Case for taking SS early (62)?

[RunningBum]

Last time, then I give up unless someone else tells me I'm wrong.

Say you start with 100,000 in your account, and you have 3000 in expenses/yr starting at age 62.

1) Taking SS at age 62, you have to take 2000 out of your account each year: 3000 expenses - 1000 in SS income

2) Taking SS at age 70, you have to take a full 3000 out of your account for expenses until you hit age 70, then you have to take 1240 (3000-1760) each year after that.

At age 80, you 62000 in your account with option 1, and 62360 with option 2. Every year after that is a bigger benefit for option 2.

Show or tell me with a spreadsheet how you make the breakeven point come at 90 instead. The only real factors are assets (starting amount), income (from SS) and expenses. If you are going to claim an "indirect" benefits you have to explain how to put it in a spreadsheet. I've already done this by taking 3000 out of the account each year with option 2 instead of 2000, so it's fully considered.

Run the numbers yourself. Use whatever you want for starting amount and expense amount, but they have to be the same for both cases.

 

[pb4uski]

 

[pb4uski]

Last time, then I give up unless someone else tells me I'm wrong.

Say you start with 100,000 in your account, and you have 3000 in expenses/yr starting at age 62.

1) Taking SS at age 62, you have to take 2000 out of your account each year: 3000 expenses - 1000 in SS income

2) Taking SS at age 70, you have to take a full 3000 out of your account for expenses until you hit age 70, then you have to take 1240 (3000-1760) each year after that.

At age 80, you 62000 in your account with option 1, and 62360 with option 2. Every year after that is a bigger benefit for option 2.

Show or tell me with a spreadsheet how you make the breakeven point come at 90 instead. The only real factors are assets (starting amount), income (from SS) and expenses. If you are going to claim an "indirect" benefits you have to explain how to put it in a spreadsheet. I've already done this by taking 3000 out of the account each year with option 2 instead of 2000, so it's fully considered.

Run the numbers yourself. Use whatever you want for starting amount and expense amount, but they have to be the same for both cases.

I agree with you, though your age 80 breakeven assumes that the account is non-interest bearing. If you add interest or investment income, it moves the breakeven point out beyond age 80 (the same as discounting does in my post).

 

[Bestwifeever]

I'm not looking at it as an investment decision. I'm looking at it as the payout at 70 to 90 and the payout at 62-90.

there are reasons to wait to 70.

No savings
was going to work til 70 anyways
wanted your spouse to inherit your lager benefit....2

Wait, there's a spousal lager benefit if we wait til 70? We are definitely waiting!

 

[willow]

Wait, there's a spousal lager benefit if we wait til 70? We are definitely waiting!

I think my spouse would prefer the lager benefit

 

[willow]

I feel the same way

 

[RunningBum]

I agree with you, though your age 80 breakeven assumes that the account is non-interest bearing. If you add interest or investment income, it moves the breakeven point out beyond age 80 (the same as discounting does in my post).

I agree with that. We were keeping it simple and ignoring return. In real life you should get some return from getting more money earlier by taking SS at 62 so that does move the breakeven point later.

 

[youbet]

I agree with you, though your age 80 breakeven assumes that the account is non-interest bearing. If you add interest or investment income, it moves the breakeven point out beyond age 80 (the same as discounting does in my post).

+1.

Folks frequently fail to assign some value to the earnings of the dollars received early. I started SS at 62 because DW is subject to GPO and this was the best way to provide her with some financial protection. Since I started SS in the depths of the recession, I've seen some nice earnings on those dollars, all of which are in our "longevity account."

 

[Big_Hitter]

has anyone taken a difference in the present value of the benefits at age 62?

maybe an immediate annuity versus one deferred to SSNRA?

 

[Peter]

I agree with that. We were keeping it simple and ignoring return. In real life you should get some return from getting more money earlier by taking SS at 62 so that does move the breakeven point later.

However, the SS payments are inflation adjusted, which will partially or completely close the gap.

 

[youbet]

However, the SS payments are inflation adjusted, which will partially or completely close the gap.

The "gap" is a function of the earnings received from the early dollars. The earnings may be less than, the same as or more than inflation. Historically, people have been able to earn more than inflation (2%+).

That's the hardest part about estimating whether taking SS early will be beneficial, neutral or harmful. At the end of the 8 years of early collections, how big will the pot be? I started SS at the depth of the recession 4 yrs ago and so far the returns have been fabulous. Starting as we approached the peak of the bubble would have yielded different results.

My decision regarding when to start SS was easy since my DW is impacted by GPO and the only way to protect her interests is to start my SS at 62. Case closed in this special situation.

But for folks more typically positioned, I think it's a real crap shoot. Even if you manage to make all the right assumptions and guesses about longevity, inflation, return rates, etc., you may still loose because something (like your longevity or other assumption) is incorrect and things just "turn out" different than you thought they would.

 

[Richard8655]

Just wanted to clarify GPO, as this acronym wasn't familiar to me (and maybe others) in these discussions.

Government Pension Offset related to the federal government pension under the old civil service system (CSRS) where no social security was withheld. This, as opposed to FERS, the later government retirement system that did integrate with social security.

 

[daylatedollarshort]

has anyone taken a difference in the present value of the benefits at age 62?

We have modeled all of the main ways to take benefits at all different ages and run them though spreadsheet after spreadsheet with different inflation and interest rate factors. Taking SS at 62 smooths out our portfolio the most, with no big dip in the age 62 - 70 years and then saving extra post age 70.

 

[Big_Hitter]

We have modeled all of the main ways to take benefits at all different ages and run them though spreadsheet after spreadsheet with different inflation and interest rate factors. Taking SS at 62 smooths out our portfolio the most, with no big dip in the age 62 - 70 years and then saving extra post age 70.

interesting - i was just thinking of taking a straight present value of an immediate versus a deferred annuity with an interest rate, cola and mortality assumption

 

[daylatedollarshort]

what interest rate, cost of living assumption and mortality table did you use?

I have interest rate and inflation as parameters, and I ran the spreadsheet through age 112. I have it set up in a master retirement spreadsheet so we can estimate our inflation adjusted liquid assets and net worth at any year in the future under different scenarios.

 

[daylatedollarshort]

I found this to be a good article that explained some of the factors to consider above and beyond the break even point for when to collect benefits -
http://research.prudential.com/documents/rp/InnovativeSocialSecurityNov2012.pdf

We won't make our final decision on when to take SS until we know what our earned income is, if any at age 62 and the tax laws in effect at that time, plus the impact on health care subsidies.

Right now we are running spreadsheet after spreadsheet to try to minimize taxes and maximize health care subsidies over the next few years. At age 62 we will have new spreadsheets with the subsidy amounts and tax rate in effect then. All other things being equal we'd like to take benefits at 62, but taxes and health care subsidies, and poverty level limits for subsidies may change that age.

 

[johnrlawjr]

I took ss at 62. Here were my reasons:

a. With my pension and ss, I could live quite comfortably without tapping into my modest nest egg. Both have cola adjustments.
b. I also figure that I can save between $8,000.00 and $10,000 a year from my current ss payments.
c. I am divorced so I currently have no spouse to worry about.
d. My mother died at 82 and my father died at 68 so longevity is not part of my genetic make-up.
e. My part time work will probably never amount to over $15,000.00 a year.
f. Since I selected to take early ss, I will probably live to an old codger who sits around and gripes about the fact that I took SS so early. ☺

 

[travelover]

I found this to be a good article that explained some of the factors to consider above and beyond the break even point for when to collect benefits -
http://research.prudential.com/documents/rp/InnovativeSocialSecurityNov2012.pdf

...........

Really good article. Got me to thinking about the post SS tax end more.

 

[Richard8655]

I took ss at 62. Here were my reasons:

a. With my pension and ss, I could live quite comfortably without tapping into my modest nest egg. Both have cola adjustments.
b. I also figure that I can save between $8,000.00 and $10,000 a year from my current ss payments.
c. I am divorced so I currently have no spouse to worry about.
d. My mother died at 82 and my father died at 68 so longevity is not part of my genetic make-up.
e. My part time work will probably never amount to over $15,000.00 a year.
f. Since I selected to take early ss, I will probably live to an old codger who sits around and gripes about the fact that I took SS so early. ☺

These are pretty much the same reasons why I'll be taking SS at 62 in 10 months. Nest egg can remain untouched. In addition, SS at a lower but longer payout means no (or minimal) SS taxes.

 

[Beryl]

I'm looking at SS at 62 as a COLA since my pension doesn't have one. Also, I want it to pay for health insurance to Medicare. I have several years to change my mind though.

 

[youbet]

Just wanted to clarify GPO, as this acronym wasn't familiar to me (and maybe others) in these discussions.

Government Pension Offset related to the federal government pension under the old civil service system (CSRS) where no social security was withheld. This, as opposed to FERS, the later government retirement system that did integrate with social security.

Close........

GPO applies to all employees (Fed, state or local) who receive a gov't pension in lieu of SS. It doesn't apply just to Fed employees.

 

[pb4uski]

These are pretty much the same reasons why I'll be taking SS at 62 in 10 months. Nest egg can remain untouched. In addition, SS at a lower but longer payout means no (or minimal) SS taxes.

If you have substantial tax deferred savings then the prudential link in some of the above posts make a compelling case that taxes are lower if you take it later because of the interaction of RMDs and SS.

 

[Richard8655]

Close........

GPO applies to all employees (Fed, state or local) who receive a gov't pension in lieu of SS. It doesn't apply just to Fed employees.

This just needs clarification... GPO doesn't apply to all federal govt employees, who are now mostly FERS (myself included). Only those under CSRS.

 

[Richard8655]

If you have substantial tax deferred savings then the prudential link in some of the above posts make a compelling case that taxes are lower if you take it later because of the interaction of RMDs and SS.

Thanks. But in my calculations, my pension together with early SS ride just under the SS taxation line. Other variables such as outlined by johnrlaw come into play (life expectancy, break even age, keeping nest egg intact) to make early SS the best choice for us. I know about RMD, but it didn't alter this strategy.

 

[youbet]

This just needs clarification... GPO doesn't apply to all federal govt employees, who are now mostly FERS (myself included). Only those under CSRS.

If you read my post, that's what I said.

And, yes, because of FERS it's state and local gov't employees who make up most of the population impacted by GPO. As the CSRS folks fall off the board, it's not really a Fed employee issue anymore.