Social Security future? Applying at 62?

[RunningBum]

One factor that will add to the "don't wait until 70" is that medicare cost increases get controlled by taking SS at age 65 (when medicare is required).

Thanks, I updated my post again to reflect that. That's one of those things I'd forgotten and never really appreciated or fully understood.

 

[Another Reader]

Took it at 62 and "invested" it in paying off rental mortgages. Family history supports the decision as well.

 

[USGrant1962]

Any thoughts about this? Has current politics made anyone revise their views about the future of Social Security? Ultimately I realize that this is like any investment decision depending on personal comfort with risk and peace of mind.

No.

There's nothing new here and as far as I know there is no current political action on SS. We've been spending down the Trust Fund for approaching a decade now and it is forecasted to run out in the mid-2030s - again nothing new.

There is likely to be (really, has to be) some adjustment some time in the future (on either or both revenue and benefits). If changes are on the benefit side they are unlikely to change to the break-even math.

 

[Sue J]

I turned 62 last February and decided to wait until Medicare age of 65 because of the Obamacare subsidy. Additional taxable income costs us about 16% in reduced subsidies and then there is the income tax on the SS benefit (15% on 85% of SS, or....maybe it will be 12% on 85% if tax law is changed). It's another chunk in taxes to be considered.

My expected SS benefit is small, only $604/mo right now and growing at 3 or 4 dollars a month. So none of this is big money, it's the idea of losing such a hefty percentage to lost subsidy and taxes that has me waiting.

We don't need the money to live. DHs pension is not large but our cost of living is very low so we are still living nicely on the pension. I make $4,000-$5,000/yr at a very part time job that I enjoy and I put my total gross income into an IRA.

For 2018 our Obamacare offerings included an HSA plan. With the opportunity to have a deduction for the HSA, I'm now considering starting my SS in 2018. I could offset the entire amount with the HSA contribution so it would not decrease our subsidy.

I'm going to play with a spreadsheet (one of my favorite activities) and make sure this works out. My hesitation is that Obamacare seems to be unpredictable from year to year. Our net costs can change drastically from one year to the next, even if our income stays the same. In 2014 and 2015 we had access to HSA plans. In 2016 and 2017 we did not and now it's back and very attractive. As we've all seen, SLCSP prices have skyrocketed, leaving a subsidized Bronze plan less expensive.

I don't know if there will be an HSA option in 2019. Without an HSA deduction my SS benefit would be hit pretty hard by subsidy loss and taxes. But in the big picture, it's not a lot of money. It's the idea that I'd be losing money from my already small benefit.

Something to think about. And I see this as a GOOD problem to have!

 

[Bigdawg]

BLUF: haven't decided on 52,66 or 70.

I'm retired military and currently a GS employee. I don't plan on staying long enough to qualify for the FERS pension.

You only need 5 years for a deferred FERS retirement pension at age 62

 

[joeea]

I'm 63, my wife is 62. Our current plan is to wait until I'm 70 to start drawing SS benefits.

We can afford any option, but this appears to provide the best possible longevity insurance for my wife. And it gives us very favorable ACA subsidies until we hit Medicare age.

That said, I was diagnosed with lymphoma a few weeks back. Right now, after doing some spreadsheet analysis, I don't think this will affect our decision. But I'm going to run a few scenarios by our financial advisor and see what they suggest.

 

[Lawrencewendall]

Didn't see this thread when I posted this in a new thread:

To calculate what your SS benefits will be:
https://www.ssa.gov/pubs/EN-05-10070.pdf

To see the effect of postponing claiming SS benefits
https://www.ssa.gov/OACT/ProgData/ar_drc.html

To calculate how much of your SS is taxable
https://www.fool.com/retirement/2016/06/06/social-security-tax-calculator-are-your-retirement.aspx

 

[Perryinva]

If you have to take it at 62 in order to enjoy a specific lifestyle, then take it. If your lifestyle will be exactly the same but you want a higher COLA annuity and lower RMDs, then delay. If I were to delay until 70 (not saying I will), I could chose a $6k/yr higher income from age 62, than by claiming at 62.

 

[Which Roger]

Interesting. I view the gambling the opposite way. If you take it early, you are gambling that you aren't going to live a long life where the larger benefits will be more useful, especially if you drain other resources. If I wait to collect but die early, I haven't really lose any bet because I didn't run out of money.

Put another way, my goal is to try to insure I have enough money to live comfortably no matter what age I die, rather than make sure I optimized the benefits for likely departure dates. If I wait to collect but die early, I won't have "beat the system", but I certainly will have had enough money during those few years so it won't bother me. Unless you know when you are going to die, it makes more sense to me to make sure you are covered for all ages rather than trying to squeeze more money out in an early death.

As you say, it's a personal decision.

+1 The answer to the question of when to take SS is always "it depends", and I think the first thing to consider is whether your primary goal is to ensure you never go broke, or to maximize the $ amount you expect to receive.

 

[ShokWaveRider]

My theory is, it takes the policy makers ages to do anything and currently it seems to take even longer. While that may change down the road, I figure I have at least [-]4[/-]... make that 3 years to make a final decision. I m sure nothing of any significance to SS will happen before then.

So the current plan is to take it when I start Medicare, either immediately at 65 or at FRA, I am 64 in January 2018. The ONLY reason I did not take it at 62 was so I could get the Maximum subsidy from the ACA. Otherwise I would have started at 62 for sure. DW will most likely do the same for as log as the ACA lets her, she is 59 next month.

 

[Hermit]

Everyone in early retirement should take SS starting at age 62. If you wait until 66, the break-even is age 78. It makes no sense to wait.

I am assuming that you are assuming everyone is like you. This is definitely not the case for me. I am collecting SS on survivor benefits from the late DW. The amount is not chump change. I will move to my account when I turn 70.

 

[Independent]

Have you considered a bridging strategy?

Many analysts recommend waiting until age 70 to tap SS because the annual payout is much greater than at 62.

If you have a large enough portfolio, go on the SS website and determine your your age 70 payout. Multiply that number by 8. Then carve out 8 years worth of payouts and invest that money in safe investments like CDs or treasuries. The remaining portfolio is invested in any asset allocation you are comfortable with.

Then for the next 8 years spend one years worth of your SS reserve money and whatever withdrawal % of the the remaining portfolio you want - 3%, 4% whatever.

Once you hit age 70 the SS reserve will be depleted but your SS payouts will begin and you can continue spending at the same rate as before.

Run the numbers. You are likely to find you can spend more money overall - very safely - using a bridging strategy than if you take SS at age 62.

+1

This strategy is common enough that it needs a name. "Bridging strategy" is the best I've hears so far, but someone may suggest something with more pizazz.

 

[Independent]

We have had numbers run by accountants over the years and they come up with scenarios by which we collect the most dollars. Most suggest me taking SS at 66 and DW at 70. But all of these calculations work out fine only if we live long enough. And no calculations account for reduced value of money as we age. IMO, the personal value of the extra $ I would get in my 80’s wouldn’t be worth waiting until 70 to collect. I will get far more satisfaction from a reduced amount in my 60’s than from an increased amount in my 70’s or 80’s. So I will probably take ss at FRA or sooner.

If you are a believer in a 4% guideline (or maybe 3.5% in 2017), and do the math for the bridge strategy above, I think you'll find that you can spend more early in your retirement in you defer SS.

 

[mamadogmamacat]

I had been planning to take at 62 due primarily to an expected lower than avg longevity based on family history. But now, with 62 only five yrs away, and relatively good health at the moment plus fabulous market performance for now, am considering the bridging strategy, but perhaps only from 62 to 65 to take advantage of the hold harmless provision. Who knows, though, a change in market conditions in the next five yrs could bring me back to the original plan. Perhaps the only real conclusion is keep your financial decision making fluid, and learn as many details (like about the hold harmless provision, thanks to this great site) as one can along the way.

 

[martyp]

Age calculators say that I will live until 86. My family history is that people in my family don't typically live into their 90's.

I can't go with the strategy of taking SS at 62 for the purpose of investing it more wisely than the SS increases. I've been a terrible investor all my life. (How come I can understand quantum mechanics but not investing?). The money I've saved is the equivalent of just keeping it in a mattress.

Something like tax reform is only a couple of votes away and I don't see the political environment changing much in the next few years. I'm just gambling that something will happen to SS and that it will be phased in and I, at 62, will not be affected much.

I will probably go in at 62 (next February) unless I see a tax consequence. Having recently divorced I don't know what my taxes are. I should know in a couple of months.

 

[Perryinva]

If you are a believer in a 4% guideline (or maybe 3.5% in 2017), and do the math for the bridge strategy above, I think you'll find that you can spend more early in your retirement in you defer SS.

+1. I always fail to understand the posters that state “rather get less now than more later “. If you can’t afford to run a bridged strategy then admit it, but the “less now than more later” just makes no sense. I will assume delaying until 68, and bridge on that higher amount, reducing RMDs and have more from day one. I CAN always change my mind. If you die younger, then it makes no difference, assuming you live the same way you would have, only counting on more income. . If you live long it pays out plus you lived like that from day one. If you are married and care about maximizing your spouses income then delaying makes more sense.

 

[Ronstar]

If you are a believer in a 4% guideline (or maybe 3.5% in 2017), and do the math for the bridge strategy above, I think you'll find that you can spend more early in your retirement in you defer SS.

Thanks - I really need to sit down and analyze the bridge strategy. This is the first I've seen of it - but it looks like you could be right.

 

[MissMolly]

My husband applied for his SS last week to start in February when he turns 66 (first check in March). I am the higher earner so waiting until I am 70. At that time my husband will also get a bump since 1/2 of my benefit at 66 is greater than his benefit at 66. And since he waited until he was 66 there won't be any reduction to that 1/2. I am still w*rking at my consulting business so my age 66 will still grow (this has been a banner year for me in my business) as I only just turned 64 last week.

 

[Chuckanut]

I believe that Mr. CutThroat has already shown that by taking SS at 70 one gets to spend more money over his/her retirement.

Of course, this assume that one lives to about the average age, IIRC.

As always, it is a very individual choice.

 

[jonat]

Both I and DW are taking ours at FRA (for her, that's 66 next February, for me it's 66 and 10 months (I think) in early 2021.) We don't really need the money, and DW is convinced she won't live into her 80s so we may as well.

 

[street]

I'm taking mine when I turn 62 or there about. I can't see any good reason for waiting and I have contemplated this and run the numbers and it is in my beat interest to take it and run as soon as I can.

 

[aboatguy]

You only need 5 years for a deferred FERS retirement pension at age 62

I don't plan on working for the necessary 5 years

 

[The Onceler]

I’m taking mine at 57 and don’t mind the reduction. [emoji848]

 

[Cobra9777]

I don't think "crazy politics" should play into my calculus on when to take SS. Of all the possible variables to consider, that would be pretty far down the list. I'm also less inclined than many here to believe that collecting early will insulate one from subsequent changes. I suppose anything is possible, but I can't imagine two identically-situated 64 year-olds being treated differently because one signed up at 62 and the other didn't. So that's not in my calculus either.

We'll probably start DW's SS at 62 or in a down market shortly thereafter. My benefit is larger and I'll probably die first. So we'll delay mine until FRA or 70, so she'll collect the larger benefit after I'm gone. That's the tentative thinking anyway. We're 56 and 57, so plenty of time to read more threads before a decision has to be made.

BTW, I like these two quotes:

...I will get far more satisfaction from a reduced amount in my 60’s than from an increased amount in my 70’s or 80’s. So I will probably take ss at FRA or sooner.

Taking it at 62 and hoping I live long enough to regret the decision.

 

[MissMolly]

My husband applied for his SS last week to start in February when he turns 66 (first check in March). I am the higher earner so waiting until I am 70. At that time my husband will also get a bump since 1/2 of my benefit at 66 is greater than his benefit at 66. And since he waited until he was 66 there won't be any reduction to that 1/2. I am still w*rking at my consulting business so my age 66 will still grow (this has been a banner year for me in my business) as I only just turned 64 last week.

Oh, and I forgot to add I will start drawing 1/2 of my husband's SS when I turn 66 while still letting mine grow.