Social Security at 62 - Yes or No

[Easypick]

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?

 

[LOL!]

When you die, will your wife still get SS payments based on your record or is this one of those things where she will never get the spouse benefits?

Are either of you still working? Is she receiving her pension now? Are you all converting traditional IRA to Roth IRA before receiving SS benefits? Do you want to? Do you have a taxable account with which to pay taxes on conversions?

 

[pb4uski]

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?

Will she get anything from SS if you were to pass on? If not, then he decision is probably similar to if you were single, in which case it may not matter because in theory the payouts are designed to be actuarially equivalent. If she will get benefits once you pass then it may be better to wait.

 

[ImThinkin2019]

Everyone's case needs to be evaluated individually. We found that in our situation it was best to take SS at 62. That was not intuitive but when we modeled our situation using ESPlanner we found that our living standard was highest when we took it early.

In our estimation, the reason it worked out this way is because my DW has a deferred salary that will start paying out as soon as she retires. It will last for 10 years. Between that and the SS we'll be able to avoid pulling much if anything out of our savings until after the 10 years are up. That will allow our portfolio to grow "unmolested" during that time, and the resulting portfolio growth will make up for the lower SS payment each month.

I would not have come to this conclusion without modeling it in ESPlanner. It really made it clear and easy to see.

But again, each situation is different. So there's no blanket advice that applies to everyone.

 

[dallas27]

I read once this little known thing about ss. You can take it at 62. At 67 you can pay it all back(nominal dollars i beleive!). Then your monthly benefit gets reset to full. Google it. Financially would be a smart move if played right and your health is good.

I might be full of it, but i did read that once.



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[bizlady]

Her survivor benefits would be my determining factor in your case.

 

[Running_Man]

I read once this little known thing about ss. You can take it at 62. At 67 you can pay it all back(nominal dollars i beleive!). Then your monthly benefit gets reset to full. Google it. Financially would be a smart move if played right and your health is good.

I might be full of it, but i did read that once.



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This is no longer allowed.

As far as SS taking, as you do not need it you should withdraw the 3% annually and let the SS value grow as a backup plan. If at any time you decide you should have taken it you can claim and get the prior 6 months worth as well, but with a 3 % withdrawal rate there is no reason to claim.

 

[REWahoo]

Yep, they closed that loophole a couple of years ago.

 

[GrayHare]

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

Solely from a $ received point of view (i.e. ignoring tax issues, spending patterns, etc.) the breakeven point comes about age 82. If you anticipate living beyond that age, the total you'll collect during your lifespan will be higher if you start payments later.

 

[photoguy]

That will allow our portfolio to grow "unmolested" during that time, and the resulting portfolio growth will make up for the lower SS payment each month.

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.

 

[Bikerdude]

Everyone's case needs to be evaluated individually. We found that in our situation it was best to take SS at 62. That was not intuitive but when we modeled our situation using ESPlanner we found that our living standard was highest when we took it early.

In our estimation, the reason it worked out this way is because my DW has a deferred salary that will start paying out as soon as she retires. It will last for 10 years. Between that and the SS we'll be able to avoid pulling much if anything out of our savings until after the 10 years are up. That will allow our portfolio to grow "unmolested" during that time, and the resulting portfolio growth will make up for the lower SS payment each month.

I would not have come to this conclusion without modeling it in ESPlanner. It really made it clear and easy to see.

But again, each situation is different. So there's no blanket advice that applies to everyone.

+1. Run your numbers. Consider taxes, State and Federal.

 

[youbet]

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?

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

 

[gauss]

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.

+1 - World's cheapest inflation adjusted annuity is to delay drawing Social Security.

For "average" lifespans, remember that includes everyone in the US over all social-economic status. Many on this board may be well above average in this regard and there may be some correlation to longevity based on this.
Research ties economic inequality to gap in life expectancy - The Washington Post

-gauss

 

[LOL!]

Something in the media lately is that "file-and-suspend" works for singles and married folks. The idea is that some folks are worried that if they wait to collect SS that they will die before they get any benefits. I think this is what the OP fears, too. A trick is available for those who are not healthy, but who will probably have some notice that they are on their death bed. If they file-and-suspend, they can get all their back benefits paid to them in a lump sum and not lose them, while still banking them and getting the 8% per year increase:

http://www.investmentnews.com/artic...le-and-suspend-strategy-works-for-singles-too

Clearly, the unintended consequence of this is that the recipient's suspended SS benefits are not lost, but become available to them and probably end up in their estate. Have your cake and leave it for your heir's to eat, too. Or don't die and enjoy the higher payouts later.

 

[marko]

Solely from a $ received point of view (i.e. ignoring tax issues, spending patterns, etc.) the breakeven point comes about age 82. If you anticipate living beyond that age, the total you'll collect during your lifespan will be higher if you start payments later.

Right. And you also need to consider this: if you're withdrawing from an IRA/401K to make up the difference instead of taking SS, you might be better taking SS.
1) The money you don't take out continues to grow in your IRA
2) SS is taxed lower than the same amount withdrawn from an IRA
3) As the breakeven is 79-80yo, you'll likely need less $$ at that age.

To me, the "don't take it till later" works best if you're still working. If you're withdrawing from pre-tax savings, SS is better taken asap.

YMMV of course and every situation is different.

BTW: I received my FIRST SS check last week!!! Yahoo!!!

 

[Running_Man]

If you wait to age 70 to claim SS then your SS benefit should be about 3400 a month or 41K per year.

The reduction in survivors SS for your wife will be 2/3 of her teachers benefit, in today's dollars assuming the teachers benefit is fully COLA which probably is not the case actually, many teachers pensions have a maximum yearly increase, would be 20K reduction meaning upon your death deferring to age 70 she would receive a SS benefit of 21K per year (41K - 20K) or almost as much as you would be claiming at age 62. Otherwise her SS survivor benefit is going to be 24K -20K or 4K per year. In other words, every year you wait to defer SS will increase SS by about 2000 per year on average which fully adds to your SS and to your wife's survivor SS.

My father in law had bypass surgery at age 50 and is still going strong at age 89 with his wife at age 87. Again since this money is not even needed I think financially and strategically it makes an incredible amount of sense to wait to claim to age 70.

 

[Running_Man]

Something in the media lately is that "file-and-suspend" works for singles and married folks. The idea is that some folks are worried that if they wait to collect SS that they will die before they get any benefits. I think this is what the OP fears, too. A trick is available for those who are not healthy, but who will probably have some notice that they are on their death bed. If they file-and-suspend, they can get all their back benefits paid to them in a lump sum and not lose them, while still banking them and getting the 8% per year increase:

http://www.investmentnews.com/artic...le-and-suspend-strategy-works-for-singles-too

Clearly, the unintended consequence of this is that the recipient's suspended SS benefits are not lost, but become available to them and probably end up in their estate. Have your cake and leave it for your heir's to eat, too. Or don't die and enjoy the higher payouts later.

Don't you have to be full retirement age to file and suspend with a right to future full payments? If you were to die suddenly ( say of a heart attack) the survivor benefits are reduced to the point the benefits were filed and suspended and in addition the estate is not entitled to the payments not received since the claim was never made, no? That is my understanding anyway. Take it this way if you file and suspend at FRA and die suddenly of of a heart attack a month before turning age 70, then the 4 years of SS are lost additionally, the survivor benefit will be based on the age 66 survivor benefit, in this case about 31K per year, permanently reducing the survivor benefit by 10K per year. In this case 11K instead of the 21K

 

[ripper1]

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

+1......Because of my government pension I will receive nothing if wife predeceases me.

 

[Running_Man]

+1......Because of my government pension I will receive nothing if wife predeceases me.

Yes but in this case this is absolutely untrue, the wife quite the opposite is standing to benefit from every year deferred in taking SS. Numbers should be run before any decision is made, but even assuming he dies at age 66 FRA --- to claim SS now would mean $96,000 in payments from the government and a higher investment balance but wife's survivor is 4K per year @ 62 claiming when it would be and 11K @ 66. I find it impossible to believe that 96K is more valuable than 7K per year COLA's for life for his wife.

 

[ripper1]

Yes but in this case this is absolutely untrue, the wife quite the opposite is standing to benefit from every year deferred in taking SS. Numbers should be run before any decision is made, but even assuming he dies at age 66 FRA --- to claim SS now would mean $96,000 in payments from the government and a higher investment balance but wife's survivor is 4K per year @ 62 claiming when it would be and 11K @ 66. I find it impossible to believe that 96K is more valuable than 7K per year COLA's for life for his wife.

Well, yes in that case but in mine because of Government Pension Offset 2/3rds of my pension is more than my wife's benefit.

 

[Independent]

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

If you do the simple math with a 4% (or 3%) SWR, you'll discover that you can safely spend a little more now if you defer SS.

If you're risk averse, and concerned about the double whammy of low investment returns coupled with a long life, deferring SS provides some insurance (this is just a re-statement of the first point).

Fortunately, the differences are so small, due to the SS adjustment in monthly income, that you can't make a "wrong" decision on this.

 

[oldtrig]

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

 

[Bestwifeever]

...

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

Should she die first, would you receive survivor benefits on her pension plus your full SS amount or does GPO come into play in that case too?

 

[34rlsa]

Should she die first, would you receive survivor benefits on her pension plus your full SS amount or does GPO come into play in that case too?

Good question.

Very curious to see if anyone has a definitive answer.

 

[GregfromTexas]

I agree with do the math, in my mind the hardest variable to decide on is life expectancy.

The SSA has piles of raw data here: Life Tables

I have a calculator that uses that data and it says the following:

A 61 year old Male today has the following probabilities of survival:

20% chance of living to 92.
33% chance of living to 89.
50% chance of living to 85.
A 70% chance of living to 78.

Of course these are national averages so you adjust for good and bad health/lifestyle a bit.

This may be obvious to some, but when I did the math it was interesting (but obvious once you think about it) to realize that the older you get the older you can expect to live to at any given probability, so the odds change for you every year (positively).

Once you put a stake in the ground on this, the rest is just modeling the policy. I don't think benefits are that likely to be cut for anyone as close to retirement as you are, but your guess is as good as mine.