Why people take SS at 62

[REWahoo]

The reason most people take it at 62 is because they need it to survive. Those of us posting here - and having the luxury of delaying by choice - are the very fortunate minority.

 

[Alan]

The reason most people take it at 62 is because they need it to survive. Those of us posting here - and having the luxury of delaying by choice - are the very fortunate minority.

I agree.

We'll make our decision in 6 years when we reach 62. If we are still in good financial shape and good health then I for sure will delay.

 

[LakeTravis]

I'm a little confused by the SSA's calculator. When it shows what my benefits will be when I retire, I'm now thinking that is in TODAY'S dollars because I found another option on the SSA site that let's me specify whether the benefits are in today's dollars or future dollars.

When I select future dollars, it looks like they are using a flat 4% per year for COLA.

All this time I've been plugging the "today" value into all of my calculations when perhaps I should have been using the "future" (and actual?) value?

 

[eytonxav]

Whether to hold out to 70 or not may very well depend on how SS rules morph over the next couple of years, so for those that are planning on that being available, may find its no longer an option.

 

[scrabbler1]

I wonder if there is a spike of people who begin to take SS at age 63.5. My dad did this back in 1994 because he was able to maintain uninterrupted health insurance coverage, first through COBRA for 18 months then starting Medicare, while retiring as early as possible to achieve the crucial HI goal. His wife (my mom) was ill at the time so he could not afford to be without HI at any time.

 

[MichaelB]

The reason most people take it at 62 is because they need it to survive. Those of us posting here - and having the luxury of delaying by choice - are the very fortunate minority.

I suspect you are right on this. It is easier to wait, or suggest others delay, when we don't need the money now. The census data on income by age show people over 65 have very low median incomes.

 

[check6]

I just applied for SS (at 62) for the following reasons:

5) I've determined after exhaustive research that the older one gets the more sickness one endures, the lesser the energy one seems to have and it even appears that the death rate goes up. Thus I've concluded that my enjoyment of a dollar might be a tiny bit higher now than when I'm 95 assuming I make it.

My mother is currently in her 90's with dementia. I can assure you that her enjoyment (or even awareness) of any additional income is rather limited.

Bingo. My 88 year old mother is sitting on a ton of cash and a govt pension that covers all her needs and more. Great for us kids but she went without for so many years when she could have spent more on herself.

 

[emkute]

My wife took it at 62 because she is less likely to live beyond the break-even age

 

[Animorph]

I think taking SS at age 62 is the lowest risk approach and probably appeals to many. Taking it later only pays off if you live long enough, which means taking on some risk. Taking it early gets the money in hand as soon as possible.

My assumed investment returns and inflation rates make taking SS at 62 look better, just from a standpoint of how much we can spend during retirement. But the difference is very small. I doubt this is a major factor for most people. It has its own risks, but taking SS late does too.

Since I'm married and DW is 5 years younger we plan to take my SS at 70, which will last until we're both gone, and DW's at 62, which will last only until the first of us goes.

 

[Calico]

The reason most people take it at 62 is because they need it to survive. Those of us posting here - and having the luxury of delaying by choice - are the very fortunate minority.

Very true. The woman who cuts my hair is in business for herself; she rents chair space from an established shop, and she has to watch every dollar. She had planned to retire and take social security in 2011 at age 65. She still would have had to watch her money carefully, but she said she could have made it. Then the economy tanked in 2008, and many of her customers began to cut waaayy back on services, including getting their hair done less often; fewer haircuts, etc. Her income took a huge hit. She said she had to take social security at age 62 just to pay the bills. This means that she will have less income coming in than she had planned on, and now she doesn't know when she will be able to retire. Her health is not great, and I feel for her. For the past three years I have been getting my hair cut more frequently than in past years - it isn't much, but it's all I can do for her.

I feel truly blessed to be in a situation where I can choose whether or not to delay social security when the time comes. For millions of people it is literally a lifeline.

 

[ERD50]

I think taking SS at age 62 is the lowest risk approach and probably appeals to many. Taking it later only pays off if you live long enough, which means taking on some risk. ...

I guess the way I view it is that either decision involves 'risk'. It is a matter of choice of which 'risk' you prefer (and I'm using those scare-quotes, or whatever you call them, because I think the term 'risk' is a very fuzzy word with many different meanings).


Take SS early, and you 'risk' living to a ripe old age with lower income.

Take SS later, and you 'risk' dying before you hit an economic break even point.

For me, if I die early, I don't see how I would really care about economic break even. What am I gonna do - sit in my casket and calculate how much money I hypothetically left on the table?

Not necessarily disagreeing with your conclusion but bear in mind that that extra SS income may increase taxes and means-testing on the suriving spouse (tax brackets kick in at half the level of joint returns). Also, it will raise AGI which can trigger certain means-tested items (e.g. Medicare parts B and D premiums and who knows what else is to come), especially when coupled with RMD's from regular IRA's

Good points. I guess that is why I'm really kind of waiting until I'm closer to 62 (and 66) to really crunch this. My estimates should be a bit better at that time.

-ERD50

 

[imoldernu]

Why not?

"You've got to be very careful if you don't know where you are going because you might not get there."

 

[Meadbh]

Well, we all know the old saying.......

http://cafecrem.wordpress.com/2008/02/01/a-bird-in-the-hand-is-worth-two-in-the-bush/

 

[Mulligan]

Personally, thanks to WEP, my SS will be minimal no matter how long I wait. But what I get, I will take at 62 and squirrel it away into my savings account and continue to stack up the nickels.

 

[RunningBum]

I doubt I'd spend any more money if I took it at 62 instead of taking it at 70. I'd just be using the SS money instead of taking from my investments.

If I die before the break even point, there's virtually no way I'm running out of money. So the only benefit to taking it early would be to leave more for my heirs if I died early, and I'd be leaving plenty anyway.

If I live beyond the break even point, waiting until 70 gives me more money over the long run. Maybe I won't be able to "enjoy" it in my old age, but there is a better chance I won't have to do without things I'm accustomed to or perhaps even need with this extra money. Not suffering with reduced money may be more important than enjoying extra money at that point.

If I didn't have enough non-IRA investments to bridge to 65 I might be looking more closely at taking SS at 62.

Of course I'll be taking the chance that SS will be cut and if you'll be penalized if you've delayed. I just don't think that will happen, but if someone else does, I can't tell them they are wrong. I figure that's a decision everyone makes for themselves.

I'm also 12 years from this decision and a lot can change by then, including my health, which is very good right now.

 

[JP.mpls]

Only for the four years between FRA age of 66 and 70 (plus any COLA adjustments).

It's not 8% from age 62 to age 70.

Regardless of that, I'm also waiting until age 70, primarily for the benefit of DW (assuming I pass first).

She will take hers in just over a year at age 66 (FRA), and I will claim 50% of her benefit for four years (we're the same age, within a few months) until my claim at age 70.

We never looked at any "payback" vs. what we/employer contributed. Money is for the living, not the dead; however we also want to maximize any future payout so we will wait.

Of course, you have to have other income sources/investments to be able to wait, and I understand those that must take it at age 62 due to health or not having other income sources.

RescueMe,
I have 10 years minimum before I think about taking SS, so I haven't dug into this in detail. If my older spouse claims SS at her FRA, can I immediately start claiming benefits at 50% of her rate, or do I also have to reach FRA to do this.
Thanks for your reply in advance.
JP

 

[rescueme]

RescueMe,
If my older spouse claims SS at her FRA, can I immediately start claiming benefits at 50% of her rate, or do I also have to reach FRA to do this.

You would have to be at least age 62, not your FRA in order to get spousal income and would result in a lower rate. This is assuming that there is not a qualified child to consider in the situation.

Here's the official word from SSA, along with a calculator to show what your reduction would be if you would claim before your FRA:

Benefits for Spouses

Hopefully this will answer your question.

 

[Moemg]

(I can't believe it wasn't until I read this thread today that I remembered I could have started taking SS yesterday, my 62nd birthday!)

Happy Birthday !

 

[WestLake]

As a single man (now 54) whose father died at 75, I plan to take SS at 62 whether I spend it or stash it.

 

[LeavingOhio]

When to take SS is a big question. I'm not one to want to do everything I can to maximize my returns, either with investing or when taking Social Security, but I don't want to make foolish mistakes either. I've known plenty of people who have died earlier than anticipated, and it makes me greatly consider taking SS at age 62. The average age in the US for white males (which I am) is 78. While I could hit the genetic lottery and make it to 100, on average we just don't do that, and too many of us tend to think we will when we likely will not. Waiting makes a HUGE difference. In my case, in FUTURE dollars, if my wife and I both take SS at age 62 (in 16 years), that will give us $47,000. If we wait until we are 65, it jumps to $65,000, and if we wait until we are 70, it's $108,000.

The issues are of course:

1) Will I live long enough to take SS at age 70?
2) Will I be healthy enough to enjoy extra money at age 70?
3) Do I risk there being HUGE changes to SS so that my payout is much less than expected?
4) If taking SS at age 62, does the longer period of time getting that money actually help me? I could use that money and keep my investments invested without withdrawing them...that would allow that money to grow. Lots of growth can happen in 8 years.
5) If I take 4% of my investments AND the SS, will I be able to make it 25-30 years?

I'm probably leaning toward taking the money at age 62. I want to get the money for a longer period of time, AND if I take that money and allow my investments to grow, then THAT is what will help me long term. PLUS, if I ever plan to leave money to my children, I can only leave my investment money, NOT any money I might get from SS.

The biggest keys in being able to take SS at age 62 are 1) retire debt free including owning a home, and 2) have another significant source of income from investments or pension.

 

[MasterBlaster]

Include in your list...

1) Spousal benefit and it's ramifications

2) Survivors benefit and it's ramifications.

By the way, as I understand things SS is actuarily equivalent for a single person. If you are an average Joe then it doesn't matter when you take your benefit, the lifetime total dollars paid out (for average Joe) are the same.

 

[67walkon]

Actually, SS does go down by 25% if you take it at 62 rather than full retirement, which is 66 for me. I look at that as a 6.25% per year increase, plus any COLA, but you would get COLA either way. From 66 to 70, it does go up 8% a year. In this market, it is pretty hard to get a safe 6.25% annual return and harder to get a safe 8% annual return.

If your full benefit is $1,000, you would get $750 by taking it early but $1,320 by waiting to 70. My rough math says that is a 76% increase in the monthly amount for waiting 8 years. That ain't bad.

On the other hand, how long will you live? And could you invest the money wisely during the time you were receiving the lesser amount?

I'm 62 now and the current plan is to pull the trigger on retirement next year. We are blessed to have a very well secured note that will pay us almost enough to maintain our current lifestyle until I'm almost 69. With our other investments, we won't need SS until the payments stop. If we are moderately frugal, we could probably live without touching retirement funds, but we will likely want to draw down about 1% to 1.5% a year until the payments stop.

But will I wait until 70 for SS? I doubt it. As some point, all that "free" money will likely be too tempting and frankly, I suspect both my wife and I will get more enjoyment out of a little extra money when I'm a little younger than we will when I'm older. My guess is that if my health is reasonably good and if a few years of real retirement demonstrate that we will have enough money either way, I'll take it at 67 or 68 or so.

This is a hard choice for most. It is likely a very personal financial decision with no right answer for everyone.

 

[ERD50]

Include in your list...

1) Spousal benefit and it's ramifications

2) Survivors benefit and it's ramifications.

By the way, as I understand things SS is actuarily equivalent for a single person. If you are an average Joe then it doesn't matter when you take your benefit, the dollars paid out (for average Joe) are the same.

It's that actuarial equivalent for a single person that I think is the key for couples (assuming the spouse qualifies for spousal benefits).

If I have this right, the tables are based on a single person a single male, or weighted towards single male life expectancy, which is shorter than for women). So the general case where one spouse outlives the other provides for a 'excess' benefit, compared to the tables. Which leverages the delay in SS with the increased payout.

-ERD50

 

[Katsmeow]

So the general case where one spouse outlives the other provides for a 'excess' benefit, compared to the tables. Which leverages the delay in SS with the increased payout.

-ERD50

Is that really only the case where the surviving spouse would be relying on getting the benefit of the deceased spouse? That is, if the two spouses had relatively equal benefits then I'm not sure it really means as much to delay taking benefits for one spouse.

 

[teejayevans]

The issues are of course:

1) Will I live long enough to take SS at age 70?
2) Will I be healthy enough to enjoy extra money at age 70?
3) Do I risk there being HUGE changes to SS so that my payout is much less than expected?
4) If taking SS at age 62, does the longer period of time getting that money actually help me? I could use that money and keep my investments invested without withdrawing them...that would allow that money to grow. Lots of growth can happen in 8 years.
5) If I take 4% of my investments AND the SS, will I be able to make it 25-30 years?

1. doesn't matter, by taking SS @ 70, you can spend more now knowing you'll have larger SS payments to supplement income later.
2. same as above, you don't wait until 70 to up your income, you just are income leveling, earlier from your pocket, later from US govt.
3. who knows, but I doubt it, if they use means testing, you'll have less at 70 because you have been spending it.
4. can you beat 8%, guaranteed?
TJ