Social Security future? Applying at 62?

[marko]

I am 60 1/2 and have always planned on taking it at 62. I won't "make any money" on waiting till I'm 80. Like they say, there are no guarantees. If I live to 85 or 90 I doubt I'll be griping about "OH crap, man! If I had waited till 70 I'd have x thousand extra dollars now!" Then die the next day.

+1 I also "took the money and ran" at 62. Get grandfathered-in a much as possible against ch-ch-ch-changes.

Plus there's that 2034 thing that folks here were sweating about last week.

 

[Which Roger]

When they last fixed SS in the 1980s, it was with a combination of increasing payroll taxes, raising the retirement age for younger people, and making SS benefits partially taxable for some recipients. But everybody on this thread seems to assume that the next time around, the fix will simply be a big across-the-board cut. What am I missing? How is it different this time?

 

[pb4uski]

We have much less confidence in the ability of Congress to actually do something today than we would have in the 1980s. If they do nothing, then the inflow will be ~25% less than promised benefits and benefits will be reduced.... most likely across-the-board to all beneficiaries.

 

[RunningBum]

^ +1. And it's an easy metric to prepare for a "worst case" that is reasonably possible.

 

[Happyras]

What if the new tax plan included a repeal of the tax on SS benefits? Now that might change some opinions both on electing at 62, and the repeal of medical itemization. So much CAN change, including future benefit rules, so take what you can, if you are able!

Even though our taxed benefits are dipping 85% in the current 28% bracket, it feels right to get what you earned. Who knew the benefit for itemizing home ownership costs would possibly become so worthless.

 

[daylatedollarshort]

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.

It is possible to take SS at 62 and leave enough buffer to not have to worry about running out of money. I don't see that the options are mutually exclusive unless the retirement plan doesn't have much padding or margin for error.

 

[RunningBum]

It is possible to take SS at 62 and leave enough buffer to not have to worry about running out of money. I don't see that the options are mutually exclusive unless the retirement plan doesn't have much padding or margin for error.

Sure, getting 1800/month, for example, by taking at 62 may be enough to not worry, but 3000/month taking at 70 is usually better longevity insurance, don't you think? It could mean the difference between flying first class on vacation vs. coach. You're not running out of money either way, but first class sounds more comfortable, especially at old age.

 

[Ian S]

One of the things you might consider is the applicability of the longevity calculator used. IMHO, the best are flexible calculators that take into consideration a number of important parameters. Abaris has a calculator that gives me a life expectancy of 93 or 94 (depending on whether or not I include the 3 months I smoked as a teenager.) That's a lot higher than what I'd get from SS which lumps me in with the entire population. Now they may be wanting to sell annuities but their methodology seems sound. That makes delaying SS much more attractive for me.

 

[mamadogmamacat]

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

 

[joeea]

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

That's interesting.

Virtually everyone makes a decision (early, FRA, late) and is happy with whatever decision they have made.

This is the first time I've heard of someone being unhappy. Ever.

Has he said what his reasoning was in starting at 62? And why he feels unhappy about that now?

 

[joeea]

When they last fixed SS in the 1980s, it was with a combination of increasing payroll taxes, raising the retirement age for younger people, and making SS benefits partially taxable for some recipients. But everybody on this thread seems to assume that the next time around, the fix will simply be a big across-the-board cut. What am I missing? How is it different this time?

I don't think folks are predicting that's what will happen with "the fix".

Instead, they are predicting what will happen if there is no fix. In 2034 there will be across-the-board cuts for all SS recipients - unless legislation is enacted to "fix" it.

I'm betting that there will indeed be a fix before then.

 

[AndyS]

The government kind of expects me to take my SS at 62 because that's when they cut my FERS supplement off that I get for retiring early as a Fed LEO. So, I guess that's what I'll do.

 

[MRG]

I don't think folks are predicting that's what will happen with "the fix".

Instead, they are predicting what will happen if there is no fix. In 2034 there will be across-the-board cuts for all SS recipients - unless legislation is enacted to "fix" it.

I'm betting that there will indeed be a fix before then.

Yes indeed. Things get fixed and there are many future issues to worry about. I'm guessing there is much pressure to extend the system for a generation or more. Extending things makes humans feel comfortable.

Seriously, in 2042 there's a huge issue with most major computer systems. Much bigger than Y2K! The TOD clock expires. Let's focus.

 

[Throwdownmyaceinthehole]

Ok mine and DH SS benefits are equal. He's 64, I'm 63. I've decided to start mine next year. He can get spousal on mine at FRA as his birthdate was 10 days before the cutoff. His will grow til 70. That gives us the best of both worlds unless we both live over 90. I've run the numbers with using the bridge strategy and looks like we are good either way. Only problem I have is that filing for SS will make me feel old and I'm not!

 

[Clone]

My wife will take hers at age 62. That will save us about $5000 per year in self employment taxes. (Once you are drawing SS, income from CRP contracts is no longer earned income, therefore no SE tax on the payments.) I plan to take mine at age 70, so as to increase the survivor benefit for her. But the option is still open for me to take it earlier if situations change.

 

[rayvt]

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)".

But that's exactly what they have done with Medicare premiums.
With the Hold Harmless law, if you are collecting SS, your medicare premium is capped and your net (SS minus medicare) will not be decreased.

But if you are not collecting SS, your medicare premium is not capped.

This is effectively the same thing as what you deem unlikely.

 

[martyp]

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.

Yes! This is actually the point of my starting this thread. Up to now there haven't been changes for a long time. My fear is that politics have fundamentally changed and now there may be changes to SS. I have no idea what those changes will be. I just think that taking the risk of applying now preferentially (maybe) protects me from all or some of those changes by already being in the system.

 

[martyp]

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.

It is true that past discussion about changes in SS benefits have focused on age. I remember proposals that would exempt those 55 and older. The question I proposed and worry about (a little) is has politics has fundamentally changed? Would any changes to SS now be applied differently. Consider attempts to repeal the ACA. Members of Congress seem to be very willing to vote to take away health care benefits and protections that people already have. Has the politics of not taking away benefits changed? And will that extend to any changes to SS if they come?

 

[martyp]

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.)

Interesting! I'll look into this.

 

[RunningBum]

But that's exactly what they have done with Medicare premiums.
With the Hold Harmless law, if you are collecting SS, your medicare premium is capped and your net (SS minus medicare) will not be decreased.

But if you are not collecting SS, your medicare premium is not capped.

This is effectively the same thing as what you deem unlikely.

That's seems a lot different, unless there's some history I don't know about. You know going in about the Hold Harmless law, and can choose at any point to start taking SS and take advantage of it. If you decide to wait until 67 to take SS, at that point you get the advantage of Hold Harmless. You didn't lose that benefit for good just because you failed to take it by a certain date and they changed benefits underneath you.

This is different from them permanently chopping the future benefits of anyone not yet taking SS even if they are eligible, and keeping the current benefits of those who have started taking it.

Admittedly I'm still learning about Hold Harmless, so please correct any misconceptions I've made.

 

[AndyS]

Not trying to be political, just a prediction ... someday when SS gets in such trouble maintaining benefit levels that Congress is forced to do something to "fix" it .... I predict rather than slashing current benefits they will just raise or perhaps eventually abolish the SS wage cap for contributions with no commensurate increase in benefits above a certain maximum benefit one can receive.

Might not be "fair" according to how one looks at it ... but that'll "fix" it. I'm not advocating for or against that idea ... I'm just saying the way I see it most voters will never earn up to the wage cap and they know it, and so they will vote to "eat the rich" before they'll see any significant reductions made in their grandparents, their parents, or their own future SS benefit. They already raised the wage cap about 7% just this year from 118k to 127k

Point being .... some here have expressed possible future benefit cuts/changes as one reason to consider taking SS early ... personally, for the reasons stated above, I'm not too concerned about future benefit cuts.

 

[martyp]

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.

Exactly! I've never been a successful investor. I am (now) very conservative in my investment strategy. Especially now that I am already ER'd. So if I were concerned enough about your worst case scenario then I would take SS at 62 to hedge my bets. Of course, this could be another bad investment strategy on my part so I opened this discussion to see what other thought. Not surprisingly (to me) most people don't think the worst case scenario is probable. Like most others, I don't absolutely need the SS.

 

[martyp]

When they last fixed SS in the 1980s, it was with a combination of increasing payroll taxes, raising the retirement age for younger people, and making SS benefits partially taxable for some recipients. But everybody on this thread seems to assume that the next time around, the fix will simply be a big across-the-board cut. What am I missing? How is it different this time?

The politics of the 1980's is not the politics of today. Or is it? Is it a law of nature that once we have a benefit they won't take it away. Congress has voted to repeal the ACA but maybe (and probably) that was posturing because they new it ultimately wouldn't become law. But has that politics shifted in any way in the last two years? I don't know but it has got me thinking only because I'm about to become 62.

 

[bobandsherry]

Better to leave money on the table than be broke at age 90..

One is not suddenly "broke" at 90, they still get a monthly check. Perhaps needing to cut back on their expenses, but def not broke.

 

[daylatedollarshort]

Sure, getting 1800/month, for example, by taking at 62 may be enough to not worry, but 3000/month taking at 70 is usually better longevity insurance, don't you think? It could mean the difference between flying first class on vacation vs. coach. You're not running out of money either way, but first class sounds more comfortable, especially at old age.

First class tickets aren't the issue I replied to in my post. I replied to the comment of not taking SS at 62 in order to not run out of money.

First class tickets gets to the issue of maximizing money if one lives beyond the break even point. For our household, we're more interested in income stream diversification maintaining the current NW and lifestyle.