Social Security at 70

[TheWizard]

...I really believe financial literacy should be taught in schools. I remember the best class I had taught us how to balance a checkbook.

I balanced my checkbook for years, from the late '60s up until maybe 15 years ago.
I no longer balance it; I just review my checking account online every so often to make sure no funny business...

 

[TheWizard]

Some people waiting until 70 to collect never made it to 70.

Same can be said for people waiting until age 62 to collect...

 

[Sunset]

With the market down, maybe a good time to put more money in the market so one could argue that's more of a reason to take SS early if one can now.

Unless the market stays down for a long time, or drops a lot more, to say 50% in the long run this will end up not a good idea.

If I take SS now, and market rebounds in 6 months, I'm stuck at the lower SS rate. However, if a person only has stock and no cash, then taking SS earlier to avoid selling low may be the only choice.

My plan is I have cash to live on a few years, if market is still low, I'll have aged closer to 70 so the decision won't be as dramatic.

It may be possible to take SS early, and if the market rebounds in 9 months, the person could repay SS with restored stock price and reset their delaying, of course a person needs to check this is possible before doing it.

 

[Music Lover]

Same can be said for people waiting until age 62 to collect...

Of course. But more people make it to 62 than to 70. And, unfortunately, some of the people that take it at 62 have health issues that suggest that they might not make it to 70.

 

[ShokWaveRider]

The Never-ending discussion continues.

My Neighbor a retired pretty well healed Judge and his missus as well-educated government type took theirs at 62 and no convincing would have changed his mind (He told her to). They both retired early at 62 albeit at different times.

As mentioned we did what opensecurity recommended and so far so good.

 

[TheWizard]

Yep, I always thought the LBYM acronym was a rather poor one. Living BEYOND your means always jumps into my mind. Maybe LWWYM would be better "Living Well Within Your Means"?

Rather than any of those terms, I think it's more important to focus on putting a certain percentage of your gross income into long term savings/investments for retirement.

15% comes to mind which may be difficult initially for new grads with educational loans.
I got up to the thirty percent level my last few working years...

 

[explanade]

Unless the market stays down for a long time, or drops a lot more, to say 50% in the long run this will end up not a good idea.

If I take SS now, and market rebounds in 6 months, I'm stuck at the lower SS rate. However, if a person only has stock and no cash, then taking SS earlier to avoid selling low may be the only choice.

My plan is I have cash to live on a few years, if market is still low, I'll have aged closer to 70 so the decision won't be as dramatic.

It may be possible to take SS early, and if the market rebounds in 9 months, the person could repay SS with restored stock price and reset their delaying, of course a person needs to check this is possible before doing it.

But even allowing for no market appreciation, I believe the break even point between taking it at 62 and at 70 is like age 86.

That is, the higher payments from taking it at age 70 takes 16 years to make up for 8 year delay in taking it at 70.

So what happens if after this down market, the returns are higher than long term averages?

 

[Chuckanut]

On the OT- I probably posted upthread that I was collecting Survivor benefits on DH's record and started my own at 69 this year. Good decision, especially with the market tanking. My net SS payment nearly doubled although I have to put aside a chunk for the extra taxes.

+1

I am taking SS at 70. I also paid for another five years of service on my COLA-Lite pension. Given today's inflation rate and the Bear market, both decisions have helped me sleep better at night.

 

[finnski1]

But even allowing for no market appreciation, I believe the break even point between taking it at 62 and at 70 is like age 86.

That is, the higher payments from taking it at age 70 takes 16 years to make up for 8 year delay in taking it at 70.

So what happens if after this down market, the returns are higher than long term averages?

80.5

 

[pb4uski]

Some people waiting until 70 to collect never made it to 70.

Same can be said for people waiting until age 62 to collect...

And in both cases I suspect that they didn't care as they had bigger fish to fry.

 

[daylatedollarshort]

That would be me- in some areas. It would KILL me to go over the initial level of data usage on my cell phone plan because, you know, that would add $7 to the monthly bill. I've got the A/C off and the windows open because we've had some rain and it's a bit cooler. When I travel in the summer the thermostat is set to 85. I get my hair cut at Great Clips.

But when I take my granddaughters to Chicago in October? Hilton O'Hare with a view of the runway.

I found a good quote for that kind of behavior from checkbook.org: "There's a big difference between splurging on luxuries and throwing money away." Not throwing money away on the small stuff leaves more money for the things that matter.


We spend more money on our kids and their partners, too, because it makes them happy and we want them to have good memories of their visits home. But when it is just us, there are a ton of fun things to do where we live that are free or cheap, so there just isn't a need for us to spend a lot for a night out.

 

[TheWizard]

But even allowing for no market appreciation, I believe the break even point between taking it at 62 and at 70 is like age 86.

That is, the higher payments from taking it at age 70 takes 16 years to make up for 8 year delay in taking it at 70...

Nothing new about those numbers.
But what that one dimensional approach ignores is the opportunity to do larger Roth conversions in the pre-70 years while getting some control over IRMAA tiers both before and after age 70.
For higher income retirees, this stuff matters...

 

[pb4uski]

But even allowing for no market appreciation, I believe the break even point between taking it at 62 and at 70 is like age 86.

That is, the higher payments from taking it at age 70 takes 16 years to make up for 8 year delay in taking it at 70.

So what happens if after this down market, the returns are higher than long term averages?

Breakeven age is 82-1/2 for someone whose FRA is 67.

Say that their PIA (benefit at age 67) is 100... therefore their benefit at 70 would be 124 (100 +100*8%*3). So if they wait to 70 they forgo collecting 3,600 of benefits (100*12*(70-67)) but get 24 more each month (124-100). 3,600/24 = 150 months or 12.5 years, which when added to age 70 results in a breakeve point of 82-1/2 (ignoring interest).

If you change it to 62 your age 62 benefit would be 70. So you would forgo 6,720 from age 62 to 70 (70*12*(70-62)). But your benefit would be 54 higher (124-70). 6,720/54 = 124 months = 10.4 years so the breakeven point would then be 80.4 (ignoring interest).

In either case, a lot lower than 86. Just curious, where did you get the 86 from?

 

[finnski1]

Breakeven age is 82-1/2 for someone whose FRA is 67.

Say that their PIA (benefit at age 67) is 100... therefore their benefit at 70 would be 124 (100 +100*8%*3). So if they wait to 70 they forgo collecting 3,600 of benefits but get 24 more each month. 3,600/24 = 150 months or 12.5 years, which when added to age 70 results in a breakeve point of 82-1/2 (ignoring interest).

Yes, but it is 80.5 when taking between 62 and 70 as stated in his example. You are correct that it is 82 1/2 when taking form age 67 to 70.
In fact it is age 82 1/2 for everyone when comparing their FRA to their age 70 benefit. I'm sure this was by design of the SS system to assure some kind of fairness or equality in the results.
ETA: sorry see I cross posted and you amended your response to include the age 62 to age 70 comparison.

 

[aaronc879]

Even though, we will not get as much SS as you, I'm still surprised at what we will get. We are looking at $47,000 a year, our spending is $60,000. If we withdraw $13,000 we are looking at less than a 0.6% withdrawal rate. Although that's today and I won't retire for 2 yrs 8 mo. If we are lucky, the market might be up making that 0.4%

Sounds like you retired way too late. Your kids will be rich unless you figure out a way to BTD.

 

[pb4uski]

Yes, but it is 80.5 when taking between 62 and 70 as stated in his example. You are correct that it is 82 1/2 when taking form age 67 to 70.
In fact it is age 82 1/2 for everyone when comparing their FRA to their age 70 benefit. I'm sure this was by design of the SS system to assure some kind of fairness or equality in the results.

Yes, after I posted I saw that he was basing it on 62 vs 70 so I added a paragraph addressing that and came up with 80.4... but 80.5 is close enough.

 

[finnski1]

Yes, after I posted I saw that he was basing it on 62 vs 70 so I added a paragraph addressing that and came up with 80.4... but 80.5 is close enough.

Yeah I saw that and amended my post.

 

[finnski1]

These sre the break evens I got when comparing age 62 to age 70 benefit.
70 v 62
born before 1954 80.53
born in 1955 80.49
born in 1956 80.48
boirn in 1957 80.45
born in 1958 80.42
born in 1959 80.40
born in 1960 or later 80.37

 

[finnski1]

In either case, a lot lower than 86. Just curious, where did you get the 86 from?

Yes. I don't know why I bother but I keep seeing numbers like that that are not true. In most cases people already have made up their minds when to file and even if it would "only be 80.5" don't think it would change anybody's mind and so I probably should ignore it but..... can't help myself

 

[ShokWaveRider]

Breakeven age is 82-1/2 for someone whose FRA is 67.

That is looking at it from a pure "Total" SS return perspective.

But the increase in monthly income between 62 and 70 is IMHO opinion well worth it, especially if one has the funds to get buy till 70. From a Couples perspective with 2 SS recipients. Having the lower earner collect at 62 and the high earner waiting is a winner.

I would even say more so now in the pandemic age. E.G: We stopped travelling because we could not put up with the hassle and we live in a resort anyway, so it is not such a big deal. When I am 70 we will downsize and do some real BTD frivolous luxury travel for 5 to 10 years.

Of course this does not work if you absolutely need the money, although IMHO taking a stipend from one's 401k or IRA to make up some income is still better than not waiting to draw from a COLA'd SS. MMDV

 

[explanade]

But with the uncertain situation of SS long term, there could be a benefit to taking it earlier to get grandfathered into existing payouts.

Vs. what the politicians may decide are future payouts.

 

[Time2]

80.5

But does this take into effect the limited Roth conversions I could make because of the extra income from SS, causing me to have larger RMDs and thus be in a higher income tax bracket? Assuming I make it to 72. And if I don't the much larger RMDs my surviving wife would have and the still higher tax bracket? More of a rhetorical question, as it can get very complicated.

 

[youbet]

The reason that age 62 is the highest is because many people live beyond their means, have little retirement savings and their bodies are making the physical work that they do increasingly difficult so they have little choice and have to take SS at 62.

Well, that's one of several possible reasons. Probably a significant one though.

 

[Chuckanut]

I found a good quote for that kind of behavior from checkbook.org: "There's a big difference between splurging on luxuries and throwing money away." Not throwing money away on the small stuff leaves more money for the things that matter.
.

During the months of the Covid lockdown, like many I noticed that my bank account was going up as my spending on many activities went to zero. I as tempted to spend some of the money, but then I thought, "What's the point of spending money just to spend money?" There is no satisfaction in that. Later when we started traveling again, I did spend extra $$'s to get an ocean front room on the Oregon coast. Now that was worth it.

 

[pb4uski]

But with the uncertain situation of SS long term, there could be a benefit to taking it earlier to get grandfathered into existing payouts.

Vs. what the politicians may decide are future payouts.

From everything that I have read in the subject, there will not be any grandfathering so that's not really a good reason... people will get a percent of what the would otherwise be expecting.