Tapping IRA to Postpone Social Security

[Lancelot]

I view the inflation-adjusted SS check as outstanding longevity insurance. By waiting to age 70, I maximize the size of that check for as long as I (or DW) live. That also should allow us to spend down our investments to a lower level than we'd otherwise be comfortable doing.

I agree. I also view SS as income insurance. Delaying SS has also allowed me to withdraw some of my IRA at a lower tax rate. In any case, we are fortunate to have the choice

 

[DougJohnson]

The Actuaries at SSA have done a fantastic job making the timing of your SS start date almost irrelevant. For a person with average life span, their total lifetime income from SS benefits will be the same whether they collect at age 62 or defer to age 70.

You're right. Sort of. The actuaries at SSA did a fantastic job in 1983, the last time this stuff was revised. Since then, interest rates have gone down and life expectancies have gone up. Both changes push towards taking SS later.
-- Doug

 

[sfbrown]

We really don't have enough info to say anything definitive, but one has to consider what the size of the RMDs will be. Too large, and not only will your taxes be higher, but you may also face higher Medicare premiums. It isn't always about getting SS while the getting is good.

 

[Indiana Randy]

Lots of opinions. Not much fact. Here's the scoop;

After exhaustive research I learned that as long as you; Live to your Expected Lifespan, You will receive the SAME amount of money REGARDLESS of when you begin collecting SSI. Read this again; Provided you live to your Expected Lifespan, you will collect the SAME amount of money regardless when you begin collecting.

Waiting for bigger checks is ONLY beneficial IF you can OUTLIVE your Expected Lifespan.

If you do not NEED the income at 62 or whenever you can begin collecting, then INVEST IT! This is the ONLY way to beat the system and come out ahead, weather you die young OR live the Expected lifespan OR Live Longer.

 

[pb4uski]

^^^^ What if you happen to be lucky and outlive your expected lifespan by 5-10 or even 20 years?

Read post #77... longevity has improved a lot since the current levels of discount for taking early or bonus for delaying were last set in 1983.. so it is quite likely that if you are in your early 60s today and in decent health that you will outlive the mortality assumption.

 

[retiredunder50]

You're right. Sort of. The actuaries at SSA did a fantastic job in 1983, the last time this stuff was revised. Since then, interest rates have gone down and life expectancies have gone up. Both changes push towards taking SS later.
-- Doug

The recent 3 year trend indicates a drop in life expectancy in the US.


see: https://www.washingtonpost.com/nati...58bc8c-f28c-11e8-bc79-68604ed88993_story.html

and

https://www.smithsonianmag.com/smar...rising-drug-overdose-suicide-rates-180970942/

Although suicides and opiods have influenced this decline, the surprise to me is that "of the top 10 leading causes of death—heart disease, cancer, unintentional injuries (drug overdoses constituted slightly less than half of this category in 2017), chronic lower respiratory disease, stroke, Alzheimer’s, diabetes, influenza and pneumonia, kidney disease, and suicide—only cancer witnessed a decrease in mortality rates. Seven, including suicide and unintentional injuries, experienced increases."

 

[Sunset]

^^^^^
If you read carefully the big factor is suicide and drugs, and "
increased deaths amongst younger and middle-aged individuals (particularly those between 24 and 44) had an outsized effect on calculations.
As Kathryn McHugh of Harvard Medical School tells NPR’s Richard Harris, “We're seeing the drop in life expectancy not because we're hitting a cap [for lifespans of] people in their 80s, [but] because people are dying in their 20s [and] 30s.”


Since I'm past 20s and 30s and don't do drugs (overdose) and don't intend to suicide, I feel my lifespan is longer than the old average.



Note: Since SS does not discriminate based on sex, and women even with old calculations lived to the 80's , it seems a slam dunk women claiming on their own earnings would delay until 70.

 

[winyaz]

So many articles on this subject miss a key point. The SS payout starting at any age is based on your life expectancy. If you live exactly as long as expected, it doesn't matter what you choose, your payout should be the same either way. The question to ask is: Do you feel lucky? Do you expect to live longer than the average life expectancy for someone your age? If so, deferring would likely maximize your expected income. If not, taking the money as soon as possible will likely maximize your expected income.

 

[retiredunder50]

^^^^^
If you read carefully the big factor is suicide and drugs, and "
increased deaths amongst younger and middle-aged individuals (particularly those between 24 and 44) had an outsized effect on calculations.
As Kathryn McHugh of Harvard Medical School tells NPR’s Richard Harris, “We're seeing the drop in life expectancy not because we're hitting a cap [for lifespans of] people in their 80s, [but] because people are dying in their 20s [and] 30s.”


Since I'm past 20s and 30s and don't do drugs (overdose) and don't intend to suicide, I feel my lifespan is longer than the old average.



Note: Since SS does not discriminate based on sex, and women even with old calculations lived to the 80's , it seems a slam dunk women claiming on their own earnings would delay until 70.

The actual data brief of the study available at https://www.cdc.gov/nchs/data/databriefs/db328-h.pdf states that "Age-specific death rates between 2016 and 2017 increased for age groups 25–34, 35–44, and 85 and over, and decreased for age group 45–54." The fact is that life expectancy over the last 3 years has not been increasing as many still seem to believe. Will this trend continue for some time? Is it statistically significant? Is there a point in time that people will start incorporating this data in their retirement planning if the trend continues? Who knows? We can dismiss this as the opioid/suicide effect, but there are some other indicators like the increases in death rates for those 85 and over, combined with the increased mortality rates for several diseases that more heavily impact the older segments of the population.

 

[Elizrogers]

I had these thoughts at your age I'm now 68. I planned on waiting to 70, but my cousin, who is 10 years older, pointed out two things. One, how much more a month will you get? In my case it was just under $200. Is that going to make a big difference in my lifestyle? Second, how much money would you be leaving in the 5 years between 65 and 70? It was around $20,000. I would have to collect SS for 12 years to break even once I started collecting at 70. I am healthy, but did I want to gamble on making it to 82 just to break even?

Take the SS at 65. Let your own money continue growing interest. SS isn't. If you continue working past 65 take it anyway and add it to your 401k, IRA or whatever investments you're saving for retirement. Then you'll have $200 extra a month. You'll come out ahead in the long run.

 

[IMATERP]

Very easy decision

A. The annuity payments from social security are based on the average life expectancy.

B. Thus, if (based on 2018 life expectancy for a male) I lived to age 80, I would probably receive just about the same amount of money if I chose to collect at age 62 or 70.

C. I suggest guesstimating where I would fit into the aforementioned. (You can do this too)

1. I take after my father (from a heredity perspective.)

2. My father lived to age 76 and his twin brother lived to 58. Their father lived to age 60. Also, although my father lived longer than his brother and father, his quality of life was very poor after age 65.

D. Now, I’d then look at my own personal health. I have lived with a chronic illness for 40+ years and have taken an expensive biologic medication for the last 12 years (and have had remarkable results.). This will have a negative impact on life expectancy.

E. I am a former smoker. I smoked for 30 years and quit 12 years ago. Although my life should be extended due to quitting - I am certain that there has been some negative impact.

Now, back to our average lifespan of 80. Not everyone dies on their eightieth birthday - so I’d take that age a standard deviation out and use the average lifespan of a male being somewhere between 76 to 84.

Based on the aforementioned life and heredity issues, I’d love to live to 84, but probably won’t. Hence, I’ll take the money and run.

At age 60 (which is in 20 months) my pension and SS covers my fixed expenses with ease. I’ll use my retirement assets for conversion purposes (tIRA > Roth) so that will become wifeys inheritance provided she outlives me.

I

 

[mickeyd]

For sure, excellent long-term health is the key to living long enough to appreciate waiting until age 70.5 to begin your SS income stream. Of course, if you need the cash earlier in order to live, your options are limited. Using up your IRA cash early in order to delay SS until 70 is an option that may or may not pay off.


There are risks and minefields all over the place. Avoid as many as possible.

 

[Archman]

In my situation,I took Social Security at age 63½, and therefore drawing less from my retirement savings, My break even point is at age 86,assuming the markets cooperate. Taking less from your investments mitigates the sequence of portfolio bad returns that might occur early in retirement.

Sequence-of-returns risk involves the actual order in which investment returns occur. Typically, negative returns earlier in retirement have a more severe impact on your portfolio than negative returns later in retirement. That’s because your portfolio’s value is reduced by both negative market performance and any withdrawals you take to fund your day-to-day expenses. This means that a smaller amount is left behind to experience any potential future growth.

 

[levindb]

In trying to figure out when the "best" time to start SSA benefits, you first have to define what "best" means to you and your family:

1. You and your spouse collect the most from SSA before you die
2. You leave the most amount of money to heirs and charities
3. You have the most amount of money to spend during your lifetime

These are very different, but somewhat related priorities. Your final decision may depend on the ROI of your investments (which may also vary over time), your Fed and State tax situation, and, of course, your longevity expectations. With all of these variables, it is relatively easy for each person to justify their choice based on which of the variables they feel is most important to them.

For me and DW, we want our last check to bounce, we hate paying taxes, we expect very low ROI (3% over inflation, but will gladly accept higher returns)...

We did File and Suspend, with DW taking 4 years of Spousal benefits at her FRA, then both of us will take our own SSA at 70. We are drawing down our brokerage accounts during the 62-70 years, paying really low taxes, and will have to deal with a new reality next year when SSA and RMD hit...but we are gaining $34K/year by waiting from 62 to 70...which is significant to us.

 

[kgtest]

You've only left money above your break-even, in which case...you are ALIVE! Alive and broke is still better than the alternative IMHO.

 

[Oakster]

The 6 years between age 64 and 70 will most likely be the most active of your entire retirement, with the desire to travel more, and buy large ticket items. I'm going to use the "House Money" to help me do that because there is no gaurantee I will live past 70.

This is my plan too. I am overweight, so I do not know if I will have the long life that truly benefits from delaying social security. Also, I would prefer to not tap the retirement accounts as hard early on and let them grow. I do not think there is enough money on the line to make me defer it, compared to take it early and leave work at around 62. I think my retirement accounts will be where I would like them to be about that time.

 

[LakeRat1]

Interesting thread.... We retired 5.5 years ago... DW 59.5, I was 53.... Pull from DW IRAs, started drawing SS at 62, turns 65 Next month, I started drawing my slashed pension at 55, my plan in to draw SS at 62, as well draw from my IRA at 59.5......We started with a portfolio of roughly 1.6mil, no outstanding loans or debt of any sort ...... Tomorrow is not promised ..... Get the $$$ while you are able to enjoy it, has been our philosophy

 

[RetireBy90]

If the stock market crashes , then take it now, so you don't touch your stocks while they slowly recover.

Thanks for this post, I hadn’t really considered this as a valid option. DW will take her SS next month at full age and I plan to wait till 70 as we don’t really need the extra $$ and it will provide more safety for DW. However, I like this idea that I could take SS before 70 rather than selling after a big drop.

 

[GravitySucks]

^^^^^
If you read carefully the big factor is suicide and drugs, and "
increased deaths amongst younger and middle-aged individuals (particularly those between 24 and 44) had an outsized effect on calculations.
As Kathryn McHugh of Harvard Medical School tells NPR’s Richard Harris, “We're seeing the drop in life expectancy not because we're hitting a cap [for lifespans of] people in their 80s, [but] because people are dying in their 20s [and] 30s.”


Since I'm past 20s and 30s and don't do drugs (overdose) and don't intend to suicide, I feel my lifespan is longer than the old average.



Note: Since SS does not discriminate based on sex, and women even with old calculations lived to the 80's , it seems a slam dunk women claiming on their own earnings would delay until 70.

Dear Dad didn't count on being an opioid addict, but at 75 the pain was unbearable and the docs told him he's be dead in a year. He lived another 11 and though he didn't die of an overdose he certainly was severely addicted to prescription pain meds. Not so sure he would not have committed suicide if his wife had died in that time frame. Wonder how many suicides are from a realisation that medicine can keep us alive but at a cost greater than the benefit.

 

[RobLJ]

As I've posted here before, I essentially see an early SS claim as a put option on my stock portfolio. I doubt I'll claim early, but in a 2008-9 style event, I will without any reservation. (I have enough cash/bonds to ride out at least 3 years, so I do see it as somewhat unlikely, but certainly possible.)

I'm 60; DW is 56.

Thanks for this post, I hadn’t really considered this as a valid option. DW will take her SS next month at full age and I plan to wait till 70 as we don’t really need the extra $$ and it will provide more safety for DW. However, I like this idea that I could take SS before 70 rather than selling after a big drop.

 

[Oakster]

Interesting. We recently attended a seminar where the FA stated the same thing - you should take SS as early as possible *IF* you were able to invest the proceeds, as the longer you lived the more likely your investment would be a better return than the delta gained waiting to take SS, and no one can predict how long they will live.

Right now I am looking at taking mine between 64 and 70, but no hard and fast decision yet. Taking it before FRA might keep me in a lower tax bracket when RMDs hit. DW wants to start her own SS next year, since her own SS is less than half of her spousal benefit and she just wants to get some SS money soon. We are not agonizing over the decision.

Isn't spending the social security and not taking more from your retirement accounts the same as investing the social security in comparison. The same amount is left in investments.

 

[Oakster]

I had these thoughts at your age I'm now 68. I planned on waiting to 70, but my cousin, who is 10 years older, pointed out two things. One, how much more a month will you get? In my case it was just under $200. Is that going to make a big difference in my lifestyle? Second, how much money would you be leaving in the 5 years between 65 and 70? It was around $20,000. I would have to collect SS for 12 years to break even once I started collecting at 70. I am healthy, but did I want to gamble on making it to 82 just to break even?

Take the SS at 65. Let your own money continue growing interest. SS isn't. If you continue working past 65 take it anyway and add it to your 401k, IRA or whatever investments you're saving for retirement. Then you'll have $200 extra a month. You'll come out ahead in the long run.

My thoughts too. The increases are not enough to concern me, but then I am not retired, nor do I have enough money to be retired. My plans could go askew and I need those SS dollars to live on. I am not a good bet to live significantly beyond the average. It seems the more "sure" bet is to take the money early and invest it, or draw down less on my retirement accounts. I am only thinking about myself at this point but I need to research how social security works for spouses etc and my plan may change to best protect my wife. She is in great condition and 5 years younger than me.

 

[Archman]

Isn't spending the social security and not taking more from your retirement accounts the same as investing the social security in comparison. The same amount is left in investments.

That's a good point.

 

[Chuckanut]

However, I like this idea that I could take SS before 70 rather than selling after a big drop.

+1

It's a safety valve. And it's certainly not take it at 62 or get nothing, zero, nada until 70. You can turn SS on anytime the market, the math or some sleepless nights make it a better option.

 

[joeea]

I am only thinking about myself at this point but I need to research how social security works for spouses etc and my plan may change to best protect my wife. She is in great condition and 5 years younger than me.

It makes a lot of sense to learn about spousal and survivor benefits and then make an informed choice - particularly if your spouse is younger, and particularly if you are the higher earner.

Also, spend a little time with https://opensocialsecurity.com/