Collecting Social Security at age 62 is the best decision, here is why:

[neihn]

My FRA is 67 - I am still 5 years away from 62. It is a difficult decision whether I should take SS at 62 or 67.

I am currently thinking about meeting at the middle 64 or 65 (it means if I am wrong, the effect would not be too much)

 

[Chuckanut]

There is also a another case for a dwindling group who are/were married for 10 years and who reached 62 by 2015. They can collect on their spouse's benefit at 66 (1/2 of their benefit) while their benefit inceases at 8% a year until they hit 70. This must move the breakeven point to an earlier age, all other things being equal.

Some people sleep better at night knowing the check is coming every month. Others sleep better knowing that in N more years a bigger check with bigger COLA's will be coming every month. Others figure they can delay SS but, if their finances or the political situation starts to go down hill, they can turn it on at any time now that they are 62.

I am happy that this has worked out well for the OP. It is good that we have such flexibility with the SS system. That is one of its best benefits, IMHO.

The big truth is that this is a very individual decision.

As an aside: I must admit I am getting a bit tired of people tossing their numbers and their assumptions at me and then telling me this is proof that I should follow their example.

 

[haha]

I
Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.

You done good! You have definitely shown that given very good luck, the stock market during this period beat waiting on a higher SS. Next maybe show that this was a certain outcome.

Bravo!

 

[brokrken]

This is true since your portfolio when up about 45% in the last 5 years... but what would have happened if your portfolio was down 25%?

+1

 

[brucethebroker]

I have always said that the real benefit to drawing at 62 is if you die earlier than the break even point. Sure don't want to prove it, though.....

 

[Senator]

Sooo many people are missing your point. I have brought this up in the best to deafening silence.

If you are going to consider a SS haircut, you must also consider what inflation will have on your returns. Inflation is MUCH more likely. If you put your SS checks in bonds, you will get hammered. Additional taxes may also wreck havoc.

Another aspect is that living expenses could increase dramatically, especially after you have more money in your pocket. A VAT tax or similar could increase prices, and take away spending power, but would not affect the amount of SS check. And extra $5 a gallon gas tax would also take money away from your budget, and knowing that you can collect more SS to help is reassuring. Even an asteroid could hit.

There are a lot of what ifs, I tend to go with what is currently known, with a knowledge that an additional financial buffer could be the best insurance against all unknowns.

 

[zinger1457]

Not everyone is in a situation where they have to choose to collect SS at 62 or draw down from one of their savings (IRA, 401K, etc.) accounts. What happens to the decision of when to start collecting SS when you have a pension that covers expenses during the early years of retirement?

 

[ERD50]

I have always said that the real benefit to drawing at 62 is if you die earlier than the break even point. Sure don't want to prove it, though.....

Only your heirs benefit. You could have been spending from the portfolio now, since you would be spending less later with the higher SS amount. You wouldn't be aware of any difference.

-ERD50

 

[Ready]

I wasn't clear from the post whether the OP was suggesting that this was the best decision for them personally, or for everybody regardless. I would agree after reading the post that it was logically thought out and seems like a very solid decision for the OP.

If the suggestion was that it applies to everybody, I think this is the wrong forum to have that discussion in. Given that this is an early retirement forum, many of the retired members here have saved up enough money to live on such that even if SS went away completely they would be perfectly fine.

I believe that one of the main reasons people take SS at 62 is because they have not saved a sufficient nest egg to live on without SS. In this case, people often have no choice but to take it early.

I do not plan on taking SS until 70 because I don't need the money, and I'd rather use it as longevity insurance. And my calculations suggest I will come out ahead if I live past about 82 years old, which is a bet I'm willing to take.

 

[SheitlQueen]

Not everyone is in a situation where they have to choose to collect SS at 62 or draw down from one of their savings (IRA, 401K, etc.) accounts. What happens to the decision of when to start collecting SS when you have a pension that covers expenses during the early years of retirement?

That is my situation.
I don't have a pension, but my income is more that what I need to live on and I am delaying taking my SS until I am 70. If for some reason I needed earlier, I would take it. But that's not likely to happen.

 

[Ian S]

There is also a another case for a dwindling group who are/were married for 10 years and who reached 62 by 2015. They can collect on their spouse's benefit at 66 (1/2 of their benefit) while their benefit inceases at 8% a year until they hit 70. This must move the breakeven point to an earlier age, all other things being equal.

Some people sleep better at night knowing the check is coming every month. Others sleep better knowing that in N more years a bigger check with bigger COLA's will be coming every month. Others figure they can delay SS but, if their finances or the political situation starts to go down hill, they can turn it on at any time now that they are 62.

I am happy that this has worked out well for the OP. It is good that we have such flexibility with the SS system. That is one of its best benefits, IMHO.

The big truth is that this is a very individual decision.

As an aside: I must admit I am getting a bit tired of people tossing their numbers and their assumptions at me and then telling me this is proof that I should follow their example.

+1

 

[alaska55]

From Jan 1 2000 to Jan 1 2009, Dow dropped 24%.

Hindsight is 20/20.

I think you forgot divdends.

 

[Mulligan]

I have always said that the real benefit to drawing at 62 is if you die earlier than the break even point. Sure don't want to prove it, though.....

That is why I am taking my projected $115 a month when I turn 62. Hmm, that wont even cover my medicare payment...So will I get a check and then send them a check, or will they deduct that and I cover the rest with a check?

 

[LRDave]

If you are going to consider a SS haircut, you must also consider what inflation will have on your returns. Inflation is MUCH more likely. If you put your SS checks in bonds, you will get hammered. Additional taxes may also wreck havoc.

Another aspect is that living expenses could increase dramatically, especially after you have more money in your pocket. A VAT tax or similar could increase prices, and take away spending power, but would not affect the amount of SS check. And extra $5 a gallon gas tax would also take money away from your budget, and knowing that you can collect more SS to help is reassuring. Even an asteroid could hit.

There are a lot of what ifs, I tend to go with what is currently known, with a knowledge that an additional financial buffer could be the best insurance against all unknowns.

While risks like a bond-heavy portfolio getting hammered by inflation are real risks and probably more likely, these are risks in which I feel that I have a few levers to pull to offset. The SS haircut risk is out of my control.

 

[ERD50]

Here's a link to the post I mentioned earlier:

http://www.early-retirement.org/for...f-maximize-my-ss-com-77660-4.html#post1604411

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any ... 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.

-ERD50

 

[ChiliPepr]

That's not a 5 year period. I had asked about a drop in a 5 year period in response to this:

Within 2000-2009 the market actually increased and then experienced a double dip.

March 5, 2004: 10,295.55
March 5, 2009: 6,594.44
Percent change: (37.76%)

In 2004 there were 33 days where the 5 year Dow return has been lower than (25%).

 

[Spanky]

I do not plan on taking SS until 70 because I don't need the money, and I'd rather use it as longevity insurance. And my calculations suggest I will come out ahead if I live past about 82 years old, which is a bet I'm willing to take.

Life expectancy for females is 81.2 years and for males, it's 76.4 years. You might be able to beat the stat, however.

 

[teejayevans]

Here's a link to the post I mentioned earlier:



http://www.early-retirement.org/for...f-maximize-my-ss-com-77660-4.html#post1604411

The reason is by delaying SS till 70, you get a return on your SS...7+%, then you assume you made nothing on your investments.
So delaying SS wins, now assume it was a bull market instead of flat(15%), by taking SS earlier, giving up the 7+%, you got 15% return...would have been better to take it at 62.

Y'all do the same things pundits do...make assumptions...if change the assumptions, you change results.
You allow me to make the assumptions I can prove any strategy was brilliant or stupid.

 

[homestead]

Turned out better for us if I took SS at 62 since my spouse had low SS and was 5 years older. Once I filed at 62 she got 50% of my FRA amount which gave us more income until about age 92 compared to me waiting until FRA or 70.

 

[ERD50]

Life expectancy for females is 81.2 years and for males, it's 76.4 years. ... .

That's not applicable. Those look like "LE at birth" stats. You need the stats for your gender and current age. For a 67 YO couple, they each have a LE > age 83. That is available here (poke around to find the 50% values for each):

https://personal.vanguard.com/us/insights/retirement/plan-for-a-long-retirement-tool

(edit/add): And in fact, there is a > 50% chance that one of the 67 YO couple will make it to 89 YO.

... You might be able to beat the stat, however.

Half the people in your stat do beat it.

The reason is by delaying SS till 70, you get a return on your SS...7+%, then you assume you made nothing on your investments.
So delaying SS wins, now assume it was a bull market instead of flat(15%), by taking SS earlier, giving up the 7+%, you got 15% return...would have been better to take it at 62.

Y'all do the same things pundits do...make assumptions...if change the assumptions, you change results.
You allow me to make the assumptions I can prove any strategy was brilliant or stupid.

The market is unknown, your LE is unknown. There is no 'answer', only a process to use to make a decision.

-ERD50

 

[JustCurious]

Life expectancy for females is 81.2 years and for males, it's 76.4 years. You might be able to beat the stat, however.

Those numbers are life expectancy at birth. The more relevant numbers are life expectancy at age 65, which is 84.3 for men and 86.6 for women.

https://www.ssa.gov/planners/lifeexpectancy.html

Statistically speaking, if a man or a woman lives to age 65, it is likely that they will live to at least age 84.

 

[Ready]

Life expectancy for females is 81.2 years and for males, it's 76.4 years. You might be able to beat the stat, however.

That’s my plan and I’m sticking to it!

 

[skipro33]

The OP has one other benefit by drawing SS early and not taking a bigger hit on his personal savings; that he'll leave a bigger inheritance to his family. By not drawing down his savings, there's more left for his estate. Might not matter to some, but matters to me; I'd like to know my estate helps out my grand kids or great grand kids pay for their education than to die with little or no inheritable estate.

That is a BIG deal; SS is lost money if you don't collect. Your savings is passed along after you die.

 

[ERD50]

The OP has one other benefit by drawing SS early and not taking a bigger hit on his personal savings; that he'll leave a bigger inheritance to his family. By not drawing down his savings, there's more left for his estate. Might not matter to some, but matters to me; I'd like to know my estate helps out my grand kids or great grand kids pay for their education than to die with little or no inheritable estate.

That is a BIG deal; SS is lost money if you don't collect. Your savings is passed along after you die.

That would depend on when the OP dies. That is where the "break even" comes into play, but it is an unknown, so nothing that really works into planning.

IOW, if OP lives well into 90's (like so many), his heirs would likely have benefited by the higher SS leading to less draw down of portfolio over the age of 70-90+.

-ERD50

 

[Ian S]

Those numbers are life expectancy at birth. The more relevant numbers are life expectancy at age 65, which is 84.3 for men and 86.6 for women.

https://www.ssa.gov/planners/lifeexpectancy.html

Statistically speaking, if a man or a woman lives to age 65, it is likely that they will live to at least age 84.

And of course, those are over the entire population. An individual's circumstances may push their life expectancy far away from those values. For example, here's a calculator that allowed me to input more details and wind up with an age of 92 for life expectancy Lifespan Calculator – Test Your Life Expectancy || NM