Draw social security early or not?

[jerome len]

If you're in good health wait! I have family that grabbed the money.....now, one is 79, living on a very tight budget and constantly complaining that she should have waited. I don't know anyplace else that your money will grow 8% a year......but if your health isn't good, that's another story. Good luck with your decision......and, enjoy your retirement.

[pb4uski]

If the OP is single then in theory it is actuarially neutral so in theory it doesn't matter when SS starts. If one is in good health then I think the smart play is to wait because you might outlive the mortality table and waiting is cheap longevity insurance. If your retirement funds perform poorly you can always opt to start at anytime of your choosing after 62. Or stop/defer benefits if they recover.

If the OP is married and the spousal benefit is in play (spouse's PIA benefit based on earning record is less than 1/2 of OP's PIA, or vice versa) then I think deferring is the smart play because of joint mortality. If spousal benefit isn't in play, then it is the same as two singles.

Here is a good tool to help in the decision. Social Security Benefits Evaluator - T. Rowe Price

The oft-mentioned 8% growth in the benefit is only from FRA to age 70. From 62 to FRA the annual growth is more modest but still substantial. Also, the 8% growth is simple (not compounded) growth, so if one's FRA is age 66 then the age 70 is 132% of the age 66 PIA. From age 62 to FRA, the growth is between 6-6.7% depending on when you were born. See http://www.ssa.gov/retire2/agereduction.htm

[rodi]

I'm 10 years younger than my husband. But I also have higher SS earnings than my husband. For us - the benefit for the spouse didn't factor in at all. That said - we're taking full advantage of benefits for minor kids. Because we were late to parenting, our kids are minors and DH is 62. He's collecting, and so are they. We ran the numbers and this was a total no brainer for DH to take SS early since we'll get SS for the kids till they turn 18.

[jime444]

like many have said, it depends So, not to bore you, here's how we will decide when the time comes, a little less than 5 years from now:
1. Current health-it's good, but I had heart surgery at age 45, so...
2. Longevity-DW parents passed away early 60's, my Dad at 72,Mom still kick'n at 80 (though significant health issues), no one in either family tree past 83.......ever........and I researched back to 1900 or so.
3. Financial SS - supposedly neutral; however, the long term health of the program is questionable....disappear....no way.....reduction of cola, taxable changes, etc.......more than likely to future retirees, I'd estimate.......
4. Financial/personal- solid 401k's and savings 35x, significant cola'd pensions, no kids, similar ages and incomes throughout work careers. pensions plus SS would be 125% of our needs, 70% of our wants.

Current (today) thoughts; my analysis shows a SS "break-even" point at a age of 83/84. Given that including health, longevity, financial stability issues, the smart play is to mitigate the risk and take the money sooner than later. I do reserve the right to change my mind...........however.

[gerntz]

I think the spousal benefit to younger spouses is overly generous such that if SS is ever reformed; i.e., costs/outlays brought into line with revenue, it should be addressed. Perhaps a reduction based on the amount added life expectancy of the spouse over that of the beneficiary or a delay as to when it can be received would be ways to go.

[photoguy]

SS is designed to be actuarially neutral but this cannot be true for an individual. Some demographic groups have significantly longer life expectancies (e.g. asian and hispanic females) and correspondingly others must be less.

A family history of longevity would obviously push one to taking SS at 70 and of course the opposite would be an argument for taking SS early.

I've seen various life expectancy tables but they only report the mean (or conditional mean). E.g. if you are 62 you can expect to live on average an addition 23 years. Has anybody seen a table that gives the distribution of outcomes given a starting age?

E.g. the table would have information that at age 62, 50% would live to 82, 15% would live to 90, 1% would live to 100 etc. I think this would be key to determining longevity risk. Even better if this is broken down by race and gender.

The closest information I've been able to find are tables in this paper ( http://goo.gl/lVDiXU ) which give life expectancy as of a specific age and standard deviation (it's around 10-11 years at 62).

[easysurfer]

For me, the situation will depend on my health when I'm near eligible age.

If I'm still healthy, then I'll wait later. Otherwise, I'll take SS early. I've seen too many folks who had they waited, they wouldn't have drawn any SS or only a year or two.

[Chuckanut]

Quote:

Originally Posted by pb4uski I think the smart play is to wait because you might outlive the mortality table and waiting is cheap longevity insurance. If your retirement funds perform poorly you can always opt to start at anytime of your choosing after 62. Or stop/defer benefits if they recover. The oft-mentioned 8% growth in the benefit is only from FRA to age 70. From 62 to FRA the annual growth is more modest but still substantial. Also, the 8% growth is simple (not compounded) growth, so if one's FRA is age 66 then the age 70 is 132% of the age 66 PIA. From age 62 to FRA, the growth is between 6-6.7% depending on when you were born. See Retirement Planner: Benefits By Year Of Birth

Thanks for some good information and links.

I agree that it is cheap longevity insurance. And, as I states before, it's my best option for LTC, though certainly not enough.

On the growth rate, you're right that it is not compounded, but I also figure that the COLA's will be based upon the higher amount. That has to be a very big plus as the years roll on. I did a quick spread sheet using 3% inflation and my projected SS benefit at 62 and 70. After 20 years the difference is over $2100 a month. At 30 years, it's almost $2900 a month.

[haha]

Quote:

Originally Posted by photoguy SS is designed to be actuarially neutral but this cannot be true for an individual. Some demographic groups have significantly longer life expectancies (e.g. asian and hispanic females) and correspondingly others must be less.

Clearly true. IMO, this "actuarially neutral" claim is basically impossible, given the design of the time adjustments.

How can the same annual bump-up be "actuarially neutral" in markedly different interest rate environments? Hint: it cannot be. In a less formal way, would your take or wait decision be different at S&P PE10 levels of 7, 15, and 25?

If not, why not?

IMO, there are a few valid reasons for taking SS early under current bond and stock market
conditions. 1)Special considerations regarding spouses, other pensions, etc. These are beyond my understanding. 2) Near term need for the money. 3) Definite and marked bad health. 4)Fear that the conditions, taxes, etc. will be changed in such a way that taking a bird in hand seems the only prudent path. 5) Strong emotional needs to "get the money", which generally in most people will trump anything else anyway.

Ha

[Car-Guy]

Even though I didn't really need the money, I began taking it last year at 62. Lot of reasons for taking it then but the one that push my decision over the top was what happened to a good friend of mine about 3 years ago and then to my BIL just last year. Both were in very good health "until" they were both diagnosed with pancreatic cancer. Both only lived about 9 months after they were diagnosed. My friend was in his late 50's so he never saw a dime from SS. My BIL was 63 so he collected it for about a year.

OK, it's possible that either the DW or I (or both of us) could live to be 100. That's always been my financial planning basis but I seriously doubt that will be anywhere near the real case. So, even though we don't need it, I'm taking it now and just adding it to the pile. Worse case (for us) is our heirs inherit more money early. If we both live to 100, we have enough to live comfortably without the extra money that delaying SS would have given us.

As many have said, it depends. Every case is different.

[Lancelot]

Quote:

Originally Posted by haha 5) Strong emotional needs to "get the money", which generally in most people will trump anything else anyway. Ha

True. So many folks are convinced that "SS won't be there when I retire" so they grab the money at the first opportunity.

I've debated with friends about the merits of postponing SS, but most folks are on automatic, its hard wired in to their DNA

Personally speaking, I've come to the conclusion that the more people that opt for early SS, the better it is for the long term sustainability of the program, since most will probably receive a lower total amount of benefits compared with those that delay.

[old woman]

I am waiting for 70 while drawing on half my ex. I consider it longevity insurance. It will grow to enough to live off if I need to allowing me to invest more aggressively knowing I would be ok without my life savings.

[photoguy]

Quote:

Originally Posted by haha How can the same annual bump-up be "actuarially neutral" in markedly different interest rate environments? Hint: it cannot be. In a less formal way, would your take or wait decision be different at S&P PE10 levels of 7, 15, and 25?

That's a very good point. Although maybe by "actuarially neutral" the SS administration is just referring to lifespan under their assumptions for return ignoring market alternatives.

I'm also surprised when I read comments by others that based on Firecalc (or a similar program) they are going to take SS early. Usually this is because it results in more money but I suspect they haven't done much analysis into the return rate assumptions (I'd much rather have US historical returns than what people are projecting today).

[PandaBear]

My husband and I are currently age 56/52. If dh lasts the next 4 years in his job (layoff concerns) he will retire at 60. He is planning on taking SS at age 62 because there won't be a survivor benefit for me. Not sure it's the best plan, but it's a hard thing to figure out!

Panda


Sent from my iPad using Early Retirement Forum

[43WorkYears]

Your right. This is a hard thing to figure out. Actually you can't figure it out from the extensive reading and research I've done on this matter. The main undetermined factor on this website or that any other place is how long do you live. This would provide answers to this question. I would love to hear your responses. No answer is right or wrong. This is the most changeling question on this website. Love to hear responses, solutions. We, I'm sure many of us are in the same boat. Please advise.


Sent from my iPhone using Early Retirement Forum

[RunningBum]

Quote:

Originally Posted by 43WorkYears Your right. This is a hard thing to figure out. Actually you can't figure it out from the extensive reading and research I've done on this matter. The main undetermined factor on this website or that any other place is how long do you live. This would provide answers to this question. I would love to hear your responses. No answer is right or wrong. This is the most changeling question on this website. Love to hear responses, solutions. We, I'm sure many of us are in the same boat. Please advise.

Translation: There's no way to figure out the right answer, but please tell me what it is.

[43WorkYears]

It's gets down to not right or wrong, it gets down to hearing as many opinions and situations we can all read about and respond to make the best decision based on our situation. This is a thread that will go along for quit some time. Keep up your great ideas/opinions. This helps all of us in some way. Keep them coming. Thanks all very much. Keep them coming. I'm sure there are many out there that can add value to all of us. Please respond with your thoughts.


Sent from my iPhone using Early Retirement Forum

[Animorph]

Quote:

Originally Posted by photoguy SS is designed to be actuarially neutral but this cannot be true for an individual. Some demographic groups have significantly longer life expectancies (e.g. asian and hispanic females) and correspondingly others must be less. A family history of longevity would obviously push one to taking SS at 70 and of course the opposite would be an argument for taking SS early. I've seen various life expectancy tables but they only report the mean (or conditional mean). E.g. if you are 62 you can expect to live on average an addition 23 years. Has anybody seen a table that gives the distribution of outcomes given a starting age? E.g. the table would have information that at age 62, 50% would live to 82, 15% would live to 90, 1% would live to 100 etc. I think this would be key to determining longevity risk. Even better if this is broken down by race and gender. The closest information I've been able to find are tables in this paper ( http://goo.gl/lVDiXU ) which give life expectancy as of a specific age and standard deviation (it's around 10-11 years at 62).

This is the one I use:

Actuarial Life Table

Only broken out by gender, but you can figure out quite a bit from it.

[43WorkYears]

Thanks. Would like our members to elaborate with actual situations/opinions, rather than statistics. We all seen those before, but we can all learn from our own opinions and life situations. Keep them coming. We can all benefit from what we read.



Sent from my iPhone using Early Retirement Forum

[springnr]

Exploring the ins and outs of SS is an interesting endeavor. Social Security has quite a few nuances to its implementation, some matter, others are just that, nuances. If I forgo collecting SS until I'm 70, the monthly payout will become 1.75x the 62 amount, for the rest of my life. The total pay out I could collect from 62 to 70 would amount to ~175K counting cola increases. From reading here 175K is less than 12% of most portfolios.

Is the choice of what time period to collect this 175K crucial or akin to re-balancing strategery?