Theory Behind taking Social Security Early?

[pb4uski]

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Originally Posted by Fedup I like to know the real definition of longevity insurance and why some people don’t think they need it. Unless you are already ill, you don’t know you will croak at 63 or 103. Again who can predict X.

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Originally Posted by Floridatennisplayer Obviously some people here think they can!

The reality is that longevity for a group of lives is pretty predictable.... for one life, not so much.

[daylatedollarshort]

As far as longevity insurance, at one extreme if someone has $20M invested in TIPS (I don't, this is just an example) and lives off $20K a year, do they need longevity insurance even if they live to 130? If someone has a military pension that covers 150% of their retirement expenses, $3M in CDs, Social Security and $4K a month in rental income, do they need longevity insurance? Maybe I'm just throwing caution to the wind here, but I'd say they can take SS whenever they want and wouldn't run out of money in either case.

[pb4uski]

I doubt that someone with $20m or a COLAed pension that is 150% of spending give much thought at all to when to take SS.... flip a coin or take it at 70 because a lot of what you read suggests that.

[Fedup]

Interesting, if you have money then why would you take it at 62. You have to pay tax at 62. Longevity insurance doesn’t always mean you think you run out of money. At least I don’t think I will be in that case, yet I’m still go for longevity insurance. Why? Because it’s the only thing that makes sense for my situation when it comes to when to take SS.

Btw, I have fire insurance, earth quake insurance, life insurance. I only let go of LTCi recently.

[frankbrenowitz]

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Originally Posted by Independent To me "longevity insurance" means giving up money in the case that I die "young", in order to get money in the case that I die "old". Similar to "fire insurance" means giving up money in the case that my house doesn't burn down, in exchange for getting money in the case that my house does burn down. In both cases, I can make rational decisions, without knowing my date of death or whether my house will burn down.

This analogy would work a little better if at some point you were guaranteed that your house would burn down. I could theoretically pay fire insurance premiums for 10,000 years and never have a claim. Your eventual death is a certainty, however.

Delaying social security can be considered a purchase of the best SPIA on the market today. I just turned 62, and my monthly benefit at 62 is $1,8333. If I delay claiming for one month, my COLAd benefit is $125 higher for the rest of my life, however long that is. I am effectively purchasing a lifetime income stream of $125 per month for my wife and me in exchange for an immediate payment of $1,833. I can do that each month, “buying” a SPIA of $125 for the next 16 months, at which time the future receipts increase to $167 per month until FRA, at which time they increase again to $200 per month until I reach 70. So over that eight years I will have purchased 96 SPIAs for a total of $176,000. In return, I will receive a COLAd $16,800 until both of us die. You can nibble around the margins with “ What happens in 2034 when the trust fund is depleted?” and “What if you die at 71?” My primary concern, and mine alone, is to secure the highest reliable income stream I can against the expected time when I am old, weak, and cognitively impaired. Others may have different concerns and that’s OK.

[Independent]

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Originally Posted by Floridatennisplayer I bought a single premium annuity that I will take at 65 and when I will also be taking Social Security. Which I consider early versus waiting till age 70

That makes more sense. I thought "early" meant 62.

But, did you consider using some of the money that went into the private annuity to defer SS to 70?
On an earlier post, you said "simple". Maybe you just preferred the simplicity of having them both start at 65.

[Independent]

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Originally Posted by frankbrenowitz This analogy would work a little better if at some point you were guaranteed that your house would burn down. I could theoretically pay fire insurance premiums for 10,000 years and never have a claim. Your eventual death is a certainty, however. Delaying social security can be considered a purchase of the best SPIA on the market today. I just turned 62, and my monthly benefit at 62 is $1,8333. If I delay claiming for one month, my COLAd benefit is $125 higher for the rest of my life, however long that is. I am effectively purchasing a lifetime income stream of $125 per month for my wife and me in exchange for an immediate payment of $1,833. I can do that each month, “buying” a SPIA of $125 for the next 16 months, at which time the future receipts increase to $167 per month until FRA, at which time they increase again to $200 per month until I reach 70. So over that eight years I will have purchased 96 SPIAs for a total of $176,000. In return, I will receive a COLAd $16,800 until both of us die. You can nibble around the margins with “ What happens in 2034 when the trust fund is depleted?” and “What if you die at 71?” My primary concern, and mine alone, is to secure the highest reliable income stream I can against the expected time when I am old, weak, and cognitively impaired. Others may have different concerns and that’s OK.

Yes, the extremes for deferring SS aren't nearly as stark as for buying fire insurance.

(Old fashioned whole life insurance is more of an eventual sure thing, so the only unknown is the date of death. We still call it "insurance".)

And, I agree with the rest of the post.

[rayvt]

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Originally Posted by Independent If we focus on change in mortality rates over time, I can find this paper https://www.ssa.gov/policy/docs/work...ers/wp108.html It says that most of the mortality improvement for the two birth cohorts they studied came from the higher income group. So, yes, higher income people have probably always had better mortality, but the rate of improvement is also faster for the higher income group. This has political implications when people propose raising the SS normal retirement age.

That's an interesting paper, and has some insights that I've not seen before. Dated 2007 so it's been out there for quite a while.

Chart 1 is quite a demontration of two things: 1) Medical advances have greatly lowered mortatlity rates (1912 cohorts vs. 1941 cohorts) and 2) there is a hard wall about age 100. Doesn't matter where you sit in the income percentiles, that wall is there.
As it says, "In Chart 1, all birth cohort groups start out with 100,000 members at age 60. As members of each group age and die, the number of survivors falls, until almost no one is left at age 100 and beyond."

But, yeah, some day somebody is going to blow out 125 candles on their birthday.

Or, as the great philosopher/poet Jim Morrison said, "No one here gets out alive."

[rayvt]

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Originally Posted by joeea According to the Social Security Administration in 2017, 21% of married couples and 43% of single seniors rely on Social Security for 90% or more of their income. These are the folks where the right choice could be most important, if not critical.

Well, that's the thing. Those folks do not have a choice. They have to start taking SS as soon as they retire and lose their paycheck.
The only people who can make a choice are people who don't need any money from Social Security for 8 years. And that's the people who engage in this "when to take SS" debate---people who already have plenty of money/income. And, really, it's only the folks who are on the cusp of the need/don'tneed the longevity insurance aspect. If your portfolio is large enough that it is throwing off $100K a year, then it's as useful as buying insurance on your bicycle.

It's a little bit like agonizing if you should get a 2-burner or splurge for a 6-burner stove.
It's a different category of decisions if the stove is for a 1 bedroom house or a 70-foot yacht.

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Actually, my brother-in-law was one of those 43%. He filed at 62. Because he needed the SS money to live on. EVen though it was well explained to him that he'd get more money if he waited to 65 (his FRA). When he turned 65 he was expecting to get a jump in his SS benefit, up to the age 65 level (if he hadn't filed early). Took him quite a while, and a few visits to the local SS office, to accept that it didn't work that way.

[ncbill]

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Originally Posted by rayvt Well, that's the thing. Those folks do not have a choice. They have to start taking SS as soon as they retire and lose their paycheck. The only people who can make a choice are people who don't need any money from Social Security for 8 years. And that's the people who engage in this "when to take SS" debate---people who already have plenty of money/income. And, really, it's only the folks who are on the cusp of the need/don'tneed the longevity insurance aspect. If your portfolio is large enough that it is throwing off $100K a year, then it's as useful as buying insurance on your bicycle. It's a little bit like agonizing if you should get a 2-burner or splurge for a 6-burner stove. It's a different category of decisions if the stove is for a 1 bedroom house or a 70-foot yacht. --------- Actually, my brother-in-law was one of those 43%. He filed at 62. Because he needed the SS money to live on. EVen though it was well explained to him that he'd get more money if he waited to 65 (his FRA). When he turned 65 he was expecting to get a jump in his SS benefit, up to the age 65 level (if he hadn't filed early). Took him quite a while, and a few visits to the local SS office, to accept that it didn't work that way.

Yep, I'm currently helping an older single female relative who was laid off around age 60.

Had to cash out their pension to survive until starting SS at 62.

Small inheritance at 67.

Now a few years later, the reason they probably won't outlive what's left is due to their recent diagnosis of metastatic cancer.

Based on what their oncologist said initially, I thought it could be years.

But after getting them assessed by & enrolled with Hospice yesterday it's likely only to be months.

Still working on getting their house cleaned out & ready for sale.

[samclem]

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Originally Posted by ncbill Yep, I'm currently helping an older single female relative who was laid off around age 60.. . . Now a few years later, the reason they probably won't outlive what's left is due to their recent diagnosis of metastatic cancer.

Best wishes as you move ahead. I'm sure she appreciates the assistance and your kindness.

[cbo111]

I am amused that there are 670 replies to this "when to take social security" question. To me, the one essential variable is to have a heart-to-heart conversation with oneself and ask "how long do I think I will live?" It might be more useful to have a candid discussion with your primary physician and ask him/her that same question. I wonder how many doctors get that "how long will I live" question regarding when to claim benefits.

[Cut-Throat]

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Originally Posted by cbo111 I am amused that there are 670 replies to this "when to take social security" question. To me, the one essential variable is to have a heart-to-heart conversation with oneself and ask "how long do I think I will live?" It might be more useful to have a candid discussion with your primary physician and ask him/her that same question. I wonder how many doctors get that "how long will I live" question regarding when to claim benefits.

I am amused that people keep asking this question!


1.) No one could possibly know
2.) It is completely irrelevant.

[Fedup]

Hey, I did ask. Doctor said to take SS at 70. But seriously, he told me I look very young for my age.

[braumeister]

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Originally Posted by Fedup Hey, I did ask. Doctor said to take SS at 70. But seriously, he told me I look very young for my age.

That's called "bedside manner" and is the most important class they teach in medical school. Those who get the highest marks are approved to specialize in Diseases Of The Rich.

[Winemaker]

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Originally Posted by Fedup Hey, I did ask. Doctor said to take SS at 70. But seriously, he told me I look very young for my age.

Well, if your doctor told you that you had two years left, he isn't doing a good job as a doctor. And he might have to take SS at 62!

[jimandthom]

During all these "when to take SS" one of the key statements for delaying is to provide the cushion for the surviving spouse.

Providing a cushion for my spouse, is why I will be taking SS at between 65-66. He cannot collect a spousal on my SS due to his federal pension

Should I go first, he will be without my SS and the amount that we spent from our nest-egg for those 5 years.

As others often state and seem to be suggesting is that they are more concerned about their spouses comfort than their own. I want my spouse to need nothing for him to have a comfortable and cared for remainder of his life.

If he goes first, being concerned about my level of comfort will be the last thing on my mind.

[joeea]

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Originally Posted by rayvt Well, that's the thing. Those folks do not have a choice. They have to start taking SS as soon as they retire and lose their paycheck. The only people who can make a choice are people who don't need any money from Social Security for 8 years.

That's incorrect.

Many folks who will be in that situation can choose to continue to work. I know a fair number of seniors who stay employed in order to delay their social security benefits and to pay for health insurance.

[jimbee]

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Originally Posted by joeea That's incorrect. Many folks who will be in that situation can choose to continue to work. I know a fair number of seniors who stay employed in order to delay their social security benefits and to pay for health insurance.

Continuing to work is a valid method of not needing Social Security.

[arch57]

In our situation (age 61, DW is 60) besides my fixed pension we are pulling out of our tax-deferred accounts to fund our retirement. So I did a quick Excel sheet today. In our case taking SS @62 allows us to keep the money in our accounts and assuming a conservative 4% gain that grows to $335K at age 90 vs. the extra $218K I would have accumulated by delaying SS until I am 70.

So since our cashflow needs require us to withdraw from IRA and 401K funds to live the lifestyle we desire I'm planning on starting SS at 62 to offset tapping too much out of the tax deferred accounts.