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Retiring early: Should I tap Social Security or savings?
Old 06-22-2011, 02:55 PM   #1
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Retiring early: Should I tap Social Security or savings?

Article for those who are still trying to figure out SS options. This same logic could be applied to pensions (that are reduced for early retirement) and the purchase of a nominal SPIA.

Should I postpone Social Security and tap into my savings? - Jun. 22, 2011

Here is the link to the BU guide... a couple of formats.

The Social Security Claiming Guide - Center for Retirement Research at Boston College
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Old 06-22-2011, 04:48 PM   #2
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Originally Posted by chinaco View Post
Article for those who are still trying to figure out SS options. This same logic could be applied to pensions (that are reduced for early retirement) and the purchase of a nominal SPIA.

Should I postpone Social Security and tap into my savings? - Jun. 22, 2011

Here is the link to the BU guide... a couple of formats.

The Social Security Claiming Guide - Center for Retirement Research at Boston College
The matter is settled for me; I waited and recently started at age 70. However I did read the first of these articles.

Other than the 2 issues of expected return and expected lifespan mentioned in the article, there is one that IMO has recently become the elephant in the room. Will the government means test your SS benefit into meaninglessness?

To me, things do not look very promising on this dimension, and I think if I were making the decision today I rightly or wrongly might decide to get it while the getting is good.

Ha
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Old 06-22-2011, 06:04 PM   #3
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We started last year at 67. We were going to wait until 70, but with the drop in the market it became a decision of sell assets or use SS funds for expenses.
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Old 06-22-2011, 07:14 PM   #4
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I started SS at 62 to maximize financial protection for DW. Her own SS is near zero due to mostly working in non-SS covered jobs and WEP and she cannot collect based on my earnings due to GPO. By starting SS early, I'm preserving a portion of our FIRE portfolio that we'd otherwise need to withdraw annually. Should I meet an early demise, she'll benefit from the larger portfolio. If I was waiting until FRA or later to start SS and died early, I'd have collected nothing, she'd get nothing and our portfolio would be smaller (by about $21k annually).

This scenario where one spouse has no/little SS based on his/her own earnings and WEP and also cannot collect based on the other's earnings (GPO) is seldom discussed in the literature. At least I've never stumbled across and articles, etc. But after noodling the situation, I determined that this was the best way for us to go.
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Old 06-22-2011, 09:02 PM   #5
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The matter is settled for me; I waited and recently started at age 70. However I did read the first of these articles.

Other than the 2 issues of expected return and expected lifespan mentioned in the article, there is one that IMO has recently become the elephant in the room. Will the government means test your SS benefit into meaninglessness?

To me, things do not look very promising on this dimension, and I think if I were making the decision today I rightly or wrongly might decide to get it while the getting is good.

Ha
ha ha: We'll be 55 next year and we're thinking the same thing; the earlier the better.
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Old 06-22-2011, 09:05 PM   #6
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ha ha: We'll be 55 next year and we're thinking the same thing; the earlier the better.
If you mean by "we" as a legally married traditional couple, you may want to read the paragraph under the heading "Team Play" for additional options:

Two Ways To Optimize Social Security Benefits

You can also see the following for some ideas related to SS:

http://www.prudential.com/media/mana...Strategies.pdf

Just be aware that any reference to file/repay no longer apply, since that option was highly curtailed.
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Old 06-22-2011, 10:07 PM   #7
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I dunno, when I chart out 62 vs 70 and factor in the draw down on savings between 62 and 70, I get the opposite picture from the article for average returns 3 % or greater. Makes me think you should take the money and run. Now, for 3% and below, there does seem to be and advantage to waiting.
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Old 06-23-2011, 08:29 AM   #8
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I suppose anything can happen to SS.

But so far it seems that the consensus is that it will not change much for those 55 or older.

We are still planning on a 62/70 plan. We will have to make decisions based on how it actually turns out. We are still 7 years away from early SS eligibility.

IMO - if one has the resources to wait, and the SS COLA remains in tact.... longevity is the primary factor.

Unless one has really good information about their longevity.... it is a bit of a guess. 62/70 helps us to play both sides of it.

I look to SS and the other sources of guaranteed income as risk mitigation. Yes, I hope to optimize/maximize.... but I like the idea of a safety net if all else fails.
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Old 06-23-2011, 08:37 AM   #9
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62/70 helps us to play both sides of it.
For a legally recognized married couple, I agree.

DW is still employed, but regardless of that, does not plan on claiming SS for another 2.5 years when she reaches her FRA age.

At that time, I'll claim 50% of her FRA benefit and let mine "run" till the age of 70, when I file.

If I don't live that long? It dosen't matter. DW will still get more than her expected age 66 benefit when matched against mine - as calculated the day before I die.

I'm not looking at SS just for me (and those who are single should certainly look at a different path), but for the benefit of my DW.

Heck, that's why I have a (term) life insurance policy. It's for her benefit - certainly not mine...
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Old 06-23-2011, 09:10 AM   #10
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We'll be 55 next year and we're thinking the same thing; the earlier the better.
I turn 55 next August, and I'm just hoping they don't do anything before the November 2012 elections. From everything I've heard if you have hit the magic number 55, they might leave your benefits alone. Too bad my DH is a couple of years younger.....
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Old 06-23-2011, 09:23 AM   #11
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As I am well over 55, I admit I have not paid much attention to proposed changes to SS, but I have heard nothing about over under 55. There is the Republican proposal on Medicare, but not SS. I have heard about extending the age for taking it, raising the ceiling the tax is paid on, raising and lowering the SS Tax and most likely several others, but nothing about 55 years old as some sort of a break point.
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Old 06-23-2011, 11:27 AM   #12
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I turn 55 next August, and I'm just hoping they don't do anything before the November 2012 elections. From everything I've heard if you have hit the magic number 55, they might leave your benefits alone.

The question is whether 55 is the key or born in 1956?

If they keep keying on 55 and the debate takes as long as I think it will, most of the boomers will be over 55 and so the bulge of boomers won't have been reduced.

But if 1956 is the cutoff then meaningful numbers of boomers will be affected.
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Old 06-23-2011, 12:12 PM   #13
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This nugget is buried at the bottom of the first article
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: This sort of break-even calculation makes sense only if you're confident you've got enough savings to carry you through retirement. "If you don't have enough to sustain you, then you may want to work a few more years," says Schwab retirement director Beth Chang.
I'd say that deferring SS, like buying a private SPIA, isn't about break-even year for people who have a real risk of outliving their assets.
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