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

[WestUniversity]

What kind of return are you assuming you will get from your investments from age 62 to 70?

You already know the year to year guaranteed increase you will get from social security. You feel that you will do better than that with your investments? And you have a sense of the risks behind those investments?

Have you also considered the effect on your spouse if you should die first?

Assumed a 7% return and my spouse cannot collect on my SS, so that is not a factor...

 

[mathjak107]

the average return means little. it is the sequence of returns that means everything for the most part when spending down .

 

[gayl]

Assumed a 7% return and my spouse cannot collect on my SS, so that is not a factor...

and that's why it's different for each one of us. Great that you've done the math & found your best option

 

[WestUniversity]

and that's why it's different for each one of us. Great that you've done the math & found your best option

Thanks. At a 6.5435% projected rate of return, the two options in my case are equal. The long term historical performance of my portfolio is significantly higher than that however. I was surprised the numbers worked out that way because the conventional wisdom seems to be to wait until FRA or 70. In addition to doing sensitivity testing of multiple scenarios, all of my assumptions err on the side of conservatism.

At the end of the day however my crystal ball is not any better than anyone else's. We all have to make the best decision we can, with the information available at the time of the decision. I've still got about 2 years until 62, so my decision could change but at this point it seems unlikely.

As for DW, while she cannot collect my SS, she can benefit from our investments and the effect of the compounding of the payments received from 62 to 70, and in this case the delta is significant...

 

[capjak]

SS is a voter guaranteed. Too many retirees collecting that vote. I can not imagine a politician getting elected or re elected that did anything to limit SS for the 65+ crowd.

 

[REWahoo]

SS is a voter guaranteed. Too many retirees collecting that vote. I can not imagine a politician getting elected or re elected that did anything to limit SS for the 65+ crowd.

+1

Political suicide.

 

[ShokWaveRider]

The ONLY reason I did not take SS at 62 was to qualify for ACA subsidies. That is a double whammy in our favour. Not only are we getting a little extra interest on our SS funds, we are saving money on our healthcare. 2018 subsidy for our situation is $1966pm (Almost $25k for the year). That is a big chunk of cash.

 

[pb4uski]

Part of the reason that I am deferring is to continue to be able to milk low tax-cost Roth conversions from 62 to FRA or 70... once I start SS I will be in a substantially higher tax bracket and my ability to do Roth conversions or harvest LTCG at a reasonable cost evaporates.

 

[rayvt]

SS is a voter guaranteed. Too many retirees collecting that vote. I can not imagine a politician getting elected or re elected that did anything to limit SS for the 65+ crowd.

Failure of imagination. They imposed income tax on SS benefits in 1984.

It'll happen like these things always do. First a small tax (or cap) that hardly anybody gets hit with. Then a few years later they tax/cap gets lowered, so a few more people get hit. Then a few years later the amount that is subject to tax/cap gets increased.

Government only do this every single time.

 

[donheff]

SS is a voter guaranteed. Too many retirees collecting that vote. I can not imagine a politician getting elected or re elected that did anything to limit SS for the 65+ crowd.

Failure of imagination. They imposed income tax on SS benefits in 1984.

It'll happen like these things always do. First a small tax (or cap) that hardly anybody gets hit with. Then a few years later they tax/cap gets lowered, so a few more people get hit. Then a few years later the amount that is subject to tax/cap gets increased.

Chained CPI has been offered up as a sacrificial lamb. I can't even argue with it as a tweak to avoid other changes. Still, I side with capjak on the bigger picture - SS may get tweaked a bit here and there but it isn't going away or getting cut drastically. Unfortunately, I could see us permitting some sort of privatization that would leave those most in need of a guaranteed income at market risk.

 

[Running_Man]

I re-read my post later, and see that I should have said surviving spouse benefit. The terminology can get confusing.

To your question-

https://www.ssa.gov/planners/retire/agereduction.html

As I understand it: If lower earning spouse takes their benefit at 62, they will have a discount applied to their FRA benefit. Then the higher earning spouse takes their benefit at age 70. What will the surviving spouse benefit be?

If they are claiming on their own record, they would get 75% of their FRA amount. If they are claiming the spousal benefit, they would get 70% of the 50% benefit (or a total of 35% of the higher earning spouses FRA amount).

The surviving spouse benefit would be reduced because they claimed early. That reduction would be applied against the higher earning spouses amount (which is increased because of waiting to age 70).

So, they would get 75% (due to lower earner claiming early) of the 132% (due to higher earner claiming at age 70), or basically 99% of the higher earners FRA amount. If they had waited until their FRA to start, they would receive the 132% of the higher earners FRA amount.

All of these numbers are based on a birthdate from 1943 to 1954. The percentage numbers shift a bit as the FRA age was increased.

This is simply not true. The surviving spouse benefit is based on the age of the surviving spouse at the time the surviving spousal benefit is claimed, it has nothing to do with the age the surviving spouse originally claimed Social Security. As long as they are over the FRA at the time of claiming the spousal benefit, they get whatever the deceased spouse was entitled to at the month of death. All other Social Security benefits do not even enter into the calculation.

 

[mathjak107]

that is correct . anything the surviving spouse took in their own retirement benefit does not count when calculating survivor benefits ..

but survivor benefits can be really complex .

the 3 factors are the age of the deceased at time of death , the age of the survivor when they take survivor and whether the deceased was already collecting a benefit .

nothing pertains to whether the surviving spouse took their retirement benefits yet or not .

if the deceased spouse was not collecting yet than their age for ss purposes is calculated as their age they would have been when the survivor files for survivor benefits . .

other wise their benefit is what it is for purposes of calculations .

if the surviving spouse is less than fra there is a reduction formula off what their benefit would be .

for those who have an fra of 66

at 60 it less another 28.50%
61 less 23.7
62 less 19%
63 less 14.2
64 less 9.50
65 less 4.7
66 less zero .

however , if the deceased spouse filed early at 62 , and the survivor filed for survivor benefits at 60 you can see that double cut can be pretty nasty . so there is what is called the widow's floor put in place .

that is a back up formula to keep the surviving spouse from getting hit to hard with double cuts .

If your deceased spouse had already begun benefits...

and had begun benefits before they reached their FRA, then you as the*surviving spouse are*entitled to the larger of what your*deceased spouse was getting, or 82.5% of their PIA amount, (this is the amount they would have received had they begun benefits at their FRA).

This benefit amount is subject to a reduction if you have not yet reached your*FRA. (82.5% of their PIA will be more than what they would have gotten if they began benefits at age 62, so this rule is in place to protect a surviving spouse from a permanently lower income if their other half began benefits at age 62.)


https://www.thebalance.com/social-security-for-widows-and-widowers-2388284

 

[mathjak107]

one thing i see from the math is that the survivor benefit with the floor is the same at age 60 as it is at age 62 without the floor . since you get the higher of the two there is nothing to be gained by taking survivor at 62 vs 60 since the widow floor already boosts you to 62 .all you do is give up checks . pretty shrewd here .

after 62 the floor really does not come in to play at all since the reduction is less so waiting until your fra grows what you get .

nice gotcha ss , well done slipping that lil money saver in .

it is as if social security said if you take ss at 62 we will give you the higher of your reduced rate or your 64 rate as a floor , but if you delay longer we will increase you from that point . . if you wait until 64 and go no further you get nothing extra and just gave up 2 years checks .

same deal here with survivor and 60 vs 62 .

 

[jkern]

the average return means little. it is the sequence of returns that means everything for the most part when spending down .

And accumulation phase too!! Sequence of Returns will determine how big your nest egg is.

 

[mathjak107]

to some extent but no where near the 15 year difference in how long the money will last you get in the decumulation stage. milevsky came up with a difference of 15 years from best to worst outcomes with the same average return .

 

[Doc0]

SS will go according to the way the law is written with the 23% haircut. The politicians will just stand back and let it happen. The voters won't have a say. It's already been said. So put that into your plan and consider what that will mean to a 17 year older you.

 

[pb4uski]

Failure of imagination. They imposed income tax on SS benefits in 1984.

It'll happen like these things always do. First a small tax (or cap) that hardly anybody gets hit with. Then a few years later they tax/cap gets lowered, so a few more people get hit. Then a few years later the amount that is subject to tax/cap gets increased.

Government only do this every single time.

But to be realistic rayvt if someone put after-tax contributions in a deferred annuity for 30+years and then annuitized it then a portion of each annuity benefit payment received representing growth would be taxed and the portion representing return of principal would be tax-free.... and given such a long compounding period it would be a substantial portion of the benefit... 85% is probably in the ball park.... especially since half of your benefits are based on employer contributions that you never paid taxes on just to begin with.

 

[GravitySucks]

SS is a voter guaranteed. Too many retirees collecting that vote. I can not imagine a politician getting elected or re elected that did anything to limit SS for the 65+ crowd.

+1
And don't forget the votes of our kids if they think we're moving in with them!

 

[joeea]

+1
And don't forget the votes of our kids if they think we're moving in with them!

That's one powerful threat!

 

[Doc0]

There is nothing to vote on, It's already law

 

[RunningBum]

There is nothing to vote on, It's already law

So the projected future shortfall issue is fixed then? Yippee! How did they do it? I somehow missed it.

 

[Tree-dweller]

WEP and GPO and family longevity history means 64 1/2 for me.

 

[youbet]

Just pulled the trigger to start collecting at 64 1/2. DW is impacted by WEP and GPO, so o nly way

Yep, that's my case too. DW will never see a penny of my SS due to GPO. Therefore to provide her with some financial protection, I started my SS at 62 and invested the money each month. It worked out well. A reasonable WR from that pot yields more than the delta between my current SS and what I would have received had I delayed until 70.

GPO really changes the picture for a married couple. There are several others here on the FIRE board in a similar situation and have mentioned similar strategies.

 

[daylatedollarshort]

We'll probably take at least the larger of the two at 62 for income stream diversification and because we think benefits may be cut, taxed more or there may be asset / income testing in the future that might impact us.

 

[mathjak107]

odds are if it wasn't grandfathered up to a certain age like the last changes it will be done to those already collecting too