Social Security Questions

[Offgrid Organic Farmer]

While I agree with your comments on the benefits of retiring early, do not confuse when to retire with when to take SS. For some there is no choice. Financially, they must take SS in order to afford to retire. But, for many people on this site who have taken LBYM to an art-form, they can and do put off taking their SS benefits.

True.

I will have been retired for 23 years before I first become eligible for SS.

 

[DougB]

Doug,

You need to check your numbers... they don't make sense.

If your FRA is 66 and 4 months then that means that you were born in 1956.

If you were born in 1956 then your age 56 benefit would be 73 1/3% of your primary insurance amount (PIA) at your full retirement age (FRA) of 66 and 4 months. See table linked below.

https://www.ssa.gov/oact/ProgData/ar_drc.html

If you have $24,000 a year coming to you at age 62, then your FRA benefit would be $32,727 ($24,000/0.73333), not $29,000.

Given that, the break even point would be ~78.25. $24,000*(78.25-62)=$390,000 and $32,727*(78.25-66.333)=$390,008.

Thanks for pointing that out. I've had some trouble logging into my account to doublecheck my notes from a few years ago. I was able to get back in tonight. My early benefit is 2,064 per month, so it's gone up a bit. I guess that would push my breakeven closer to 80.

 

[pb4uski]

It should be the same break-even point because your FRA benefit probably went up as well... probably to ~$2,815 ($2,064/.73333)... in both cases probably increased for COLA plus perhaps a bit of increase if you are still working.

IOW, your age 62 benefit will still be 73 1/3% of your FRA benefit.

 

[mamadogmamacat]

Hypothetical 62 yo retiree with $1m nestegg and 33 year time horizon (to age 95).

Retiree can take $24k SS a year at 62, $32k SS a year at 66 or $42.24k SS a year at age 70.

Spending at 95% level and ending net worth at $60k withdrawals per year under each alternative according to FIRECalc.

62..... $62,808 spending at 95% success rate or $2.211m NW at age 95
66..... $65,679 spending at 95% success rate or $2.285m NW at age 95
70..... $65,962 spending at 95% success rate or $2.279m NW at age 95

If we reduce the time horizon to age 85, then:
62..... $69,033 spending at 95% success rate or $1.178m NW at age 85
66..... $70,684 spending at 95% success rate or $1.733m NW at age 85
70..... $69,517 spending at 95% success rate or $1.631m NW at age 85

Thanks
Since we can only guess at our individual longevity, and since for at least five generations i have had only one same gender blood relative live past 90 (91), this is yet more support for taking it at FRA, or perhaps 65 to correspond with Medicare enrollment

 

[Independent]

Ignoring inflation and the rate one gets on investments makes the analysis much less realistic.


If you are of the opinion that that the equity market will be doing roughly the same as it has been doing, and you plan to participate in those equities, then the answer seems to be "take it ASAP", even if you think you'll live to a ripe old age.


If you consider yourself having "won the game", and are stepping away from risk, that's a valid position. Your allocation, then, will be sans equities. If that describes you, then you fall in the "take it only if you need it" camp.

You're replying to Chuckanut who uses the 4% SWR. It includes both inflation and the assumption that you will invest in equities.

 

[Riajean]

Really confused - husband is ill

Ok.......my husband who is 65 has early onset Alzheimers; "technically" diagnosed in Fall 2014, but noticed signs of something wrong as early as 2012. He's started to decline; is on SSDI and I've just turned 62 and working - mostly part time because I'm his caretaker.

I'm self employed and pay myself based on the work brought in -- right now it's at a stop, but don't expect that to continue.

Don't know whether it's wise to wait or to take less salary - to get through those slow times - or just tough it out.

Trying to rid ourselves of credit cards - almost there - 2 years. One car payment. Mortgage and more. Living frugally, but we can go out once in awhile.

Savings account? What's that?! About $1K. We've had many financial difficulties over the years.

Wisest thing to do??

Thanks.

 

[pb4uski]

I suggest that you go to opensocialsecurity.com ...... click on the Advanced options box and fill out the forms and see what it suggests for an optimal claiming strategy.

Unfurtunately that tool doesn't yet handle factoring in SSDI but I know it is on the list of future enhancements.... but it is a good place to start.

FWIW, you are in good company.... 42% of men and 48% of women claim at 62... in most cases because they need to.

 

[pompanobeach]

Take the money early! Statistics show that whether you take it early or later, the average person collects relatively the same amount of money in total. It’s eaither start early and get less for longer or start later and receive more for less time.

I myself am planning on retiring at 55 and taking SS at 62!

Good luck!

Pompanobeach

 

[RetireBy90]

I’m waiting till 70, and DW at FRA of 66. I am the higher earner, and by waiting till 70, if I find the exit first she will have more income.

For me, I could compute a reason to take it early, at FRA, or 70. The reason for 70 for me is peace of mind. Hard to price that into a call.

 

[Fishsticks007]

Take it and invest it

My husband and I plan to take ours at 62 and invest it in the market! I think we will make more than the 8% you get by waiting until FRA. And if we want to do a fabulous vacation instead of investing that month, we will do it!

 

[DougJohnson]

There is another way of looking at when to take Social Security. It is a form of longevity insurance. An inflation adjusted lifetime annuity will insure you will never be totally broke, no matter how long you live.

As for me, I am waiting until 70. In the meantime, I am taking spousal benefits on my wife's account. That will lower the break even point to about age 76. As others have pointed out, the increased payments for waiting are based on 1983 life expectancy and interest rates. In the last 35 years, life expectancy is up and interest rates are down. Both push towards waiting.

I am healthy with long lived ancestors. The longevity insurance and the additional SS my wife will get if I check out early makes it an easy decision.

-- Doug

 

[sengsational]

You're replying to Chuckanut who uses the 4% SWR. It includes both inflation and the assumption that you will invest in equities.

There are two things one must have or believe in order to make taking SS early a slam-dunk. 1) Have a significant equity allocation, and 2) think equities will perform about the same as they "always" have, and 3) have enough dry powder to weather equity troughs. That's three. Dang. Never trust anybody who gets two and three confused.

My husband and I plan to take ours at 62 and invest it in the market! I think we will make more than the 8% you get by waiting until FRA. And if we want to do a fabulous vacation instead of investing that month, we will do it!

Welcome to the forum! Make sure you check out the travel stuff on this board! And yeah....good plan!

 

[skipro33]

Ok.......my husband who is 65 has early onset Alzheimers; "technically" diagnosed in Fall 2014, but noticed signs of something wrong as early as 2012. He's started to decline; is on SSDI and I've just turned 62 and working - mostly part time because I'm his caretaker.

I'm self employed and pay myself based on the work brought in -- right now it's at a stop, but don't expect that to continue.

Don't know whether it's wise to wait or to take less salary - to get through those slow times - or just tough it out.

Trying to rid ourselves of credit cards - almost there - 2 years. One car payment. Mortgage and more. Living frugally, but we can go out once in awhile.

Savings account? What's that?! About $1K. We've had many financial difficulties over the years.

Wisest thing to do??

Thanks.

You describe almost exactly my brother's and his wife/care giver's situation except he was diagnosed at age 53, now 65.

Did your husband ever serve in the military? At his age, if so, he's most likely a Vietnam era vet. My brother (me too) was. He got his own personal physician to declare that his Alzheimers was 'likely as not' caused by his exposure to agent orange. The VA agreed and has given him a tax free disability pension of a little over $3,000 a month. The VA also pays for a transport service to pick him up from his home every day and take him to an adult day care center and bring him home. There's several other things they cover as well for his in-home care, such as a stipend for his wife for her part in his care giving.

He also worked for the federal government as an air traffic controller and was given a medical early pension once he could no longer do any job in the agency at age 58. He also had some sort of mortgage insurance that paid off his mortage if he ever became medically/physically unable to work any more.

I am so sorry this has happened to you and your husband and I hope you are able to collect any benefits if he does qualify.
****EDIT****
I want to add; with is diagnosis he probably qualifies for 100% medical and you shouldn't be paying any federal income tax. Both my father and my brother confirmed with their CPA who does their taxes that indeed they are able to declare all their incomes as medically related and haven't had to pay fed or state taxes since their diagnosis. (My dad was diagnosed 2 years ago with Alzheimers and I'm his care giver, living with me and DW and aged 86.) For my dad, the VA sends him $1,800 a month because 100% of his income is designated for medical and he served during Korean War. (despite never serving in any war zone. He was on an aircraft carrier in the Med off Italy during his 2 years of service in the Navy.) Who would have thought Dad was due anything. I took him to the local VA center when he moved in just to get a VA ID card. They interviewed us, filed some paperwork and next thing we know, he's qualified for a disability pension.

 

[BoodaGazelle]

I am in almost the exact age and situation, and pretty much agree with your thinking. The biggest consideration for us is that after my COBRA runs out in Nov., I have to get my own health care. For that reason, and since I can afford to, I want to have a little income as possible until I turn 65 and can get Medicare. So my current thinking is that I will wait, but have DW start hers when she turns 62 in 2019. She earned less than me, but still will have a pretty decent amount. We can then figure that at the very least, her SS will pay for our health care premiums until I turn 65...


I don't know if this is the *best* way, but it is what I currently think we will do.... Good luck!

 

[akidagain2018]

I did similar analysis, and I have more weakness in my projections in the short run, vs in the over 70 years, when I'll have more than I need. So I plan to take SS at 62. You can run the math on the cash flow stream at 62 vs 67, or later, decide from there. If it allows you to not draw down savings, I think it's a good idea as SS is only ever going to be so much. But potential earnings on higher savings could over the long run out produce the lost SS income from collecting early. Hope this helps.

 

[Caskem]

Excellent post

Statistically, based on the IRS life expectancy tables, SS will pay the same amount of $ to a person with an average lifespan, whether they retire early (62), on time (FRA), or wait until up to age 70 (at an 8% premium per year), by the time they pass at their predicted year. If you live longer than your life expectancy, then you would get more by waiting.

Dead on...the life expectancy table shows me living to 84. Crunching the numbers show the delta of the SS payouts at 83. I'd rather have the money now and invest it since I can do better than the government.

 

[Dtail]

Dead on...the life expectancy table shows me living to 84. Crunching the numbers show the delta of the SS payouts at 83. I'd rather have the money now and invest it since I can do better than the government.

I have some similar thoughts, but we have a huge % of investments in TIRA, so paying down some of that TIRA to lessen the RMD tax impact also comes into play.

 

[Huston55]

Did your husband ever serve in the military?

If your husband is a Veteran, and the “Jamestown” in your profile is in Virginia, this is the contact info for the local VA office.

https://www.dvs.virginia.gov/dvs/locations/williamsburg-benefits-office

If it’s not Virginia, go to the site below & search by state. There will almost certainly be a local Veterans Services Officer (VSO) close to you if you’re not close to one of the regional offices. The regional offices will have that contact info.

https://www.va.gov/directory/guide/division.asp?dnum=3&isFlash=0

 

[Independent]

There are two things one must have or believe in order to make taking SS early a slam-dunk. 1) Have a significant equity allocation, and 2) think equities will perform about the same as they "always" have, and 3) have enough dry powder to weather equity troughs. That's three. Dang. Never trust anybody who gets two and three confused.

I agree with 1 and 2, but 3 isn't so clear.

It seems that people who start SS early have less need to withdraw from their assets early. So they don't need as much "dry powder".

 

[meleana]

I did the calculator and it said for me to claim SS now at age 62 and 3 months and for hubby to wait until age 70. I am losing my job this month.



Hubby is 64 and working (hopefully to age 66 at least) and we have health insurance through his job, but if he retires at age 66 I will not yet be eligible for Medicare.



We can live on his salary, but will have to stop most all savings when I stop work after this week, except for a 5% contribution to his 401k and the max to his HSA until he goes on Medicare in the spring.



I don't know what to do. Suggestions?

 

[meleana]

There is another way of looking at when to take Social Security. It is a form of longevity insurance. An inflation adjusted lifetime annuity will insure you will never be totally broke, no matter how long you live.

As for me, I am waiting until 70. In the meantime, I am taking spousal benefits on my wife's account. That will lower the break even point to about age 76. As others have pointed out, the increased payments for waiting are based on 1983 life expectancy and interest rates. In the last 35 years, life expectancy is up and interest rates are down. Both push towards waiting.

I am healthy with long lived ancestors. The longevity insurance and the additional SS my wife will get if I check out early makes it an easy decision.

-- Doug

But this strategy - claiming spousal benefits while allowing your own to grow-is no longer allowed for new claimants going forward.

 

[sengsational]

When he retires, he can go on Medicare and you can get coverage from the healthcare.gov exchange (aka "Obamacare"). The price on the exchange can be very reasonable if your family income is below $65K because you qualify for subsidies.

Pulling spending-money out of traditional IRA or 401k counts as "income", but just spending money out of your non-IRA after tax accounts doesn't count as income. Roth conversions DO count as income, but of course those are optional. As long as you have 3 years' spending money in non-IRA funds, you can probably control your income to the point of getting a reasonably priced policy (reasonable only after the subsidy is applied) on healthcare.gov.

As to taking SS, that money you get at age 62 does count as income, and although it's probably optimal to do what the calculator says, it's probably not that much different between taking it at 62 vs 65. In your case, SS might be the "tail" vs the "dog" is PPACA heath insurance subsidy. Of course you might be able to do both if taking your SS plus whatever other income you have doesn't push you out of the range where you get a health insurance subsidy.

 

[joeea]

I did the calculator and it said for me to claim SS now at age 62 and 3 months and for hubby to wait until age 70. I am losing my job this month.

Hubby is 64 and working (hopefully to age 66 at least) and we have health insurance through his job, but if he retires at age 66 I will not yet be eligible for Medicare.

We can live on his salary, but will have to stop most all savings when I stop work after this week, except for a 5% contribution to his 401k and the max to his HSA until he goes on Medicare in the spring.

I don't know what to do. Suggestions?

Sounds like you either claim your benefits early and have your husband wait until 70, or you find a new job.

If the former, then hopefully you can both afford to eventually retire despite stopping most of your saving.

If I were cutting it that close, I'd find a new job.

 

[meleana]

Sounds like you either claim your benefits early and have your husband wait until 70, or you find a new job.

If the former, then hopefully you can both afford to eventually retire despite stopping most of your saving.

If I were cutting it that close, I'd find a new job.

Umm- at 62 in a rural area that won't be easy even if I wanted to, which I don't. No more slavery for me- unless maybe at some point I could do something from home on my own terms. Then again, if I collect SS it would probably be more than I could earn.

 

[joeea]

Umm- at 62 in a rural area that won't be easy even if I wanted to, which I don't. No more slavery for me- unless maybe at some point I could do something from home on my own terms. Then again, if I collect SS it would probably be more than I could earn.

Nobody said life has to be easy.

If you can afford to retire and collect early, then you don't have to submit to "slavery" I guess. Not everyone has that choice. And not everyone wants to cut thing that close.

I thought you were looking for suggestions, but it seems like you have already decided and just wanted support for your decision. You haven't posted enough details regarding your income, savings, and expenses for a real answer anyway.

Good luck, I hope it works out for you.