Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
When to start taking SS?
Old 07-28-2011, 11:30 AM   #1
Dryer sheet aficionado
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 37
When to start taking SS?

I'm new here, more commonly over at BH forums.
What's the general thinking here about when is the best time to start taking SS retirement income?

Let's assume the current time-frame with FRA = 66 and interest rates for "safe" investment what they are right now.
Let's simplify the discussion to a single person who has sufficient assets that he can terminate employment at age 58, 60, or 62 without desperately needing SS income.
Let's further assume that our early retiree is in nominally good health.

So our retiree's income consists of some combination of pension/annuity, supplemented by as-needed withdrawals from his good-sized nest egg. His SS income will be somewhere between $15K/yr and $30K/yr, depending on when he chooses to start receiving it.
So what starting-age between 62 and 70 would yield the best long-term nest egg results?
And what starting-age do most folks here in similar situations use?
__________________

__________________
TheWizard is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-28-2011, 11:38 AM   #2
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by TheWizard View Post
I'm new here, more commonly over at BH forums.
What's the general thinking here about when is the best time to start taking SS retirement income?

Let's assume the current time-frame with FRA = 66 and interest rates for "safe" investment what they are right now.
Let's simplify the discussion to a single person who has sufficient assets that he can terminate employment at age 58, 60, or 62 without desperately needing SS income.
Let's further assume that our early retiree is in nominally good health.

So our retiree's income consists of some combination of pension/annuity, supplemented by as-needed withdrawals from his good-sized nest egg. His SS income will be somewhere between $15K/yr and $30K/yr, depending on when he chooses to start receiving it.
So what starting-age between 62 and 70 would yield the best long-term nest egg results?
And what starting-age do most folks here in similar situations use?
There isn't a definite answer for you. Some believe that you should wait until you are 70 to insure you get the highest payout. Others take the money at 62, invest it (or don't hit up the nest egg so much for income), and believe they come out better.

It gets more complicated with spousal benefits and survivor benefits involved.

But what it really comes down to is... Can your investments beat the sure thing of delaying SS and getting increased payments from them. Perhaps you can but you will be taking on additional risk to do that.

Also notice that present tax laws are kind of stacked against you in that SS benefits get (increasingly) taxed at higher incomes. When you do your analysis, the (correct) answer must include tax effects.
__________________

__________________
MasterBlaster is offline   Reply With Quote
Old 07-28-2011, 11:52 AM   #3
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,378
Waiting is a good choice but you have to be alive for it to work. I'm 62 and my plan is to jump in when DW turns 62 in Dec. of 2012. If the market dumps out again I'll take it sooner. I don't think there is any one answer, you have to go with your gut.
__________________
Work is something you do to get enough $ so you don't have to....Me.
73ss454 is offline   Reply With Quote
Old 07-28-2011, 11:52 AM   #4
Dryer sheet aficionado
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 37
Quote:
Originally Posted by MasterBlaster View Post
There isn't a definite answer for you. Some belive that you should wait until you are 70 to insure you get the highest payout. Others take the money at 62, invest it (or don't hit up the nestegg so much for income), and beleive they come out better.

It gets more complicated with spousal benefits and survivor benefits involved.

But what it really comes down to is... Can your investments beat the sure thing of delaying SS and getting increased payments from them. Perhaps you can but you will be taking on additional risk to do that.

Also notice that present tax laws are kind of stacked against you in that SS benefits get (increasingly) taxed at higher incomes. When you do your analysis, the (correct) answer must include tax effects.
Right, you've pretty well summarized the issues.
If we could get "high-paying" CDs, then starting at 62 would make more sense.
Maybe the right answer is to monitor your nest egg and see how it goes?
With 40% in stocks, one could easily grow the nest egg even while withdrawing from it.
But if there's another downturn like 2008, then start taking SS income then?

Separately, I need to look at SS taxation vs taxation of similar net amount from 403b accounts...
__________________
TheWizard is offline   Reply With Quote
Old 07-28-2011, 11:56 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
My current thinking is to take it at 62 - for both "bird-in-the-hand" and to enable retirement earlier issues. Subject to change...

One reason not often mentioned when discussing waiting as long as possible is to draw down retirement accounts, thereby reducing RMDs.
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 07-28-2011, 12:07 PM   #6
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by MasterBlaster View Post
There isn't a definite answer for you. Some believe that you should wait until you are 70 to insure you get the highest payout. Others take the money at 62, invest it (or don't hit up the nest egg so much for income), and believe they come out better.

It gets more complicated with spousal benefits and survivor benefits involved.

But what it really comes down to is... Can your investments beat the sure thing of delaying SS and getting increased payments from them. Perhaps you can but you will be taking on additional risk to do that.

Also notice that present tax laws are kind of stacked against you in that SS benefits get (increasingly) taxed at higher incomes. When you do your analysis, the (correct) answer must include tax effects.
Current Strategy (acceptable risk)
__________________
fritz is offline   Reply With Quote
Old 07-28-2011, 12:13 PM   #7
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,950
Quote:
Originally Posted by MasterBlaster View Post
There isn't a definite answer for you. Some believe that you should wait until you are 70 to insure you get the highest payout. Others take the money at 62, invest it (or don't hit up the nest egg so much for income), and believe they come out better.

It gets more complicated with spousal benefits and survivor benefits involved.

But what it really comes down to is... Can your investments beat the sure thing of delaying SS and getting increased payments from them. Perhaps you can but you will be taking on additional risk to do that.

Also notice that present tax laws are kind of stacked against you in that SS benefits get (increasingly) taxed at higher incomes. When you do your analysis, the (correct) answer must include tax effects.
Excellent answer, and I think fairly represents our members' division on this frequently discussed topic. I'd guess that our singles are more or less evenly divided on whether or not to claim at 62 or wait. We sometimes refer people who are making this decision to Bogleheads.

The crash of 2008-2009 inspired at least one of our members to change course and claim early, despite prior plans to wait.

Unknowns in this decision include future possible changes in taxation of SS.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 07-28-2011, 01:51 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Apr 2011
Posts: 1,573
If one has the income, I think looking at SS as last chance safety net insurance is good. I.e., if all of your other sources of income go away for whatever reason, the one remaining is most likely SS. Net, you'd want that to be as large as possible. That's waiting till age 70 to take. What if you die early? Well then, what does it matter given you had enough other income sources.
__________________
gerntz is offline   Reply With Quote
Old 07-28-2011, 03:31 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
One consideration is the size of your total retirement fund (including pensions).

Case 1. You have enough money that there's no risk that you will run out before you die.

In this case, we're talking about how to maximize your estate. Get that answer by accumulating the start-at-age-62 payments at your most likely accumulation rate and comparing to your start-at-some-later-age payments accumulated at the same rate, both to your most likely date of death. Adjust for taxes on your investment earnings and SS if you like.

Case 2. You see a real risk of running out of money before you die, particularly if you live to an unusually high age and experience unusually poor investment performance.

In this case I think of deferring SS as buying longevity insurance. Like any insurance, you test it against the unlikely events, not just the most likely. A good place to start the analysis is with FireCalc with some longer-than-average life span and insist on high probabilities of success. Run a start-at-62 scenario and a defer-to-later-age scenario. See which provides higher higher withdrawal rates or better probabilities of success. Back of the envelope calculations using the traditional 4% SWR say that you're better off deferring.
__________________
Independent is offline   Reply With Quote
Old 07-28-2011, 03:38 PM   #10
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
The Journal of Financial Planning did an in-depth analysis on this topic.

Their conclusion on when to take SS is........................It depends

1) Do you want to maximize income potential
2) or do you want to minimize the possibility of ever running out of money.

You can read about the details of the study here:

Social Security: When to Start Benefits and How to Minimize Longevity Risk

and here:

www.anchorfg.com/new/anchorfg/content.asp?contentID=2017413313

Quote:

Executive Summary
  • This study examines strategies for singles and couples who are deciding when to begin Social Security benefits.
  • Two factors should affect individuals' decisions about when to begin Social Security benefits. First, which starting date for singles or starting dates for couples maximize the present value of benefits? Second, which date or dates minimize longevity risk?
  • For single taxpayers with average life expectancies who will not be subject to an earnings test, present value of benefits is approximately the same no matter when benefits begin. Therefore, based on present value criterion, singles with short life expectancies should begin benefits early and those with longer life expectancies should delay. To minimize longevity risk, benefits should begin at 70.
  • The decisions for couples revolve around spousal and survivor's benefits. For an average couple, present value is usually maximized when the lower-earning spouse begins benefits as soon as possible (as long as those benefits would not be lost due to the earnings test), while the higher-earning spouse delays benefits until age 70. Longevity risk is minimized when the higher-earning spouse delays benefits until 70.
__________________
MasterBlaster is offline   Reply With Quote
Old 07-28-2011, 03:53 PM   #11
Full time employment: Posting here.
 
Join Date: Jul 2007
Location: ST LOUIS
Posts: 995
I like playing with this. You just got to guess your death in the ballpark.

Social Security Benefits Calculator
__________________
Proverbs 15:22 Designs are brought to nothing where there is no counsel: but where there are many counsellors, they are established.
rec7 is offline   Reply With Quote
Old 07-28-2011, 04:18 PM   #12
Dryer sheet aficionado
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 37
I'll read the JFP article later this evening, thanks.

In my case, I'm not too worried about running out of funds in later years. I think my goal is to have a comfortable excess of discretionary income to permit more elaborate SCUBA diving island travel than has been feasible to this point.

The major $$ uncertainty isn't so much on the SS side, but on the side of my personal nest egg investments. So, as someone else said, it's becoming clear that this will be a steer-it-as-you-go kind of plan, not something that can be cast in cement ahead of time...
__________________
TheWizard is offline   Reply With Quote
Old 07-28-2011, 04:41 PM   #13
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 882
Quote:
Originally Posted by rec7 View Post
I like playing with this. You just got to guess your death in the ballpark.

Social Security Benefits Calculator
Unless you are willing to self-inflict, yes, you need to guess.
__________________
jebmke is offline   Reply With Quote
Old 07-29-2011, 12:33 PM   #14
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 136
I've studied this topic fairly extensively.

Using fairly reasonable assumptions, the general consensus is to take it as soon as you can (hint: the actuaries are better mathematicians than most of us).
__________________
TN_INVEST is offline   Reply With Quote
Old 07-29-2011, 12:54 PM   #15
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by TN_INVEST View Post
I've studied this topic fairly extensively.

Using fairly reasonable assumptions, the general consensus is to take it as soon as you can (hint: the actuaries are better mathematicians than most of us).
No that's not the general consensus.

Would you care to expand on your thinking.
__________________
MasterBlaster is offline   Reply With Quote
Old 07-29-2011, 12:57 PM   #16
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
The decision to start at 62 (even if you didn't need it) used to be easier when the "do-over" was in place. Now that it's mostly going away, the decision to take it ASAP isn't as easy to make. There's also the possibility for couples where one takes it as early as possible and the other waits until 70, which can be advantageous in some situations.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 07-29-2011, 01:42 PM   #17
Recycles dryer sheets
 
Join Date: Dec 2010
Location: Tequesta
Posts: 279
Most people I know who continue working past 62 don't take SS until they quit. I don't know of anyone who has actually waited until 70. I'm 61 and may quit next year or the year after. My wife is 5 years younger. It makes sense for her, and maybe for me, to delay taking SS until I'm 70 because I think she will live a long time. On the other hand, when I hit 66 or whatever, it sure would be nice to have that extra money coming in.

I think I'll play it by ear.
__________________
67walkon is offline   Reply With Quote
Old 07-29-2011, 02:20 PM   #18
Full time employment: Posting here.
Coolius's Avatar
 
Join Date: May 2010
Posts: 684
After much deliberation, I have decided to take SS at 63. I believe that I can get a 4% return on the money if invested, so that my Breakeven time is about 83 years old.

I personally do not believe I will live to that age ( Parents died at 77 and 82 ) and I have High Blood Pressure and High Cholesterol to boot, so 83 is a reasonable age to take - perhaps a little on the optimistic side?

The reason for not taking at 62 is to minimize taxes for that final year before benefits start, and I intend to draw down my taxable accounts as much as I can.

IRAs will not need to be accessed until 70 1/2, so I have no issues there.

Everyone's approach to this is individual, depending on one's personal circumstances. Thus, I acknowledge that my plan is not for anyone except myself.
__________________
Coolius is offline   Reply With Quote
Old 07-29-2011, 02:33 PM   #19
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 136
Quote:
Originally Posted by MasterBlaster View Post
No that's not the general consensus.

Would you care to expand on your thinking.
One of the main issues I see with most folks and their break even analysis is they forget you can pass away before taking social security (let's say age 64). Had they started ss @ 62, they would have probably already pocketed $40K.
__________________
TN_INVEST is offline   Reply With Quote
Old 07-29-2011, 02:41 PM   #20
Dryer sheet aficionado
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 37
Quote:
Originally Posted by TN_INVEST View Post
One of the main issues I see with most folks and their break even analysis is they forget you can pass away before taking social security (let's say age 64). Had they started ss @ 62, they would have probably already pocketed $40K.
Right, and I could be run over by a cement truck on the way home tonight and not even make it to early retirement.

But financial planning generally needs to take a longer view.
I will agree that the extent of one's "bequest motive" may influence how they structure their financial empire.
I personally have minimal concerns about leaving a large estate...
__________________

__________________
TheWizard is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Delay taking pension? ER Fireball FIRE and Money 23 07-12-2011 09:38 AM
I'm ready to start stocking up on guns and canned goods here in Minnesota Hamlet FIRE Related Public Policy 12 07-11-2011 07:54 PM

 

 
All times are GMT -6. The time now is 10:56 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.