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

[marko]

The OP states "...The last few years were hell. My bosses had done everything that they could to make my life miserable and get me to quit..."

Thought I'd share my experience.
I had an employment contract stipulating that if I were terminated under certain conditions I'd get a hefty pay-out but if I quit I'd get nothing.

One night I received a 1AM email (intended for someone else) from someone on how they might get me to quit using certain strategies and obviously saving the company some money.

Considering the time of day, I'd guess it was a 'drunk email'. Seems that instead of putting my name in the "Subject" line, it was put in the "To" line, autofill took it from there and I got the message instead of the intended recipient.

I never let on. They paid me.

 

[HadEnuff]

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

I found WEP on the acronyms page, but not GPO...

What is GPO, and how do WEP and GPO effect your decision?

 

[REWahoo]

GPO = Government Pension Offset

https://www.ssa.gov/planners/retire/gpo-calc.html

 

[LRDave]

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

We will be whacked by the double-sided GPO/WEP club as well and it looks like DW's entire SS benefit will disappear.

So are you thinking you need to take it early to invest it? Is there something about 64.5 in particular that works for you?

 

[LRDave]

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.

Are you saying you are outearning SS? I'm probably being thick, but I am not quite following your strategy.

 

[marko]

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.

Are you saying you are outearning SS? I'm probably being thick, but I am not quite following your strategy.

I think this is what most/many of us who take SS early do in a roundabout way. In my case, instead of reinvesting my SS, I spend it and the same amount that I DON'T have to withdraw continues to earn returns.

 

[Tree-dweller]

I think this is what most/many of us who take SS early do in a roundabout way. In my case, instead of reinvesting my SS, I spend it and the same amount that I DON'T have to withdraw continues to earn returns.

This.
Family history doesn’t predict life far into the 80s for me, so odds against break even point. Why 64 1/2 for me? Took me 2 1/2 years to admit to myself I was old enough to collect SS, I guess ;-)

 

[Cut-Throat]

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.

Seriously? ... You don't think they'll be any politicians running that will want to get elected based on 'changing the law'....
You want to see an issue that will unite the Far Right and the Far Left (Especially those 50 and older (The ones that vote)
It will become like raising the debt ceiling, where congress gets out their "rubber stamp".

Politicians have already proven that they don't care about the debt.... The "conservatives' in the House have just proposed increasing the debt by 1.7 Trillion over the next 10 years for an unnecessary tax cut.

 

[marko]

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.

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

I"m not following this. Are you saying that we're in for a 23% reduction in SS? Or is this for future recipients?

 

[Blueskies123]

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.

You are not seeing the tsunami of baby boomers taking SS in the next 10 years. The number of people on SS, medicare, and disability will approximately double in the next 10 years. Coupled with increasing interest rates on ballooning debt you need to imagine what the national budget will look like in 2027-2035.

 

[donheff]

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.

Cites. I have always understood SS to be a straightforward entitlement requiring legislative action to change the benefit formula. Where does the law say it must be cut back if spending outruns the Trust Fund?

 

[Doc0]

In 2034 the fund becomes unfunded from an actuarial perspective. There original law has this provision to cut benefits if that happens. http://money.cnn.com/2017/07/13/news/economy/social-security-trust-fund-projection/index.html

 

[pb4uski]

I"m not following this. Are you saying that we're in for a 23% reduction in SS? Or is this for future recipients?

Cites. I have always understood SS to be a straightforward entitlement requiring legislative action to change the benefit formula. Where does the law say it must be cut back if spending outruns the Trust Fund?

My understanding is that Social Security is ring-fenced.... if it has surpluses it can "invest" the surplus and it invests in in US government bonds.. effectively lending money to the general fund... and the current surplus is $2.85 trillion, but it is projected that the surplus will be spent on benefits as babyboomers retire and will be gone by ~ 2034-2035.

My understanding is that the rub is that Social Security is prohibited from borrowing... so after the surplus is gone the only option will be to reduce benefits in aggregate by ~23% in 2034 and possible as much as 27% by 2091... with those reductions SS benefits will be equal to SS tax revenues. It is unclear how these reductions would be implemented.. whether it would be across-the-board to all recipients, to only future recipients, to only recipients with benefits exceeding $x or what.

 

[Doc0]

Presently everybody gets cut.

 

[pb4uski]

Do you have a cite for that? I have not seen anything specific on that point.

 

[Doc0]

I looked up the law several years ago and that's the way I read it. You can do the same. There is a lot of wishful thinking but in 17 years the millennial will be eligible for AARP, and I doubt the boomers who are in the process of dying will allow boomers to pick their pockets

 

[pb4uski]

So basically you don't have a cite.

 

[Chuckanut]

I can't see much being done in the current political environment.

I do remember how both sides managed to get rid of the loophole that allowed people to like me to collect on their spouse's SS while they let their own SS payout increase at 8% a year. For some oddball reason, there was no big fight over that, no partisan bickering, no great debate. Wonder of wonders!

This tells me that the Congress can do things they really want to do.

I still think we will see the tax system used to skim SS dollars from the wealthier people rather than broad cuts. They are already doing this by not indexing certain amounts to inflation such as the Income Test amount. IIRC, when this test was first passed it only affected 10% of recipients. Today it is more like 30%.

I have run Firecalc and a Montecarlo simulator to see what would happen if SS was cut to 75% of the current amounts and I do survive, though I will have to skip the monthly trips to Paris for dinner at Le Ronruer. And keep my car longer.

 

[donheff]

In 2034 the fund becomes unfunded from an actuarial perspective. There original law has this provision to cut benefits if that happens. Without action, Social Security trust fund will be tapped out in 17 years - Jul. 13, 2017

Still looking for real cites. This CNN article simply points out that actuaries predict the Trust Fund will not be able to support the full benefits after 2034 and asserts that we would therefore get a haircut. My understanding is still that to effect said haircut would require legislative action. Absent that we would just go into a deeper deficit. I am open to being corrected but I would like to see some legislative language that supports that, or even an expert opinion that tells us the law works that way.

 

[pb4uski]

I have had trouble finding the details but everything that I have seen is consistent with the Wikipedia entry:

.... The Trust Fund represents a legal obligation of the federal government to program beneficiaries. The government has borrowed nearly $2.8 trillion as of 2014 from the Trust Fund and used the money for other purposes. Under current law, when the program goes into an annual cash deficit, the government has to seek alternate funding beyond the payroll taxes dedicated to the program to cover the shortfall. This reduces the trust fund balance to the extent this occurs. The program deficits are expected to exhaust the fund by 2034. Thereafter, since Social Security is only authorized to pay beneficiaries what it collects in payroll taxes dedicated to the program, program payouts will fall by an estimated 21%. ...

IOW, while the SS Trust Fund can loan surplusses to the federal government general fund, the other way around is prohibited... general tax revenues can't be used to pay for any SS Trust Fund accululated deficits.

 

[CRLLS]

Still looking for real cites. This CNN article simply points out that actuaries predict the Trust Fund will not be able to support the full benefits after 2034 and asserts that we would therefore get a haircut. My understanding is still that to effect said haircut would require legislative action. Absent that we would just go into a deeper deficit. I am open to being corrected but I would like to see some legislative language that supports that, or even an expert opinion that tells us the law works that way.

I did some googling for a cite and found the following. According to https://fas.org/sgp/crs/misc/RL33514.pdf

If a trust fund became depleted, there would be a conflict between two federal laws. Under the Social Security Act, beneficiaries would still be legally entitled to their full scheduled benefits. However, the Antideficiency Act prohibits government spending in excess of available funds, so the Social Security Administration (SSA) would not have legal authority to pay full Social Security benefits on time.

Looking up the Antideficiency act

§1341. Limitations on expending and obligating amounts
(a)(1) An officer or employee of the United States Government or of the District of Columbia government may not—
(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation;
(B) involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law;
(C) make or authorize an expenditure or obligation of funds required to be sequestered under section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985; or
(D) involve either government in a contract or obligation for the payment of money required to be sequestered under section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985.


Without digging further, I take it that, while SS is still obligated to pay the full amounts, without Congress providing outside funding to the SS, they are prohibited by that the Antideficiency Act from making those payments in full.

My gut feel is that Congress may end up funding it and if passed later, pay recipients in arrears for any short pay they received. This is similar to what was done in 2013 when we had a a government shutdown and furloughed employees got paid in arrears for their lost pay.

 

[pb4uski]

Excellent!!! I had trouble with the link but it worked fine when I copied and pasted the web address into my browser.

 

[CRLLS]

Excellent!!! I had trouble with the link but it worked fine when I copied and pasted the web address into my browser.

Fixed the link.

 

[Pilot2013]

So basically you don't have a cite.

+1

 

[donheff]

Thanks for the interesting cites. It sounds like my understanding of the obligation was correct but not my assumption that the SSA could tap other funds in a crunch. We would be in a similar boat to a debt ceiling block. The Antideficiancy Act scares the s*** out of Federal CFOs and managers because violations are criminal and IGs love to go after them.