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SS at 62 or 70?
 03-05-2017, 01:34 PM #1 Moderator Emeritus   Join Date: Aug 2007 Location: Northern Illinois Posts: 13,739 SS at 62 or 70? Thought I'd calculate whether it would make more sense to take ss at 62 or 70. According to SS, my mo ss pmts at 62 yo = \$2010 my mo ss pmts at 70 yo = \$3522 For comparison, I thought I'd compare by taking ss at 62, saving the proceeds for the 8 years difference between the 2 options. Then calc a mo annuity pmt from the savings after 8 years. Then compare the sum of the 62yo ss + monthly return from the savings to the 70yo ss. Given 8 years between 62 and 70, if I invest the \$2010 pmts(less 15% for taxes) at 4% for 8 years, I get a value of \$192,921.32 at age 70. Calc’d in excel =2010*.85*(((1+0.0033)^96)-1)/.0033 where .0033 is the monthly interest rate (.04/12) I then calc’d the monthly payments I would receive from the \$192,921.32 lump sum, adjusting the number of payments in the formula so that the calc’d payment equaled the difference between the 62yo and 70yo monthly payments (\$1512) In excel = PMT(rate,periods,PV,FV) So = PMT(.0033,167,192921.32,0) yields 167 payments of \$1508.31. 167 months = 13 years, 11 months. So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly \$ than taking it at 62 and saving it until 70? Does this make sense?
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03-05-2017, 02:00 PM   #2
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Quote:
 Originally Posted by Ronstar Thought I'd calculate whether it would make more sense to take ss at 62 or 70. According to SS, my mo ss pmts at 62 yo = \$2010 my mo ss pmts at 70 yo = \$3522 For comparison, I thought I'd compare by taking ss at 62, saving the proceeds for the 8 years difference between the 2 options. Then calc a mo annuity pmt from the savings after 8 years. Then compare the sum of the 62yo ss + monthly return from the savings to the 70yo ss. Given 8 years between 62 and 70, if I invest the \$2010 pmts(less 15% for taxes) at 4% for 8 years, I get a value of \$192,921.32 at age 70. Calc’d in excel =2010*.85*(((1+0.0033)^96)-1)/.0033 where .0033 is the monthly interest rate (.04/12) I then calc’d the monthly payments I would receive from the \$192,921.32 lump sum, adjusting the number of payments in the formula so that the calc’d payment equaled the difference between the 62yo and 70yo monthly payments (\$1512) In excel = PMT(rate,periods,PV,FV) So = PMT(.0033,167,192921.32,0) yields 167 payments of \$1508.31. 167 months = 13 years, 11 months. So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly \$ than taking it at 62 and saving it until 70? Does this make sense?
As long as you think that the risk profiles of SS and an imaginary 4% real pa are identical, then sure, makes sense.

03-05-2017, 02:28 PM   #3
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Quote:
 Originally Posted by Ronstar So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly \$ than taking it at 62 and saving it until 70? Does this make sense?
This has been discussed several times with dozens of perspectives. Each perspective is valid because there are so many variables. A lot of "YMMV".

My own math comes out to about age 84 as well. In my personal case, taking SS at 62 was a winner because 1) that money would otherwise come from my tax deferred accounts 2) My state doesn't count SS as income (a 5.1% gain right there) 3) My Fed tax is lower 4) the money I keep in my portfolio continues to grow. 5) If I'm lucky enough to live to 'break even' I will be thrilled to be 'losing money' at that point.

I figure I'm putting about \$4K in my pocket each year from now until age 70.

As noted YMMV.
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 03-05-2017, 03:01 PM #4 Thinks s/he gets paid by the post   Join Date: Dec 2010 Location: USA Posts: 1,007 +1 Marko's comment For me, as I investigate options for the future, it'll depend on my & DW's health, roth conversion options/needs, taxes, but it's no longer an absolute to wait until age 70 to collect. In my case, none of the males lived past 70 on my side and 75 on DWs; females lived until 72 - 78, so worrying about mid-80s for SS break even or 100 is so overrated in the planning, but I do. Besides collecting SS at 62 or 70, anything in between is an option too.
 03-05-2017, 03:11 PM #5 Moderator   Join Date: Feb 2010 Location: Flyover country Posts: 19,249 Every calculation I've ever seen has shown a break-even point in the mid 80s, so yours is consistent.
03-05-2017, 03:56 PM   #6
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Quote:
 Originally Posted by Ronstar Thought I'd calculate whether it would make more sense to take ss at 62 or 70... Does this make sense?
It makes sense.

You haven't considered if you have a spouse who would be collecting benefits based on your earnings or not. Often, that can make a difference as claiming at 62 can negatively impact spousal and widow/widower benefits.

I am currently 62 and I will be waiting until 70 to begin collecting. Based on family history, I expect to be around longer than 84 and I want to make sure my wife can collect as much as possible should I predecease her.

(And of course should our financial situation change, or should significant tax laws change, I can always change my mind and start collecting immediately. Once you start collecting for 12 months you can't change your mind and stop.)

 03-05-2017, 04:46 PM #7 Moderator Emeritus   Join Date: Aug 2007 Location: Northern Illinois Posts: 13,739 Thanks for the comments - I didn't check the impact of taking at 62 on spousal benefits. I need to look into that.
03-05-2017, 04:55 PM   #8
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Quote:
 Originally Posted by Ronstar Thanks for the comments - I didn't check the impact of taking at 62 on spousal benefits. I need to look into that.
It's worth reviewing and understanding.

When you are married or divorced it's important to coordinate the choice of benefit start dates with your spouse or ex-spouse.

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03-05-2017, 05:04 PM   #9
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Quote:
 Originally Posted by Ronstar Thought I'd calculate whether it would make more sense to take ss at 62 or 70. According to SS, my mo ss pmts at 62 yo = \$2010 my mo ss pmts at 70 yo = \$3522 For comparison, I thought I'd compare by taking ss at 62, saving the proceeds for the 8 years difference between the 2 options. Then calc a mo annuity pmt from the savings after 8 years. Then compare the sum of the 62yo ss + monthly return from the savings to the 70yo ss. Given 8 years between 62 and 70, if I invest the \$2010 pmts(less 15% for taxes) at 4% for 8 years, I get a value of \$192,921.32 at age 70. Calc’d in excel =2010*.85*(((1+0.0033)^96)-1)/.0033 where .0033 is the monthly interest rate (.04/12) I then calc’d the monthly payments I would receive from the \$192,921.32 lump sum, adjusting the number of payments in the formula so that the calc’d payment equaled the difference between the 62yo and 70yo monthly payments (\$1512) In excel = PMT(rate,periods,PV,FV) So = PMT(.0033,167,192921.32,0) yields 167 payments of \$1508.31. 167 months = 13 years, 11 months. So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly \$ than taking it at 62 and saving it until 70? Does this make sense?
The only thing I would add is that using the \$2010 is a little conservative. I would assume that during those 8 years, there would be some years with COLA's.

03-05-2017, 05:44 PM   #10
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Quote:
 Originally Posted by joeea (And of course should our financial situation change, or should significant tax laws change, I can always change my mind and start collecting immediately. Once you start collecting for 12 months you can't change your mind and stop.)
I took at 62, so that my young children could collect. I plan to stop at 66 and restart at 70, so that my young children will continue collecting and my wife who is decades younger will get a higher survivor benefit.

03-05-2017, 05:46 PM   #11
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Quote:
 Originally Posted by joeea It's worth reviewing and understanding. When you are married or divorced it's important to coordinate the choice of benefit start dates with your spouse or ex-spouse.

I gathered that at a FA sponsored SS seminar a few years ago. The FA ran 5 scenarios for taking SS. The scenarios spelled out who to file when for what benefits and also listed the cumulative lifetime benefits.

Of course the cumulative lifetime benefits is a crap shoot based on life expectancy. And it doesn't take into consideration the reinvestment of SS benefits that I'm considering.

In any case, the lowest \$ benefit scenario was both of us retiring at 62. We aren't doing that, so no need to consider it. The other 4 scenarios had a spread of \$90k in cumulative lifetime benefits.

The highest \$ option is the "You suspend, spouse files restricted" option. The lowest (other than both at 62) is "You file restricted, Spouse files" (DW is "you". I am "Spouse")

I need to research if these options are still available under the law.
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03-05-2017, 05:57 PM   #12
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Quote:
 Originally Posted by Ronstar Thanks for the comments - I didn't check the impact of taking at 62 on spousal benefits. I need to look into that.
What does SSAnalyze - Bedrock Capital Management say?

If you are going to do a DIY analysis in Excel then I think a better approach is to just schedule out the cash flows to certain ages and discount at an real rate of return since the cash flows will increase with inflation. If you want to use an after-tax real rate then that is fine but you may want to only use 85% of the tax rate.
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03-05-2017, 06:03 PM   #13
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Quote:
 Originally Posted by NYEXPAT I took at 62, so that my young children could collect. I plan to stop at 66 and restart at 70, so that my young children will continue collecting and my wife who is decades younger will get a higher survivor benefit.
You cannot take social security and stop it and start later. You can stop it the first year and pay back the \$ withdrawn. And then start later.

One consideration is one's health. If it's bad, you may want to start withdrawals early. If health is good and you have a decent cash flow, putting making any withdrawals up to age 70 may be equivalent to getting a good ROE.

03-05-2017, 06:27 PM   #14
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Quote:
 Originally Posted by Ronstar The highest \$ option is the "You suspend, spouse files restricted" option. I need to research if these options are still available under the law.
This one is no longer available. They ended it about a year ago. Now, in order for a spouse to collect under "spousal" you have to be drawing SS.
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 03-05-2017, 06:33 PM #15 Thinks s/he gets paid by the post   Join Date: Jan 2013 Posts: 2,802 Something that's been at the back of my mind about this controversy is the requirement to pay Medicare premiums starting at 65. I wonder if there is any benefit to taking the annuity early to get three years of full payments before the Medicare premium is subtracted out. It's probably not significant, just another wrinkle.
03-05-2017, 06:38 PM   #16
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Quote:
 Originally Posted by NYEXPAT I took at 62, so that my young children could collect. I plan to stop at 66 and restart at 70, so that my young children will continue collecting and my wife who is decades younger will get a higher survivor benefit.
Quote:
 Originally Posted by Bamaman You cannot take social security and stop it and start later. ....
Actually that isn't right... once you reach your FRA you can stop your benefits and then restart them later... if you don't restart them before you turn 70 they automatically restart when you turn 70. So what NYEXPAT plans to do is fine.

https://www.ssa.gov/planners/retire/suspend.html
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 03-05-2017, 06:49 PM #17 Thinks s/he gets paid by the post   Join Date: Mar 2013 Location: Southern California Posts: 3,832 I suppose everyone's tax situation is a bit different, but in my case, delaying SS until 70 would definitely lower my taxes. I don't believe that was factored into the original analysis unless I missed it.
03-05-2017, 06:53 PM   #18
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Quote:
 Originally Posted by Ronstar Thought I'd calculate whether it would make more sense to take ss at 62 or 70. According to SS, my mo ss pmts at 62 yo = \$2010 my mo ss pmts at 70 yo = \$3522 For comparison, I thought I'd compare by taking ss at 62, saving the proceeds for the 8 years difference between the 2 options. Then calc a mo annuity pmt from the savings after 8 years. Then compare the sum of the 62yo ss + monthly return from the savings to the 70yo ss. Given 8 years between 62 and 70, if I invest the \$2010 pmts(less 15% for taxes) at 4% for 8 years, I get a value of \$192,921.32 at age 70. Calc’d in excel =2010*.85*(((1+0.0033)^96)-1)/.0033 where .0033 is the monthly interest rate (.04/12) I then calc’d the monthly payments I would receive from the \$192,921.32 lump sum, adjusting the number of payments in the formula so that the calc’d payment equaled the difference between the 62yo and 70yo monthly payments (\$1512) In excel = PMT(rate,periods,PV,FV) So = PMT(.0033,167,192921.32,0) yields 167 payments of \$1508.31. 167 months = 13 years, 11 months. So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly \$ than taking it at 62 and saving it until 70? Does this make sense?
What are your confidence intervals on the 4% return & the 15% taxes?

03-05-2017, 07:21 PM   #19
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Quote:
 Originally Posted by Ronstar Then calc a mo annuity pmt from the savings after 8 years.
Did you make that annuity joint life and does it have a COLA?

03-05-2017, 07:42 PM   #20
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Quote:
 Originally Posted by marko This has been discussed several times with dozens of perspectives. Each perspective is valid because there are so many variables. A lot of "YMMV". My own math comes out to about age 84 as well. In my personal case, taking SS at 62 was a winner because 1) that money would otherwise come from my tax deferred accounts 2) My state doesn't count SS as income (a 5.1% gain right there) 3) My Fed tax is lower 4) the money I keep in my portfolio continues to grow. 5) If I'm lucky enough to live to 'break even' I will be thrilled to be 'losing money' at that point. I figure I'm putting about \$4K in my pocket each year from now until age 70. As noted YMMV.
This is my case too. But I'm also likely to pay the higher Medicare Part B premiums and unless I am mistaken, those premiums will increase even more if I delay SS as I will not be protected by the hold harmless provision. I'm 62 this year and need to do the calculations but am waiting to see if there are any changes to all of this with the current Administration. And being single and having a pension to cover non-discretionary expenses, I'm not concerned about survivors or having a large SS benefit as a safety net in my older years if the market crashes.
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