SS at 66 or 70 - not such an easy question?

[Runner]

I am within a few months of Full Retirement Age for SS. I have a state pension and earn a reasonable income as a part-time lawyer, so I don't "need" my SS benefit at this point.

If I take SS now and simply put it in the bank, I will accumulate $117K by age 70. If I wait until age 70, my monthly benefit will increase by $790. So the question is, $117K over the next four years vs. $790 more per month at age 70?

The additional $790 per month would eventually offset the $117K, but it would take 12 years. Dan Celia of Financial Issues, a fount of incorrect information about SS, always makes it sound like a no-brainer to wait until 70. However, I find the notion of an additional $117K in emergency savings to be somewhat attractive; if I need to draw it down to supplement my monthly income at some point, so be it.

The main attraction of waiting until 70 is that my wife, who has never worked, will have her SS benefit or survivor's benefit calculated off of mine - so if I wait, hers will be correspondingly larger.

Any thoughts on this?


Edit: The $117K is a before-taxes amount, so the banked portion wouldn't actually be that large. But the additional $790 would be before-taxes as well, so the question remains basically the same.

 

[dirt_dobber]

subscribed to thread.
Interesting question that I have not considered before. I look forward to the responses.

 

[Dash man]

If you plan to put the SS funds into a low interest savings account, putting it off until age 70 to help your DW is probably the better decision. If you invested the money in low to moderate risk dividend stocks, it may do better in the long run, but does carry more risk. It's very much a personal decision and needs to consider other assets you have, including survivor benefits on your pension. Be sure to include DW in the decision.


Sent from my iPhone using Early Retirement Forum

 

[athena53]

Since you're still working, don't forget to factor in taxes on SS, too.

 

[Runner]

If you plan to put the SS funds into a low interest savings account, putting it off until age 70 to help your DW is probably the better decision. If you invested the money in low to moderate risk dividend stocks, it may do better in the long run, but does carry more risk. It's very much a personal decision and needs to consider other assets you have, including survivor benefits on your pension. Be sure to include DW in the decision.


Sent from my iPhone using Early Retirement Forum

I put EVERYTHING into ultra-safe accounts, so that would be my approach with the SS. (Is DW my Dear Wife? Hopefully not my Divorced Wife, since we aren't divorced.)

 

[pb4uski]

I think of it this way. You are forgoing $117k to get a COLA adjusted annuity of $790/month starting when you are 70 for as long as you or your spouse live. That is a 8.1% payout rate [($790*12)/$117k]

According to immediateannuities.com $117k would buy a fixed joint life annuity for a 70 yo couple of $613/month (6.3% payout rate). So delaying SS is a great deal because not only is $790/month much better than $630/month, the $790/month is also COLAed and the $630/month is fixed.

 

[Dash man]

I put EVERYTHING into ultra-safe accounts, so that would be my approach with the SS. (Is DW my Dear Wife? Hopefully not my Divorced Wife, since we aren't divorced.)

Yes, DW is Dear Wife. A divorced wife in my world would be FB. I'll let you figure it out.


Sent from my iPhone using Early Retirement Forum

 

[Runner]

I think of it this way. You are forgoing $117k to get a COLA adjusted annuity of $790/month starting when you are 70 for as long as you or your spouse live. That is a 8.1% payout rate [($790*12)/$117k]

According to immediateannuities.com $117k would buy a fixed joint life annuity for a 70 yo couple of $613/month (6.3% payout rate). So delaying SS is a great deal because not only is $790/month much better than $630/month, the $790/month is also COLAed and the $630/month is fixed.

Yes, I agree that is a reasonable way to look at it. On the other hand, in Year 1 of the "annuity," I would have $0 in hand and a promise of $790 per month for as long as I live after age 70, versus $117K in hand at age 70 by going the other route (ignoring the taxes). If I die in Year 1 and my wife dies in Year 5, this annuity has not been such a good deal.

On the other hand, if I had $29K per year in SS between ages 66 and 70, I would have the use of those funds for emergency purposes and, if I didn't use them, could begin supplementing my SS at the rate of $790 per month for roughly 12 years beginning sometime after age 70.

The equation probably does come down to things like how significant the $29K per year is likely to be to someone over the next four years, how significant the additional $790 per month at age 70 is likely to be, how likely someone is to live to age 80+, etc.

My thinking about this was prompted by Dan Celia telling every caller that delaying until age 70 is a no-brainer because "at some point, income is all that matters" (which is, of course, why he relentlessly peddles charitable gift annuities through the American Family Foundation). This seems to me to be plainly incorrect - if you accumulate significant savings, you have the use of them for emergency purposes and can always use them to supplement income as needed. Probably if we could see into the future, for most couples waiting until age 70 would be the better choice (in raw dollars) - but it doesn't seem to me like a no-brainer.

 

[Senator]

My plan is to wait until age 70. Here is why.

SS is actuarially neutral. When you are 66+, you are ahead of the odds. Your longevity is expected to beat the SS estimate.

If you have a spouse that may need a higher survivor benefit, for as long as they will live, it goes on for their life too, not just your life.

Look at it as self-insured LTC insurance. $3K a month is $100 a day, forever. With COLA. How much would you have to pay for a LTC policy like that? And you keep the premium if you do not use it.

It's great longevity insurance. If things go bad in the next 4 years, you have SS to count on, which will be larger.

If they change SS, you can collect right away.

 

[stepford]

Yes, DW is Dear Wife. A divorced wife in my world would be FB. I'll let you figure it out.

Ah, former bedmate, or perhaps, fondly-remembered beauty. It's sweet that you think so highly of your exes.

 

[pb4uski]

Interesting, I had something very different in mind for FB.

 

[Runner]

My plan is to wait until age 70. Here is why.

SS is actuarially neutral. When you are 66+, you are ahead of the odds. Your longevity is expected to beat the SS estimate.

If you have a spouse that may need a higher survivor benefit, for as long as they will live, it goes on for their life too, not just your life.

Look at it as self-insured LTC insurance. $3K a month is $100 a day, forever. With COLA. How much would you have to pay for a LTC policy like that? And you keep the premium if you do not use it.

It's great longevity insurance. If things go bad in the next 4 years, you have SS to count on, which will be larger.

If they change SS, you can collect right away.

Yes, the fact that I could apply for SS anytime during the next 4 years if it were needed, and that the benefit would increase with each passing month, is a very legitimate consideration.

And as I mentioned in my OP, the fact that my wife's increased survivor's benefit would continue as long as she lives is probably the primary consideration pushing me toward waiting until 70.

Actually, if I didn't take SS until age 70 and my non-working wife (who is a mere child of 61 now) waited until age 70 to take her benefit that is calculated as a percentage of mine, we could potentially come out way ahead. At 95, we'll be cackling our toothless heads off at the way we've gamed the system.

 

[Whisper66]

I'll offer a bit of a different viewpoint than many that normally answer this question. I accept the math (such as offered by Pb4uski) as correct for the assumptions used but I currently plan to take SS at full retirement age (I'm 55 now so full retirement age is 67 for me).

The key uncertainties that in the analysis that drive me to take SS earlier than 70 is (a) expected longevity and (b) government willingness to maintain current SS and taxation rules in light of the need to eventually address a large US debt.

With those uncertainties, I personally consider the long payout (12 yrs in your case) as too long for me so plan to take it earlier.

One caveat though is that I'm not counting on the higher SS to ensure high probability that I and my wife will kick the bucket before the assets go to zero. If the higher SS was the only game in town that kept my probability high, I would take it at 70.

Great question that many of us have to wrestle with.


EDIT: I see your wife if much younger than you. In your case, that might drive me to wait until 70. My DW and I are the same age.

 

[pb4uski]

Runner, I think you will find that your DW is best off taking her benefit at FRA, not 70. She doesn't get any larger benefit by deferring from FRA to 70 but just forgoes benefits she could have otherwise had.

You may want to run your situation through http://www.bedrockcapital.com/ssanalyze/

 

[NW-Bound]

Runner, I think you will find that your DW is best off taking her benefit at FRA, not 70. She doesn't get any larger benefit by deferring from FRA to 70 but just forgoes benefits she could have otherwise had.

You may want to run your situation through http://www.bedrockcapital.com/ssanalyze/

OP's wife is only 61 now. By the time she gets to her FRA, OP is already past 70.

With File-and-suspend option going away, some options are no longer possible.

 

[pb4uski]

I understand... my point was that there is nothing to be gained by her waiting until she is 70. I guess she could claim spousal benefits anytime between when she turns 62 and her FRA.

 

[LiveBelowMeans]

Seems like there is an uncertainty factor that needs to be recognized. If you take the money today, that is definite. Every year later becomes more and more uncertain that you will be around to enjoy the benefit. After feeding the beast for all these years, I want to get something out of it, so I will be taking SS asap at 62. If I last to 85 or when ever the cross over point is so what. Then the government wins. I can live with that defeat... JMHO

 

[Runner]

Runner, I think you will find that your DW is best off taking her benefit at FRA, not 70. She doesn't get any larger benefit by deferring from FRA to 70 but just forgoes benefits she could have otherwise had.

You may want to run your situation through http://www.bedrockcapital.com/ssanalyze/

Thanks, that is one fine point I hadn't actually researched yet since we aren't close to worrying about it - whether my wife's participation in SS would increase after her FRA.

 

[AtlasShrugged]

I am impressed with the quality of this discussion. This is helpful for those of us who are still working and contemplating retirement. The question of taking SS at 66 or 70 is indeed complicated. Let me throw another wrinkle into the discussion that has probably been debated ad nauseam in another thread. I apologize if it has, but it seems appropriate here.

Assuming most of the people in this forum are financially independent, isn't this crowd potential targets for social security means testing (income-based or asset-based.) How do you factor in that social security may be reduced or eliminated for people in this position? Wouldn't that argue for taking SS earlier before it disappears? Or do you simply assume it's too tough to forecast and leave it out of your analysis?

 

[Runner]

Seems like there is an uncertainty factor that needs to be recognized. If you take the money today, that is definite. Every year later becomes more and more uncertain that you will be around to enjoy the benefit. After feeding the beast for all these years, I want to get something out of it, so I will be taking SS asap at 62. If I last to 85 or when ever the cross over point is so what. Then the government wins. I can live with that defeat... JMHO

Yes, even in my situation there is a third alternative that was really my original plan and has not yet been entirely discarded. Assuming one has reached FRA, is in reasonable health and has no immediate need for the SS:

1. You congratulate yourself on having prudently delayed SS until FRA.
2. You carefully calculate what your after-tax SS benefit will be between ages 66 and 70 - say roughly $24K in my case.
3. You take SS at FRA and cheerfully blow the entire after-tax amount on a world-class vacation each year between 66 and 70.
4. If you actually live to 85 or 90 and find yourself financially strapped, you let society figure out what to do with you (this assumes, of course, that America and the world in general will still be around in anything like their present form when you are 85 or 90, a sufficiently iffy assumption that taking those vacations now may be a good idea).

In many ways, I regard this as an entirely sensible plan. It is, of course, adaptable for someone who begins taking SS before FRA.

 

[Texas Proud]

OP's wife is only 61 now. By the time she gets to her FRA, OP is already past 70.

With File-and-suspend option going away, some options are no longer possible.

I did not see where he said his DW as 61, but if so, then taking it at 70 means a much greater chance of living longer than the 12 year payback....


I would go with 70....


The good thing in this question is that in reality no answer is bad... IOW, your lifestyle will not change at all which ever way you go... for some it matters...

 

[2017ish]

Runner,

Does your state pension continue for your wife when you die? Is it inflation adjusted?

If the answer to either of those is "no," I'd count it as a factor in favor of delaying until 70--and if the first is "no," I'd see it as a major factor.

 

[harley]

Assuming you don't need the money now, like me and like the OP, there's only one aspect to consider (IMHO). That's the survivor benefit for DW after I'm gone. Even though she'll have plenty too, she's not into managing finances and having the guaranteed larger SS will give her peace of mind in her old age. As far as winning or losing against the gov't, I'm having fun doing that while I'm still alive by manipulating my income and winning the battle of the taxes.

 

[Runner]

Runner,

Does your state pension continue for your wife when you die? Is it inflation adjusted?

If the answer to either of those is "no," I'd count it as a factor in favor of delaying until 70--and if the first is "no," I'd see it as a major factor.

The answer to both is no - the pension can be adjusted upward if there is a surplus in the system.

But this question does highlight the importance of personal circumstances. My wife is a citizen of Belarus (as well as the U.S.), owns a home (in a high-rise) in Belarus, and has all her family in Belarus, where health care is 100% free if you go to government facilities and extremely cheap if you go to private facilities. If she wanted to return to Belarus, our savings and my life insurance would make her quite well-to-do by Belarusian standards, so the SS would be an issue only if I died first and she decided to remain in the U.S.

More than you wanted to know, I'm sure, but it does show how we need to factor all sorts of things into the equation as we near FRA.

 

[dallas27]

Or... Skip all the math, take it at 68 and realize you made at least 50% of the right choice applying 0% of your time worrying about it.


Sent from my iPhone using Early Retirement Forum