Social Security future? Applying at 62?

[Floridatennisplayer]

I’m in a different situation that no one has mentioned yet. I HATE MY JOB. I’ll be 63 in March. Plan on taking SS at 65 to match up with Medicare for health insurance. I will quit my job at 64 and a half and pay COBRA for 6 months.

In great health, play a lot of tennis, no debt. I see light at the end of the tunnel.

 

[VanWinkle]

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.

Here's hoping you see 70, 80 and 90s.



Best to you,

VW

 

[Youngster]

I waffle back and forth about whether I will take at 62. I think for me, it will boil down to whether the ACA is still around when I'm 62. If it is, I will likely hold off until I can get on Medicare. Health insurance premiums are my main financial concern for the future.

 

[VanWinkle]

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.

Shok,

My plan matches yours exactly.

Brilliant minds think alike.....

VW

 

[GravitySucks]

I was wondering if someone at 90+ really had regrets on starting benefits early, you answered that question. I figure at 90+ they don't have as much need for $$ as they did when they were younger and may not miss the extra few hundred $$ each month now vs enjoyed having it when they were younger. I totally get trying to get there most you can, but also see the side that says enjoy life now.

85 year old Dad just complained last week that he's sorry he took his at 62 instead of waiting.

 

[robnplunder]

I was gonna take it at 62 but reviewing my tax situation made me reconsider. In 6 years, I will be 62. I will have to review the tax, ACA subsidy situation then.

 

[Scuba]

I was gonna take it at 62 but reviewing my tax situation made me reconsider. In 6 years, I will be 62. I will have to review the tax, ACA subsidy situation then.

I haven't spent any time on analyzing this for us. We're 57 & 58, currently have a grandfathered pre-ACA health plan, and who knows what will change with healthcare, taxes, and SS between now and then. Lots of great thoughts on this site, and apparently many nuances to consider.

 

[daylatedollarshort]

We've optimized our expenses so that pensions at 55 and SS at 62 for both of us will cover most of our baseline expenses. So that's our current plan. That allows us to reinvest most of our portfolio income and proceeds or rent from the house, if we downsize, in conservative investments and maintain our current net worth in today's dollars no matter how long we live as long as we get at least a 0% real return, less what we need for LTC or the asteroid strike.

 

[LRDave]

We plan on retiring next year when we are 60/58 and immediately start spending our hard-earned savings on world travel (first class), fine dining and expensive booze. Then at about 65-ish, we will settle down and become conservative homebodies, maybe live off the land some (grow a little weed in the woods perhaps...), dine on cat food occasionally and aim to become wards of the state shortly before dementia sets in and/or dirt nap time.


So I will take SS at the right time to support the plan above.

 

[Shanky]

What about the possibility of means testing? Would that affect your choice?

 

[MrLoco]

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.

This. Times 10. Far better to delay taking SS early ( as long as you don't really need it) than taking it early only to find that you live a long life and are in danger of running out of money. Better to leave money on the table than be broke at age 90. Some may argue that by taking SS early, one's portfolio can continue to grow. But what if you DO take SS early and at the same time we have a devastating long term bear market. Then your portfolio takes a huge hit AND you have a smaller SS benefit.
Your SS is a guaranteed annuity from Uncle SAm. Sure....they may cut benefits, delay COLA's , etc. but for most of us at or near retirement age SS will always be there.

 

[Independent]

What about the possibility of means testing? Would that affect your choice?

One possibility is that "means" will be defined as non-SS income and assets. If I defer SS, I'll spend down my other assets and hence lower my "means".

But, I can't predict the exact rates, cutoffs, etc. to know if that will matter.

 

[VanWinkle]

I’m in a different situation that no one has mentioned yet. I HATE MY JOB. I’ll be 63 in March. Plan on taking SS at 65 to match up with Medicare for health insurance. I will quit my job at 64 and a half and pay COBRA for 6 months.

In great health, play a lot of tennis, no debt. I see light at the end of the tunnel.

You know you can get cobra for 18 months!!! Maybe slip out a little sooner!

VW

 

[DEC-1982]

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).

I wasn't aware of this, so I read up on the "hold harmless" feature of medicare. Clearly I have to give some more thought to my current plan to take SS at 70. How often have these sudden "big" premium jumps occurred in Medicare in the past?

 

[ERD50]

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.

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.

This was explained years ago by poster Cut-Throat - he gave an accounting example similar to above ( I think he used the age 62 amount for years 62-70), and summarized it simply:

"You can spend more now (62-70), knowing you will getting more later"...

Here's a recent discussion:

http://www.early-retirement.org/for...decision-here-is-why-88951-2.html#post1956130

-ERD50

 

[UnrealizedPotential]

I don't know what I am going to do. I have plenty of time to think about it . I have 14 years until age 62. In the mean time it doesn't hurt to learn how everything works,SS,Medicare,etc. For instance I didn't know there wasn't an out of pocket limit on Medicare. I never thought of the possibility of taking SS in a down market.

There's a lot to consider. I have read up on some of the Part A,B,C and D and how those work. Interesting stuff that eventually I will need to make a decision on. Also, the "hold harmless" was interesting too. It can't hurt to understand some of this.

 

[ERD50]

I wasn't aware of this, so I read up on the "hold harmless" feature of medicare. Clearly I have to give some more thought to my current plan to take SS at 70. How often have these sudden "big" premium jumps occurred in Medicare in the past?

I was not aware of this either. Is it a big deal? Maybe that deserves it's own thread?

-ERD50

 

[freetodream]

If a person starts SS @ age 62, I find it hard to believe a law change would further reduce said amounts for those who are already receiving SS payments.

 

[teejayevans]

62-70....I’ve decided to take it at 66, King Solomon would be proud.

 

[USGrant1962]

If a person starts SS @ age 62, I find it hard to believe a law change would further reduce said amounts for those who are already receiving SS payments.

Probably true, but based on history changes will be based on your age, regardless of starting benefits or not. I don't know where this idea comes from that starting benefits at 62 is more likely to preserve your benefits than a 62-year-old that hasn't started collecting.

 

[Cobra9777]

If a person starts SS @ age 62, I find it hard to believe a law change would further reduce said amounts for those who are already receiving SS payments.

Probably true, but based on history changes will be based on your age, regardless of starting benefits or not. I don't know where this idea comes from that starting benefits at 62 is more likely to preserve your benefits than a 62-year-old that hasn't started collecting.

+1

When I hear people say they are collecting at 62 to protect against future changes, they seem to be implying that those changes WOULD apply to someone 62-70 who decided not to collect early. Again, I suppose anything is possible, but that seems so highly unlikely that I would never base the decision on that.

 

[pb4uski]

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.

IMO, this is a conservative way to increase your retirement spending. Let's take and example of 62 yo a retiree with $1 million saved and SS of $25k a year at their FRA of 66.

If they take SS at 62 and use a conservative 3.5% WR, then their inflation-adjusted spending can be $53,750 ($35,000 from portfolio and $25,000*75% or $18,750 from SS).

Alternatively, they carve out 8 years worth of age 70 benefits into a separate fund of $264,000 to provide $33,000 a year for ages 62-70 since their age 70 SS benefit will be $33,000 ($25,000 * (1+(8%*4))). They have $736k left and at a 3.5% WR that is $25,760... add the $33,000 and the total is $58,760.

So with some minimal financial engineering they have increased their retirement spending by 9.3%!

(I'm assuming that the $264k side fund earns the inflation rate so the $33,000 a year can be increased for inflation, but even if you bumped the $264k up a little bit to consider inflation more explicitly, it is still a winning strategy.)

 

[audreyh1]

We plan on retiring next year when we are 60/58 and immediately start spending our hard-earned savings on world travel (first class), fine dining and expensive booze. Then at about 65-ish, we will settle down and become conservative homebodies, maybe live off the land some (grow a little weed in the woods perhaps...), dine on cat food occasionally and aim to become wards of the state shortly before dementia sets in and/or dirt nap time.


So I will take SS at the right time to support the plan above.

LOL! Sounds like a plan!!!

 

[RunningBum]

+1

When I hear people say they are collecting at 62 to protect against future changes, they seem to be implying that those changes WOULD apply to someone 62-70 who decided not to collect early. Again, I suppose anything is possible, but that seems so highly unlikely that I would never base the decision on that.

I guess I assumed they wanted to get full benefits for a few years before cuts come to all. If you can get 5 years of uncut benefits before a 25% across the board cut comes, you move the breakeven point at least a couple of years.

I agree it's extremely unlikely for them to say "You've been collecting, so you'll keep getting the same amount, but this other person chose to delay, so we'll cut their benefit 25% (or more)". In fact, if they really were fair if they do a cut across the board, they'd compensate for those eligible but not yet collecting, to even them up to make up for the uncut money they did not get, but I don't think that will happen either.

My thought had been that when they make changes, anyone 62 or older would be grandfathered in at the old benefit rates for the rest of their lives, whether they are collecting or not. However, as 2034 gets closer with nothing being done, I don't know how they can afford to do this. I'm judging that it will be more likely that someone who defers will lose out by not collecting uncut benefits while they can. The worst case, as I wrote in another thread, is that you defer until 70, and at that point everyone gets hit with a 25% cut. You've missed on the uncut benefits from 62-70 and it will take more years to make up the difference.

 

[audreyh1]

I wasn't aware of this, so I read up on the "hold harmless" feature of medicare. Clearly I have to give some more thought to my current plan to take SS at 70. How often have these sudden "big" premium jumps occurred in Medicare in the past?

It occurred only once so far? And recently. I think it was 2016 and 2017

But after two years of a break in Part B premiums, the held harmless folks are catching up in 2018.

They did get to pay lower premiums for two years, but (almost) everyone is back to paying the same rate in 2018. So maybe it doesn't matter so much to those who delayed after all.

This will never be an issue for us because we are in one of the higher income tiers, and higher income folks are never held harmless.