Social Security at age 62

[tmm99]

I agree that if SS is to be reduced, it will probably by income, not by net worth. Maybe we should start withdrawing from our tax deferred accounts now (instead from the after tax accounts) to lower the RMD payout (in order to lower income in our 70's in case SS reduces payout based on income. )


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[starry night]

Waiting for SS until Medicare eligibility because of ACA

We had looked forward to beginning SS benefit at age 62 for many/all the reasons already mentioned. But because our Health Ins is provided under ACA with qualifying premium subsidy, we would lose that subsidy because SS Benefit is calculated in the Modified Adjusted Gross Income used in qualifying. So, we determined it is best to wait for SS until age 65 when we will get health coverage through Medicare.

 

[frayne]

Between my employer and I over $200K was paid into social security. I figured the sooner I could get my grubby little hands back on my money and my employers match and invest it how best I think, the better. Yes, I took at 62 and have no regrets.

 

[marko]

OP here.

I

With Fidelity Income Planner if I take ss at full retirement age my success grade was 97. If I take ss at age 62 the grade went up to 102. The ran the numbers taking ss at age 62 and at full retirement age in firecalc and Fidelity Income Planner.

Both planners calculated 100% success with either option. However with Firecalc there was an average balance at the end of 16,000 more with full retirement age. (not much money in the big picture -- 35 years) higher the grade the more likely the money will last throughout retirement.

This was very interesting since I have always thought ss at full retirement age was the best situation. I might take it at age 62 instead.

Regulars here will note that I'm no mathematician but I suspect that it depends on how big your SS benefits are vs taking the same amount out of your portfolio.

I came out with a similar positive result on taking SS at 62 vs 70

A good sized SS benefit would allow a nice chunk of your portfolio to grow another 8 years (62 vs 70), in some cases tax deferred which could add up.

 

[Sunset]

I can't see SS paying any less. I can maybe see the CPI being adjusted, but not any 'cut'.

In any case, there are a lot more things that are entirely more possible. I would worry more about these...

• Things like high inflation, when you have no COLA adjustments in your income stream.
• The stock market stagnating for 20+ years, like Japan.
• Living in a neighborhood that becomes dangerous.
• The price of a lap dance becoming too prohibitive to invest in.

The first 3 are definite worries and are like a slow boil where you don't notice for a while.

The 4th is really just an opportunity to come out of retirement for a new career

 

[Sunset]

Our plan is to first do a Roth conversions on all our remaining IRA’s. My tax code knowledge may be incorrect and would invite anyone to comment and correct me. I started this when I turned 60 and have been trying to convert as much as I can without going over the 15% bracket which for married filing jointly is around $75K for TY 2016.

I will be 63 in July and DW will be 59.5 by years end. We will do my conversions first since my window before RMD’s is shorter. We pay 15% to the feds and 7% to the state of SC. If I took SS now I would not be able to convert as much on the Fed Tax side and keep within the 15% bracket. SC does not tax SS income. If we live in a state such as FL, we would not pay state income taxes on the Roth conversions or SS income. If we live in a state such as Utah we would pay a 5% tax on Roth conversions and they also tax SS. We don’t like RMD’s. We would end up with us in a higher tax bracket at age 70.5. With demographics in the US showing an aging population, I would guess that higher tax rates are in the future.

Another reason for the Roth conversion is that our son is currently in the 25% tax bracket. If he inherits an IRA he will have to take RMD’s and pay 25% tax on them. If he inherits a Roth he will still have to take RMD’s but would not have to pay taxes. Before I turn 66 which is my FRA, I will have to buy a copy of Mike Pipers latest book since SS laws may change again. Born in 1953, there may still be a File and Suspend rule where I can claim my spouses SS and delay taking mine until 70.

As I mentioned in my first paragraph, this is my understanding of the tax code. I’m new to posting and my wish is to be helpful and accurate. If there are any experts on this forum please comment.

I missed the age cut off of 62, for the last change in SS , the one a few months ago. So my understanding is very limited.

However, if I was 62 or older right now I'd certainly check on exactly what was eliminated from SS, as even if you are age 62, I thought there was a time limit that expires soon, to do a clever move or you lose it.

Besides if you are eligible for a clever move and there is no time limit, then you are losing out on free money, so still worth checking out.

 

[audreyh1]

I'm counting on SS to pay my Medicare premiums. Most of rest will go to taxes incurred from the SS.

 

[rodi]

DH took SS at age 62... It was a no brainer because we have minor age children who get a benefit because he's collecting.

For me - I'm planning on doing the analysis when I'm closer to the date... (I turn 55 this year - so I have time.) ACA premiums are a factor... as will be the size of my nest egg. I think it was REWahoo who decided to turn on the SS spigot earlier than originally planned during the market downturn in 2008/2009 - in order to prevent withdrawing too much from his nest egg.... I can't know what the market will be doing 7 years from now when I first qualify for SS.

So - like in all things retirement related - I plan to stay agile and remain willing to redesign my retirement plans as circumstances dictate.

 

[ziggy29]

(I turn 55 this year - so I have time.)

Also a sigh of relief, and IMO a reason to let your guard down a bit. There's no way massive reform happens this year, and pretty much everyone in Washington agrees not to touch anyone over 55. But me, at 50... I'm on the cusp and may or may not be whacked. In some perverse sense it might be good for me to see more gridlock for four more years, but IMO the damage to the finances of the republic are too great to root for that!

 

[rodi]

Ziggy - I hear you... I always thought the proposed age 55 "cliff" was pretty steep... I might feel different after my birthday.

 

[cyber888]

I will probably take SS at 62, and DW will be FRA when I turn 62 because's she's older. It will allow us to take less from our 403B and IRA. The benefit of letting our retirement accounts grow from 62 to 70 with less withdrawals will probably extend break even point from 78 yrs old to 82 - 83 yrs old. If I live beyond 83, I'll probably downsize from a 3,500 sq.ft home to a 800 sq.ft. studio LOL.

 

[Dave J]

Our plan is to first do a Roth conversions on all our remaining IRA’s. My tax code knowledge may be incorrect and would invite anyone to comment and correct me. I started this when I turned 60 and have been trying to convert as much as I can without going over the 15% bracket which for married filing jointly is around $75K for TY 2016.

How many years to do all the conversions? What will your income be after you do them. I trust you will not pay 15% now and then be in a 10% bracket after you start SS. You don't have to do it all . I was in a hurry at first but slowed down and now I'm planning on finishing depleting my IRA's in my 80's to make the most of lower tax rates.

 

[Katsmeow]

DH took SS at about 62.75 (when he retired). In our case, it was a very easy decision because we had 2 minor children and those benefits made that the right call.

I recently turned 62 and haven't taken yet. I tentatively plan to take at the beginning of 2017, but that is subject to some change. My benefit is slightly more (if taken at the same age as DH) so there are no spousal reasons to defer. I prefer the flexibility of taking earlier and don't want to deplete the portfolio to wait until FRA or 70. I tend to think benefits will be cut at a later time. I don't think taking early will protect me from such changes. But, I will get the benefit of current benefits by taking sooner rather than later.

 

[ownyourfuture]

God willing, I'll turn 62 in the year 2024. If SS is still available at that age, I'll be on it like a hobo on a ham sandwich!!

ATTN littleb:
You mentioned that a couple of your relatives weren't that confident in Social Security being around for the next 10 years.

I'm including a scan of a pamphlet that was included in my 401(k) statement sometime in 2006. I think this lady does a pretty good job of showing the realities of Social Security even though the pamphlet is 10 years old.



FYI: In case you didn't know this, the government started cutting SS way back in 1983 when they voted to tax benefits for the 1st time. And they continue to cut benefits by occasionally lowering the amount of income you're allowed in addition to your SS before it becomes taxable. Criminal in my opinion but what are you going to do ?

What this shows is that the government knew Social Security was in trouble a long, long time ago. So don't believe the political party that tells you everything is & will be hunky-dory.

It's not

 

[cyber888]

The way around it is to stay in a State where SS is not taxed. And also ge the minimum amount from your nest egg, so it does not raise your tax bracket. Congress is corrupt and fattening their own pork barrel for sure.

God willing, I'll turn 62 in the year 2024. If SS is still available at that age, I'll be on it like a hobo on a ham sandwich!!

ATTN littleb:
You mentioned that a couple of your relatives weren't that confident in Social Security being around for the next 10 years.

I'm including a scan of a pamphlet that was included in my 401(k) statement sometime in 2006. I think this lady does a pretty good job of showing the realities of Social Security even though the pamphlet is 10 years old.



FYI: In case you didn't know this, the government started cutting SS way back in 1983 when they voted to tax benefits for the 1st time. And they continue to cut benefits by occasionally lowering the amount of income you're allowed in addition to your SS before it becomes taxable. Criminal in my opinion but what are you going to do ?

What this shows is that the government knew Social Security was in trouble a long, long time ago. So don't believe the political party that tells you everything is & will be hunky-dory.

It's not

 

[nubill]

How many years to do all the conversions? What will your income be after you do them. I trust you will not pay 15% now and then be in a 10% bracket after you start SS. You don't have to do it all . I was in a hurry at first but slowed down and now I'm planning on finishing depleting my IRA's in my 80's to make the most of lower tax rates.

With zero growth in the IRA and based on our current spending, if I converted the rest of my IRA it would take about 5 years. Then my wife would take 5 years. If I take SS at full retirement age (66), 50% of it would be subject to tax, if I take SS at 70 it jumps to 85%. Pensions and SS will keep me and DW above the 10% bracket. The 7% state income tax on IRA/401K withdrawals here in SC starts at $14,400 for married filing jointly.

I can slow down some time in the future, but if I did nothing at age 60 RMD’s would push me in the 25% bracket. Your suggestion made me think that I should run these “Should I do a Roth Conversion Calculators” (Fidelity has one, takes about 15 minutes) every year before conversion. I have not done one in a couple of years, and the stock market is never static. Dave J, thanks for the advice.

 

[garyt]

My crystal ball says SS will not go away and if the payout decreases, it will be only by a very slight amount. There are just too many people whose main source of income is SS. The government won't want to create a bunch of old homeless people who are starving to death.


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Very true, but they may institute means testing, which is my fear. I save all my life and then they tell me I'm "too rich" to need SS.

 

[ownyourfuture]

Very true, but they may institute means testing, which is my fear. I save all my life and then they tell me I'm "too rich" to need SS.

I feel the same way Gary. You know, people have questioned me on this and even called me greedy for feeling the way I do about Social Security. Sometimes they bring up the old motto 'whoever said life was fair'

I understand that motto, but I always figured it should apply to something like losing a loved one early, etc
Not your very own government punishing you for doing what they told me to do. Save early save a lot, & therefore you won't be a burden on us.

Yeah right

 

[ownyourfuture]

The way around it is to stay in a State where SS is not taxed. And also ge the minimum amount from your nest egg, so it does not raise your tax bracket. Congress is corrupt and fattening their own pork barrel for sure.

I'll almost certainly have to leave the state of Minnesota at that time.
They're one of only four states that taxes both SS & Pension income.
And it doesn't matter if it's a government civilian Pension, military pension, or a private sector Pension, which I have.

Government greed

 

[Hermit]

I'm waiting until 70. But then again I am getting a nice SS check based on the late DW's account until I start my own. I'm withdrawing the difference between my income now and what I will get at 70 just to smooth the income. High tax bracket won't ever be a problem I can do anything about. I'm in the 25% bracket now and most likely always will be. As discussed in other threads, plenty of income (and the associated higher tax burden) is a problem I can live with.

 

[Whisper66]

Your suggestion made me think that I should run these “Should I do a Roth Conversion Calculators” (Fidelity has one, takes about 15 minutes) every year before conversion.

Optimal Retirement Calculator and Retirement Decision Support System does a nice job of testing if Roth Conversions would be beneficial or not. Output includes a table of how much you will pay in taxes each year and how much is paid into each tax bracket. Can run a case w/o I-ORP suggestions for Roth Conversions and one with those suggestions and compare your tax impact.

Sometimes Conversions make sense and save overall tax spend depending on the situation. Sometimes not so much so.

Roth conversions can also impact when you may want to take SS. If Roth conversions are beneficial in your case AND you need a few more years to convert the amount you want, delaying SS may allow more years of conversions without a high taxable income (SS + conversion).

 

[hurricane harry]

SS at 62

 

[kcowan]

DW and I both in at 62. Since deferral is just an actuarial game, I figured we could play it to our benefit. We also get deferred pensions at 72. So the cash flow would help for 10 years.

 

[MichaelB]

Starting to get off topic. Just a reminder to avoid politics and get back to the original question, posted here as a reminder

So, I see different reasons why someone might take ss at age 62. Maybe if you are in bad health, longevity does not run in the family or you don't have the money to coast from age 62 to FR age.

What age were you when you took social security? Are there other advantages at age 62 vs full retirement age?

 

[pb4uski]

We'll be waiting to FRA. Good health and family longevity, not to mention joint mortality.