When to take SS?

[Willers]

$85K single. BTW, I am not sure I have never seen anyone change his/her mind about the best approached to this, in all my time on this board. It may be genetic.
Ha

Although I've never posted about it I'm one that has changed since joining. That's what I consider a great benefit of this board. I get to learn from other's experiences.

I started in the definitely at 70 camp, but then after reading some of the stories of the benefits of taking it early in 2008/2009 to protect portfolios I'm now in the take it a yer at a time camp. I'll likely decide each year if it makes sense or not. An element of my version of the flexible withdrawal plan I suppose.

Thanks to all of you that share your decisions and the results.


Sent from my iPhone using Early Retirement Forum

 

[REWahoo]

I started in the definitely at 70 camp, but then after reading some of the stories of the benefits of taking it early in 2008/2009 to protect portfolios I'm now in the take it a yer at a time camp. I'll likely decide each year if it makes sense or not. An element of my version of the flexible withdrawal plan I suppose.

+1

Include me in the 'changed my mind' group. I had intended to wait until at least FRA to take SS, then along came 2008...

 

[Independent]

I went thru most of the threads. I don't think any of the calculators listed cover all the issues or do a statistical look like Firecalc does. I also have to wonder how sophisticated Firecalc is about SS. I'm only using the free version.

Wonder if its time to put those programming skills to work and build a better model...

With FireCalc, you input your SS benefit amount and start date. FireCalc increases the benefit with inflation. You can test different options on when to take SS by comparing different FireCalc runs. It will automatically account for the level and volatility of your investment returns because that's what FireCalc does.

This seems reasonably "sophisticated" to me.

 

[Willers]

+1

Include me in the 'changed my mind' group. I had intended to wait until at least FRA to take SS, then along came 2008...

A thank you to you. Your comments were the ones that finally tipped the scales. A further thanks for freeing me from the need to over analyze that question for the next ten years until I'm eligible.!


Sent from my iPhone using Early Retirement Forum

 

[ArkTinkerer]

With FireCalc, you input your SS benefit amount and start date. FireCalc increases the benefit with inflation. You can test different options on when to take SS by comparing different FireCalc runs. It will automatically account for the level and volatility of your investment returns because that's what FireCalc does.

This seems reasonably "sophisticated" to me.

It is but I'm more interested in other changes that will grossly affect the outcome. Mostly having to do with having a spouse and looking at the effects of mortality. What are the different ways and timings of taking SS. What happens for each spouse depending upon who passes first and in what year?

Most likely the calculations would involve looking at mortality tables for men and women based upon age and doing runs sort of like Firecalc does with historical stock market returns. There would probably be inputs for general health issues to help make the tables as accurate as possible. This would then be overlaid with investment returns the way Firecalc does its estimations. Might also include corrections for SS not being adjusted if inflation is too low--not sure Firecalc does that right now, I know some other calculators don't.

Its just so hard to wrap ones head around all the ways SS can be played. I find SS to actually be harder than asset allocation and money vs longevity that Firecalc does!

 

[Katsmeow]

To me, if one is financially able to delay, the only reasons to not do so are very certain early demise. or very high interest rates, or a very low PE10 stock market valuation.

I can think of a few things that I think are relevant factors:

1. Someone with minor children where the children will receive substantial benefits that outweigh the benefit of waiting to 70.

2. I think there is a legitimate concern that benefits may be reduced in the future and to take them earlier (bird in hand). I'm not saying that benefit reductions would not affect people who took benefits early. What I am saying is that those who took benefits early (when higher) might have several years of higher benefits before lower ones kicked in.

3. Some might argue as to what financially able means. For example, some calculators will have you literally spend down every investment to zero and then take SS at 70 leaving the person with zero money other than SS. I don't consider that being financially able to wait until 70. I think there is a threshhold of assets most people would want to have and wouldn't want to spend them all down just to wait until 70. What that threshhold is will vary from person to person.

 

[haha]

+1

Include me in the 'changed my mind' group. I had intended to wait until at least FRA to take SS, then along came 2008...

I think that prior to age 70, most of us carry a mental algorithm, We assess conditions in our own lives, and also wrt investment opportunities other than leaving the money to build in our SS account. I think few of us change our algorithm, but most of us are flexible enough to respond intelligently to conditions. 2008 certainly qualified as changed conditions, and given the way equity prices and bonds bolted out of the relatively low place they were to the very high place they are today, it was very likely in retrospect a financially highly successful gamble to have taken take that SS then.

Ha

 

[Independent]

[FONT=&quot]Starting to collect “early” or full:[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]Age 62 payment $1,628
Age 66 & 2 months payment $2,279[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]The difference between the two dates is 50 months.
[/FONT]
[FONT=&quot]The difference between the two monthly payments is $651.[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]My first argument would be… who says I’m going to live to 66? If I do not start SS at 62, and the wife & I die in a car accident on the 4th of July after my 66th birthday, that money went "poof“”. ($1,628 x 50 = $81,400 that could have been received and invested)[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]If I take the early payments and just shove them in a box as cash, then once I reach 66 & 2 months start pulling it out at the rate of $651 per month, the box-o-cash lasts until seven months after I turn 76.[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]($81,400 / $651 = 125 months) If I die at any point before that, the extra cash in the box is a bonus for my heirs.[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]If I take all the early payments and deposit them at just 1%, then start to withdraw $651 every month from that account as of 66 & 2 months, the amount on deposit CONTINUES TO GROW.[/FONT]
[FONT=&quot]
[/FONT]
[FONT=&quot]What I'll probably due is use the SS money to pay off a small rental, that will "free up" the money...
[/FONT]

This has been discussed at great length on this board, so I'm sure I won't say anything new here. But, I'll still say ...

I agree that there is no guarantee you'll live till 66. Similarly, there is no guarantee you'll die before 100. If we all knew our dates of death, the math part of this decision would be easier. There are a number of online life expectancy calculators that claim to adjust for health, genetics, and lifestyle. You might want to try a couple. Here's one https://www.northwesternmutual.com/learning-center/tools/the-longevity-game

If your SS benefit is greater than your wife's, and you die first, she "steps into your shoes". So your benefit will be paid until the second of two deaths.

You math doesn't mention inflation. For the most part, I don't see a problem with that. However, when you get to "at just 1%", you should be saying "at just CPI + 1%".

The "CONTINUES TO GROW" seems to overstate the case. That addition of some investment return slows the rate of decline. At CPI+1%, the crossover point is at age 77 and and 4 months.

I'm guessing that you have enough assets that you really aren't concerned about running out of money before you die. If that's correct, we're simply talking about how much of a windfall your heirs will get when you die. I can't imagine a "bad" choice in that case, so this is pretty much an academic exercise.

 

[Independent]

It is but I'm more interested in other changes that will grossly affect the outcome. Mostly having to do with having a spouse and looking at the effects of mortality.
1) What are the different ways and timings of taking SS. What happens for each spouse depending upon who passes first and in what year?

2) Most likely the calculations would involve looking at mortality tables for men and women based upon age and doing runs sort of like Firecalc does with historical stock market returns.
3) There would probably be inputs for general health issues to help make the tables as accurate as possible. This would then be overlaid with investment returns the way Firecalc does its estimations.
4) Might also include corrections for SS not being adjusted if inflation is too low --not sure Firecalc does that right now, I know some other calculators don't.

Its just so hard to wrap ones head around all the ways SS can be played. I find SS to actually be harder than asset allocation and money vs longevity that Firecalc does!

I can believe that nobody has a black box with all that already included. You will have to use those analytic and/or programming skills to get what you want. I think it's possible to cobble something together.

1) There are online tools (some for a fee) that will give you the options and the dollar amounts of benefits. They probably will help you rule out some options.

2) Mortality may be added in without making date-of-death a full random variable. It depends on what output you want.

3) There are online resources (I've got a link above) that can estimate adjusted life expectancy. It's possible to back into a mortality table from that.

4) I'm not sure what you mean by this. This year's SS increase was 1.7%, what is "too low" to make an adjustment? Note that if the CPI actually decreases, SS benefits don't decrease.

One of the comforting things about SS is that the prospective difference between option A and option B is often so small that you can't go too far "wrong". So there's a limit on how much calculating you want to do.

 

[BBQ-Nut]

I personally think the strategy of when to take SS is much more complicated than isolating it to just the different benefits vs age and when they 'cross'.

How will SS affect AGI and WRs and what impact will that have on taxes and portfolio growth or drain?

Will deferring SS to 70 result in lower AGI in that interval which means more tax deferred assets up to 70 can be converted to a Roth?

I haven't seen anything so far that completely factors all parameters & variables that gives a maximum strategy at the micro level detail.

The 'big picture' approach is compelling - that if you live longer, wait.

For those of us whose nature is to do a complete analysis - the exercise can make one's head hurt.

I guess I need to chill and accept the 'can't go too far wrong' approach!

 

[Hermit]

There is another issue that nobody seems to talk about. If you have 401Ks and IRA withdrawals at age 70 that combine with SS and/or pension funds that put you up over the
medicare & drug limits --- 80K single/170 married....then you may possibly be giving up your gain.

This is so complicated by individual circumstances that trying to look at it generally usually does not work. I will be in the category of paying more for Medicare when I turn 70. In the meantime, I collect more than half of what I would have collected on my account taken at retirement by collecting on my late DW's account. My increased SS income will be a lot more at 70 than the ~$40 per month in additional Medicare payments.

 

[RetireBy90]

I'll just add that there are more than one way to look at the various options available. Just so you know the end of the story, DW is 3 yrs older than I am, but she is stubborn, so I expect will be around after I do the big retire. Therefore, we plan to take her SS at FRA of 66, then I'll claim spousal at my FRA, and switch to my SS at 70.

The reason for our plan is not due to total $$ we can obtain or collect in benefits, but because:

first: DW will get a SS offset with her county pension till her FRA.

Second: The I'll wait till 70 to maximize my draw in case I go before she does. With her pension and my SS at the 70 yr rate she will have enough cola'd income to pay her required expenses. I look at the 4 years between my FRA and 70 as an insurance policy.

There are lots of financial reasons I would probably go this route anyway but the overriding purpose is for the insurance provided that she will have expense money. Even if you could show me I'd likely collect more by another strategy, I would still pursue this plan for the peace of mind. Kinda like you crazy folks that want to pay off a 3% mortgage for peace of mind. Even the best answer is no good if it doesn't work for you

 

[Sunset]

Right now my plan is for DW to wait until 70, so she gets the most or I get the more should she pass first.
I also will use the opportunity time of not collecting SS to reduce IRA/401K's so they don't push us into higher brackets when RMD's start.
Certainly one of the motivations for me to wait is SS is like a pension and I want it maxed out.
I will also get a very tiny windfall type pension, so SS will reduce its payout by up to 1/2 of my tiny windfall, so I might as well collect all the windfall I can first before turning on the SS.
I agree with most others, that this issue is Super complex, and I still don't know how long I will live.

 

[Clone]

...

first: DW will get a SS offset with her county pension till her FRA.

Here is a 'calculator' that presents possible alternatives based on the goals you select. Social Security Benefits Evaluator - T. Rowe Price

Regarding a 'social security offset' in the pension- I had the option of doing that, but it lowered the long term monthly benefit. This might be another choice that you need to make.

At some point, I simply decided that we had enough such that we could retire and do what we wanted. Then an opportunity came along to switch careers, and it has been golden. Our plan was to take SS at 70, to lock in the higher payment. If we decide to change that, for some reason that we don't see right now, then we can change it.

 

[Aeowyn]

We have a bit of a wait before we have to make that decision (49 and DH 48). I used to think that we’d take it as soon as we were eligible. I have a bird in the hand mentality as well as I figured that we get a better rate of return (on average) by investing (or not unplugging our current investments) then the increase in SS if we waited.

But that was before I discovered the various strategies couples could take when filing for SS and before I thought about the tax implications of the money we have sitting in tax deferred accounts. All those wonderful capital gains (with currently favorable tax rate) trapped inside an IRA that gets taxed as ordinary income when it comes out. Fortunately I aggressively tilted our savings toward Roth, but we still have a decent chunk in tax deferred accounts.

This will definitely play a part in our strategy:

How will SS affect AGI and WRs and what impact will that have on taxes and portfolio growth or drain?

Will deferring SS to 70 result in lower AGI in that interval which means more tax deferred assets up to 70 can be converted to a Roth?

Every one has different circumstances that factors into when they opt to take SS.

I have higher SS credits than DH. DH’s business keeps doing better each year, but I’m far enough ahead on SS I don’t think he’ll catch up unless he works into his 70’s (not the plan). I’m also retired from the Reserves and have a military pension that will kick in when I turn 60.

Current plan is to:

• Draw down or convert to Roth all tax-deferred retirement accounts before I reach age 70 when RMDs kick in (currently all tax-deferred IRAs are in my name)
• Military pension when I reach 60 and I am not planning to take the insurance on it (cost is reduced benefit). So if I pass before DH, my pension will go away. But the higher benefit amount allows our investments to cook longer. (we are self insuring through this risk)
• DH to take SS at or before my FRA and I will take the spousal benefit at my FRA
• I will wait until 70 to take my own SS (which will also benefit DH should I pass first) My SS @70 amount is similar to my military pension amount.

 

[beltonr]

I will FIRE in ten days - 30 January (61, but since I always assumed it would be 65 it is EARLY)! Yes, everyone's situation is different and each must make their own decision. DW and I will take SS at FRE, 66 (birthdays within 30 days of each other). DW was stay-at-home spouse so will get spousal benefit. Running our numbers, wash age between starting at 66 vs. 70 is age 83. I expect the advantage of not drawing on savings from 66 - 70 will more than make up for greater SS total after age 83 (should either/both of us live that long). Of course, I reserve the right to change my mind at any time given changing circumstances or new information!

 

[Car-Guy]

It's clear that everyone has different circumstances and/or concerns that factors into when they decide to take SS.

I can remember thinking seriously about it in my mid 40's that I would take it at 62. And when I turned 62, I did take it, but the reasons I took it had completely changed. Funny, as I got older, I began to see some things differently. For the DW and I, it was never a concern of having enough money no matter when we were to take it or how long we might live. Now, a few years into it, I'm 100% happy with my decision.

It's pretty much a done deal now but who knows, maybe in another 20 years I may see it differently again.