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

[ShokWaveRider]

I do not take mine simply so I can qualify for ACA subsidies. Maybe it is a blessing in disguise. Depending what happens in future years, I may hold off longer... I am eligible for Medicare in January of 2019. However, DW is not till 2023, so I do not know how that will turn out.

 

[joeea]

HOWEVER, the loss of the compounding of my investments from taking the larger withdrawals from 62 to 70 far exceeds the pickup from delaying SS payments until 70. I will most likely take my SS at 62...

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?

 

[CRLLS]

For us, every [-]year[/-] day we delay filing is one more [-]year[/-] day that we can deplete the 401K's and IRA's thus lowering the RMD's.

We did not claim at 62 to manage the ACA subsidy.

And to maximize the surviving spouse's benefit.

Everyone's situation and decisions are unique.

 

[haha]

Same here. I want Mrs Scrapr's next husband to be comfortable

Yes, ideally he will live high and contract gout.

Ha

 

[aza455]

None of the theories discussed in this thread take into account taxation. If taking SS later (rather than earlier) pushes you in the higher tax bracket, then your break even age is delayed even further.

It's not something that Kitzes could account for in his analysis due to variations in tax brackets but it makes a difference nevertheless.

 

[teejayevans]

None of the theories discussed in this thread take into account taxation. If taking SS later (rather than earlier) pushes you in the higher tax bracket, then your break even age is delayed even further.

It's not something that Kitzes could account for in his analysis due to variations in tax brackets but it makes a difference nevertheless.

If pushing SS out, then you can pull IRA money out now to avoid high RMDs later, certainly SS alone won’t be enough. That’s my plan.

 

[Cut-Throat]

You are focusing on How much Money you can 'Pile Up' instead of Focusing on How much you get to Spend. A common misunderstanding for someone your age because you are currently Piling up Money. When you are retired however, you are now spending money and it takes a slightly different thought process. No one knows when they are going to die or how much returns on investment or inflation will be in the future, so these calculations are pretty futile.

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You can actually Spend more money in your 60s by Delaying SS to age 70.

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.

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For a complete discussion on this Topic including inflation ramifications visit this link

https://www.bogleheads.org/forum/vie...ocial+Security

 

[Doc0]

I prefer the ERN spreadsheet for SS calculations

https://earlyretirementnow.com/2017...uide-to-safe-withdrawal-rates-part-7-toolbox/

It allows you to adjust when SS starts, when spousal SS starts, a 25% haircut etc. The sheet tells you safe withdrawal % instead of a given dollar amount, but you can adjust the factors up and down and see increasing or decreasing SWR v failure as you change parameters. With this calculator you can easily judge what taking SS and when does to your withdrawal. It takes a little fooling with to understand how to use it but well worth the effort for this kind of "what if"

 

[Pilot2013]

I think the politicians are going to stand back and watch the "law" as it's written do its work. By then we will be a gazillion in debt so there won't be any wiggle room. I'm not taking till 70 so my wife's spousal portion, whatever that is, will be maxed after I'm dead.

Your wife's won't change beyond your FRA amount for Survivor Benefit, I think?

 

[Perryinva]

None of the theories discussed in this thread take into account taxation. If taking SS later (rather than earlier) pushes you in the higher tax bracket, then your break even age is delayed even further.

It's not something that Kitzes could account for in his analysis due to variations in tax brackets but it makes a difference nevertheless.

How can taking SS later increase your taxes? For a given income, most states SS is untaxed, and at most only 85% of SS is taxed federally. For me that is about a $3500 reduction in taxes or $4700 less I have to take out of taxable accounts to have the same net amount. As said repeatedly, “it depends”. In many cases where your income is generated from is a most significant deciding factor. Pensions that preclude any chance of a 15% bracket make delayed filing much more attractive.

One other point not mentioned is that the assumption is that handling of and reacting to changes in investments is done as competently at 85 or 90 as it is for those now in ER. Rather presumptuous don’t you think? And as far as spousal support, while many are married couples here how many not posting are the more financially competent? DW has zero idea how to handle investing and has zero interest in learning. All she want is for me to die after her as far down the road as possible. I have to set her up to have as much income with as little effort as possible in case Inbite it younger. Delaying SS helps that significantly.

 

[frankbrenowitz]

Your wife's won't change beyond your FRA amount for Survivor Benefit, I think?

The spouse receives the higher of one half of the highest earner's benefit at FRA or the benefits based on his or her own record. At the death of the highest earner, the smaller benefit is discontinued and the survivor receives the highest benefit, including the value of the delayed retirement credits if the higher earner waited until 70 to start collecting benefits.

 

[Clone]

Regarding the spousal benefit: So long as spouse starts SS at FRA, they will be eligible for the age 70 benefit of higher earning spouse.

Check out this post and this thread:

This should clear things up. From the SSA https://www.ssa.gov/OP_Home/cfr20/404/404-0313.htm Learn something new every day.

(e) What is the effect of my delayed retirement credits on the benefit amount of others entitled on my earnings record?—(1) Surviving spouse or surviving divorced spouse. If you earn delayed retirement credits during your lifetime, we will compute benefits for your surviving spouse or surviving divorced spouse based on your regular primary insurance amount plus the amount of those delayed retirement credits. All delayed retirement credits, including any earned during the year of death, can be used in computing the benefit amount for your surviving spouse or surviving divorced spouse beginning with the month of your death. We compute delayed retirement credits up to but not including the month of death.

 

[Gryphon]

How can taking SS later increase your taxes? For a given income, most states SS is untaxed, and at most only 85% of SS is taxed federally. For me that is about a $3500 reduction in taxes or $4700 less I have to take out of taxable accounts to have the same net amount.

But if you're withdrawing the money from tax deferred accounts, you might not be allowed to withdraw that much less thanks to RMDs. The higher SS benefit plus your RMD might push you into a higher tax bracket.

That isn't going to stop me from waiting until 70 to collect SS, but it is a potential risk.

 

[mathjak107]

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?

it is not so much the returns you think you will get when spending down . it is the sequence of that return coming in that matters .

the same exact average return can see a difference of 15 years in how long the money will last over a 30 year period according to work by milivsky

 

[mathjak107]

Your wife's won't change beyond your FRA amount for Survivor Benefit, I think?

spousal is capped at the fra amount , survivor gets delayed credits to 70 too

 

[mathjak107]

But if you're withdrawing the money from tax deferred accounts, you might not be allowed to withdraw that much less thanks to RMDs. The higher SS benefit plus your RMD might push you into a higher tax bracket.

That isn't going to stop me from waiting until 70 to collect SS, but it is a potential risk.

yep , higher ss could be taxed at a higher marginal rate once rmd's kick in .

the loss of a spouse can really get painful when the other has to file single .

 

[Pilot2013]

Regarding the spousal benefit: So long as spouse starts SS at FRA, they will be eligible for the age 70 benefit of higher earning spouse.

Check out this post and this thread:

Thanks for the info. So, a surviving spouse that starts their benefit at 62 would not be eligible for the 70 benefit of the higher earning spouse?

 

[homestead]

Surviving benefit is separate from the spousal benefit.

 

[Pilot2013]

Surviving benefit is separate from the spousal benefit.

That's what I was thinking. So while I don't think it matters if wife starts at 62 as to her surviving spouse benefit, it's good to know that if I want/can wait until 70 to start SS, it would also result in a higher survivor benefit for DW.

 

[Doc0]

That also is my understanding

 

[Clone]

That's what I was thinking. So while I don't think it matters if wife starts at 62 as to her surviving spouse benefit, it's good to know that if I want/can wait until 70 to start SS, it would also result in a higher survivor benefit for DW.

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.

 

[JoeWras]

We plan to delay as late as possible as a form of longevity insurance.

But some people have to take it early. Understood.

 

[Perryinva]

But if you're withdrawing the money from tax deferred accounts, you might not be allowed to withdraw that much less thanks to RMDs. The higher SS benefit plus your RMD might push you into a higher tax bracket.

Yes, that is a possibility, depending on income and sources and as always it can go both ways. In many cases, like mine, where I will always have to pay fed taxes on 85% of SS, due to pensions, and plan to always live in a state that is tax free SS, drawing down from deferred tIRA to delay filing (I already have 35 + years maxed PIA) will lower my RMD enough that I will be right below a nominal 4% WR, so I am substituting full tax bracket withdrawals for tax free state and reduced federal tax income. Its nice to talk percentages but when it comes to real dollars it makes a bigger impact. That COLA 8% increase of my FRA is $2400/yr. I can always change my mind at any time while delaying. By taking it at 62, it eliminates any chance to roll over tIRA in to Roth, and a higher tax bill requiring a significantly larger than nominal 4%WR (larger than RMD) to equal the same net income, the rest of my life compared to delaying and reducing my taxed RMDs to slightly exceed my desired WR.

Delaying to after FRA allows me to never worry about needing invested money to eat and all my expenses plus. The larger Roth allows a lot of flexibility especially for the surviving half.

 

[Doc0]

Yes, that is a possibility, depending on income and sources and as always it can go both ways. In many cases, like mine, where I will always have to pay fed taxes on 85% of SS, due to pensions, and plan to always live in a state that is tax free SS, drawing down from deferred tIRA to delay filing (I already have 35 + years maxed PIA) will lower my RMD enough that I will be right below a nominal 4% WR, so I am substituting full tax bracket withdrawals for tax free state and reduced federal tax income. Its nice to talk percentages but when it comes to real dollars it makes a bigger impact. That COLA 8% increase of my FRA is $2400/yr. I can always change my mind at any time while delaying. By taking it at 62, it eliminates any chance to roll over tIRA in to Roth, and a higher tax bill requiring a significantly larger than nominal 4%WR (larger than RMD) to equal the same net income, the rest of my life compared to delaying and reducing my taxed RMDs to slightly exceed my desired WR.

Delaying to after FRA allows me to never worry about needing invested money to eat and all my expenses plus. The larger Roth allows a lot of flexibility especially for the surviving half.

This is close to my plan. I'm moving as much tIRA money as I can by Roth converting up to the 15% rate. To do that I need 0 income. So I am slicing off some post tax stocks and mixing them with tax harvested LT cap loss for money to live on while moving into Roth's. My post tax stocks/LT cap loss combo yields a $0 tax bill so I only pay the 15% on the Roth conversions. At 70 I'll have to RMD but I hope my tIRA will only throw off about 40K per year with 42.5K SS. This should keep me very close to the 15% bracket (with a little to pay the 15%) I can then slice of a little more post tax stock mixed with some cap loss to make up the rest of my nut.

 

[gayl]

Late to the party: sketchy coverage out traveling

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.

-ERD50

I'm glad you found something that works out for you but as ERD50 points out that this is an individual decision. There are several other factors that must be taken into consideration:

(1) spousal or divorced spouse benefits
(2) pension plans covering needs / wants
(3) other income outside stock / bond investments
(4) family longevity

I am taking my pension now, divorced spousal benefit at FRA, SSA @ 70, not dipping into IRA much until RMD (apx 6k yr) and I'm not alone with that being my best option IMHO