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Why I am taking SS before 66
Old 04-28-2014, 06:07 PM   #1
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Why I am taking SS before 66

I will be retiring at the end of this year at 63. When I decided to retire early I never understood why people advise on waiting to take SS until 66 years old or later. I am taking it at 63 and this is why.
1. The estimated 8% annual increase only applies if you are still working and earning the amount your SS payments are calculated on, if you quit work your payments will not increase so why wait?
2. In my case I would have to wait 16 years for my increased payments to catch up with the income I lost by not taking early SS.
3. If I wait until I reach 66 most people advise taking more money out of their 401K or IRA, if I do this and if there is a downturn (bear) in the market I may never recover the extra money I have taken.
Regards
Bigfish
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Old 04-28-2014, 06:17 PM   #2
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#1 is not true, there are actuarial adjustments that occur each year you defer

#2 Is a valid reason it is years 17-30 that most people are waiting to help the funding that do wait to take SS

#3 While this might be true, you will have spent the full value and have increased social security payments to offset in the future. Actually you will be further behind if there is a big bull move starting right at the end of the increased spending, but really that needs no insurance against in the future and is a good problem to have.
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Regarding #1
Old 04-28-2014, 06:21 PM   #3
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Regarding #1

My SS statement says that the projected benefits are based on a certain income level which is way more than my AGI will be when I retire, you may be corrrect on an increase but it is no where near the 7-8% amount that would apply if I continue to work.
BF
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#3
Old 04-28-2014, 06:23 PM   #4
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#3

As to #3 I'm not sure how I will be farther behind in my S&P 500 fund in a bull market if I take less money out.
BF
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Old 04-28-2014, 06:30 PM   #5
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Started at 62 because that's when my pension decreased.
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Old 04-28-2014, 06:38 PM   #6
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I'm waiting till 70 as I'm optimistic I'll live to 101. There's no factual basis for 101 though.
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Old 04-28-2014, 06:39 PM   #7
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Every time I run the SS scenarios through FireCalc it always tells me I can spend more if I take SS at 62 instead of waiting. At 62 I immediately spend less of my own money.
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Old 04-28-2014, 06:39 PM   #8
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My husband started at 62 because our minor age children qualified for benefits as the children of a retired person.

We would have held off - but this totally skewed the spreadsheets in favor of him taking it earlier.

We'll play it by ear for me. I'm 10 years younger than him - and have a higher benefit amount even if I stop working today... The idea of him getting a bump if I take it later, and die first is kind of negated by our age difference... so that's less of an issue for us compared to many couples where the spouse with the higher SS earnings delays taking it to provide an income safety net for the lower SS spouse .

(That last paragraph is a mess - I couldn't figure out a good way to state what my spreadsheet shows.)
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Old 04-28-2014, 06:39 PM   #9
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I will begin SS at 62 because my pension(s) make me subject to WEP so I am only looking at around $250. If I wait several more years, that will not increase enough to make it worth it (to me) to wait. I'd rather get the $250 while I'm above ground to spend it. Ya never know......and I'd be mad as hell if I died before I could collect!
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Old 04-28-2014, 06:43 PM   #10
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Originally Posted by Bigfish View Post
My SS statement says that the projected benefits are based on a certain income level which is way more than my AGI will be when I retire, you may be corrrect on an increase but it is no where near the 7-8% amount that would apply if I continue to work.
BF
You can run the numbers on the social security web site (The United States Social Security Administration) to find out how much your income will be if you delay retirement but stop working now. I have run the numbers several times and have found that even if I stop working many years before I begin collecting, the numbers don't change much compared to working right up until the day I collect.

As an example, if I work until age 70 I will collect $3,369 per month. If I stop working at age at age 52, my payment at age 70 only drops to $2,900. So stopping work 18 years early only drops my payment by 14%.

In your case the numbers will be much smaller than that since you are only talking about a few years.

Make sure you run your ideas by someone who is really knowledgeable on the subject. Once you file, you are committed, and I see so many family members who didn't understand how the calculations worked and filed for early benefits. Now they are all in their 80s and 90s and wish they had waited for the higher payments.
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Old 04-28-2014, 07:11 PM   #11
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The discount is designed to be actuarially neutral for single lives form everything I have read, so if your are single and have "average" mortality risk then it shouldn't matter much when you claim. If you are single, in great health and/or good genetic longevity then it is more likely you would come out ahead by waiting. Conversely, if you are single, poor health and/or poor genetic longevity then your would likely come out ahead by claiming early.

For couples it is more complicated because you have joint mortality, potential age differences, potential significant PIA differences, etc.

When the time comes that DW is about to turn 62 (she's older than me) I plan to have socialsecuritysolutions.com or some other expert do an analysis of the best options for us, but I think they will advise us to have DW claim her own benefit earlier then switch to her spousal benefit at FRA and for me to file and suspend until I'm 70.

As to the OPs reasons, reason #1 is obviously wrong. If you quit work earlier than when you claim your benefit, your benefit still increases by 5-6.5% a year (depending on your year of birth) for each year that you defer from age 62 to FRA and increases about 8% a year from FRA to age 70.

Also see Early or Late Retirement for a more precise calculation.

The other advantage for claiming later is lower RMDs as you will have drawn down your tax-deferred accounts some and potentially lower taxable SS as a result. From the modeling I have done I would have much higher RMDs and pay much higher taxes if I start taking SS at 62 compared to 70.
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Old 04-28-2014, 07:39 PM   #12
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Originally Posted by Bigfish View Post
I will be retiring at the end of this year at 63. When I decided to retire early I never understood why people advise on waiting to take SS until 66 years old or later. I am taking it at 63 and this is why.
1. The estimated 8% annual increase only applies if you are still working and earning the amount your SS payments are calculated on, if you quit work your payments will not increase so why wait?
2. In my case I would have to wait 16 years for my increased payments to catch up with the income I lost by not taking early SS.
3. If I wait until I reach 66 most people advise taking more money out of their 401K or IRA, if I do this and if there is a downturn (bear) in the market I may never recover the extra money I have taken.
Regards
Bigfish
Good for you man, make up your own mind, right or wrong!

It amazes me when new people show up here and immediately set about telling us how it is done. Do you think we are all idiots? There are 10+ years of discussions here on all these issues, by some very well informed people. (Not me, I am an idiot.)

By the end of a busy thread, the full facts are usually on display. Interpretations are debatable, but the basic facts are very easily ascertained.
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Old 04-28-2014, 07:48 PM   #13
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Started at 62 because that's when my pension decreased.
+1. In addition I have saved on taxes both State and Fed.
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Old 04-28-2014, 08:06 PM   #14
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Quote:
Originally Posted by Bigfish View Post
I will be retiring at the end of this year at 63. When I decided to retire early I never understood why people advise on waiting to take SS until 66 years old or later. I am taking it at 63 and this is why.
1. The estimated 8% annual increase only applies if you are still working and earning the amount your SS payments are calculated on, if you quit work your payments will not increase so why wait?
2. In my case I would have to wait 16 years for my increased payments to catch up with the income I lost by not taking early SS.
3. If I wait until I reach 66 most people advise taking more money out of their 401K or IRA, if I do this and if there is a downturn (bear) in the market I may never recover the extra money I have taken.
Regards
Bigfish

Do what what you think is best for you and yours.

But, please rethink your reason #1. As others have pointed out it is incorrect.

Best wishes for a great retirement.


Sent from somewhere in the world with whatever device I can get my hands on.
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Old 04-28-2014, 08:10 PM   #15
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Good for you man, make up your own mind, right or wrong!

It amazes me when new people show up here and immediately set about telling us how it is done. Do you think we are all idiots? There are 10+ years of discussions here on all these issues, by some very well informed people. (Not me, I am an idiot.)

By the end of a busy thread, the full facts are usually on display. Interpretations are debatable, but the basic facts are very easily ascertained.
That's pretty funny!

I assumed that the OP created the post because he wanted some feedback, in spite of the writing style he used where he made declarative statements about how things really are.
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Old 04-28-2014, 08:24 PM   #16
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My SS statement says that the projected benefits are based on a certain income level which is way more than my AGI will be when I retire, you may be corrrect on an increase but it is no where near the 7-8% amount that would apply if I continue to work.
BF
Bigfish, you made an incorrect assertion in your OP about the increase in benefits from delaying Social Security until FRA and are now repeating the same mistake even after being given the correct information. Since your retirement is coming up quickly, I suggest you abandon your preconceived notions and spend the time to research how SS actually works. Claiming early under the mistaken impression that you aren't losing much in benefits can lead to expensive and irrevocable errors in retirement planning that will affect you financially for as long as you live.

I also don't agree that there is any bias in the forum in favor of delaying SS. Some of us do, some don't. Since SS benefits are designed to be actuarially neutral, there are cogent reasons to both claim early and to delay. It's all up to you, but to make your decision based on mistaken beliefs about how SS works is not, in my judgment, a particularly good way to decide.

Here is a link that documents the reduction in benefits for a person with a FRA of 66. For the sake of keeping the calculations simple, let's assume that the person would be entitled to $1,000 per month at FRA. Then the benefit at each birthday from 62-66 would be

age=62, benefit = $750
age=63, benefit = $800 (increase of 6.67% over claiming at 62)
age=64, benefit = $867 (increase of 8.375% over claiming at 63)
age=65, benefit = $933 (increase of 7.61% over claiming at 64)
age=66, benefit = $1000 (increase of 7.18% over claiming at 65)

Full Retirement Age: If You Were Born Between 1943 And 1954
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Old 04-28-2014, 08:26 PM   #17
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Every time I run the SS scenarios through FireCalc it always tells me I can spend more if I take SS at 62 instead of waiting. At 62 I immediately spend less of my own money.
How many years in the run? The whole point of delaying SS is for 'longevity insurance'. What does FIRECalc say if you stretch it to 40-45 years?

-ERD50
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Old 04-28-2014, 09:29 PM   #18
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How many years in the run? The whole point of delaying SS is for 'longevity insurance'. What does FIRECalc say if you stretch it to 40-45 years?

-ERD50
Waiting till 70 is always a loser. For 30 yrs and for 40 yrs. There is a slight (few hundred bucks a yr) benefit for 40 yrs if I wait till age 66.5. All other runs for 30+ yrs had a dime's worth of difference at best. I will be 57 any minute now, and given my medical history anything more than 30 yrs is entering the realm of the ridiculous. Nickles and dimes don't cut it any more. That's was the old days.
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Old 04-28-2014, 09:42 PM   #19
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If you are absolutely sure that you are going to live till 70-80 and you have other sources of income, by all means postpone your SS.
If you are sickly or have a short family longevity, take your SS early.
BTW I don't think you can predict exactly how long you are going to live.
There is a study which says that if a man lives very long, it does not really matter when he get it, and the person will getting almost the same amount?
I'll get mine at 64 when I retire. I'll get it while I can.
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Old 04-28-2014, 09:50 PM   #20
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.... BTW I don't think you can predict exactly how long you are going to live. ....
Now there is a perceptive glimpse of the obvious
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