Are Early Claimers Making a Mistake?

[dallas27]

Because the payoff is not effected by the market and is adjusted monthly by delay, i plan to delay my draw until a bear market hits and changes my drawdown, it seems to me that would optimal in the long term, using it as a perfectly timed hedge.


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[Which Roger]

Waiting till 70 just because it is more money is a fruitless exercise. IOHO it is almost being a little greedy, if you do not need the extra income.

Disagree. Waiting until 70 provides better longevity insurance and inflation protection than taking a smaller payment earlier.

 

[pb4uski]

Just reacting to the headline... for single people, if the discounts for age are actually actuarially neutral as we understand they are, how can it be a mistake to claim early?

 

[pb4uski]

.... Waiting till 70 just because it is more money is a fruitless exercise. IOHO it is almost being a little greedy, if you do not need the extra income.

Unless you (or your spouse) live to be 100, in that case it is smart... not fruitless. Just like it is a taxpayer's right to structure their financial affairs to minimize taxes they have a similar right to structure their financial affairs to optimize benefits (SS or otherwise)... so while I disagree with the last part, I respect your right to have an opinion to the contrary.

 

[CRLLS]

DW will take at 66 (FRA). I will take a wait and see attitude once I reach FRA. Taking SS at FRA will cover 100% of our current expenses and is inflation adjusted. Waiting to withdraw from our retirement investments will preserve the nest egg. We may take a few "special" vacations using some of the nest egg. By waiting to 70 to claim, the benefit is 32% higher which is a good hedge against one of us kicking the bucket. Single expenses will go down a bit and the extra 32% should cover the survivor's expenses. We should be able to live on the gains on our investments and DW's SS to cover our gap to 70 yrs leaving the principle alone.

LBYM over the years has accustomed us to a certain lifestyle. It is comforting that SS alone will cover that lifestyle in our retirement and our extra "wants" will be covered by our investments.

At least that is the plan. But who knows what tomorrow may bring? The nice thing is that we have options!

 

[samclem]

Just reacting to the headline... for single people, if the discounts for age are actually actuarially neutral as we understand they are, how can it be a mistake to claim early?

I think the problem is in the definition of the term "mistake." For many (most?) people, if a decision turns out to have a negative outcome, then that decision was a "mistake." I belong to the camp that believes if a decision was the right one based on all the information available at the time, then it was not a "mistake" no matter how things turn out.
Now, back to your question: It could still be a mistake for a single person to claim SS early even though the options are actuarially neutral. The true utility of the promised increased SS payment for a lifetime could easily be higher than the utility of early checks. It's not about the absolute dollar value of the prospective benefits, it's about expected utility. Or, the ramifications of being wrong.

 

[SumDay]

Well, so I have read on here at least several, if not many, times that lower earning spouse should take at 62, larger earning spouse at 70. Does that lower earning spouse lose? I don't think so, seems like a very astute move to me. Therefore I put it in our plan.

Pilot, every SS Planner we've used, along with our fee-only financial planner, have told us to do this very thing. Therefore, we also put it in our plan.

 

[pb4uski]

Well, so I have read on here at least several, if not many, times that lower earning spouse should take at 62, larger earning spouse at 70. Does that lower earning spouse lose? I don't think so, seems like a very astute move to me. Therefore I put it in our plan.

Pilot, every SS Planner we've used, along with our fee-only financial planner, have told us to do this very thing. Therefore, we also put it in our plan.

This one (and others we have used) suggest that DW (lower earner and 9 months younger than me) claim benefits based on her work record at her FRA (NOT 62) and that I wait until 70.

Optimal filing solution (DW@ FRA, me at 70)...............100.000
DW@ 62, me at 70....................................................97.987
Both as early as possible............................................84.149

Using default assumptions and that I live to 86 and DW lives to 90 (also defaults).

 

[old woman]

The problem people I have seen are 62 year old woman who are single. They sometimes work only enough to not have SS reduced when they saved nothing for retirement. They quit working as soon as they earn enough but are living on wages and SS and SS will not increase when they actually retire.
My brother and his wife took it at 62 but they weren't working and were afraid to wait and have pensions, 403B and savings. Brother has cancer now and liver failure and diabetes at 67 so may not need longevity insurance. I wait until 66 but he asked me how I would feel if I died before I broke even and I told him I wouldn't care because I would be dead. Mine will increase when I turn 70 since I am collecting half of my exs instead of mine.

 

[clobber]

I do not even count SS in my plans, and will wait until 70.

I'm the opposite. I do not even count SS in my plans, and will take it at 62. If I don't *need* it why not just start taking it early and spending it young. Since the break even point is somewhere in my 80s - what am I going to do with all that extra money that old? I predict i will spend less the older I get.

 

[clobber]

I draw the conclusion that in some cases taking early SS is the result of poor planning, but in other cases is part of a well thought out plan.

No real surprises here.

+1

 

[youbet]

Disagree. Waiting until 70 provides better longevity insurance and inflation protection than taking a smaller payment earlier.

Not necessarily. You can only say this if you make assumptions regarding investment returns that favor that scenario.

These "when to take SS" discussions always seem to bring out the "broad brushes" with people assuming their situation applies to everyone.

 

[youbet]

Using default assumptions and that I live to 86 and DW lives to 90 (also defaults).

The important issue here is getting your application in and approved so that the gov't is guaranteeing you and DW live until those ages. It's a complicated project. There are more applying for this than you might think.

 

[Bigdawg]

I'm the opposite. I do not even count SS in my plans, and will take it at 62. If I don't *need* it why not just start taking it early and spending it young. Since the break even point is somewhere in my 80s - what am I going to do with all that extra money that old? I predict i will spend less the older I get.

I'm in the same boat. Do not need it. Not to mention I am 6'6". Tall people statistically don't live as long. I'm betting on early 80's. Both DW and I have COLA adjusted pensions. I plan on to take SS at 62. She is 6 years younger. I am encouraging her to take at 70. No survivor benefit on our pensions.

Our biggest problem with her taking at 70 will be the tax hit. Pensions, SS and RMD's will have us at over 150K/yr. We will refi and carry mortgages so we have some deductions.

Plans will change as the years go by. A plan is just a point to start deviating from as variables change.

 

[gerntz]

I'm the opposite. I do not even count SS in my plans, and will take it at 62. If I don't *need* it why not just start taking it early and spending it young. Since the break even point is somewhere in my 80s - what am I going to do with all that extra money that old? I predict i will spend less the older I get.

I think the wait till 70 side has a lot to do with having a spouse who could survive you & him/her getting a bigger payment for the rest of their years. Is there data that married folks wait more often than singles?

 

[athena53]

Just asking, as a young guy, is there any benefit to delaying until 70 so you can be "poor on paper" between 62-70 and get much better government benefits or tax treatment?

It's a two-edged sword and tax laws change, anyway. I'm 63 and planning to wait till age 70 but then I'll be hit with the double whammy of SS as well as required minimum distributions from my IRAs. In the meantime, our taxable income is low enough that we paid no Federal taxes in 2015 (even though DH gets SS). I don't think we'd qualify for any programs meant for the poor- Obamacare subsidies, food stamps, etc.- partly because we do have decent income, it's just that most is interest, dividends and long-term gains. Frankly, I'd feel bad applying for them anyway. If DH and my mother hadn't gotten seriously ill around the same time, DH and I would be getting onto a flight to Iceland about now- in Business Class. (We went last year and loved it, so don't feel too bad for us.) We are definitely not poor.

 

[Pscott2019]

I updated my Fidelity RIP information recently. I loaded the data with scenarios where I took SS at 62, 67 and 70. My score moved up 7 points when I changed from SS draw date from 67 to 62. I certainly did not expect that. I would have thought delaying SS would be the best choice to grow your score.


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[jazz4cash]

I belong to the camp that believes if a decision was the right one based on all the information available at the time, then it was not a "mistake" no matter how things turn out.

This is spot on!


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[haha]

Looks like this time we finally got the definitive correct answer, doncha think?

Ha

 

[Dawg52]

Looks like this time we finally got the definitive correct answer, doncha think?

Ha

Maybe.

 

[GravitySucks]

Just reacting to the headline... for single people, if the discounts for age are actually actuarially neutral as we understand they are, how can it be a mistake to claim early?

Because for some reason they did not interview the people that took it at 62 but died at 70.
;-)

 

[rayinpenn]

Ok there's the math... Hit 75 or whatever and bam waiting would paid off
Then there's you'll spend more in the early years of retirement
Then there's the whole discipline think ..can you hold off

Finally there's karma the $2k a month I'll pay for 35 months until I'm 65.. Which will be offset by my SS. Me I'll go with the karma... And I won't sweat about it...



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[ejman]

Looks like this time we finally got the definitive correct answer, doncha think?

Ha

Haha!

 

[UpAnchor]

I belong to the camp that believes if a decision was the right one based on all the information available at the time, then it was not a "mistake" no matter how things turn out.

Wholeheartedly agree. I've often told the kids that such a decision is the "wise" decision irrespective of future variables which may cause the result to be an "unfortunate" one. Wisdom does not imply the ability to see into the future nor does it guarantee the desired result. But making "wise" decisions along the way certainly tips the odds in one's favor.

 

[daylatedollarshort]

Right or wrong claiming age depends on what your goals are and future expectations for SS benefits / taxes. We value diversified income streams, having the money in our estate for the kids if we die early, and not running down our own portfolio as that is money we control more than SS payments. We will probably claim at 62, but might delay depending on the hobby income.