Why people take SS at 62

[MasterBlaster]

Your assuming that future benefits would be a fair reflection of the current situation. I don't see that as realistic. If that were the case we could all make rational decisions based on the current situation. What we view as fair today may not be the same tomorrow.

Imagine the scenario where interest rates have gone through the roof and T-bonds cannot be rolled over at anything except extortionary rates (eg. Greece-style). At that point a budget crisis occurs and all bets are off as to what happens. I suspect that when push comes to shove the results will be anything but fair.

 

[explanade]

You really think the US will ever be as hapless as Greece? That our economies are in any way comparable?

 

[SpencerM]

Good luck with that whole pension thing leg.

Worked for me, but I know there are fewer now. Point is not to depend on any government entitlement program for any significant portion of your retirement. It was not designed to be that, nor should it be.

SM

 

[eytonxav]

Based on the gov't mortality tables, I assume the NPV of SS is the same whether you take it at 62, FRA, or 70. However, I wonder which of these scenarios actually works out more favorably for the gov't or does it indeed correlate perfectly with the mortality tables?

 

[rescueme]

Based on the gov't mortality tables, I assume the NPV of SS is the same whether you take it at 62, FRA, or 70. However, I wonder which of these scenarios actually works out more favorably for the gov't or does it indeed correlate perfectly with the mortality tables?

Well, by the tables currently in use by SSA, they expect some folks to live well beyond the century mark (Male age: 111; Female age: 113):
Actuarial Life Table

I would go with the general assumption that regardless of when you start SS (62, FRA, 70) it might be a "wash" for an indivudial. This can be tested by plugging in the various age/amounts into your retirement income forecast tool of choice.

However, for married folks this "automatic assumption" goes out the window, based upon their ages, SS credits, and desires (such as my waiting till age 70 for the benefit of DW, while at the same time tapping into her benefit when she submits her claim at FRA).

It's truly a mesurement and a decision based upon many factors in a married (or even previously married, at least 10 years) situation.

The government also has to consider the "tails" in the situation. Those who may collect benefits due to their age and the death of one/both parents.

And then there the question of SSD (Social Security Disability - don't confuse the term with SSI which is a completely different program that pays SS to disabled folks who never wo*ked).

Not to be political (sorry), but the "government" dosen't make out one way or another, other than to measure the "health" of the system and look/suggest ways of adjusting inflow/outflows, IMHO.

 

[eytonxav]

Not to be political (sorry), but the "government" dosen't make out one way or another, other than to measure the "health" of the system and look/suggest ways of adjusting inflow/outflows, IMHO.

Given all the permutations and some of the smart statisticians employed by the Gov't, I wouldn't be shocked if they had this figured out to some degree. The only reason I am curious, it makes me wonder that with future changes to SS likely, whether the 70 bump up will survive. It seems that many here are counting on that

 

[rescueme]

(snip)...it makes me wonder that with future changes to SS likely, whether the 70 bump up will survive. It seems that many here are counting on that

True. However some of us (this "old phart" included) can make projections based upon what we know as fact - not that might/will be in the future.

Our age 70 calculations are based upon current rules. While we can plan based upon the current, we are certainly aware of what can change in the future.

Heck, our (DW/me) SS FRA age was changed; our respective pension plans were eliminated (replaced by 401(k), and "cash balance" plans) over many decades.

We can only plan/do what is currently in "vogue", but be aware of possible changes in the future.

That's life ...

 

[JP.mpls]

Rescume,
You stated the following in this old thread on taking SS at 62:
"She (DW) 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."

My question:
I believe your wife must reach FRA for you to claim 50% of her SS benefits. Is it necessary for her to wait until FRA to start her SS claims?

My wife is older than me, and she is planning on taking SS at 62. When she reaches her FRA 4-5 years later, would I be able to claim 50% of her benefit?

Thanks in advance for your reply.

JP

 

[Alex in Virginia]

I decided I was better off taking my SS at 65 rather than waiting to 70.

First, because of future government risk to today's payout level and in a worst case scenario to any payout at all for people with other sources of income.

Second, because I don't need the money to meet expenses at present, which means I can bank/invest the SS payments between now and age 70. That's $100,000 gross ($80K net?) plus interest/market gains that I'll have in hand at age 70 that I would not otherwise have had.

A bird in hand, folks.

Alex in Virginia

 

[Lisa99]

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

 

[youbet]

Because of GPO, starting SS at 62 maximized financial security for DW should I predecease her.

 

[Animorph]

Rescume,
You stated the following in this old thread on taking SS at 62:
"She (DW) 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."

My question:
I believe your wife must reach FRA for you to claim 50% of her SS benefits. Is it necessary for her to wait until FRA to start her SS claims?

My wife is older than me, and she is planning on taking SS at 62. When she reaches her FRA 4-5 years later, would I be able to claim 50% of her benefit?

Thanks in advance for your reply.

JP

From Retirement Planner: Benefits For Your Spouse :
"
If your spouse is under full retirement age and qualifies on his or her own record, we will pay that amount first. But if he or she also qualifies for a higher amount as a spouse, they'll get a combination of benefits that equals that higher amount. If he or she begins receiving benefits:

• between age 62 and their full retirement age, the amount will be permanently reduced by a percentage based on the number of months up to his or her full retirement age.
  If your spouse is under full retirement age and works while receiving benefits, his or her benefits may be affected by the retirement earnings test.
• at his or her full retirement age, their benefit can be equal to one-half of your full retirement amount.

"

From Maximize Benefits with File and Suspend | Social Security Choices :

"Under current law a spouse cannot claim a spousal benefit unless the main beneficiary claims benefits first. However, once full retirement age (FRA) is reached (age 66 for those born between 1943 and 1954), a beneficiary can file for benefits, but then immediately suspend receipt of those benefits until some future date. By doing this, his or her spouse can claim a spousal benefit and the main beneficiary can let his or her own retirement benefit grow at 8 percent per year. In addition, if both spouses have reached FRA, it is possible for the spouse's own benefit to grow due to delayed requirement credits if he/she elects to receive free spousal benefits (also referred to as the restricted application option). "

It looks to me that full spousal benefits require one spouse to be receiving benefits, at any age, or to file and suspend, which must occur at FRA or older. After that, the amount of the spousal benefit is determined only by the age of the spouse receiving the spousal benefit. Take it before FRA and it will be reduced. And no increase for taking it late.

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.

Survivor's benefits will be different, and would depend on when your wife started SS, if her benefit is larger than yours.

 

[SumDay]

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

+1. What she said.

 

[RunningBum]

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

+1. What she said.

I'm curious, to what age are you taking Firecalc out to?

 

[bjorn2bwild]

If congress fixes the 2033 (or earlier) reset by the time DW reaches the age of 62 (6yrs) from now, we plan to do a FRA/70 split. Her SS benefit is larger than mine and she will likely out live me.
If not, we will do a 62/FRA split.

When conditions change.......

 

[FANOFJESUS]

If a person knew their date of death this would be an easy question but we don't. No male has lived past 77 years old in my family so that makes it easy for me.

 

[Katsmeow]

I'm curious, to what age are you taking Firecalc out to?

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.

 

[haha]

Your example clearly shows that Firecalc, while useful, should not be used to answer questions like when should I take SS. Anything that is that sensitive to meaningless parameter changes flunks the important test of "is it robust".

Ha

 

[slaternuthink]

If a person knew their date of death this would be an easy question but we don't. No male has lived past 77 years old in my family so that makes it easy for me.

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.

 

[heirloom]

I took it at 62 for a couple reasons:

1) Hubby and neighbor both think, "take it while its there before it changes."

2) Lady at SS office also showed that it would take 23 yrs. to collect the increase I would get if I waited until FRA.

3) Invest it in mkt now and let hubby have whats left if I die first.

4) QUESTION: Congress is talking about changing the equation for yearly increases...will this affect the 8% increase if you wait until FRA?

 

[Khufu]

I took it at 62 for a couple reasons:

1) Hubby and neighbor both think, "take it while its there before it changes."

2) Lady at SS office also showed that it would take 23 yrs. to collect the increase I would get if I waited until FRA.

3) Invest it in mkt now and let hubby have whats left if I die first.

4) QUESTION: Congress is talking about changing the equation for yearly increases...will this affect the 8% increase if you wait until FRA?

answer to Question 4: No. The change under consideration is to calculate the COLA differently. The COLA, however it is calculated, does not affect the Delayed Retirement Credits which you earn each month that you do not take benefits until age 70.

 

[anethum]

I know that the SS website says that for people born from 1943 or later, the annual rate of increase for delaying SS benefits is 8.0%. However, when I calculate my benefits on the SS website saying that I will not have any future earnings before I apply for benefits, the annual increase for the numbers it spits back works out to be exactly 7.3%. Does anyone have any idea why?

 

[growing_older]

Don't know your exact FRA, but the 8% number that is often described is not compounded, so the phrase "annual rate of increase" is probably not exactly calculated the way you expect. If your FRA is 66, then 70 is 4 years later, so the benefit is 32% (4 x 8%) more. Not 1.08 ** 4 as is usually meant by annual rate of increase.

Or, put another way, the first year you delay the benefit increases 8%, the next year the benefit increases 7.4% over your FRA+1 amount, the next year you delay your benefit increases 6.9% over your FRA+2 amount and the last year you delay your benefit increases 6.45% over your FRA+3 amount.

 

[ziggy29]

Remember - lifespan = Nature/nurture + chance.

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

 

[HighRoller]

No matter what the government does with SS in the future, I seriously doubt that it will mean more money for the average Jack and Jill. I've always made my retirement calculations/plans based on the assumption that I won’t receive any SS benefits. However, now that I'm there and have "earned it over the past 40 years of being forced to pay into the system "it's time to take it. Signed up at 62.