Social Security future? Applying at 62?

[bobandsherry]

200 messages and what I've learned --> there is no single right or wrong answer on this, yet many seem to think it is that simple.

 

[USGrant1962]

200 messages and what I've learned --> there is no single right or wrong answer on this, yet many seem to think it is that simple.

Good insight. Fact is that the math is approximately actuarially neutral, which is simple. The rest is opinion. And opinions are like...

 

[Sunset]

No clawback that I have heard of.

For me, it is breakeven. I was born in 1955. So let's say that I could collect $1,000 at my FRA of age 66 + 2 months.

From 62 to FRA I would collect $750/month for 50 months or $37,500. Beginning at FRA I would collect an additional $250/month so it would take me 150 months or 12 1/2 years to "breakeven" which will be 2034... so I'll take my chances with FRA because if I am collecting $1,000 and get haircut 23% that is $770/month from 2034 on vs if I start at 62 it be $750 haircut to $578.

$750 for the rest of my life from 2034 on is better than $578.

Great thinking !!
Since we are close in age, this is helpful to me also to understand.

I do think an actual 23% cut will not happen as I think it will be fixed by a number of small measures as the time gets closer.

1. The tax-ability will move to 100% as that is easy and "only" affects rich folks.
2. The payroll tax upper limit will move a lot higher without a corresponding rise in top payments.
3. They may move future FRA out to 69 or 70 as people are living longer.
4. Finally they may simply allow SS to borrow for the next 30 years while these changes phase in.

 

[Perryinva]

DLDSs take is that he would get the “full amount” longer, such that if the harcut iccurs, it makes “break even” based on his spreadsheets so far down the road that it makes no sense to delay. Again, I never stated delaying is correct for everyone, nor one size fits all. The reality is that no one knows what will happen with SS. This group loves to point out that historically, the market will follow an average return and preaches firecalc. I would easily venture that the chance of an across the board SS haircut is far less likely than any guarantee that future investing will do as well as it has historically. The ramifications to the US economy if a monstrous cut to such a large percentage of the population were to occur plus the political fallout, to me, spell out many other solutions besides an across the board cut. There are dozens of solutons to increase revenue to SSA that are orders of magnitude more likely than cutting benefits.

As far as individual preferences go, the inheritance to my heirs is literally about the last thing I care about, so as DLDS says, there is no one size fits all solution. Reducing taxes, and an effortless COLA annuity rank much much higher.

 

[Perryinva]

I guess I thought the math and logic were sound. It's a simple case, but I think it is makes a valid point which eliminates this one reason for starting early.

There are plenty of good arguments for starting early. "I can safely spend more in the early years" isn't one of them.

+1. I’ve yet to see any real math examples, simple or complex that show otherwise. It’s income vs NW. There have never been cuts in SS, yet dozens of income limit increases and percentage increases while SS was still sound. To believe that passing the buck to future generations and wealthier income taxpayers to fund SS will not occur has zero precedence lacks any credibility.

 

[Perryinva]

I wonder how many people who boast....” well we are waiting till 70 to get the bigger check” will even make it to age 70 it’s such a guess you don’t know how long you’re going to live. I have a lot of friends who thought they would live to 90 and died at 61 with heart attack.

So what is the relevance of this connected to the discussion ? Dead at 61 is dead and SS has zero impact. If I were to die at 69 (my mother did but she was a chain smoker), and was not aware that I would, and I lived from 62 to 69 living on a $6k/yr higher income, assuming I would collect SS at 70, have I not lived better for longer than the person that took it at 62 and died at 69 so they could preserve their NW? It makes zero sense to me to die leaving $1M to heirs while living on less, rather than living on a higher income for those 7 years and leaving them $750k. If my spouse is still living, she will be FAR better off getting my larger SS check and “only” $750k than a $2k/m smaller check and $1M. If your portfolio is so reduced that you are uncomfortable by delaying filing then the reality is you can’t afford to delay so why discuss it? At 70, (and I’m not claiming I will file at 70, but I sure will not file at 62 or likely even FRA), my net income from pensions and SS alone far exceeds what my expenses will be. Expense reduction is not a factor. I didn’t work and save so that I would watch my pennies in retirement. There will be no reduction in my standard of living in retirement. At 70, even delaying filing, RMDs will force my WR and increases my taxes to a far higher taxed income than I want. So why on earth would I file early to live on less and pay more taxes if I live longer??

I’m already 60, so I want to start retirement with a higher income from day one. I’ve attended way too many funerals of friends & family that died before 70 and after 85. All I’ve gotten (financially) from attending them is I want the higher income, from day one, not to leave more to heirs to waste.

 

[DrRoy]

I'm planning to take it at 70. I can always change my mind later on and take it earlier.

But if I took it at 62, then I'm stuck with that decision.

So why am I waiting until 70:
- married so one of us will likely make it to 90
- gives me time to convert IRA to ROTH before age 70 , and if I did it when collecting SS, then the SS would be taxed.
- I have faith that all the congress members want to be re-elected so any change won't affect old folks who planned on SS.

+1. I have never counted SS in my planning so it will be like finding money. I sometimes think of it as a one time COL adjustment.

 

[Winemaker]

+1. I have never counted SS in my planning so it will be like finding money. I sometimes think of it as a one time COL adjustment.

+2

 

[rayvt]

+1. I have never counted SS in my planning so it will be like finding money. I sometimes think of it as a one time COL adjustment.

+3

And the thing to do with "found money" is to go ahead and spend it.

If you've already got your ducks lined up in a row, then you don't need the SS money and you also don't need to maximize it by deferring.

And if you don't need it, might as well spend it on extra goodies.

 

[atmsmshr]

2016 Bipartisan SS fix recommendations

Link to 2016 Bipartisan SS recommendations:

https://www.ssa.gov/OACT/solvency/BPC_20160609.pdf

Contains possibilities I never could have imagined.

The sky is not falling - Little haircuts for everybody.

Good for you if you are older than 62 in 2022. (But word search 'clawback')

 

[JoeWras]

Link to 2016 Bipartisan SS recommendations:

https://www.ssa.gov/OACT/solvency/BPC_20160609.pdf

Contains possibilities I never could have imagined.

The sky is not falling - Little haircuts for everybody.

Good for you if you are older than 62 in 2022. (But word search 'clawback')

Thanks for the find. Very interesting. I think these kind of things don't get much reporting since it is hard to find a severe sob story of someone affected.

I wrote a bunch here that I fear would be political. Let my try to summarize without it:
- A good plan overall. Gotta do something, glad someone is thinking.
- May hit the future generations a bit harder than the current. Sadly, I'm "future" in this report. Oh well.
- Phase ins are good, but should be longer in my opinion. But at least there are phase-ins to cushion the blow.
- The dates given have already passed, meaning there is no action. The longer the wait, the greater chance of turmoil and short or no phase ins.


I really don't know when I'll take SS. I'm 62 in 7 years. I think this issue will be in the limelight by then (nice graphs about cost and income in the report). Maybe I'll have clarity. My current plan is to use it for longevity insurance and delay it as much as possible. That may change based on what is done or being talked about.

 

[NW-Bound]

Link to 2016 Bipartisan SS recommendations:

https://www.ssa.gov/OACT/solvency/BPC_20160609.pdf

Contains possibilities I never could have imagined.

The sky is not falling - Little haircuts for everybody.

Good for you if you are older than 62 in 2022. (But word search 'clawback')

Thanks for posting.

I am going to tell my children to save more if they don't want to work till they are 69.

About the clawback, it applies to the yet non-existent BMB (Basic Minimum Benefit). It appears to be something to replace SSI, hence the clawback will reduce this benefit to those who have other incomes despite having little SS benefit. It does not apply to people who have earned a higher SS like most workers, except that they will pay more taxes on their SS. Do I miss something?

 

[Independent]

Link to 2016 Bipartisan SS recommendations:

https://www.ssa.gov/OACT/solvency/BPC_20160609.pdf

Contains possibilities I never could have imagined.

The sky is not falling - Little haircuts for everybody.

Good for you if you are older than 62 in 2022. (But word search 'clawback')

It looks to me like the tax increases are worth about 1.40% of total payroll. They are: increasing the tax rate from 12.4% to 13.4%, and increasing he taxable wage base to about $195,000.

The three bigger benefit cuts are worthabout 1.21% of taxable payroll.
They are: adding more years to the AIME calculation, increasing the NRA, and using a different COLA index.

I know that the SSA does this type of analysis for proposals backed by "important" congress people. In this case, a former senator seems to have enough clout to get noticed.

 

[Perryinva]

That is part of it. I will be 64 in 2022, and DW 69. If you do not need to count on SS, then you are a lucky minority. Maybe y’all are part of the 17 in the $20k/mo + group? In that case, I wouldn’t sweat it either, and take it at 62 to just invest or give to charity. Or the flip side is you retired young and have had most income from non SS paying sources, so your SS is a small amount. If my SS was only $500/mo, then “optimizing” it is rather pathertic. But for even the bulk that responded in the income survey, where expected income is in the $5-11k/mo range and especially if you have maxed out contributions for 35 plus years, not planning on $2-3.5k/mo is ludicrous. If I collect at 62, my SS will be $2k/mo. Going to 67 makes it $3k. And 69 makes it $3320, all in 2017 bucks. The difference between a $7k and $10k income in todays dollars is huge, where I come from. I actually don’t know anyone that would not consider an extra $36k/yr of tax advantaged income (much less, even a $12k/yr) very significant.

When I was in my twenties, SS contributions and expected income was a joke. I remember my grandfather talking about finally getting his “free” 400/mo SS check. Relatively speaking it probably WAS free as I’m sure he collected way way more than he ever contributed back then, (he was a self employed barber). The pittance that was taken out per year in my early paychecks was barely a blip on my paycheck and I also didn’t expect it to be there when Inretired at 65, and if it was, just a bonus. Fast forward to today, and something like $9k comes out from FICA &Med, so its no longer a blip, and the income from it is sizable and within my grasp. DW is 65 and already collecting. Counting on SS enables me to retire early. And it is the only income for the vast majority of retirees. Certainly almost every relative I have.

 

[daylatedollarshort]

I didn’t work and save so that I would watch my pennies in retirement. There will be no reduction in my standard of living in retirement.

The interesting thing about pennies is if you save enough of them they turn into millions of dollars, especially over 50 years of retirement. If a retiree household can figure out how to live a $200K life on $100K not by scrimping but by optimizing, there's $100K X 50 = $5M less retirement funding needed for the same, or perhaps with a little creativity, an even better overall lifestyle. Additionally, there aren't any SS, Medicare, state and federal income taxes on lower overhead compared to earned income, maybe knocking off another $1M+ in retirement funding required over those 50 years.

I agree with you I'm not ignoring our SS. The net present value of our combined SS benefits is in the seven figures. Good for people who have so much money they can ignore that kind of money in their calculations, but even if I had $10M, $1M in SS benefits would still be 10% of my net worth.

 

[Chuckanut]

Good for you if you are older than 62 in 2022. (But word search 'clawback')

Clawback seems to indicate that the belief that the tax system will be used to 'payback' some SS dollars paid to higher income peoples certainly on the table. Thus, nobody's benefits are cut, they are simply returned to the Feds.

Money is fungible.