Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
SS at 66 or 70 - not such an easy question?
Old 11-30-2015, 08:29 AM   #1
Dryer sheet aficionado
 
Join Date: Jun 2010
Location: Winslow
Posts: 38
SS at 66 or 70 - not such an easy question?

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.
__________________

__________________
Runner is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-30-2015, 08:46 AM   #2
Recycles dryer sheets
 
Join Date: Aug 2015
Location: Bee Cave, TX
Posts: 141
subscribed to thread.
Interesting question that I have not considered before. I look forward to the responses.
__________________

__________________
dirt_dobber is offline   Reply With Quote
Old 11-30-2015, 08:52 AM   #3
Thinks s/he gets paid by the post
Dash man's Avatar
 
Join Date: Mar 2013
Location: Limerick
Posts: 1,668
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
__________________
Dash man is online now   Reply With Quote
Old 11-30-2015, 08:56 AM   #4
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 2,979
Since you're still working, don't forget to factor in taxes on SS, too.
__________________
athena53 is online now   Reply With Quote
Old 11-30-2015, 08:57 AM   #5
Dryer sheet aficionado
 
Join Date: Jun 2010
Location: Winslow
Posts: 38
Quote:
Originally Posted by Dash man View Post
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.)
__________________
Runner is offline   Reply With Quote
Old 11-30-2015, 09:04 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,412
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.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 11-30-2015, 09:10 AM   #7
Thinks s/he gets paid by the post
Dash man's Avatar
 
Join Date: Mar 2013
Location: Limerick
Posts: 1,668
Quote:
Originally Posted by Runner View Post
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
__________________
Dash man is online now   Reply With Quote
Old 11-30-2015, 09:35 AM   #8
Dryer sheet aficionado
 
Join Date: Jun 2010
Location: Winslow
Posts: 38
Quote:
Originally Posted by pb4uski View Post
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.
__________________
Runner is offline   Reply With Quote
Old 11-30-2015, 09:50 AM   #9
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,046
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.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 11-30-2015, 09:52 AM   #10
Full time employment: Posting here.
 
Join Date: Sep 2013
Posts: 511
Quote:
Originally Posted by Dash man View Post
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.
__________________
stepford is offline   Reply With Quote
Old 11-30-2015, 09:57 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,412
Interesting, I had something very different in mind for FB.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 11-30-2015, 10:04 AM   #12
Dryer sheet aficionado
 
Join Date: Jun 2010
Location: Winslow
Posts: 38
Quote:
Originally Posted by Senator View Post
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.
__________________
Runner is offline   Reply With Quote
Old 11-30-2015, 10:11 AM   #13
Full time employment: Posting here.
 
Join Date: Apr 2014
Location: Houston
Posts: 639
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.
__________________
Whisper66 is offline   Reply With Quote
Old 11-30-2015, 10:12 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,412
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/
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 11-30-2015, 10:25 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,401
Quote:
Originally Posted by pb4uski View Post
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.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 11-30-2015, 10:28 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,412
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.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 11-30-2015, 10:38 AM   #17
Recycles dryer sheets
 
Join Date: May 2013
Location: Sarasota
Posts: 97
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
__________________
LiveBelowMeans is online now   Reply With Quote
Old 11-30-2015, 10:47 AM   #18
Dryer sheet aficionado
 
Join Date: Jun 2010
Location: Winslow
Posts: 38
Quote:
Originally Posted by pb4uski View Post
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.
__________________
Runner is offline   Reply With Quote
Old 11-30-2015, 10:57 AM   #19
Dryer sheet aficionado
 
Join Date: Sep 2015
Posts: 28
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?
__________________
AtlasShrugged is offline   Reply With Quote
Old 11-30-2015, 10:57 AM   #20
Dryer sheet aficionado
 
Join Date: Jun 2010
Location: Winslow
Posts: 38
Quote:
Originally Posted by LiveBelowMeans View Post
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.
__________________

__________________
Runner is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Puerto Rico not such a good idea? Ed_The_Gypsy Life after FIRE 3 02-08-2014 06:15 PM
Turns Out I'm Not Such An Early Retiree! tangomonster Life after FIRE 16 11-10-2011 10:27 AM
Apple Computer need help - Not as easy as I've heard!.... Cut-Throat Other topics 22 03-31-2006 07:33 PM
It's not as easy as you think Gone4Good FIRE and Money 8 12-21-2005 06:21 PM
Covered calls made easy....too easy? laurence FIRE and Money 8 09-13-2005 10:13 AM

 

 
All times are GMT -6. The time now is 11:06 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.