Taking Social Security at 62 - Point to Ponder

[freebird5825]

Hi again, Hi again. Well it is that time for me - turning 62 in August. Now EVERYBODY tells me "grab it at 62 - do the math - you will have to live to about 77-80 to make up the difference on what you are giving up not taking it early.

Uhh huh and good point. However I recently read an opinion for a CFP on this issue. "If you NEED the income then take it. However if you don't need it and are just going to let it sit in the bank consider this. For every year you don't take it at 62, Social Security grows at an annual rate of about 8%. It is kind of like investing your money at an 8% growth rate per annum. If you are just going to let it sit in a Savings Account, CD or Money Market earning the current .75 or 1 percent you are better off letting it sit growing at 8%. That is unless of courses you can find a better investment vehicle for it that can generate an annual return of 8 % or better. Plus remember the approx 8% growth SS generates is tax free growth. Thoughts Mr. B

 

[REWahoo]

Uh, Mr. B, having your very own account on this board is very inexpensive. Why not take a couple of minutes to set one up for yourself rather than confuse us by piggy-backing on freebird?

 

[travelover]

Hi Mr. B. This topic has been discussed in detail here recently in these threads.

http://www.early-retirement.org/forums/f28/case-for-taking-ss-early-62-a-66739.html

http://www.early-retirement.org/forums/f28/age-of-first-claim-for-social-security-66709.html

 

[obgyn65]

To answer the OP's question : there is a break even point around age 66-68. That's when I plan to take social security in my FIRE planning, if I make it until that age.

 

[OAG]

Don't know but I looked and looked at this issue for a long time a few years ago and the only thing I could determine for sure is "it depends". It can be different for almost everyone. FYI I did take it at 62 but then paid it back at 67 then took it again at 67.5 years of age (an option no longer available). So I just about split the difference (original eligibility was 65 and 7 months). There are several factors to consider the least of which are Taxation of Benefits, Taxation of RMD's on IRA's and resulting Taxation of Benefits, Martial Status and who earned the greatest SS Benefit and the age difference between spouses, and on and on. Now at 73.5 years of Age I think I made the correct decision but who knows?

 

[W2R]

Uh, Mr. B, having your very own account on this board is very inexpensive. Why not take a couple of minutes to set one up for yourself rather than confuse us by piggy-backing on freebird?

+1 Although your posts are always welcome either way, this would make things a lot easier for those reading your posts and it's easy to do!

As for SS? Personally I decided to take my SS at 70 for the reasons your CFP suggests, and simply because of the SPIA annuity-like aspects of SS. I want to have enough guaranteed direct deposited income each month in my old age to cover my monthly bills.

But others differ, and really, I think SS has enough of a handle on life expectancy that it is a toss-up. I don't think there is necessarily a wrong answer to the question of when to claim SS.

 

[Animorph]

Definitely consider your SS as part of a couple (unless Mr B is just an honorific!). The surviving spouse gets the larger of either spouse's benefit if both are eligible. That means the largest SS benefit will end only after both spouses are gone. The smallest benefit ends when the first spouse dies. Is your SS benefit potentially the largest or smallest?

Then there are the spousal benefits while both are living. Generally when you hit full retirement age and your spouse has claimed (or filed and suspended) benefits, you might want to claim a spousal benefit of 50% of the spouse's FRA benefit. By doing it after FRA, you'll be able to claim your full benefit (if larger) at 70 or whenever. So that's a possible extra few years of benefits for free. Look up the rules, since I may have got something wrong there.

Other than the usual individual decision, those are the two big things couples need to consider.

 

[freebird5825]

Hey kids...I will make sure that Mr B will create his own profile and log in on his own.

Sorry for the confusion.

Feel free to bust chops on him the same way you do for me.

Are we good ?

 

[REWahoo]

Are we good ?

I'll give you mediocre, but I'm not sure I could go with good...

 

[freebird5825]

Bronx cheer

TY everyone for helping Mr B out in the other thread.

 

[MichaelB]

Feel free to bust chops on him the same way you do for me.

Amazing you have survived, all the abuse you get around here.

 

[freebird5825]

I live for it !

 

[Independent]

Hi again, Hi again. Well it is that time for me - turning 62 in August. Now EVERYBODY tells me "grab it at 62 - do the math - you will have to live to about 77-80 to make up the difference on what you are giving up not taking it early.

Uhh huh and good point. However I recently read an opinion for a CFP on this issue. "If you NEED the income then take it. However if you don't need it and are just going to let it sit in the bank consider this. For every year you don't take it at 62, Social Security grows at an annual rate of about 8%. It is kind of like investing your money at an 8% growth rate per annum. If you are just going to let it sit in a Savings Account, CD or Money Market earning the current .75 or 1 percent you are better off letting it sit growing at 8%. That is unless of courses you can find a better investment vehicle for it that can generate an annual return of 8 % or better. Plus remember the approx 8% growth SS generates is tax free growth. Thoughts Mr. B

I'm in favor of deferring. I'm 65 and I haven't started benefits yet.

But, the CFP is seriously confused. Deferring isn't at all like investing at an 8% growth rate. It's like buying a CPI-adjusted SPIA that pays somwhere between 6.7% and 8.3% of your premium. That's not an annual "return", as mentioned on many annuity threads.

Many people who post here have done the numbers. I'll do it again: if my annual SS benefit is $10,000 at age 62, it will be $10,667 if I defer for one year. I give up $10,000 to get a stream of CPI-adjusted payments that start at $667.

The actual IRR on that money depends on how long I live.
If I live to 73, I will have earned CPI - 5%
If I live to 77, I will have earned CPI + 0%
If I live to 82, I will have earned CPI + 3%
If I live to 91, I will have earned CPI + 5%

I don't see any 8% on that list.

(Deferring the next year - to 64 - is more attractive. Having a spouse who may get benefits from my work history is more complicated.)

 

[youbet]

I'm in favor of deferring. I'm 65 and I haven't started benefits yet.

But, the CFP is seriously confused. Deferring isn't at all like investing at an 8% growth rate. It's like buying a CPI-adjusted SPIA that pays somwhere between 6.7% and 8.3% of your premium. That's not an annual "return", as mentioned on many annuity threads.

Many people who post here have done the numbers. I'll do it again: if my annual SS benefit is $10,000 at age 62, it will be $10,667 if I defer for one year. I give up $10,000 to get a stream of CPI-adjusted payments that start at $667.

The actual IRR on that money depends on how long I live.
If I live to 73, I will have earned CPI - 5%
If I live to 77, I will have earned CPI + 0%
If I live to 82, I will have earned CPI + 3%
If I live to 91, I will have earned CPI + 5%

I don't see any 8% on that list.

(Deferring the next year - to 64 - is more attractive. Having a spouse who may get benefits from my work history is more complicated.)

Great comments and explanation!

 

[WWDog]

Has anybody used any of those services for about $40 that design a plan on the most effective approach to taking SS? With a spouse and differences in payouts and differences in age, the calculations can be quite difficult. I used to thing that a bird in the hand is worth two in the bush. However, that is quite a simplistic approach. The 50% spouse rule can make quite a difference in total $ you get.

 

[padlin00]

Has anybody used any of those services for about $40 that design a plan on the most effective approach to taking SS? With a spouse and differences in payouts and differences in age, the calculations can be quite difficult. I used to thing that a bird in the hand is worth two in the bush. However, that is quite a simplistic approach. The 50% spouse rule can make quite a difference in total $ you get.

Yes, Social Security Choices recommend... Wife starts at her FRA 66+, I start spousal at my FRA of 66+. At 70 I put in for my benefit and wife changes to Spousal at that time. The figures seem to work out correctly.

My PIA is 2500
Wife's PIA is 950
Wife is 11 months older then I
HUSBAND: Normal planning horizon – 82 years
WIFE: Long planning horizon – 92 years

Sent PM

 

[packrat44]

Yes, Social Security Choices recommend... Wife starts at her FRA 66+, I start spousal at my FRA of 66+. At 70 I put in for my benefit and wife changes to Spousal at that time. The figures seem to work out correctly.

My PIA is 2500
Wife's PIA is 950
Wife is 11 months older then I
HUSBAND: Normal planning horizon – 82 years
WIFE: Long planning horizon – 92 years

Sent PM

Look into the following: DW starts her benefits at her FRA. You begin your benefits 11 months later when you hit your FRA. At that time have DW take Spousal (50%) benefits. When that commences, suspend your own benefits (or not) until whatever age you desire.

After you hit FRA the spousal benefits do not increase by waiting until a later date.

 

[padlin00]

Look into the following: DW starts her benefits at her FRA. You begin your benefits 11 months later when you hit your FRA. At that time have DW take Spousal (50%) benefits. When that commences, suspend your own benefits (or not) until whatever age you desire.

After you hit FRA the spousal benefits do not increase by waiting until a later date.

It's not big bucks, but doing it the way I marked down pays out about an extra $1800 a year between 66 and 70 then me doing file and suspend and wife doing spousal at my FRA, $1401 (901+450) vs $1244 (2488/2) a month.

 

[Richard8655]

Hi again, Hi again. Well it is that time for me - turning 62 in August. Now EVERYBODY tells me "grab it at 62 - do the math - you will have to live to about 77-80 to make up the difference on what you are giving up not taking it early.

Uhh huh and good point. However I recently read an opinion for a CFP on this issue. "If you NEED the income then take it. However if you don't need it and are just going to let it sit in the bank consider this. For every year you don't take it at 62, Social Security grows at an annual rate of about 8%. It is kind of like investing your money at an 8% growth rate per annum. If you are just going to let it sit in a Savings Account, CD or Money Market earning the current .75 or 1 percent you are better off letting it sit growing at 8%. That is unless of courses you can find a better investment vehicle for it that can generate an annual return of 8 % or better. Plus remember the approx 8% growth SS generates is tax free growth. Thoughts Mr. B

Yep, and every year you wait you get 8% older and closer to death. It's like a deal with the devil. Give me your life now, and I'll give it back to you later with my payment.

Not for me. It's going to be 62 here, and will enjoy those active years.

 

[haha]

Yep, and every year you wait you get 8% older and closer to death.

Wow! You must really be on a fast track to meet the reaper! According to the life actuarial tables of the SSA, expectancy at age 63 is down 3.8% from age 62; and the decrement from 69-70 is 4.56%.

So actuarially, you are indeed shifting some years from the future to the past, but not at the rate you proposed. But those who wait for SS do it in part because we are long horizon planners, and partly because a longer life with dwindling funds is a threat to our finances, while a rapid rendezvous with death is not.

Ha

 

[Richard8655]

Wow! You must really be on a fast track to meet the reaper! According to the life actuarial tables of the SSA, expectancy at age 63 is down 3.8% from age 62; and the decrement from 69-70 is 4.56%.

So actuarially, you are indeed shifting some years from the future to the past, but not at the rate you proposed. But those who wait for SS do it in part because we are long horizon planners, and partly because a longer life with dwindling funds is a threat to our finances, while a rapid rendezvous with death is not.

Ha

Wow. You must think you're immortal and will be physically active for forever. For sure, shifting payments into the future will give higher benefit, but you miss the point. Even if you'll live as long as you so optimistically think, quality of life will inevitably go down hill.

I'm not saying waste all your money in the early years with nothing left over later (in planning for a longer life). It's all a balance. Just don't think greedy and try to be stingy upfront to collect more when too old to enjoy. Life is basically short, and this sort of planning is all about balance.

 

[haha]

Wow. You must think you're immortal and will be physically active for forever. For sure, shifting payments into the future will give higher benefit, but you miss the point. Even if you'll live as long as you so optimistically think, quality of life will inevitably go down hill.

I'm not saying waste all your money in the early years with nothing left over later (in planning for a longer life). It's all a balance. Just don't think greedy and try to be stingy upfront to collect more when too old to enjoy. Life is basically short, and this sort of planning is all about balance.

Thanks amigo. I'll take it under advisement.

BTW, your numbers are still wrong, however deluded I may be in my "optimism". I tend to balk when confronted with factually wrong but easily checked assertions.

Oh, I almost forgot YMMV!

Ha

 

[Greg V]

It's OK to disagree on the right way ahead. We have different solutions because there are many facets to the SS decision and for each of us they vary in importance.

For example, in my case, with my DW 3+ years younger, ensuring she has the highest survivors benefit in the likely event that I'm the first to die tops my list of priorities when making the SS decision. I aim to wait until 70 to maximize that benefit. If my circumstances changes, maybe that decision will change.

For a single person, a couple with a different age gap or anyone that needs the SS earlier for a reasonable lifestyle, the calculus is different...and probably should be different.

As long as you come to your strategy through study and analysis, seriously considering the various options before picking your path, you've done the right thing. Your choice does not need to match mine, but hearing how you came to your choice is useful for me as I ponder the decision.

 

[Independent]

Wow. You must think you're immortal and will be physically active for forever. For sure, shifting payments into the future will give higher benefit, but you miss the point. Even if you'll live as long as you so optimistically think, quality of life will inevitably go down hill.

I'm not saying waste all your money in the early years with nothing left over later (in planning for a longer life). It's all a balance. Just don't think greedy and try to be stingy upfront to collect more when too old to enjoy. Life is basically short, and this sort of planning is all about balance.

You're talking about two different ideas.
The first is my planned spending pattern - level? increasing? decreasing?
The second is when I start SS.

You seem to think that if I want to spend more money in the early years, I have to take SS early. I don't see that. If I run FireCalc with a step down spending pattern, it won't tell me that I'm better off taking SS early.

(I'm assuming that my ultimate annual spending goal is more than my anticipated SS benefit.)

 

[packrat44]

It's not big bucks, but doing it the way I marked down pays out about an extra $1800 a year between 66 and 70 then me doing file and suspend and wife doing spousal at my FRA, $1401 (901+450) vs $1244 (2488/2) a month.

I misread your original post. I thought your were intending your DW to switch to a 50% spousal once you hit 70. My intent was to have her start a 50% spousal based on your benefits once you hit FRA.

If I have read it correctly now, you intend to take the 50% spousal on your DW's benefits. If that is the case, I think there is a problem. I believe when requesting a spousal, SS looks at which is higher. If the 50% spousal is higher than your benefits you would get the 50% spousal. Since your own benefits are higher than the 50% spousal you would receive them not the spousal. Maybe I read this incorrectly again. Sorry if I did. However, it is best to know the rules before we step into the game.