When to take Social Security

[sgeeeee]

This really wasn't a very good article, but the topic is always worth discussing. You have to register to read the article, but there's no charge.

http://www.nytimes.com/2007/05/12/business/12money.html?_r=1&th&emc=th&oref=slogin

"A Contrarian on Retirement Says Wait

By DAMON DARLIN
Published: May 12, 2007

Come retirement, it will finally be time to get back the money that has been extracted from your paycheck your entire working life. Indeed, requesting your Social Security benefits might seem like the first order of business as soon as the going-away party is over. But you might be a lot better off waiting a bit longer, until age 66 or even 70 before tapping into the government retirement fund. Relying at first on other savings like individual retirement accounts or the 401(k) from work could raise your living standard in retirement as much as 10 percent, according to calculations made by Laurence J. Kotlikoff, an economics professor at Boston University. . . "

 

[TromboneAl]

Re: When to take SS

The average retirement age is now 62, not 65. Indeed, only 27 percent of Americans retire at age 65 or later, according to the Employee Benefit Research Institute.

What? What happened to "people aren't saving enough -- they'll have to work until they die"?

 

[haha]

Re: When to take SS

Here is an interesting aside from the article:

Mr. Kotlikoff relies on financial planning software he has been developing called ESPlanner. It has been used by a number of economists and academics who are studying retirement savings. Mr. Kotlikoff used it recently to reach the startling conclusion that over a lifetime a plumber has a higher standard of living than a physician with a general practice because the doctor starts earning later, pays higher taxes and high malpractice insurance premiums.

Don't really know how to interpret that in terms of lifetime satisfactions, rather than lifetime earnings. But medical school looks like a hard slog, not to mention the four years of college and 4 years or so of PG training.

And of course, in either career you get a bit of mierda on your fingers, so not much to choose there either.

So I guess the same guy who theoretically could do either might conceivably become the world's smartest plumber, make a ton of money and retire early to a life of young women in foreign lands. Not so much worry about deaths and malpractice either.

Back to topic-- unless equity markets crash, I plan to wait until 69 or 70 to draw SS. To me, the extra money should things get tight as I get older trumps having a bit more to spend right now. If equities should drop to where I would consider a very high equity allocation, I'll start my SS immediately to avoid depleting high powered cash resources.

Ha

 

[mathjak107]

Re: When to take SS

i agree ha ha, its not about living long enough if you file later to come out ahead. its about being able to take a bigger withdrawl rate right from the 1st day of retirement with the comfort of knowing if you live long enough the buckets will be re-filled at a much higher rate when you finally take ss and get the much higher rate.

 

[REWahoo]

Re: When to take SS

Back to topic-- unless equity markets crash, I plan to wait until 69 or 70 to draw SS. To me, the extra money should things get tight as I get older trumps having a bit more to spend right now. If equities should drop to where I would consider a very high equity allocation, I'll start my SS immediately to avoid depleting high powered cash resources.

Life events are providing me first hand knowledge that we will not learn the right answer to this question until we're dead.

 

[chinaco]

Re: When to take SS

This is a bit more complicated discussion that meets the eye. Quite a number of variables to consider.

I have read several analysis with slightly different conclusions.

For DW and I... my SS is the larger amount. We will begin taking hers at 62. I am thinking about taking mine at full retirement (65.x), possibly will wait till 70.

This would allow both of us or the survivor to have a higher COLA Annuity.

I need to run some projections to determine which approach works the best. I want to make sure we do not run out of money... and I also want to spend most of our portfolio.

Since we will begin drawing SS at the earliest 7 years after we RE, we can see how we are doing at that time.

Our Ultimate goal is to spend more in the early years... but we do not want to run out of money. I believe deciding when to begin SS is part of the strategy.

http://money.cnn.com/2004/11/18/news/insights/taking_ss_0412/index.htm

 

[mathjak107]

Re: When to take SS

what it comes down to assuming you have enough assets to hold out longer before taking it ,is do you want to die with the biggest pile or take the biggest monthly withdrawl you can get. if you dont need the extra money monthly than taking it early will work best for the biggest pile if you dont think you will live along time. if you live an extended life than taking it later results in the biggest pile. . if you want the maximum withdrawl without regard for the biggest pile when you die than take it later

 

[Mwsinron]

Re: When to take SS

Id rather take it sooner to reduce my withdrawals on my egg. Obviously only time would give you the right answer.

 

[mathjak107]

Re: When to take SS

just curious why you would be concerned about the extra withdrawls on your nest egg taking it later when you can replace those extra withdrawls later on with a much higher rate? if you die it dont matter anyway.

 

[Mwsinron]

Re: When to take SS

just curious why you would be concerned about the extra withdrawls on your nest egg taking it later when you can replace those extra withdrawls later on with a much higher rate? if you die it dont matter anyway.

I don't have any faith that SS will be there down the road. So Id rather get it while I can.

 

[mathjak107]

Re: When to take SS

i have no doubts about ss being there. , its medicare i worry about

 

[73ss454]

Re: When to take SS

SS may be there but we may not. I'll take my $ as soon as I can get it. The government's been holding my money long enough.

 

[chinaco]

Re: When to take SS

SS may be there but we may not. I'll take my $ as soon as I can get it. The government's been holding my money long enough.

It will be there... but probably with more tax (means based). Since you saved... You don't need it!

They would not dare take it back... they will use a complex shell game that results in those of us who saved getting probably about 25% less.

I guess we will see how it turns out.

 

[Gearhead Jim]

Re: When to take SS

It will be there... but probably with more tax (means based). Since you saved... You don't need it!

They would not dare take it back... they will use a complex shell game that results in those of us who saved getting probably about 25% less.

I guess we will see how it turns out.

Exactly. If I was confident that my future SS dollars would not be confiscated by tax increases or means testing, then I would definitely wait until 70. That would provide a hedge against living longer than I or DW expected. But after a lifetime of watching the government stiff people who act responsibly, my attitude is "Take the money and run."

 

[Freein05]

Re: When to take SS

I am taking my SS at 62 to enjoy the extra income to have fun and travel while I am still healthy. I want to get back what I have been putting in for over 35 years. I left the work force about two years before I was eligible for SS and as I recall the numbers I got from SS for drawing it at 62 and 65 were not a lot different. I think it was 2 or 3 hundred dollars a month more if I had waited to 65. Having more fun now is more important than a couple of hundred dollars a month three years from now. SS is gravy for us.

 

[dmpi]

Re: When to take SS

I expect some sort of means testing right when I'm forced to unload my 401K.
I don't need it, but I'm taking mine ASAP.

 

[mathjak107]

Re: When to take SS

i say it all the time: but i dont see taxes for retiree's higher at any point, lower yes but higher no. with 80 million voting bay boomers i cant picture any political group telling them they are increasing their taxes.

however i do see the working stiffs getting hammered with social security and medicare taxes.

 

[Spanky]

Re: When to take SS

According to my calculation (numbers from SS and assumed rate of inflation at 3%), the break even point of taking SS at 66 (vs. 62) is age 76. The break even point for taking SS at age 70 (vs 66) is age 80.

I think I take mine at 62 while I still have a good chance of being healthy to enjoy it.

P.S. The average life expectancy is only 77.

 

[mathjak107]

Re: When to take SS

this is where you have to think outside the box. for alot of us its not about breaking even, like i said its about being able to take far more of a withdrawl each month to enjoy life with right from day 1 because you have the comfort of knowing you will be refilling your nest egg later on with about 30% more dollars. dosnt matter how long you live, its about having more to spend each month ,once your gone it dosnt matter .

 

[Mwsinron]

Re: When to take SS

this is where you have to think outside the box. for alot of us its not about breaking even, like i said its about being able to take far more of a withdrawl each month to enjoy life with right from day 1 because you have the comfort of knowing you will be refilling your nest egg later on with about 30% more dollars. dosnt matter how long you live, its about having more to spend each month ,once your gone it dosnt matter .

Right there is no one answer. It depends on the individual or the couple.

 

[Bikerdude]

Re: When to take SS

Every FC I run says take SS at 62. I'm single and the additional WD to age 70 depletes my principal to the point where it's more vulnerable to failure. In addition, with my desired income, I'm taxed less when I take SS early. So when I add it all up for MY situation it makes sense to go early. Your results may vary.

 

[baldeagle]

Re: When to take SS

Interesting perspective here:

http://www.nysscpa.org/printversions/cpaj/2006/606/p42.htm

 

[bssc]

Re: When to take SS

I can see the arguments either way for people retiring this year but since I have a few years to go, I can see that the government can fiddle with the calculations, especially since I will have 401(k) and pension income.

 

[chinaco]

Re: When to take SS

Interesting perspective here:

http://www.nysscpa.org/printversions/cpaj/2006/606/p42.htm

Great article! Thanks BE.


I cannot find an article that I found awhile back. It gave some decision rules.

Part of the decision depends on how you view SS. I look at it as an income stream that helps to create a floor (minimal base income). Do I want it? Heck yeah! Do I want to maximize the money I get back from the government after paying it in all those years? Heck yeah? But what I want more is to not be destitute at 80, 85, or 90 if I live that long (and/or DW).

There are several factors in the mix that are variables that make the decision difficult.


1) future legislation on SS (taxes or caps)... how will it be affected. It seems that the later in the Boomer retirement era, more stress will be on the system.
2) How large is your nest egg at the age of 62 - 66.x (this will affect the decision)
3) your and DW mortality.
4) earning on portfolio (cpj article) and volatility risk depending on assets.
There are probably more


On one hand, I want to take it as early as possible. But in my tax situation, I am not sure that delaying is not the best approach. Plus if everything (investments) went to h3ll in a hand basket (a means test would not affect us).

I am inclined to do as I stated in my earlier post on this topic. But I need to run some what if scenarios and projections. I want to spend more in the early years. That will put us in a higher tax bracket. That might mean that having more SS as part of the floor income component is a good thing.

The other issue about SS is that I am not sure many people will actually retire @ 62 unless they are disabled. I am not sure they will be able to afford to do so.


Plus, I expect to see large immigration law changes in the next few years. This will fix a number of problems. One big problem it will fix is the shortage in worker in the USA (when boomers retire). More legal immigrants put more people paying into the system. I am not against immigration at all... I think it is part of our way out of this problem. But I do not want another general amnesty. It encourages more of the illegal behavior. Plus, we need to figure out how to keep the criminal element out.

I wish there would be a change in the laws such that one can be a quasi-citizen (probationary period) for about 10 years before being able to become a citizen. With a law that demands deportation if a certain class felony is committed/conviction. And the road to citizenship revoked so jail time does not help meet the time requirement. Most criminals will get caught in that period of time.

 

[Cut-Throat]

Re: When to take SS

According to my calculation (numbers from SS and assumed rate of inflation at 3%), the break even point of taking SS at 66 (vs. 62) is age 76. The break even point for taking SS at age 70 (vs 66) is age 80.

I think I take mine at 62 while I still have a good chance of being healthy to enjoy it.

P.S. The average life expectancy is only 77.

That's OK. When you die your nest egg will be bigger if you took Social Security early and your heirs will be able to enjoy your nest egg while they are healthy