Why people take SS at 62

[misanman]

Sorry if I missed it, but I'm surprised that there has been no comment on the tax implications of taking early vs delaying. The gist of this is that only half of SS is accounted for in the calculation that is used to determine how much of SS is taxed. A strategy that some folks might investigate, depending on the specifics of their situation, is to skew their income towards SS in the later years so as to reduce the amount of it that is taxed. Is anyone considering this?

 

[Lsbcal]

Don't forget you can pick an intermediate age between 62 and 70.

 

[Lsbcal]

Sorry if I missed it, but I'm surprised that there has been no comment on the tax implications of taking early vs delaying. The gist of this is that only half of SS is accounted for in the calculation that is used to determine how much of SS is taxed. A strategy that some folks might investigate, depending on the specifics of their situation, is to skew their income towards SS in the later years so as to reduce the amount of it that is taxed. Is anyone considering this?

Up to 85% of SS is taxed and that depends on your other income + deductions.

In California, there is no state tax.

One multi-year strategy we are using this year: (1) in year 1, take a big lump of IRA distributions with SS, (2) in year 2, take much smaller IRA distribution. For year #1 you hit the max SS taxed and then your marginal rate actually starts declining. For year #2, you are in a lower marginal tax situation because you are just starting to fully tax the SS. So this strategy depends very highly on whether or not you are in a tax position to use it.

P.S. All the above are just my wandering thoughts on taxes, you still have to do your due diligence.

 

[rescueme]

Up to 85% of SS is taxed and that depends on your other income + deductions.

In California, there is no state tax.

Same in PA - no state/local tax on any retirement vehicle (SS, pension, SPIA, etc.)

As far as FIT on SS? We're planning on 100% taxability. Heck, it's currently only 15% of SS that is not being taxed. How long do you really think that will last in the future?

 

[ShokWaveRider]

Sorry if I missed it, but I'm surprised that there has been no comment on the tax implications of taking early vs delaying. The gist of this is that only half of SS is accounted for in the calculation that is used to determine how much of SS is taxed. A strategy that some folks might investigate, depending on the specifics of their situation, is to skew their income towards SS in the later years so as to reduce the amount of it that is taxed. Is anyone considering this?

And the $99 that is taken out for Medicare Part B. (After 65)

 

[MasterBlaster]

What I wonder is how long it will take for us to wake up to the evidence that the world from which the FireCalc database was abstracted is long gone, likely forever?

Not that there wil not be strong markets, but IMO they will reward thinking carefully rather than just trying to set our sails to catch prevailing fair winds

Ha

So based on your permabear outlook, what asset allocation model would you suggest for someone looking at a 30 year retirement ?

And what is the new SWR ?

 

[Dawg52]

Don't forget you can pick an intermediate age between 62 and 70.

True. Me being the wishey washy type, I'll probably take it at 64 1/2.

 

[eytonxav]

True. Me being the wishey washy type, I'll probably take it at 64 1/2.

+1 I'd like to hold off as long as possible to increase DW's payout if I'm gone, but must admit I am suspectible to the spend it now while we can enjoy it approach, which may convince me to take it at 64.5 or 65. In the overall scheme of things, the $ difference may not matter too much and I have no idea if SS will continue to allow the 67-70 deferral bump, especially given where interest rates are today.

 

[73ss454]

+1 I'd like to hold off as long as possible to increase DW's payout if I'm gone, but must admit I am suspectible to the spend it now while we can enjoy it approach, which may convince me to take it at 64.5 or 65. In the overall scheme of things, the $ difference may not matter too much and I have no idea if SS will continue to allow the 67-70 deferral bump, especially given where interest rates are today.

Well, if you keep working you won't have to worry about SS.

 

[Animorph]

In reference to one spouse delaying to 70 and the other taking early at 62:

Is that really only the case where the surviving spouse would be relying on getting the benefit of the deceased spouse? That is, if the two spouses had relatively equal benefits then I'm not sure it really means as much to delay taking benefits for one spouse.

DW and I are eligible for roughly the same SS benefits. Still, having one start SS at 70 and one at 62 gives you the larger benefit as long as either spouse is alive and the smaller benefit only as long as both are alive. Kind of like that "Price is Right" brain teaser where you should switch doors after Monty reveals a losing door. Sure, both spouses taking at 70 or 62 might turn out best, but knowing that the longest living spouse is getting the highest benefit and the other spouse is getting the lower benefit hits a pretty good middle ground.

 

[eytonxav]

Well, if you keep working you won't have to worry about SS.

Of course you meant finding and restoring a SS= supersport vs social security, but seriously I did officially announce my retirement in January 2013, but with vacation and personal days they won't see me after 12/31/12

 

[unclemick]

Canned at 49(aka layed off). Took early retirement non-cola pension at 55 and SS at 62.

Single now 69. My Father died at 72(heart attack).

Math wise if I live to 91 - dat was a no no given Mr Markets performance from 1998 to now.

BUT! I could have done something totally stupid - like WORK!



Heh heh heh - Katrina and my last two girlfriends passing in their 60's slightly altered my view of longevity.

 

[rodi]

I have a lot of factors skewing my decision making process on this.

My husband is 60 and looking at age 62 retirement. But might keep working. He's currently only working about 60% of full time. His field (architecture) has never fully recovered from the recent economic crash.

What may skew him to retire at 62 is that we have minor age children, that could collect as dependents. What you think of the ethics of this doesn't matter... it's the rules of the system as it stands. We'd be stupid not to claim them if he does retire.

On my side - I'm younger. Turn 51 next month. My company has been split in pieces, acquired, split in pieces again, acquired yet again, and my division is reported to be on the sales block. (Newest corporate overlords don't want our part of the company.) Layoffs are happening at a furious pace... next round reported to be next week. I don't think I'll be on the list this time... but job security is not guaranteed. I'm going to keep working here till I get a severance package.

Add in my family history. Cancer is everywhere. Brother died at 48, both parents died in late 60's/ early 70's. 3 grandparents died in late 60's/early 70's. All of various forms of cancer. I looked at age my ancestors died, going back to great-grandparents... On average it's 72. So realistically, I can't bank on living to my 90's. (I can plan for it - but odds are against it.)

Given the fact that longevity does not really apply on my side - that leans me towards taking it at 62 also. But my SS earnings are greater than my husbands... so maybe it makes sense to take it later. But the hubster is 10 years older than me... so we may want the income sooner...

It's complicated. We'll make the decision on DH's SS in the next year or two - depending on how much work he's getting... and the decision on my is more than a decade away... so we have time. Current plans are for me to retire at 55... but if I get laid off before that - I'm done.

 

[Lsbcal]

...(snip)...
Add in my family history. Cancer is everywhere. Brother died at 48, both parents died in late 60's/ early 70's. 3 grandparents died in late 60's/early 70's. All of various forms of cancer. I looked at age my ancestors died, going back to great-grandparents... On average it's 72. So realistically, I can't bank on living to my 90's. (I can plan for it - but odds are against it.)
...

My parents both died of cancers in their late 60's. But my uncle who smoked and drank a bit made it to 83 and would have gone on longer if he'd had a proper medical checkup.

I'm thinking that with good eating habits, proper exercise, and reasonable medical care, the odds are better of surviving longer then my relatives.

Still I took SS at 64 because the focus is on the 60's and 70's for me. The 80's and 90's are a perhaps dubious gift if they come.

 

[NYEXPAT]

Well, I have a young wife and kids ( I am 59). I plan to file and suspend at age 62, so my kids will get my FRA and then take mine at 70, so my wife gets the higher survivor benefit.

 

[haha]

And the $99 that is taken out for Medicare Part B. (After 65)

I believe that it is the gross SS pmt that is taxed, at whatever level the individual sustains.

Ha

 

[heirloom]

I turned 62 in Jan and began taking SS in Feb.

It seems they are always taking another year off when SS will run out, so I figured I can take it now while it is still here and invest it.

If I don't touch it before I die, hubby and son can have it. Plus, my husband is waiting until he is 65 to collect SS. If he dies before me, I'll collect his SS insteas of mine since his will be more.

 

[jime444]

It's a easy decision for us. DW parents both died in their early 60's, my Dad at 72 after being kept alive for 10 years (multiple heart surguries), Mom still alive at 78; however, lots of medical issues, just waiting for that call. My health is suspect, first heart surguery at 45 (yes, 45), stressful jobs for both of us all our lives. Our SS is about $20k.yr at 62 for each of us. Given those facts and our complete lack of trust in our political leaders, we're gett'n it while the gittn's good, at 62 about 5 years from now.

 

[freebird5825]

I'm taking it because for me it makes sense. While I don't need it I don't have a wife or children to consider. The breakeven point at 78 seems like a risk I can accept. A bird in the hand to my way of thinking.

Taking Social Security While You Can Get It | Go To Retirement

Ditto.
My only SS benefit will be my own, i.e. late husband was a fed employee under the CSRS system and was 4 quarters short of qualifying for any SS benefit from his own private sector j*bs prior to the fed j*b. C'est la vie.

Even if Mr B and I eventually marry, he had a similar income level and earnings history as I did before he retired 2 years ago. So it makes no difference to us as far as a benefit amount goes.
His current pension is adequate for a LBYM lifestyle. He intends to take his SS at age 62. His life expectancy is a bit more tenuous (than mine) for ongoing medical conditions.
I intend to take SS in 8 years at age 62 and spend some of it merrily
I will invest the rest in an existing TE muni bond fund to earn interest. I envision us retiring to a nice condo in a warm climate or even snowbirding between an apartment here and an apartment elsewhere. Lots of options.

 

[Lazarus]

I plan on taking mine at 62 as well. I will then be able to not take money from the 401k.

 

[teejayevans]

I plan on taking mine at 62 as well. I will then be able to not take money from the 401k.

It depends on how big your 401k is & what tax bracket you are in...
But if you pulled money from the 401k from 62-70, you would be at 70.5 have a smaller 401k, so smaller RMDs, possibly resulting is less/no tax on your SS, or using those years to convert some to a Roth. Obviously we can't predict tax laws 1 year from now, let alone 10 years, but it may be better from a tax perspective to delay SS. I'm not 62, but this is some of the what-if scenarios I will do before I make any decision.
TJ

 

[ejman]

It depends on how big your 401k is & what tax bracket you are in...
But if you pulled money from the 401k from 62-70, you would be at 70.5 have a smaller 401k, so smaller RMDs, possibly resulting is less/no tax on your SS, or using those years to convert some to a Roth. Obviously we can't predict tax laws 1 year from now, let alone 10 years, but it may be better from a tax perspective to delay SS. I'm not 62, but this is some of the what-if scenarios I will do before I make any decision.
TJ

That's true, but if I use up my 401K between 62 -70 wouldn't I then be, in my 70's, even more dependent on government resources that I'm reminded daily, ad nauseum, by the media, my neighbors et al (THE DEBT!) may not be there?

 

[Lsbcal]

That's true, but if I use up my 401K between 62 -70 wouldn't I then be, in my 70's, even more dependent on government resources that I'm reminded daily, ad nauseum, by the media, my neighbors et al (THE DEBT!) may not be there?

These are two extremes.

You could always delay a few years and then take SS. During that time perhaps your 401k would not deplete too fast if equities rise. Happily you could make that call year to year.

 

[ejman]

These are two extremes.

You could always delay a few years and then take SS. During that time perhaps your 401k would not deplete too fast if equities rise. Happily you could make that call year to year.

Why muddle thru when one could make a commitment! I'm only half joking. It's relatively easy to calculate to the nth decimal place what would be advantageous under current tax laws and current SS regulations. A bit harder to calculate what these might be 10, 20 or 30 years from now. Personally, I try as best I can to look at the larger environment of where we are at as a nation and to its ability both fiscally and politically to maintain the current tax laws and benefit levels. My conclusion is that the current public funds/taxation situation will be difficult to maintain for decades and hence, I conclude I wish to depend as much as I can on my own resources and as little as I can on public ones. Of course, others will differ as they should. Everyone's situation IS different.

 

[Lsbcal]

Very true that everyone's situation is a bit or a lot different.

I am thinking not of where things are going on a macroeconomic scale, but one's personal balance sheet. For instance, one has a nice plan that is working quite well and then a market like 2008-2009 comes along and your balance sheet changes a lot. Maybe then you take stock (mild pun), size up the options, then make a change in 2012. It's not generally necessary to pull the trigger right away on the SS decision. You can make the decision at age 62, 64, 66, ...