timing SS start

[Dash man]

You are certain you will be alive at 70 as well? I had one friend 66 and the owner of a motorcycle repair shop I use, 71. Both slim and in good shape die from Hemorrhagic strokes in the last 10 months.

It’s not a game to see how much you can gain from SS before we die. My goal, at least, is to be financially secure through my wife’s and my lives, no matter how long they are. A secondary goal is to leave a nest egg for our kids. We don’t need SS now and taking it would cost us more in taxes as we do Roth conversions. By delaying we can convert more and get higher monthly SS checks beginning at 70 to help us as we age to whatever age that may be. I think some people are so emotionally focused on getting the most out of SS no matter what, and fail to look at the big picture.

 

[GenXguy]

Well I understand your logic but by my calculations at your 3% return the point at which age to switch to 70 would be 83.36 not 77 as you have stated. There is a flaw in your spreadsheet. You show numbers in your age 70 column accumulating starting at age 68 in your left column. Your age 70 column should shift down 2 years. This extra 2 years plus the extra compounding @3% pushes the switch over age to 83.36 and not 77.
See my enclosed spreadsheet. Even at 0% return the switch over point is still 80.37. The reason I had asked about 0% was that I had run that on my own spreadsheet and wanted to see f you got the same answer. That led me to discover the flaw in your spreadsheet.

This would make your argument for taking it at 62 and invest it at 3% even better. But if we entered a bear market and your returns were negative 3% or worse the opposite would be true and you might be better off to wait to take ss. OK I just ran it assuming a -3% return for the years from 62 to 70 and then from 70 on put your positive 3% return in. It still looked like you would be good to age 79 (instead of the 83.36)if you took it at 62 before the age 70 total takes over. No too bad. This is the gamble one takes by taking it early. If someone took it at 62 say 8 years ago and invested it all in an index fund they would be looking pretty good right now but no guarantees going forward.

Back to assuming the positive 3% as your example spreadsheet: The age 70 total doesn't catch the age 67 total until you reach 85.5.
It's also interesting to see that if you did wait to 67 you probably would be better to take it at 68 or 69 because the age 70 never catches the total of either of these until well past 100.
Now having said all that all these totals assume that you never spend any of this money and the totals keep growing at 3%, This is fine if you want to pass the money along to heirs. In my situation we have no heirs so would be spending most or all of each years checks. This would change the "break even" numbers but wouldn't matter to me at that point.

Sorry for the long winded post and I could have missed something myself. Check my work and see if I missed something or misunderstood yours.

I noticed another flaw related to Boston Bulldog's chart's "Assumed Interest Rate - 3%". From one year to the next, in the chart, there's no COLA or inflation adjustment in the SS benefits received. However, the interest rate is listed as 3%, and the full 3% is added on in the chart. So, as the chart is now, the 3% interest rate would actually be a a "real" return, so that would mean an actual interest rate that is 3% ABOVE inflation. That is unlikely - for example, it would mean about a 5% interest rate today, when actual interest rates are less than 1%. So, to get a "real" return of 3%, you would need to invest the money at greater risk (e.g. stock funds), and that's not exactly apples to apples when comparing to guaranteed SS benefits.

Boston Bulldog added:

if you make the assumed rate of return 7% (vs. 3%)

And if you assumed a rate of return of 7%, note that is a "real" return based on how this chart calculated returns, meaning 7% ABOVE the inflation rate, so that's about an actual 9% absolute return today.

9% return = age 91

That's a real return of 9%, so that's an actual 11% absolute return today.

10% return = age 100+

That's a real return of 10%, so that's an actual 12% absolute return today.

 

[Markola]

I’m 55. I’m going to wait to decide based on what my life and finances turn out to be at 62, 63, 64....70.

 

[GenXguy]

DGF is already taking SS in SSDI form at 59 y.o.
I will wait until at least 66 - 70 y.o. due to ACA management of income plus small lump sum pension at 65 y.o.

Same here. Waiting until Medicare age because the SS income prior to that would be a hit on my ACA subsidies... if they are still around by the time I'm 62.

Ag 62 is a non-starter!

 

[Jerry1]

I’m 55. I’m going to wait to decide based on what my life and finances turn out to be at 62, 63, 64....70.

I’m 60 and I’m going to model the comment made earlier that it makes most sense to go at 62 or 70 but no mathematical logic to go at any of the in between years. I’m focused on waiting until 70, but I could be convinced to go at 62. I have a few years to consider it.

 

[finnski1]

I’m 60 and I’m going to model the comment made earlier that it makes most sense to go at 62 or 70 but no mathematical logic to go at any of the in between years. I’m focused on waiting until 70, but I could be convinced to go at 62. I have a few years to consider it.

Well as I pointed out there is a flaw in his spreadsheet at least according to me and I included one that shows there are scenarios which show "mathematical logic" to go in between 62 and 70.
I included a spreadsheet of my own. You might be interested in my post and response to his analysis and see if my logic makes any sense before you go thru modeling that

 

[jkern]

There are multiple reasons why I started SS at 62. The first is that with modest to average returns my break even point is in my early to mid 80's. The second, I would rather spend other people's money instead of my own. It use to be my money, but the second the government taxed me it became their money. The third is legislation risk. The government can change the rules at any given time and maybe say I have have enough money and not give me anymore.

 

[Whisper66]

There are multiple reasons why I started SS at 62. The first is that with modest to average returns my break even point is in my early to mid 80's. The second, I would rather spend other people's money instead of my own. It use to be my money, but the second the government taxed me it became their money. The third is legislation risk. The government can change the rules at any given time and maybe say I have have enough money and not give me anymore.

The above plus the potential impact if spouse or I die early are why we plan to take at 62 as well.

 

[GenXguy]

Here's a break-even chart. This would be based on absolute returns equaling the inflation rate, NOT "real" returns of 3% as in the chart previously posted. This isn't my own chart nor did I calculate it.

 

[Jerry1]

Here's a break-even chart. This would be based on absolute returns equaling the inflation rate, NOT "real" returns of 3% as in the chart previously posted. This isn't my own chart nor did I calculate it.

I don’t understand the chart. Can you give an example of how it works? For example, if I take SS at 64, what is my break even. Also, break even compared to what? Taking it at FRA? Or break even compared to waiting until 70?

 

[GenXguy]

I don’t understand the chart. Can you give an example of how it works? For example, if I take SS at 64, what is my break even. Also, break even compared to what? Taking it at FRA? Or break even compared to waiting until 70?

Down the left side of the chart is the age you take your benefit.

Along the top is the age you consider delaying to.

So you can line them up to compare to whatever age you want to see what the breakeven would be:

So, if you take SS at 64, the breakeven for each age is:

vs taking at 65 - breakeven is age 78
vs taking at 66 - breakeven is age 79
vs taking at 67 - breakeven is age 79
vs taking at 68 - breakeven is age 79
vs taking at 69 - breakeven is age 80
vs taking at 70 - breakeven is age 81

These are rounded off.

 

[Jerry1]

Thank you.

 

[GenXguy]

At a 0% return, age 75 is when an age 70 distribution pays out and starts passing the age 62.

This is incorrect. I don't know how you calculated that, but it would be age 80 based on the other charts.

Even at 0% return the switch over point is still 80.37.

Yes, that looks better.

 

[L Carlisle]

I am currently 55 and DW is 57. We are a couple years away from a happy retirement. I just ran some Social Security retirement estimates for both of us and then ran a few simple models of taking the Social Security benefit at ages 62, 63, 64, 65, 66, 67 or 70. The short summary of my findings was that it is either better to take the benefit at age 62 or age 70...but nothing in between. I have often heard "wait until you reach 67", but my calculations do not support this. I have posted the model in a PDF here:

Thanks!

Thanks for this information. I thought it would pencil out to start taking SS at 62 rather than 67. It would be interesting to see what taking SS at an age over 62 would do to your existing savings. My wife and I are 56 and both retired. My wife is on SSDI and getting more than 1/2 what my SS will be at 67 so I am not concerned with her taking my SS if I die before her.

 

[Sunset]

I've realized taking it at age 62 allows a person to spend OPM (Other People's Money) and enjoy the money at a younger age.

The SS check might be smaller than if I wait until age 70.
When I'm 85 and my taste buds start to go, I'll be able eat every night by buying cheaper cat food for supper

 

[shotgunner]

You shouldn't plan around dying early. You need to go on the presumption that you will have a long lifetime because you don't want to run out of money, so you can plan accordingly to make it last.

I am not worried about running out of money, and I hope I live a long time, my life would not change if there was no SS. It's fun money to me and I am in better shape now to have fun then I will be when I am older. We are the sum of our experiences, my mother passed at 63 from cancer, my father's life was compromised by age 75 from dementia. A friend I carpooled with everyday survived a stroke at age 60 he lost vision in one eye, slurred speech and uses a walker. There is more to this decision then number crunching.

 

[GenXguy]

I am not worried about running out of money, and I hope I live a long time, my life would not change if there was no SS. It's fun money to me and I am in better shape now to have fun then I will be when I am older. We are the sum of our experiences, my mother passed at 63 from cancer, my father's life was compromised by age 75 from dementia. A friend I carpooled with everyday survived a stroke at age 60 he lost vision in one eye, slurred speech and uses a walker. There is more to this decision then number crunching.

Sorry, but I have to call you out here. You weren't talking about your need for SS in the post I responded to, you were questioning another poster who said they would have more money coming at age 70, and you questioned them asking if they are sure they would live to age 70. And that's not how anyone should plan retirement, assuming they won't make it to a particular age. It sounds like you are already set without SS, so it might not be as important in your case, but don't assume everyone else's situation is the same as yours, and even so, you may be better off in the long term by delaying. In my view, SS dollars are just as useful to spend as the dollars from my stash, so I factor them in as part of my total retirement spending over the long term enjoying all of retirement. When delaying SS benefits, you can still front load your overall spending to earlier years if that's what you prefer to spend more during your younger more energetic years by increasing your draw-down from your investments in the earlier retirement years, assuming you have significant investments to pull from. It doesn't have to come from SS to have a higher budget in your earlier retirement years. Taking benefits at 62 for me would highly likely be a mistake even before factoring in the negative effect on ACA subsidies before Medicare age. Delaying SS to age 65 or even 70 doesn't mean you have to sacrifice an enjoyable retirement during your younger healthier retirement years.

 

[finnski1]

There are multiple reasons why I started SS at 62. The first is that with modest to average returns my break even point is in my early to mid 80's. The second, I would rather spend other people's money instead of my own. It use to be my money, but the second the government taxed me it became their money. The third is legislation risk. The government can change the rules at any given time and maybe say I have have enough money and not give me anymore.

Unless I am misunderstanding something(which is certainly possible)this makes no sense to me. You state "with modest to average returns my break even point is early to mid 80"s. This implies you are investing the money since 62 and not spending it in order to get that "break even" point you mentioned. In the very next sentence you state " I would rather spend other people's money instead of my own."
Well if you are taking the money and investing it you can't be spending it(other peoples money) at the same time.
What am I missing?

 

[Boston_Bulldog]

The reason this isn't very useful is that if someone "takes it and spends it immediately every month to pay their living expenses," the decision becomes moot. If you need SS at 62 to live, you gotta take it. No choice.

Generally, the "when to take SS" decision process assumes you have a choice.

Not necessarily. Many live a "comfortable" lifestyle but when they are able to have an additional $1,500 or 2,000 a month, they can then do the things on their bucket list. An age 62 may enable some to ha e the income for travels, for a gift to their kids or grandkids or to indulge in things the never had the time or money to experience.

 

[shotgunner]

Not necessarily. Many live a "comfortable" lifestyle but when they are able to have an additional $1,500 or 2,000 a month, they can then do the things on their bucket list. An age 62 may enable some to ha e the income for travels, for a gift to their kids or grandkids or to indulge in things the never had the time or money to experience.

This! +1

 

[GenXguy]

The reason this isn't very useful is that if someone "takes it and spends it immediately every month to pay their living expenses," the decision becomes moot. If you need SS at 62 to live, you gotta take it. No choice.

Generally, the "when to take SS" decision process assumes you have a choice.

Not necessarily. Many live a "comfortable" lifestyle but when they are able to have an additional $1,500 or 2,000 a month, they can then do the things on their bucket list. An age 62 may enable some to ha e the income for travels, for a gift to their kids or grandkids or to indulge in things the never had the time or money to experience.

The response doesn't match up to the post responded to. Youbet said that if you need SS at 62 to live, you gotta take it, it's not an option. The response doesn't address that key point and talks about extra money and bucket lists, not the person who has no option to delay because they need it at 62 to live on.

 

[shotgunner]

Sorry, but I have to call you out here. You weren't talking about your need for SS in the post I responded to, you were questioning another poster who said they would have more money coming at age 70, and you questioned them asking if they are sure they would live to age 70. And that's not how anyone should plan retirement, assuming they won't make it to a particular age. It sounds like you are already set without SS, so it might not be as important in your case, but don't assume everyone else's situation is the same as yours, and even so, you may be better off in the long term by delaying. In my view, SS dollars are just as useful to spend as the dollars from my stash, so I factor them in as part of my total retirement spending over the long term enjoying all of retirement. When delaying SS benefits, you can still front load your overall spending to earlier years if that's what you prefer to spend more during your younger more energetic years by increasing your draw-down from your investments in the earlier retirement years, assuming you have significant investments to pull from. It doesn't have to come from SS to have a higher budget in your earlier retirement years. Taking benefits at 62 for me would highly likely be a mistake even before factoring in the negative effect on ACA subsidies before Medicare age. Delaying SS to age 65 or even 70 doesn't mean you have to sacrifice an enjoyable retirement during your younger healthier retirement years.

Although all income is used to calculate ACA subsidies would SS at 62 replace taxable income such as distributions from an IRA, 401K, 403B etc?
If so you might be able to keep the same income and reduce the amount of tax you pay and possibly pocketing more of the refundable tax credit from the ACA.

 

[kimcdougc]

It may sound simplistic but I think any "extra" money a person can have coming in at age 62 allows a person to do and enjoy more things/activities in life while they have the physical ability to do them. The value of those extra dollars at a younger age goes beyond the investment calculations. There is a good chance many us will have slowed down physically and possibly mentally between 62 and 70.

+1 This is my thinking for taking my ss at 62. DH already took it at 62. Rather have the money now while we are still physically able to go and do the things on our bucket list. After COVID of course.

 

[GenXguy]

Although all income is used to calculate ACA subsidies would SS at 62 replace taxable income such as distributions from an IRA, 401K, 403B etc?
If so you might be able to keep the same income and reduce the amount of tax you pay and possibly pocketing more of the refundable tax credit from the ACA.

No, my drawdown in those years will not be from any of those (except maybe a Roth IRA which doesn't count toward MAGI) and mostly from other investments, such as CDs, principal, capital gains, and dividends. I won't start drawing from 457B until Medicare age. I have it all laid out on a spreadsheet to get decent ACA subsidies and minimize taxable income while having steady spending through retirement. SS combined with my dividends/interest would kick my taxable income up too high, so those few extra years of waiting is well worth it, plus there's the break-even age since you never know how long you might live and have to assume a long life. Having said that, I might take it at 65 rather than 70, but I'm a long way from having to make that decision as I'm still in my mid 50's.

*One thing to note about ACA subsidies is that the MAGI calculation factors in both taxable and non-taxable SS benefits.

 

[GenXguy]

+1 This is my thinking for taking my ss at 62. DH already took it at 62. Rather have the money now while we are still physically able to go and do the things on our bucket list. After COVID of course.

You don't necessarily need to draw SS early in order to spend more in earlier retirement. You may actually be able to spend more in earlier retirement by NOT taking SS early by drawing down more on your investments (if you have significant $) earlier knowing that you will have a higher SS benefit later by waiting, and you could be money ahead if you are planning to live a long life (I don't think it's a good idea to plan on living a short life)

https://www.early-retirement.org/forums/f28/timing-ss-start-107826-4.html#post2560864