Another reason to claim Social Security at 62

[shotgunner]

On a similar vein IMO not enough attention gets paid to what happens if you or spouse expires prematurely. You need to ask yourself in the event of this grim reality would it be worth it to gamble that you won't expire before your perceived break even happens?

Which is why this is such a debate, the most critical piece is one's expiration date, it is unknowable and it is the deciding factor of what the best choice is. Whatever one's choice is on SS isn't really the point if your goal is ER, the goal should be can you retire at 62 or earlier and not run out of money. I haven't read one post where someone is concerned about that happening should they take it at 62, there argument is always about having more or less money.

 

[Koolau]

Short of knowing I had a terminal illness, I wouldn't be thinking in terms of dying prematurely. It's not that I would ignore the possibility, it would be that taking it later would outweigh the downside possibilities. I took SS at 70 to increase DW's survivor benefit more than any other reason (also, I didn't need the money before then.) It also allowed me to Roth more qualified money at lower tax rate.

MOST of us here, don't "need" the money, though we certainly don't want to leave it on the table. Waiting has some advantages and you can start anytime you "need" the money.

I don't suggest that taking it after 62 is right for anyone but me. I would think for most single people, taking it at 62 would be the best choice though YMMV.

 

[TheWizard]

...But, I'll give it to you, if you *could* defer SS but it would mean your budget includes only necessary things and no extras because you don't have much other money, yes, you might want to take at 62 so you can enjoy some extras. I was assuming this audience has enough other money to use for those extras, knowing that they would be getting a larger SS check later to offset the savings they've spent. Maybe I'm wrong.

Exactly.
I spent down and Roth converted a fair amount of my tax-deferred account prior to starting SS four years ago at age 70.
Now I have a negative withdrawal rate and my Investible Assets can be expected to grow significantly over my remaining years. And I'm doing a decent amount of discretionary spending as well...

 

[pb4uski]

+2 The results of a recent poll suggest that for ~2/3 of respondents that spending or quality of life is not impacted or negligibly impacted by deferring SS and for ~1/6 of respondents starting SS early results in a huge or significant increase in spending or quality of life.

 

[Koolau]

+2 The results of a recent poll suggest that for ~2/3 of respondents that spending or quality of life is not impacted or negligibly impacted by deferring SS and for ~1/6 of respondents starting SS early results in a huge or significant increase in spending or quality of life.

View attachment 52151

I'm actually surprised by these results. Part of it may be my interpretation of what the results actually mean. I said "significant" because SS is my largest monthly source of "guaranteed" income. It's true that any month (or time frame) I care to, I can take a relatively "huge" chunk from my stash (and, from time to time, I have done that and I continue to do that - RMDs at minimum.)

But vs my pension, SS is considerably larger and pension is the only other "guaranteed" money I have coming in.

I think for me, it has been the fact that it's in the checking account and I haven't had to "go get it" from my stash. The mere availability of "all that cash" has meant that I spend MORE than I did before. Also, before, I was spending my cash for things like taxes to cover Roth conversions. Now, I just get to spend, spend, spend if I want to. To me that's significant. It is true that we don't buy a lot of stuff or travel a lot more, etc., but we do more of what we love to do with our money. Again - significant but YMMV.

Thanks for the original poll and thread, pb4uski.

 

[pb4uski]

It's not so much the significance of SS as a percentage of income. It is more the impact of receiving SS on your spending or quality of life. For us, since our retirement is very well funded and we don't fear running out of money 12 years in, we spend pretty much what we want to and it doesn't matter to us whether the source of funds is SS or retirement portfolio withdrawals... the old money is fungible argument. While our inbred frugality sometime makes spending more hard where the value proposition is questionable.

Like upgrading to first class for a two hour flight for example. We tend to not upgrade not because we can't afford it but more because the added pleasure isn't commensurate with the added cost.

 

[Gumby]

I'm actually surprised by these results. Part of it may be my interpretation of what the results actually mean. I said "significant" because SS is my largest monthly source of "guaranteed" income. It's true that any month (or time frame) I care to, I can take a relatively "huge" chunk from my stash (and, from time to time, I have done that and I continue to do that - RMDs at minimum.)

But vs my pension, SS is considerably larger and pension is the only other "guaranteed" money I have coming in.

I think for me, it has been the fact that it's in the checking account and I haven't had to "go get it" from my stash. The mere availability of "all that cash" has meant that I spend MORE than I did before. Also, before, I was spending my cash for things like taxes to cover Roth conversions. Now, I just get to spend, spend, spend if I want to. To me that's significant. It is true that we don't buy a lot of stuff or travel a lot more, etc., but we do more of what we love to do with our money. Again - significant but YMMV.

Thanks for the original poll and thread, pb4uski.

We have two pensions and one social security. Even though we could safely double our spending by taking from the portfolio, I still get a twinge of uneasiness if we spend more than the checks that automatically land in the bank account every month. Irrational? Yes, but there it is.

 

[Flieger]

Ouch! Well, thanks for that heads up. I assume since she has already well surpassed that for 2024, we need to at least wait until 2025 to start her SS and then decide on 1.) Have her only earn ~22k in 2025 or; wait another year. Was that the only assumption I screwed up on Gumby?

Flieger

So, interesting update.

Went in to Login.GOV and filed for wife's SS. Since it was further than 3 months, and I had already gone past that point of getting a re-entry number, it only allowed me to pick a December start date. She will make ~$50k this year, so the December will be reduced to $0. I couldn't get out or cancel and wait another month so I could pick Jan without a paper form and associated hassle. Reduced payment for Dec start vs Jan start of about $8/month. We pressed on.

A person from SS office sent an email and asked for her to call. She went through what we knew (she makes too much) and said we could file paper form, or leave as-is and they will show as Suspended due to too much income. We said press on. She has to call early Jan to state she will not be working (or won't make over $22k) and they will remove the suspension, and her first payment will be Feb since 1 month in arrears.

2 questions:

1. Even though it is a few $'s, wouldn't the over-earning now make an adjustment to her payment going forward? Seems I read that here somewhere, that when they do the 1$ for every $2 over max, it goes back to adjust the PIA
2. I'm assuming her PIA will be adjusted by the upcoming (expected) 2.65% COLA, therefore her adjusted for early SS would be adjusted as well?

While these are minimal $'s we are talking about and not impactful, I am just curious and love diving in to details while I am lazy on Sunday's (see my earlier post on Lazy Sunday).

Flieger

 

[GenXguy]

I don't suggest that taking it after 62 is right for anyone but me. I would think for most single people, taking it at 62 would be the best choice though YMMV.

As a single guy who is under 62, if I were to start taking it at 62, I would probably not even qualify for ACA PCT for four years and have to spend many thousands of dollars more on health care insurance and deductibles/co-pays. I'm right at one of the ACA MAGI thresholds that can trigger an increase in my expenses and am already taking measures to reduce my income. So I need to hold off on SS until the year following my 65th birthday under the current law.

 

[Lorenzo]

MOST of us here, don't "need" the money, though we certainly don't want to leave it on the table. Waiting has some advantages and you can start anytime you "need" the money.

I believe I may be in the minority who "need" the money, because without either SS or a pseudo-SS payment to myself from my savings while delaying actual SS, I could not fund the activites that I am retiring in order to be able to do.

So while for those who have very well-funded retirements these discussions may be about having "more or less money," as @shotgunner put it in a comment above, for me it is going to be a sigificant part of how I fund my retirement. I am almost 62, which is not very ER but still, I need to work out my strategy now, in advance of the relatively short span of years I will be able to engage in physically demanding adventures.

 

[Texas Proud]

But vs my pension, SS is considerably larger and pension is the only other "guaranteed" money I have coming in.

Some of us have zero guaranteed income coming in... so when I start SS it easily will be larger as it will be the only guaranteed income...

I am ignoring dividends and interest... they are very spotty anyhow...

 

[Koolau]

We have two pensions and one social security. Even though we could safely double our spending by taking from the portfolio, I still get a twinge of uneasiness if we spend more than the checks that automatically land in the bank account every month. Irrational? Yes, but there it is.

I'm no longer "ashamed" of my "irrational behavior" as it got me to FIRE a lot sooner. I am trying to address said irrational behavior with some successes (and still some failures.)

 

[SJhawkins]

I am going to guess you haven't spent much time in a Skilled Nursing Facility which is what most people call a Nursing Home. In my experience nobody who is a resident is really enjoying themselves. Their freedom to do what they want is gone. Most need help with dressing, shaving, toileting etc. Many have suffered cognitive decline and many others physical decline, often both interfering with being able to do many basic things we take for granted. Food is the last great joy in life and even then many dementia patients forget how to swallow, their food is pureed and staff will rub their throat to induce swallowing. Some will swallow wrong which can result in bacterial pneumonia leading to death. Don't be fooled by the television ads for a Home for Mom and Assisted Living Facilities those are not Nursing Homes.

Spending the past 30+ years working in many of these facilities (think engineering/construction) this is a fair assessment.

I would call them gods waiting room, so hoping our state gets on the right to die train (we are getting closer). After all I have seen I'm not a fan, just my .$02.

 

[FREE866]

I am going to guess you haven't spent much time in a Skilled Nursing Facility which is what most people call a Nursing Home. In my experience nobody who is a resident is really enjoying themselves. Their freedom to do what they want is gone. Most need help with dressing, shaving, toileting etc. Many have suffered cognitive decline and many others physical decline, often both interfering with being able to do many basic things we take for granted. Food is the last great joy in life and even then many dementia patients forget how to swallow, their food is pureed and staff will rub their throat to induce swallowing. Some will swallow wrong which can result in bacterial pneumonia leading to death. Don't be fooled by the television ads for a Home for Mom and Assisted Living Facilities those are not Nursing Homes.

This sounds so damn depressing and unfortunately true. My dad spent the last year of his life in a nursing home and frankly it's no way to live. Having to need a nurse to wipe your butt. Just think about that. Talk about emasculating. We euthanize our pets why not humans ? ( whole nother thread)

 

[Koolau]

This sounds so damn depressing and unfortunately true. My dad spent the last year of his life in a nursing home and frankly it's no way to live. Having to need a nurse to wipe your butt. Just think about that. Talk about emasculating. We euthanize our pets why not humans ? ( whole nother thread)

Haveing someone to wipe you is significantly better than NOT having someone to deal with that.

 

[Taco]

.... I can use that SS money AND my IRAs etc, whereas delaying I can only use my IRAs. I have more money, so I can spend more money. That isn't "digging my heels in." It's basic math.

Hi Motley,
Over a decade ago someone made a compelling post on Bogleheads titled "Delay SS to age 70 AND spend more money at 62". What? Delay AND spend more early? Here is a summary of the example they put forth...

Let's say you retire at 62 and are comfortable with a 4% withdraw rate from your IRAs etc.
You have a $1 million portfolio, so you can withdraw $40,000 a year.
You would get SS of $19,476 at 62, or $34,092 at age 70. (I'm using the numbers in the post they made back in 2012.)

Scenario 1 - take SS at 62.
You could spend $59,476 each year, which is $40,000 from withdraws and $19,476 from SS.

Scenario 2 - take SS at 70
At age 62, you take 8 years of the SS amount you will get at age 70 and stash it in a savings account. So, $34,092 x 8 = $272,736. The savings in your IRA would then drop from $1 million to $727,264. A 4% withdraw rate on that reduced amount would give you $29,090 a year, down from $40,000. But each year, you also withdraw the $34,092 you stashed away for that year, so your spending for the year would be $63,182 (which is $29,090 + $34,092).

You have INCREASED your yearly spending by $3,706, not just at age 62 but indefinitely, by NOT taking SS early.

That is all just a fancy way of saying one can temporarily use a higher withdraw rate (in the example above, ~5.9%) during the 62-70 time frame, and then a lower withdraw rate once SS kicks in.

 

[Chuckanut]

Hi Motley,
Over a decade ago someone made a compelling post on Bogleheads titled "Delay SS to age 70 AND spend more money at 62". What? Delay AND spend more early? Here is a summary of the example they put forth...

I’m glad to see many people are advocating this idea when deciding when to take SS benefits. For some it’s a viable alternative.

People should know that there are two big IFs that have to fall into place for it to work.

1.). You need to have the money to fund your desired retirement from 62 to 70.

2.). You don’t have a need or desire to leave a meaningfully large estate to your heirs. You do spend part of your kid's inheritance when you do this.

 

[Lorenzo]

Hi Motley,
Over a decade ago someone made a compelling post on Bogleheads titled "Delay SS to age 70 AND spend more money at 62". What? Delay AND spend more early? Here is a summary of the example they put forth...

Let's say you retire at 62 and are comfortable with a 4% withdraw rate from your IRAs etc.
You have a $1 million portfolio, so you can withdraw $40,000 a year.
You would get SS of $19,476 at 62, or $34,092 at age 70. (I'm using the numbers in the post they made back in 2012.)

Scenario 1 - take SS at 62.
You could spend $59,476 each year, which is $40,000 from withdraws and $19,476 from SS.

Scenario 2 - take SS at 70
At age 62, you take 8 years of the SS amount you will get at age 70 and stash it in a savings account. So, $34,092 x 8 = $272,736. The savings in your IRA would then drop from $1 million to $727,264. A 4% withdraw rate on that reduced amount would give you $29,090 a year, down from $40,000. But each year, you also withdraw the $34,092 you stashed away for that year, so your spending for the year would be $63,182 (which is $29,090 + $34,092).

You have INCREASED your yearly spending by $3,706, not just at age 62 but indefinitely, by NOT taking SS early.

That is all just a fancy way of saying one can temporarily use a higher withdraw rate (in the example above, ~5.9%) during the 62-70 time frame, and then a lower withdraw rate once SS kicks in.

That Bogleheads post was linked to in post #31 of this thread. And post #24 described the same basic idea but using a bond ladder instead of a savings account.

As I read about these strategies, it occurred to me that an even simpler twist on them would be, beginning at age 62, use a withdrawal rate from the IRA that is higher than what would otherwise be considered a safe withdrawal rate, then at 70 when SS kicks in revert if necessary to a conventional safe withdrawal rate over your estimated remaining years.

 

[Ballhawker]

I've read a number of these SS threads and they have been soooo informative! The various perspectives and information shared made me think about so many new concepts. At first I was like, Woah! too much information, too many variables, this does not compute! Then I started digging in to each concept and term, one by one.

I figured out what a SS PIA is and how to calculate my own based on my actual earnings data going back 35 years. I figured out what our survivor benefits would be and determined they did not factor in to our decision making. I learned about RMD's and how they would affect our tax burden starting at 73. This spurred me into learning about Roth conversions to see if they would help us (they do). I learned what IRMAA is and how that could affect our decision - turns out for us it doesn't really come into play. Our MAGI is around $206k (a bit above for later SS filing scenarios) each year until RMD's hit at age 73.

This all spurred me on to develop a spreadsheet that analyzes multiple SS scenarios tailored for DW and I so we can see the effects on "income" right alongside expected projected federal taxes and portfolio balances for a variety of assumed investment returns and SS filing dates.

Our situation is DW and I are both 59 and have fairly substantial COLA pensions- I've started taking mine and am re-retiring starting next month (went back to work for 26 months to help DD). My DW is still working until 62 and will begin drawing pension at 65. We also have both pre-tax and post-tax investment accounts. We both have decent sized SS benefits coming. I believe based on what's important to us we will both take SS at 62. This provides a really nice (more than we need) monthly income stream, and allows our retirement accounts to really compound over the long term since we only need to draw a fairly small amount from now through age 62. We will do a few Roth conversions between ages 59 and 62 also. This will help reduce future RMD taxes and provide a nice little tax free chunk for our heirs.

Bottom line there are many unique situations, personalities, risk tolerances, etc. which make it a very personal decision for each individual. My huge takeaway is to do the math for a number of scenarios, and make an informed decision. I feel so much better armed with good information about our own unique situation. There really is no "one size fits all". If you can't do the math yourself, get some help- it's increased my peace of mind a lot.

 

[RetiredHappy]

@Ballhawker Your RMD age is 75.

 

[AudiDudi]

@Ballhawker You said "I figured out what a SS PIA is and how to calculate my own based on my actual earnings data going back 35 years."

Social Security currently uses the **highest** 35 years of earnings, adjusted for inflation. The inflation numbers used are on the SS website. After age 60, there is no inflation adjustment. Just wanted to clarify.

 

[camfused]

^^^ And for this reason, I think it is best to let the SS website figure out your PIA for you, so that there is no confusion.

 

[Ballhawker]

@Ballhawker You said "I figured out what a SS PIA is and how to calculate my own based on my actual earnings data going back 35 years."

Social Security currently uses the **highest** 35 years of earnings, adjusted for inflation. The inflation numbers used are on the SS website. After age 60, there is no inflation adjustment. Just wanted to clarify.

Thanks for adding that info in to clarify - yes I used the highest 35 years and the indexing factor for each of those highest 35 years (omitting the index factor from the last two years).

 

[Ballhawker]

@Ballhawker Your RMD age is 75.

Thank you for correcting me on this!

 

[RetiredHappy]

Thanks for adding that info in to clarify - yes I used the highest 35 years and the indexing factor for each of those highest 35 years.

You know that you can get the SS benefits number from the SS website. No need to calculate yourself.