When I'll Take SS

[TromboneAl]

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[73ss454]

Show me the money at 62.

 

[REWahoo]

Al, I didn't respond to your poll voted "other".

Until the past year or so I planned on taking SS at age 62. My "take the money and run" mentality has weakened a bit now that I have a greater understanding of SS taxation rules and how benefits increase by delaying beyond 62. Other factors influencing my delay is the fact that both my parents lived into their 90's and that my helath is good (other than currently being on crutches from a nasty ankle sprain yesterday ).

My current thinking is to take a wait and see attitude, looking at where the old portfolio balance is in two years when I turn 62. If it still looks OK at that point, I'll delay for a while before dipping into the SS bucket.

 

[MasterBlaster]

Unless you plan to die young, you can make a pretty good case to not take SS until 70. This is especially true if you have moderate or greater income and consider that SS is taxed at outragious levels for people above that income level.

So one might think about living off your investments, using those investments at a rate greater than the SWR and then take a larger SS payout at a later date (ie. 70). Once you start taking SS you could throttle back the investment withdrawal rate.

This only works well if you have income over the SS tax floor.

Check out the www.analyzenow.com website, click on free publications, and look at their discussion of when to take SS.

The conclusion from this paper...

With few exceptions, the best choice is to delay the higher earner’s social security to age 70 and the other spouse’s social security until that spouse’s full retirement age (e.g., 66)—if savings are sufficient. To implement this, it may be necessary for the higher earner to “file and abandon” just before the higher earner’s full retirement age. See the Social Security Administration for the necessary paperwork.

But if you die young you lose all three life lotteries...

You lose the long life lottery.
You lose the SS maximum lifetime payout lottery.
And you lose lifestyle lottery by dieing young with lots of money in the retirement accounts.

 

[youbet]

But if you die young you lose all three life lotteries...

You lose the long life lottery.
You lose the SS maximum lifetime payout lottery.
And you lose lifestyle lottery by dieing young with lots of money in the retirement accounts.

Well damn MasterBlaster, it's a good thing it's 5:00 PM and cocktail hour has arrived!  Your analysis is soooo true, but soooo depressing!   

 

[uncledrz]

With two people, the equation changes. Lower wage earner takes first, at 62, higher wage earner waits until later. Then lower wage earner is eligible for 50% of higher's PIA. Of course depends on individuals situation, heath, family history of longevity, ohter assets, deferred assets, taxation. But that's one reason to deferred for a married couple.

 

[MasterBlaster]

With two people, the equation changes. Lower wage earner takes first, at 62, higher wage earner waits until later.  Then lower wage earner is eligible for 50% of higher's PIA.  Of course depends on individuals situation, heath, family history of longevity, ohter assets, deferred assets, taxation.  But that's one reason to deferred for a married couple.

Tio:

That's not quite right. If the lower earner takes SS at 62 they will have lifetime reduced SS payouts. The smart money says to wait until full SS age to start SS payouts.

 

[mathjak107]

Just about every scenerio i ran gave us a bigger draw or more money left at the end for the kids by waiting until 65 instead of 62.keeping the same draw would have given us over 60,000 more at the end for the kids.But 60,000 grand in 20 or 30 years is like 6,000 today.Not really enough to wait for so 62 it will be.

 

[Khan]

I have a FERS pension (with some CSRS thrown in). The pension decreases by a significant amount when I hit 62.

I really haven't decided yet.

 

[Cut-Throat]

With the 'Borrow and Spend' mentality in Congress and the White House, I am going to take my Social Security as early as possible. If I could be guarenteed of the money, I'd wait until age 66, but this voodoo economics is going to blow sometime and I want as much of my Portfoilo left as possible!

 

[WilliamG]

I said "other". I've always said 62 as soon as possible, but am kinda slowing down as the time arrives; will be 62 in March. The difference between 62 and 66 is a 25% reduction. That is broken down as 6 2/3% for each of the first 3 years and 5% for the last year. To me that means 65 at the latest since will also need to sign up for Medicare then. Did calculation and if I wait just 9 months and begin in Jan 2008 instead of next Spring, will be starting at around $1,000/ year more not considering any cost of living increases. Looks like almost $10/month each month I wait, so may just let it ride a little while. I realize am spending the money from portfolio, but that and SS is all we have. Can't help but wonder how much a joint annuity (which is what the higher wage earner's SS basically is for a couple) that is inflation adjusted would cost. Still may not wait too long though, cause sure hate to spend down the ole portfolio.

I'm so conflicted!

 

[Caroline]

what Cut-Throat said.

Assuming anything is there for me in 12 years, I'm locking it in.

 

[MJ]

I am about 4 years away from collecting at 62 but I have always planned to take it between 66 and 70. My father is 95 1/2 and unless, I get some oddball disease, get hit by a little ol lady while riding my bike or get done in (for the money, of course) by my future 16 yo bride, I hope to live for another 45+ years. I like the idea of getting a cola'd monthly pension. This plan is, of course contingent on my confidence in our guvment coming through.

Correction, I meant 35+ years. 45+ might be pushing the envelope a tad.

 

[mathjak107]

The only reason i can see for waiting to 65 or 70 if your not working is if money is tight and if you die your wife will need the higher payment to make ends meet.

 

[MasterBlaster]

With the 'Borrow and Spend' mentality in Congress and the White House, I am going to take my Social Security as early as possible. If I could be guarenteed of the money, I'd wait until age 66, but this voodoo economics is going to blow sometime and I want as much of my Portfoilo left as possible!

Well that's true. If they change the rules mid-stream then all bets are off.

The SS at 70 scenario just games the system to maximize after tax income based on present rules.

 

[Eagle43]

I got mine. Started at 62. Check keeps coming in. I know I don't deserve it, but I'm not returning it.

 

[tryan]

DW will need it more and longer ... so I'll hold out as long as possible.

Figure if it's there at 62, in 17 years, it'll be there at 66 or 70 , in 20+ years.

 

[bosco]

Well, maybe my situation is different than others here, but this talk about maximizing income by waiting until 70 doesn't seem to make sense to me.

This is because most of DW and my retirement savings are in various tax-deferred programs, and at age 70 1/2 the minimum distributions kick in. At that point, the higher ss benefit at age 70 is taxed at a higher rate since all the RMDs are considered ordinary income. I'd rather get some of those benefits up front, even if the monthly check is lower.

Add to this the fact that we will be in Canada, and some of our money is in RRSPs (Canadian IRA) which have a much more aggressive RMD schedule, and I am inclined to take the SS money at 62 and the CP (Canada Pension) money at 60.

 

[New Thinking]

Keep in mind that the permanent reduction between 62 and 70 is a real 25%. Many calculators misguide here. Its more like a 33% cut if you assume a 3% COLA.

Also, the survivor benefit (as many, but not all seem to understand) is based on the higher benefit at the death of the first spouse. So delaying a benefit could benefit your spouse too.

Bosco, the reason that there is a tax benefit by delaying SS to 70 is that SS income counts at a 50% rate in the calculation of SS taxes. Thus your RMDs are taxed less and perhaps even at a lower rate.

 

[bosco]

Bosco, the reason that there is a tax benefit by delaying SS to 70 is that SS income counts at a 50% rate in the calculation of SS taxes. Thus your RMDs are taxed less and perhaps even at a lower rate.

I thought it kicked up to 85% at some point...

 

[Texas Proud]

Keep in mind that the permanent reduction between 62 and 70 is a real 25%. Many calculators misguide here. Its more like a 33% cut if you assume a 3% COLA.

Also, the survivor benefit (as many, but not all seem to understand) is based on the higher benefit at the death of the first spouse. So delaying a benefit could benefit your spouse too.

Bosco, the reason that there is a tax benefit by delaying SS to 70 is that SS income counts at a 50% rate in the calculation of SS taxes. Thus your RMDs are taxed less and perhaps even at a lower rate.

A question on this one... I was discussing with my sister who is closer to getting it...

If the spouse dies and was getting a higher SS benefit.. does the surviving spouse get thier full amount or only half

Also, Bosco... think about taking money out of your IRA during those years you do not get SS if there is a tax advantage to doing so.. might as well pay low tax on income if you can before it goes up..

 

[New Thinking]

Bosco - Admittedly, this is confusing. Yes, once the forumula is calculated, if income is over a certain amount (32k married/25k single), SS can be taxed up to 50% and then over a second threshold (44k/34k), then up to 85% is taxed..But you have to take it back a step to say how much of each income type GOES INTO THE FORMULA (knowns as Combined Income or Provisional Income). This formula only counts SS at a 50% rate.

Texas Proud - The surviving spouse gets the full amount. Example: Husband getting $1600/mo. and wife getting $950/mo. Husband dies. Wife "drops" her $950 and received $1600 going forward.

 

[mickeyd]

I have always thought that I would delay taking SS until age 70 or so, but more recently I am thinking that somewhere between 66 and 70 may be the best way to go.

For me, taking it at 62 just does not make a bit of sense. For others it is the best, maybe the only, choice.

I appreciate the opprtunity to delay taking my SS as long as possible and being rewarded for delaying it. As long as I clearly understand the risk that I am taking (die too early) vs. a life-long larger monthly check, I can easily manage it.

 

[WilliamG]

Texas Proud

"If the spouse dies and was getting a higher SS benefit.. does the surviving spouse get thier full amount or only half"

The lower wage spouse gets the higher wage full retirement benefit if the higher wage spouse has not started social security yet. If the higher wage spouse has started, the lower wage spouse will lose their SS but will step up to whatever their spouse was making. That is why the higher wage spouse's SS is like a joint annuity and is the most important of the two to handle correctly. Lower wage spouse's SS goes away when EITHER spouse dies. The reverse is just the opposite, higher wage spouse's SS continues until BOTH of the couple are gone.

 

[Khan]

Everyone knows that after 62 you can start SS at any time?