Theory Behind taking Social Security Early?

As a couple we took SS at 66 & 62. We used a web program that showed waiting longer never paid off for us. Program is no longer available. Biggest factor for taking it early was 5 yr age difference for us.
 

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MrLoco said:
I am curious why you think that current SS recipients would not be affected by any cuts/changes to SS?

I hear this all the time as if current SS recipients are somehow immune to any future changes in benefits.
Those of us a few years away from collecting vote as much as those currently receiving benefits.
I think any changes will ( and should) affect everyone....those waiting to collect and those currently collecting.

A fair and balanced approach might include:

1) Gradually raise the minimum age to begin collecting benefits from 62 to age 65 over the course of the next 20 years.

2) Increase the FICA tax withheld slowly and responsibly in future years. Amounts to be determined.

3) Responsibly cut benefits to all current SS recipients.

This way everyone takes a haircut and no one escapes the pain.
This should keep the program solvent for many years to come.

The people who are in danger of collecting much less they they ever contributed are those in their 20's and 30's....not those of us within a few years of collecting.
Click to expand...
I'm not going to say this is a terrible solution, but it could use some more details.

1) If you mean raise the early start age without changing the NRAs or early start factors, then this has very little long term financial effect. Just however much those factors fail to be perfectly "actuarially neutral".

2 & 3) Depends on your definition of "responsibly". If the shortfall in 2034 is 25% of benefits, how much would you change each?
Cut benefits by 10% and increase tax rates by 20% would do it.
Cut benefits by 20% and raise taxes by 6.7% would also do it.

Note that not everyone feels the pain equally. If we don't change the tax cap, someone with wages of 3x the cap only "feels" 1/3 as much pain as all those people under the cap.
 
My 2017 SS statement says that I've paid $118K and my employers paid $125K into SS = $243K. My wife will qualify for spousal benefits. If we both start taking distributions (me, 70, her 67), I've calculated that if we both were to live to 100, we would have received $1.7M in benefits (today's $). This was always a sort of pyramid scheme, and for it to work, the birth rate needed to keep rising. There are many problems with the system that need fixing. But most retirees will be wholly or nearly wholly dependent on SS benefits for their 'golden years'. The quickest route to social unrest (and voting politicians out of office) would be to cut their benefits by 25%!
 
The Continuing Discussion of When to Claim SS

Since it has been at least 15 minutes since reading on this subject, wanted to post a link to another article to discuss various point and counter-point.
"Readers Argue for Collecting Social Security Right Away"
https://www.wsj.com/articles/readers-argue-for-collecting-social-security-right-away-1535642564?mod=searchresults&page=1&pos=3

My takeaway from the discussion is there is no right answer. If you want to compute which age will give you the greatest total $ from SS then that is an easy question. The article shows that there are other reasons that some claim for taking early. Not my money, you earned it and you should spend it how ever you wish, just don't come to me to bail you out if your choice turns bad.
 
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Independent said:
Let's take the simplest example. Single, 62-year old has $1,000,000 in IRA and a
$20,000 SS benefit (stating at 62) or a
$35,000 SS benefit (starting at 70).

How much can/should this person spend in the first year of retirement if he/she
A. Starts at 62
B. Plans to start at 70
Click to expand...



It really depends on if he/she has a 40 year old BF / GF
 
Lukeee said:
It really depends on if he/she has a 40 year old BF / GF
Click to expand...
And what his/her spending needs are at 62. If the investments throw off enough income, they may want to wait...and what is their health like?
 
1. Do you have enough other sources of income such that you can delay SS?
a) Are they indexed for inflation?

2. What will be the return on investments over your planned retirement?
3. What will inflation be over that same period of time?
4. Do you have a spouse that would benefit from survivor benefits?
5. How long will you live?
6. If a surviving spouse, how long will they live?
7. If you have a spouse, are they eligible to draw SS on your record?
8. Your Age?
9. Your expiration date?
10. If you have a spouse, their age?
11. If you have a spouse, their expiration date?
12. Your FRA SS amount?
13. If you have a spouse, their FRA amount?
14. Dependent children?
15. Expected spending pattern in retirement?
16. Annual earnings before FRA that might be adjust the SS payment amount?
17. What changes will occur in SS payments over the time associated with your retirement?
18. Do you feel that you need to be drawing the money ASAP?
19. Do you feel like you would rather have the larger payment, regardless of total returns impact?
20. Do you really feel like everyone has to agree with your decision on THE correct time to draw Social Security?


Because everyone's situation is slightly different, we will never reach a consensus decision.
Because there is so much debate, perhaps this is a personal choice, much more than a calculated optimized solution.
Because many of these factors will not be known until the game is over, we each will make a decision, and it will probably be OK.
 
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MrLoco said:
I am curious why you think that current SS recipients would not be affected by any cuts/changes to SS?

I hear this all the time as if current SS recipients are somehow immune to any future changes in benefits.
Those of us a few years away from collecting vote as much as those currently receiving benefits.
I think any changes will ( and should) affect everyone....those waiting to collect and those currently collecting.
Click to expand...


You have stated the answer and it is 'Voting'.... Whether you are collecting S.S. or a few years away, you are 'Paying attention'... When they slipped in the Taxing and raising retirement age of S.S. back in the Reagan era, I was only 30 and 'Not paying Attention'... They did not screw the older folks as much as the younger folks..... Expect the future 'solution' to be screwing the younger folks 'Not paying attention'
 
Bankgirl0157 said:
As a retired banker, I suggest three things:
1) Determine the age you want to be when you retire and estimate where your expenses will/should be at that age. For example, I determined I wanted to retire at 60 without taking any distributions from my 401-K. The only way I could do that was to have my mortgage paid off. THAT became my goal along with enough in savings to pay expenses until age 62.
2) Calculate your SS breakeven point and decide your personal risk. For example, my breakeven, if I wait to take my SS until age 66, is age 82. If I die before then, I leave money on Social Securities table instead of my own.
3) Last, 3-5 years before your projected retirement, determine the large expenses you may be able to eliminate prior to the big day. For example, I replaced my roof, A/C, appliances, did painting, etc., so I could avoid these huge expenditures during the gap period with little to no income. You can never avoid everything, but determining end-of-life on household maintenance and other necessities should be easy to accomplish.

Just my two-cents! :)
Click to expand...

Along with a few others, I question #1 and #2, but #3 really has me stumped.

How the heck would replacing something before it was really needed help anyone financially, under any circumstances?

You spent the money early, and if you didn't it would be available "during the gap period with little to no income". I don't need income to purchase something, I need funds.

In your other posts, you said you were a banker for 38 years and worked as an FA for 5 of those years, so I'm wondering what I'm missing (since I was neither). Can you explain?

-ERD50
 
ERD50 said:
.... In your other posts, you said you were a banker for 38 years and worked as an FA for 5 of those years, so I'm wondering what I'm missing (since I was neither). Can you explain?

-ERD50
Click to expand...

I guess that the earlier drivel all makes sense now.
 
HNL Bill said:
... This was always a sort of pyramid scheme, and for it to work, the birth rate needed to keep rising. There are many problems with the system that need fixing. But most retirees will be wholly or nearly wholly dependent on SS benefits for their 'golden years'. The quickest route to social unrest (and voting politicians out of office) would be to cut their benefits by 25%!
Click to expand...

Oh boy! I picture in my mind a mob of geezers out on the streets throwing Molotov cocktails, overturning cars, smashing business glass windows, battling with riot police. :)

Seriously, most likely to happen is that SS will be taxed more heavily for those with 401k and IRA. The people with money are too busy traveling in Europe or taking cruises to riot. Plus the well-to-do are too risk averse and afraid of bodily harm to go rioting. :LOL:
 
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Sorry ERD but I find your posts don’t really make sense.
 
Let me throw out an emotional component. As a life long compulsive saver investor and master of delayed gratification I excelled at the accumulation phase. In ER I kinda suck at the distribution phase, the idea of depleting what I accumulated as I age makes sense on paper but not in practice. It bothers me even though I have been doing it for years and my portfolio increasing. SS will be like getting a paycheck, money coming in again instead of money going out. Taking it at 62 will cover about 50% of my expenses at 62 (next year) and reduce the draw on my portfolio to just under 2% annually. Early SS will make me feel better and if I feel better I will enjoy retirement more. That's my plan and I am sticking to it.
 
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research also suggests that if you feel better you'll live longer...

in case that's a part of the equation too :cool:
 
shotgunner said:
..... Taking it at 62 will cover about 50% of my expenses at 62 (next year) ...
Click to expand...

If your age 62 benefit will cover 50% of your expenses, then your FRA benefit will probably cover 67% of your expenses (50%/75%=67%) and your age 70 benefit will cover 88% of your expenses (67%*132%=88%).
 
pb4uski said:
If your age 62 benefit will cover 50% of your expenses, then your FRA benefit will probably cover 67% of your expenses (50%/75%=67%) and your age 70 benefit will cover 88% of your expenses (67%*132%=88%).
Click to expand...


Sound good but that is more years of doing something that goes against my grain. Remember I threw out an emotional point of view not a reasoned point of view. :)
 
Cut-Throat said:
You have stated the answer and it is 'Voting'.... Whether you are collecting S.S. or a few years away, you are 'Paying attention'... When they slipped in the Taxing and raising retirement age of S.S. back in the Reagan era, I was only 30 and 'Not paying Attention'... They did not screw the older folks as much as the younger folks..... Expect the future 'solution' to be screwing the younger folks 'Not paying attention'
Click to expand...


Agree on the "not paying attention" part. I was 20-something and don't even recall being aware of the debate or the changes. In addition to voting being a factor in how the changes impact the older crowd, another big factor is fairness - the older crowd has already contributed what was decided by actuaries and politicians to be the "right" amount, and have planned for retirement based on what's been promised to them. But a new round of calculations is needed for the younger crowd since they will likely live and draw SS longer than the older folks. It's also worth noting that the ratio of older-to-younger is higher now than it was back in the Reagan era, which makes the "voting" factor even bigger.

For the above reasons and others, I think the next fix for SS, whenever it happens, will look a lot like what happened under Reagan.
 
shotgunner said:
Let me throw out an emotional component. As a life long compulsive saver investor and master of delayed gratification I excelled at the accumulation phase. In ER I kinda suck at the distribution phase, the idea of depleting what I accumulated as I age makes sense on paper but not in practice. It bothers me even though I have been doing it for years and my portfolio increasing. SS will be like getting a paycheck, money coming in again instead of money going out. Taking it at 62 will cover about 50% of my expenses at 62 (next year) and reduce the draw on my portfolio to just under 2% annually. Early SS will make me feel better and if I feel better I will enjoy retirement more. That's my plan and I am sticking to it.
Click to expand...

I also suck at the distribution phase, and here's another emotional reason for taking early. Government seems even more arbitrary than usual these days. Maybe I am reading way too much history but I can imagine scenarios shy of total social breakdown where the existing rules for social security, retirement accounts, and even ownership of "wealth" get changed. Take the money and run holds more appeal for me now.
 
Nothing wrong with including emotions in the equation. Emotion is generally agreed to be one of the most important factors in setting one's asset allocation, and is also a big factor for many who decide to pay off the mortgage early.


The exception to the above is when the emotion is fear caused by lack of understanding. Before I make any of the above decisions, I should conquer the fear-due-to-ignorance component by educating myself. Then factor whatever emotions remain into my decision.
 
By the way, countries all around the world are raising retirement age. The demographic effect of people living longer affects more than the US, as one can reasonably surmise.

Russia is increasing the retirement age from 60 to 65 for men, and 55 to 63 for women. There have been public demonstrations and protests. Ireland is increasing retirement age from 66 to 68, etc...

The good news: You may live longer. The bad news: You will work longer. :)
 
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