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

[Forced to Retire]

I was going through some old posts on the Early Retirement Board and found a common theme- countless people who were proud to announce that they were waiting until they are seventy (70) years old to collect Social Security, These were people who were not working and WITHOUT A PENSION, so they would be using savings and invested money to tide them over until the Social Security money kicked in at age 70.

Yes, I know, you get an 8% increase every year you wait from age 62 but I still wonder about the logic and the math. Help me understand.

1) First, I don't trust the government. They may decide to cut benefits for future retired folks who start collecting sometime in the future. Are you absolutely sure that your benefits will be 8% a year higher per year when you finally collect? Maybe they will change the rules. (I think it would be easier for them to cut benefits of people who have not started collecting.)

2) If you use your own savings and invested assets to pay for your lifestyle for the eight years from age 62-70, you will have less money to invest and support your lifestyle and needs later in life. (For example, many posters say they are doing a 7-8 percent annual distribution to pay expenses per year from age 62 to age 70 and then plan on cutting it down to 3-4 percent when they start collecting Social Security at age seventy. If we go into a bear market for the next eight years then they will be nearly wiped out with the higher withdrawals between ages 62-70. And if we go into a bull market in eight years and forward, the people who waited will have less monty to invest because they went through their funds from age 62-70.

I would rather get less money per year but collect for more years and if I live until 80 or so, I will do just fine. (If I not blow my money until Social Security is open to me in 2017)

 

[Forced to Retire]

One more thing:

All the article that tell us we should wait until we are 70 years old to collect Social Security act like we are going to come out ahead and get more money from Uncle Sam. But according the government, they have figured it all out. Their math experts have determined that on average they will not pay out any more or any less if a person retires at age 62, 66, or 70. It's all a wash.

Some people decide to wait until they are 70 to collect and die the next year, while others collect age age 62 and live for years. The government has got it all figured out, what ever age people start collecting, the final cost to the government is going to be the same.

So who are these people who are pushing so hard to try to convince people to wait and and not collect Social Security until you are seventy (70) years old. Are they writing these articles to really help you because they want you to get more money from the Social Security trust fund over your life? I suspect it is the financial service industry, who want you to work longer and put more money into your Fidelity Mutual Fund and 401k, 403B and IRA Accounts.

What do you think?

 

[pb4uski]

It's cheap longevity insurance. Let's say that your FRA benefit is $2,000, your age 62 benefit is $1,500 and your age 70 benefit is $2,600. If you defer to 70 you "pay" $144k in premiums ($1,500/month for 8 years) and receive a COLAed annuity of $1,100/month for life. It's actually more complicated because of COLA increases so the premium is higher but the benefit is higher too, but that's the basic idea.

As you note, for singles the benefits are designed to be actuarially neutral. In your case, since you can use the money, are single and overweight, taking at 62 isn't a bad idea.

 

[marko]

Good question with perhaps a few dozen good reasons coming later today/tomorrow.

I think one reason is that some people view SS as an insurance policy. They can spend down a lot of their own money now knowing that there's a supplement coming later on.

Personally, I share your concerns about possible changes in the future but for me there is also a tax benefit in that SS is not fully taxed by the Feds and many states do not tax it at all. In my case, I add about $5K to my bottom line each year in tax avoidance and investment opportunity (investment gains on $ I don't need to withdraw).

The consensus here is "it depends on your own situation" but with an age 80 break even makes me wonder if it matters at all.

 

[Forced to Retire]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age. There are tons of posts and articles talking about the glories of waiting until you are seventy. We have already heard those arguments.

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

 

[ziggy29]

We all have to make our own decisions based on our own number crunching and gut feeling. But to me, the folks in this situation are:

* Not needing any SS income for living expenses and not expecting to need it;
* Are in good health and have family history of longevity.

Keep in mind that even if you believe government may "water down" benefits for people in the future who are not yet collecting, two points come to mind here also: first, people above a certain age (almost certain to include folks 62+) will likely be spared the reduced benefit; secondly, usually these changes take several months to enact so there's a good chance that one could immediately file benefits upon hearing that such a change is in the pipeline, getting in before changes take effect.

Other than that, if you really distrust the system that much and believe a bird in the hand is worth several in the bush, yeah -- regardless of what the math says now, take it now and sleep better.

 

[Ronstar]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age. There are tons of posts and articles talking about the glories of waiting until you are seventy. We have already heard those arguments.

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

I'm in the same situation as you and wonder the same thing. I see lots more posts/articles telling us to wait. But you may have partially answered your own question. I also see some benefit saving our portfolios and using the SS $ to fund retirement starting at 62. And if the gov't has it figured out so that it makes no difference depending on age, I'm sure they used a fairly conservative rate of return in their calculations. It seems to me that someone starting SS at 62 could beat someone taking at 70, especially in years prior to turning 80. I just need to see (or develop) some proof.

 

[alaska55]

As some above said " It's cheap longevity insurance." If the market takes a dump and your nest egg drops you can always go in and file. My plan is to take it one year at a time. I can file at any time between 62 and 70. Oh and by the way I used to live in the greater Richmond Va area, Chesterfield County. Virginia is slowly being overrun by people moving from the northeast. Taxes and fees are fast becoming accepted as the norm. I just left there in 2012.

 

[LOL!]

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

I think many of these folks believe they will be dead before age 70 because their parents died and their brothers and sisters died and they are in poor health.

 

[HadEnuff]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age. There are tons of posts and articles talking about the glories of waiting until you are seventy. We have already heard those arguments.

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

I guess I fall into the category of not "needing" it, but taking it at 62. I think you have hit on many of my major reasons already.

1. I don't have any pension income, so whatever I don't take in SS now, I have to spend down my assets by that amount to live my life. I'd rather not spend down my assets. Maintaining my assets gives me more flexibility in my asset allocation should there be a large correction in our future. I guess another way of stating this is to suggest that by taking it now, and reducing my withdrawal rate, I feel I minimize to some degree, the "sequence of returns" risk.

2. As you stated, there is no guarantee the government won't change the rules between now and my "break even" point.

3. 15% of my SS income is not taxed federally, and none of it is taxed by my state. If I drew that money from my IRAs it would all be taxed as regular income, by both state and the feds

4. As well as I can calculate, making assumptions about rates of returns and tax rates, etc. in my case my break-even point would be 12 -15 years out, which would coincide with my increasing Required Minimum Distributions years, and a greater portion of that SS benefit would likely be taxed. It gets complicated and I didn't even figure that into my calculations, but in actual after tax dollars, that may move the "break-even" point even farther out.

Those are my reasons, and of course, YMMV.

 

[Redbugdave]

If you take your SS at 62 vs 65, the total amount you get will equal out at around age 78 or 79. In my mind, you get about three of the best years left in your life to enjoy it earlier and let your IRA money to gain interest to boot. It is a downhill ride the older you get. If you are sitting on a pile of money at 80, but in La La Land did you win your race with really enjoying life? There is a balance.

 

[aaronc879]

I think many of these folks believe they will be dead before age 70 because their parents died and their brothers and sisters died and they are in poor health.

Exactly. It has at least as much to do with health and expected longevity as it has to do with money. The OP is obese and will almost certainly not live to 80 without significant lifestyle changes so waiting until 70 to start collecting makes no sense. Most people on this board are projecting a life span for themselves of 90+ so it makes sense to wait until 70 to collect. It's not one size fits all, it truly is dependent on your personal circumstances.

 

[marko]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age.

I took it at 62 and didn't need to.

My reasons:
* I expect changes to the program in the future that might affect me negatively (more stringent means testing; get in and get what you can, hope for grandfathering)
* I hope I live beyond the age 80 break-even but can't count on it. I paid into this for 40 years...I want as much of my money as I can get!
* Tax benefits vs withdrawing the same amount from my IRA leave me with about $4K more to spend each year.

 

[target2019]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age. There are tons of posts and articles talking about the glories of waiting until you are seventy. We have already heard those arguments.

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

You're asking a question in a greatly skewed audience, I believe. Many on this forum have sufficient assets that they can wait for the amount to grow. If you have spouse, the question takes on a greater dimension. Those who take it at 62 are in the minority here, so you simply will get fewer responses than you expect, in support.

If you need it, than take it.

I decided to wait, to maximize longevity insurance for spouse. Also, an opportunity came to go back for a much better job and pay, until I'm FRA. It's a personal decision, and there are a wide range of solutions.

 

[Gumby]

The young wife and I will not need the money to cover expenses, but I will still take SS at 62. Why? Because the young wife has been a schoolteacher all these years. She does not pay social security and will not be entitled to any on her own record. She also will not be entitled to any benefit based on my record due to the Government Pension Offset (GPO). The GPO rule reduces any social security payment based on the record of another (she would otherwise receive [-]half of[/-] my SS after I die) by 2/3 of the amount of any government pension from a non-SS paying job (which is what she will have). She is younger and most likely will survive me. So our idea is that I will take SS at 62 and we will use that money instead of drawing on our stash. Then, after I die and the SS is turned off, there will be more left in our stash for her use.

EDITED to correct error on survivor benefit amount and clarify the way GPO is caclulated as pointed out by Accidental Retiree below

 

[Another Reader]

I did not need the money but I took it at 62. The longevity in the family supports taking it earlier to maximize the benefit. Also, the annuity does not compound at 8 percent. The numbers are all based on the PIA. You get 75 percent of your PIA at 62 and it grows every month by the same amount until you reach FRA. It increases by 8 percent of the PIA each year from FRA until you turn 70. If your PIA is $1,000 a month, it will increase $80 a month every year until you reach 70.

I'm investing mine in paying off rental mortgages and in paper investments. Those investments do compound over time. I'm also in the camp that believes benefits will be cut. My opinion is that changes will be swift and sneaky once the decision is made, like the changes in claiming rules for couples that "suddenly" happened last year. It will be too unpopular to cut Grandma and Grandpa's existing benefits, but watch out below.

 

[Accidental Retiree]

If you are not working, why would someone wait until 70 to collect Social Sec...

The young wife and I will not need the money to cover expenses, but I will still take SS at 62. Why? Because the young wife has been a schoolteacher all these years. She does not pay social security and will not be entitled to any on her own record. She also will not be entitled to any benefit based on my record due to the Government Pension Offset (GPO). The GPO rule reduces any social security payment based on the record of another (she would otherwise receive half of my SS after I die) by the amount of any government pension from a non-SS paying job (which is what she will have). She is younger and most likely will survive me. So our idea is that I will take SS at 62 and we will use that money instead of drawing on our stash. Then, after I die and the SS is turned off, there will be more left in our stash for her use.

I am also subject to WEP and GPO; however, a forum member here explained GPO to me somewhat differently.

If my husband were to predecease me (I'm assuming FRA for both of us), I would ordinarily be able to collect his full SS as his survivor. The GPO, though, would reduce those survivor benefits by 2/3 of the amount of my pension, IIRC.



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[ivinsfan]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age. There are tons of posts and articles talking about the glories of waiting until you are seventy. We have already heard those arguments.

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

Why would they need to defend anything? There are literally hundreds of posts on this subject in this forum, spend a few hours reading through them for your own benefit.All of the post are not about the glory of waiting until 70.

Do what you want to for your own benefit..as you see fit. I've noticed in the other 10 page thread you started that you have pretty strong opinions and beliefs. The take at 62 people might give you dozens of reasons why waiting might not be prudent and I don't think that you would be swayed by any of them. In fact I think you are pretty much a contrarian and like it that way. The reasons for taking at 62 are varied and pretty much the opposite of the take at 70 camp. If you want some advice on your particular situation, put up your budget numbers, your nest egg and go from there. I believe you only indicated your rent number and not your annual budget.

 

[bingybear]

I'm presently on the take it at 70 side, but this is all a series of trades in the decision process. Most of us at the point of making a decision does not have enough information to make a choice that is a sure thing. For one, none of us know before 62 if we will live longer than the cross over point.
One reason for my putting off SS is to allow more roth conversions at lower tax rates which will reduce my RMDs at 70.5.
Remember that some of these people who are planning on taking SS at 70 won't live that long and others won't live long enough to reach the cross over (break even) point. However, some will live well past break even.

It is really a roll of the dice to know what is better unless you have some insight to your longevity. But try to consider your taxes both ways. Don't look at SS in a vacuum. The best choice if dependent on may factors with your own (or spouse if they could get your benefit) longevity.

I would try to understand the reasons others are choosing 70 and then make your own decision. It is not so important that you get people to argue your side, but that you understand and the options and pick the best choice for yourself.

 

[bmcgonig]

It's a good investment. The Govt pays you a lot to wait relative to other guaranteed investments.

Also great longevity insurance. My mom is 98 and still lives alone and is very healthy. So just in case.

This SWR example also:

In my case I will get SS of 24k at 62. Or 40k at 70.

Let's say I have a 1M portfolio and want to take 4%/yr

If I take SS at 62 and take 4% of 1m I have 40k + 24k = 64k/yr to spend.

Instead If I remove 40k year for the 8yrs between 62 and 70 from my portfolio and instead pay myself that 40k/yr as if I'm getting the SS of a 70 yr old, and then take 4% of the remaining, I get to spend 40k + 28k I.e., 4% of the remaining 700k left over from the 1M.

yes..Im sure I'm just pre spending and it's just fun wit numbers but that's what we do here


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[Gumby]

I am also subject to WEP and GPO; however, a forum member here explained GPO to me somewhat differently.

If my husband were to predecease me (I'm assuming FRA for both of us), I would ordinarily be able to collect his full SS as his survivor. The GPO, though, would reduce those survivor benefits by 2/3 of the amount of my pension, IIRC.


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You are correct about getting full SS if you are the survivor. I was confusing the ordinary spousal benefit, which is 1/2. I will fix my post accordingly.

You are also correct about the 2/3rd GPO reduction. However, in the case of the young wife, 2/3 of her pension will exceed my full SS benefits, even at FRA. So she won't get a spousal benefit before I die and won't get a survivor benefit after.


Here are the appropriate links to the SSA documents explaining all of this.

Spousal benefit
https://www.ssa.gov/pubs/EN-05-10035.pdf

Survivor benefit
https://www.ssa.gov/pubs/EN-05-10084.pdf

Government Pension Offset
https://www.ssa.gov/pubs/EN-05-10007.pdf

 

[btdt22]

One more thing:

All the article that tell us we should wait until we are 70 years old to collect Social Security act like we are going to come out ahead and get more money from Uncle Sam. But according the government, they have figured it all out. Their math experts have determined that on average they will not pay out any more or any less if a person retires at age 62, 66, or 70. It's all a wash.

Some people decide to wait until they are 70 to collect and die the next year, while others collect age age 62 and live for years. The government has got it all figured out, what ever age people start collecting, the final cost to the government is going to be the same.

So who are these people who are pushing so hard to try to convince people to wait and and not collect Social Security until you are seventy (70) years old. Are they writing these articles to really help you because they want you to get more money from the Social Security trust fund over your life? I suspect it is the financial service industry, who want you to work longer and put more money into your Fidelity Mutual Fund and 401k, 403B and IRA Accounts.

What do you think?

If I were single I might have taken SS at 62. If I were single and not in great health I would definitely have taken SS at 62. In my case, I was looking out for my stay at home DW and therefore waited until 69. No one size fits all, and to each their own

 

[NW-Bound]

For a couple, there are more variables to consider. Some people are better off collecting early, such as in Gumby's case.

We still have a couple of years, but I think my wife will collect at 62 or soon after. I will hold out until FRA if not 70. It is most likely that I will die before my wife does, and when I do she will get my SS while losing hers. As mine is higher, that will help when she is down to a single SS.

That's the plan, but if the market crashes, I may have no choice but to rush to the SS office.

 

[sengsational]

We need two planning dates

As to the (possibly) skewed high opinion of the 'wait until 70' idea, I think it has to do with "wishful thinking" and incomplete analysis.

There are a lot of analyticals on this forum, and most of us are not predicting an early demise. In fact, when planning, most of us are predicting a very optimistic "plan sunset date". This more distant date is good for making sure you don't run out of money, but it gives unduly higher weighting to the idea of delaying Social Security.

As already discussed, if you're not likely to live past average age, you'd be advised to take SS sooner.

So we need to plan with two dates...one "pessimistic" early date for when you are calculating things like the value of social security and pensions, and one "optimistic" later date, for when you're trying to understand if your money will run out. I don't know how to do that, really.

What can be done is to value a lifetime income stream, not based on a single date, but on a set of dates [.1*(pmts thru 64) + .2*(pmts thru 67) + .3*(pmnts thru 70) + .2*(pmnts thru 73) + .1*(pmnts thru 76) + .05*(pmnts thru 79) + .05*(pmnts thru 82)]. So .1+.2+.3+.2+.1+.05+.05 are the chances you'll not be around to collect in those years. You do seven separate calculations (present values) and weight them as above. This would be a much better calculation than presuming you're going to get to age 95 [1.0*(pmnts thru 95)].

I usually just opt-out of this discussion because I'm a long way away from the first decision point at age 62 (I figure the rules won't be the same then, so why bother wasting brain cells on it now). But I've kind of HAD to spend mental energy because all of the planning tools require you to select or at least accept some idea for how SS will play-out.

So when it comes to planning tools, if I can, I try to tone-down the over-weighting of delayed SS benefits if the planning horizon is extended just to make sure the money lasts until the end. But I'm generally in the "cheap longevity insurance" camp, since I do plan to live forever

 

[NW-Bound]

... What can be done is to value a lifetime income stream, not based on a single date, but on a set of dates [.1*(pmts thru 64) + .2*(pmts thru 67) + .3*(pmnts thru 70) + .2*(pmnts thru 73) + .1*(pmnts thru 76) + .05*(pmnts thru 79) + .05*(pmnts thru 82)]. So .1+.2+.3+.2+.1+.05+.05 are the chances you'll not be around to collect in those years. You do seven separate calculations (present values) and weight them as above. This would be a much better calculation than presuming you're going to get to age 95 [1.0*(pmnts thru 95)]...

From what I have seen posted here, people will go through your sensical suggested calculations and say "the chances of me dying at 70, 80, etc... are zero, and the chance of me living till 100 is 100%". Heck, people even thought of life after death, well not quite but something like a head transplant.

So, it's back to their original premise of delaying till 70.