Thinking About Taking Social Security at 62

[Old Microbiologist]

I would add having a Russian wife who went through the Reset in the Russian economy where all back accounts were depreciated by over 90% and the New Ruble implemented so everyone with savings lost everything. The US is looking very similar these days to Russia in 1992. So, that is more food for thought. COVID-19 is just accelerating the process.

 

[teejayevans]

but I don't want to leave anything on the table.

I hear people say that a lot but why does it matter? At your last moments are you gonna be thinking “Man I should’ve taken Social Security earlier“. If your married, I would do what’s best for your wife.

 

[teejayevans]

Wife, as in Dear Wife.

Given that, you can probably figure out DH.

DS is ambiguous, because it could be spouse or son.

See Acronyms and Slang Frequently Used on the Forum

Is there a DXW or DXH? (X = “ex”)

 

[RunningBum]

I hear people say that a lot but why does it matter? At your last moments are you gonna be thinking “Man I should’ve taken Social Security earlier“. If your married, I would do what’s best for your wife.

Note that at the title in that post (a field that most of us never fill in) he writes "Just to maximize inheritance for kids". That's a good reason to take SS early if you really don't think you'll make the breakeven point.

 

[pb4uski]

I feel there is always value in leaving some money in the IRA, for the reason that late in life a person can have large medical expenses. ....

Also, after we turn 70 1/2 we'll do all of our charitable giving from the IRA... why pay tax to get it out to then just give some of it away when I can give it away from the IRA and avoid the tax.

 

[HunterAdvisor]

When I ran my SS calculations my break even was about 77. There are so many unkowns regarding my health, the world at that time and the ability for the government to make the payments. My experience with 80 family accounts I managed for several years was their spending was heavy just after retirement and slowed substantially in their mid seventies. Most folks had already traveled, renovated or down sized and really just wanted to enjoy time with family and friends. There is also the ability if you take SS now to leave your retirement funds to grow or in some cases recover. Converting to a ROTH will ward off the evil RMD. For myself I felt the income was more valuable to me now in my active years so I took SS at 62.

 

[Third Son]

When I ran my SS calculations my break even was about 77. There are so many unkowns regarding my health, the world at that time and the ability for the government to make the payments. My experience with 80 family accounts I managed for several years was their spending was heavy just after retirement and slowed substantially in their mid seventies. Most folks had already traveled, renovated or down sized and really just wanted to enjoy time with family and friends. There is also the ability if you take SS now to leave your retirement funds to grow or in some cases recover. Converting to a ROTH will ward off the evil RMD. For myself I felt the income was more valuable to me now in my active years so I took SS at 62.

This makes sense.

 

[Car-Guy]

I am taking mine when I turn 62. next year. I just want it.

Lot's of us do, even when we don't need it... After all, it's your money, you earned it, use it when you want.

Just expressing my opinion. I have read countless posts with arguments both ways. Unless you know when you are going to die......so I just shared my opinion. I usually keep quiet on here but I don't appreciate your emoji.

I suspect there are is a good number of forum members that keep quiet on many topics, because it's counter to the tone of the specific thread. I learned a long time ago, just because it's the loudest voice(s) in the room doesn't mean it's right... From my perspective, if I'm interested in the topic, I'll read most of the posters comments, consider the "discussion" and make my own decisions. Sometimes I'll comment, sometimes not.


Thanks for posting your opinion.

 

[powlusr]

Between now and age 90, you will receive roughly the same amount of money whether you start collecting now or at age 68. Do you want slightly smaller checks from now on, or larger checks starting at age 68? We chose to start early so we can use the money while we're healthy enough to travel.

 

[Winemaker]

Is there a DXW or DXH? (X = “ex”)

Are there any eX's that are "dear"? Just askin'.

 

[Freedom2021]

When OP dies, his DW will be getting a pension of approximately $49,000 plus her SS.

DW taking SS at age 70 would be far better for her if she lives longer.

OP is not affected by whatever age DW takes SS, as OP cannot collect it, so does not care as does not affect him if he lives longer.

The increase to spending of 60K appears designed to spend every penny of the $1 million savings in less than 20 yrs, as it's a 6% withdrawal rate.
The simple calculator below says taking out $60K per yr from $1M fund, will exhaust the fund by age 78. Note if you put in taking out $40K per year then it lasts to age 90, so it seems fairly accurate.

https://money.usnews.com/money/personal-finance/features/calculator#card

Exactly this ^^^ Running out of money by 78 is pretty damn scary if you happen to come from a long-lived family.

Life is full of surprises at any age!
So trying to down spend to zero just in time for your demise seems a somewhat silly, if not a financially dangerous undertaking.

To protect DW it makes sense financially for her to take SS at age 70.

We all have different circumstances and reasons for our retirement decisions. I'd say look at the math from every angle first then consider your priorities and go from there.
A stash of one mil is great, but realistically simply not quite enough to consider playing guessing games with your finances.
Just my totally unqualified two cents.

 

[RetireBy90]

WSJ this morning had a great touching story about a couple 90 and 92 still kicking and spending $$. An argument in favor of waiting till 70, but then my dad died at 70 so that would favor taking early for me. Who knows ?

 

[pb4uski]

.... There is also the ability if you take SS now to leave your retirement funds to grow or in some cases recover. Converting to a ROTH will ward off the evil RMD. ...

But if you are collecting SS then you significantly reduce your ability to do low tax cost Roth conversions by about 85% of the SS that you collect.

 

[pb4uski]

WSJ this morning had a great touching story about a couple 90 and 92 still kicking and spending $$. An argument in favor of waiting till 70, but then my dad died at 70 so that would favor taking early for me. Who knows ?

You don't know... which is why I find it useful to frame the SS delay debate as the purchase of a COLA-adjusted annuity... you make monthly installment payments equal to the SS that you would have received if you claimed early... and receive a COLA adjusted life annuity (or joint life annuity if married) for the increase in your monthly benefit as a result of delaying.

DF died at 75... DM is still kicking at 90. DGM and a couple great aunts on DM's side lived into their mid-late 90s.

 

[RobLJ]

In terms of planning, I've intended to take SS at full withdrawal age. But I also thought if I hit a really bad set of returns, I might take it early to avoid drawing down.
I turned 62 in May and with COVID, I thought, well, I'll wait a year or two and see, even though I have cash for 3-4 years.
Here we are and the portfolio is above where I was in January, even though I've pared stocks from 60% to 45% over the last 18 months (a big paring of stocks in Dec, Jan, Feb, and early March).
So much for planning.

 

[chassis]

1. Run the scenario where you take SS at 62 and put 100% of it in a growth portfolio for the entirety of your life expectancy. There are NPV and sum of cashflows numbers to calculate.

2. Think about the potential of not living to your life expectancy, calculate this NPV and sum of cashflows.

Where is the breakeven, in terms of age (year) where scenario 1 = scenario 2 on an NPV or sum of cashflows basis? The numbers will be close, and they will be in the mid-late 70s of age.

Take your money from the government as soon as you can. It's yours and it doesn't belong to them.

 

[RunningBum]

1. Run the scenario where you take SS at 62 and put 100% of it in a growth portfolio for the entirety of your life expectancy. There are NPV and sum of cashflows numbers to calculate.

2. Think about the potential of not living to your life expectancy, calculate this NPV and sum of cashflows.

Where is the breakeven, in terms of age (year) where scenario 1 = scenario 2 on an NPV or sum of cashflows basis? The numbers will be close, and they will be in the mid-late 70s of age.

Take your money from the government as soon as you can. It's yours and it doesn't belong to them.

LOL, what's the point of doing any calcs at all if you're just going to do the bolded part.

I can't figure out what you're trying to calculate in steps 1 & 2. For example, I don't know how to do an NPV on the potential of not living to my life expectancy. In any case, I already know how to do a breakeven analysis, and this ain't it.

By all means, take SS when you want to. I'm trying not to keep repeating myself in every SS thread, but this one was too funny to pass up.

 

[chassis]

LOL, what's the point of doing any calcs at all if you're just going to do the bolded part.

I can't figure out what you're trying to calculate in steps 1 & 2. For example, I don't know how to do an NPV on the potential of not living to my life expectancy. In any case, I already know how to do a breakeven analysis, and this ain't it.

By all means, take SS when you want to. I'm trying not to keep repeating myself in every SS thread, but this one was too funny to pass up.

@RunningBum OK I didn't word scenario 2 well. I'll try again.

1. SS payments starting at 62 lasting until today's life expectancy. Invest the funds in a growth portfolio. There is an NPV and sum of cash flows for this scenario.

2. SS payments starting at 65, lasting until today's life expectancy. Invest the funds in a growth portfolio. Likewise NPV and sum of cashflows.

Compare 1 and 2. Consider the year (age) they cross over.

If one dies before the crossover age, it's better to take SS at 62. If one dies after both the crossover age and 65, it might be better to take SS at 65.

In my view any NPV or sum of cashflows benefit of taking SS at 65 is small enough to be trivial for most people. And given the choice to get my money from the government sooner, rather than later, I will choose sooner in this case.

My risk tolerance is fairly high. Not everyone has this tolerance.

 

[RunningBum]

OK, that sounds pretty similar to what I do, though I also consider deferring SS to 70. The big difference is that my goal for SS is longevity insurance, not maximizing SS for whatever age I think I'm most likely to die. But it's not for me to decide what anyone else's goal should be.

 

[Archman]

In my situation,I took Social Security at age 63½, and therefore drawing less from my retirement savings, My break even point is at age 86,assuming the markets cooperate. Taking less from your investments mitigates the sequence of portfolio bad returns that might occur early in retirement.

Sequence-of-returns risk involves the actual order in which investment returns occur. Typically, negative returns earlier in retirement have a more severe impact on your portfolio than negative returns later in retirement. That’s because your portfolio’s value is reduced by both negative market performance and any withdrawals you take to fund your day-to-day expenses. This means that a smaller amount is left behind to experience any potential future growth.

However, if I was fortunate not to tap into my savings as Firecat did, I would at least delay it to FRA.

 

[RunningBum]

In my situation,I took Social Security at age 63½, and therefore drawing less from my retirement savings, My break even point is at age 86,assuming the markets cooperate. Taking less from your investments mitigates the sequence of portfolio bad returns that might occur early in retirement.

Sequence-of-returns risk involves the actual order in which investment returns occur. Typically, negative returns earlier in retirement have a more severe impact on your portfolio than negative returns later in retirement. That’s because your portfolio’s value is reduced by both negative market performance and any withdrawals you take to fund your day-to-day expenses. This means that a smaller amount is left behind to experience any potential future growth.

However, if I was fortunate not to tap into my savings as Firecat did, I would at least delay it to FRA.

Interesting. I like this kind of thinking because it's a worst case kind of scenario. I'm more interested in protecting myself from failure in those cases than optimizing my wealth when everything is rosy. In most cases, my SS benefit isn't a big piece of my plan. But in a market plunge, SS takes on a more important role since I have less of my own investment assets.

Have you modeled this? It seems to me that you'd have to live pretty long to have SORR make you fail. In other words, if I hit SORR but only live to 72, I won't have run out of money. I'm wondering how much, if any, it would push back the crossover date. If you have a fairly low investment balance at the crossover, you'd really appreciate the larger SS benefit if you'd delayed to 70. But it's possible the crossover point comes so late that your chances of hitting it are slim.

My thought has been that if the market plunged at any time before 70, at that point I'd start taking SS, so I wouldn't have to sell off as many depressed investments for my living expenses. You're saying that rather than reacting to a market drop, you'd act in case of an early market drop. If there is no such drop, your plan should work anyway because your investments didn't get hammered. No big deal if you pass the crossover date and still have lower SS benefits, because you don't need SS so much.

And this is why I still participate in SS threads. You never know when someone comes up with a new (to me) idea worth considering.

 

[Sunset]

In my situation,I took Social Security at age 63½, and therefore drawing less from my retirement savings, My break even point is at age 86,assuming the markets cooperate. Taking less from your investments mitigates the sequence of portfolio bad returns that might occur early in retirement.

Sequence-of-returns risk involves the actual order in which investment returns occur. Typically, negative returns earlier in retirement have a more severe impact on your portfolio than negative returns later in retirement. That’s because your portfolio’s value is reduced by both negative market performance and any withdrawals you take to fund your day-to-day expenses. This means that a smaller amount is left behind to experience any potential future growth.

However, if I was fortunate not to tap into my savings as Firecat did, I would at least delay it to FRA.

It seems the SORR danger/worry caused you to take SS early, which seems (IMHO) premature and wasteful.
If for example the market stays flat for the next 2 years, and then plunges to despair, you will have conserved 2 yrs of investment money, only to see it drop a great deal, while you have also cut yourself off from SS yearly growth for the 2 yrs.

I've always kept the idea of taking SS early if the markets really tanked so that I'd avoid draining my savings. I got this idea a few years ago from a long term member on here

But I think I would wait to React to a market collapse, rather than preemptively do it.
Reason being in the preemptive act, one has to hope investment returns are good->great going forward, and not pretty flat to even down a few percentage, for the preemptive claiming SS to work out beneficially.

In my React to a market collapse, I'd first use my cash to go a year or more, before claiming SS, so I don't jump the gun like some folks might have in March, thinking this is the end of the market. Part of this is that I'm slow to react rather than brilliant

 

[latexman]

So much for planning.

"Everybody has a plan, until they get punched in the mouth." - Mike Tyson

 

[pb4uski]

It seems the SORR danger/worry caused you to take SS early, which seems (IMHO) premature and wasteful.
If for example the market stays flat for the next 2 years, and then plunges to despair, you will have conserved 2 yrs of investment money, only to see it drop a great deal, while you have also cut yourself off from SS yearly growth for the 2 yrs.

I've always kept the idea of taking SS early if the markets really tanked so that I'd avoid draining my savings. I got this idea a few years ago from a long term member on here

But I think I would wait to React to a market collapse, rather than preemptively do it.
Reason being in the preemptive act, one has to hope investment returns are good->great going forward, and not pretty flat to even down a few percentage, for the preemptive claiming SS to work out beneficially.

In my React to a market collapse, I'd first use my cash to go a year or more, before claiming SS, so I don't jump the gun like some folks might have in March, thinking this is the end of the market. Part of this is that I'm slow to react rather than brilliant

+1 while I haven't yet started SS because I want more room for Roth conversions, once I was 62 it was comforting that if the SHTF that I could start SS at anytime.

 

[5Miler]

While I have no pension of consequence (won't pay electric bill), I have been able to live very comfortably on about a 3.5% withdrawal rate from my IRA. This allows me to consider my social Security as a longevity insurance similar to several others on this forum. If I need additional funds for a new roof or major repair as has happened several times over recent years, I simply augment my emergency funds with an additional withdrawal from my IRA knowing I can safely do that with my SS as a reserve cash resource. I'm now 67 and well past my FRA. I keep at least a year of cash equivalent so I have plenty of time to react in case of a market decline which would make me want to start my SS. With no additional COLA increases, I figure my SS nut at 70 would be right at $40K which exceeds my spending today by a decent margin. I probably need to increase my spending but I prefer experiences to things and that's pretty difficult in today's environment. I supported my mother for almost 20 years as she did not plan for retirement. It's not a pretty picture when you outlive your money.