Social Security - When to start benefits..

[TromboneAl]

Never mind, my question was already answered.

[packrat44]

Quote:

Originally Posted by audreyh1 Here is an interesting chart from a blog that Midpack linked to earlier. Basically, only 3% of the SS recipients in 2004 and earlier elected to wait until 66 years or older to start receiving SS. Half of them elected to start at 62. From Pensions, Retirement Planning, and Economics Blog: Annuities and Delayed Social Security Audrey

I was aware about 50% started receiving their SS benefits at 66. However, I was shocked that only 3% waited until 66 or later. The majority in the US tend to live for the present and ignore the future. It shows by how many have debt problems.

There are many reasons why it is more beneficial for someone to receive benefits early. But there also many reasons for someone to delay. The 97%/3% break appears not to be logical.

Personally, I am waiting until 70 (2.5 yr), DW will start at 62 (3 yr). My parents are almost 98 and 95 and live at home without outside assitance. The rest of my parents siblings also show longevity. This is the secondary reason I am waiting; betting on also having longevity. The primary reason for waiting is the insurance value to DW. I do expect to pass before her (she also has longevity in her family). I am receiving 3 COLAd pensions that do not have survior benefits. DW will start receiving a small non-COLAd pension in 6 years. My present pensions cover our needs, but am drawing from our portfolio to cover some wants and taxes (agressively converting TIRAs to ROTHs). When we begin to receive SS benefits, all needs and wants should be covered. Our portfolio will be used to cover unforeseen shortfalls and when I pass and my pensions cease.

[rayvt]

I think anybody who is surprised at this is in a cocoon, and expecting that everybody else should be thinking the same way they do.

* Delay SS until 70? And live on what for the 5 years between 65 and 70?
Delaying is only an option for people who have a great pension or a lot of money in investments. That's got to be a portfolio of at least $250K to $500K.

* Much of the hoop-la w/r/t delaying until 70 is the substantially higher monthly benefit. Most of the proponents ignore the time-value of money and act as if a dollar in 5 years has the same value as a dollar today. This, even though the SSA says that whenever you start taking benefits, the dates are all actuarilly equivalent. "Age-related adjustments to Social Security benefits are intended to be actuarially equivalent, on average rendering lifetime benefits invariant to the timing of first receipt."

The SSA links to a 2002 research paper which says, in part, "Generally, with an age-65 normal retirement age, the profiles imply an actuarial premium for males, particularly low-earnings males, who accept benefits early" [actuarial premium means they get more than they should]
and

"Particularly for males, the eight percent annual credit for benefit claims past the NRA appears to be woefully inadequate, falling short of the age-70 AAF (actuarial adjustment factor) by almost seventeen percentage points." and

"Under our midrange discount rate assumption, most male beneficiaries face actuarial premiums that decline with benefit acceptance after age 62 and most females face actuarial losses that also decline with delayed acceptance. Thus, males have little actuarial incentive to delay their initial benefit claim and the disincentive is strongest for low-earning males. In contrast, most female beneficiaries have little actuarial incentive to accept benefits early. These gender differences in relative benefit profiles can translate into substantial lifetime actuarial premiums for males who claim early, and actuarial losses for early-claiming females."

[haha]

Quote:

Originally Posted by rayvt I think anybody who is surprised at this is in a cocoon, and expecting that everybody else should be thinking the same way they do. * Delay SS until 70? And live on what for the 5 years between 65 and 70? Delaying is only an option for people who have a great pension or a lot of money in investments. That's got to be a portfolio of at least $250K to $500K. * Much of the hoop-la w/r/t delaying until 70 is the substantially higher monthly benefit. Most of the proponents ignore the time-value of money and act as if a dollar in 5 years has the same value as a dollar today. This, even though the SSA says that whenever you start taking benefits, the dates are all actuarilly equivalent. "Age-related adjustments to Social Security benefits are intended to be actuarially equivalent, on average rendering lifetime benefits invariant to the timing of first receipt." The SSA links to a 2002 research paper which says, in part, "Generally, with an age-65 normal retirement age, the profiles imply an actuarial premium for males, particularly low-earnings males, who accept benefits early" [actuarial premium means they get more than they should] and "Particularly for males, the eight percent annual credit for benefit claims past the NRA appears to be woefully inadequate, falling short of the age-70 AAF (actuarial adjustment factor) by almost seventeen percentage points." and "Under our midrange discount rate assumption, most male beneficiaries face actuarial premiums that decline with benefit acceptance after age 62 and most females face actuarial losses that also decline with delayed acceptance. Thus, males have little actuarial incentive to delay their initial benefit claim and the disincentive is strongest for low-earning males. In contrast, most female beneficiaries have little actuarial incentive to accept benefits early. These gender differences in relative benefit profiles can translate into substantial lifetime actuarial premiums for males who claim early, and actuarial losses for early-claiming females."

Can you give the link from which you are quoting?

[packrat44]

Quote:

Originally Posted by rayvt I think anybody who is surprised at this is in a cocoon, and expecting that everybody else should be thinking the same way they do. As I stated above, there are reasons to take benefits early and reasons to take them later. Because you have resons to take early does not mean others are wrong for choosing to take them later. * Delay SS until 70? And live on what for the 5 years between 65 and 70? Delaying is only an option for people who have a great pension or a lot of money in investments. That's got to be a portfolio of at least $250K to $500K. Yes. Live off your investments and/or pensions from 65 through 70, and far into the future. Some of us are blessed with good pensions and adequate portfolios. I would not have considered myself FI if my porfolio were south of $500k and therefore would not have retired. * Much of the hoop-la w/r/t delaying until 70 is the substantially higher monthly benefit. Most of the proponents ignore the time-value of money and act as if a dollar in 5 years has the same value as a dollar today. This, even though the SSA says that whenever you start taking benefits, the dates are all actuarilly equivalent. "Age-related adjustments to Social Security benefits are intended to be actuarially equivalent, on average rendering lifetime benefits invariant to the timing of first receipt." Not all people intend to die on the date the actuary tables state. Even if I were to pass prior the break even point, I could not care less about not taking benefits early. I did not need them early. Taking the benefits later gives an insurance that DW will have a higher benefit when I die and my pensions cease. The SSA links to a 2002 research paper which says, in part, "Generally, with an age-65 normal retirement age, the profiles imply an actuarial premium for males, particularly low-earnings males, who accept benefits early" [actuarial premium means they get more than they should] and "Particularly for males, the eight percent annual credit for benefit claims past the NRA appears to be woefully inadequate, falling short of the age-70 AAF (actuarial adjustment factor) by almost seventeen percentage points." and "Under our midrange discount rate assumption, most male beneficiaries face actuarial premiums that decline with benefit acceptance after age 62 and most females face actuarial losses that also decline with delayed acceptance. Thus, males have little actuarial incentive to delay their initial benefit claim and the disincentive is strongest for low-earning males. In contrast, most female beneficiaries have little actuarial incentive to accept benefits early. These gender differences in relative benefit profiles can translate into substantial lifetime actuarial premiums for males who claim early, and actuarial losses for early-claiming females."

Bottom line - if you are in poor health and plan to die before the cross over point and your porfolio is so small that you are not FI and you need every last penny to live on, then take your benefits early.

There are good reasons to take benefits early and there are good reasons to take them later.

[gerntz]

Quote:

Originally Posted by audreyh1 Here is an interesting chart from a blog that Midpack linked to earlier. Basically, only 3% of the SS recipients in 2004 and earlier elected to wait until 66 years or older to start receiving SS. Half of them elected to start at 62. Audrey

Makes sense. For almost all those folks, full retirement age was 65. And the reduction for age 62 benefits was much less than today.

[rescueme]

Quote:

Originally Posted by packrat44 There are good reasons to take benefits early and there are good reasons to take them later.

True.

That's why they make more flavors of ice cream than just vanilla (even if it is the largest seller) ...

[audreyh1]

Quote:

Originally Posted by gerntz Makes sense. For almost all those folks, full retirement age was 65. And the reduction for age 62 benefits was much less than today.

Yes, looking at that chart with the 28% chunk retiring at 65, I was thinking that full retirement age must have been 65 in 2004. And it was. It didn't shift to 66 until about 2008. So, yes, that 3% applied to people waiting past full retirement age.

[Lsbcal]

Quote:

Originally Posted by gerntz Makes sense. For almost all those folks, full retirement age was 65. And the reduction for age 62 benefits was much less than today.

Good points! Do you or anyone else know roughly what the reduction percentage was for retiring at 62 instead of 65 on or around 2004? Just curious.

[ziggy29]

Quote:

Originally Posted by Lsbcal Good points! Do you or anyone else know roughly what the reduction percentage was for retiring at 62 instead of 65? Just curious.

My FRA is 67 (assuming it doesn't go to 70 in the next few years), and the benefit at 62 is about 30% less than the benefit at 67 and about half the benefit at 70. These are in nominal dollars, of course, and inflation makes the actual, "real" adjustments quite a bit less.

[Independent]

Quote:

Originally Posted by Lsbcal Good points! Do you or anyone else know roughly what the reduction percentage was for retiring at 62 instead of 65 on or around 2004? Just curious.

This chart:
Benefit Reduction for Early Retirement

[Lsbcal]

Quote:

Originally Posted by Independent This chart: Benefit Reduction for Early Retirement

So this chart seems to say that the benefit reduction does not differ all that much for older retirees that had put off retiring until 2004. If we label the age 65 group as FRA in Audrey's chart (post #177), it would not change much for current retirees.

[jeffmete]

"If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between. "

From the SS web page.

[ziggy29]

Quote:

Originally Posted by jeffmete "If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between. " From the SS web page.

That was at least presumably true when the benefits and retirement ages were last adjusted. I think there have been changes in life expectancy since then which would make waiting a better deal from an expected payout perspective. It's not like they have built-in adjustments for changes in life expectancy each year.

[jdw_fire]

Quote:

Originally Posted by ziggy29 My FRA is 67 (assuming it doesn't go to 70 in the next few years), and the benefit at 62 is about 30% less than the benefit at 67 and about half the benefit at 70. These are in nominal dollars, of course, and inflation makes the actual, "real" adjustments quite a bit less.

SS gets COLAs whether you are receiving it or waiting till age 70 so why would "real adjustments" be quite a bit less?

[Independent]

Just updating the retirement age table to 2010

Age	2004	2010
62	51%	45%
63	7%	8%
64	10%	7%
65	17%	10%
DisConv	11%	13%
66	1%	13%
67	1%	1%
68	0%	1%
69	0%	0%
70-74	1%	1%
75+	0%	0%

The "DisConv" is disability conversions. I believe that when a disabled person reaches NRA they re-label the benefit as "old age".

At any rate, the average age seems to have moved up a little.

I'm surprised that 45% of Americans are ready to quit work at 62. But I'm not surprised that most start SS about the time they quit work. Most people live paycheck to paycheck.

Even if they have savings, spending them down to defer SS isn't something that most people even consider seriously. Those that do usually can't part with the savings (just like most people can't commit to an SPIA). People on this board are unusual in that we both have savings and are analytical enough to think about it.

Table 6.A4 at: http://www.socialsecurity.gov/policy...t/2011/6a.html

[ziggy29]

Quote:

Originally Posted by Independent I'm surprised that 45% of Americans are ready to quit work at 62.

An increasing number of them, no doubt, are laid off older folks who weren't completely ready to retire, but had no good job prospects (especially with today's rampant age discrimination) and had to take it at 62 whether they wanted to or not...

[ziggy29]

Quote:

Originally Posted by jdw_fire SS gets COLAs whether you are receiving it or waiting till age 70 so why would "real adjustments" be quite a bit less?

Except that historically, benefit levels before you start collecting rise according to overall wage increases, not inflation. And historically (though this may be changing), wage increases have exceeded inflation.

Again, this may not be the case any more -- wage growth has essentially been zero over the last five years or so.

[audreyh1]

Quote:

Originally Posted by Lsbcal Good points! Do you or anyone else know roughly what the reduction percentage was for retiring at 62 instead of 65 on or around 2004? Just curious.

A person turning 62 today (born in 1950) and taking SS benefits sees a reduction of 25%.
A person turning 62 in 2004 and starting SS saw a 20% reduction.

So to me the difference is 5%. At least that's what I got from Independent's table.

Audrey

[audreyh1]

Quote:

Originally Posted by Independent Just updating the retirement age table to 2010 Age 2004 2010 62 51% 45% 63 7% 8% 64 10% 7% 65 17% 10% DisConv 11% 13% 66 1% 13% 67 1% 1% 68 0% 1% 69 0% 0% 70-74 1% 1% 75+ 0% 0% The "DisConv" is disability conversions. I believe that when a disabled person reaches NRA they re-label the benefit as "old age". At any rate, the average age seems to have moved up a little. I'm surprised that 45% of Americans are ready to quit work at 62. But I'm not surprised that most start SS about the time they quit work. Most people live paycheck to paycheck. Even if they have savings, spending them down to defer SS isn't something that most people even consider seriously. Those that do usually can't part with the savings (just like most people can't commit to an SPIA). People on this board are unusual in that we both have savings and are analytical enough to think about it. Table 6.A4 at: Annual Statistical Supplement, 2011 - Summary of OASDI Awards (6.A)

Thanks for the updated table.

The average age moved up one year. That's simply because the Full Retirement Age (FRA) moved up one year for younger folks. We are still at only 3% starting SS after FRA. And, wow, only 1% wait until 70 - same as before.