to me, but...she's the expert.) I've also had a serious auto-immune disorder since age 40.

DM died at 68 (but she didn't quit smoking until 40). DF died at 74, despite taking excellent care of himself. DM had several relatives who lived into 90's (and her sister is still going at 88).

At what age would you take SS in my shoes? At 61, my current plan is waiting until FRA unless I develop another serious medical issue in the meantime....

*Treatment ended three years ago. Have religiously taken post-treatment meds, work out 5x / week, eat healthy diet and have never smoked.

 

[joeea]

Did you catch this "recommendation". Looks like Big Brother should help.

Did you read the report?

They also say " an easier place to start would be to change how the Social Security Administration frames claiming age options to the public. Instead of portraying age 62 as the “early eligibility age,” for instance, claiming at age 62 could instead be labeled as the “minimum benefit age” while age 70 could be labeled as the “maximum benefit age.”"

 

[ziggy29]

Thing is, there are too many variables involved. Difference in ages, differences in benefits, differences in expected longevity given current health and family history, whether married or single.

For now we're keeping our eye on things, but our default for now is the usually typical advice (in the post "file and suspend" era), where DW will file at 62 and I will at 70. Finances and health changes, not to mention future changes in the law, may change things (we're 53 and 51, so a lot can happen before then).

 

[CardsFan]

Did you read the report?

The also say " an easier place to start would be to change how the Social Security Administration frames claiming age options to the public. Instead of portraying age 62 as the “early eligibility age,” for instance, claiming at age 62 could instead be labeled as the “minimum benefit age” while age 70 could be labeled as the “maximum benefit age.”"

Yes. I read the whole document, and saw the comment you quoted. That does not change, that at the end, they kind of advocated for legislation that would make it more difficult for those that do not have a "need" (need decided by who?) to take before FRA.

Sorry, I still see Big Brother.

 

[scrabbler1]

Many people keep working to maintain continuous health insurance into Medicare age of 65. This many not be as big an issue these days thanks to the ACA. But I wonder if a lot of people do what my dad did back in 1994 when he retired at 63.5, then went on COBRA for 18 months to give him continuous HI through age 65 when he went on Medicare. At the time, my mom was still alive but suffering from cancer, so maintaining continuous HI coverage was an absolute requirement.

 

[joeea]

In case anyone wants to read the actual report, instead of the clickbait summary, you can find it here:

https://unitedincome.com/documents/papers/RetirementSolutionHidinginPlainSight.pdf

 

[scrabbler1]

No exact correct answer, but at the very least if one delays to 70 as one example, one should at least be able to substitute other monies to live on between 62 and 70 and not cut down on the lifestyle without of course not draining too much of the other investments.

SS is one my "reinforcements" waiting to become available to me starting at age ~60. The others are unfettered access to my tIRA, and my frozen company pension. The tIRA's unfettered access becomes available in just 3 years, when I turn 59.5, while the frozen company pension becomes available at age 65, 9 years from now.

I will have to be careful about the tIRA and SS prior to age 65 because the added income could muck up an ACA subsidy, something I have been teetering on getting versus not getting every year since the ACA exchange's inception in 2014. My FRA for SS is 67, so in my long-range planning I have entered that figure.