Started Social Social Security at age 62 but my break even date is well into my 80s

[rayvt]

The main reason for not taking it at 62 is that 16% of any SS with go toward increased Obamacare costs.

Only until early next year.

 

[rayvt]

And as Senator suggested - you have more insight into your own health and family longevity than the statisticians...
You know if you have high-blood pressure, diabetes, prior heart attacks, smoking or drinking issues, previous cancer, etc.

You know what you don't know?
You don't know about that drunk in the pickup truck coming around the bend in your lane.
You don't know about the pneumonia virus that has your name on it.

Whatever insights you have into your own health can only tell you that you should take SS as early as you can -- if you know your health is bad. None of this knowledge is useful to deciding to defer.

The 7% is meaningful. No one's "safe" type money is earning 7% guaranteed presently.

The 7% is not meaningful. It doesn't mean what you think it means. It is not a return, it is a payout rate.
If you do an analysis with the incorrect assumption, you will come up with an incorrect answer.

To get that 7% higher payout later, you have to give up 100% now. All that that means is for the first (100/7 =) 14.8 years you are just getting your own money back, as little bit at a time. Only after you've gotten all your own money back do you see a net benefit.
Which is okay, if that's what you want .... but it is not the same thing as a 7% return.

 

[sheehs1]

by the same thinking by taking ss early you will be pulling more out of your portfolio for a lifetime starting at age 70 then you would getting a 69% bigger check at 70 vs 62 .

so it can go both ways for heirs .

Yes, perhaps. But I think it depends on whether one thinks they have more years before 70 than after 70. None of us has a crystal ball so it truly becomes a "best guess", albeit based on the longevity genes of our families, luck or whatever.

Lastly, there are reasons the incentives are there to delay. Many pass away in their 60's and early to mid-70's. ( and many even before that!) Because I know our government knows this, that becomes part of the incentive to take it at 62. At least for me.

 

[Chuckanut]

Many pass away in their 60's and early to mid-70's. ( and many even before that!) Because I know our government knows this, that becomes part of the incentive to take it at 62. At least for me.

If the SS payout is actuarily balanced then for the government it should not make a difference. Individuals yes, but the government should not detect a long-term difference. Right?

 

[Senator]

You know what you don't know?
You don't know about that drunk in the pickup truck coming around the bend in your lane.
You don't know about the pneumonia virus that has your name on it.

Whatever insights you have into your own health can only tell you that you should take SS as early as you can -- if you know your health is bad. None of this knowledge is useful to deciding to defer.

You are right, you do not know about the anomalies. Just as you do not know whether to save for ER at all or not.

You do know about the age that 50% live longer and 50% do not.

Blackjack players give their souls to get the 52% advantage on the house. By knowing your health, you can get the odds up to 60%+ in your favor. If you are a woman, it's even easier. Women generally live longer.

 

[NW-Bound]

If the SS payout is actuarily balanced then for the government it should not make a difference. Individuals yes, but the government should not detect a long-term difference. Right?

If anything, people are living longer, and that's one reason the SS fund is running out of money. There's talk about raising FRA to 69!

No matter what you do for a living, can you imagine yourself working till 69? It's tough with a desk job, let alone menial work.

Yes, I do agree that plenty of people drop dead in their 60s and 70s, some even in their 50s. But there are some true geezers out there to more than make up for the short lived ones. Life is really unfair. Some get longevity, and more money too.

I say the way to balance it is to cut geezers' SS in half if they live above a certain age, say 85. That will teach them.

 

[sheehs1]

Well...for those interested and that have the time they can parse thru this data. I gave up on the SSN actuarial studies. Ha!
It's from a 2006 CDC study printed in 2010...so just a few years old and I don't know how often they update it.

Not making a statement, just providing a link for data.

Summary: From one of the tables it looks like for every 100,000, the people that live to a certain age are:

------------ People Left------ % Deaths (out of original 100,000)

Age 60-: 88,251 = 11.7%
Age 65-: 83,251 = 16.7%
Age 70-: 76,661 = 23.3%
Age 75-: 67,331 = 32.7%
Age 80-: 54,201 = 45.85
Age 85-: 37,805 = 62.2%
Age 90-: 20,898 = 79.1%

https://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_21.pdf

 

[LRDave]

I say the way to balance it is to cut geezers' SS in half if they live above a certain age, say 85. That will teach them.

They are forgetful by 85, usually. SS could get cut and many wouldn't notice.

 

[NW-Bound]

Should you and I run for Congress, sharing the above platform?

Look at what Sheesh1 posted above. Out of 100,000 people, almost 21,000 survive till 90. That's 21%, or 1 in 5, a whole lot more than I expected.

I guess these geezers are hiding out in their home, and do not go out much. Hence we do not see them in public.

Seriously, my 90-year-old mother-in-law does not leave the home much at all.

 

[sheehs1]

I like your "glass half full" optimism NW-Bound!

Or one could say...."Uh oh...almost 80% of us don't make it"

Or that "almost" 50% of us don't make it to 80.

 

[NW-Bound]

No, I am not that lucky, so do not expect to find myself in that 20% lucky group. The glass is 1/2 full, but I will not be the one to empty it.

If anything, I think I will be in the lower 1/2, which means those who do not live beyond 77 years, about the life expectancy for males. It's higher than 81 for females.

Hence, I want laws to cut SS of true geezers to give to me to make up for my poor fortune.

 

[pb4uski]

....If (on average) it doesn't matter when you take SS, then you might as well take it at 62. Or 70. Because it doesn't matter.

For the "average" single I agree it "doesn't matter " other than a nit that current payouts don't factor in mortality improvements since the current discount/bonus rates were put in place which was some time ago and would tilt the decision slightly in favor of delaying.

Plus, as others have pointed out, there is a small "play" because SS is based on average and is uni-sex. A single person who is healthy and has good family longevity would likely be better off deferring. Someone with health issues or poor family longevity would generally be better off taking it early. So it should be a pretty easy decision for someone who is single given their gender, health and family longevity.

For married people with disparate earnings history, it "does matter" a lot because of joint mortality and survivor benefits.

 

[NW-Bound]

Seriously, the joint longevity of a couple is much better than that of a single person.

The odds are stronger that one of them will make it to an older age, and the joint longevity is about 95.

 

[pb4uski]

So many of my friends seemed so healthy, lived a good lifestyle and were college educated professionals, and I was completely shocked when they died suddenly in their 60s and 70s. (Many of them died before getting much or any money from Social Security because they took the experts advice and waited until they were 70 to collect.

Now their children did not get much of of an inheritance because their parent spent down a lot of their assets and investments from age 62-70 because they were not working and waited until they were 70 to collect the larger Social Security Check.

Since when are children entitled to inheritances?

20/20 hindsight is easy... while many of us know of people who died early we also know of people who have lived long.

If they defer and live long then their children will get more of an inheritance than if they take at 62. In fact, if the person uses their deferral period to do low-tax cost Roth conversions their children may end up with more because Roths are tax-free.

Deferring also reduces the risk of someone running out of money and becoming a financial burden on their children.

My point is that it is a double edged sword and you take your chances.

 

[NW-Bound]

By the way, the chance of making it to 90 is better than 21% for the people reading this forum. How so?

Look at the number that Sheesh1 posted above. Out of 100,000 people, 83,251 make it to 65, and then 20,898 make it to 90.

So, if you are already about 65, then the odds that you will live till 90 is 20,898/83,251 = 25%.

I still do not think I am among those 1-out-of-4.

The statistics show that 12% did not make it to 60. I was almost among those poor guys due to an unexpected grave illness! Not even SS at 62, let alone 70.

 

[Souschef]

Present value

I have not seen any discussions about the present value theory of money. A dollar at age 62 or 65 is worth more than one at age 70.

 

[pb4uski]

Since SS benefits are adjusted for increases in the cost-of-living, in theory the spending power of benefits received at age 62 or 65 is the same as the spending power of benefits received at age 70 or later.

 

[NW-Bound]

However, the break-even point calculation does not consider the rate of return if one invests the money received at 62 instead of spending it.

If one just keeps up with inflation with that early SS money at 62, then the break even point is about 81. If the market is bullish, the guy who delays SS will take even longer to be ahead of the guy who takes it early to invest. Conversely, if the market crashes, the 70 SS guy gets ahead sooner.

The calculator by Bedrock to which I provided a link addresses that.

 

[jkern]

I'm 59 and plan on taking SS at 62. Depending on ROI, my breakeven point is somewhere around early to mid 80s. If the government changes the rules, the chances are the breakeven point gets pushed out even further. That's good enough for me.

For some reason the government treats SS as their money and not mine. This is a reason to take it early and spend other peoples money instead of my own.

 

[jkern]

Since SS benefits are adjusted for increases in the cost-of-living, in theory the spending power of benefits received at age 62 or 65 is the same as the spending power of benefits received at age 70 or later.

Having SS COLA keep up with the cost-of-living is definitely in the Theory category and not Reality category.

 

[pb4uski]

I'm 59 and plan on taking SS at 62. Depending on ROI, my breakeven point is somewhere around early to mid 80s. If the government changes the rules, the chances are the breakeven point gets pushed out even further. That's good enough for me.

For some reason the government treats SS as their money and not mine. This is a reason to take it early and spend other peoples money instead of my own.

Well, it isn't your money, just like a defined benefit pension is not your money. If you think it is your money then you lack an elementary understanding of the program. The official name is the Old-Age, Survivors and Disability Insurance Program.

You and your employers have paid a percentage of your earnings as premiums over the years and as a result your are entitled to certain benefits, just like other forms of insurance. If you live then you will receive retirement benefits.. if you die, then your survivors will get benefits.... when your survivors die then it's over whether you and your survivors have received what you paid in or more than what you paid in.

Having SS COLA keep up with the cost-of-living is definitely in the Theory category and not Reality category.

Actually for us in retirement inflation has been pretty unnoticeable... if it were noticeable then I would have expected to increase my withdrawals and I have not seen any need to do so in 5 years. YMMV.

 

[youbet]

Deferring also reduces the risk of someone running out of money and becoming a financial burden on their children.

Yes, there are circumstances where that would be the case. OTOH, I believe I have reduced the possibility of becoming a burden to my children by taking SS at 62 (started in 2009). Investment returns on that money, DCA'd into the TSM, have been excellent and a 4.5% WR from the accumulated pot makes up for the additional I would have collected by deferring to 70. Plus it provides additional protection for DW since she is prohibited by law from collecting my SS if I predecease her.

But it's different for everyone. I like to invest and DIY and the markets were very favorable. If it hadn't worked out as favorably, my FIRE position is conservative and I'd still have been OK. I wouldn't recommend the approach for everyone.

For singles, or marrieds whose spouse is impacted by GPO, it's the investment returns on the early money that really spell out the success of the strategy. But you have to be comfortable investing and DIY finances and be able to survive if the markets are poor.

 

[braumeister]

Not that it needs saying, but just to point out another viewpoint:

I didn't need SS to maintain my lifestyle, so I elected to wait until 70.

Of course if I had taken it earlier and invested it I would be quite a bit ahead now. And it will take me a number of years before I hit the breakeven point, assuming I'm lucky enough to do so.

But the pleasure of seeing that larger check come in every month and knowing that future COLA increases will be based on that larger amount gives me a feeling of freedom that is kind of a reward in its own right.

Disclaimer: My situation is unusual in that my pension and SS cover all our essential expenses. DW's smaller pension and her spousal SS cover much of our discretionary expenses. When she switches to her own SS in two years, most of our discretionary expenses will be covered. So our WR is only for the really fun travels.

 

[NW-Bound]

With no pension, my expenses will have to be covered by WR from my stash.

I am 95% certain that we will draw my wife's SS at 62, for the reasons detailed in my earlier post. I am not that sure about what to do with mine though. I still have 2 years till 62. A lot will depend on how the market behaves. If it soars, I will delay. If it tanks, I will draw early, even though we have plenty to last till 70.

...I didn't need SS to maintain my lifestyle, so I elected to wait until 70...

... the pleasure of seeing that larger check come in every month and knowing that future COLA increases will be based on that larger amount gives me a feeling of freedom that is kind of a reward in its own right...

I also do not need SS to survive. However, the pleasure of seeing my stash grow, or at least not diminish rapidly, should not be underestimated either.

 

[ls99]

I took SS at 62. Going with the KISS formulae. Money in my pocket now is worth more than J dollars in the future.