Why people take SS at 62

[HighRoller]

If you look at the human body like a car, there might be three factors in determining the life of the car:

* How well the car was built (i.e. genetics and family history of longevity)
* How well the car was treated and maintained (lifestyle factors)
* Luck, randomness and unpredictable variations

Reminds me of an Alan Jackson song.

 

[Malcolm2]

Take it sooner rather than later. It seems almost certain that it will be asset means tested in the future. I think the days of collecting 25+ times your contributions are over soon if you have other assets. As it is an entitlement program and not a pension, I have no problem with that except I do have an issue with the means testing rewarding non-savers.

 

[FANOFJESUS]

Remember - lifespan = Nature/nurture + chance.

The men on DH's side of the family didn't make it out of their late 50's, but they all commited lifestye suicide. By comparison, hubby is an ascetic monk.
Put us down on the side of split the difference.

That is a good way to look at it. The man that pasted away at 77 drank and smoke but did not do them heavy. A man that does not drink or smoke might make it a few more years. No female in our family went past 84 they led a good life but had a little weight on them. I think the break even point of SS is about 81 so as you can see this is going to be close one way or the other.

 

[HighRoller]

Take it sooner rather than later. It seems almost certain that it will be asset means tested in the future. I think the days of collecting 25+ times your contributions are over soon if you have other assets. As it is an entitlement program and not a pension, I have no problem with that except I do have an issue with the means testing rewarding non-savers.

I really hope you are wrong when you say "it seems almost certain that it will be asset means tested in the future" but I'm afraid that you might not be. After 40 years of paying taxes in the highest income tax brackets and paying the max amounts in social security each year, it makes me mad to even hear that they might change the rules again and penalize those of us who saved and/or were successful.

 

[ziggy29]

Take it sooner rather than later. It seems almost certain that it will be asset means tested in the future.

Possible, though in reality I suspect if this is rolled out, if you are already old enough to be eligible to take it you're going to be old enough to be grandfathered out of any changes *directly*.

I suspect the only means testing for people above a certain age will be related to calculations of AGI for the purposes of taxation of benefits or in how inflation is calculated. I could be wrong obviously, but no one in Washington has shown **any** inclination to directly cut benefits for folks already receiving benefits (or anyone currently over 55, for that matter).

 

[LinCella]

I'm taking mine at 62. It was never going to be really big, but as I have a pension it will be smaller as they will subtract 40%. At the very least it will some walking around money. That's 8 years from now so I'm hoping its still there.

 

[W2R]

Possible, though in reality I suspect if this is rolled out, if you are already old enough to be eligible to take it you're going to be old enough to be grandfathered out of any changes *directly*.

I suspect the only means testing for people above a certain age will be related to calculations of AGI for the purposes of taxation of benefits or in how inflation is calculated. I could be wrong obviously, but no one in Washington has shown **any** inclination to directly cut benefits for folks already receiving benefits (or anyone currently over 55, for that matter).

+1

I am pushing 65, and will probably wait until 70 before claiming SS. I expect to be taxed on 100% of it instead of 85%, but otherwise hope my benefits are not cut. It is a gamble to wait, but I like the idea of using SS as extreme old age insurance since I have a family history of occasional extreme longevity.

 

[JP.mpls]

Animorph,
I have some reading to do. Thanks for the web links on this topic.

Based on your comment it looks like I may be able to collect 50% spousal benefits when I reach 62 (My wife will be at her FRA at that time.). If I am allowed to do this, I will most likely delay claiming my SS until I'm 65 or 66.

Your previous comment:
"I think if your wife takes SS at 62, you are free to get a spousal benefit based on her FRA benefit at any time after you turn 62, reduced if you take it before you reach 66. I don't see that the spousal benefit depends in any way on what age your wife starts her benefit. "

Thanks,


JP

 

[Katsmeow]

Animorph,
I have some reading to do. Thanks for the web links on this topic.

Based on your comment it looks like I may be able to collect 50% spousal benefits when I reach 62 (My wife will be at her FRA at that time.). If I am allowed to do this, I will most likely delay claiming my SS until I'm 65 or 66.

I don't think this is going to work. It is different when you take a spousal benefit before FRA and taking one at FRA.


See: Retirement Planner: Benefits For You As A Spouse

If you begin receiving benefits:

• between age 62 and your full retirement age, the amount will be permanently reduced by a percentage based on the number of months up to your full retirement age.
  If you are under full retirement age and you continue to work while receiving benefits, your benefits may be affected by the retirement earnings test.

Also:

Understanding "Free Spousal" Benefits | Social Security Choices

 

[Independent]

Because Firecalc shows a higher probability of success if we take it at 62 than other years.

+1. What she said.

FWIW, was running Firecalc earlier this evening. DH is already on SS, but I ran it for me starting at 62 (2017) or at 66 (2021). I input spending numbers and other numbers. In our case, we will have very high withdrawals for the next couple of years (about 15% of the portfolio each year) mostly for child college reasons. So I do expect the overall portfolio to lessen between now and 2017.

Anyway, I ran this with a couple of different starting portfolios - one is the actual portfolio we have now and the other was the portfolio we had at the start of this year. Both times I ran it saying 2013 for retirement year (DH is already retired).

Anyway - When I ran it with the current portfolio amount it was slightly higher percentage (98%) to take SS at 62 than at 66 (97%).

However, when I ran it with the portfolio amount we had at the start of the year which is about 95% of the current portfolio then it came out a slightly higher percentage to take SS at 66 rather than at 62.

These were all based upon 30 year retirements - DH is currently 65 and I am currently 59.

FWIW, I also ran everything for a 36 year retirement. Changing it to a 36 year retirement didn't make any difference in terms of whether taking SS early or late would make a difference.

Warning: Firecalc gives surprising answers depending on your current age.

If I'm 55 and using Firecalc to plan ahead, it may well tell me that I can spend slightly more if I start SS at 62 rather than waiting till 66.
However, if I'm 62 and using Firecalc to decide what to do today, it will probably tell me to defer till 66.

Remember that we expect very high probabilities of success when we run Firecalc. It may run 111 start years, but 100 of them are basically irrelevant for this type of question - you're going to succeed with either strategy. The differences boil down to a few start years. Very subtle differences in orders of returns in a very few years, interacting with the options, can make a difference.

If you're under 62, I assume you'll be running this again before you actually pull the trigger on SS. Don't be surprised if the Firecalc recommendation changes.


Here are some details that should be easy to check:
I tried a "standard" Firecalc run (all the default assumptions) except that I added SS. It was either $15k starting immediately or $20k starting in 4 years. This would be a typical at-age-62 question. Firecalc solved for safe withdrawals of $44,813 and $46,663 respectively. A clear win for deferring.

To double check that, I input exactly $45,700 of withdrawals, and got 8 failures for starting immediately vs. 5 failures for deferring. Both strategies failed for start years 1965, 66, 68, 69, and 73. But the early start also failed for 1964, 66, and 1906. All of these years have low returns in the "early" years of the projection, meaning the early SS payments don't earn any significant interest.

Then I input either $15k starting in 7 years, or $20k starting in 11. This would be the input for someone who is currently age 55 and thinking ahead. Firecalc solved for safe withdrawals of $40,774 and $39,950 respectively, a narrower victory for starting at 62.

When I checked that by inputting $40,000 of withdrawals, I got 5 failures for starting earlier and 6 failures for starting later. Again, both failed for starts in 1965, 66, 68, 69, and 73. This time the extra failure was the 1972 start year.

Looking at the results, I think it would take a lot of effort to determine exactly how the pattern of returns in those few years impacted the results. I'll just say that these differences are based on very little data.

 

[ziggy29]

The thing about FIRECalc, much like the question about "optimal" asset allocation, is this: We are not looking at the decision that produces the *average case* highest return or largest portfolio. We are looking at the decision that minimizes the chances of failure.

These are not the same question, obviously. For someone with 30+ years to plan for, a 100% stock portfolio almost certainly produces the best *average case* performance in terms of the expected ending balance at the end of the period. But it also increases your chances of a catastrophic failure compared to, say, a 40-70% allocation in equities. With 100% equities, you are much more likely to die with (say) $5-10 million in savings and investments than with a 50/50 or 60/40 strategy.... but also considerably more likely to "go to zero" in your lieftime.

I'm more interested in not failing in my (and my wife's) lifetime than I am in leaving the largest average case windfall to our heirs when we are both feeding the worms.

 

[JP.mpls]

I don't think this is going to work. It is different when you take a spousal benefit before FRA and taking one at FRA.

Understanding "Free Spousal" Benefits | Social Security Choices

Katsmeow,
Yes, it looks like a terrible stratagie unless I want to wait until I reach my FRA, and then claim free spousal benefits based on my wife's social security benefit.
The spousal benefit isn't what I was hoping it would be, but at least I understand it better.

Take care,

JP

 

[imoldernu]

Looking back

-We are age 77
-When we were born, our life expectancy was 62
-Those born today have a life expectancy of 79
-Retired age 53 in 1989
-Took SS at age 62 in 1998
-My SS was maxed, DW 1/2 of mine.
-Total SS for both in 1998 $21,000/yr
-Total SS for both in 2013 $25,000/yr

Simple one page chart -by year- for max SS payments
Workers with Maximum-Taxable Earnings

The years between 1989 and 1998 were taxable years, so SS looked pretty good.

Each year since turning 70, our expenses have gone down... less travel, less entertainment, less capital improvement, less upgrading of household "goods" etc. In short, the annual expense planning that we did in the "retirement decision" years was greater than the actual expenses today. The slowdown has been easy and natural.

We might have done better by waiting, but can't think of anything that we missed, and the future looks pretty good. Hey!... even if we live to 95, there may be a few $$$ left for the kids.

 

[DeborahB]

I took it at 62 1/2 - which was January. I didn't want extra income the year before (I worked half the year). I figured it provided me with an income stream, which was comforting, and if they changed the rules I'd be grandmothered in. I haven't regretted it. I know I'd get more if I had waited, but I had huge medical expenses and an income stream helped.

 

[explanade]

I suppose if you expect to spend more between 62 and 70 instead of after 70, it could make sense?

 

[RunningBum]

I suppose if you expect to spend more between 62 and 70 instead of after 70, it could make sense?

If you're mainly relying on pension and SSA, then it probably does make sense. Otherwise, you can just as easily withdraw more of your savings during those years, knowing you have a bigger SSA payment coming later. Some people aren't comfortable with this though.

 

[Mulligan]

Looking back

-We are age 77
-When we were born, our life expectancy was 62
-Those born today have a life expectancy of 79
-Retired age 53 in 1989
-Took SS at age 62 in 1998
-My SS was maxed, DW 1/2 of mine.
-Total SS for both in 1998 $21,000/yr
-Total SS for both in 2013 $25,000/yr

Simple one page chart -by year- for max SS payments
Workers with Maximum-Taxable Earnings

The years between 1989 and 1998 were taxable years, so SS looked pretty good.

Each year since turning 70, our expenses have gone down... less travel, less entertainment, less capital improvement, less upgrading of household "goods" etc. In short, the annual expense planning that we did in the "retirement decision" years was greater than the actual expenses today. The slowdown has been easy and natural.

We might have done better by waiting, but can't think of anything that we missed, and the future looks pretty good. Hey!... even if we live to 95, there may be a few $$$ left for the kids.

IM, are your SS benefit numbers, correct? In 15 years, your SS benefits have only went up $4,000? That sure doesn't seem like you have got much in Cola's over the years.

 

[imoldernu]

IM, are your SS benefit numbers, correct? In 15 years, your SS benefits have only went up $4,000? That sure doesn't seem like you have got much in Cola's over the years.

Thank you... You are right... I'm not good with numbers, and just took the max SS benefits for the year (1998) I started taking SS. In fact, I hadn't been earning credits for the 9 years prior, so my benefits when I did retire were actually much less... Can't find the records, but the original SS payments in 1998 were more like $17,000.

Additional thanks... I hadn't signed up for online SS, so now have done that. In going over these records, the most startling thing (to me), was what a great deal SS is for us.

Total payments into Social Security since 1956 including my contributions and those of my
employers was $50,000 (DW contributions not included, though she made them. Had she not worked, the total SS income for both of us would have been the same, "50% of my benefits").

Thusfar, we have collected approximately $310,000, in the 14 years since retirement @ age 62.

I know that my situation is not germane to the planning of younger ER members, and that "entitlements" will change, still, the relative safety of the Federal Government is comforting to us, as we are very risk averse and feel that between IBonds and Social Security we should be able to hold our own in the face of variable markets, and potential inflation.

 

[Tree-dweller]

I'm taking mine at 62. It was never going to be really big, but as I have a pension it will be smaller as they will subtract 40%. At the very least it will some walking around money. That's 8 years from now so I'm hoping its still there.

Linny, just to be clear, you are talking about a pension from a job where you didn't contribute to SS taxes, right? I'm just looking to make sure I haven't missed any "gotchas".

 

[bubblehead]

I've been reading these posts.

Money from deferred accounts is going to be taxed.most of the people on this site have substantial deferred income.

should not the goal be not to reduce the 'dollar figure of taxes" but to make sure you never pay more than the 15 percent rate.

one reason to take ss early is obviously to be able to control one's income in the future.

once my wife and i hit 70-we both have retirement accounts. our goal is to not be taxed at more than that 15 percent tax rate.

 

[M Paquette]

I've been reading these posts.

Money from deferred accounts is going to be taxed.most of the people on this site have substantial deferred income.

should not the goal be not to reduce the 'dollar figure of taxes" but to make sure you never pay more than the 15 percent rate.

one reason to take ss early is obviously to be able to control one's income in the future.

once my wife and i hit 70-we both have retirement accounts. our goal is to not be taxed at more than that 15 percent tax rate.

There are two paths for minimizing taxes for folks who can receive Social Security and also have deferred accounts.

1) Take SS early to reduce the annual SS income, and withdraw from deferred accounts later, when required minimum withdrawals start at age 70.

2) Withdraw from deferred accounts early, spending down the accounts to the point where they won't make the higher SS payments (too) taxable when one starts those later, at age 70 for example.

Additional considerations here include other taxable income outside SS and IRA withdrawals, and whether you consider SS to be longevity insurance, that is, your ultimate fallback income stream much later in life should you outlive your portfolio. The idea is to minimize overlapping taxable income streams.

In my personal evaluation, I want to use SS payments as longevity insurance, so I'd prefer to start SS later with a higher monthly payment. As an additional consideration, if I left my IRA untouched, the required minimum withdrawals at age 70 from my IRA would make most of the SS payments taxable. The best plan in my case is to use a combination of investment returns (at the low capital gains & dividend rates, with capital gains offset by losses carried forward from 2009), and IRA withdrawals starting at 59 1/2. The goal is to run the IRA balance down to the point where the required minimum distributions won't push my Modified Adjusted Gross Income too far above the baseline where Social Security becomes taxable.

Note that in no way will I let the tax tail wag my lifestyle dog. I'd rather pay the modest tax bill than sit around shivering in the dark while cackling over how I foxed the The Man!


http://www.irs.gov/uac/Are-Your-Social-Security-Benefits-Taxable?

 

[meierlde]

Note in addition the income limits for increased medicare part B premiums, all be it that the single limits start at 85k (not indexed for inflation) and at 107k go to $100 more per month, at 160k 170 more and at 214k go to 235 a month, married limits are double these. All be it at these income levels the Taxation of SS is no longer an issue, but its the next income based increase up the chain (also applied to part D as well) (ranging from an additional 29 above 107 k to 66 at 214k, again single rates)

 

[bubblehead]

Note in addition the income limits for increased medicare part B premiums, all be it that the single limits start at 85k (not indexed for inflation) and at 107k go to $100 more per month, at 160k 170 more and at 214k go to 235 a month, married limits are double these. All be it at these income levels the Taxation of SS is no longer an issue, but its the next income based increase up the chain (also applied to part D as well) (ranging from an additional 29 above 107 k to 66 at 214k, again single rates)

the brackets for social security taxability are not inflation adjusted

 

[RunningBum]

2) Withdraw from deferred accounts early, spending down the accounts to the point where they won't make the higher SS payments (too) taxable when one starts those later, at age 70 for example.

or similarly,

2b) Convert some tIRA money to a Roth IRA up to the top of the 15% bracket (or higher for someone who has really socked it away). Deferring SS can give you 8 more years to do this.