Social Security age 70

[Running_Man]

In reviewing the increases in Social Security I see that the increase from age 69 to age 70 is actually only 6.45% not 8% as the 8 percent is of the full retirement benefit. So waiting each additional year after the first year is steadily less advantageous. Using the single male the life expectancy of 14.8 years at age 69 would result in a 6.75% payout for just the return of capital to the end of life expectancy. For a single female it is 5.85% so there is a small expected real return built in for females but not males. Obviously if both are alive it would have an even better return.

So for you single guys out there, Social Security is probably fiscally better to take at 69 than 70.

 

[Options]

I note that you say it's probably fiscally better to take SS at 69 versus. That's a big "probably". For those with longevity in the family history, or those with a history of above average health (such as myself), not so much. I will be delaying until 70 personally.

 

[pb4uski]

Good point

Age	Benefit	% increase
66	100
67	108	8.0%
68	116	7.4%
69	124	6.9%
70	132	6.5%

 

[Options]

See this (and the discussion in the comments section as well):

The Retirement Café: Early Retirement and Social Security Benefits

Specifically:

Some of those arguments made by the "claim early" crowd are valid. Maybe you and your spouse won't live a long time, who knows? Maybe benefits will be reduced in the future. But living long enough to regret claiming early is a far more common event than reductions in Social Security benefits have been. Don't protect yourself from sharks and ignore heart disease.

Nearly all academics in the field and economists, some Nobel laureates, recommend delaying benefits as long as possible. If they can't convince you, I certainly can't. If you do, however, agree that delaying claims for Social Security benefits is a good idea, then it becomes a consideration for early retirement.

Emphasis added

 

[samclem]

I note that you say it's probably fiscally better to take SS at 69 versus. That's a big "probably". For those with longevity in the family history, or those with a history of above average health (such as myself), not so much. I will be delaying until 70 personally.

I think it's more general: "For those who aren't certain how long they'll live, not so much."

69 vs 70 probably won't be a big deal for anyone. But "less advantageous" isn't the same as "disadvantageous." If the idea of a lifetime inflation-adjusted monthly check is attractive, and if we've priced commercial annuities and seen what they costs/yield, then waiting to 70 may be more attractive than other options

 

[Running_Man]

See this (and the comments in the comments section as well):

The Retirement Café: Early Retirement and Social Security Benefits

Specifically:



Emphasis added

Claiming at age 69 instead of age 70 is not claiming early, it is merely looking at the benefit and determine if one would be better off waiting. i think if I was a single male and my wife had passed, most of the benefit of waiting to age 70 has evaporated. At full retirement age benefit of 2500, the age 69 benefit of 3100 is probably better for a single male to take instead of spending the $37,200 one would need to spend in order to defer the benefit of an additional 200 per month which would only require a 6.48% withdrawal from that portfolio to maintain. It has a 56% chance according to Firecalc of lasting 25 years and 85% chance of lasting 15 years and 99% chance of lasting 12 years to age 81.

If at age 69 I was a single male I think the increase in social security for that last year of increase is not worth it. After all if social security increased 8% each year after full retirement age to infinity there must be a point at which one should absolutely collect it, eh?

 

[Options]

...

If the idea of a lifetime inflation-adjusted monthly check is attractive, and if we've priced commercial annuities and seen what they costs/yield, then waiting to 70 may be more attractive than other options

This.

Claiming at age 69 instead of age 70 is not claiming early, it is merely looking at the benefit and determine if one would be better off waiting. i think if I was a single male and my wife had passed, most of the benefit of waiting to age 70 has evaporated. At full retirement age benefit of 2500, the age 69 benefit of 3100 is probably better for a single male to take instead of spending the $37,200 one would need to spend in order to defer the benefit of an additional 200 per month which would only require a 6.48% withdrawal from that portfolio to maintain. It has a 56% chance according to Firecalc of lasting 25 years and 85% chance of lasting 15 years and 99% chance of lasting 12 years to age 81.

If at age 69 I was a single male I think the increase in social security for that last year of increase is not worth it. After all if social security increased 8% each year after full retirement age to infinity there must be a point at which one should absolutely collect it, eh?

But SS does not increase to infinity after FRA. My point is that other variables exist regarding how much delaying SS is "worth it". Those variables regarding when (as in which year) to take or delay SS involve more than a simple financial evaluation. In the example you used, that $200 more withdrawn monthly might very well make a difference should an individual live longer than expected, exhausting their PF. Regarding FC calculations, I would never be comfortable with 56% or 85% chance of success of anything. Then again, I'm very conservative, so YMMV.

Here's Cotton again responding in the comments section of another post viewing using delaying SS as a hedge against longevity risk:

I don't believe that financial arguments based on guessing when some healthy person might die are sound. Yes, the odds favor your spouse outliving you, but I know a 97-year old man who has so far outlived his decade-younger and much healthier wife by nearly a decade. You should be planning to protect yourself from longevity risk, not guessing when you will die.

Emphasis added

Also see this comment by Mark Zoril regarding the emotional aspect of when SS is claimed:

In my experience as an adviser (and with my Father as well), the decision to take benefits early is emotional. For many people, especially middle and lower income types, SS represents a significant marker in their life. They also feel like they are "ready" to receive it. They have worked a long time, many in work that has not been satisfying or frustrating, and finally want to get paid from a plan that they have paid in to forever. The numbers and risk evaluation, as it were, are just not as interesting to people that feel this way.

 

[Animorph]

Good point

Age	Benefit	% increase
66	100
67	108	8.0%
68	116	7.4%
69	124	6.9%
70	132	6.5%

Thanks for the chart.

I believe CPI inflation will essentially add on top of that, via the PIA calculation. So that's a decent equity market return for one year, even for the last year, guaranteed.

 

[Independent]

Thanks for the chart.

I believe CPI inflation will essentially add on top of that, via the PIA calculation. So that's a decent equity market return for one year, even for the last year, guaranteed.

That's the increase in monthly benefit you get for giving up 12 months of benefits.
It's not at all like a "market return for one year".

 

[Ready]

I thought the increase in return from 67-70 was exactly 8% per year. What am I not understanding here?

 

[RunningBum]

I thought the increase in return from 67-70 was exactly 8% per year. What am I not understanding here?

Seems it's 8%/yr but not compounded. So, 8% each year over the benefit at full retirement age. I hadn't realized that either.

 

[Running_Man]

I thought the increase in return from 67-70 was exactly 8% per year. What am I not understanding here?

It is 8 percent of the Full Retirement amount not a compound 8 percent. So the actual percent increase per year falls as the amount builds. It falls below the simple capital return at 0% real return for expected life at age 69 for single males.

0 percent real return lasts to age 85 - 16 years
If one could earn 2% real return the $37,200 would last to age 88

 

[Animorph]

That's the increase in monthly benefit you get for giving up 12 months of benefits.
It's not at all like a "market return for one year".

Not exactly, but close. The only real difference is the one year of payments lost. Otherwise the present value and payments scale together. The present value growth is like a market return.

 

[ronin]

Also watch if filing at 70 that they don't default you retro back to 69.5. Seems to be what they do unless you specifically decline.

dont-let-social-security-cut-your-retirement-benefit-with-retroactive-benefits-against-your-will/

 

[pb4uski]

I thought the increase in return from 67-70 was exactly 8% per year. What am I not understanding here?

As others have said, it is 8% of your FRA benefit for each year you delay. Simple , not compounded. So if you delay two years your benefit increases 16%, 24% for three years and 32% for four years.

 

[rayvt]

Although. actually, it isn't 8% per year. It's 24/36% per month. Non-compounded, so just multiply the # of months after your FRA by 24/36 percent.

 

[pb4uski]

Insightful post.

 

[Independent]

Not exactly, but close. The only real difference is the one year of payments lost. Otherwise the present value and payments scale together. The present value growth is like a market return.

I'm not sure what math you're doing.

I view deferring from 69 to 70 to be equivalent to lending the gov't $124 over a period of 12 months, then getting back $8 per year for as long as I live. That is not a 6.5% "market return". If I live to 89, my IRR is 2.6%. Die sooner and the IRR is lower, live longer and it's higher.

 

[Koolau]

If you need it now, take it now. Otherwise, SS has some subtle (to folks not visiting this forum) advantages if delayed to 70. If you are worried about leaving money on the table, you probably take SS early. But if you want to "use" SS to cover a need created by your particular situation, you may want to delay.

At least so far, I do not need the SS income. I am using it for longevity insurance for myself, but especially for DW who I'm "betting" will outlive me. Stated before, I took the 25% pension survivor benefit instead of 50% to improve my starting pension benefit. To make up for that, I will attempt to wait until 70 to claim SS so that my higher SS survivor benefit will make up for the lowered pension survivor benefit. I also think of the higher SS benefit at 70 as a form of Long Term Care insurance.

Would never attempt to tell anyone else how to proceed with such an intricate decision as SS. Fortunately, at least the folks here understand just how many permutations are involved with SS strategy. Even if we ultimately "guess" wrong, we will have had the knowledge to make a plan that fits our needs. So many other folks just assume you take your SS when you retire or at 62. While "knowing" the intricacies of SS makes it a headache to pick the right path, at least we have the knowledge to play our "what if" games with ourselves before we choose. YMMV

 

[mickeyd]

Even a 6.5% increase is pretty sweet these days.

 

[CRLLS]

I look at it as how much do I really need? Once I meet some amount of SS + expected investment returns that beats my lifestyle requirements (with my personal buffer), I'm taking it. That said, even though all of my numbers say I can take it now and have a better lifestyle than I have for the last 60 years, I'll probably still delay until FRA to provide some "extra" spousal benefit. Delaying SS past my needs is futile IMO. YMMV.

 

[imoldernu]

Interesting to see how this has changed over the years. After spending 9 years on "what we had", taking Social Security at age 62 in 1998 kept us going, and being under the tax brackets allowed us to keep on keeping on. CD rates were still in the 6% range, so overall, it worked out well.
A little bit off the SS subject, but planning in the early 1990's was different from today. FDIC insured CD's paid as high as 11%. It was one of the factors that made us so conservative. Certainly, we would have made more by investing, but the safety factor was comforting.

Have never gone back to see how much more we might have been getting from SS today, had we waited, but current amount for DW and I... she, receiving 1/2 of mine... is $25,000/yr. Have been receiving SS for 17+ years, and thankful for that.

 

[OAG]

Interesting to see how this has changed over the years. After spending 9 years on "what we had", taking Social Security at age 62 in 1998 kept us going, and being under the tax brackets allowed us to keep on keeping on. CD rates were still in the 6% range, so overall, it worked out well.
A little bit off the SS subject, but planning in the early 1990's was different from today. FDIC insured CD's paid as high as 11%. It was one of the factors that made us so conservative. Certainly, we would have made more by investing, but the safety factor was comforting.

Have never gone back to see how much more we might have been getting from SS today, had we waited, but current amount for DW and I... she, receiving 1/2 of mine... is $25,000/yr. Have been receiving SS for 17+ years, and thankful for that.

+++1 for us "old" folks. DW took hers early for almost 15 years. I only the past almost 8 years (took it the last time at 67.5 years old). We learned the safety of CD's (and decent returns) though the 70s, 80s, 90s and even part of the 2000s and were debt free since the mid 80's (homes and cars purchased for cash).

 

[Options]

I look at it as how much do I really need? Once I meet some amount of SS + expected investment returns that beats my lifestyle requirements (with my personal buffer), I'm taking it. That said, even though all of my numbers say I can take it now and have a better lifestyle than I have for the last 60 years, I'll probably still delay until FRA to provide some "extra" spousal benefit. Delaying SS past my needs is futile IMO. YMMV.

This is interesting because even in the most dire scenarios all calculators show I'll die with way too much $--and that's with all kinds of contingencies and buffers. Having only FIRE'd in the last two months, what's really surprised me is my psychological adjustment to not having income coming in. I've even effectively worked OMY by deciding to not spend $ that was earmarked for remodeling, thereby funding the rest of this year.

I only recently found this blog of a woman who blogged about her financial fears just before and after retiring, and a lot of her thoughts I've been able to relate to:

Thoughts from a Bag Lady In Waiting: January 2010

I point all of this out because one valuable aspect of delaying SS that I don't see too often in the discussion is psychological in nature. For me, delaying SS is an integral part of my SWAN PF/financial picture. YMMV because I have been and probably always will be financially conservative in nature.

 

[Koolau]

I point all of this out because one valuable aspect of delaying SS that I don't see too often in the discussion is psychological in nature. For me, delaying SS is an integral part of my SWAN PF/financial picture. YMMV because I have been and probably always will be financially conservative in nature.

In addition to my specific reasons for delaying SS to 70, I too think of it in psychological terms. It just feels better knowing that it is still out there when I want/need it. I know my monthly benefit is growing every month I do not take it. As a former scientist, I look at SS as "potential energy" vs "kinetic energy" at this point. YMMV