Why people take SS at 62

[MichaelB]

Yes my wife and I thought about it and discussed all the ups and downs of retiring early. First if I croak she receives my SS which is larger than hers. Next I am well insured, so there is some upside to my departure.

One of my life rules is always make sure you are worth more alive than dead. No need to tempt destiny - or anyone else

 

[rescueme]

One of my life rules is always make sure you are worth more alive than dead.

OTOH, if you have the "responsibilty" to protect those that remain after your passing, you may look at it in a different manner.

It's not a normal situation for most, but we have to face the responsibilites that were given to us (as parents of a disabled person).

Not my intent at all to bring down the conversation to our level, but just to comment that what most folks think as a "normal life" - may not be.

There are exceptions to all rules...

 

[Lsbcal]

There is certainly a healthy diversity of opinions on this subject.

Has this discussion changed anyone's mind? Or are we all just stating our position?

 

[rescueme]

(snip)...Or are we all just stating our position?

Like any subject, there will always be a difference in opinion, based upon personal situations, along with wants/requirements.

I would like to think that all of us on this thread are showing the variations that can/could be considered, and hopefully can be used by others to form their own decision on the subject under discussion.

As in all things in life - there is no such thing as the "perfect answer" that must/be followed by others...

 

[Mulligan]

There is certainly a healthy diversity of opinions on this subject.

Has this discussion changed anyone's mind? Or are we all just stating our position?

It has brought clarity to my situation. I have a long time GF, and the plan is to stay together and eventually live together, but no certificate to bind as it really offers no benefit tax, income, or procreation wise. However, based on the math and current asset level, the only way to get her into retirement at an age where I can enjoy her company and yet still provide her long term protection is clear. We will have to be at a point where we can live off my pension, and save her smaller resources, and delay her SS until 70. I will go a head and draw my meager WEP SS of about $100 bucks in current dollars at 62, as delaying for $150 seems trivial.

 

[rescueme]

(snip) but no certificate to bind as it really offers no benefit tax, income, or procreation wise.

While I respect your decision, being married may give you some advantage on the income side, be it survivor benefits on your pension and also on the SS side under survivorship benefits and possible spousal claims.

Hopefully you have considered those points in your "calculations"...

 

[MichaelB]

There is certainly a healthy diversity of opinions on this subject.

Has this discussion changed anyone's mind? Or are we all just stating our position?

My view 'til now had been focused on the benefit of delaying as long as possible and I hadn't considered taking SS earlier in response to a portfolio decline or other negative financial hit. The ability to begin SS at any point in an 8 year window gives us financial flexibility.

 

[Mulligan]

While I respect your decision, being married may give you some advantage on the income side, be it survivor benefits on your pension and also on the SS side under survivorship benefits and possible spousal claims.

Hopefully you have considered those points in your "calculations"...

Being single when I started drawing my pension, I had no choice but to take option 1 which is full payment of pension, but when I die, it dies too. My only other option was 2 with my daughter being the recipient, but since she was 17, my pension would have been whacked severely. I wont benefit from GF SS because the WEP and/or GPO would net me nothing due to my high pension. Drawing her SS early would not only reduce her monthly income at a later age if I die, but drag her income into my 24% tax bracket which she would not be in on her own.

 

[W2R]

There is certainly a healthy diversity of opinions on this subject.

Has this discussion changed anyone's mind? Or are we all just stating our position?

Well, my position isn't very firm so it has been wobbling as always. I do think that if I (personally) want to get the maximum $$$$ I would wait until I am 70, and also I still think that would be great old age insurance. If I never thought about it, I'd probably just wait until 70.

But whenever I read these threads, I think how neat it would be to get a regular, reliable check every month. I think about my family's longevity and how that gives me absolutely no guarantees. All in all, greed can be a pretty strong motive, too.

 

[rescueme]

Being single when I started drawing my pension, I had no choice but to take option 1 which is full payment of pension...

Understood.

You play the hand that was dealt ...

 

[Mulligan]

Understood.

You play the hand that was dealt ...

Of course if I had taken option 2 and died today, I would have always wondered if my daughters tear would have been of sorrow, or of joy having a monthly COLA'D pension for the rest of her life at age 19!

 

[jime444]

My second post to the string, sorry. The wife and I are taking it at 62 for all the reasons we stated earlier. Health issues, genes, (lack of) trust in our political leaders, etc. I understand why many of you are thinking about delaying this until 70, yes, I understand the 8+% return/year? Sure, you betcha, longevity insurance, federal government style.

However, another thought comes to mind. Call me a contrarian, a cynic, a sarcastic old bastard, I'd probably agree. In every instance during my life, pension "reform", benefit "improvements", etc. someone (a business, government, or whatever) has tried to steer me towards their "new" plan. "buy now, demand will be incredible". And my analysis at that time using various calculators would show the numbers looked better. That is, using the basic assumption that things will continue to go on "as usual". What else would you do, eh? Now, being the cynic that I am, in many cases we did not do it. Guess what, I've been right about 80% of the time. The latest was with a megaCorp pension. We got the full court press to change to a "enhanced" 401k matching a few years ago and give up the pension. A independant financial engine showed a remarkable 8% better return with the enhanced match. Hmm......notice any similarities? Now, 6 years later (after we've been acquired/takenover, hostile but not disclosed by the way); the enhanced match is cut to 40% for everyone and the guys who stayed with the pension accruing years of service, made out just fine. In fact, much better.

My point is, "burning up" your hard earned savings first, money that YOU have control of, and counting on the feds to provide you with longevity insurance is, in my opinion, pretty trusting. Btw, my dark side changed the word trusting to insane in the sentence above. Yes, a 8% return, sounds a little too good to be true to me. I think like megaCorp, the feds are just one little "made-up" rule change away to making this a very poor economic decision. If I make it to 80 years old, we'll see. However, at least we get a choice and I know what ours will be. Personally, we're going in the opposite direction. Good luck to you and yours.

 

[rescueme]

(snip) ...it has been wobbling as always.

Weebles wobble, but they don't fall down ...

I think you are safe...

 

[wingfooted]

Slightly unusual situation

DW is four years older.

DW accumulated SS benefit is roughly 50% of DH.

Simulations indicate the maximum benefit from the following strategy:

DW takes SS at age 62
DH takes 50% spousal benefits based on DW's plan at FRA (66 years and 2 months) for the period until age 70
DH waits until age 70 to take his plan's maximum benefits and then DW switches over to the 50% spousal benefit based on DH's plan

Anyone see any problems or pitfalls ?

 

[Rustward]

...
Now, 6 years later (after we've been acquired/takenover, hostile but not disclosed by the way); the enhanced match is cut to 40% for everyone and the guys who stayed with the pension accruing years of service, made out just fine. In fact, much better.

Would it have turned out any better if they just fired you and some of your colleagues instead of cutting benefits?

 

[ER Fireball]

DW takes SS at age 62
DH takes 50% spousal benefits based on DW's plan at FRA (66 years and 2 months) for the period until age 70
DH waits until age 70 to take his plan's maximum benefits and then DW switches over to the 50% spousal benefit based on DH's plan

I'm not sure this is all that unusual. DW and myself are roughly the same age, she did the mom thing and her SS is roughly 50% of mine. If the option exists, we will do the same as you outline. She will draw on her record at 62, We will wait to draw on mine until 70.

My motivation is to maximize the survivor benefit for DW if I should croak first.

I have recently tried to find information on this scenario on the SS site, and have not been able to do so. It seems to indicate that when she applies, they will look at her benefit as a function of my record as well. Has something changed in the last year or two?

 

[packrat44]

One of my life rules is always make sure you are worth more alive than dead. No need to tempt destiny - or anyone else

When I retired from the military and Civil Service I elected not to take survivor benefits. I told DW I wanted to be worth more alive than dead. Did not want her to get any evil ideas.

 

[BLS53]

My point is, "burning up" your hard earned savings first, money that YOU have control of, and counting on the feds to provide you with longevity insurance is, in my opinion, pretty trusting. Btw, my dark side changed the word trusting to insane in the sentence above. Yes, a 8% return, sounds a little too good to be true to me. I think like megaCorp, the feds are just one little "made-up" rule change away to making this a very poor economic decision. If I make it to 80 years old, we'll see. However, at least we get a choice and I know what ours will be. Personally, we're going in the opposite direction. Good luck to you and yours.

So you're essentially saying that those of us that spent a career in the military, and rely on our pensions, were/are insane?

I don't understand after seeing Enron, Madoff, and all the rest, how anyone can think investing is more secure than a monthly check from the federal government.

 

[frayne]

So you're essentially saying that those of us that spent a career in the military, and rely on our pensions, were/are insane?

I don't understand after seeing Enron, Madoff, and all the rest, how anyone can think investing is more secure than a monthly check from the federal government.

Exactly the reason you diversify, to hedge your bets, so to speak !

 

[jime444]

rustward/BLS53,

The company I'm currently working for is making record profit margins and sales. The resultant reduction in benefits was entirely due to the profit taking of the evil doers in megaCorp II. That's the trouble nowadays, they've offshored so many jobs, they don't have to give a damn about employees, they just say "next". With reasonable competition for a skilled local workforce, they could not do it, as easily. They might try, but, if capitalism works correctly, workers would leave, go across the street and maximize their return(pay, benefits, etc) for their effort. In my opinion, that's why we need a return of tariffs to level the playing field for US workers vs low cost foreign competition. Yes, you will pay more for stuff bought at Wally's mart. Sorry.

And maybe you're missing my other point. In my opinion, "burning down" MY investment dollars and having a greater reliance on the government to provide me "longevity" insurance pretty much goes against ever fiber of my being. I believe it would be much harder for a government in the US to "garnish" individual retirement accounts than to "just change slightly" the future SS benefits of people not yet retired. I've seen it many times in my so-called career, a "tiered" benefit plan. One for current retirees and one for future retirees; that's how they "divide and conquer". Easy, squeezy. I believe any attempt to "nationalize" individuals personal retirements monies would be met with something no less than armed insurrection. So, given that statement, my longevity which probably is less than the "norm", and the current state of the SS system (which could turn dramatically worse if they are telling the truth, btw), we're taking it early.

 

[ejman]

After reading (and participating) in a number of these SS at 62 vs 70 threads I've come to understand that some people are born with the SS at 62 gene, some with SS at 70 gene and a very few misguided souls with an in between gene. Near as I can tell either side is totally impervious to the arguments of the other side and I do not believe that a single soul has been converted. Long live the 62'ers!!!!

 

[wingfooted]

I have recently tried to find information on this scenario on the SS site, and have not been able to do so. It seems to indicate that when she applies, they will look at her benefit as a function of my record as well. Has something changed in the last year or two?

I used the social security calculator SSCalc.net to derive the optimum strategy based on NPV at age 90.

 

[Brett_Cameron]

I have estimated my inflation adjusted expenses for each year through age 86. I have a "three legged stool" of non-Cola pension, 401k and SS. I determined 401k withdrawals based on projected spending and estimated taxes for each year for each of three scenarios of SS benefit starting ages of 62, FRA (66 y 2 mo), and age 70.

I then took the year by year withdrawals for each of the three scenarios and modeled them in Firecalc.

I used deterministic values for inflation, investment return after inflation and SS COLA.

I then calculated the sum of the PV of the 401k, pension, and SS benefits for the three scenarios.

results are:

[Age]........... [PV] ........[sum of future dollars] [Firecalc to age] [firecalc to age 86] [401k balance at age 86]
[62 ].......... [-$111k]............ [highest]................. [100% to 62]......... [98.2% success]............ [highest]
[FRA] .......... [-$42k]............ [-$239k] ................. [100% to 66-2] ...... [99.2% success]........... [-$293k]
[70]........... [highest]............. [-$339k]................. [100% to 70]........... [62% success]............. [-$560k]


Deterministic values used were:
inflation: 2.5%
return after inflation 3.5%
SS COLA: 2.5%
tax bracket inflation: 2.426% (last value they used)

The decision of when to take social security will consider:
1) at age 62, my youngest child could draw half of my SS for a few years until he gets too old
2) the later the better for my wife's benefit on my record
3) the Firecalc results
4) the future importance of preserving a lot of my 401k

I am torn between age 62 and and 66-2 for starting SS based on the Firecalc results. I think the next 5 years investment results will be the deciding factor.

I also calculated break-even dates just comparing the PV of each of the SS benefit streams. The breakeven for PV of starting at age 66-2 compared to age 62 is at age 78. The breakeven for starting at age 70 instead of age 62 is age 80. The breakeven for starting at age 70 instead of age 66-2 is between age 81-82.

I modeled to age 86 since my the oldest attained age of any of my ancestors going back two generations is age 86. Most lived to their early to late 70's. My father however is still going strong at age 83.

 

[tessaduncan]

I'm not sure this is all that unusual. DW and myself are roughly the same age, she did the mom thing and her SS is roughly 50% of mine. If the option exists, we will do the same as you outline. She will draw on her record at 62, We will wait to draw on mine until 70.

My motivation is to maximize the survivor benefit for DW if I should croak first.

I have recently tried to find information on this scenario on the SS site, and have not been able to do so. It seems to indicate that when she applies, they will look at her benefit as a function of my record as well. Has something changed in the last year or two?

I asked about this scenario in another thread & was told that if I (same situation as your DW) were to take SS at 62 on my record, my benefit will ALWAYS be reduced, even when I later draw on my DH's record.

 

[MasterBlaster]

I have estimated my inflation adjusted expenses for each year through age 86. I have a "three legged stool" of non-Cola pension, 401k and SS. I determined 401k withdrawals based on projected spending and estimated taxes for each year for each of three scenarios of SS benefit starting ages of 62, FRA (66 y 2 mo), and age 70.

I then took the year by year withdrawals for each of the three scenarios and modeled them in Firecalc.

I used deterministic values for inflation, investment return after inflation and SS COLA.

I then calculated the sum of the PV of the 401k, pension, and SS benefits for the three scenarios.

results are:

[Age]........... [PV] ........[sum of future dollars] [Firecalc to age] [firecalc to age 86] [401k balance at age 86]
[62 ].......... [-$111k]............ [highest]................. [100% to 62]......... [98.2% success]............ [highest]
[FRA] .......... [-$42k]............ [-$239k] ................. [100% to 66-2] ...... [99.2% success]........... [-$293k]
[70]........... [highest]............. [-$339k]................. [100% to 70]........... [62% success]............. [-$560k]


Deterministic values used were:
inflation: 2.5%
return after inflation 3.5%
SS COLA: 2.5%
tax bracket inflation: 2.426% (last value they used)

The decision of when to take social security will consider:
1) at age 62, my youngest child could draw half of my SS for a few years until he gets too old
2) the later the better for my wife's benefit on my record
3) the Firecalc results
4) the future importance of preserving a lot of my 401k

I am torn between age 62 and and 66-2 for starting SS based on the Firecalc results. I think the next 5 years investment results will be the deciding factor.

I also calculated break-even dates just comparing the PV of each of the SS benefit streams. The breakeven for PV of starting at age 66-2 compared to age 62 is at age 78. The breakeven for starting at age 70 instead of age 62 is age 80. The breakeven for starting at age 70 instead of age 66-2 is between age 81-82.

I modeled to age 86 since my the oldest attained age of any of my ancestors going back two generations is age 86. Most lived to their early to late 70's. My father however is still going strong at age 83.

Take a look at the I-ORP calculator.

http://www.i-orp.com/

Your results may change when you examine how Social Security is taxed. You'll need to look at the Social Security "provisional" income to show that not all dollars are equal when it comes to taxation.

Let us know what you find out