Would it be better to take Social Security at 62?

[almost there]

You're confused. *You're talking about WEP and we're discussing GPO,

Edit: *Oooops, just noticed Gumby addressed this above.

You are right. I know little about it. Have friends and neighbors whom it effects. Most well into no brainer 6 figures retirements. (yea a bit jealous*) But no pension here. So I never looked into it. *Found this, kind of sums it up. *"The WEP adjusts a person's Social Security worker benefit, and the GPO adjusts a person's spouse or survivor benefit. The WEP and GPO rules are intended to prevent beneficiaries who work outside the system from receiving overly generous Social Security benefits, ensuring a more equitable program."

 

[Gumby]

I understand that aspect, and I'm pretty sure I fully agree (just hedging a bit in case there are some corner cases I didn't consider).




But your wife did pay into a system that was an approved substitute for SS - that can't be ignored. So it seems the rules are about the same regardless of GPO. Comparing your wife's payments into an approved substitute for SS and someone who never paid into any form of SS is just not apples-apples.

-ERD50

It wasn't an "approved substitute" for social security. When social security was first enacted, it didn't apply at all to state and local government employees due to constitutional concerns. In the 1950's, those groups of people were allowed voluntarily to join social security (for themselves) if they wanted. In some states, the teachers did not join. It is simply independent of social security.

You still do not account for the difference in survivor benefits to someone who stayed home and never worked at all and someone who just did not conduct their economic activity within the social security ecosystem. Why you didn't pay into social security is irrelevant. The only relevant fact under the current system should be that your spouse did pay and you are his (or her) survivor.

As I said, if you wanted to change to a system where nobody who didn't personally pay in could get any benefit, then that would be fair. The current system is not.

 

[Midpack]

70 is statistically the best age by far for us to claim SS. Most people who could and would benefit from waiting until 70 don’t, the interwebs are littered with studies showing same…

 

[FREE866]

70 is statistically the best age by far for us to claim SS. Most people who could and would benefit from waiting until 70 don’t, the interwebs are littered with studies showing same…

That is what I thought for years, but now I'm not so sure.


Hear me out. Lets say between the years of age 62-70 your money invested grows at 8%. If you're taking money out of your account thats growing at that rate because you want to wait for social security I don't think the numbers indicate waiting till 70 is the right move. When I inputted that data into the open social security calculator it confirmed that.

 

[Midpack]

70 is statistically the best age by far for us to claim SS. Most people who could and would benefit from waiting until 70 don’t, the interwebs are littered with studies showing same.

Let’s say between the years of age 62-70 your money invested grows at 8%. If you're taking money out of your account thats growing at that rate because you want to wait for social security I don't think the numbers indicate waiting till 70 is the right move. When I inputted that data into the open social security calculator it confirmed that.

Longevity is key, there isn’t a single right answer - so I dismiss anyone with a generic answer. My parents lived to 93 and 96, DW’s Mom lived to 88 despite a decidedly unhealthy lifestyle. We’ve both lived healthier lifestyles than our parents.

We’re fortunate to have “won the game” long ago.

Taking Soc Sec earlier would have reduced with our Roth conversions.

I am not suggesting everyone should wait until age 70 to claim Soc Sec…

Just casually assuming 8% return for 8 years isn’t a given. Do all retirees target an AA with that kind of projected return?

And many academics have studied the take early and invest vs wait proposition, this isn’t some new idea. Maybe read a couple instead of putting cocktail napkin calcs out there for people to make crucial decisions?

https://www.cbsnews.com/news/should-you-start-social-security-early-and-invest-your-benefit/

Below shows assuming Soc Sec 2% annual COLA.

 

[FREE866]

Longevity is key, there isn’t a single right answer - so I dismiss anyone with a generic answer. My parents lived to 93 and 96, DW’s Mom lived to 88 despite a decidedly unhealthy lifestyle. We’ve both lived healthier lifestyles than our parents. I am not suggesting everyone should wait until age 70 to claim Soc Sec…

Just casually assuming 8% return for 8 years isn’t a given.

And many academics have studied the take early and invest vs wait proposition, this isn’t some new idea. Maybe read a couple instead of putting cocktail napkin calcs out there for people to make crucial decisions?

https://www.cbsnews.com/news/should-you-start-social-security-early-and-invest-your-benefit/

Below shows assuming Soc Sec 2% annual COLA.

I've read many and I'm not saying anything is a given or waiting is wrong. Why do some people get so touchy when others bring up an opposing thought?
We are just conversing. It's an interesting topic. I'm 57 now and I'm thinking 67 might be the number for me, but who knows.

 

[FREE866]

And thanks for that article, it's a good one.



I'm a stock market guy too; not interested in bonds, never have been, never will be so that is influencing my view too.

 

[Midpack]

I've read many and I'm not saying anything is a given or waiting is wrong. Why do some people get so touchy when others bring up an opposing thought?
We are just conversing. It's an interesting topic. I'm 57 now and I'm thinking 67 might be the number for me, but who knows.

Show us a credible source that shows taking Soc Sec at age 62 and investing it is statistically superior to waiting until age 70. If it was a universal truth, we’d all have known about it a long time ago…

I’m touchy about seeing overly simple information without qualification out there without rebuttal, that’s all. Your post #79 didn’t have any qualifiers. You’re welcome to manage your finances as you see fit.

 

[FREE866]

Show us a credible source that shows taking Soc Sec at age 62 and investing it is statistically superior to waiting until age 70. If it was a universal truth, we’d all know about it…

The Open social security calculator clearly shows that if you're expecting even below average stock market returns ( discount rate of 4%) and have avg life expectancy of 85 claiming earlier is recommended. Also the article you posted has an example of it.

 

[Midpack]

The Open social security calculator clearly shows that if you're expecting even below average stock market returns ( discount rate of 4%) and have avg life expectancy of 85 claiming earlier is recommended. Also the article you posted has an example of it.

I have no idea what inputs you’ve used, OSS does not show that IME but clearly my entries are different than yours, though I have tried many different life expectancy assumptions. The best answer for you, and a different best answer for us, can both be right - that’s the point.

Again, show us a credible study that supports your claim. I’d think Kitces, Pfau and many others would be all over it if it had merit…

 

[VanWinkle]

Longevity is key, there isn’t a single right answer - so I dismiss anyone with a generic answer. My parents lived to 93 and 96, DW’s Mom lived to 88 despite a decidedly unhealthy lifestyle. We’ve both lived healthier lifestyles than our parents.

We’re fortunate to have “won the game” long ago.

Taking Soc Sec earlier would have reduced with our Roth conversions.

I am not suggesting everyone should wait until age 70 to claim Soc Sec…

Just casually assuming 8% return for 8 years isn’t a given. Do all retirees target an AA with that kind of projected return?

And many academics have studied the take early and invest vs wait proposition, this isn’t some new idea. Maybe read a couple instead of putting cocktail napkin calcs out there for people to make crucial decisions?

https://www.cbsnews.com/news/should-you-start-social-security-early-and-invest-your-benefit/

Below shows assuming Soc Sec 2% annual COLA.

The bolded 8% for 8 years is a fallacy. You only get the 8% jump for the years over your FRA. Before that the increase is closer to 6 %. I'm sure you all know this, but I am making it clear.

From the SSA:

https://www.ssa.gov/benefits/retirement/planner/delayret.html

 

[Midpack]

The bolded 8% for 8 years is a fallacy. You only get the 8% jump for the years over your FRA. Before that the increase is closer to 6 %. I'm sure you all know this, but I am making it clear.

From the SSA:

https://www.ssa.gov/benefits/retirement/planner/delayret.html

The post I quoted (#79) assumed “between the years of age 62-70 your money invested grows at 8%.”

Neither of us are talking about the Soc Sec jumps between age 62 and 70. He’s assuming investment returns on top of that.

 

[Rocky mtn high]

Right or wrong? We have been withdrawing $5k from savings or we can take $5k from SS. We were going to wait until 70 but have now had two CPAs and a financial guy say take the SS. So we have just applied.

 

[FREE866]

I have no idea what inputs you’ve used, OSS does not show that IME but clearly my entries are different than yours, though I have tried many different life expectancy assumptions. The best answer for you, and a different best answer for us, can both be right - that’s the point.

Again, show us a credible study that supports your claim. I’d think Kitces, Pfau and many others would be all over it if it had merit…

Well it's not a "study" , but again Mike Piper, who I have a lot of respect for created the Open Social Security calculator and as I said my numbers inputted showed ss earlier is best.


And Pfau lost all credibility with me when he started pushing annuities. Kitces is smart , but if I followed his whole "bond tent" thing I'd still be working. Don't put anyone on a pedestal.

 

[VanWinkle]

The post I quoted (#79) assumed “between the years of age 62-70 your money invested grows at 8%.”

Neither of us are talking about the Soc Sec jumps between age 62 and 70. He’s assuming investment returns on top of that.

My mistake, and apologies.

VW

 

[Midpack]

Well it's not a "study" , but again Mike Piper, who I have a lot of respect for created the Open Social Security calculator and as I said my numbers inputted showed ss earlier is best.

You should tell Mike Piper, here’s what he’s said on his own site:

Still, a majority of people (as in, “more than 50%” — not “almost everybody”) will be well served by waiting. Specifically, the higher earner in married couples should usually wait all the way until 70. Most unmarried people will want to wait (though not necessarily all the way until 70). And some lower earners in married couples will want to wait — though it’s pretty uncommon for age 70 to be the ideal choice there.

https://articles.opensocialsecurity.com/8-return/

I’m done with this discussion.

 

[FREE866]

You should tell Mike Piper, here’s what he’s said on his own site:


https://articles.opensocialsecurity.com/8-return/

I’m done with this discussion.

"waiting " doesn't necessarily mean waiting until 70

 

[TheWizard]

You should tell Mike Piper, here’s what he’s said on his own site:


https://articles.opensocialsecurity.com/8-return/

I’m done with this discussion.

This thread was NOT the standard question of When Should I Take my SS Benefit.

Instead, it was a hypothetical query about where would my portfolio end up if I invested all of my SS checks starting at age 62, vs 67 or 70.

We should focus narrowly on the specific question posed and not broaden the discussion out to the usual rathole.

To me, this looks like a fairly simple spreadsheet exercise where you invest a COLAd income stream from one of the three starting ages up to age 100, say.
You need a few adjustable parameters, such as average COLA and average portfolio Total Return.

And we can pretty much ignore SS details like tax withholding and Medicare premiums.
Just start with $2000/month cash flow into investments at age 62 and turn the crank. Simple...

 

[latexman]

Show us a credible source that shows taking Soc Sec at age 62 and investing it is statistically superior to waiting until age 70.

I thought the University of Michigan Health and Retirement Study (HRS) was an excellent study that looked at this question. It took 20,000 people's SS decisions and backtested to see if there was a more optimum decision they could have made.

We discussed it here.

I thought qwerty3656 nailed the summary.

The key line in the article (if you want to skip it):

the four best claiming ages, in order of optimal lifetime income, were 70, 67, 69, and 68

Being statistical, I believe the study's trend is correct for the majority, but I do realize that each person's situation is different and there are times where 62 may be the optimum time for that person to claim.

 

[Big Gun]

Re:WEP/GPO

It may have been said upstream, but the simplest way to view applicable gov pensions is as if they were SS contributions/benefits, I.e if your teacher spouse had paid into SS instead of the state pension fund, s/he’d be getting roughly the same amount.

Sure, there are aspects of SS that are unfair, but IMHO WEP/GPO are actually reasonable and logically consistent with the overall SS structure. Are there scenarios that are slightly unfair, sure, but life’s too short to worry about it.

My MIL was a teacher and then worked (paying SS) for a few years. She gets a reduced SS benefit, but I’ve given up trying to explain why her benefit isn’t calculated using the 90% bend point. FIL wastes his time writing letters to politicians about it.

 

[Flyfish1]

Hmm interesting: open social sec. com suggests my wife file at 62, then I file at 66 y 3 mo , then my wife file for spousal benefits at age 67. It then shows my wife continues to receive both her benefit and the spousal benefit. I thought she would get only the higher benefit, the spousal benefit , not both.

 

[Flyfish1]

Never mind, I was too lazy to look it up: From the SS web site: " If your benefit amount as a spouse is higher than your own retirement benefit, you will get a combination of the two benefits that equals the higher amount."

 

[ERD50]

... You still do not account for the difference in survivor benefits to someone who stayed home and never worked at all and someone who just did not conduct their economic activity within the social security ecosystem. Why you didn't pay into social security is irrelevant. The only relevant fact under the current system should be that your spouse did pay and you are his (or her) survivor. ...

Because that's not the relevant comparison.

The relevant comparison is a surviving spouse who worked and paid into SS, and a surviving souse who worked and paid into a system covered by GPO rules.

... As I said, if you wanted to change to a system where nobody who didn't personally pay in could get any benefit, then that would be fair. The current system is not.

And I agreed with you on that.

It wasn't an "approved substitute" for social security. When social security was first enacted, it didn't apply at all to state and local government employees due to constitutional concerns. In the 1950's, those groups of people were allowed voluntarily to join social security (for themselves) if they wanted. In some states, the teachers did not join. It is simply independent of social security. ....

Well, maybe "approved substitute" wasn't the best choice of words, but does it matter? Certainly, your wife's pension is 'special', and is tied to SS (or 'within the social security ecosystem' to use your words), or there would be no GPO rule. I think "approved substitute" is close enough to make the point.

https://www.ncsl.org/fiscal/state-and-local-government-workers-without-social-security-coverage

A sizeable segment of the state and local government workforce does not participate in Social Security. Instead, they participate in public sector retirement systems that must provide a minimum comparable level of benefits. Workers without Social Security coverage do not pay the associated payroll taxes based on their earnings and are therefore ineligible for Social Security benefits. Public pension benefits for these non-covered workers are generally higher than those of other public employees to compensate for the lack of Social Security coverage.

The historical roots of this complex system lie in depression-era Constitutional concerns about the authority of the federal government to impose payroll taxes on states and localities. Following modifications to the Social Security system in the 1950s, state and local government employees may now, as a group, elect coverage through a special agreement between a state and the Social Security Administration. These agreements, called Section 218 Agreements, are authorized under Section 218 of the Social Security Act (42 U.S.C. §418) and involve a referendum among eligible employees. The extent of the coverage under these agreements varies significantly from state to state.

Since the non-SS plan "must provide a minimum comparable level of benefits", there must be some review/approval process, right? So isn't "approved substitute" a reasonable term to use?

-ERD50

 

[pb4uski]

That is what I thought for years, but now I'm not so sure.


Hear me out. Lets say between the years of age 62-70 your money invested grows at 8%. If you're taking money out of your account thats growing at that rate because you want to wait for social security I don't think the numbers indicate waiting till 70 is the right move. When I inputted that data into the open social security calculator it confirmed that.

8% is unrealistic for two reasons. First, since SS benefits are COLAed the interest rate used (or the interest rate input for opensocialsecurity.com) should be a real interest rate rather than a nominal interest rate. Second, it would be imprudent to support SS with domestic equities. Typically, one would use TIPs or a bond ladder.

opensocialsecurity.com suggests the yield on 20-year TIPs, which is currently ~2%.

If you do use equities, and use a real rate of 5% (your 8% less 3% inflation) then it will always say to take SS at 62. OTOH, if backed by bonds earning 5% less 3% inflation so a 2% real rate then it will always suggest taking later than FRA... between FRA and 70.

That is using 2017 Preferred Non-Smoker mortality.

Using a 2% real rate of return the present value of expected benefits is 5.4% higher taking at 68 and 5 months vs 62. Using a 5% real rate of return, the present value of expected benefits is 7% lower taking at 68 and 5 months vs taking at 62 and 1 month.

 

[FREE866]

8% is unrealistic for two reasons. First, since SS benefits are COLAed the interest rate used (or the interest rate input for opensocialsecurity.com) should be a real interest rate rather than a nominal interest rate. Second, it would be imprudent to support SS with domestic equities. Typically, one would use TIPs or a bond ladder.

opensocialsecurity.com suggests the yield on 20-year TIPs, which is currently ~2%.

If you do use equities, and use a real rate of 5% (your 8% less 3% inflation) then it will always say to take SS at 62. OTOH, if backed by bonds earning 5% less 3% inflation so a 2% real rate then it will always suggest taking later than FRA... between FRA and 70.

That is using 2017 Preferred Non-Smoker mortality.

Using a 2% real rate of return the present value of expected benefits is 5.4% higher taking at 68 and 5 months vs 62. Using a 5% real rate of return, the present value of expected benefits is 7% lower taking at 68 and 5 months vs taking at 62 and 1 month.

I did not input 8% into the "real discount rate" section on open social security.


I inputted 5% which suggests me taking at 65 1/2 and then even 4% suggests me taking at 68 years old. Those are both below historical real rate of returns for equities. I put in dying at 87 years old.