Best time for SS withdraw is age 67 not 70?

[Brook2]

A friend told me she did a bunch of calculations on comparing her predicted life span and investment return on taking her social security funds early (at the midpoint of 67 instead of waiting until 70), and investing those 3 years in the stock market, and that she found she would have about the same ultimate return - and that there was no reason to wait until 70. I have not evaluated her calculations, and I've never heard of this viewpoint before.

It's not something I ponder for myself - I'm just interested in the accuracy of that conclusion.

Your thoughts?

[Forgive if this topic has already been addressed. I'm new here and did not find this specific question in a search.]

 

[ShokWaveRider]

I took at 69, DW at 62. It is different for all folks.

 

[RunningBum]

Depends upon the accuracy of her assumptions. She can't know whether the 3 years investing from 67 to 70 will match what her assumption is, nor does she know when she will die.

 

[Spock]

On the SS side, when to draw is engineered to ROUGHLY equate to the same.
(Draw early = less $ * more years) approximately equals (Draw later= more money * less years).
Within that broad statement are a lot of nuances: personal tax brackets, your personal longevity, other sources of income, survivor benefits for a spouse, etc.

 

[Al18]

The best time to take SS is when you need it - no calculations required!

 

[camfused]

There was a time, about a year or so ago, where a couple of SS calculation sites had a better number in the end, if DW and I took SS at (I think) 68, instead of 70. Before that, and since, it is back to 70. So, it *can* happen, but nearly always, the advice is to delay as long as you can, if you can.

 

[W2R]

The best time to take SS is when you need it - no calculations required!

+1 Exactly!

Back in 2008-2009 I was inspired by REWahoo's decision to take SS when things got tough, instead of waiting as he had planned. That seemed so sensible to me and I decided to follow his lead and decide one year at a time once I got to SS age. "Shall I take it now, or next year?" I got some unexpected divorced spousal benefits which helped, although they were far less than my own full age 70 SS but I got by. Anyway, year by year, I made it to age 70 before claiming on my own work record.

I'm so glad I waited! But I would have taken it earlier if I had felt I needed to do so.

 

[rodi]

As Spock mentions - SS is designed to be actuarially neutral for the average individual.
Lots of waffle words in my statement... because no-one is average... Male vs Female have different life expectancies. Different people have different life expectancies. And lets not forget the whole basket of computations on survivor spouse issues.

I've seen people argue for taking SS earlier because they can invest the money (they don't need it to live on) and feel they can do better investing. They may be right, or they may be wrong... only the future markets know.

I turn 62 later this year. My plan is to NOT take SS until age 70 for survivor spouse issues... but I also plan to be flexible... If we go into a long and deep recession - I'll revisit the plan.

 

[CRLLS]

The accuracy of her conclusion is no better than the assumptions she made for inputs and her personal preferences/goals. It is great that she has used her predicted lifespan instead of plucking an age from the air. What happens if she lives longer than that? What about much longer? We are planning out to age 100. I'm thinking of moving that out a bit longer. The likelihood is slim but I don't want to be destitute in my final tears.

DW took SS at FRA of 66. I took it at 70. Everyone has different circumstances. Perhaps you should ponder it for yourself.

 

[youbet]

I've seen people argue for taking SS earlier because they can invest the money (they don't need it to live on) and feel they can do better investing. They may be right, or they may be wrong... only the future markets know.

.

Yep, the value of "early money" is hard to predict in advance for sure. I started my SS at 62 as protection for DW who gets no SS on her own and is ineligible to receive SS based on my earnings. Our timing was fortunate and the 8 years I collected SS (from age 62 to 70) were great years to be DCA'ing into the market. The accumulated stash now covers the difference between my SS at 62 and SS at 70 at a reasonable WR. Of course, it might not have worked out that way.

But, again, the primary motivation was protecting DW who otherwise would have never received SS from her own earnings or from mine had I died prior to 70.

There's a million scenarios out there. Most everyone feels what's right for them must be right for everybody. And that is just not true.

 

[38Chevy454]

Yep, there's that pesky return on investments number, as well as predicting your age of death; that together depending on what numbers you use/choose can make that a better or worse decision.

 

[pb4uski]

A friend told me she did a bunch of calculations on comparing her predicted life span and investment return on taking her social security funds early (at the midpoint of 67 instead of waiting until 70), and investing those 3 years in the stock market, and that she found she would have about the same ultimate return - and that there was no reason to wait until 70. I have not evaluated her calculations, and I've never heard of this viewpoint before.

It's not something I ponder for myself - I'm just interested in the accuracy of that conclusion.

Your thoughts?

[Forgive if this topic has already been addressed. I'm new here and did not find this specific question in a search.]

The best source to evaluate it is opensocialsecurity.com

However, stock returns are probably too volatile to be a valid measure.

I think much better way to look delaying is as purchasing a COLA adjusted life annuity. So for your friend, lets say that her monthly PIA at 67 is $2,000/month or $24,000 annually. If she delays until 70 her benefit grows 24%, to $29,760 annually, or is $5,760 per year higher. In order to get that additional $5,760 annuly, she has to forgo receiving $2,000/month for 3 years from age 67 to age 70, or $72,000.

$5,750/year divided by $72,000 is an 8% payout rate. In the commercial annuity marketplace, $72,000 will buy a fixed annuity benefit of $500/month or $6,000 annually for a 70 yo according to immediateannuities.com, an 8.33% payout rate.

So "buying" a life annuity from SSA with a 8% payout rate with a benefit that increases with inflation is a much better deal than buying a fixed annuity with a 8.33% payout rate.

 

[pb4uski]

Depends upon the accuracy of her assumptions. She can't know whether the 3 years investing from 67 to 70 will match what her assumption is, nor does she know when she will die.

Yes, what if she turned 67 on Jan 1, 2022 and invested her age 67 SS benefits in the market during 2022? Sounds like she would be behind the 8-ball to me with what the market did last year.

 

[Gallaher]

I’ve always understood that SS is neutral from an actuarial stand point and you really need to evaluate after you pass as to what is best.
What if you plan to take it 67 but pass at 66?

 

[Teacher Terry]

I took it at 65 because I needed it.

 

[walkinwood]

The best source to evaluate it is opensocialsecurity.com

However, stock returns are probably too volatile to be a valid measure.

I think much better way to look delaying is as purchasing a COLA adjusted life annuity. So for your friend, lets say that her monthly PIA at 67 is $2,000/month or $24,000 annually. If she delays until 70 her benefit grows 24%, to $29,760 annually, or is $5,760 per year higher. In order to get that additional $5,760 annuly, she has to forgo receiving $2,000/month for 3 years from age 67 to age 70, or $72,000.

$5,750/year divided by $72,000 is an 8% payout rate. In the commercial annuity marketplace, $72,000 will buy a fixed annuity benefit of $500/month or $6,000 annually according to immediateannuities.com, an 8.33% payout rate.

So "buying" a life annuity from SSA with a 8% payout rate with a benefit that increases with inflation is a much better deal than buying a fixed annuity with a 8.33% payout rate.

Nice analysis!
Plus, she doesn't have that $72K in hand when she'd 67, so she'd have to dig into her savings.

 

[pb4uski]

I’ve always understood that SS is neutral from an actuarial stand point and you really need to evaluate after you pass as to what is best.
What if you plan to take it 67 but pass at 66?

Then it didn't work out for you, just like the many people who die before they are 62.

 

[pb4uski]

Nice analysis!
Plus, she doesn't have that $72K in hand when she'd 67, so she'd have to dig into her savings.

Yes, all of that presumes that the person has a choice, in this case to take at 67 or 70. If you have to take at 67 then there isn't a decision to be made so it is all a moot point, right?

 

[Foghorn Leghorn]

As with most things related to retirement decisions it would be so much easier if you knew when the lights were going out on your journey here on this side

 

[RunningBum]

I’ve always understood that SS is neutral from an actuarial stand point and you really need to evaluate after you pass as to what is best.
What if you plan to take it 67 but pass at 66?

Probably not a big deal. Obviously you didn't run out of money or you would've started taking it before you died.

A greater concern is the other end of the spectrum. What if you live to 100?

 

[perez99]

But, again, the primary motivation was protecting DW who otherwise would have never received SS from her own earnings or from mine had I died prior to 70.

youbet,
Can you elaborate why she would not have rights to social security as a widow if you died prior to claiming social security on your own? Was that because of her age or is there a social security regulation that impede it?

 

[Focus]

The best source to evaluate it is opensocialsecurity.com

However, stock returns are probably too volatile to be a valid measure.

I think much better way to look delaying is as purchasing a COLA adjusted life annuity. So for your friend, lets say that her monthly PIA at 67 is $2,000/month or $24,000 annually. If she delays until 70 her benefit grows 24%, to $29,760 annually, or is $5,760 per year higher. In order to get that additional $5,760 annuly, she has to forgo receiving $2,000/month for 3 years from age 67 to age 70, or $72,000.

$5,750/year divided by $72,000 is an 8% payout rate. In the commercial annuity marketplace, $72,000 will buy a fixed annuity benefit of $500/month or $6,000 annually for a 70 yo according to immediateannuities.com, an 8.33% payout rate.

So "buying" a life annuity from SSA with a 8% payout rate with a benefit that increases with inflation is a much better deal than buying a fixed annuity with a 8.33% payout rate.

I also use the Open Social Security calculator. I fully expected to wait until 70, but the calculator is indicating that ideally I should take it two years earlier. So I'm reconsidering.

 

[ut2sua]

A friend told me she did a bunch of calculations on comparing her predicted life span and investment return on taking her social security funds early (at the midpoint of 67 instead of waiting until 70), and investing those 3 years in the stock market, and that she found she would have about the same ultimate return - and that there was no reason to wait until 70. I have not evaluated her calculations, and I've never heard of this viewpoint before.

It's not something I ponder for myself - I'm just interested in the accuracy of that conclusion.

Your thoughts?

[Forgive if this topic has already been addressed. I'm new here and did not find this specific question in a search.]

Your friend's conclusion is based on a number of assumptions. Stock market performance is one of the assumptions, and that one assumption alone guarantees that the answer is unknown until after the fact. So, unfortunately, there is no conclusion here just from a "ultimate return" standpoint. Assuming ultimate return = total return (from a dry math standpoint without taking in needs, happiness, sleep well at night etc. stuffs )

 

[Surewhitey]

I would consider anytime after 65 to maximize ACA subsidies, personally. Probably a moving target depending on health and expected day of demise...

 

[TheWizard]

People with a decent amount of other retirement income and/or assets, along with good health, often delay SS to age 70 to get more room for Roth conversions without getting into higher IRMAA tiers.
That's what I did...