SS at 62 or 65

[runnerr]

Ok I have read and heard various opinions now to get it from the real source. Is it better to take SS at 62 or wait till 65? And how many years will you have to live to make it more advantageous to wait till 65. I think I have heard that you will have to live past 85 to make 65 the better choice. Any one that can clarify this for me.

My father always told me a bird in the hand is better than 2 in the bush.

 

[retire@40]

Ok I have read and heard various opinions now to get it from the real source. Is it better to take SS at 62 or wait till 65?  And how many years will you have to live to make it more advantageous to wait till 65. I think I have heard that you will have to live past 85 to make 65 the better choice. Any one that can clarify this for me. 

My father always told me a bird in the hand is better than 2 in the bush.

And your father is right. Take the money at 62. I would take it at 40 if they gave me the option.

 

[bongo2]

If you can afford to, and are in good health, you should delay. Scott Burns laid it out very simply in the article below. Basically you are purchasing a very valuable COLA annuity for well below what it would cost in the open market. Since you have a cost based on everyone's mortality you can make it more valuable if you expect to live a lot longer than most. If you have a spouse drawing on your benefits and you are looking at joint mortality it isn't even close. But the more imporatant thing is that you are hedging your own longevity at a very attractive price. Anytime you can reduce risk and increase expected return you should do it.

http://www.dallasnews.com/sharedcon...-burns_22bus.ART0.State.Edition2.967628d.html

 

[runnerr]

Thanks for the information. I guess one could look at it as safty net knowing if you want you can get once 62 but waiting for 65 is best.

 

[azanon]

One's health is going to be a big key I would think. Ive seen some folks retire from where i work, not even 60 years old, that look like they might fall over dead tomorrow; or if they did, it would not come to the surprise of anyone.

If you think you are one of these..... take it at 62

 

[cute fuzzy bunny]

I think it takes you something like 12 years to break even if you take it at 65 vs 62. You'll be in your mid 70's by then. I'm going to bet you'll enjoy the money a lot more between 62 and 74 than you will after 74.

About the only reason I can think of why I'd wait is if I just absolutely, positively couldnt think of a dang thing to spend it on, or if I thought I'd be ok until I was 70 but might run out of non-SS money by then.

 

[haha]

Become informed, and then do your own thinking!

Sorry, that just isn't the way things are done around here.

Ha

 

[FreeBird]

I'll be 50 this year  so I've also begun to tumble this nearing decision somewhat. I hope to ER at (or just before) 55 so I'm sure that I'll be more knowledgeable on how this decision will apply "uniquely to me" at that time.

Will SS put me into a higher tax bracket at that time? Will it be to my advantage to collect SS at 62, then re-invest if my own funding is still quite sound? Or will delaying SS until some later date be in my best interest? Interesting questions with lots of unkown variables...

Guess that everyone's situation is different & unique to them but I believe that I'll eventually make the correct decision by begining to ponder upon it now... but still, I know that I'll best be able to answer this question as I get much closer to that magic age.

Heck, a LOT could happen in just the five more years to age 55 limiting me to draw from my own ER funds. Probably won't happen but it could so I'll decide on that closer to the magic day also.

 

[Nords]

Read the book, and make your own decision.

Perhaps instead of telling the poster to go away and make his own decision from a favored document, we could provide more info and let him decide who to believe...

Ok I have read and heard various opinions now to get it from the real source. Is it better to take SS at 62 or wait till 65?  And how many years will you have to live to make it more advantageous to wait till 65. I think I have heard that you will have to live past 85 to make 65 the better choice. Any one that can clarify this for me. 
My father always told me a bird in the hand is better than 2 in the bush.

Scott Burns is the man when it comes to the SS debate, but he's also going to work until he drops in harness.  I think he's physically, emotionally, & mentally incapable of retirement.  He just turned 65 but I've lost track of whether or not he's drawing SS.  My guess is that he's going to delay it until age 70 to avoid taxation.

Here's some other considerations, although they may be mutually incompatible:
- The SS system is healthier than we're being told.  It'll probably last 20-30 years with no changes.
- My father says that your father is always right.
- Your spouse says that too.  She'd prefer that you delay SS as long as possible, especially if she gets more survivor's benefits from SS than on her own distribution.  Bud Hebeler has a thought-provoking article on delaying SS to raise the inevitable survivor's benefits...
- How long are you planning to work?  Drawing SS while you're working generally means paying taxes on it.
- Are you taking any required minimim distributions from IRAs or other deferred-compensation plans?  That income will probably push your SS receipts into a taxable bracket.
- How much SS income are you talking about?  If it's $25K/year then you need to crunch some numbers, but if it's less than $10K and not necessary for your lifestyle then there's no harm in waiting.
- How's your health?  A 14-year payback is pushing your life expectancy if you're starting it at age 62, but "only" half your demographic dies at "your" life expectancy.
- As Scott Burns says, every year that you delay gives you an 8% return on your money.  If you don't need the income, and if you're banking SS in a checking account instead of small-cap value stocks, then you're probably better off delaying the benefits and hoping to live longer.

My personal inclination is to take the money & run.  However I have nearly 17 years to make a decision and we're "only" talking about ~$9-$10K/year.  We don't expect to have any RMDs I'm expecting to live into triple digits.  Spouse has her own darn pension and will receive more from her own SS than from survivor's benefits.

It would give me extreme personal satisfaction to take more money from SS than I've paid into it.  I'll keep running the numbers to figure out the most effective way to achieve that goal...

 

[haha]

It would give me extreme personal satisfaction to take more money from SS than I've paid into it.  I'll keep running the numbers to figure out the most effective way to achieve that goal...

If you are "planning" to live until >=100, no crunching necessary unless the rules change.

I really don't see the fuss. If you need the money, take it. If the stock market is at generational lows, take it. If you have a great deal of confidence in your all season investment prowess, take it.

All other situations say wait, unless you have been diagnosed with a terminal illness.

I did what Scott suggested- looked at them as annuities, and priced the annuities. Hands down, age 70 is the winner. For a man. It is even better for a woman, and if one earner has a high benefit and the spouse much lower one, it is even more clear-cut. And this is for someone who is already retired; hence there are no give-back issues. Few things in retirement finance are as clear as this. You don't need to ask anybody, only be able to compare two numbers and see which is bigger. IMO, the "breakeven age" is essentially a red herring.

I don't understand the psychology of people willing to live on beans and rice and chicken wings, which to me implies a great tolerance for delayed gratification, and then when a real bargain is being offered that takes only some waiting, they start talking about "bird in the hand."

There is a famous experiment which gets to this. Kids are offered an ok cookie right now or a humungous cookie tomorrow. Only a few can wait.

Ha

 

[Gearhead Jim]

Looking at the idea that "A bird in the hand is worth two in the bush", there is a real possibility that SS will be reduced some time, some way. When I turn 62 in two years, I'll be inclined to take SS immediately just because I might lose some or most of it later.

But two questions:

Any predictions on when we will know how SS will be changed?
and
Any predictions on how those changes will effect folks my age?

 

[haha]

Any predictions on when we will know how SS will be changed?
and
Any predictions on how those changes will effect folks my age?

Sure; lots of them. And all equally valuable.

Ha

 

[Lancelot]

I'm always ammused when people say "SS will not be there for me..." Maybe so, but if SS is the "Third Rail" of politics -as in touch it and you die- why is it that today, the system seems impossible to change (reform) and in say 10 years time every one will passively say, well, gee wiz, I guess I won't receive any earned benefits. Oh well...

My guesses are: the SS COLA increases will be "adjusted", increase the retirement age and raise the SS payroll taxes.

Interestingly enough, a SS program is being created here in Thailand. The current "system" in Thailand is relying on your kids...

Lance

 

[cute fuzzy bunny]

Why dont you outline what you think is inaccurate then? Thats what a discussion group is. Ask a question, get some answers, debate the answers. Not crap on the answers without giving any direction other than to go read a book while concurrently saying that you should never take advice from an internet discussion group! Guess we should all just close the browser and go make a nice sandwich or something?

Seems to me that the only reason you offered as to why it might be a good idea to defer taking SS was the tax impact on earned income if you took it early.

So riddle me this Batman...why would someone planning on working until 65+ be asking questions about social security on an early retirement board?

In the meanwhile, about half the people who decide to wait will die before reaching a break even. I'm going to guess a good sized portion of the other half will suffer a debilitating mental or physical event that will leave them in a situation where the best they'll be able to do with the extra money is to buy a higher quality soup to drool into while they watch tv. Some small portion will live well past 75 and be physically and mentally viable and active enough to enjoy a few extra dollars a month.

I'm basing this line of thinking on admittedly anecdotal evidence. My dad lives in a 55+ community, although most of his neighbors are 70+. He's still active at 71, a few of the few hundred people he knows and interacts with are still able to be active. Most hardly leave the house. A lot of strokes, hip and other joint troubles, etc. And these people are financially well off, so they probably have better health care and the financial ability to resolve problems with their health. I'd imagine its a little bleaker among the poor and middle class elderly.

Given early retirement, the focus of this discussion board, an early retiree will be able to reduce withdrawal demand and increase portfolio survival rates, increase the amount left to a spouse or family, and give them a higher current income while they can actually enjoy it.

And I'd apply that line of thinking even more greatly to someone with limited means vs a "multi millionaire", since for some reason you think that changes the advice...

 

[retire@40]

...In the meanwhile, about half the people who decide to wait will die before reaching a break even.  I'm going to guess a good sized portion of the other half will suffer a debilitating mental or physical event that will leave them in a situation where the best they'll be able to do with the extra money is to buy a higher quality soup to drool into while they watch tv.  Some small portion will live well past 75 and be physically and mentally viable and active enough to enjoy a few extra dollars a month...

Exactly.

People can write any lengthy analysis they want on when the best time is to take social security benefits. However, all I know about this subject and all I believe is relevant about this subject I gained from my own real-life experience, not any formulas.

I've witnessed too many people who worked 30 or 40 years and then waiting until 65 or later to take benefits only to see them die before the first payout. One person very close to me died of a massive heart attack at 64 a few days after talking to me about how much more he would be getting from SS now that he waited to age 65.

It's a suckers game to wait.

 

[MasterBlaster]

well I guess dying puts a real step-function in the analysis.

However as I understand it taking payments at any age, on average, gets you the same amount of money. They are all actuarally equivalent for the average person.

Sure you can game the system if you are likely to live to be 90 or expect to die at 63.

However, you have to look at your own situation and decide what is right for you.

There is no right answer here !

 

[SteveR]

(), Agree with your comments.

My plans are to take SS at 62.  I want to continue to grow my IRA as long as possible and SS will allow me a smaller distribution.  My RMD will be high enough later in life that a small increase in SS is meaningless so I will take it in the early stages of retirement when my income needs are higher rather than wait.  It is all about what works for you.  Your needs may vary so there is no one size fits all to this or any other FIRE issue. 

edited because I can't type worth a crap.

 

[bongo2]

I've changed my mind. I just realized that I'm going to be paying for y'all's social security, so forget about everything I've said. Don't read Burns. If you're healthy take it at 62. If you have cancer please wait until you're 70.

 

[cute fuzzy bunny]

Ok thanks. The opinions stated are wrong, but its too much trouble for you to say why.

Your thoughtful input is very much appreciated. Is there a particular reason why you seem to be taking this personally?

Scotts article is fine, but it compares taking SS early with an annuity that a lot of people wouldnt buy, makes assumptions about investing that dont apply to a lot of people here, and completely whiffs on the whole idea of quality of life at 62 vs 75 when you'll finally start getting an ROI.

Sounds like there are some reasons in your mind as to why those things arent applicable, but since you wont share, I guess we'll all have to remain in the dark... :

 

[bongo2]

I think what you may be missing is that delaying social security may allow you to spend more today as well as later. Consider the following example from FIREcalc:

You are 62, have the max SS, and want a 20 year portfolio with 95% survival in FIREcalc. With the defaults you can withdraw $33.9k + your $17.9k from SS = $51.8k. Now you plug in waiting until 66, so you put $24.3k in 4 years in the SS spot. Now your 95% withdrawal is $54.6k. So, even if you croak before 80 you still "win" because you've been spending an extra $3k a year.

 

[cute fuzzy bunny]

Whodathunkit: I'm sorry you feel we're all bullying thugs who want to railroad you from your own version of the facts. A particular "objective" financial analysis using numbers that dont necessarily apply to anyone does make a case to wait. The "objective" analyses I've looked at say the opposite. But thanks again for taking a lot of time to tell us why we're bad people and why you wont debate your point.

Bongo: Can you tell me exactly what you put in and where? I did a pair of runs using my numbers (changing ONLY the first 5 boxes - withdrawals, starting portfolio, lifespan, the amounts of SS (I used the two #'s you suppled...17.9k and 24.3k) and the year to start withdrawals. I also changed the inflation from PPI to CPI. What may be weird in my case is a 45 year lifespan of the withdrawal. In my runs, firecalc says if I take SS at 62 I can take an extra $660 per year @ 95% survival for all 45 years vs waiting until 67.

So one of us is doing something funny, or perhaps firecalcs small 650k default port size causes more failures than most ER's might see. Maybe my change from ppi to cpi did something odd? I'll run it again using PPI...

Edit: I tried it using PPI and the results were even more compelling: I get to spend an extra $880 a year for 45 years by taking SS early vs waiting.

 

[Texas Proud]

Whoda.... I think you are being attacked a bit by () for some reason... but, as you say it does not bother you...

BUT, I will debate a bit. I am looking at it for my sister and it is NOT a slam dunk... yes, if you are looking at it as an annuity it most definately is a slam dunk, but if you invest in stock and earn a bit more, then it is a wash or you win by taking early..
And as everybody else has said, if you want to spend more money NOW than later, it is not a win..

 

[haha]

I have listed several references that make a case for waiting to take SS.  To this list I would add the work of Henry Hebeler (analyzenow.com).

Question -- has anyone seen an analysis published in a vetted outlet by an analyst of equal standing that recommends taking SS at age 62?

Note -- I'm NOT saying that such a thing does not exist.  I'm not directing this as a rhetorical question toward any person in particular.  I'm just asking the question so that I can read the analysis, for my own information, if it does exist.

I don't think such an analysis could exist. The reasons for waiting- given reasonably good health and no immediate need- are very compelling rationally. The reasons for taking it now are very compelling emotionally.

As we all know, emotions are more powerful than reason, so many people take it early.

The argument that you can do better with stocks is just hope, and even so, you need fixed income, and a COLA annuity growing at 8% pa dominates any possible choice in that domain.

The early choice is especially doubtful, since the decision to take it is irrevocable, whereas delay is just that- you can start anytime once you are past 62.

Several years ago when this first came up on this board I went through this, referencing Hebeler's book in particular, as well as several papers. No one debated with me, they just totally ignored any of the things I said. I guess they figured what could some old peckerwood know about this anyway?

Hey, come to think of it, that might be  point to ponder. 

Ha

 

[cute fuzzy bunny]

Whoda.... I think you are being attacked a bit by () for some reason... but, as you say it does not bother you...

I dont think so. I started out trying to find out if whodathunkit actually had any significant points to make and wished to debate them so I could possibly learn something and perhaps change my point of view. However, he felt his opinions were statements of fact, that any other opinions expressed here were not worth anything, and that he he has no need to explain his point of view...we should simply accept it...or better still, dont because he doesnt care in the first place. ?!?

So yeah, I poked him a little. I think it was well deserving. If you dont agree, then I'm open to that debate as well. Maybe re-read the whole thread and tell me what you think?

Ha - I tried modelling waiting vs not waiting with many investment mixes as part of my total financial picture - not just equities - I mentioned some above. I couldnt find any reasonable mixes (20:80 to 80:20) that made any difference. I always had better portfolio survivability and a higher withdrawal rate by taking SS sooner. That jibes with what I thought.

That the financial aspect is superior, I dont have to factor in survivability or quality of life possibilities...well...I'm still having a hard time finding the reason to wait.

That Scott Burns compared taking it early unfavorably with an annuity, or unfavorably compared to a stated investment return (7%) that is lower than I'm seeing on a long term basis isnt swaying me either.

Perhaps if Bongo can help me find where I screwed up with firecalc to produce the numbers I did, and the results do show a favor towards waiting, I'd change my feelings about it.

But then again I have about 20 years to work it out. By then the decision may have been made for me...

 

[New Thinking]

The other item you need to ask yourself is whether you want to pay taxes on your income or not after age 70. If you do want to pay taxes, take the SS at 62 and supplement that income with IRA withdrawals..The result is that both will be taxed. If you don't want to pay taxes on your income after your delayed SS age, take your IRA withdrawals first and double up on the SS..It often escapes taxation...And keep growing with COLAs