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Theory Behind taking Social Security Early?
Old 08-27-2018, 12:51 PM   #1
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Theory Behind taking Social Security Early?

Some people believe that due to the fact that my dad passed at age 97, my mom is still alive at 96, and three of my four grandparents lived till their 90's, I have "good genetics". I personally don't believe this one bit. If a truck runs me over, it is not going to do a genetic scan. I would be dead no matter what. Anyway, a financial advisor told me that with my heredity, I should claim SS early. Can someone explain the logic to that? I guess my "great genetics" did not carry over to understanding finances very well. Thanks for your time and expertise.
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Old 08-27-2018, 12:56 PM   #2
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Hmmm... If a person believes he is going to have a long life, meaning living at least 90, he should delay SS, and not take it early. It's the reverse of what your FA said. By delaying to 70, a person gets 32% more than what he gets at 66. Over a longer life, he will catch up and get more.

Of course, it assumes that you have enough funds to live on while not taking SS.

On the other hand, if your health is not good and you think you may not make it to 70, then by all means rush to the SS office when you get to 62.
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Old 08-27-2018, 12:58 PM   #3
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Try this I do not know how accurate it is but it is another source...check the assumptions....

https://opensocialsecurity.com

I had a FA tell me to take it at 62 because "why use your own money to live off of take the SS first as you paid into it and save your investments..... there is no right/wrong answer"?
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Old 08-27-2018, 01:12 PM   #4
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I don't know what your FA meant by that.

I waited until age 70 to claim SS based on my own employment, and although that is not a popular tactic here, I am so glad that I did. I think I am getting 175% as much as I would have, had I claimed it at age 62. But check on that.

At any rate, to me it seems like a lot and I am enjoying getting that SS money every month. Being older is sometimes a bit of a drag, but getting a big deposit in the bank every month? Now that is fun and it cheers me up tremendously.

Another possibility is to take SS when you are 66, halfway between 62 and 70, to sort of "split the difference" between the early SS and late SS proponents.
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Old 08-27-2018, 01:15 PM   #5
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I don't know what your FA meant by that.

I waited until age 70 to claim SS based on my own employment, and although that is not a popular tactic here, I am so glad that I did. I think I am getting 175% as much as I would have, had I claimed it at age 62. But check on that.

At any rate, to me it seems like a lot and I am enjoying getting that SS money every month. Being older is no fun but getting a big deposit in the bank every month? Now that is fun.

Another possibility is to take SS when you are 66, halfway between 62 and 70, to sort of "split the difference" between the early SS and late SS proponents.
Yep! Not my FA just one trying to earn my business via a "free Dinner" mostly pushing FIAs for "safe money", I do not use a FA
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Old 08-27-2018, 01:18 PM   #6
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You're getting great advice.

Keep in mind some FA's are idiots. I remember two guys who Megacorp dumped because they were idiots. They were idiots! I know both had a floor map just to find their cubes. Both are friends of ED today.
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Old 08-27-2018, 01:20 PM   #7
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Maybe your FA is thinking "reversion to the mean"!
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Old 08-27-2018, 01:53 PM   #8
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Originally Posted by LXEX55 View Post
Some people believe that due to the fact that my dad passed at age 97, my mom is still alive at 96, and three of my four grandparents lived till their 90's, I have "good genetics". I personally don't believe this one bit. If a truck runs me over, it is not going to do a genetic scan. I would be dead no matter what.
You don't believe what? You understand that you can both have "good genes" and still be run over by a truck, right?

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Anyway, a financial advisor told me that with my heredity, I should claim SS early. Can someone explain the logic to that?
I could use a "stupid adviser" explanation, because it makes no sense to me. But realistically, that's a question you should ask of your adviser rather than asking for people here to guess.

In general, if an adviser says anything that you don't understand, stop right there and ask.

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I guess my "great genetics" did not carry over to understanding finances very well.
Perhaps. Did your dad and mom and grandparents understand finances very well?
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Old 08-27-2018, 01:55 PM   #9
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Social Security benefits are actuarially neutral at the 50th percentile. Based only on age and a desire to maximize benefits, if you are going to live less than the 50th percentile, take it early. If you are going to live longer than the 50th percentile, take it later. Of course, as you pointed out, that't an unknowable assumption.

Most factor in other considerations into when to take SS.
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Old 08-27-2018, 02:06 PM   #10
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Social Security benefits are actuarially neutral at the 50th percentile.
That was true when the delayed benefits were designed.

But the actuarial tables used then are out of date. And the interest rates available then are no longer the case. See: https://maximizemysocialsecurity.com...vesting-market

Even if it were true, as Mike Piper eloquently points out in https://obliviousinvestor.com/social...al-neutrality/ , "Basing your personal Social Security claiming decision upon Social Security’s program-wide actuarial neutrality is like basing your personal tax planning decisions on the average effective tax rate paid by individuals in the U.S. (rather than on your own personal tax rate). It makes no sense at all."
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Old 08-27-2018, 02:09 PM   #11
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I can't tell you what to do only what I am doing and why. I am taking SS at 70 for three reasons:

1. My parents and two of my grandparents lived to 90+.
2. I took my pension early, so it was cut by about 30%. I figure taking SS at 70 will compensate for that.
3. I do not have LTC insurance because I don't find the policies offered to me to be a good value. So, if I do require LTC the extra SS dollars will come in handy and help out.

Arguments can be made for and against my reasoning. We will only know if I made the right decision when I am no longer here to care about it. Like my old grand pappy used to say - "You can't know if it's the right decision until it's to late, so make the best decision instead".
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Old 08-27-2018, 02:23 PM   #12
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If your FA is paid by AUM, then you will be spending your SS money instead of your AUM. More $$ for him/her, I plan to take at 70, with DW applying just before she turns 65 for her own benefits, so she can have Medicare taken out of her check. DW is older and has a lower benefit than I.
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Old 08-27-2018, 02:27 PM   #13
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^^ Hmm.. I think winemaker might be on to something.

I was going to suggest that the FA just misspoke and got it backwards.
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Old 08-27-2018, 02:32 PM   #14
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Your FA might suggest 62 if you can't make ends meet otherwise for the next several years
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Old 08-27-2018, 02:47 PM   #15
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With longevity, I figure to delay starting SS. Meanwhile if Mister Market takes a dive, rather than sell stocks at a loss at that point I can choose to start up SS before age 70.
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Old 08-27-2018, 02:59 PM   #16
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Basing your personal Social Security claiming decision upon Social Security’s program-wide actuarial neutrality is like basing your personal tax planning decisions on the average effective tax rate paid by individuals in the U.S. (rather than on your own personal tax rate). It makes no sense at all."
The OP's question was about basing SS on age only. And, I underlined "only" to clarify the point I was making. Finally, I closed by indicating, "Most factor in other considerations into when to take SS." Not sure how you missed this.
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Theory Behind taking Social Security Early?
Old 08-27-2018, 03:09 PM   #17
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Theory Behind taking Social Security Early?

In the overall scope of things I don’t think it really effects much. Sure if you take it at 62 it’s a lower payment, but the break even point is a long ways out. Usually around age 82. Feeling lucky? Then wait.

I say there are many “fun advantages to taking early”. Perhaps you have a job you are miserable in, perhaps you are financially comfortable...take it and have fun. It’s the sure thing. So what if you wait and your monthly check is a few hundred higher? You probably won’t be in condition to have fun with it anyway.

I know way to many who told me they were waiting to get the bigger check who skimped and croaked not long after starting it. Ugh, always thought what a shame.
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Old 08-27-2018, 03:20 PM   #18
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That was true when the delayed benefits were designed.

But the actuarial tables used then are out of date. And the interest rates available then are no longer the case. See: https://maximizemysocialsecurity.com...vesting-market
This guy is selling software. Did not see any useful information. He mentions the tables are out of date, but I don't see any back up for his statement. Interest rate assumptions only matter if you are taking SS and investing it. That is a different discussion and not what the OP asked.

Quote:
Even if it were true, as Mike Piper eloquently points out in https://obliviousinvestor.com/social...al-neutrality/ , "Basing your personal Social Security claiming decision upon Social Security’s program-wide actuarial neutrality is like basing your personal tax planning decisions on the average effective tax rate paid by individuals in the U.S. (rather than on your own personal tax rate). It makes no sense at all."
This guy indicates SS is actuarially neutral. As I did. He goes on to say, there are other considerations. As did I.
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Old 08-27-2018, 03:24 PM   #19
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Its a hedge against your life expectancy and that is it. If you are healthy and have "enough" then wait. If you need the money, don't wait. Especially if its a matter of that life or death medicine you couldn't afford without it.


As for me, if I were healthy, and financially able to make it, I might re-visit my decision each year.



As soon as my health or finances changed unfavorably, I might decide the benefit would be better now.


My long term plan has always been to delay it but in reality, I need to see where health and finances are when the decision day comes.



We need a third option which is to give it back, never take it and give our portion to someone who needs it.



But that all goes back to the eye of the beholder and what "need" means to them. Food tastes different when your mouth is chewing it than when mine does. I might say it tastes great, you might say it doesn't. And that is okay.
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Old 08-27-2018, 04:38 PM   #20
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I can't answer OP's question, but here's our plan and reason.

Plan: Grab early and go!

Reason: DW was a SAHM and is a few years older than me. Under the SSI reforms of 2016, there is no "File and Suspend" option. Ergo, not a dime for her until I file (or die). I ran an analysis not long ago. Our break even point is mid 80's for me and late 80's for her. F that! DW has a few health issues that will only worsen with age and I'm already a member of the myocardial infarction club.

As some of the more sage* members have stated, it's very personal. Hey... what's the best color??!!



*I am not sage - - - more like parsley.
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