Social Security at 70

[Scuba]

DH, who just turned 63 and had no previous known serious health issues, just had a heart attack and emergency quadruple bypass surgery. This made me think perhaps we should accelerate taking his SS. Our financial modeling was done assuming both of us start at FRA, but we also assumed that we might start earlier if there was a lengthy market downturn or delay if we didn’t need the income or we wanted to keep taxes lower.

I don’t want to panic and assume DH will likely die sooner due to his bypass surgery. Initially I thought that was a good assumption, but now I’m hearing that most bypass surgery people who make it through the recovery from the surgery live a normal lifespan.

How would you view this situation?

 

[tmm99]

Scuba, of course, you should do what you feel comfortable with and what is best in your situation, but I think it's quite possible that your DH will live a long healthy life. I have a diabetic friend who had a heart attack at 40 (He even briefly died but his brother who was with him resuscitated him), and had quadruple bypass surgery. His dad died of a heart attack at 40. And sadly, his brother who saved him died of a heart attack around age 50 as well, but my friend is still doing fine at age 74 because he had the bypass. He has very close relationships with all his doctors and is on different medications (His diabetes complicates his health), but he lives a normal life. Your DH's bypass surgery may actually give your DH a very long life.

 

[youbet]

My main quibble with the previous quote is that we simply don't know whether the estate will be larger or smaller if you claim early or late. If you claim early, and live a long time, the estate would be worse off than if you claim late and live a long time.

Contrariwise, if you claim late and die soon thereafter at age 70.5, the estate will be smaller than if you claim early and die at 70.5.

Actually, I don't think you can make those assumptions either. You might "collect" more or less from SS depending on your start age and your age at death, but that doesn't include earnings on the SS money you collected. For example, those of us who 10 or 15 years ago started collecting SS at 62 and investing it at our 60/40 AA are happy campers today. And it could go the other way of course.

The stash that I accumulated from investing age 62 SS more than funds the difference between my age 62 SS and what my age 70 SS would have been at a reasonable WR. The often overlooked time value of money is an important factor frequently not taken into consideration.

 

[DallasGuy]

For people like me who have a chronic health condition (multiple myeloma) with no cure, the calculations can be different than for most other people. Life expectancy and how much you're willing to roll the dice play into when you start taking SS. I'm almost 66 and probably should have taken my SS at 62, given the life expectancy of people with multiple myeloma (I was diagnosed 9 years ago). But I decided to roll the dice and hope that I live longer than expected....and take SS around my full retirement age of 66 and 4 months in order to get a little more each month. Fortunately for me, I don't need SS to live on, at least right now.

Having said that, as others have said, it's never a sure thing to wait given the fact that no one really knows how long they're going to live.

 

[TheWizard]

Actually, I don't think you can make those assumptions either. You might "collect" more or less from SS depending on your start age and your age at death, but that doesn't include earnings on the SS money you collected. For example, those of us who 10 or 15 years ago started collecting SS at 62 and investing it at our 60/40 AA are happy campers today. And it could go the other way of course.

My stash accumulated from investing age 62 SS more than funds the difference between my age 62 SS and what my age 70 SS at a reasonable WR. The often overlooked time value of money is an important factor frequently not taken into consideration.

Correct.
Your reply buttresses my point that not all retirement income is SPENT in the year that it's received. This fact can cause simplistic analyses to go astray...

 

[youbet]

Correct.
Your reply buttresses my point that not all retirement income is SPENT in the year that it's received. This fact can cause simplistic analyses to go astray...

Yep. It's common to see the assumptions that age 62 SS dollars are all immediately spent but age 70 SS dollars were made possible by not needing to spend the equivalent of SS income in order to finance the delay. The comparisons are made into a bit of an "apples to oranges" situation when you do this.

 

[Fermion]

Taking it at 62 for sure.

Why take the risk of cutbacks? A bird in the hand is worth two in the bush and all that.

Also, I would like to be able to regret taking SS at 62 rather than the other choice.

 

[REWahoo]

Also, I would like to be able to regret taking SS at 62 rather than the other choice.

At age 75 I'm beginning to really appreciate the ability to regret my age 62 choice!

 

[Out-to-Lunch]

Actually, I don't think you can make those assumptions either. You might "collect" more or less from SS depending on your start age and your age at death, but that doesn't include earnings on the SS money you collected. For example, those of us who 10 or 15 years ago started collecting SS at 62 and investing it at our 60/40 AA are happy campers today. And it could go the other way of course.

The stash that I accumulated from investing age 62 SS more than funds the difference between my age 62 SS and what my age 70 SS would have been at a reasonable WR. The often overlooked time value of money is an important factor frequently not taken into consideration.

Are you saying that it is always better to claim early, regardless of age of death?

Or are you saying only that I should not equate "estate" with "money received"?

(If the latter, I clearly meant ceteris paribus.)

 

[Fermion]

The time value of money is a very important factor.

Consider that if you started taking SS at 62 and the market slumped, you would essentially be "investing" that money in at low prices for 8 years. You might end up with $300,000 more in the market than the person who didn't take SS until age 70. That $300,000 then could be put into an annuity that added to the reduced SS amount you are getting at 70 would actually be more than you would have gotten had you waited until 70.

It seems all a gamble really...will you live, what will the market do, how will policy change?

 

[Turbo29]

The time value of money is a very important factor.

Consider that if you started taking SS at 62 and the market slumped, you would essentially be "investing" that money in at low prices for 8 years. You might end up with $300,000 more in the market than the person who didn't take SS until age 70. That $300,000 then could be put into an annuity that added to the reduced SS amount you are getting at 70 would actually be more than you would have gotten had you waited until 70.

It seems all a gamble really...will you live, what will the market do, how will policy change?

I started SS in January of this year (FRA+2mo) and the market indeed has slumped (although the market was flying high 3mo earlier when I applied). So it has been a good decision so far.

 

[ncbill]

The time value of money is a very important factor.

Consider that if you started taking SS at 62 and the market slumped, you would essentially be "investing" that money in at low prices for 8 years. You might end up with $300,000 more in the market than the person who didn't take SS until age 70. That $300,000 then could be put into an annuity that added to the reduced SS amount you are getting at 70 would actually be more than you would have gotten had you waited until 70.

It seems all a gamble really...will you live, what will the market do, how will policy change?

I doubt many people invest the difference...my in-laws both took SS at age 62 so they could spend it.

Father-in-law retired on a COLA pension at 52, ~30 years ago.

They (correctly) figured they would be more able to travel back then than now, so that's what they did...my youngest graduates this month at a school ~8 hours away by car & it's now too much of a trip for either of them.

 

[Freedom56]

I plan to take my SS at age 62. My company pension automatically lowers the monthly payments by the calculated amount of monthly SS benefits starting one month after attaining the age of 62. When you delay payment, there is no guarantee that payments won't be cut in the future due to SS solvency issues. "A Bird in the hand is worth two in the bush".

 

[Time2]

The time value of money is a very important factor.

Consider that if you started taking SS at 62 and the market slumped, you would essentially be "investing" that money in at low prices for 8 years. You might end up with $300,000 more in the market than the person who didn't take SS until age 70. That $300,000 then could be put into an annuity that added to the reduced SS amount you are getting at 70 would actually be more than you would have gotten had you waited until 70.

It seems all a gamble really...will you live, what will the market do, how will policy change?

That's all correct, however, you would only invest 78% to 88% of your early SS check because of taxes. Early SS would also reduce my wife's survivor payment, and reduce the amount I can Roth convert. I'm surprised there is not a popular calculator for doing this. I know it has a lot of input variables, but even a simpler program could help us with the decision.

 

[Exchme]

The answers depend on the assumptions and I highly recommend the opensocialsecurity.com site to do studies on relative claim ages, discount rate, life spans and possible future benefit cuts.

We've always thought of SS as being part of the lowest risk bit of the portfolio, basically longevity insurance, so we were planning on waiting to claim to maximize the size of the checks later on. However, I'm coming around to the idea of my wife claiming on her benefit at age 62.

My benefit is much larger than DW's so it turns out her claim age hardly matters. Anything from age 62 to age 67 is indistinguishable. For instance, claiming at 62 vs the optimum of 7 months later optimum is a lifetime penalty of $250.

The program's default discount rate is currently 0.18% (20 year TIPS yield) to match a long term, inflation adjusted asset class. Everything about SWRs suggest that portfolio returns will do better than that in the long run and increasing the discount rate makes it overwhelming to claim hers early and may be even attractive to claim mine early.

Pre-RMDs is also where we would otherwise need to sell appreciated assets and incur new lifetime capital gains taxes, so claiming early gives us more cash in the early years when it matters. Getting her (small) benefit check does cut into Roth conversion space a bit, but not enough to matter.

 

[Turbo29]

This site may have been mentioned already. It allows for calculating based upon different assumptions.

https://opensocialsecurity.com/

 

[W2R]

It seems all a gamble really...will you live, what will the market do, how will policy change?

Absolutely. This is why I think that there are no right or wrong answers to the question of when to take SS.

One factor that seems relevant to me, but not often discussed, is this: AFAIK the SS actuaries' figures do not result in different SS income levels for male and female since they pool these two groups. So, if females (on average!) tend to live longer than males, then females might want to choose age 70 and males might want to choose age 62.

I dunno. I chose age 70 for the security of having a bigger monthly payment as "old age insurance" since I have some ancestors who lived to over 100. On the other hand, I seem to be aging faster than other 73-year-olds, so who knows.

Like you said, it's all a gamble! "Round and round and round she goes, where she stops, nobody knows!"

 

[Chuckanut]

I doubt many people invest the difference...my in-laws both took SS at age 62 so they could spend it.

+1

My instincts tell me that the people who would be disciplined enough to invest the SS money they get by starting at age 62, were also disciplined in the previous years so that they probably can delay SS until 70 and not feel pinched for money.

 

[eytonxav]

+1

My instincts tell me that the people who would be disciplined enough to invest the SS money they get by starting at age 62, were also disciplined in the previous years so that they probably can delay SS until 70 and not feel pinched for money.

Most of the friends I know that took SS at 62 were so well off, they did not need it, but just wanted to start getting their money back from gummit ASAP. If they waited to 70, it would have little to no effect on the living standard.

 

[Chuckanut]

Most of the friends I know that took SS at 62 were so well off, they did not need it, but just wanted to start getting their money back from gummit ASAP. If they waited to 70, it would have little to no effect on the living standard.

And most I know who started at 62 had to have the money or it was Hi Ho Hi Ho, it's off to work I go for more than a few years.

 

[Fermion]

I didn't literally mean that most people would directly invest the age 62 to 70 SS monies, but rather that it would be like they were investing it if they did not have to draw down as much from their invested 401K/IRA monies.

But I could see the temptation to view the extra money as a windfall and take a lot of nora/covid cruises while continuing to heavily draw from one's 401K and spending the early SS money.

 

[harllee]

Less than 5% of people wait to get SS at age 70. I waited until age 70 but of my friends I am the only one that waited until 70. Most people I know took SS as soon as possible.

 

[ncbill]

And most I know who started at 62 had to have the money or it was Hi Ho Hi Ho, it's off to work I go for more than a few years.

Sometimes you don't have a choice.

Last relative I buried had their entire corporate department outsourced when she was in her late 50s...no luck finding another job (female in IT over age 60) so she had to cash in her pension to make it to 62 for early SS.

By remortgaging her home & later adding a HELOC to suck as much equity out of it as possible she managed to enjoy what I'd call a lean retirement for another decade or so before terminal cancer claimed her.

 

[pb4uski]

The time value of money is a very important factor.

Consider that if you started taking SS at 62 and the market slumped, you would essentially be "investing" that money in at low prices for 8 years. You might end up with $300,000 more in the market than the person who didn't take SS until age 70. That $300,000 then could be put into an annuity that added to the reduced SS amount you are getting at 70 would actually be more than you would have gotten had you waited until 70.

It seems all a gamble really...will you live, what will the market do, how will policy change?

FWIW, opensocialsecurity.com factors in the time value of money using a real discount rate. They provide a default of the 20-year TIPs rate (currenty 0.18 according to them) but you can override that with any real discount rate that you want to use. So if you think that over the projection period that you'll earn 7% and inflation will be 4%, then enter 3% instead of 0.18%.

What the tool will do is calculate the cash flows for each possible scenario based on the birth date and PIA that you provide, adjust those cash flows for the probability of your being alive to receive them based on the mortality that you select (default is 2019 SS Table) and then discount them for the time value of money using the real discount rate that you provide.

On policy changes, it allows you to provided assumptions for a % haircut and the year that the haircut will begin.

 

[NotCreativeName]

So if leaving an inheritance is important to me, does that mean a better approach would be to take SS earlier so I'm not drawing down from IRAs? I have 25% in taxable and 75% in tIRA. I am 62 now and maximizing ACA subsidies. Was planning to take SS at 65 when I can get Medicare. Then was going to do Roth conversions up to 12% as long as I could. My husband is 4 years younger and gets nominal SSDI. Feedback appreciated.