Social Security at 70

[RunningBum]

So if leaving an inheritance is important to me, does that mean a better approach would be to take SS earlier so I'm not drawing down from IRAs? I have 25% in taxable and 75% in tIRA. I am 62 now and maximizing ACA subsidies. Was planning to take SS at 65 when I can get Medicare. Then was going to do Roth conversions up to 12% as long as I could. My husband is 4 years younger and gets nominal SSDI. Feedback appreciated.

Too many factors to give an accurate answer, #1 being how long you will live.

The way I see it, if I die early, I'll likely have left a lot of investment money untouched, and my heirs will be fine even though I did use more of my investment money from 62 to 70. If I die past the breakeven, the excess SS money can go to my heirs. So for me, deferring to 70 is probably better. Also, if somehow I do outlive my money, a higher SS will make me less of a burden to them. Of course if your health makes it unlikely for you to reach SS breakeven, taking it early probably makes sense.

Next factor is their tax bracket when they inherit vs. yours now. If you can convert your IRA at a lower rate than they would be paying if they have to liquidate your IRA in 10 years, your Roth conversions leave them better off. Better to receive Roth money already taxed (and reduced) by 12% tax than tIRA money yet to be taxed.

Those are the main things I see. There are no guarantees, but you can prioritize or offset conflicting factors.

 

[NotCreativeName]

If I die past the breakeven, the excess SS money can go to my heirs.

Thank you for your response. I know there's no guarantee, just trying to weigh out the options and getting some other thoughts in the mix. Would you elaborate on excess SS money going to heirs? I don't know how that works.

 

[RunningBum]

Thank you for your response. I know there's no guarantee, just trying to weigh out the options and getting some other thoughts in the mix. Would you elaborate on excess SS money going to heirs? I don't know how that works.

Suppose I'm retired and 62, can take SS now with a $20K benefit or at 70 with a $35K benefit, and that I spend $50K/yr regardless of when I start SS and have sufficient assets to wait until 70 for SS.

If I defer SS to 70, I'm taking $50K from my investments for spending instead of $30K had I started SS at 62.

Starting at 70, I get the $35K benefit and only have to take $15K out of my investments now, while had I started SS at 62 I'd still be taking $30K.

At some point, if I live long enough, I'll hit the point where my investment nest egg is the same whether I started at 62 or 70. This is what we call the breakeven point. Let's say that's at age 86, assuming decent but not skyrocketing investment returns.

From that point on, assuming I'm still spending $50K (inflation adjusted), I'm taking $15K less if I started SS at 70 than at 62. This means I keep $15K more in my investments, every year until I die. Who will benefit from me keeping an extra $15K/yr in my investments? My heirs, of course.

Had I died before that break even point, my heirs would have been better off with me taking SS early. But, I probably left a decent amount anyway, since I was prepared to live longer than that.

Does that make sense?

 

[pb4uski]

So if leaving an inheritance is important to me, does that mean a better approach would be to take SS earlier so I'm not drawing down from IRAs? I have 25% in taxable and 75% in tIRA. I am 62 now and maximizing ACA subsidies. Was planning to take SS at 65 when I can get Medicare. Then was going to do Roth conversions up to 12% as long as I could. My husband is 4 years younger and gets nominal SSDI. Feedback appreciated.

It depends. How long will you live to?

When you say SSDI do you really mean SS? (SSDI is Social Security Disability Income benefits vs Social Security retirement benefits).

If his work record is lower than yours they if he waits until his FRA he would get the higher of 50% of your PIA or the retirement benefit based on his work record. You may want to run your situation through opensocialsecurity.com

 

[NotCreativeName]

Yes - SS Disability Income. He will get more from spousal once he reaches FRA since my earnings were higher. I tried opensocialsecurity.com, but couldn't figure out a way to put SSDI in for age 58.

I guess there isn't an overall good answer unless you KNOW you're dealing with health issues that make filing at 62 obvious or if you need the cash flow before 70.

I'm now on the path of thinking through capital gains harvesting until 65 and then Roth conversions until 70 or 72. I was initially optimizing for ACA subsidies and to avoid SSDI becoming taxable. Now I'm thinking that is too narrow thinking - that the non taxable capital gains space is what will give me cash flow to do the Roth conversions. Man, this is quite the puzzle, isn't it??

 

[Music Lover]

Most of the friends I know that took SS at 62 were so well off, they did not need it, but just wanted to start getting their money back from gummit ASAP. If they waited to 70, it would have little to no effect on the living standard.

And most I know who started at 62 had to have the money or it was Hi Ho Hi Ho, it's off to work I go for more than a few years.

Everyone has their reasons for taking it when they do. Not everyone who takes it early needs the money, and not everyone who waits until 70 made the right choice.

I'm taking CPP at 60 (Canada). I don't need the money but my investments are minimal and the majority of my income is a solid COLA pension. With early CPP I can be ahead of the game every day for about 14 years or I can deny myself the extra money for 14 years and hope that at 74 (if I get there) that I'll have enough energy and the mental capacity to take advantage of the tiny amount of extra money that I deferred. If I live well beyond 74, so what? I'll still have enough to live on comfortably. if I die at 80 I still had 14 years of more money and 6 years of a little less.

Call it living for today or blowing that dough but I'm taking the money now and spending it now. I've been retired for 6 years and am just turning 60 in a couple weeks. I've already won the game, all that's left is to do is to make the most of what's left.

 

[Bryan Barnfellow]

Perfectly healthy a 62 and considering waiting until 70. I decided to take it at 62. Next week I'm having major cancer surgery. I was probably brilliant. Why don't I feel it.

Best of luck on the surgery and best wishes for an excellent recovery!

-BB

 

[pb4uski]

Yes - SS Disability Income. He will get more from spousal once he reaches FRA since my earnings were higher. I tried opensocialsecurity.com, but couldn't figure out a way to put SSDI in for age 58....

There is a way to input SSDI. Go to opensocialsecurity.com click the little checkbox at the top in the first sentence that says "Certain financial situations require additional input" The first one listed is Disability, so click that checkbox. That will add to the input information a section for you to fill in on disability.

 

[youbet]

Are you saying that it is always better to claim early, regardless of age of death?

Nope. Definitely not.

Or are you saying only that I should not equate "estate" with "money received"?

Yes. You should consider both the money received and the earnings on that money over the years (which there is no way to accurately predict).

History has shown the time value of money to be significant and important. But because of its unpredictability, we often want to not consider it.

In my opinion and in my situation, I think that it makes little difference if you take SS at 62 or 70 as long as you invest the 62 SS dollars prudently. You don't know which will prove to be the best financial strategy unless you know your end date and the time value returns.

 

[youbet]

The time value of money is a very important factor.

Consider that if you started taking SS at 62 and the market slumped, you would essentially be "investing" that money in at low prices for 8 years. You might end up with $300,000 more in the market than the person who didn't take SS until age 70. That $300,000 then could be put into an annuity that added to the reduced SS amount you are getting at 70 would actually be more than you would have gotten had you waited until 70.

It seems all a gamble really...will you live, what will the market do, how will policy change?

+1. You get it. Especially the "gamble" part!

 

[youbet]

I doubt many people invest the difference...my in-laws both took SS at age 62 so they could spend it.

I disagree. The discussions here point to folks who delay SS to 70 being able to fund equivalent spending form their FIRE portfolios while they wait. The anecdotal examples of your in-laws must be true, but only anecdotal. The whole point of the "when to take SS" discussion is that it is a choice for people who can wait to collect.

 

[youbet]

Absolutely. This is why I think that there are no right or wrong answers to the question of when to take SS.

Sounds like you get it W2R. No surprise there.........

 

[harllee]

One thing I have not seen mentioned--i look at delaying my SS as a form of Long Term Care Insurance. In my case, I am moving to a Continuing Care Retirement Community (the life care type where your monthly payments stay the same even if you move to skilled nursing). By delaying my SS DH and I get a monthly payment of over $5500 which will pay our CCRC monthly fees. SS has annual increases so hopefully it will keep up with the CCRC cost increases (which average 3%).

 

[DrRoy]

I'm in good shape at 63 and planning to wait a while, maybe to 70. DW is 62 and starting hers in July.

 

[Dtail]

I disagree. The discussions here point to folks who delay SS to 70 being able to fund equivalent spending form their FIRE portfolios while they wait. The anecdotal examples of your in-laws must be true, but only anecdotal. The whole point of the "when to take SS" discussion is that it is a choice for people who can wait to collect.

+1 although for many outside this forum and other like forums, not so much.

 

[Bigdawg]

(the life care type where your monthly payments stay the same even if you move to skilled nursing). By delaying my SS DH and I get a monthly payment of over $5500 which will pay our CCRC monthly fees. SS has annual increases so hopefully it will keep up with the CCRC cost increases (which average 3%).

Which is it? Do the monthly payments stay the same or does the CCRC cost increase by 3% each year?

 

[Dtail]

Which is it? Do the monthly payments stay the same or does the CCRC cost increase by 3% each year?

Think she meant that the monthly payments are the same, whether one is in regular housing or skilled nursing care.
Both types of living situations have had an average of 3% yearly increases.

 

[harllee]

Which is it? Do the monthly payments stay the same or does the CCRC cost increase by 3% each year?

In a life care CCRC if you move to skilled nursing from independent living the monthly payment stays the same. In most CCRCs there's a big monthly increase when you move from independent to skilled nursing.

For example, in the Life Care CCRC we are moving into the monthly payment for a couple is currently around $5000 per month no matter which level of care you are in. In a CCRC that is not a life care your monthly payment might be $4000 in independent living, $5000 in assisted and $9000 in skilled nursing.

In all CCRCs that I have looked at there is some annual increase for inflation no matter what level of care you are in. In the one I plan to move to the annual increase since the place has been in existence (about 20 years) has been 3% but I bet it will be a little more this year due to inflation.

I am hoping that my SS payment increases will keep up with the increases in the cost of the CCRC. That has been the case in past years.

 

[Foghorn Leghorn]

When I turn 62 in a few months Im taking it. My wife cannot collect a survivor benefit without giving up her teachers retirement pension ( which would not make numerical sense at all) I smoked cigs for 30 years and although I quit 11 years ago I still figure that habit will take a toll on my longevity.

Any constructive opposing ideas would be considered

 

[Jakob]

After many discussions with friends and financial advisors and my own analysis, it occurs to me that taking Social Security earlier is the better option. Keep in mind that our legislators can reduce the amount of your Social Security at any time. Perhaps, it is unlikely that they will eliminate Social Security, but it is probable that they will reduce the payout. When I did my analysis comparing taking my Social Security at 62 years old, 66 in 10 months ( my full retirement age), and at 70 years old, my break even year would be 79 years old. The argument is, if you don’t need the money why take it earlier when appreciation of benefits is approximately 8% a year. My reply would be that by taking my benefits early I can reinvest those funds.

 

[athena53]

I disagree. The discussions here point to folks who delay SS to 70 being able to fund equivalent spending from their FIRE portfolios while they wait. The anecdotal examples of your in-laws must be true, but only anecdotal. The whole point of the "when to take SS" discussion is that it is a choice for people who can wait to collect.

According to a quick Google search, slightly less than 1/3 of people start collecting at 62. About 9% of women and 6% of men wait till 70. On the anecdotal side, I do think that many who start at 62 need the money and have either lost a job and can't find another one or have had their bodies beaten up by physically demanding jobs they can't do anymore.

After many discussions with friends and financial advisors and my own analysis, it occurs to me that taking Social Security earlier is the better option. Keep in mind that our legislators can reduce the amount of your Social Security at any time. Perhaps, it is unlikely that they will eliminate Social Security, but it is probable that they will reduce the payout.

I do worry about the impact of future changes, especially those affecting taxation of SS and "stealth taxes" like IRMAA. It's one of the reasons I finally started taking it at 69. The tax situation is likely to get worse instead of better.

 

[RunningBum]

When I did my analysis comparing taking my Social Security at 62 years old, 66 in 10 months ( my full retirement age), and at 70 years old, my break even year would be 79 years old. The argument is, if you don’t need the money why take it earlier when appreciation of benefits is approximately 8% a year. My reply would be that by taking my benefits early I can reinvest those funds.

It shouldn't be hard to include an investment return in your calculations. You might include inflation as well, which increases your SS benefit, even if you haven't yet started taking it. I used a 5% return with 2% inflation. At 82, my FRA at age 67 passed taking at 62. At 86, taking SS at 70 became better.

I further modified my spreadsheet to take a 25% cut at age 70 (end of 2031 for me). This pushed the breakeven times to 88 and 91.

Of course returns and inflation can turn out to be just about anything, but running the numbers with assumptions seems better than an open ended statement about reinvesting early SS benefits.

My own decision based on those numbers is that I like the longevity insurance, basically a no-fee annuity, even though it may not be likely I live beyond 91. Also, if market returns are worse (pushing the breakeven earlier), I'm more likely to need SS income in my later years. If the market does better than my assumption (pushing the breakeven later), I'm almost certainly not dependent on the money. I can revisit that decision anytime between 62 and 70.

You (and anyone else) may look at those same numbers and make a different decision that works best for your circumstances.

 

[FANOFJESUS]

Absolutely. This is why I think that there are no right or wrong answers to the question of when to take SS.

One factor that seems relevant to me, but not often discussed, is this: AFAIK the SS actuaries' figures do not result in different SS income levels for male and female since they pool these two groups. So, if females (on average!) tend to live longer than males, then females might want to choose age 70 and males might want to choose age 62.

I dunno. I chose age 70 for the security of having a bigger monthly payment as "old age insurance" since I have some ancestors who lived to over 100. On the other hand, I seem to be aging faster than other 73-year-olds, so who knows.

Like you said, it's all a gamble! "Round and round and round she goes, where she stops, nobody knows!"

I think family history is the key not the amount. That is what I am betting on.

 

[Foghorn Leghorn]

So much of retirement planning would be so much easier if we knew how long we are going to be here ....

 

[ShokWaveRider]

For all the folks taking SS at 62 and taking a haircut on what they would get at FRA or 70. That is a good thing, puts less burden on the SS fund, perhaps increasing it's longevity. Just sayin'. Thanks folks we that are waiting till 70 really appreciate you sacrifice.