Draw social security early or not?

[travelover]

Quote:

Originally Posted by 43WorkYears .......... Would like our members to elaborate with actual situations/opinions, rather than statistics..........

As an engineer, I definitely prefer anecdotes / opinions to boring ole statistics.

[harley]

Another tax issue to keep in mind. If you are drawing from your 401K without taking SS, you'll probably in a lower tax bracket than when you were putting the money in. If you take SS early, then start drawing from your 401K when RMDs start, you will probably be paying higher taxes on the withdrawals. Add to that, if you die and your wife is getting your (lower because you took it early) SS check, but then has to do RMDs from the 401K, she could be pushed into a significantly higher tax bracket, decreasing her spendable income.

But for me the main reason to wait on taking SS is to guarantee my beloved spouse the highest income possible after dealing with my loss.

My Mom, who just passed a few weeks ago, was in the opposite situation. While both of them were alive, they had a significant income. He was on a retired full bird Col.'s pension, he had a SS check of about $1300, and she had a SS check of about $900. Then he died, and his 0% survivorship pension went away, and all she had left was his SS check. And a very little life insurance. Luckily he had been exposed to Agent Orange and died of lung cancer (lifetime smoker), so she got another $1000/month from the VA. But she went from being very well set up to being pretty financially strapped at the same time she lost her husband. It was hugely traumatic. If I had known he'd gone 0% survivorship AND took his SS early he'd have been dead long before. A-hole.

[daylatedollarshort]

Quote:

Originally Posted by harley It was hugely traumatic. If I had known he'd gone 0% survivorship AND took his SS early he'd have been dead long before. A-hole.

Sorry to hear about your mom. For our private pensions, my husband and I had to sign each others' pension application papers. I don't think either of us could have taken 0% survivorship without the other's consent. I took 100% survivorship on DH's pensions and I told him he could do whatever he wanted on mine, since I'd be dead then anyway. I can't remember if he took 50 or 75%.

[Chuckanut]

I thought the days of getting a 100% pension without the spouse's approval were over.

[photoguy]

Quote:

Originally Posted by Animorph This is the one I use: Actuarial Life Table

Thanks Animorph. That has the information I need.

Just eyeballing it seems like 1/3 of women and 1/5 of men will live to 90 or more given that they've reached 62. That seems me a pretty big argument for delaying SS in the absence of a family history of shortened lifespans.

[harley]

Quote:

Originally Posted by Chuckanut I thought the days of getting a 100% pension without the spouse's approval were over.

I'm sure she approved it. She wasn't very smart financially. I give her a lot of the blame too. I just can't see why anyone would leave someone they loved in that position. When you're a team you have to consider both player's well being. IMHO.

[NW-Bound]

Quote:

Originally Posted by photoguy Thanks Animorph. That has the information I need. Just eyeballing it seems like 1/3 of women and 1/5 of men will live to 90 or more given that they've reached 62. That seems me a pretty big argument for delaying SS in the absence of a family history of shortened lifespans.

The way I look at that table, I am not sure that the choice is so conclusive. It shows that out of 100,000 males 84,090 will make it to 62. And among that 84K, 46884 will make it to the age of 81, that break-even age. This means that 56% will live long enough to make it worthwhile to delay. It is a bit better than 50%, not overwhelming.

In my case, I seriously doubt that I will live till 81. Still, I will not claim early, just so that I will leave my wife with more to live on when I am gone.

If I were by myself, I would claim early even though I could live on my own savings, because of my own anticipated lifespan.

[photoguy]

If it's a break-even probability then why wouldn't one delay to get the longevity protection?

Medical issues obviously change the whole equation and of course the other reasons listed by haha and others.

[Independent]

Quote:

Originally Posted by photoguy Thanks Animorph. That has the information I need. Just eyeballing it seems like 1/3 of women and 1/5 of men will live to 90 or more given that they've reached 62. That seems me a pretty big argument for delaying SS in the absence of a family history of shortened lifespans.

I'd say that this Social Security actuaries' table has somewhat higher mortality rates (shorter life expectancies) than most people who ask this question on this site will experience. This SS table is a "total population, period" table. I can think of three adjustments:

The table includes everybody, regardless of current health. For example, it includes people who were in hospices on their birthdays, and people who know they have serious diseases. People who ask the "should I defer SS?" question are usually in better health than the perfectly average American (simply because "average" includes those special cases).

The table does not distinguish by economic status. Other SS statistics show that people with higher lifetime average incomes tend to outlive those with lower lifetime average incomes. Most posters on this site are in the "higher" income group.

A "period" table is a snapshot based on current mortality. It assumes no future improvements in mortality rates. The general trend in mortality rates is downward. The SS actuaries use the "cohort" mortality tables, instead of "period" tables, when they are doing the projections for the SS trust fund.

[photoguy]

Quote:

Originally Posted by Independent I'd say that this Social Security actuaries' table has somewhat higher mortality rates (shorter life expectancies) than most people who ask this question on this site will experience.

These are good points. Ideally I'd like some sort of regression model (that outputs quantiles) where I could put inputs like race, gender, education, etc.

Quote:

The SS actuaries use the "cohort" mortality tables, instead of "period" tables, when they are doing the projections for the SS trust fund.

Is this a big effect (say more than 1 year)?

[NW-Bound]

Yes, it all comes down to a person knowing his/her specific situation better than the overall statistics would indicate. Still, a lot is left to chance when it comes to longevity.

I'd rather have a long life, everything else is secondary. Perhaps it's because I happen to be able to live off my stash, and SS is just a reinforcement. But people who happen to draw it early and find themselves still alive at 90 should be reminded that having such a long life is a blessing already. They want to be rich too? As rich as Steve Jobs?

[springnr]

The truly FI are free to choose their SS timing on a whim. By delaying to 70, if you exit early then you have helped SS stay solvent, if your good karma blesses you with longevity, well you had good intentions. ; >) Or pick another spin, your choice.

[daylatedollarshort]

Quote:

Originally Posted by photoguy If it's a break-even probability then why wouldn't one delay to get the longevity protection?

We're more interested in maximizing an estate and maintaining our net worth in the shorter term than maximizing longevity insurance in the long run. You can't maximize for everything. You have to pick what is most important.

I don't think we will be eating cat food either way.

[NW-Bound]

Quote:

Originally Posted by springnr The truly FI are free to choose their SS timing on a whim. By delaying to 70, if you exit early then you have helped SS stay solvent, if your good karma blesses you with longevity, well you had good intentions. ; >) Or pick another spin, your choice.

Or claim it early even if you do not need it, then use it to invest during market crashes. Enjoy "counting" it while you are still alive, then donate it to charity when you expire? Heck, you can even donate it plus all the gain back to SSA if you want, but I think most people would chose a different beneficiary.

"Money is much more exciting than anything it buys." -- Mignon McLaughlin

[Which Roger]

Jim Otar's book includes a lot of discussion regarding how to hedge against longevity and inflation. He doesn't talk much about SS, but he did get me thinking about how DW and I will hedge against these. A couple like us who were both reasonably-high earners and who wait until age 70 to take SS will be pulling in a combined 60-70K per year from SS, inflation-adjusted, for the rest of their lives. This virtually eliminates the need to use other mechanisms to hedge against inflation and longevity.

[springnr]

Quote:

Originally Posted by NW-Bound Or claim it early even if you do not need it, then use it to invest during market crashes. Enjoy "counting" it while you are still alive, then donate it to charity when you expire?

Yep, that works. Just trying to suggest the necessity to fine tune Social Security could indicate OMY syndrome as a viable choice too.

[NW-Bound]

I know! And you are the 1st to point out the parallel of "SS delay" and "OMY of work".

[NW-Bound]

Quote:

Originally Posted by Which Roger ... A couple like us who were both reasonably-high earners and who wait until age 70 to take SS will be pulling in a combined 60-70K per year from SS, inflation-adjusted, for the rest of their lives. This virtually eliminates the need to use other mechanisms to hedge against inflation and longevity.

A couple of months ago, I finally sat down and entered our exact income history into the SS calculator. And I found that if we delay SS till 70, we will be drawing 66K/year (in today's dollars). That, despite stopping work early (DW at 50, myself at 56). That's less than what we are spending now, but we would not be eating cat food with that.

But heck, if I am in good health at 70, I should be counting my blessing and not my money.

If we are still around in 10+ years, will somebody remind me of the above if I forget?

PS. Hmmm... What if my taste deteriorates such that cat food tastes the same as some other delicacies? Then, it matters even less. See how things can get really complicated if we consider all possible factors?

[ProspectiveBum]

I'm 42, and DW is 46. Most retirement calculators give us slightly better odds of success if we take SS early. DW's family is very long-lived, though, and she and I have a nearly identical earning history. So, assuming the rules don't change, I plan to file at 62, and she'll file for her spousal benefit on my record at that time. Then, when she turns 70, she'll take her own full benefit. This strategy should preserve the most capital if I should die before she does (which is likely, given our family histories).

Will the current system still be in place in 20 years? Doubtful, so we'll monitor and adjust the plan as we get closer to filing age.

[photoguy]

Quote:

Originally Posted by NW-Bound A couple of months ago, I finally sat down and entered our exact income history into the SS calculator. And I found that if we delay SS till 70, we will be drawing 66K/year (in today's dollars).

Sweet. We won't get as much as you at 70, but I was very surprised at how much SS will payout for us (roughly 40k at 70). When I first started seriously planning for ER I had been assuming that SS would be insignificant.