Collecting Social Security benefits at age 62

[North Texas Cajun]

I sense means testing is for the younger generation who has not contributed. The older population that contributed their whole life would throw a sh_t fit. I've contributed since age 14. DH, close behind. They need to raise the cap from $118K. What's wrong with that and save the entire program, right? Do kids know how to save better than we did? My experience says, not.

Not sure if we’re allowed to speculate on what the government might do. But I think we can talk about how economists’ proposals might impact our rtirement planning.

Here’s what I’ve generally seen proposed by economists for solving the SS shortfall (which is real today, not in 16 years):

1. SS full retirement age is gradually increased to age 70;

2. SS benefits are means tested - very soon - so that retirees with $500k non SS income receive $0, smaller sliding scale reductions for retirees with $499k down to $150K in non-SS income;

3. Income tax cap for SS tax eliminated.

For me - currently age 66 - that current retirees paid in all their lives is unimportant. Younger people will also pay in all their lives but will likely also see reduced benefits from current levels (in real, inflation adjusted $).

 

[pb4uski]

Sorry, but you are mistaken. Interest only counts if cash is moved as a result. Treasury never sends cash to SS for the accounting entry “Accrued Interest”.



Again, Treasury does not send cash to SS. Social Security checks are sent to SS beneficiaries directly from Treasury - either via paper in the past or electronically today. SS Administration is primarily an accounting and enforcement entity. They do tell Treasury who to send checks to and how much.

By not focusing entirely on cash flow, you are distorting - as the SS Adminstration has distorted - the true financial situation of the government’s SS program. The SS Trust “Fund” is very much like Enron’s Special Purpose Entities: both have hidden from investors/taxpayers the true picture of how underfunded or over-leveraged is the business/program.

No.... you're wrong. Even now, taxes collected are less than benefits paid... the Treasury pays the excess and reduces the amount that it owes the SS Trust Fund by the amount that they paid... which is substantively the same as what I stated above. Currently, the interest on the trust fund assets exceeds the deficiency so a portion of the interest on trust fund assets is paid in cash and the remainder is reinvested.

Also, the fact that the general Treasury owes money to the SS Trust Fund is very prominently disclosed as a portion of the National Debt. If it was excluded from the National Debt number then you might have a point.

Google "fund accounting" to learn more. It is no different than if the SS Trust Fund was a separate entity from the US Government and had bought US Government bonds with its surpluses over the years and was now using some pf the interest from the bonds to make up the difference between taxes taken in and benefits paid out.

The funding status of SS is all well laid out in the SS Trustees annual reports which are readily available to the public... it is no deep, dark secret.

 

[Exrook]

Just curious - If I (the higher income earner) decide to delay to 70 and I die before 70, does DW receive my FRA amount?

I think they receive any delayed retirements credits you earned as of the date of your death.

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

However, when you start your retirement benefits also affects the amount your surviving spouse may receive. If you start your benefits:

• before full retirement age, we cannot pay your surviving spouse the full benefit amount from your record. The maximum survivors benefit is limited to what you would receive if you were still alive.
• after full retirement age, your surviving spouse may receive your full benefit amount plus any accumulated delayed retirement credits.

Accidents or unexpected changes in your circumstances can't be ruled out, of course, so your final decision may be based on your "best guess" about your future.

 

[Independent]

I think they receive any delayed retirements credits you earned as of the date of your death.

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

That has nice, clear language that answers a question that comes up here from time to time. I thought I'd save the link. But, when I followed the link, I didn't see this. Did you click through to some other page?

 

[Sunset]

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?

Interesting, I wonder if it's in the future.

Canada has increased their discount for taking CPP earlier , they phased it in over 5 years.
It used to be 0.5% , now after phasing it in, is it 0.6% taken off for every month earlier than age 65. CPP can be taken as early as age 60.

https://retirehappy.ca/taking-cpp-early-the-new-breakeven-points/

 

[North Texas Cajun]

Google "fund accounting" to learn more. It is no different than if the SS Trust Fund was a separate entity from the US Government and had bought US Government bonds with its surpluses over the years and was now using some pf the interest from the bonds to make up the difference between taxes taken in and benefits paid out.

The funding status of SS is all well laid out in the SS Trustees annual reports which are readily available to the public... it is no deep, dark secret.

Sir, I’ve probably read every Trustees annual report offerred for the past 15 years.

Relying on a SSA report to gain undersanding of SS financial condition is like relying on Enron’s annual report to decide whether to invest in the company. Every thing they both write is true, but also incomplete and potentially misleading.

As I wrote before, the clearest explanation of SS funding problems was provided, amazingly, by Obama’s OMB:

From page 385 of the Analytical Perspectives section of President Obama’s FY2017 budget, prepared on February 9, 2016 by Obama’s Office of Management and Budget:

“When trust fund holdings are redeemed to fund the payment of benefits, the Department of the Treasury finances the expenditure in the same way as any other Federal expenditure—by using current receipts if the unified budget is in surplus or by borrowing from the public if it is in deficit. Therefore, the existence of large trust fund balances, while representing a legal claim on the Treasury, does not, by itself, determine the Government’s ability to pay benefits.”

https://www.govinfo.gov/features/featured-content/Budget-FY2017

In case that is not clear to you, they are admitting that the Trust Fund actually funds nothing. The accumulated surpluses and the interest paid on those surpluses cannot pay SS benefits. The surpluses are already gone and the interest never existed except as an accounting entry. Only newly collected taxes and new borrowings can pay SS beneficiaries the cash that is deposited into their bank accounts.

 

[Exrook]

That has nice, clear language that answers a question that comes up here from time to time. I thought I'd save the link. But, when I followed the link, I didn't see this. Did you click through to some other page?

You need to click on the box that says:

Will other family members qualify for benefits with you on your record?

It will open up the block of text that contains the info I quoted.

 

[pb4uski]

Sir, I’ve probably read every Trustees annual report offerred for the past 15 years.

Relying on a SSA report to gain undersanding of SS financial condition is like relying on Enron’s annual report to decide whether to invest in the company. Every thing they both write is true, but also incomplete and potentially misleading.

As I wrote before, the clearest explanation of SS funding problems was provided, amazingly, by Obama’s OMB:

From page 385 of the Analytical Perspectives section of President Obama’s FY2017 budget, prepared on February 9, 2016 by Obama’s Office of Management and Budget:

“When trust fund holdings are redeemed to fund the payment of benefits, the Department of the Treasury finances the expenditure in the same way as any other Federal expenditure—by using current receipts if the unified budget is in surplus or by borrowing from the public if it is in deficit. Therefore, the existence of large trust fund balances, while representing a legal claim on the Treasury, does not, by itself, determine the Government’s ability to pay benefits.”

https://www.govinfo.gov/features/featured-content/Budget-FY2017

In case that is not clear to you, they are admitting that the Trust Fund actually funds nothing. The accumulated surpluses and the interest paid on those surpluses cannot pay SS benefits. The surpluses are already gone and the interest never existed except as an accounting entry. Only newly collected taxes and new borrowings can pay SS beneficiaries the cash that is deposited into their bank accounts.

What they are clearly saying in the quoted section, and I agree with, is that the Treasury's ability to make good on its IOUs to the SS Trust Fund depends on their continuing ability to borrow... as I said earlier, they will need to issue more debt to pay off this existing debt. But that true for all government debt that matures.... owned by the SS Trust Fund or institutions or individuals or the Chinese...... unless there is a current FY surplus they issue new debt and use the proceeds to pay off existing debt. This is not at all unusual so I'm not sure why you are so wound up about it. It sounds like you believe that there should be some sort of sinking fund for maturing debt ... the world just doesn't work that way.

US government debt is the most credit worthy debt on the planet... they don't use the saying "full faith and credit" for nothin'. There is no reason to believe that the U.S. government will ever get to the point where it is unable to refinance its maturing debt... including its owings to the SS Trust Fund.... especially between now and 2034 when all that debt will have been redeemed. If it ever happens that the government can't refinance its maturing debt, then collecting SS will be the least of our problems.

That said, we'll just need to agree to disagree (as I suggested many posts ago).

 

[skipro33]

Federal government funding runs out Friday I hear. But even then, Social Security is a mandatory program that will continue even if Congress fails to pass a spending bill.

 

[Independent]

You need to click on the box that says:
It will open up the block of text that contains the info I quoted.

Thanks.
I tried that earlier and again just now, it just took me back to the first page.
I'll assume that something is temporarily not working for me and try again on another day.

 

[Independent]

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?

That is an interesting fact.

At first I read "The discount for starting early" as the ratio between the benefit if you start at 62 vs. your PIA. That number has/will certainly go down. It was .80, it went to .75, and it will go to .70.

But, then I thought about the ratio between starting at 70 and starting at 62. That number has hardly moved:
1.40/.80 = 1.75
1.32/.75 = 1.76
1.24/.70 = 1.77

 

[GravitySucks]

Not sure if we’re allowed to speculate on what the government might do. But I think we can talk about how economists’ proposals might impact our rtirement planning.



Here’s what I’ve generally seen proposed by economists for solving the SS shortfall (which is real today, not in 16 years):

1. SS full retirement age is gradually increased to age 70;



$).

Great. I suppose it's easy to be an economist at 70. Probably not much fun to be a mason.

Like the old joke - It's not a depression until the economists get laid off. Everyone else gets laid off and it's a recession.

 

[Independent]

Not sure if we’re allowed to speculate on what the government might do. But I think we can talk about how economists’ proposals might impact our rtirement planning.

Here’s what I’ve generally seen proposed by economists for solving the SS shortfall (which is real today, not in 16 years):

1. SS full retirement age is gradually increased to age 70;

2. SS benefits are means tested - very soon - so that retirees with $500k non SS income receive $0, smaller sliding scale reductions for retirees with $499k down to $150K in non-SS income;

3. Income tax cap for SS tax eliminated.

According to the BLS, there are 21,000 people working in the US with job title "economist". I expect any of the many suggestions for changing individual provisions of the SS rules will be supported by more than one economist.

Are you saying there is a clear consensus for #2, or just that you saw it suggested by a couple people?

 

[North Texas Cajun]

According to the BLS, there are 21,000 people working in the US with job title "economist". I expect any of the many suggestions for changing individual provisions of the SS rules will be supported by more than one economist.

Are you saying there is a clear consensus for #2, or just that you saw it suggested by a couple people?

Please note that I said proposals from economists I’ve seen. Probably half the dozen or so economists I’ve read on the subject do not propose or analyze solutions. Those who did advocated multiple part solutions very close to what I listed.

I apologize. For no 2, I meant the income levels I showed to be an example of what I have seen proposed. Some of the proposals did not specify exact amounts, but suggest sliding scale means testing. But here’s three from economists and a legislator that did specify levels, and below are the married filing jointly levels in their proposals:

David John in 2012 proposed these reductions for couples:

1. Below $110K income - no reduction
2. $110K to $154K - 1.8% benefit reduction for every $1K above $110K
3. $155K and above - no SS benefit


Jason Chaffetz’s 2011 proposal for married couples:

1. Below $120k - no reduction
2. $121K to $359K - 0.4% reduction for every $1K above $120K
3. $360K and above - no SS benefit

Center for Economic and Policy Research in 2011 analyzed set of measures which included, for couples:

1. Below $200K - no reduction
2. $200K to $549K - max benefit reduced by 10% times income above $200K
3. $500K and above - no SS benefit

Chaffetz is not an economist, but I think it likely he had his proposal worked up by someone with an economics background.

 

[Cessna152]

Summary of changes that have been proposed to SS to make it solvent:

https://www.ssa.gov/OACT/solvency/provisions/index.html

(Note that "All categories" includes short summaries with the percentage of the shortfall each proposal is estimated to reduce.)

Under the category that affects monthly benefit payouts (Primary Insurance Amount (PIA)) it looks like most proposed changes would apply only to "newly eligible" individuals after some date in the future.

While some of the proposals under the COLA category would affect existing current retirees, others target newly eligible recipients.

 

[Independent]

Please note that I said proposals from economists I’ve seen. Probably half the dozen or so economists I’ve read on the subject do not propose or analyze solutions. Those who did advocated multiple part solutions very close to what I listed.

I apologize. For no 2, I meant the income levels I showed to be an example of what I have seen proposed. Some of the proposals did not specify exact amounts, but suggest sliding scale means testing. But here’s three from economists and a legislator that did specify levels, and below are the married filing jointly levels in their proposals:

David John in 2012 proposed these reductions for couples:

1. Below $110K income - no reduction
2. $110K to $154K - 1.8% benefit reduction for every $1K above $110K
3. $155K and above - no SS benefit


Jason Chaffetz’s 2011 proposal for married couples:

1. Below $120k - no reduction
2. $121K to $359K - 0.4% reduction for every $1K above $120K
3. $360K and above - no SS benefit

Center for Economic and Policy Research in 2011 analyzed set of measures which included, for couples:

1. Below $200K - no reduction
2. $200K to $549K - max benefit reduced by 10% times income above $200K
3. $500K and above - no SS benefit

Chaffetz is not an economist, but I think it likely he had his proposal worked up by someone with an economics background.

Thanks.

I couldn't find the David John proposal. Maybe you have a link.

I found the SS actuaries' analysis of the Chaffetz proposal here: https://www.ssa.gov/oact/solvency/JChaffetz_20111109.pdf
It puts the value of the means testing at .24% of taxable payroll, or about one-tenth of all the changes that Chaffetz proposed.
(Note that this write up limits the reduction to 50%, you many have a different source.)

I found the CEPR paper here: https://www.google.com/url?sa=t&rct...-2011-03.pdf&usg=AOvVaw18BAZV3V9aoR0GLjhLP9oJ
Note that they are not promoting means testing. The point of the paper seems to be to throw cold water on it, saying the the dollars saved are less than you might expect. Table 1 on page 4 is worth considering. (Note, however, that the data comes from the CPS, IRS records may give somewhat higher incomes.)

I think this https://www.ssa.gov/oact/solvency/ could be interesting.
These are proposals that have enough clout to get analysis time from the SS actuaries. It seems that looking at each proposal and seeing if it includes a means testing provision would be a good way to gauge the political chances of the idea. Although either of us can do that, I'm not sure how much resulting discussion the moderators would tolerate.

For my personal planning, I'm not giving means testing a very high probability.

 

[Cut-Throat]

For my personal planning, I'm not giving means testing a very high probability.

+1 .... Most of these people will want to fly 'under the radar'....

 

[pb4uski]

For those interested in learning more on option to fix SS this link is interesting to see how various moves help towards solving the problem.

Try your hand at Social Security reform | American Academy of Actuaries

 

[PERSonalTime]

You miss my point;
It's not about how much money I have available to safely spend, it's the quality of life I'll be able to enjoy.
Isn't that the whole point of retiring early? To build up a source of income to safely see you to the end and to enjoy the prime of life at a higher quality with the spoils? When better to enjoy that quality of life than when you are still able? When is enough enough and it's time to enjoy the fruits of your labors?

I've spent most of my adult life LBYM so that one day I wouldn't have to. I want to be 85, sitting in a rocking chair on the front porch, not regretting what I didn't do, but recalling all I was able to do. One day we will wake up and there will be no more time to do the things we want to do. Do them now.

+1!

Couldn't said it better.[emoji106]

 

[PERSonalTime]

A bird in hand is worth two in the bush. Collect it and reinvest it until 70. The major assumption here is that you have the self discipline to do this.

If you and your wife are spenders, this will likely not work well for you, but if you are spenders, you probably NEED the SS to break even. (No judgement intended here, just being brutally honest).

PoorOldCountryBoy,

So what did you do, 62 or later?

 

[JonB]

Just retired this month at 55 and learning a lot from this site! Sorry if this has been addressed before, but I couldn’t find it if it has.

I still have 7-15 years until I am in the age range when I need to make decisions on taking SS benefits, so have some time and can reevaluate as things change in the coming years. I understand that my DW, who is 6 months older than me, will not be eligible for benefits on her own, so she will need to wait until I start taking mine and then receive half what I receive as her spousal benefit. If I understand correctly, her benefit maxes out at half of what I receive at full retirement age, and does not grow further, while mine could continue to grow to age 70. I am thinking that since her benefit doesn’t grow past my FRA, we should plan to start taking benefits no later than my FRA. Seems it is not a wash since her benefit does not grow past my FRA.

We may consider to take earlier due to health, or other reasons mentioned in this thread, but was wanting to see if there are any good reasons to consider delaying from 67 to 70? The only one that I can think of is that if one of us dies significantly before the other, the survivor will receive a higher benefit, but the difference in how long we each live would need to be very large to make up for the lost benefits of delaying past 67. Am I thinking about this correctly?

 

[Cut-Throat]

but was wanting to see if there are any good reasons to consider delaying from 67 to 70? The only one that I can think of is that if one of us dies significantly before the other, the survivor will receive a higher benefit, but the difference in how long we each live would need to be very large to make up for the lost benefits of delaying past 67. Am I thinking about this correctly?

No. - You get more money from 67 to 70.... And you both might live a long time.

 

[pb4uski]

Check out SSAnalyze.

 

[Chuckanut]

No. - You get more money from 67 to 70.... And you both might live a long time.

Mr CT makes a good point. But, the qualification is you are NOT interested in leaving an estate for others.

 

[Jerry1]

Went to eat lunch with DD and SIL both in their early 30's. Having just retired, the subject came up and one thing I mentioned was that me and DW were going to have to determine when to take SS. Without a bit if hesitation, DD said "Why wouldn't you take it right away, before it's no longer available." Just sharing that as an FYI as to what the younger generation is thinking about SS and their faith of it being there when they need it.