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Taking Social Security early vs. not
Old 01-04-2013, 01:45 PM   #1
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Taking Social Security early vs. not

Would like to get opinion on this.

I am of the age that I can get "full" Social Security benefits at age 67. Being that I post here, it should be clear that I do not want to work until that age. I've invested my money and plan to be completely debt free by the time I retire (sometime between age 55-60, but probably closer to 60). Unless my wife continues to work then (she hasn't decided yet), we will need to take money from our investments on which to live. BUT, when I turn 62 and then my wife does also not too long after, we can start taking early, diminished Social Security disbursements.

I've seen often that people recommend putting off taking that money as long as possible so that the amount is increased. Sounds fine, but then while I wait for that, I decrease my own investment pile.

I didn't invest my money so that I could leave money to my children, but given a chance, I wouldn't mind being able to leave them something. Wouldn't it then be better to take Social Security as soon as possible to minimize my own draw from my own money so that not only will it grow, but it's money I can pass down?

Is there something here I'm not considering?

Thanks!
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Old 01-04-2013, 01:47 PM   #2
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An oldie, but mostly if not entirely still applicable.

When to take Social Security

There is no universal answer as you've noted. Depends on your expected longevity, tolerance for risk, size of your nest egg/how much of your income will come from SS, family, leaving a bequest or not, etc.

https://guidance.fidelity.com/viewpo...-security-pr-2

When should you take Social Security? - CBS News
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Old 01-04-2013, 01:54 PM   #3
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Old 01-04-2013, 01:58 PM   #4
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It's actually not all that complicated to figure it out.

1. What will your WR be with early SS?
2. What will your Wr be with later SS?
3. How long are you going to live?

Plug those values into you calculation and you'll have your answer quickly.

See what I mean?
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Old 01-04-2013, 02:24 PM   #5
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What I do is have SS at 67 as my base case in Quicken Lifetime Planner and then do a what-if with starting at age 70. Then I decide which of the two lines (which graph my retirement assets) I like better. Repeat with SS at age 62. Done.
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Old 01-04-2013, 02:28 PM   #6
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this question is the most common.

the answer depends entirely on one's longevity.

unfortunetly it's also the one unaswerable variable.

if you think you'll die before 80 i would take it at 62.

if you think you'll die much past that i would take it at FRA.

if you think you'll live to around 90 taking it at 70 is probably the way to go.


flip a coin
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Old 01-04-2013, 02:35 PM   #7
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I know this has been debated ad nauseam.

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

But even if you do not necessarily need to take them until 70, I think in this climate, I would not delay past full retirement age to start collecting benefits. There may be more and more mean testing at lower and lower thresholds and claw back in higher and higher amount as years go by. While you can get more by waiting till 70, what you have in excess of what you spent by taking SS at full retirement age you can invest on your own and I hope grow as well.
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Old 01-04-2013, 02:37 PM   #8
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Quote:
Originally Posted by braumeister View Post
It's actually not all that complicated to figure it out.

1. What will your WR be with early SS?
2. What will your Wr be with later SS?
3. How long are you going to live?

Plug those values into you calculation and you'll have your answer quickly.

See what I mean?
I don't think it's that easy. For one thing, I can only guess how long I will live. Nothing is guaranteed. Mainly though, if I'm not using Social Security money to live on, then that means I'm using my own investment pile, a pile that I would like to see grow rather than not, and this is money I CAN give to my heirs when we both die. In a perfect world, I will live to be 100, spending every dime of my investment money just before I die, but that's not likely to happen.

I guess I'm leaning toward taking Social Security as soon as possible, but I could change my mind. I have my investment money and then also Emergency Fund money that slowly grows in its own account. I've sort of allowed myself to think of that as non-retirement investment money, so if for example I have 3 or 4 years of expenses built up in that fund by the time I retire at age 60 (maybe a little earlier), I can see myself deciding to live off that money while not taking Social Security maybe until age 63 or even 65 if I can stretch it that far. I realize I could just consider all that money as retirement investment money, but right now I have this disconnect with it, so perhaps I could tell myself to use that and allow the SS to build up.

As has already been said, there's no easy answer to this question. It's certainly not easy to me.
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Old 01-04-2013, 02:39 PM   #9
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Originally Posted by bondi688 View Post
There may be more and more mean testing at lower and lower threshold and claw back in higher and higher amount as years go by.
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
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Old 01-04-2013, 02:45 PM   #10
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No, it means taxing social security benefits as part of total income, and exposing a larger portion of the benefits to taxation.
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Old 01-04-2013, 02:46 PM   #11
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I don't think it's that easy. For one thing, I can only guess how long I will live.
I believe braumeister was pulling your leg.
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Old 01-04-2013, 02:48 PM   #12
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No, it means taxing social security benefits as part of total income, and exposing a larger portion of the benefits to taxation.
Not retroactively, but in real time?

Then I agree with you, no doubt this could and likely will occur sometime.

Ha
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Old 01-04-2013, 02:50 PM   #13
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LeavingOhio: You are exactly correct in that if you delay SS you will need to spend down your savings. That is the situation I mull over periodically. In my case I have/will have three income streams: pension, 401k, and SS. I projected income and expenses and taxes for 30 years and examined what percentage of retirement income would come from each. What the decision for me will likely come down to is how much trust do I have in each of the streams. Do I trust the stock and bond markets? Do I trust the SS stream to continue close to projections? How important is having the flexibility of maintaining a higher savings balance to use in unforeseen events? What is the risk in losing a higher SS payment by taking SS early?


As others have stated it is up to you and what is important to you.

As for me, I have few years yet before I reach 62. I watch all of these threads on SS and it seems all of the arguments for and against early or delayed SS are here in these forums. There is no one best answer for everyone.
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Old 01-04-2013, 02:55 PM   #14
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Yes, I mean going forward. I think what will happen is that SS benefits will be reduced if you have certain level of income, let say from your savings and investments. And, in increasing amount, the already reduced benefits will be considered as part of total income you have for the year, and taxed as such.
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Old 01-04-2013, 03:08 PM   #15
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As a lifetime LBYM person I am beginning to transition. Perhaps the final phase of my life should ebe more live for today. In other words I plan to take SS early. The OP's point about a legacy is often ignored.
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Old 01-04-2013, 03:14 PM   #16
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I don't think it's that easy. For one thing, I can only guess how long I will live. Nothing is guaranteed.
True enough, unfortunately some people know their probability of a long life is (very) low based on existing health issues and/or family history. If odds are you will not live to average life expectancy, you should probably take SS early. That's what I (and undoubtedly others) mean when we raise longevity as a consideration, we mean lack of longevity, but we'd rather not come out and say it.

My parents are both 90 and going strong, so odds are I'll be better off waiting until 70. Getting 'hit by a bus' (something that someone always throws into these discussions) is possible but not likely, so not a basis for a plan. If things change as I age, I'll change my plan.
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Old 01-04-2013, 03:31 PM   #17
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It's interesting timing that this has appeared again. My plan was all laid out -- take SS at 70 and consider it longevity insurance, since it really would be enough for me to be comfortable on if necessary. The idea of trying to maximize my total take from SS never seemed important, so guessing when I'll die didn't enter my calculation.

But as I approach 62 my thinking is changing. Because investments have done well since I retired in March, 2009 (the DOW was about 7500 then), and I'm at heart a tightwad, it's now harder to imagine running out of money. I'll probably end up taking SS at 62. My RMDs are likely to be well over my needs, and to add a fat SS check at the same time seems kind of silly.
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Old 01-04-2013, 04:19 PM   #18
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Here is the analysis for my situation, if I take SS at 62, I begin making more money at 80. If I take it at 66, the crossover is 81. Both of these estimates assume investing the money and receiving a 5% growth rate. The investment delays the crossover age by about a year.

For me, it will come down to predicting my life span. When I run it out to age 90, the income is about 30% more. Obviously, the children and Uncle Sam will be penalized with a lower inheritance if we die sooner. Maybe I should have them make the decision ?
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Old 01-04-2013, 04:41 PM   #19
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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.
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Old 01-04-2013, 04:42 PM   #20
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DW and I had another take... considering that we have a DB pension of almost $60k and net worth of close to $900k, there is a greater chance that "reform" would institute a "means test" that would exclude us. BUT, I am wagering that CURRENT RECIPIENTS will be grandfathered in (POLITICALLY it is way easier to DENY benefits to someone who is not getting them than to take them away from someone already drawing them). Given THAT, in our case, the plan is TAKE THEM THE FIRST DAY WE CAN.
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