Case for taking SS early (62)?

[pb4uski]

...Why let Uncle Sam keep your lifelong contributions until you're feeble, and if you pass away before break even (or even starting at 70) never realize your benefits?

Because catfood sucks. That's why they call it the Old Age, Survivors And Disability Insurance Program. Those who die before receiving benefits help subsidize those who survive - that is the way insurance works.

Yes, Richard, there is a vast conspiracy in the media and government to lead you down a primrose path to take SS later and get shortchanged so the smart thing to do is to jump on it while you can. Besides, taking it early will make the whole system more sustainable, so thank you.

 

[Richard8655]

Because catfood sucks. That's why they call it the Old Age, Survivors And Disability Insurance Program. Those who die before receiving benefits help subsidize those who survive - that is the way insurance works.

Yes, Richard, there is a vast conspiracy in the media and government to lead you down a primrose path to take SS later and get shortchanged so the smart thing to do is to jump on it while you can. Besides, taking it early will make the whole system more sustainable, so thank you.

Conspiracy? Interesting you think so (as you say here). If waiting to 70 makes you feel more secure in avoiding cat food, then scratch that Friskies off your old age menu.

 

[Bestwifeever]

I've seen these points before about delaying SS until 66 or 70. In my view, they're lottery gambles to convince us to wait as long as possible, where a good percentage of folks will never realize, enjoy, or appreciate these delayed benefits in their very old age.
...

It's all the same to SS if people take their benefits early, late or in between. I really doubt anyone cares when you or I choose to file.

 

[travelover]

....... I really doubt anyone cares when you or I choose to file.

I know that I don't.

 

[daylatedollarshort]

It's all the same to SS if people take their benefits early, late or in between. I really doubt anyone cares when you or I choose to file.

I think the investment companies have a vested interest in keeping people working and saving money rather than retiring early and spending down their portfolios or living on SS for income.

The article on that was posted here from the UK recently on how people were unhappy and died who retired early so working til 70 was better seemed like a pure propaganda piece to me.

 

[Bestwifeever]

I know that I don't.

Wha....?

 

[travelover]

Wha....?

I think that people (not you) get a little too cranked up over this. In the end we are all dead.

 

[nun]

Because catfood sucks. That's why they call it the Old Age, Survivors And Disability Insurance Program. Those who die before receiving benefits help subsidize those who survive - that is the way insurance works.

Deferring SS until 70 is my longevity insurance and takes the place of a annuity in later life. I'd rather back end load my SS to the time when I won't be physically capable of working.

 

[Independent]

I've seen these points before about delaying SS until 66 or 70. In my view, they're lottery gambles to convince us to wait as long as possible, where a good percentage of folks will never realize, enjoy, or appreciate these delayed benefits in their very old age.

I still believe (in my situation anyway) in taking what you've earned and contributed while you can, and enjoy and use the money. Why let Uncle Sam keep your lifelong contributions until you're feeble, and if you pass away before break even (or even starting it at 70), never realizing your benefits?

This thread seems to have morphed. The first post said "I'll assume SS retirement dates are actuarially equivalent, but here's an interesting FIT angle". This post seems to say they aren't equivalent.

But, since I had a worksheet, I dug it out. Here are some numbers.

Assume I'm married, trying to get $50k of annual gross income from some combination of ordinary income (IRA, pension) and Social Security. We've got $21k of SS if we start at 62 and $28k if we start at 66.

If we start at 62, we'll need $29k of non-SS income to get up to $50k.
Only $3,750 of our SS will be taxable, so our AGI is $32,750.
Assuming standard deduction, we've got $12,950 of taxable income, our marginal bracket is 10%, and our FIT is $1,295.

If we defer to 66, then in the four years prior to 66 we'll need $50k of non-SS income.
That generates $50,000 of AGI,
$30,200 of taxable income,
a marginal bracket of 15%, and a FIT is $3,638.

After the first four years, we'll need $22k of non-SS income.
Only $2,000 of the SS is taxable, for an AGI of $24,000,
taxable income of $4,200,
and FIT of $420.

If I did all those numbers correctly (no guarantees) in the start-at-62 scenario we'll pay $1,295 every year. In the defer-to-66 we'll pay $3,638 for four years, and $420 thereafter.

I won't claim that one is clearly better than the other.

Note, however, that this ignores the fact that the $32k and $44k trigger points aren't inflation indexed. So taxes in all cases go up as inflation shrinks those numbers. That's an additional complication.

I was targeting a higher income than $50k. After looking at various scenarios, I thought there were too many variables to predict with much accuracy.

 

[tryan]

My pet peeve is married people who disregard the effects of delaying SS on the survivors benefit.

Our choice is a no brainer ... wait as long as possible to tap my SS. DW is 7 years younger and will have a much smaller SS check. So my much larger SS should be maximized to carry her as long as possible. But tap hers ASAP ... however small.

 

[BUM]

Getting my first gummint SS payment (at 62) in 21 days!

DW got her's in Feb.

Its all G.

 

[MRG]

I think I don't know enough, except we all have unique situations,
MRG

 

[Richard8655]

Can someone confirm if the following is true?

You retire early at 62 based on your working record. Your spouse retires a number of years later at 66 (her FRA), and can then receive half of your FRA (age 66) benefit, even though you retired early at 62.

This rule (if true) was never clear to me.

 

[misanman]

You retire early at 62 based on your working record. Your spouse retires a number of years later at 66 (her FRA), and can then receive half of your FRA (age 66) benefit, even though you retired early at 62

We have done this same thing. DW began drawing at 62. At my FRA I began to draw my spousal benefit. I will let my own benefit continue to increase and switch over to it at a later date.

 

[Richard8655]

We have done this same thing. DW began drawing at 62. At my FRA I began to draw my spousal benefit. I will let my own benefit continue to increase and switch over to it at a later date.

Great, thank you. Although no subsequent switchover planned for my spouse as a homemaker.

 

[padlin00]

Can someone confirm if the following is true?

You retire early at 62 based on your working record. Your spouse retires a number of years later at 66 (her FRA), and can then receive half of your FRA (age 66) benefit, even though you retired early at 62.

This rule (if true) was never clear to me.

Your FRA benefit is slightly less if you leave the workforce before FRA.

As I understand it, if you wait till FRA to file, and your spouse does the same, spouse will get her FRA benefit and the spousal to bring it up to 1/2 of your slightly reduced benefit.

 

[Richard8655]

Your FRA benefit is slightly less if you leave the workforce before FRA.

As I understand it, if you wait till FRA to file, and your spouse does the same, spouse will get her FRA benefit and the spousal to bring it up to 1/2 of your slightly reduced benefit.

True. And as I understand it, if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.

 

[target2019]

True. And as I understand it, if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.

Am I hearing that wife will defintely get one-half of your FRA if she waits until her FRA?

This is difficult to nail down, but your FRA benefit is reduced by some amount since you retire early at 62. Also, your spouse's FRA will be more in some cases, as she continues to work, and her FRA benefit will be increased as a result.

I think age difference between spouses has to be one factor that is included. For example, I am 3 years, 4 months older than wife.

 

[tessaduncan]

if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.

But her benefit will be reduced proportionally due to your taking it early... at least that is what I understand from an earlier discussion.

 

[RetiringAt55]

True. And as I understand it, if I retire at 62, spouse will still get half of my FRA benefit if she retires at her FRA.

No. By taking it early you have reduced both her spousal benefit and her survivor benefit by a non-trivial amount.

This is why it is often recommended to have the higher paid spouse delay to 70 and the other spouse take theirs at 62. You really have to run the numbers and look at more than just the first decade. The odds are one of you will be widowed and live alone a lot longer. That is such an important consideration.

 

[misanman]

It appears that I am receiving 1/2 of DW's FRA amount.

 

[padlin00]

When in doubt

Retirement Planner: Benefits For Your Spouse

From another SS page... The spousal benefit can be as much as half of the worker's "primary insurance amount," depending on the spouse's age at retirement. If the spouse begins receiving benefits before "normal (or full) retirement age," the spouse will receive a reduced benefit. However, if a spouse is caring for a qualifying child, the spousal benefit is not reduced.

 

[Alex in Virginia]

I think it comes down to what you want to save yourself for.

I'd rather live on SS in my early years and keep the nest egg (investments) intact until I have to use it. Others would rather draw down their nest egg early for a larger SS payout later.

Neither is right or wrong, as it depends on individual goals, priorities, and expectations.

You bring up the point of expectations.

Something I have not seen yet discussed in this thread is expectations about the future of the social security program and/or potential changes to who gets how much under the program in future years.

We all know (or should) that the social security program picture going forward is not pretty. And that picture is controlled by politicians. In my estimation, anyone assuming that all will be well, and that each of us will in fact get what our social security benefit statements say we will get is taking a big chance. (In fact, the benefit statements themselves carry a disclaimer to that effect.)

This defensive thinking led me to start collecting benefits sooner than later (which in my case was 65 because I didn't think this through earlier). In my view, once the money is in my pocket it's a lot less likely that Uncle Sam is going to mess with it. And, between 65 and 70, I am going to have collected over $100,000 -- all of which I can plow back into investments if I so choose.

And that last observation leads to some interesting thinking. Had I waited to age 70, my social security benefit would then have been 40% greater than what I collect now. But that extra 40% works out to $8000 a year more. I'll bet that if I ran the compounded 5-year growth calculations of investing the lower present soc sec payouts in stocks, I would find that by age 70 I would be in a position to pay myself that extra $8000 a year (or at least a big hunk of it) from those investments.

Alex in Virginia

 

[homestead]

Spousal benefit is quite confusing. I called SSA to discuss and they said
YOUR spousal benefit is only reduced if YOU take benefits early. As long
as your mate takes their benefits after FRA they can get the full 50%
spouse benefits but the other person must also be collecting benefits.
You can see this is true using this calculator for your specific situation.
Social Security calculator: when to collect for you and spouse.

 

[Richard8655]

You bring up the point of expectations.

Something I have not seen yet discussed in this thread is expectations about the future of the social security program and/or potential changes to who gets how much under the program in future years.

We all know (or should) that the social security program picture going forward is not pretty. And that picture is controlled by politicians. In my estimation, anyone assuming that all will be well, and that each of us will in fact get what our social security benefit statements say we will get is taking a big chance. (In fact, the benefit statements themselves carry a disclaimer to that effect.)

This defensive thinking led me to start collecting benefits sooner than later (which in my case was 65 because I didn't think this through earlier). In my view, once the money is in my pocket it's a lot less likely that Uncle Sam is going to mess with it. And, between 65 and 70, I am going to have collected over $100,000 -- all of which I can plow back into investments if I so choose.

And that last observation leads to some interesting thinking. Had I waited to age 70, my social security benefit would then have been 40% greater than what I collect now. But that extra 40% works out to $8000 a year more. I'll bet that if I ran the compounded 5-year growth calculations of investing the lower present soc sec payouts in stocks, I would find that by age 70 I would be in a position to pay myself that extra $8000 a year (or at least a big hunk of it) from those investments.

Alex in Virginia

I quite agree with what you say here, Alex.