If you are not working, why would someone wait until 70 to collect Social Security?

[Huston55]

Inspired by (Marko’s) post #167 and having read up page 10 of the responses to the OP. I fall in the camp of delaying SS. Here is a tally of reasons to delay SS up to age 70. Sorry if I missed any. My reasons for delaying SS are #’s 2,4,5,6,7,8 and 10. To me it is a personal decision based on my situation. YMMV.

1. It’s cheap longevity insurance.
2. Don’t need the money now.
3. Good health and family history of longevity.
4. Increase survivor benefit for lower benefit spouse.
5. Take advantage of spousal claiming strategies if still available.
6. Spend or convert to Roth tax deferred savings before RMD’s start.
7. Convert to Roth to leave heirs tax free income.
8. Allow more money to convert to Roth within marginal tax rate.
9. Avoid increase in ACA premiums.
10. Catastrophic market loss insurance.
11. Working part time and making above 15K.

This IS a good list. But, the problem with it is that most of it doesn't apply to the OP.

1. Only if you don't run out of money first
2. Doesn't apply; he clearly needs the money
3. Doesn't apply
4. Doesn't apply
5. Doesn't apply
6-8. Don't apply (all 3 are really part of the same thing)
9. Might apply
10. Applies only if he doesn't run out of money before 70
11. Does apply (And he should do this IMO)

It's frustrating to read all this good advice & the subsequent lack of acceptance by the OP but, we all have our own pace at which we accept our circumstances. I think the best advice given thusfar is:

A. Cut your expenses
B. Move to a lower cost area
C. Find employment (even part time if that's all there is)
D. Delay claiming SS for as long as financially possible.

"Forced" - I wish you the best & hope you put some of this advice into action.

 

[youbet]

So it doesn't matter hugely

This is the outcome I get when I repeatedly work the numbers.........

If you take SS early and prudently invest the money over the 8 years of delay, you'll generally have enough to substantially or even completely offset the increase in SS you would have gotten by waiting until 70.

Some individuals may have particular circumstances which nudge the decision one way or the other. Otherwise, it matters little other than the fact that it's a popular subject to debate. The more "comfortable" your FIRE situation is financially, the less small differences will matter.

I started SS at 62. I'm now pushing 70 and my 8 years of collecting and investing is almost over. Given my individual circumstances, it's worked out great. YMMV.

 

[Helena]

This is the outcome I get when I repeatedly work the numbers.........

If you take SS early and prudently invest the money over the 8 years of delay, you'll generally have enough to substantially or even completely offset the increase in SS you would have gotten by waiting until 70.

Some individuals may have particular circumstances which nudge the decision one way or the other. Otherwise, it matters little other than the fact that it's a popular subject to debate. The more "comfortable" your FIRE situation is financially, the less small differences will matter.

I started SS at 62. I'm now pushing 70 and my 8 years of collecting and investing is almost over. Given my individual circumstances, it's worked out great. YMMV.

My calculated SS "break-even" age is 78.

Since I was already retired at 55 and most of my family had died by age 78, I took SS early at age 62. It is working out great for me too.

.

 

[harley]

This IS a good list. But, the problem with it is that most of it doesn't apply to the OP.

1. Only if you don't run out of money first
2. Doesn't apply; he clearly needs the money
3. Doesn't apply
4. Doesn't apply
5. Doesn't apply
6-8. Don't apply (all 3 are really part of the same thing)
9. Might apply
10. Applies only if he doesn't run out of money before 70
11. Does apply (And he should do this IMO)

It's frustrating to read all this good advice & the subsequent lack of acceptance by the OP but, we all have our own pace at which we accept our circumstances. I think the best advice given thusfar is:

A. Cut your expenses
B. Move to a lower cost area
C. Find employment (even part time if that's all there is)
D. Delay claiming SS for as long as financially possible.

"Forced" - I wish you the best & hope you put some of this advice into action.

I think you've crossed threads with the OP's thread about his life situation. This is the one where he asked why would someone(/anyone) wait until 70. The list above by nubill answers that question very nicely. Whether it applies to the OP's life was not the question.

 

[Helen]

I'm thinking of taking it at age 62. We have more money than we need and taking it at 62 means we will spend less of our investments and will leave more to our heirs and charities.

 

[Sunset]

I'm thinking of taking it at age 62. We have more money than we need and taking it at 62 means we will spend less of our investments and will leave more to our heirs and charities.

And pay a lot more in taxes from 62 to 70, and then because you didn't spend down your IRA's pay more when RMD's start.

 

[Helena]

And pay a lot more in taxes from 62 to 70, and then because you didn't spend down your IRA's pay more when RMD's start.

I am NOT looking forward to the RMD mandate. So I am taking out just enough of my IRA yearly to keep me under an increased tax bracket every year... and lessen the tax burden after age 70.

.

 

[RunningBum]

I'm thinking of taking it at age 62. We have more money than we need and taking it at 62 means we will spend less of our investments and will leave more to our heirs and charities.

Not necessarily. I figure, even if I die early, I'm still going to be leaving a lot to heirs--not as much as I could with taking SS early, but still should be a lot. If I outlive the crossover point, I'll definitely be leaving more by deferring to 70.

 

[Huston55]

I think you've crossed threads with the OP's thread about his life situation. This is the one where he asked why would someone(/anyone) wait until 70. The list above by nubill answers that question very nicely. Whether it applies to the OP's life was not the question.

Yep, you're correct. The OP's posts have started to blend together for me.

Hope he still takes the advice.

 

[Helen]

And pay a lot more in taxes from 62 to 70, and then because you didn't spend down your IRA's pay more when RMD's start.

Good point. I will at some point sit down and attempt to figure out all of the ramifications. I'm 59.5 so I have some time to ponder.

With what we are spending now, I think we will be living on our two smallish pensions, Social Security and dividends.

 

[Running_Man]

Few posters have done a math analysis of the costs of the extra TAXABLE 401K and IRA withdrawals that would be necessary to support their lifestyle from age 62-70 years old while they wait to collect Social Security. (You are paying the full tax rate to withdraw money from your 401K or IRA.)

OR:

The cost of pulling the money out of the savings and 401K, IRA during the years they are 62-70 if there is a bear stock market during that period. If you are collecting social security during that period you would not need to be taking as much money out during those bear market years and will have more money in your retirement accounts at age 70 going forward.

I believe this is true as most here have so much income in retirement the reduction to the portfolio is not really a factor in any retirement outcome and only serves to raise the bottom for a worst case scenario. With an average retirement portfolio of 300K or below spending that down in order to increase Social Security is foolish and bad advice as too much of the portfolio is lost to taxes. An early retiree in this case needs to be able to control their expenses. If that is not possible then waiting as long as possible to collect Social Security is the best course because of behavioral deficiencies.

But with 300K in a 401K pretax and choice between SS or not the taking of $1800 a month in Social Security and limiting only spending to income a 300K portfolio can produce (I suggest the following portfolio for the average retiree: 100K in my 5% portfolio as outlined in a different thread, 100K in 5 year CD or ST bond ladder, 100K in VTI-- spending 3% of balance or income produced per year whichever is higher) or the income produced by the 10 stock dividend portfolio, presently that portfolio composition will produce $9,250 in income. This results in total income of $30,850

The alternative is to spend at 3,000 per month or $36,000 annually increased by the amount SS increases each year until age 70 and begin collecting whatever Social Security offers in 8 years.

For ages 62-65 to take the 2nd portfolio and not SS means you have $5,150 more in income but you will pay $2,392.50 more in Federal Income Taxes than the first portfolio. Also if you take the ACA and take a silver plan you will also pay $840 per year for reduced subsidies resulting in $3,232.50 effective taxes on the $5,150 or 63 percent marginal taxes on 5K of income, a particularly poor use of a portfolio.

The idea that one should therefore work is equally bad idea, why should one work at age 62 if they don’t want to? At $30,850 per year one could live in Chicago by renting a Streeterville Studio with nearly 500 square feet of space comfortably having an indoor pool, indoor tennis courts of high quality available for free use, pool table ping pong tables, fitness equipment equal to health clubs a terrace garden and barbeque area with sunning lounge chairs and outdoor seating for enjoying an evening with friends on an income that should be growing faster than inflation. And in a neighborhood where the average income is $141,000 and all the advantages that living in such a neighborhood provides.

The loss of surety of income is offset by the low portfolio retiree by a greater likelihood of a portfolio upon which one could count on in case a move to nursing home is required late in retirement. At average costs today taking 1800 a month in social security and needing full nursing home assistance a 300K portfolio will provide nearly 5 years of nursing care in a private room or 7 years in a semi private room which will not be possible if one spends a 300K portfolio down in order to have greater Social Security.