Collecting Social Security at age 62 is the best decision, here is why:

[joeea]

First, the OP had no choice since he had insufficient retirement savings to stop working at 62 without drawing SS prior to FRA.

To be fair, the OP did have the choice to continue working.

 

[Pilot2013]

My own opinion is that the cuts will be means tested in some way or another. Perhaps it will be similar to the method currently used to have folks with higher incomes pay much more for their Medicare Part B than folks with lower incomes.

It won't matter what age you are or if you've already started SS or not. Your cut will depend on your other income.

I think that will be political suicide. But i am wrong (right?) 50% of the time....

 

[youbet]

I think that will be political suicide. But i am wrong (right?) 50% of the time....

It’s working for Medicare Parts B and D today with no hint of “political suicide”that I’m aware of.

 

[pb4uski]

To be fair, the OP did have the choice to continue working.

True, but at the same time depending on the OP's profession finding new employment at age 62 can often be challenging or in some cases even impossible.

 

[joeea]

True, but at the same time depending on the OP's profession finding new employment at age 62 can often be challenging or in some cases even impossible.

Many folks are capable of changing professions. There are always other options.

 

[rayvt]

My own opinion is that the cuts will be means tested in some way or another.

The risk is that the cut will be something like "You managed to get along quite well from 62 to 70 with no SS, so clearly you don't truly need the SS benefit."

 

[Sunset]

All changes that I know of where SS cut the amount paid out, left existing folks grandfathered in. Including those that were close to the point.
Example is the file and suspend (I think that's what it was called).
The reasoning being that people planned their retirement upon it.
Well, a wholesale 25% cut would not be something most SS recipients planned upon.

How to not do a random 25% cut, they could employ a number of things.
If they want to means test it (sort of backwards) then just raise the 85% taxable to 100% and raise the 50% taxable to 65%.
Plus of course raise the FRA to 68.
Remove the cap on earnings, but no increase in benefit (yep just an extra tax on the rich, but in a way the bend points are light that right now.). So if folks don't like no increase in benefits then just ad another bend point of 1%

 

[Ian S]

If and when we get closer to the time when the trust funds run out, I'm sure there will be a successful effort to avoid the haircut put forth by the SSA. It will be through a combination of adjustments to the cap, perhaps COLA, minor cuts to future retirees and some additional taxes on higher incomes. IMHO, the reason the SSA only describes a cut is because that's the simplest most concise way to describe the magnitude of the problem. I think the cap should gradually be raised probably starting fairly soon.

 

[ERD50]

...
Well, a wholesale 25% cut would not be something most SS recipients planned upon.

...

I took a very rough cut at what a 25% overall cut would look like. It sure looks like it would be pretty tough to get 25% out of the top half and leave the average people alone.

I found a source that says the average SS is ~ $16,000, and max (at 70) is ~ $42,500. I took a stab at doing a distribution across that, 30 entries, weighted with average numbers, and fewer entries going above and below. It's hard to hit 25% overall even if I cap everyone at the average. It depends on the actual distribution of course, but obviously a problem along those lines exists - if the distribution was normal, half the money would be above average, and to get 25% overall out of half the total, you need to take 50% from that upper half. If you do that to the ones making a little more than average, they now make less than average (so that doesn't work!). So then you need to take even more than half from the high SS payments.

I suppose with means testing, if someone has a very high income, they could have 100% of SS cut. But I'm guessing there just isn't enough "there" there, to get 25% out of the total, w/o it being unacceptable/weird.

So doing by cuts alone might be very tough, w/o digging down to the average folks.

-ERD50

 

[ncbill]

even with means testing couldn't income be "managed" to qualify, as many already do for ACA subsidies?

 

[teejayevans]

even with means testing couldn't income be "managed" to qualify, as many already do for ACA subsidies?

Be harder to do once past 70 1/2, RMDs would force income up.

 

[jimnjana]

Since we are discussing SS possibly running out of funds down the road, I wonder why they don't eliminate the caps (6.2 % SS tax on income, capped at $127,200 in 2017) on SS contributions paid by wage-earners. ..

omni

I think this and other SS/FICA tax increases are likely. Capped benefits, increase FRA, wealthy paying more, etc is the way the politicians will go. No way are most seniors gonna see a big cut in benefits.

 

[Chuckanut]

Most likely we will see a tax scheme to take away SS benefits from higher income people. Like ER forum folk.

 

[homestead]

Something to think about, those who delay SS to FRA or 70 stand to lose more if there is a 25% cut in SS.

 

[PatrickA5]

All changes that I know of where SS cut the amount paid out, left existing folks grandfathered in. Including those that were close to the point.
Example is the file and suspend (I think that's what it was called).
The reasoning being that people planned their retirement upon it.
Well, a wholesale 25% cut would not be something most SS recipients planned upon.

How to not do a random 25% cut, they could employ a number of things.
If they want to means test it (sort of backwards) then just raise the 85% taxable to 100% and raise the 50% taxable to 65%.
Plus of course raise the FRA to 68.
Remove the cap on earnings, but no increase in benefit (yep just an extra tax on the rich, but in a way the bend points are light that right now.). So if folks don't like no increase in benefits then just ad another bend point of 1%

Exactly, the Social Security administration is just saying that they would have to cut benefits if NOTHING is done. They aren't saying that is what ultimately is going to happen. I don't think the career politicians (that want to keep their jobs) are going to allow granny to have a 25% pay cut. My guess is those 50 and over get grandfathered in to the old system with maybe some minor adjustments (COLA, etc).

Raising the 85% taxable to 100% might make a little money. They might as well make all SS taxable because the 0% and 50% brackets are so low now it's pretty darn hard for someone not living almost entirely on SS to not pay taxes on it. When I went out to the SS calculator and plugged in my DW and my numbers using "future" dollars, our combined SS at age 70 (11 years from now) will be over $100K per year, and we're nowhere near maximum SS. With those kinds of numbers, the vast majority of people will be paying the max 85% taxable in the not too distant future.

 

[Clone]

Change the max earnings from 128700 to 142000.
Change the bend formula 90% 32% 15% to 91% 32% 12%

Politicians can claim that they have increased the SS monthly payment for the lower earners, while at the same time they are taxing the crap out of the higher earners.

Yet, the 12% of the higher average monthly earnings may even result in slightly higher payout, thus the politicians could claim higher SS payments for the top earners (while ignoring the significantly higher taxes paid).

Discussing SS on this forum is somewhat equivalent to the Jerry Springer Show!

 

[ncbill]

Change the bend formula 90% 32% 15% to 91% 32% 12%

Anyone have a link with a decent explanation of how the "bends" work?

 

[marko]

Be harder to do once past 70 1/2, RMDs would force income up.

But a massive one year withdrawal might fix that.

 

[Chuckanut]

But a massive one year withdrawal might fix that.

Possibly. Or change the 'normal' order of recommended withdrawals from:

Non tax advantaged money, Reg IRA/401K, Roth IRA/401K

to.....

Reg IRA/401K, Non Tax advantaged money, Roth IRA/401K.

Bite the bullet and go through the Reg IRA/401K money first, then enjoy a blissful retirement with no more Tax Torpedos.

Or.....

Decide that having enough financial assets to worry about Tax Torpedos is a sign of being in the upper income levels of retired people and enjoy life more.

 

[Ian S]

Decide that having enough financial assets to worry about Tax Torpedos is a sign of being in the upper income levels of retired people and enjoy life more.

My thoughts exactly!

 

[teejayevans]

BTW, the tax on SS doesn’t go back into the SS “trust fund”, if it were, we may not have to do anything to SS. All this is just funny accounting, they can find the money, just raise the deficit.

 

[gabrewer]

I rather doubt I have anything else to add to this thread, but it is an area of interest to me (and obviously to a lot of people here) -- so I do want to share my own perceptions.

I'm still working, age 57 (sort of caught in the one more year loop unfortunately), and request my social security statement every year in late spring when -- hopefully -- the previous year's contributions are finally showing up.

I have my own excel spreadsheet set up, and I've reviewed the scenarios multiple times -- most recently a few minutes ago -- to see if I'm missing something. My conclusion is always the same. In comparison to starting to take payments at age 62, my breakeven year from starting at age 67 (my FRA) would be age 79. At age 70, breakeven becomes age 81. Given that the social security estimates presume employment until starting to take payments makes these breakeven points all the more interesting to me -- that is working longer does not seem to improve the math a lot. I would have thought -- or hoped -- that working until age 70 would make breakeven with a starting payments at age 62 scenario occur much more quickly.

So anyway, I find myself more in the camp of the OP -- especially since longevity does not seem to be a strong point of men in my family. Speaking of, I know that many here seem to view social security as a type of longevity insurance, without a lot of concern that they might not ever receive as much as they've contributed over the years. I don't know that I could ever reach the point of that way of thinking. I would have to have significantly more assets that I do now, and my blue collar family roots pretty much instilled the idea of social security being a promise of some retirement income.

Good thoughts and good discussion here.

 

[PatrickA5]

Possibly. Or change the 'normal' order of recommended withdrawals from:

Non tax advantaged money, Reg IRA/401K, Roth IRA/401K

to.....

Reg IRA/401K, Non Tax advantaged money, Roth IRA/401K.

Bite the bullet and go through the Reg IRA/401K money first, then enjoy a blissful retirement with no more Tax Torpedos.

Or.....

Decide that having enough financial assets to worry about Tax Torpedos is a sign of being in the upper income levels of retired people and enjoy life more.

We will only have SS and retirement accounts with a little taxable. My plan is to play the tax game by taking some from pre-tax, tax free and taxable every year in order to minimize taxes. We are not wealthy enough to just assume we're going to be in a high tax bracket and just not worry about it. I'm planning on doing Roth conversions for the next 5-10 years up to the top of the 15% bracket. My goal is to decrease my tax deferred money to a point where RMDs won't (by themselves) cause us to be in a high bracket. We may even get to a point where we can pay 0% taxes or close to it.

 

[pacergal]

always an interesting discussion. I have run SS analyze with multiple scenarios ever since I found the info on this forum. The end result (total lifetime income I think, if I am understanding correctly) is about 200,000 difference between age 62 and 70, if I recall from last run. I thought it would be a greater amount, not sure if it is because DH and I are same age and earned about the same income or the fact that we have cola'd pensions that pretty much covers our expenses.
Still on the fence when to apply for sure, feel blessed to be in this position.

 

[Texas Proud]

BTW, the tax on SS doesn’t go back into the SS “trust fund”, if it were, we may not have to do anything to SS. All this is just funny accounting, they can find the money, just raise the deficit.

I was thinking this also....

Remember when we got 2% off our SS payments a few years back? I wonder if that reduction was to the SS fund or if the general fund 'paid' the SS fund for that credit?