Join Early Retirement Today
Closed Thread
 
Thread Tools Display Modes
Collecting Social Security at age 62 is the best decision, here is why:
Old 10-24-2017, 06:42 AM   #1
gone traveling
 
Join Date: Oct 2017
Location: Washington DC
Posts: 2
Collecting Social Security at age 62 is the best decision, here is why:

In October 2012, I turned 62 years old and had just been fired from my job. The last few years were hell. My bosses had done everything that they could to make my life miserable and get me to quit. I refused to quit because I was told by experts that I should work until I was 67, close to my regular retirement age to get full Social Security benefits. Well on my 62nd birthday- of all days- I was formally fired.

One side of me wanted to get right back on the rat race but another said it was time to call it a day and a career and retire and go on Social Security. (Early benefits at age 62) My friends and financial planner kept telling me that if I waited until 67 (or 70) I could get more money. But I kept telling them I did not have enough savings to stop work and not collect Social Security. Assuming a 4% average annual withdrawal from my $700,000 in savings and investments, I would need to collect both Social Security and take the annual 4% withdrawals to pay my living expenses.

So after much thought, I decided to retire and start collecting benefits and do the annual withdrawals.

Now 5 years later, I have done significant analysis and have determined that I will have more money up to my late 80s because I started to collect SS benefits at age 62 vs waiting until I was 67 years old. Here are the details:

On a 60/40 Stock Bond portfolio my $700,000 nest egg in October 2012, the month I turned 62 and was fired, with annual 4% withdrawals is now worth $1,036,551 today.

IF I would have waited to collect SS until I was 67 and have pulled out an additional $1300 a month out of the $700K to cover the lost Social Security benefits, above and beyond the 4%, to cover my expenses, I would have $933,638.00 today. ($102,913.00 less)

Yes, I would be getting $600 a month more in SS if I waited until I was 67 to collect. But it would take me 15 years to break even assuming no investment return from the additional $102,913. If I could get a 5% return going forward with my extra money, it would be 18 years before I broke even.

Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.
Glad to be retired is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-24-2017, 06:54 AM   #2
Moderator Emeritus
Ronstar's Avatar
 
Join Date: Aug 2007
Location: Northern Illinois
Posts: 16,543
Quote:
Originally Posted by Glad to be retired View Post
Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.


Good analysis. Others here have computed similar results. It's good to know that several people have arrived at the late 80's break even point.

But I'm still on track to begin SS at 66 years 2 months. But that could change.
Ronstar is offline  
Old 10-24-2017, 06:58 AM   #3
Recycles dryer sheets
 
Join Date: Feb 2014
Posts: 215
I also started taking my social security early, at 63. This is not what I initially planned. I stopped working just a few months before. The stock market is doing so well, I did not want to take any funds out at this time. I will have a long life based upon my family's and my health, and I am sure that my account will support me for my life now that I am not taking much money out of it.
__________________
DH retired 2014.
Sold my business in '16 and retired 5-17!
Ginny is offline  
Old 10-24-2017, 07:02 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 2,232
deleted, double post
HadEnuff is offline  
Old 10-24-2017, 07:03 AM   #5
Full time employment: Posting here.
 
Join Date: Jan 2011
Location: Southern Maine
Posts: 672
Quote:
Originally Posted by Glad to be retired View Post
On a 60/40 Stock Bond portfolio my $700,000 nest egg in October 2012, the month I turned 62 and was fired, with annual 4% withdrawals is now worth $1,036,551 today.
This is true since your portfolio when up about 45% in the last 5 years... but what would have happened if your portfolio was down 25%?
ChiliPepr is offline  
Old 10-24-2017, 07:04 AM   #6
Dryer sheet wannabe
 
Join Date: Mar 2014
Location: Orlando
Posts: 17
Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.[/QUOTE]
Hzefam is offline  
Old 10-24-2017, 07:04 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 2,232
I am in a similar circumstance as you, in that I have no pension income, so I have to live off of my nut and SS. Well, if I don't take the SS now ( I started a few months after 62nd birthday) I have to spend more of my nut, most of which is in various IRAs. If I wait until 67 I will have spend down my IRAs, and will be taking more of my SS income when in the required minimum distribution years, and will be paying more income tax on it, pushing the "break-even" date even farther down the road.

On top of all of that, my state does not tax SS benefits, but would be more than happy to tax my IRA income. By the time I get to my IRA withdrawals , I may well be a resident of a state that does not tax them.
I strongly suspect that for retirees with significant pension income, who are not spending down their nut, waiting may make a lot more sense than for you and me.
HadEnuff is offline  
Old 10-24-2017, 07:05 AM   #8
Dryer sheet wannabe
 
Join Date: Mar 2014
Location: Orlando
Posts: 17
Quote:
Originally Posted by Hzefam View Post
Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.
[/QUOTE]



Does it show this or does it show that under a particular set of circumstances it is better to collect at 62?
Hzefam is offline  
Old 10-24-2017, 07:15 AM   #9
Full time employment: Posting here.
Lawrencewendall's Avatar
 
Join Date: Feb 2017
Location: Severn
Posts: 947
I create a retirement scenario in personal capital drawing SS at 67. The scenario was automatically calculated based on historic annual returns of my portfolio (8.6%). I then created and saved another scenario drawing SS at 70. I was surprised and found it counter-intuitive that drawing at 67 gave me a larger portfolio at 75 and 80 than drawing at 70.
I then created and saved a scenario starting SS at 62. Low and behold my portfolio was hardly different than drawing SS 67 or 70. It then dawned on me that giving up the 8% yearly increase by waiting on SS was better than withdrawing from my portfolio pulling 8.6%. Now I realize that my portfolio may not always pull 8.6% but postponing SS will always pull around 8%. Someone on here actually did the math but you still get the point. And by drawing SS at 62, it lets me avoid pulling from the portfolio in a down market. Works for me.
Lawrencewendall is offline  
Old 10-24-2017, 07:18 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 2,509
I think there are many different best cases and it depends on personal circumstances. There are many variables... such as if and how one's SS is taxed, investment performance, amount and location of other assets, etc. I still have not sorted what is best for us. Early SS is at least 5 years away. I do have some time to decide.

Glad it worked for you.
bingybear is offline  
Old 10-24-2017, 07:18 AM   #11
Thinks s/he gets paid by the post
 
Join Date: Jul 2013
Posts: 1,876
Quote:
Originally Posted by ChiliPepr View Post
This is true since your portfolio when up about 45% in the last 5 years... but what would have happened if your portfolio was down 25%?
+1

This is an anecdote, not a sound strategy.
mrfeh is offline  
Old 10-24-2017, 07:38 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Nov 2015
Posts: 2,691
Quote:
Originally Posted by ChiliPepr View Post
This is true since your portfolio when up about 45% in the last 5 years... but what would have happened if your portfolio was down 25%?
When was the last occurrence of 25% reduction in the market for 5 year period?
bobandsherry is offline  
Old 10-24-2017, 07:46 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 1,087
Due to my personal circumstances, I am in the 62 camp.

Just ran Firecalc twice. First time was drawing SS at 62, second at 70. The average portfolio at "the end" was about 10% higher drawing at 62.
Z3Dreamer is offline  
Old 10-24-2017, 08:02 AM   #14
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,689
Say I have a $1,000,000 portfolio that drops 25% to $750,000. I would rather draw less from a $750K portfolio with the help of SS. If SS provides $30,000/yr at 62, ours does, I would be taking @ $40,000 rather than $70,000 from my portfolio if I wait to FRA. Historically, the market may drop but it rebounds. My state does not tax SS. We would be guaranteed $44K at FRA, provided politics does not interfere.

All things staying the same, $750K - $315K = $435K, that's what I'm left with starting SS at FRA. Take that out 30 years. Simple math leaves me with 14.5K/year until 95. $44K + $14.5 = 58.5K. We don't know the inflation rate of the future, don't know if SS will be there in the future or be less than what it is today. The market could drop even more or it could be over 25,000 in 2020.

Simple math shows without guessing RR or inflation, there are so many variables it's ridiculous. All you can really do is guesstimate your comfort zone. Is it the market or is it SS?
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline  
Old 10-24-2017, 08:04 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Aug 2010
Location: Back woods of Fennario
Posts: 1,170
An intangible benefit to the OP's strategy is that the risk of a future haircut is diminished. (This assumes current retirees will be somewhat less likely to get reduced benefits at the time of the haircut as opposed to future retirees.....not sure if that's true, but it will be a hard sell to not grandfather in everyone already in the game IMO.)
__________________
"Time wounds all heels...." - Groucho Marx
LRDave is offline  
Old 10-24-2017, 08:05 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Nov 2006
Posts: 1,637
I'm still a couple of years away from 62, so I'm not sure which way we'll go. Right now, I suspect I'll take at 62 and DW (higher earner) at 70.

But, last week I ran several scenarios through TurboTax and was somewhat surprised to see just how much taxes I was saving in the early years by taking SS early. Our effective tax rate is 3.4% lower with both of us taking SS early due to the 15% not taxed on Federal and none of it being taxed in my state. That is a several thousand dollar increase in income due to less taxes (on our projected income). Of course, the flip-side of that is if we wait until 70 an even larger SS payment will enjoy those same tax savings, so it's probably a wash over time. But, I imagine if you add in the tax savings of taking SS earlier, it will increase that break even age out a little bit.
PatrickA5 is offline  
Old 10-24-2017, 08:13 AM   #17
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Hopefully you collected unemployment after you left your job, which would have made the SS comparison even better.

You may have done OK, after all, SS is actuarial neutral.

I do not think you can do the final analysis yet. Only after you expire can you determine what age was actually better. And then, only after seeing your various investments. Would a SS check at 62 allow for more equities? What did equities do for the period that you were invested in them, etc.

Currently I plan on waiting until 70. My health is good, I have a surplus of funds, and I cannot collect anyway. Once I get to age 62, the decision gets tougher.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline  
Old 10-24-2017, 08:15 AM   #18
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 317
Quote:
Originally Posted by Glad to be retired View Post
In October 2012, I turned 62 years old and had just been fired from my job. The last few years were hell. My bosses had done everything that they could to make my life miserable and get me to quit. I refused to quit because I was told by experts that I should work until I was 67, close to my regular retirement age to get full Social Security benefits. Well on my 62nd birthday- of all days- I was formally fired.

One side of me wanted to get right back on the rat race but another said it was time to call it a day and a career and retire and go on Social Security. (Early benefits at age 62) My friends and financial planner kept telling me that if I waited until 67 (or 70) I could get more money. But I kept telling them I did not have enough savings to stop work and not collect Social Security. Assuming a 4% average annual withdrawal from my $700,000 in savings and investments, I would need to collect both Social Security and take the annual 4% withdrawals to pay my living expenses.

So after much thought, I decided to retire and start collecting benefits and do the annual withdrawals.

Now 5 years later, I have done significant analysis and have determined that I will have more money up to my late 80s because I started to collect SS benefits at age 62 vs waiting until I was 67 years old. Here are the details:

On a 60/40 Stock Bond portfolio my $700,000 nest egg in October 2012, the month I turned 62 and was fired, with annual 4% withdrawals is now worth $1,036,551 today.

IF I would have waited to collect SS until I was 67 and have pulled out an additional $1300 a month out of the $700K to cover the lost Social Security benefits, above and beyond the 4%, to cover my expenses, I would have $933,638.00 today. ($102,913.00 less)

Yes, I would be getting $600 a month more in SS if I waited until I was 67 to collect. But it would take me 15 years to break even assuming no investment return from the additional $102,913. If I could get a 5% return going forward with my extra money, it would be 18 years before I broke even.

Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.
I take it your single.
Murf2 is offline  
Old 10-24-2017, 08:26 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 26,819
Quote:
Originally Posted by Glad to be retired View Post
... Yes, this all shows that unless you live well into your late 80s, it is better to collect your SS benefits at age 62 if you are not working.
Sorry, but NO, it does no such thing.

First, there is no "one size fits all" answer to this. Second, your calculations ignore far too many important issues. That's just a start.

You created a false scenario when you said you could not retire at 62 w/o SS because 4% withdraws from your portfolio would not cover your expenses. You certainly can take a higher % for the years until you get that higher (for the rest of your life) SS. And then a higher % of your income stream is COLA'd. You would need to make some estimates for your own situation - again, not one size fits all.

The "break-even point" of ~ 80 YO, while it may be a reasonable mathematical calculation based on reasonable assumptions, isn't really the relevant calculation. It has been discussed many times, treat the delay of SS as "longevity insurance". We don't really think in terms of car or fire insurance as "break even", it is there in case we need it, and we know that on average we will pay for that insurance. So one can choose to delay SS to gain some insurance in case they live a long time.

And if you have a spouse, survivor benefits play into it. The odds of one of two living to a ripe old age are greater than any one living that long. Check out the longevity calculator at Vanguard for that.

I think it was member "Cut-Throat" who said it this way: "You can withdraw more now, knowing you will be withdrawing less later".

-ERD50
ERD50 is offline  
Old 10-24-2017, 08:28 AM   #20
Thinks s/he gets paid by the post
 
Join Date: Jun 2013
Posts: 1,019
Quote:
Originally Posted by bobandsherry View Post
When was the last occurrence of 25% reduction in the market for 5 year period?
From Jan 1 2000 to Jan 1 2009, Dow dropped 24%.

Hindsight is 20/20.
Which Roger is offline  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Started Social Social Security at age 62 but my break even date is well into my 80s Retired and Restless FIRE and Money 96 12-24-2016 11:49 AM
Earnings Test When Collecting Social Security Before FRA when Self Employed omysteve FIRE and Money 2 07-14-2015 04:21 PM
Collecting Social Security Early (Before 66) blueeyes88 Hi, I am... 8 05-12-2008 04:35 PM
collecting full social security and military retirement? miatagirl FIRE and Money 15 01-23-2007 12:58 PM

» Quick Links

 
All times are GMT -6. The time now is 03:05 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.