Collecting Social Security benefits at age 62

[Cut-Throat]

No, I said the government knows the odds and they aren’t giving anything away.

Yup, just like Insurance Companies. But that doesn't mean you shouldn't buy insurance.

 

[davismills]

I've seen many calculations here that make my head hurt as well.

I'm just curious if anyone has thrown in the often overlooked variable that SS payments are only taxed at 85% (during the 8-year delay window) versus IRA withdrawals being taxed at 100% during the same period.

I'm sure it's been done but my ER laziness precludes me from any further searches.

 

[marko]

I've seen many calculations here that make my head hurt as well.

I'm just curious if anyone has thrown in the often overlooked variable that SS payments are only taxed at 85% (during the 8-year delay window) versus IRA withdrawals being taxed at 100% during the same period.

I'm sure it's been done but my ER laziness precludes me from any further searches.

I've been advocating this for a few years. Plus, many states (like mine) do not tax SS as income; another 5.1% in my pocket.

 

[Perryinva]

I find all these arguments funny and pretty much pointless. Unless you know exactly when you are going to die you are ALL JUST GUESSING! So take it when you think it’s best for you. It’s still a guess and unless you are an outlier.....it is all a wash.

Do me a favor. Seriously, go walk through a cemetery. I did that just last weekend putting flowers on my dads grave. What a wake up call! BTW he died in 1991 unexpectedly of a heart attack at 58. I am still heartbroken 27 years later. As I walked around I was astounded at the ages people died. So many men in their 60’s and 70’s. I wondered how many bragged...we have good genetics in our family and longevity. We are waiting.......

Take it whenever you want, it’s just a guess, enjoy it, enjoy your decision, enjoy your life, you are just splitting hairs.

Some people sure have thinner skins than others. As I stated many times, I have no opinion on when anyone takes their SS. It is a total guess as to which choice is better, for exactly as stated above. It is the REASONS that people use to claim early (or late) as if they are so sure they are valid. I said point blank in my post that many better brains than ours have done this analysis ad nauseum. Its nothing new. Beat to death. A simple, “I feel better taking it early, because I want it now or I don’t trust the government ” is reason enough. The “gut math” used is silly. As CRLL stated it all depends on future ROR which no one can know, just like they don’t know when they will die.

Do you think anyone in that cemetery regrets anything? They are dead. Were you able to ask their still living spouses if they were glad they got the larger survivors benefit? Substitute “I took a walk through a low income home for the aged” and then see if your attitude takes an about face. Who is regretting it more, the ones in the cemetery or the ones living in a nasty place in their old age?

To get sensitive (which I am not, in the least) as to what is right, wrong or best choice, is a waste of time, pointless, and to get upset to the point of name calling, certainly immature. It is a discussion. Chevy or Ford, rent or own. Yada yada yada.

 

[Independent]

I've seen many calculations here that make my head hurt as well.

I'm just curious if anyone has thrown in the often overlooked variable that SS payments are only taxed at 85% (during the 8-year delay window) versus IRA withdrawals being taxed at 100% during the same period.

I'm sure it's been done but my ER laziness precludes me from any further searches.

Many people have tried. Somebody may have even shared a worksheet.

Yes, I'll pay lower taxes in the 62-70 period if I take SS at 62. But, then after 62 more of my income comes from IRA withdrawals, so I pay higher taxes then.

And I'll have higher RMDs if I defer. If I don't need the full RMD amount, I've got another tax complication. Then, think about withdrawals from taxable investments, Roth conversions, ACA premium subsidies, and not everyone is in the 85% taxable situation.

These tax optimization things get tied up in lots of individual circumstances. In my case, I played with the numbers long enough to convince myself that the taxes were pretty much a pay-me-now or pay-me-later situation.

 

[NYTech]

It really depends on good luck, good health and how much money you have. Take your numbers from ssa.gov. At 62 and $1650 a month you would get $403k by 83 years old. At 67 and $2300 a month you would get $441k by 83 years old. At 70 and $2900 a month you would $452k by 83 years old. So figure your budget and add 20%. Watch out for health insurance and tax, the chaos factors.

 

[pb4uski]

No, I said the government knows the odds and they aren’t giving anything away. .....

Then how do you explain that while longevity has improved over the last 20-30 years (a fact... due to advances in medicine, less smoking, et al partially offset by higher obesity) that the discount for taking SS early and the premium for delaying has not changed over the last 20-30 years?

 

[Cessna152]

The people who think the 4% SWR guideline makes sense can actually enjoy more money early in retirement by deferring their SS start date.

That's the answer to the (IMHO correct) question:

What are the maximum dollars per month that can be "safely" spent (for some quantifiable value of "safe") over a period of indefinite length when exercising SS at age 62 and at 70?

Once we have those two amounts we know enough to make a choice between the two SS exercise dates.

The units for the two answer values are in dollars per month, not years (i.e. break even date,) or average number of people, or kumquats. If we end up with answers in any other unit than dollars per month, then we certainly got an answer that doesn't address the question posed above (of course even correct units is no guarantee we answered the question as posed or answered it correctly.)

Crunching the numbers so as to get a break-even age doesn't yield a choice to the original question because the choice then requires knowing the answer to another question (unknowable for most of us): when do I think I'll die?

 

[Cut-Throat]

That's the answer to the (IMHO correct) question:

What are the maximum dollars per month that can be "safely" spent (for some quantifiable value of "safe") over a period of indefinite length when exercising SS at age 62 and at 70?

Once we have those two amounts we know enough to make a choice between the two SS exercise dates.

And the answer is:

http://www.early-retirement.org/for...benefits-at-age-62-a-90176-4.html#post1993410

 

[Perryinva]

For you. Not me.

 

[Cut-Throat]

For you. Not me.

For most people it is not for them... Most of us here are wealthier than the average joe that need S.S. at age 62 just to pay the Bills... So we are talking about the 2% of Men that delay S.S. to age 70, as this chart indicates....

https://www.fool.com/retirement/gen...the-average-american-start-collecting-so.aspx

But this is a Forum, that has a lot of folks that are astute about their finances, can afford to delay. I have always been glad that I am not in the Majority. (Retired 18 years now and wintering in Australia)

 

[DEC-1982]

I prefer to look at the 90% age where 90% have died and 10% survive past that and then add a couple more years for good measure.

This is an interesting thought. Is there any chart out there that shows at what ages people die?

e.g.
60-65 4%
66-70 8%
71-75 11%
76-80 22%
81-85 25%
86+

 

[North Texas Cajun]

For most people it is not for them... Most of us here are wealthier than the average joe that need S.S. at age 62 just to pay the Bills... So we are talking about the 2% of Men that delay S.S. to age 70, as this chart indicates....

https://www.fool.com/retirement/gen...the-average-american-start-collecting-so.aspx

But this is a Forum, that has a lot of folks that are astute about their finances, can afford to delay. I have always been glad that I am not in the Majority. (Retired 18 years now and wintering in Australia)

When to start early retirement does not depend entirely on one’s financial situation. Of course one’s assessment of his personal longevity is important. But also important is one’s assessment of his chances of being means tested for a partial or total reduction in SS benefits.

Further, if a wealthy retiree believes that his income will cause him to be means tested, there is also the matter of when such means testing will begin. Because the SS cash flow shortfall is now ten years old and accelerating - and the SS cash flow shortfall is already increasing the federal debt held by the public - some may believe that means testing will start before 2034.

 

[marko]

When to start early retirement does not depend entirely on one’s financial situation. But also important is one’s assessment of his chances of being means tested for a partial or total reduction in SS benefits.

Further, if a wealthy retiree believes that his income will cause him to be means tested, there is also the matter of when such means testing will begin.

This is one of my top 3 reasons on why I took SS at 62.
As a 'wealthy retiree', "take the money and run" is my mantra on this issue.

(Yes, I understand the current means testing of taxation on SS; no need to go there)

 

[Mdlerth]

Life expectancy

This is an interesting thought. Is there any chart out there that shows at what ages people die?

e.g.
60-65 4%
66-70 8%
71-75 11%
76-80 22%
81-85 25%
86+

Try this link from SSA

https://www.google.com/url?sa=t&rct...able4c6.html&usg=AOvVaw0Q-oED4A8s8rvid_0W4juQ

 

[street]

This is one of my top 3 reasons on why I took SS at 62.
As a 'wealthy retiree', "take the money and run" is my mantra on this issue.

(Yes, I understand the current means testing of taxation on SS; no need to go there)

Thanks and well said. I want the money in my younger age not when I'm older. I still feel I can do just as good taking the money early then waiting. For each their own. We all got to where we are at by not being or doing everything the same.

 

[joeea]

Behavioral Economics tells us that it is far easier to spend "their" money, rather than "my" money.

I have to believe that influences some (many?) to claim social security early and thus avoid having to spend from their retirement portfolio.

 

[CRLLS]

This is an interesting thought. Is there any chart out there that shows at what ages people die?

e.g.
60-65 4%
66-70 8%
71-75 11%
76-80 22%
81-85 25%
86+

You can try this link and read it.

Kitces Life Expectancy

It is from Kitces. Ages for the 10% survivors are: Males ~95 years, Females ~96 years. For married couples the remaining survivor at 10% is ~97. Even the likely hood for one survivor of a married couple reaching 95 yrs is 18%!

FWIW, I run my plan out to 100 yrs. I don't expect to live that long but want to be prepared to.

 

[North Texas Cajun]

With respect to SS, I think that spending “their” money may be wise. One may expect his spouse to significantly outlive him - and that spouse may have considerable SS benefits based on her own earned income. In that case - which I believe is fairly common - the rationale for taking SS early could be that IRAs are inheritable and SS benefits are not.

 

[pb4uski]

Behavioral Economics tells us that it is far easier to spend "their" money, rather than "my" money.

I have to believe that influences some (many?) to claim social security early and thus avoid having to spend from their retirement portfolio.

But..... but..... but..... I thought money was fungible?

 

[Dawg52]

Behavioral Economics tells us that it is far easier to spend "their" money, rather than "my" money.

I have to believe that influences some (many?) to claim social security early and thus avoid having to spend from their retirement portfolio.

But..... but..... but..... I thought money was fungible?

I'm using the bucket strategy. Tapping into the government's bucket first.

 

[joeea]

But..... but..... but..... I thought money was fungible?

That was my point.

Money is fungible. Classic economics tells us that actors will maximize their long term benefits by delaying whenever it is mathematically beneficial to do so. Behavioral economics tells us that actors don't always act in their best financial interest.

There was a classic experiment showing how we tend to value what we own more than we value what we don't yet own. Participants first given a Swiss chocolate bar were generally unwilling to trade it for a coffee mug, whereas participants first given the coffee mug were generally unwilling to trade it for the chocolate bar. The cash value of the chocolate and the mug was the same.

Other experiments show that we tend to endow owned objects with about twice the value of an unowned object.

Thus we value our retirement portfolio ("our stuff") more than we value the social security benefit ("their stuff) - even to our financial detriment. It's just human nature. And it's not hard to construct a mental map showing why our choice is wise, even if the math says otherwise.

That's why I say it's hard to find someone who made a choice to start collecting social security benefits at any age who isn't pleased with the choice actually made.

 

[Independent]

Behavioral Economics tells us that it is far easier to spend "their" money, rather than "my" money.

I have to believe that influences some (many?) to claim social security early and thus avoid having to spend from their retirement portfolio.

I'm sure that's part of it.

"I've spent a lifetime accumulating this nest egg. I just can't bear to spend it down any faster than I have to."

 

[North Texas Cajun]

That was my point.

Not sure I understand your point. IRAs can be passed on to heirs. SS cannot. Further, in many cases, widows may not receive any of a spouse’s benefit after he dies. But both taxable and non-taxable retirement savings are generally 100% available to the surviving spouse.

 

[Independent]

When to start early retirement does not depend entirely on one’s financial situation. Of course one’s assessment of his personal longevity is important. But also important is one’s assessment of his chances of being means tested for a partial or total reduction in SS benefits.

Further, if a wealthy retiree believes that his income will cause him to be means tested, there is also the matter of when such means testing will begin. Because the SS cash flow shortfall is now ten years old and accelerating - and the SS cash flow shortfall is already increasing the federal debt held by the public - some may believe that means testing will start before 2034.

Yes.
And, how would that hypothetical means testing work? Would it be based on private assets and income only? Or, would it include SS? And, where would the cut-off, or grade-off begin?

I can construct a "plausible" means testing where it's best to defer SS, spend down assets, and have lower private "means" at the time.

I won't speculate on whether that's the most likely political result.