When to take Social Security - Any new ideas?

[Raygun99]

Hello Friar I wonder if you have modeled the early pay back scenario--
regarding the financial benefits of taking money from an IRA or 401K to repay the $$ when the time comes. Does that strategy guarantee you aprox 7-8% annual ss gain (based on stepped up benefits) as compared to lower gains that could potentially be in the retirement accounts? Just looking for a 2nd opinion. Would it be prudent to take the money early, save it or spend it and pay it back from IRA funds .. especialy if their gains are less than the guatanteed 8% annual stepped up ss gain?

 

[Independent]

Hello Friar I wonder if you have modeled the early pay back scenario--
regarding the financial benefits of taking money from an IRA or 401K to repay the $$ when the time comes. Does that strategy guarantee you aprox 7-8% annual ss gain (based on stepped up benefits) as compared to lower gains that could potentially be in the retirement accounts? Just looking for a 2nd opinion. Would it be prudent to take the money early, save it or spend it and pay it back from IRA funds .. especialy if their gains are less than the guatanteed 8% annual stepped up ss gain?

If you were planning to start at, say, 66 anyway, then I think the "take it at 62 just so I can pay it back" strategy amounts to taking an interest-free loan from the gov't. If you can earn more than 0% on the money, you've got a gain (before taxes). Taxes can make it more complicated.

If you were planning to take it early anyway, then any decision at a later date to restart is just a case of buying a COLA'd life annuity at that time. That decision is based entirely on the forward-looking value of an immediate annuity at that time.

 

[youbet]

I think the biggest advantage to the "take SS at 62 and consider paying it back and resetting at 66 scheme" is the knowledge you gain about your potential longevity during those four years. I'm starting my SS when I turn 62 (right now actually) with the intent of resetting at 66 if my health continues to be excellent. If the next four years brings bad news health-wise, of course I won't be repaying and resetting.

 

[CuppaJoe]

I think the biggest advantage to the "take SS at 62 and consider paying it back and resetting at 66 scheme" is the knowledge you gain about your potential longevity during those four years. ....

I think along those lines also. Scott Burns in "Spend 'Til the End" says:

The option to withdraw appears to have been implemented in order to assist applicants who ... decided to continue working...Social Security may view other reasons for wanting to withdraw an application as valid. Examples here include "I didn't think I'd live this long"....

 

[WhoDaresWins]

I plan to apply for SS in five years, as soon as I hit 60. I want to get grandfathered in before they start messing with it. My Mom died at 61 before she even collected a penny. My Dad called his SS his "walking around money".

 

[GoodSense]

New York Times Article

Saw this very relevant article on the NYTimes a couple of days ago. For singles, the calculation seems fairly straight-forward. For couples it is wayyy more complicated.

http://www.nytimes.com/2009/07/11/your-money/11retire.html?_r=1&em

I am still 35+ years away from full SS age, so I won't spend too many brain cells on it right now. Maybe it'll still be there. Who knows?

 

[rescueme]

I plan to apply for SS in five years, as soon as I hit 60.

Age 60?

 

[rescueme]

Most advisors say wait as long as you can to start taking Social Security if you can afford it.

It's looking like the system may collapse sooner than expected or perhaps the rules will change.

Is anyone nearing 62?

I can file for early SS (age 62 benefit) in a few months - however I will not.

As has been discussed in many forums concerning techniques for married couples, my wife will be filing early next year for age 62 benefits (we're a few months separated in age). At age 66 (FRA for both of us), I'll file against her, drawing 50% of her age 66 benefit (not 62!) and continue to accrue my benefit for nearly four years (ages 66-70). At age 70, I'll claim my benefit, primarily for her benefit, assuming I pass first.

Many folks say you should take SS at age 62. I would agree that there are those that must do this, based upon their health or affordability to retire. Also, those still working, nearing retirement age, and laid off in this economy (with little chance to get another job) are forced to take any revenue stream they are eligible for.

We look at it a bit differently. For many years, my DW/me led a LBYM lifestyle, delaying consumption by saving/investing for retirement. For us, delaying SS is no different; it is simply "delaying consumption", albeit at a different stage of life.

Additionally, since I pay for all expenses for our home (no note/mortgage, but I do cover taxes, utilities, upkeep/improvements, etc.) and assuming I pass first, my wife will get my SS benefit (an amount estimated to be over 2.5x her age 62 benefit) and allow her to age in place rather than move to a smaller home or apartment after I'm gone, per her desire.

Anyway, that's our plan...

 

[bizlady]

Rescueme-

I wonder if your plan will be allowed? My understanding is that when a married couple applies (at any relevant age), SS will look at whether your benefit, or 50% of your spouses will be higher, and you automatically get paid the higher benefit.

I may be wrong, but would be interested to know if your strategy is accepted by SS.

 

[rescueme]

Rescueme-

I wonder if your plan will be allowed? My understanding is that when a married couple applies (at any relevant age), SS will look at whether your benefit, or 50% of your spouses will be higher, and you automatically get paid the higher benefit.

I may be wrong, but would be interested to know if your strategy is accepted by SS.

This is not the condition of "file and suspend" in which I would apply at age 66 to allow my wife to get 50% of my benefit but not draw mine till age 70. While my wife's lifetime SS credit/earnings is less than mine, it would still be below 50% of mine (the "kicker" is the 8% increase per year from age 66 till age 70, for increasing my benefit). The file/suspend is used to allow early access of my wife to my benefit, but that's not what I'm doing with this plan.

Here's a link to this technique. Look under "Team Play" for details:

Two Ways To Optimize Social Security Benefits - Features

 

[FIRE'd@51]

Age 60?

A widow(er) is allowed to take her deceased spouse's SS at age 60 (with a reduction in benefits).