Taking Social Security early vs. not

[Major Tom]

Last night I ran Firecalc a few times, one variable being when to start SS. It made less than 1% difference whether I took it at 62, 66 and a few months (FRA), or 70. That was a bit surprising. If we do a bit of part-time work, we are at 100% no matter which, so I had to remove the part-time work to find the difference. Now I'm really undecided--how to decide! Probably the 62 for reasons several have articulated.

I did the same - with the same results.

For the record I'm not married, and no plans of being married, so these decisions are much easier. Unless anything substantial changes, I'll be taking SS at 62 (which is a way off for me).

I'm getting by on my low income for now and am hoping to increase it a little in a few years. However, the big bump-up in income due to SS wil be very welcome. As AWeinel said - MAD money

 

[Animorph]

Are you and your wife the same age or is one of you older than the other?

You mention your wife working. How does her SS compare to yours?

It is highly likely that you and your wife won't both die at the same time. Therefore, one of you will have to live in a situation where there is one SS income coming in rather than 2. Therefore there is a case to be made for one of you to claim early and one of the two of you to claim late.

+1, that's what we'll do. The surviving spouse gets the larger SS check per the SS rules. We're also about equal earners, but I'm five years older. I'll take SS at 70, DW at 62. The last one standing still gets the fatter age 70 SS checks. That's a fairly safe choice.

As far as SS versus investments, if your investments do better than the COLA'd SS then take SS early. Otherwise, or for longevity insurance, take it late. Sure you have to spend down your investments faster early on if you take SS later, but once the larger SS amount kicks in you'll be drawing less from investments than if you had taken SS at 62. It balances out, depending on how long you live.

 

[BLS53]

If by clawback you mean what that usually means, demanding repayment of money lawfully received when rules change-I cannot think of anything in the politics sphere that I would feel more comfortable betting against. Imagine being the politician who made Granny sell her house to pay back her social security.

Ha

+1 The SS reform paranoia grows more bizarre by the day.

 

[bondi688]

+1 The SS reform paranoia grows more bizarre by the day.

Before you make judgmental comment, maybe you should carefully read and actually understand what was said!

 

[BLS53]

Before you make judgmental comment, maybe you should carefully read and actually understand what was said!

It's not a judgmental comment. Merely an observation of things I have heard and read from various individuals, running scared that their SS is going away. Without anything of substance to justify such beliefs.

The comment was not directed at you, or anyone in particular.

 

[Alex in Virginia]

I've taken my SS early. Because I am still working and not needed the SS to cover my expenses, I have simply banked the SS payments and thus added them to my reserves. Even factoring in the income tax hit on those SS payments, I consider myself much better off adding tens of thousands of dollars to my when-I-really-retire reserve than waiting to collect.

Had I waited to collect in order to receive a larger monthly payment, I calculated it would take a minimum of TEN years of the incremental moneies to come up even with the SS I will already have collected by my FRA.

Once I saw THAT, it became a very easy decision for me.

 

[racy]

I saw this posted by someone someplace and thought it was interesting:

"For me, the key consideration is the cost/benefit analysis of the various scenarios. For example, if I take my SS early, but then I die early, I have a small benefit of receiving at least something, but it is very small since I had more than enough money saved in anticipation of a long retirement that didn't happen. If I plan to take my SS late but I end up dying early, then I have a small loss of not getting as much SS, but since I had enough to live on from my savings and am dead, I don't miss the loss.

If I take my SS early and end up living a long long time, then I have put myself in a position where I could run low of funds and my SS is less than it could have been. Potentially a large cost. If I take my SS late and I end up living a long long time, then I am getting the max benefit that I could in the situation where I might need the max benefit, potentially a large advantage.

What this tells me is that I avoid a large cost and gain a large advantage in the scenarios where I take SS late. In the scenarios where I take SS early I risk incurring the large cost and have potential for a small gain, but the only benefit of that (small) gain is to heirs since I have to die to get it. Consideration of each specific scenario and cost/benefit of each matters because I care more about results when I am living than I do about results where I am dead. The absolute size of the dollars received is outweighed by the utility of those dollars in each of the scenarios".

 

[obgyn65]

My thoughts exactly.

If you need the money, take SS when you are able to.

 

[bUU]

The fact that there are good arguments for both 62 and 70 leads me to aim for taking SS at age 66.

 

[HighRoller]

I will take benefits as soon as I can. Bird in the hand kind of guy.

+1 However, if I really felt they wouldn't change the rules, I'd wait until FRA.

 

[Lisa99]

I've run all of the scenarios through firecalc and for us starting at 62 gives us the most spending power over our expected lifetimes.

 

[eytonxav]

The fact that there are good arguments for both 62 and 70 leads me to aim for taking SS at age 66.

Right now I am leaning this way myself, but with DW being 5 years younger and with her much smaller SS, I may push out taking mine beyond 66, depending on how the port holds up in the next several years. Also, might change depending on what our gummit does to SS.

 

[KingB]

I've taken my SS early. Because I am still working and not needed the SS to cover my expenses, I have simply banked the SS payments and thus added them to my reserves. Even factoring in the income tax hit on those SS payments, I consider myself much better off adding tens of thousands of dollars to my when-I-really-retire reserve than waiting to collect.

Had I waited to collect in order to receive a larger monthly payment, I calculated it would take a minimum of TEN years of the incremental moneies to come up even with the SS I will already have collected by my FRA.

Once I saw THAT, it became a very easy decision for me.

If your income exceed a $14640/year, you will have to repay $1 for every $2 that you made over the limit.

 

[fh2000]

I may have missed this particular reason to delay SS in this long thread: I will have to wait to collection SS until I have converted some (or most) of my 401K/IRA to Roth. Therefore, I have not decided to collect at 66 or 70. But, not at 62 for sure.

 

[coolowl]

I quit working at 61 so it was a choice of whether to take ss and draw down a small amount of investment money, or wait on ss and draw down even more of my investments. I opted for the former - ss at 62 so as not to use up my investments.

 

[gerrym51]

I may have missed this particular reason to delay SS in this long thread: I will have to wait to collection SS until I have converted some (or most) of my 401K/IRA to Roth. Therefore, I have not decided to collect at 66 or 70. But, not at 62 for sure.

i investigated this . ss only uses actual EARNED income on this test. money from retirement accounts does not apply to the 14,500 max.

don't believe me. go to ss and read it . I don't know how to do links

 

[ronin]

Is there something here I'm not considering?

If anyone wants to review these 2 articles, seems like it is possible to access the archives of the Journal of Financial Planning. The info contained is also addressed in the author's new book (see link below). It is pertinent to the OP's original question. See Fig. 1 in each.

fpanet.org/journal/SocialSecurityWhentoStartBenefits

fpanet.org/journal/HowtheSSClaimingDecisionAffectsPortfolioLongevity/

Social Security Strategies

 

[gerrym51]

I suspect that most of us realize we can get more total money from ss if we wait and take it later assuming we live long enough.

However even if you have enough money to get you to that later ss start
human nature dictates "take it as soon as possible".

In my case logic says take it later- i can afford to take it at 70-but i will take it at 65 when I start medicare.

Logic loses to emotion every time.

 

[Chuckanut]

I doubt if any reform or means testing will benefit those who take SS at 62 versus those who take it in later years. Those who took SS at 62 would probably see some type of freeze on the yearly increase or some actuarial adjustment to payments that would equalize the affects. SS seems pretty good at using actuarial tables and such to make things fair for the overall group.

I think it is far more likely we will see another increase in the retirement age and a bigger increase in the reduction for retiring before that age.

I also think high income people have more to fear from increased taxation of SS benefits than an actual reduction in them due to means testing. The 'means testing' will result in higher taxes on the benefits, not reduced benefits. Just my 2 cents.

 

[Rustward]

I doubt if any reform or means testing will benefit those who take SS at 62 versus those who take it in later years. Those who took SS at 62 would probably see some type of freeze on the yearly increase or some actuarial adjustment to payments that would equalize the affects. SS seems pretty good at using actuarial tables and such to make things fair for the overall group.

I Agree 100%.

 

[Lisa99]

I may have missed this particular reason to delay SS in this long thread: I will have to wait to collection SS until I have converted some (or most) of my 401K/IRA to Roth. Therefore, I have not decided to collect at 66 or 70. But, not at 62 for sure.

Why do you have to wait until you've converted to Roth?

 

[youbet]

Why do you have to wait until you've converted to Roth?

Not to answer for fh2000, but folks sometimes delay SS or pensions until Roth conversions are done to avoid higher tax rates.

 

[omni550]

John Greaney on SS

Many here are familiar with John Greaney, one of the 'fathers' of retiring early. John RE'd in 1994 at age 38.

He just posted an article on his website called "Social Security, a Better Deal than I Thought?" where he discusses SS benefits based on different earning records:

Social Security a better deal than I thought?

omni

 

[Alan]

Not to answer for fh2000, but folks sometimes delay SS or pensions until Roth conversions are done to avoid higher tax rates.

My thoughts also. As income increases the tax on SS income increases. And Roth conversions count as income.

 

[Original Wally]

My thoughts also. As income increases the tax on SS income increases. And Roth conversions count as income.

+1. My SS Disabiity is 85% taxable.