Social Security at 62 - Yes or No

[youbet]

Good question.

Very curious to see if anyone has a definitive answer.

You could quickly satisfy your curiosity with a quick glance at SS.gov which I suggest you do. But, in a nutshell, GPO would not impact survivor benefits of the teacher's pension. GPO impacts survivor and spousal benefits of SS.

 

[RunningBum]

I don't get the regret thing at all. Unless I know I am going to die early (which makes it a no-brainer to collect as early as possible), I'm going to spend the same whether I'm collecting SS or taking it out of my account. If I do happen to die early, I really doubt I'll be regretting that I spent more of my own money rather than SS money. For one, I'll be more concerned about dying than I am about financial details, and 2) it didn't matter anyway since I wouldn't have spent money differently. Do people who die early also regret that they didn't have a 15% or 20% WR? Most would say that's ridiculous because you wouldn't spend that much in case you didn't die. But it's kind of the same thing.

Too bad for my heirs that I was spending more of my own money rather than SS money, but they could still get more money, and sooner, than if I live to be a lot older.

What I would regret, though, is living into my 90s and every month getting a smaller SS check because I took it early. Maybe I'll be spending less then, but maybe not, because I might need assistance, or want to be able to keep the heat on higher during the winter, help my heirs more while living, etc.

Being single I don't have the factors which may favor one spouse taking SS earlier.

The one thing that gnaws at me is changes (reductions) to the system. I don't believe that the government will make direct reductions to those already eligible without factoring in some fairness for those waiting until 70, but it could happen. What I think is much more likely is that SS becomes fully taxable, which if it happens in my late 60s means I'd have missed getting some tax-free or tax-reduced SS benefits.

 

[youbet]

Yes but in this case this is absolutely untrue.............. I find it impossible to believe that 96K is more valuable than 7K per year COLA's for life for his wife.

I'll suggest your use of the word "absolutely" might not be appropriate. Depending on investment returns on the 4 yrs of SS payments and how long the wife lives beyond 66, delaying SS might or might not be the winner.

I have no problem with the strategy of delaying SS. Everything has it's pros and cons. But it isn't a strategy that's "absolutely" guaranteed to win. It depends....... primarily on the investment returns on the invested SS dollars, the particular tax situation, how long you live, your spouse's financial particulars and how long your spouse lives.

Personally, for folks not impacted by situations such as GPO, I think that if you invest early SS dollars prudently, we have reasonably positive markets and neither you or your spouse have unusually long or short life spans, it isn't going to make much difference whether SS is started at 62, 66, 70.........

I started SS at 62 because of GPO, our particular circumstances and my desire to protect DW financially should I predecease her. So far, the strategy is working thanks to the favorable investment climate during the five years I've been collecting and investing the money for her.

 

[RunningBum]

Personally, for folks not impacted by situations such as GPO, I think that if you invest early SS dollars prudently and we have reasonable positive markets and neither you or your spouse have unusually long or short life spans, it isn't going to make much difference whether SS is started at 62, 66, 70.........

That's true. During the huge market run up in the 90s I remember talking about it with co-workers also getting rich on stock options and deciding it made sense to take the money early and invest it. However, you would have to take some risk to match the return. Not necessarily and imprudent risk, but a risk nonetheless.

 

[Running_Man]

I'll suggest your use of the word "absolutely" might not be appropriate. Depending on investment returns on the 4 yrs of SS payments and how long the wife lives beyond 66, delaying SS might or might not be the winner.

I.

My use of the word absolutely was in regards to your quote. I think people are underestimating just how valuable the social security survivor benefit becomes.

"Because your wife is impacted by GPO, it would be to her benefit if you started SS at 62."

Yet the benefits of deferring Social Security is totally unaffected by his wife's GPO, as I calculate the figures, every dollar the OP gains in deferring social security will absolutely go to his wife as a survivor benefit as well. As a matter of fact, since she will have no social security benefit prior to his death, this deferral is even more valuable than a normal spouse where you would have to exceed the spouse's own social security benefit in order for a benefit to accrue. This means this is an example of the survivor benefit accruing at the highest possible value in social security since the OP is also at the absolute maximum of social security payouts.

As for needed returns an annuity with just a 2% annual step up on the Fidelity web site for a 70 year old and a 68 year old today would cost $432,000 and this isn't even a COLA amount. Deferring for 4 years to age 66 gains $7,000 per year and would cost about $200,000 for a couple at that point with today's quotes. That is over 18% per year US government guaranteed return on a $96,000 investment for deferral. The need to overcome this will be a doubling of the stock market over the next 4 years assuming the OP was 100% in stocks.

 

[Running_Man]

I'll suggest your use of the word "absolutely" might not be appropriate. Depending on investment returns on the 4 yrs of SS payments and how long the wife lives beyond 66, delaying SS might or might not be the winner.

I.

My use of the word absolutely was in regards to your quote, not the benefits accrued. I presume this is referencing the loss of spousal benefits while both are alive.

"Because your wife is impacted by GPO, it would be to her benefit if you started SS at 62."

I think people are underestimating just how valuable the social security survivor benefit becomes.

The benefits of deferring Social Security is totally unaffected by his wife's GPO, as I calculate the figures, every dollar the OP gains in deferring social security will absolutely go to his wife as a survivor benefit as well. As a matter of fact, since she will have no social security benefit prior to his death, this deferral is even more valuable than a normal spouse where you would have to exceed the spouse's own social security benefit in order for a benefit to accrue. This means this is an example of the survivor benefit accruing at the highest possible value in social security since the OP is also at the absolute maximum of social security payouts.

As for needed returns an annuity with just a 2% annual step up for 17,000 per year on the Fidelity web site for a 70 year old and a 68 year old today would cost $432,000 and this isn't even a COLA amount. Deferring for 4 years to age 66 gains $7,000 per year and would cost about $200,000 for a couple at that point with today's quotes. That is over 18% per year US government guaranteed return on a $96,000 investment for deferral of just 4 years. The need to overcome this will be a doubling of the stock market over the next 4 years assuming the OP was 100% in stocks.

One extra added benefit of deferring at least to FRA is that his SS @FRA is $31,000 which means the pension of his wife would be a guaranteed minimum by his social security from cuts and loss to inflation of her teachers pension's while he is alive to $15,500, versus the $12,000 protection the claiming at age 62 SS provides.

 

[LongTerm]

I'm 50 so I haven't really worried too much about SS yet...since my situation will undoubtedly be very different in 12 years than it is now. I however did a little comparison of the total payout year by year of SS if I were to take it at 62, 67 and 70 years old.

It is interesting that the crossover point where starting SS at 67 would have a total gross payout greater than if I started at 62 occurs after I am 76. If I compare 62 to may expected gross payout when I'm 70, that occurs when I am over 78.

But this doesn't take into account the growth of my investments I could leave in my accounts if I used the SS payments to fund expenses instead of withdrawing from investments. My SS payment at 62 is $21,252. If I leave that in my investments it will continue to grow.

Another way to look at it.. IF I live till 90, then the total payout from 62=$612,766, 67=$755,898, 70=$823,250.

Its not an easy or obvious decision... Lots to think about and it will depend on what my expenses are when I'm nearing 62. I've got some expensive plans for when I retire.

I'd love to hear more about how people made the decision one way or the other.

 

[ripper1]

An interesting point that the ss.gov site said was that no matter what age you take ss the average person will get about the same. In other words if you live to the average life expectancy. Of course not everyone is average but to me a bird in the hand is better than two in the bush.

 

[gerntz]

I would take the SS at 62. We can all look back and say what we should have done. In you case with already having heart disease take the money at 62. oldtrig

I think this way too.

 

[pb4uski]

An interesting point that the ss.gov site said was that no matter what age you take ss the average person will get about the same. In other words if you live to the average life expectancy. Of course not everyone is average but to me a bird in the hand is better than two in the bush.

The "about the same" relates to a single life and would be true for a single person.

For a couple you're talking about joint mortality so more analysis is required because in many cases a couple will get more if they defer because of joint mortality unless both people have poor longevity prospects due to hereditary factors or poor health.

 

[PhrugalPhan]

I'm 50 so I haven't really worried too much about SS yet...since my situation will undoubtedly be very different in 12 years than it is now. I however did a little comparison of the total payout year by year of SS if I were to take it at 62, 67 and 70 years old.

It is interesting that the crossover point where starting SS at 67 would have a total gross payout greater than if I started at 62 occurs after I am 76. If I compare 62 to may expected gross payout when I'm 70, that occurs when I am over 78.

But this doesn't take into account the growth of my investments I could leave in my accounts if I used the SS payments to fund expenses instead of withdrawing from investments. My SS payment at 62 is $21,252. If I leave that in my investments it will continue to grow.

Another way to look at it.. IF I live till 90, then the total payout from 62=$612,766, 67=$755,898, 70=$823,250.

Its not an easy or obvious decision... Lots to think about and it will depend on what my expenses are when I'm nearing 62. I've got some expensive plans for when I retire.

I'd love to hear more about how people made the decision one way or the other.

I look at this way too, and soon to turn 52, I, like you, have some time until this becomes a concern. I put together a spreadsheet that compares various scenarios against average rates of return and inflation if I invest the SS payments. The crossover point is usually early to mid 80s. The only thing it doesn't take into account is tax implications of getting SS early. I should probably update it to take that into account.

 

[Easypick]

Wow, thanks for all the replies. It certainly gives me more to think about.

The GPO offset mentioned by youbet and others was a primary driver for wanting to take SS early. The ideal was to leave “our” money to grow while using SS.

Running Man made the point about the effect of waiting until 70 she would get almost as much as my early SS amount.

Decisions, decisions

It sounds like I need to dust off the spreadsheet and add a few columns. I’ll provide feedback when I get things sorted out.

Thanks again. What a great group.

 

[Walt34]

I'd love to hear more about how people made the decision one way or the other.

I'm going to put off SS until at least 66 (FRA) or perhaps 67. The reason is that when I do get The Big Ache the pension drops by 30% for DW. The longer I put off SS the less that affects her income (and thus her options) post-me. I've seen what happens when people fail to take into account unplanned-for events so I'm trying to cover all the bases.

I'm six years older than her, we are both in reasonably good health given our ages so believing that she will outlive me is a reasonable assumption. Her SS benefit is less than half of mine so that is no small thing.

We have everything we need and most of what we want (which being human will never be satisfied) so there is little to be gained by taking SS early. What matters most to me is that I will know she will not be deprived of options if/when I am not there.

 

[ImThinkin2019]

This critically depends on what ESP planner assumes for equity returns. Do you know what assumptions it uses and what was the variance in outcomes?

Personally I see taking SS at 70 as the best longevity insurance one can buy.

Re the ESPlanner equity return prediction, I actually input a predicted return myself. I used a return that is about 3/4 of the return that I'm getting now from fixed income. The good news about ESPlanner is that once the data is loaded it's possible to test different earnings percentages and see how they affect living standard.

 

[wolf]

I am 61 and the wife is 59. We both have upcoming birthdays, so I am facing the “do I take SS early or not”. I think it is a good move based on the following:

• Our annual expenses less travel are $60K
• Wife has a state teacher’s pension of $30K per year (no SS contributions)
• My SS at 62 would kick in about $24K per year for a delta of $6K
• Her health is good. I had bypass ten years ago (runs in the family), but still doing great
• A 3% withdrawal rate would easily cover the balance ($30K) and travel if no SS taken

Can you think of any reasons not to take the money and run?

Sorry if this common question is already answered.

1. If you need the money now, you have no choice.

2. If have good genes, (know you are going to live a long time), wait.

3. If you have plenty of current money, wait, so you heirs will have more.
or just enjoy life.

 

[FIRE'd@51]

3. If you have plenty of current money, wait, so you heirs will have more.

If you are not worried about longevity risk, the studies I have seen indicate you will have a larger portfolio at death if you take SS at 62 and invest it.

 

[photoguy]

If you are not worried about longevity risk, the studies I have seen indicate you will have a larger portfolio at death if you take SS at 62 and invest it.

I think that would highly depend on market valuations at the time you retire.

I'm guessing most of these studies used average US historical returns which may be overly optimistic (at least right now)

Sent from my Nexus 5 using Early Retirement Forum mobile app

 

[eytonxav]

One thing that concerns me is in the event of change in benefits, is the possibility that the potential impact might be greater if you are not already drawing benefits (e.g. deferring to FRA - 70) vs already receiving benefits. No way to know, but nevertheless it is a concern.

 

[Chuckanut]

One thing that concerns me is in the event of change in benefits, is the possibility that the potential impact might be greater if you are not already drawing benefits (e.g. deferring to FRA - 70) vs already receiving benefits. No way to know, but nevertheless it is a concern.

I have thought about that but I can't see Congress giving early SS beneficiaries a break while hitting the those who wait until 70 harder. The idea is that SS should be actuarialy even over the entire group, no matter when one takes SS.

It's more likely, IMHO, that they will simply raise taxes on SS earnings so that people with higher income will pay more and in effect, have reduced SS benefits.

Or they might freeze current beneficiaries until they are moved 'down' to the new lower benefits. I have seen companies do this when wage scales were readjusted.

Or they might to both.

Of course, I may be wrong. And if it looks like current beneficiaries will get a better deal than those who waited, I will be first in line the next day at the SS office.

 

[youbet]

If you are not worried about longevity risk, the studies I have seen indicate you will have a larger portfolio at death if you take SS at 62 and invest it.

Yes. If, for whatever reason, leaving an inheritance at your passing is your objective, you don't do that by buying an annuity.

 

[LoneAspen]

I'll be 48 next year, and plan to ER then. I'm single, never married, no kids, so no dependents to worry about.

I've written Social Security off my entire life because I never counted on it being there for me when I retired. To me, it's just icing on the cake if I get money back out of the system at some point.

Given all that, I plan on taking SS as soon as I possibly can. I want to start collecting early and get as much water from the well as I can before the well goes dry, or I kick the bucket.

Who knows, maybe the monthly check will make a car payment or something. I really am not counting on SS to provide much more than that for me. If everything goes to plan with FIRE, I won't need it anyway.

 

[gauss]

@LoneAspen,

I am 49 and I use to think like you did. I would just save enough on my own. Well I finally ran the numbers for SS and what I had accrued already was huge. Between 1M & 2M in NPV 2014 dollars for my wife and myself. This was assuming that we both quit and never worked another day. I had only worked 22 years at this time. This made the difference between me being able to RE a few years ago and not.

SS is a popular program with the masses, just not with certain groups in politics.
Even if they don't adjust the system to cover more earnings, there still will be enough to pay about 70% of accrued benefits perpetually due to the current ongoing FICA taxes paid by the next, fairly large in number, generation.

If you really like your job or you have enough funds that the difference won't matter to you then this may be a non-issue for you, but you might want to run your numbers so that you have an idea of what is available if your life circumstances change suddenly and you need to make a fairly quick decision.

You can run your numbers at the SS web site -- the trick is to enter 0 for last years earnings so that it assumes that you will earn 0 going forward. This will tell you what you have already accrued under current law.

-gauss

 

[LoneAspen]

If you really like your job

Unfortunately, I don't really like my job that much, and even more unfortunately, I've grown to absolutely hate the career I'm in (the IT field). I hate being a cube rat and staring at a computer all day. That's why, assuming I can FIRE when my 4-year vesting is up, I'm leaving the IT field and never coming back.

You can run your numbers at the SS web site -- the trick is to enter 0 for last years earnings so that it assumes that you will earn 0 going forward. This will tell you what you have already accrued under current law.

Thanks for that info. I knew there were calculators on the SS site, but had never used them. I just used the one that pulls in your actual salary history, and the rough estimates are:

Age 62 = $1407
Age 67 = $1998
Age 70 = $2478

I'll go with the age 62 one. The other amounts aren't high enough for me to put off applying for that long.

 

[Fermion]

Thanks for that info. I knew there were calculators on the SS site, but had never used them. I just used the one that pulls in your actual salary history, and the rough estimates are:

Age 62 = $1407
Age 67 = $1998
Age 70 = $2478

I'll go with the age 62 one. The other amounts aren't high enough for me to put off applying for that long.

Hmmm, with those numbers I would probably hold off for the age 67 figure of $1998 a month. My reasoning is that if I took the $1407 a month at age 62 and put it in a mattress for 60 months, I would only have $84,420. If I waited until age 67 and got $1998 a month, the extra $591 a month or $7092 a year would require a portfolio of $177,300 to generate with a SWR of 4%. Could I grow $84,420 into $177,300 reliably in five years with a safe investment? (worse than that since I don't get it lump sum at the beginning of the five year period).

 

[LOL!]

Once again, singles can benefit from file & suspend. That way, if they need a lump sum of all the payments that they have deferred, then they can get them.

This is not to be ignored nor treated lightly as it is a powerful option not available with mere annuities.