Don’t need social security

[Joylush]

I’ve read a lot on when to file for social security. There are so many different thoughts on this.

Doesn’t it make sense to file early or at least at your FRA if you don’t need it at all? Wouldn’t this allow you to keep more of your own money which your heirs can actually get one day?

It’s just added income you can save if you start taking it. I understand waiting to take it to get a higher amount if you will rely on it for needed income but I can’t figure out why it makes sense to wait if you know you’ll never need it anyway.

 

[pacergal]

That's what fueled our decision to take at 62. Our pensions cover our bills, and are 100% joint survivor.
SS allows us to up our budget a bit, give some to kids now, and even save a bit more for unexpected things that crop up.
It is a blessing.
Did what feels/is right for YOU

 

[candrew]

DW & I have decided to hold off claiming SS until age 70. Longevity exists on both sides of our family and we view SS as our "old age insurance".

 

[Trailwalker]

Life throws curves. I don't "know" that I won't ever need it. I know that I won't need it next year. I plan on kicking the can for at least five years. Then I'll look at it again. Agree that everyone should do what they feel is right. No guarantees on how long the ride will last.

 

[CRLLS]

If only my crystal ball was 100% accurate in knowing the future! One can run thru a number of calculators that will predict what the right decision would be. Unfortunately the only way to know is at the end. Calculators are only as good as one's assumptions input. And most of the inputs are assumptions.

If taking SS at age 62 works for you, then great. Take it and don't look back. Everyone's situation and needs for the future are different. I can say that personally I have never been able to predict my life's situation 30 -40 years in advance. DW took SS at FRA, I took it at 70. This provides the higher amount for the survivor. Taxes for singles would be much higher. Hopefully, the higher SS will help to provide a comfortable life for one of us.

 

[Dtail]

The number question on the site. Hard to say what is exactly correct. Only a few situations call for a definitive conclusion.
I am managing MAGI for ACA and am getting a lump sum pension at 65. So 66 is the earliest for me.

 

[pb4uski]

... Doesn’t it make sense to file early or at least at your FRA if you don’t need it at all? Wouldn’t this allow you to keep more of your own money which your heirs can actually get one day?...

Not necessarily. If you don't need it then you need to assess the likelihood that you will outlive the actuarial assumptions implicit in the discount compared to taking at age 70. Another important assumption would be the real rate of return on the assets that you will use for spending money while you defer.

As an example, if you are in great health and have really good family longevity then you'll collect more than you forgo by a wide margin, so that would be one situation where it is definitely silly to start early.

Have you played around with opensocialsecurity.com?

Below are the expected present value of SS benefits based on the assumptions of a single male born on 11/15/1960 with a $1,000/mo PIA. I change the default mortality assumption to the 2017 CSO Nonsmoker Preferred mortality table and the interest rate assumption to 2% (real rate of return).

The expected present value of benefits is $146,847 at 62 and 1 month, $155,315 at the "optimal" age of 68 and 6 months, $153,657 at age 70.

In order for 62 to be optimal you would need a 4.1% real rate rate of return with all other assumptions held constant. So that is 4.1% plus inflation for a nominal return on investments that you are not using because you are taking SS.

That's for a single person. In my case, married with a SAHM spouse whose PIA is less than half of mine and we are both in good health, 70 is the best option.

 

[MRG]

Maybe. Maybe not. I retired at 56, now a decade later SS sounds interesting haven't taken mine yet. DW gets hers now. We have no heirs.

I haven't been thinking about it too much but.... I have longevity and dementia in my family, DW not so much. Mine is supposed that be a significant amount that I would like to have now, but it's much less if I take it now. If I got the correct numbers the ~3k I would get today is ~4.2k monthly in 4 more years. I will definitely wait till FRA and evaluate then and every 6 months.

You need to consider taxes to answer your question about heirs.

 

[RunningBum]

Doesn’t it make sense to file early or at least at your FRA if you don’t need it at all? Wouldn’t this allow you to keep more of your own money which your heirs can actually get one day?

Not if you live past the breakeven point. I don't know why so many people say it leaves your heirs more money without addressing this.

It’s just added income you can save if you start taking it. I understand waiting to take it to get a higher amount if you will rely on it for needed income but I can’t figure out why it makes sense to wait if you know you’ll never need it anyway.

I don't think I'll need SS but I don't know this. If things go badly due to poor returns and unexpected high expenses combined to living a long life I'd rather have the longevity insurance of higher monthly benefits. This makes SS a hedge against a down market.

Most likely it doesn't really matter and you can do what you want. I'm just pointing out some opposing views of the reasons you give. Do what you will with that info.

 

[explanade]

Not necessarily. If you don't need it then you need to assess the likelihood that you will outlive the actuarial assumptions implicit in the discount compared to taking at age 70. Another important assumption would be the real rate of return on the assets that you will use for spending money while you defer.

Have you played around with opensocialsecurity.com?

Below are the expected present value of SS benefits based on the assumptions of a single male born on 11/15/1960 with a $1,000/mo PIA. I change the default mortality assumption to the 2017 CSO Nonsmoker Preferred mortality table and the interest rate assumption to 2% (real rate of return).

The expected present value of benefits is $146,847 at 62 and 1 month, $155,315 at the "optimal" age of 68 and 6 months, $153,657 at age 70.

In order for 62 to be optimal you would need a 4.1% real rate rate of return with all other assumptions held constant. So that is 4.1% plus inflation for a nominal return on investments that you are not using because you are taking SS.

That's for a single person. In my case, married with a SAHM spouse whose PIA is less than half of mine and we are both in good health, 70 is the best option.

Those figures don't seem that far apart.

That's like over the expected life of the recipient? So if he or she was getting $25k a year say, that's only like a little over 6 years?

 

[pb4uski]

I’ve read a lot on when to file for social security. There are so many different thoughts on this.

Doesn’t it make sense to file early or at least at your FRA if you don’t need it at all? Wouldn’t this allow you to keep more of your own money which your heirs can actually get one day?

It’s just added income you can save if you start taking it. I understand waiting to take it to get a higher amount if you will rely on it for needed income but I can’t figure out why it makes sense to wait if you know you’ll never need it anyway.

Here is another way to think about it. Let's say that your PIA is $1,000/mo at aage 67. At age 62, it would be 70%, or $700/mo and at age 70 it would be 124% or $1,240/month.

So if you wait until 70, you forgo $67,200 [$700/mo*12 mos * (70-62)] but in exchange begnning at age 70 you get $540/mo more or $6,480/yr more for the rest of your life. That is a payout rate of 9.6% plus the benefits increase with inflation.

It is very hard to find a COLA adjusted life annuity in the commercial market these days... SS is one of the few opportunities where you can buy a COLA adjusted annuity of $540/month for life beginning at age 70 by making 96 payments of $700/month starting at 62.

 

[Car-Guy]

We don't need it but both the DW and I took it at 62. We give most of it to the DD in the form of annual "gifts". Lot's of reasons for taking it early, "like" we knew too many folks that died waiting for the "so called" FRA... I wanted some of what I was forced to contribute all those years. At this point, it looks like one of us "may" make it to break even point... Maybe. Regardless, no regrets.

 

[pb4uski]

Those figures don't seem that far apart.

That's like over the expected life of the recipient? So if he or she was getting $25k a year say, that's only like a little over 6 years?

If your PIA were $25k a year, then all the $ numbers in the example would be multiplied by 2.0833 [($25,000/12)/$1,000]

 

[aaronc879]

It all depends on your expected lifespan. If you are reasonably confident you will live to 90+ then you will get more money by waiting. If you will die in your 70's then start at 62. Most people don't know their exact death date so it's not an easy choice.

 

[jollystomper]

I’ve read a lot on when to file for social security. There are so many different thoughts on this.

Doesn’t it make sense to file early or at least at your FRA if you don’t need it at all? Wouldn’t this allow you to keep more of your own money which your heirs can actually get one day?

It’s just added income you can save if you start taking it. I understand waiting to take it to get a higher amount if you will rely on it for needed income but I can’t figure out why it makes sense to wait if you know you’ll never need it anyway.

If I were single, I would probably lean in this direction. I would want to get it sooner, to "enjoy" it more. But since I am married, and want to ensure, in the likely event of me passing first, that I am providing the best for my DW, I am not in a rush to take it. We do not need it now, but she will have more or a need for it if I die first. That is why I do not plan to take it now.


A secondary reason is to do more Roth conversions, which will benefit my heirs more than me taking SS now.


EDITED TO ADD: I am fortunate to be getting the maximum SS benefit, so for us our plan makes a lot of sense.

 

[rodi]

As others have said - every household is different.

Single people - it's actuarily neutral - but family history of longevity, or the inverse can factor in.

If you collect and have minor age children, they qualify for a benefit. This was our case - we had middle schoolers when DH turned 62 and retired. It made total sense for him to collect at 62 given the extra family income for the kids.

Also - a lot of people don't realize that when one person in a couple dies, the survivor gets the larger of their combined benefits - but does not get to continue with BOTH benefits. So it can make a lot of sense if there are disparities in SS income benefits to have the person with the higher wage history wait till later to increase the benefit for whoever the survivor is.

Some people collect early anticipating RMD tax torpedos when RMDs kick in.

There is no 'one size fits all'.

 

[Car-Guy]

Some people collect early anticipating RMD tax torpedos when RMDs kick in.

I had totally forgotten about that being one of my reasons for taking it early. That may start to pay off now. It's going to be close this year but regardless I'll be in the bottom tier now rather than the top. But I think I'm going to be able to squeak by. I'm actually working my taxes today so I'll know pretty soon.

 

[explanade]

If your PIA were $25k a year, then all the $ numbers in the example would be multiplied by 2.0833 [($25,000/12)/$1,000]

Ah I missed the part where you were assuming $1000 a month payment.

Still if the difference for age 62 vs. age 70 is only about $7k for $1000 a month, then a $2000 a month payment the difference would be about $14k total over the expected life of the recipient?

I guess the thing about taking it earlier is that if you have other income you're paying greater taxes because of the SS payments.

OTOH, if you withdraw less from those other income sources, your retirement savings would be expected to appreciate more over those 8 years.

 

[Midpack]

DW & I have decided to hold off claiming SS until age 70. Longevity exists on both sides of our family and we view SS as our "old age insurance".

It's that simple for us too. Why settle for less by taking it early, whether we need it or not is irrelevant IMO. We don't need it on paper, but none of us know how the next 30 odd years will play out, so I'd rather maximize SS in case.

 

[explanade]

Average social security benefit payment is about $1600-1700, or around $20k annually.

Average here at ER should be higher but OTOH, people who retired early had no SSA contributions for several years, maybe well over a decade.

 

[Samsung4321]

Here is another way to think about it. Let's say that your PIA is $1,000/mo at aage 67. At age 62, it would be 70%, or $700/mo and at age 70 it would be 124% or $1,240/month.

So if you wait until 70, you forgo $67,200 [$700/mo*12 mos * (70-62)] but in exchange begnning at age 70 you get $540/mo more or $6,480/yr more for the rest of your life. That is a payout rate of 9.6% plus the benefits increase with inflation.

It is very hard to find a COLA adjusted life annuity in the commercial market these days... SS is one of the few opportunities where you can buy a COLA adjusted annuity of $540/month for life beginning at age 70 by making 96 payments of $700/month starting at 62.

Another way: If don't need it before death, what is (future) value at death?

Death age 92, real return rate with least difference in outcome 5.560%:

[SIZE=4][B]92[/B][/SIZE]            
 Age    PIA/mth    [SIZE=4][B]5.560%[/B][/SIZE]    Formula
62    700    -$614,825.47     =FV($C$2, ($A$1 - A3), 12 * B3, 0)
67    1000    -$618,973.08     =FV($C$2, ($A$1 - A3), 12 * B3, 0)
70    1240    -$612,425.08     =FV($C$2, ($A$1 - A3), 12 * B3, 0)

Negative FV = principal is in a fund (not in hand).

Larger return rate results in larger future value with longer periods (earlier commencement).

 

[Sue J]

When I hear that someone died younger than 62, I always think, "Darn, they never got a penny of their Social Security."

We don't need my SS for living expenses. I had planned to start it when Medicare started at 65 but took it a little earlier than that just so I could have the full amount for a little while.

I save/invest it all.

 

[Joylush]

When I hear that someone died younger than 62, I always think, "Darn, they never got a penny of their Social Security."

We don't need my SS for living expenses. I had planned to start it when Medicare started at 65 but took it a little earlier than that just so I could have the full amount for a little while.

I save/invest it all.

That’s what I was thinking. While I know you can’t predict the future I do know that I absolutely do not not and will never need it. So why not take it and keep more of my own savings because that can be passed on to others. Then if you did die sooner than expected you will have at least gotten some benefit out of it.

And if you just save/invest it that’s bound to make up for some of the loss you took by taking it sooner rather than waiting longer. I am fortunate to be in a good place for sure whereby I will unable to spend down my assets regardless of taking it or not. I have paid so much in taxes I guess the thought of never benefitting from that bothers me more than trying to get as much as I can so I’d rather take what I can get because you can’t predict how long you will live. So taking it early guarantees you get something.

 

[W2R]

Life throws curves. I don't "know" that I won't ever need it. I know that I won't need it next year. I plan on kicking the can for at least five years. Then I'll look at it again. Agree that everyone should do what they feel is right. No guarantees on how long the ride will last.

+1 (Bolded emphasis mine)

I am 74, and waited until age 70 to claim my full SS. I am very happy to be getting those bigger deposits in my checking account each month, even though I don't "need" them. But who knows what will happen next? If I get dementia or need 24/7 care for some other reason, I want to be able to afford the "nice caregiver" rather than some abusive jerk who is cheaper.

Life is an adventure and I am not taking any more chances with my old age finances than I have to. I'm ready so bring it on!

 

[foxfirev5]

Spending my entire career in construction has led to wild swings in our income. Much of our success in net worth has come from having cash available. Many of the darkest days have yielded the best results. Taking SS early works for this basic need. It also keeps our investment portfolio intact at critical mass. Combined with our life expectancy and our heirs, it makes sense for us. One formula is over simplification in my opinion.