Social Security future? Applying at 62?

[Mdlerth]

Hastening that which we fear

I wonder if concerns regarding the future solvency of SS may become self-fulfilling. If everybody taps it sooner, won't it deplete its reserves sooner?

Sure, it's supposed to be actuarially neutral over one's lifetime, but does that also mean it's cash-flow neutral? I doubt it.

 

[martyp]

I had always planned to take SS at my full retirement age of 66+. I just surprised myself with my change of heart. I have had some life changes too. Divorced this year and moved to Thailand. However, the election has changed my confidence and inclined me to believer that there are plenty of changes ahead and that SS will not be immune. I feel like I can lock my place in the system to minimized the changes.

I'm not obsessing about a couple of hundred dollars/month but I don't really want to do anything stupid. Most published financial advice (which we all know is pretty useless) advocates taking SS later. Some advice says to enjoy some extra money now when you can which is consistent with most of us that retire early. Enjoying life while I'm younger and healthy was certainly a significant factor in my retiring at 55.

 

[RunningBum]

Good advice I've learned here is to start taking SS in a down market anytime between 62 and 70. That way you are selling less of your investments at a low. Basically you are betting that the additional investments you are able to keep in the market will rebound at a better rate than you'll get in SS increases by deferring.


Some people think they can beat SS increases in any market. Certainly possible, but not without risk.


The possibility of future SS cuts certainly makes a case for taking SS early.


Longevity insurance is a strong case for taking SS late if you have other funds to get you there. You can still spend the same way as you would if you took it at 62, it'll just be coming out of your other investments, knowing that you'll be getting a bigger SS check at 70.


Your personal life expectancy outlook certainly plays a factor.


Some people just don't have the other funds available to wait to take SS.


There are married/family situations that may apply. Since I'm single I don't keep up with those.


There are other factors I've either forgotten, or don't feel have much merit.


Most likely, it won't make all that much difference when you take it.


Personally, with 6 years to go, longevity insurance is my goal, but the possibility of cuts after I become eligible and timing a down market means that waiting until 70 isn't necessarily the right choice for that.


EDITED TO ADD:
Keeping income low to qualify for ACA subsidies is a good case for deferring until at least 65. Leaving room to do a tIRA->Roth conversion under the 15% cap is another reason to defer.


EDIT #2:
The "hold harmless" provision limits Medicare part B rate increases to your benefit increase rate, but only if you've started collecting SS. This makes a case for taking at 65. Thanks to Sunset for reminding me.

 

[IMATERP]

As a member of the NC State Retirement plan (or scam,) I have the option of:

a. Taking my pension at 60

B. Taking a blended amount at 60 which includes a social security leveling component. Hence, my adjusted pension amount would be higher between 60 and 62, but be adjusted lower at age 62 once Social Security kicks in.

I am retiring in 3 weeks and 4 days (where I turn 57) and I'm opting to wait until age 60 to make my decision. It really depends if I need a side hustle for my own sanity. Otherwise, I'd rather play with the house's money for a while.

I

 

[RunningBum]

I wonder if concerns regarding the future solvency of SS may become self-fulfilling. If everybody taps it sooner, won't it deplete its reserves sooner?

Sure, it's supposed to be actuarially neutral over one's lifetime, but does that also mean it's cash-flow neutral? I doubt it.

I don't think so, because people will be getting less. If in 2034, incoming revenues can only handle 75% of benefits, but everybody took early such that they are only receiving 75% of full retirement benefits, then it'll be ok. I doubt the math works out entirely like that, but there's something to it.

The worst case for solvency is having more people live longer than expected. This is exacerbated if those people waited to take the largest payment, collecting big checks beyond the breakeven point.

 

[REWahoo]

Excellent summary RunningBum.

Good advice I've learned here is to start taking SS in a down market anytime between 62 and 70. That way you are selling less of your investments at a low. Basically you are betting that the additional investments you are able to keep in the market will rebound at a better rate than you'll get in SS increases by deferring.

^ This was my motivation for taking SS at 62, since I hit that mark in late 2008 when the market was on life support. Couldn't bear the thought of continuing to live entirely off a rapidly dwindling nest egg when I could reduce the bleeding by starting my SS benefits. Absolutely no regrets.

 

[martyp]

Good advice I've learned here is to start taking SS in a down market anytime between 62 and 70. That way you are selling less of your investments at a low. Basically you are betting that the additional investments you are able to keep in the market will rebound at a better rate than you'll get in SS increases by deferring.


Some people think they can beat SS increases in any market. Certainly possible, but not without risk.


The possibility of future SS cuts certainly makes a case for taking SS early.


Longevity insurance is a strong case for taking SS late if you have other funds to get you there. You can still spend the same way as you would if you took it at 62, it'll just be coming out of your other investments, knowing that you'll be getting a bigger SS check at 70.


Your personal life expectancy outlook certainly plays a factor.


Some people just don't have the other funds available to wait to take SS.


There are married/family situations that may apply. Since I'm single I don't keep up with those.


There are other factors I've either forgotten, or don't feel have much merit.


Most likely, it won't make all that much difference when you take it.


Personally, with 6 years to go, longevity insurance is my goal, but the possibility of cuts after I become eligible and timing a down market means that waiting until 70 isn't necessarily the right choice for that.

I like the strategy of using current savings to enable taking SS later but that doesn't work if you think there will be cuts later. All investment choices are a risk.

 

[Freedom56]

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.

 

[RunningBum]

I like the strategy of using current savings to enable taking SS later but that doesn't work if you think there will be cuts later. All investment choices are a risk.

I found that it just moves the breakeven point to later. It can work, but you probably have to outlive the average.

 

[PandaBear]

My dh plans to start his at 62. I didn't pay into SS myself and my pension is way more than his benefits regardless of when he starts. If he goes first then so do the payments.

 

[Lawrencewendall]

If your investments are making more than 5%/6.6%/8%, numbers show it's better to take SS at 62 and keep your investments working for you. (Born after 1960)

https://www.ssa.gov/OACT/ProgData/ar_drc.html

 

[VanWinkle]

Waiting til DW and I are on Medicare. We have to defer SS income to stay in the "sweet spot" for ACA subsidies and cost sharing. We could take the SS now and then pay it all out in Health premiums, or wait to 65 and pay less for out health insurance.

I agree that if you need the cash flow now, take it early. I am not a fan of waiting past FRA (66) as then i think you are gambling on your life expectancy.

I have done all of the break even calculations, but am not impressed with making the decision based on break even analysis.

This is a personal decision and is different for each person.

VW

 

[VanWinkle]

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

+1

 

[Car-Guy]

I am about to become 62 and I’m contemplating applying for Social Security benefits. To be honest, I’m suffering from a bit of paranoia about US politics of the last couple of years. SS is supposed to be solvent until 2034 but I’m concerned that either the economy or the crazy politics will lead to tinkering with the system before then. Past discussion of SS reform has exempted people in the system or those over 55 but I can’t help feeling it’s safer to be in the system rather than out.

Similar concerns but even more so back when I turned 62. Didn't need it then and I suspect I never will but I took it at 62 and have never regretted it. I want to get back as much of my money that I can, that I was "forced" to pay in all those years. It seems funny to me that I needed the money most of the years I was paying it in, now I don't.

 

[golfnut]

Kidding aside, that doesn't mean a thing either. Sure if your only goal is to get as much back from Uncle Sam as possible it may matter. I could couldn't care less if I maximize the exact amount I get back. I want to maximize the enjoyment I get out of whatever money I do get.
My Dad took SS at 62 and he's now 93. So he technically left money on the table. But he couldn't have retired at 62 without SS and he had a physical job that would've really wore him out had he tried to stay to 65. At 93, a couple extra hundred or so a month is meaningless to him.

Good for your dad. Who knows he may not have lived this long if he waited to take SS early given his physical job.

 

[MRG]

I'm 60 and haven't made up my mind. The notion of starting it to help against a down market is appealing. However ACA subsidies today make sense too.

One thing I've never really understood is the thought of if I start at 62 that insulates me from changes in the plan.

 

[pb4uski]

Turn 62 this month but will not take it now as it will reduce my opportunity to continue taking low tax-cost Roth conversions that save me 15% or more in taxes. I'll wait to FRA or 70 unless there is a recession that causes my portfolio to plummet.

 

[aboatguy]

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.

Currently we (married) live on my military/va pension/s and bank/invest my salary.
Now for the SS age question:
According to personal capital's retirement planner (I've run multiple scenarios) we can safely spend more money in retirement by collecting @ age 62, (about 50% more than our current spending). All of the scenarios I've run have the potential for leaving a decent amount for our children. But it looks like collecting SS early ensures leaving money to the kids and bridges a gap in my 50s where (worst case scenario in the markets) we'd have to buckle down and only spend what we spend now.


So back to the OP, my gut wants me to wait to 70, but "our" numbers seem to suggest 62 gives me more security to spend more $$$$ and if we are able to get everything converted to ROTH significantly reduces money going back to Uncle Sugar. (lower tax rate)

The good news is I have a while to wait before we have to make the decision (I will retire @ 55 been doing the OMY since I retired from the Navy)

 

[Ronstar]

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.

 

[PatrickA5]

The SS analyzers I've run show me at 62 and DW at 70. If DW is still working, we'll delay mine. Also, ACA could change things if DW stops working. Wanting to do more Roth conversions could also cause a change of heart. I'm a couple of years (and many more calculations) away from having to decide. Or, maybe we'll both take at 62 just to quit worrying about it.

The fact that there might be a possible cut a couple of decades from now is way down the list on my worries list.

My dad is 96, so he's been collecting for 31 years. I don't think he even knew about waiting until 70, so he hasn't missed it or needed it. He easily lives on his SS and small pension - for now anyway.

 

[Sunset]

.....

I agree that if you need the cash flow now, take it early. I am not a fan of waiting past FRA (66) as then i think you are gambling on your life expectancy.

....

Everyday I'm gambling on my life expectancy, so far it has paid off.

That is why I saved for retirement, if I didn't expect to live long, I would have spent every penny I earned as I earned it.

This is how I retired early, I gambled I would live past the old age of 30 then 40 then 50. So I saved.

 

[Bir48die]

I am about to become 62 and I’m contemplating applying for Social Security benefits. To be honest, I’m suffering from a bit of paranoia about US politics of the last couple of years. SS is supposed to be solvent until 2034 but I’m concerned that either the economy or the crazy politics will lead to tinkering with the system before then. Past discussion of SS reform has exempted people in the system or those over 55 but I can’t help feeling it’s safer to be in the system rather than out.

I’m currently healthy. I have about $400k in savings. I have a very good COLA adjusted pension.

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.

One wrinkle is that though I have a great health care plan in the US, I am living in Thailand. Health care here in relatively inexpensive but right now I’m self insured. I’m looking for something like a catastrophic health care plan now.

Ok. Not sure where would come up with the idea that SS will be drastically changed in the next number of years. Also not sure where your economic concerns come from as 2018 is projected to be another strong year.

Politics has been crazy for the last 40 years. All SS withdrawal decisions should be based on longevity and portfolio makeup. I am waiting to see if there is a significant market downturn and can pull the trigger any time but it's not my goal to take earlier than later.

 

[Sunset]

Good advice I've learned here is to start taking SS in a down market anytime between 62 and 70. That way you are selling less of your investments at a low. Basically you are betting that the additional investments you are able to keep in the market will rebound at a better rate than you'll get in SS increases by deferring.


Some people think they can beat SS increases in any market. Certainly possible, but not without risk.


The possibility of future SS cuts certainly makes a case for taking SS early.


Longevity insurance is a strong case for taking SS late if you have other funds to get you there. You can still spend the same way as you would if you took it at 62, it'll just be coming out of your other investments, knowing that you'll be getting a bigger SS check at 70.


Your personal life expectancy outlook certainly plays a factor.


Some people just don't have the other funds available to wait to take SS.


There are married/family situations that may apply. Since I'm single I don't keep up with those.


There are other factors I've either forgotten, or don't feel have much merit.


Most likely, it won't make all that much difference when you take it.


Personally, with 6 years to go, longevity insurance is my goal, but the possibility of cuts after I become eligible and timing a down market means that waiting until 70 isn't necessarily the right choice for that.


EDITED TO ADD:
Keeping income low to qualify for ACA subsidies is a good case for deferring until at least 65. Leaving room to do a tIRA->Roth conversion under the 15% cap is another reason to defer.

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).

 

[RunningBum]

I agree that if you need the cash flow now, take it early. I am not a fan of waiting past FRA (66) as then i think you are gambling on your life expectancy.

...

This is a personal decision and is different for each person.

VW

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.

 

[REWahoo]

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).

+1

The 'hold harmless' provision is definitely a factor supporting not waiting beyond 65 to begin your benefits and should be included in each individual's when-to-take-it calculation.