Taking SS at age 62

[imoldernu]

We took Social Security at age 62 in 1998.

The gross amounts (before Medicare deductions) for this year are:

me-----$18000
jeanie--$9000 (half of mine) tho she earned, it was less than 1/2 of mine.

Can't figure out if I paid in the max for enough quarters, to get the full amount possible.

What will a person who paid in the max receive if they take SS today @ age 62?
What will a person who paid in the max receive if they take SS today @ age 65?

I find that looking at real numbers is easier to handle than formulas, and wondered if the payments followed inflation.

 

[SevenUp]

Maximum-taxable benefit examples shows those and more.

 

[kgtest]

Looks like imolderu:: 27,180 and J: 27,180/2=13590 could both be getting (in 2020 $) I + J = $40,770

That is IF you maxed out through your whole career and ended it at 62 in 2020.

My DW will not earn more than 1/2 as much as I do in my life and by default will get 1/2 my SS. But, with her working now even with her paying into SS we still get a huge benefit with her extra income. Once daycare is done...technically she could go find a job that only pays about $14/hr OR she could cut her hours down somehow and we would still be fine. As it is, she likes working and we handle it all just fine.

I did the math once and accounted for if we never had her extra income (And I had to pay extra $ for healthcare and benefits since she carries those)... and I think in the long run we didn't come out much better in terms of OVERALL net worth, but the key is that we are able to save more in a broker with her working than we could if she were not. AND for an Early retiree, having access to a taxable account is key to the solution.

 

[kgtest]

I looked up my ole mans...he retired 3 years ago, him and spouse earn about 45k of benefits retired at 65... vs the 51,500 if he was born 3 years later but accomplished the same thing.

His earnings peaked though, ageism is real folks. He is earning more on investments then he ever did earning a salary...saving early pays.

 

[imoldernu]

Thanks for the come backs...

I suppose this is knit-picking... and really not important, but.. the number of years worked, and the period of the 35 years can be important. In my case... the 35 SS years where monies were earned...
1954 to 1989... when we retired at age 53... Those years were were lower wage and COL years... so the $$$ amounts were lower than the "no income" period between 1989 and 1998 when we took SS @ age 62.

The 10 years before SS were a little tight, with no income coming in, and paying full bore for medical. We planned for this, with many spread sheets, and felt "free" when we finally took SS @ age 62.

For the years when we did pay in, while my annual income was not high, the inflation adjusted average wage would have been about $105,000 today... enough to have maxed out, had I worked the extra 10 years.

Not at all a "could have/would have", but it helps to understand why we are not maxing the SS dollars.

No way would we have done anything different. Now 31 years of being unemployed. When I was born, life expectancy was 56.6 years. Beat that by 27 years... Even for someone born today... already ahead of that 78.6 years... by 5 years.
...................................................................................................

Much ado about nothing important.

 

[Retiired]

Maximizing Social Security
According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 can receive per month is:

$3,790/Mo for someone who files at age 70 ($45,480)
$3,011/Mo for someone who files at full retirement age ($36,132)
$2,265/Mo for someone who files at 62 ($27,180)

 

[Kelor]

I've seen all the data on break even years, etc., but I've never seen one based on saving the income and investing it. Is there any data on a 62 year old investing the SS and comparing it to a 70 year old recipient, who then lives to age 85?

 

[pb4uski]

I've seen all the data on break even years, etc., but I've never seen one based on saving the income and investing it. Is there any data on a 62 year old investing the SS and comparing it to a 70 year old recipient, who then lives to age 85?

Yes, you can use opensocialsecurity.com... chose the Advanced Options checkbox at the top of the page... and insert a real discount rate equal to your projected real rate of return (projected nominal return less projected inflation).... also for mortality, chose an assumed age at death of 85.

It will return the present value of benefits through age 85 using their "optimal" age (start age with the highest pv). Then, in the Alternative Claiming Strategy section further down the page, you can calculate pvs based on starting at various ages (one at a time.. so 62, 65, FRA, 70, etc).

I ran a series with $1,000/month PIA for a single person born in Dec 1957, 3.3% real discount rate and got the following PVs:

62....... $139,533
65....... $142,582
67....... $143,073
70....... $139,163

Bottom line... if you only live until 85 it doesn't matter much ... do whatever you want.

 

[Ronstar]

^Thanks for the info. Very helpful.

 

[Perryinva]

Of course, one is based on a government guarantee (for whatever that’s worth) and the other on a hoped for return, which could be higher or lower. That RROR is not easy for 23 years! (Age 62 to 85). The advantage is more for your heirs if you collect at 62 and only invest it.

By the same token, it means it is easier to decide to collect after FRA but before 70, once you are ready (ie Roth conversions are done, tax advantages gone etc) because by then, the break even is even farther out.

I find the numbers interesting because I have (more than) 35 years max earnings including 2019 back, and my age 62 estimate, which I will be in 2020, is a bit shy of the $2265 posted by $23/mo. I wonder WHEN in 2020 one must turn 62 for that actual amount, since the 2019 assumption of full pay in, due to income, would already be included for the age 62 number. Not that $276/yr means much in the scheme of things, but there has to be a reason for the difference, and the only assumption for the difference I can make is the actual birthdate. Naturally, someone that turns 62 in Jan will not get the same benefit as someone that turned 62 in Dec, because the calculation assumes working until you file at 62. I can easily see where 11 more months of max earning might bump the latter filer up the $23/mo. Unless it is because the statement says it "assumes you will make $128,400 until retirement", when the actual max for 2019 is $132,800. But $23/mo seems a lot of difference for an extra $4400 added to lifetime counted earnings compared to an added 11 months of premiums.

 

[DrRoy]

Is it nit-picking to say its not knit-picking?

 

[Kelor]

So what I'm seeing from PB's post is that it really doesn't amount to a hill of beans until after age 85 or so?

Maybe a couple of considerations then is whether you actually want that monthly check coming in, whether you are in a state that taxes SS, and whether the Government will eventually call SS a tax and discriminate as to it's recipients (which I think they will).

 

[Rianne]

Yes, you can use opensocialsecurity.com... chose the Advanced Options checkbox at the top of the page... and insert a real discount rate equal to your projected real rate of return (projected nominal return less projected inflation).... also for mortality, chose an assumed age at death of 85.

It will return the present value of benefits through age 85 using their "optimal" age (start age with the highest pv). Then, in the Alternative Claiming Strategy section further down the page, you can calculate pvs based on starting at various ages (one at a time.. so 62, 65, FRA, 70, etc).

I ran a series with $1,000/month PIA for a single person born in Dec 1957, 3.3% real discount rate and got the following PVs:

62....... $139,533
65....... $142,582
67....... $143,073
70....... $139,163

Bottom line... if you only live until 85 it doesn't matter much ... do whatever you want.

This gets complicated when we factor in pension and the tax cliff. It's one complicated jigsaw puzzle to figure out. We'll be making twice as much when we're 65 (just with SS and pension) and that's not even FRA. That includes no w/d from portfolio. Is there a professional that can figure this out? Our tax accountant just retired He was not very good. Now what?

 

[pb4uski]

Is it nit-picking to say its not knit-picking?

Close call.

 

[pb4uski]

This gets complicated when we factor in pension and the tax cliff. It's one complicated jigsaw puzzle to figure out. We'll be making twice as much when we're 65 (just with SS and pension) and that's not even FRA. That includes no w/d from portfolio. Is there a professional that can figure this out? Our tax accountant just retired He was not very good. Now what?

I don't see how pension and taxes makes a huge difference to the analysis... I presume that with SS and pension that 85% of SS will be taxed whether you take it at 62 or at 70.

 

[audreyh1]

Is it nit-picking to say its not knit-picking?

I've had to pick out some knitted stitches before, but you do have a point, LOL!

 

[audreyh1]

I don't see how pension and taxes makes a huge difference to the analysis... I presume that with SS and pension that 85% of ss will be taxed whether you take it at 62 or at 70.

Certainly true for us!

 

[Perryinva]

Yes, agree, as we will ALWAYS be in the 85% taxed bracket regardless. IMHO, for us, it is not the break even amount at all, or even the amount as a part of income, but the longevity annuity WHEN one of us dies first. The larger my SS, the less impactful in loss of income AND taxable total amount going from MFJ to MFS. I ran various “one drops dead“ ages in openSS and age 70 always wins, since spouse took hers at 62.

 

[Chuckanut]

I don't see how pension and taxes makes a huge difference to the analysis... I presume that with SS and pension that 85% of SS will be taxed whether you take it at 62 or at 70.

+1

I have heard that 85% called the 'Success Tax'.

 

[daylatedollarshort]

For us when to take SS is pretty small potatoes in our retirement success compared to optimizing all our expenses. We took pensions at 55 and will take SS at 62. With optimized expenses, SS and pensions cover most of our retirement expenses, all the basics and a good chunk of discretionary, and we can let the portfolio grow and save it for LTC, money for the kids or extra discretionary items. Plus with factoring in the possibility of benefit cuts in the future, that makes taking it now more valuable to us.

 

[Siestatime]

Is it nit-picking to say its not knit-picking?

+1[emoji1360]

 

[Rianne]

I don't see how pension and taxes makes a huge difference to the analysis... I presume that with SS and pension that 85% of SS will be taxed whether you take it at 62 or at 70.

Yes, this thread is about taking SS at 62, but the discussion opens a can of worms. I can't help but consider:
- LTC. SS and pension will help cover those expenses if needed without draining the portfolio.

-Survivor benefits
-Making peace with the decision that it's better or not to think of long term gain rather than higher monthly checks for SS and thoughts of 50%, 75% or 100% survivor benefits from pension. Get what's owed to me sooner than later because I earned it and it won't be there for the beneficiaries.

pb4uski, you were (still are) an accountant and have experience in many different scenarios. I guess I need the discipline to put each scenario in a pile or box and analyze all the pros and cons of each strategy. Move around the pieces and re analyze. I'm getting there little by little.

 

[HI Bill]

If one takes SS at 62 and invests it, how much would be lost if the spouse receives spousal benefits? Is the higher earner better off waiting to 67? In my wife's case, this would reduce her monthly benefit by $372/month.

 

[pb4uski]

^^^ You could probably get a fair idea by running opensocialsecurity.com scenarios with your projected REAL investment earnings rate as the discount rate and taking it at various ages under the alternative claiming strategies section below the optimal solution results.

 

[Navigator]

I've seen all the data on break even years, etc., but I've never seen one based on saving the income and investing it. Is there any data on a 62 year old investing the SS and comparing it to a 70 year old recipient, who then lives to age 85?

There is a range of possibilities, depending on one’s investments and how well they do. I did an analysis based on a 60/40 portfolio and living to 92, using actual stock market returns from 1928 onwards. The results showed about 75% of the time taking SS at 62 was better. However, when the stock market P/E 10 is over 18 (as it is today), it was a 50/50 split. This, IMHO, favors taking SS at 70. This is for a single person. For married couples, the situation is more complex.