Another reason to claim Social Security at 62

Why? Because your SS might not get you by comfortably during your retirement years before age 70. Imagine retiring at 50 - you need the savings to live off well before you are eligible for SS, possibly pension if you're lucky. And what if you have a spouse that could live a lot longer? Or you want to leave a lot of money to your kids? I don't see a good point and the excuse of not saving for retirement.
Exactly. There are a lot of factors to consider when making financial decisions. "My father died at 65 so I'm claiming SS at 62" is not a logical decision, it's an emotional one.
 
...after you turn 80. (If you turn 80...)
From Perplexity:
While we can't provide an exact probability, a 62-year-old in good health in the United States has a favorable chance of living to 82, with the odds being somewhat higher for women than for men. The probability is likely in the range of 60-80%, depending on gender and individual health factors.
 
And after your no longer able to actually enjoy the income. I'd rather have the money when I'm in need of it, not just to pad the account so I die richer.
If you have money, as many on this forum do, that's a red herring. You use your money now while you need it knowing that reinforcement in the form of higher SS will come later. Not really much different than anyone retireing before 62 does.
 
I've heard campaign promises this election year of not federally taxing any social security. ...
You don't really believe campaign promises do you? :) Mexico will pay for the wall... too many fell for that one.

Beyond that, its a very bad idea. Many other contributory retirement benefits are taxed on the growth part... a portion of contributory pension benefits are taxed, a portion of non-deductible IRA withdrawals are taxed, a portion of payout annuities are taxed.... there is no good reason why SS sould be any different.

The 85% at is taxed is broadly, the growth and the 15% are beneficiary contributions. With today's technology we could do something more refined since your SSA statement has the total that you contributed, but the growth should still be taxed.
 
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I've heard campaign promises this election year of not federally taxing any social security. If that does come about, how will that affect the ability to transfer tIRA to ROTH IRA?
Probably not the best idea to inject political rhetoric into the discussion...
 
+1 at one point I had a spreadsheet that did the calculation and it matched so I have relied n SS from that point forward.
same here. My calculation in the spreadsheet I created matches what is on the SSA.gov website. Like the old saying "Trust but verify". Moving forward I will rely on the SSA.gov website.
 
Yes. You know, it's not that difficult to live to 80. Even the Social Security table says that the average 62-year-old can expect to live another 19 years. It's not like you've placed all your chips on one number on the roulette wheel, and you're praying for a miracle.
"Average" is a misleading statistic IMO. Even so, given a life to 81, that means taking SS at 70 was advantageous for 1 yr compared to 19 yrs it would've been for claiming at 62.
 
I’d be happy if they just took the limit for not taxing SS benefits and adjusted it for inflation. Otherwise, they are effectively lowering it every year by the inflation amount.
As has been discussed before, by rights everyone should pay tax on about 85% of their social security, because that amount represents the return on the money you invested in social security, a return that has never been taxed. Only 15% represents a return of the money you contributed (and which was already taxed). Think of what would happen if you privately replicated social security by making non deductible contributions into a regular IRA (as some people do). For 35 years you contribute 7% of your income into the IRA and then, once you hit 59.5, you start withdrawing from the accumulated portfolio. You have a basis in your account that was taxed before, so you don't get taxed on the full withdrawal, just the part that represents the investment gains over the years. For social security, the math works out to be about 15% basis and 85% gains.

That is what the law should have been in 1983 when they started the taxation of benefits. Not changing the thresholds for inflation is just a slow way to correct the problem.
 
As has been discussed before, by rights everyone should pay tax on about 85% of their social security, because that amount represents the return on the money you invested in social security, a return that has never been taxed. Only 15% represents a return of the money you contributed (and which was already taxed). Think of what would happen if you privately replicated social security by making non deductible contributions into a regular IRA (as some people do). For 35 years you contribute 7% of your income into the IRA and then, once you hit 59.5, you start withdrawing from the accumulated portfolio. You have a basis in your account that was taxed before, so you don't get taxed on the full withdrawal, just the part that represents the investment gains over the years. For social security, the math works out to be about 15% basis and 85% gains.

That is what the law should have been in 1983 when they started the taxation of benefits. Not changing the thresholds for inflation is just a slow way to correct the problem.
Good summary. I had read that in an old report about the taxation of benefits and that was the discussion. I just couldn’t remember what all was said.
 
I've heard campaign promises this election year of not federally taxing any social security. If that does come about, how will that affect the ability to transfer tIRA to ROTH IRA?
The Trust fund receives about $50Bil per year from income tax on Social Security. I suspect if that were done away with, the trust fund might run out of money a few months earlier than currently projected.
 
Exactly. There are a lot of factors to consider when making financial decisions. "My father died at 65 so I'm claiming SS at 62" is not a logical decision, it's an emotional one.
I'm not sure it's entirely illogical, either. There may be more family health history to consider than just one's father. What if father and mother both died early? Still just an emotional decision? What if grandparents died early, too? I would not call the decision of someone who gives some weight to the possibility of an inherited genetic component of their family's health history an entirely "emotional" decision.
 
"Average" is a misleading statistic IMO. Even so, given a life to 81, that means taking SS at 70 was advantageous for 1 yr compared to 19 yrs it would've been for claiming at 62.
Opensocialsecurity.com uses the weighted average of life expectancies, so the number it comes up with is the mathematical optimum for SS claiming. Of course that is standalone, without considering other information and that other information could easily drive the decision. Folks should of course consider their health and their spouse's health, the need to make Roth Conversions or get ACA premium credits or whether they just don't have the money to wait.

For single folks, the claim age is hardly worth arguing about as it was set up in the 1980's to be actuarially fair on a unisex basis. Back then, single males should have claimed at 62 and females should have waited longer. Now life expectancies have increased so it's roughly fair for males to claim early and opensocialsecurity shows than any age between 62 and 68 is within 1% of the present value of the maximum benefit.

For single females, anything from 66 and 2 months to 70 is within 1% of the same present value. Of course if her health deteriorates, she has new information and could logically claim at that point, it's not an all-or-nothing decision, it's a don't-need-claim-this-month decision.

The major reason for discussion occurs in married couples. Then the life expectancy bet for the lower earner is based on the first to pass, so that slightly favors claiming at age 62, though it's not too sensitive to that claim date. Since the higher benefit continues after the first spouse passes, that becomes a bet on the life expectancy of the longer lived. The odds are over 50/50 that at least one spouse survives to age 89, so the math strongly favors the higher earner waiting.

Everyone can make their own decision, though I hope folks start with math and then work through their personal circumstances. For us, DW is the lower earner so claimed at age 63 but we also want room for Roth Conversions, so it's an easy call for me to keep waiting, aiming for age 70.
 
I’d be happy if they just took the limit for not taxing SS benefits and adjusted it for inflation. Otherwise, they are effectively lowering it every year by the inflation amount.
That was exactly what Congress intended, a slow transition to everyone having 85% of their SS benefit subject to taxation...
 
I’d be happy if they just took the limit for not taxing SS benefits and adjusted it for inflation. Otherwise, they are effectively lowering it every year by the inflation amount.
Exactly. This is something I have pointed out various times.

There's a flaw in how taxes are calculated for Social Security benefits that results in after-tax "net" SS benefits being "cut" every year and have been for years, but most people aren't aware of this.

The SS formula for determining how much of your SS benefits are taxed is NOT indexed to inflation, so that threshold has not increased since it was first introduced in 1983. For a single person, if your income combined with half your SS benefits exceeds $25,000, you have to pay income tax on up to 50% of your SS benefits. If it exceeds $34,000, you have to pay income tax on up to 85% of your SS benefits. $25K in 1983 is worth a lot more than $25K in 2018. Since your retirement distributions and SS benefits will be adjusted with inflation, but NOT the $25,000/$34,000 thresholds, a greater percentage of your SS benefits will become taxable as each year passes (for married filing jointly, the thresholds are $32,000/$44,000.) It's a built-in tax increase, reducing "net" SS benefits, hurting seniors further. The greater your combined income and SS/2, the more you will be affected by this up to a max of 85% of your benefits being taxed! It's absurd, and those thresholds should be increased to reflect inflation since 1983.

The ways it is, you should play it safe by estimating that 85% of your SS benefits well into the future will be taxable. More information about this can be found in these references:

 
It's not a flaw nor is anyone being punished. It is income, just like any other income, and in this country we pay taxes on income. You are correct, however, that the conservative approach to retirement planning is to assume that 85% of your benefit will be taxed.
 
For single folks, the claim age is hardly worth arguing about as it was set up in the 1980's to be actuarially fair on a unisex basis. Back then, single males should have claimed at 62 and females should have waited longer. Now life expectancies have increased so it's roughly fair for males to claim early and opensocialsecurity shows than any age between 62 and 68 is within 1% of the present value of the maximum benefit.
Well no. As a single male, claiming before the year after my 65th birthday would be bad, as explained earlier. Take a wider vision beyond what is actuarially fair. There's more to it than that.
 
Yes. You know, it's not that difficult to live to 80. Even the Social Security table says that the average 62-year-old can expect to live another 19 years. It's not like you've placed all your chips on one number on the roulette wheel, and you're praying for a miracle.
Not sure of your age, but by the time I hit 62 I had seen:
-College classmate by of cancer at 45
-Another classmate die by his own hand at 60
-several co-workers die before they were 60, mostly cancer, some accidents
-my parents suffer debilitating ailments starting in their late 70s
-my own wife die at 54.

My sample of one says your assertion is no more valid than my sample of one. Things happen and we're not statistically average as individuals, only in the aggregate.

To the point of the "take it early because you may not be able to use it later" argument, I have noticed many in my circle slowing down in their early 80's. Not all of them, but enough to bolster the argument.

Check back with an update when you get to 62.
 
Yes. You know, it's not that difficult to live to 80. Even the Social Security table says that the average 62-year-old can expect to live another 19 years. It's not like you've placed all your chips on one number on the roulette wheel, and you're praying for a miracle.
Not sure I'd call it living, more like surviving. To live is to be independent and in relatively good to excellent health. To enjoy dining out and no worries about the prices. To buy those things you've denied yourself and now able to enjoy before that time is over.
If you have money, as many on this forum do, that's a red herring. You use your money now while you need it knowing that reinforcement in the form of higher SS will come later. Not really much different than anyone retireing before 62 does.
Yet one income source is inheritable, the other, not. Assuming I have no desire to spend more than I would otherwise, spending social security dollars and banking/investing IRA dollars seems to benefit my heirs rather than the government.
 
Not sure of your age, but by the time I hit 62 I had seen:
-College classmate by of cancer at 45
-Another classmate die by his own hand at 60
-several co-workers die before they were 60, mostly cancer, some accidents
-my parents suffer debilitating ailments starting in their late 70s
-my own wife die at 54.

My sample of one says your assertion is no more valid than my sample of one. Things happen and we're not statistically average as individuals, only in the aggregate.

To the point of the "take it early because you may not be able to use it later" argument, I have noticed many in my circle slowing down in their early 80's. Not all of them, but enough to bolster the argument.

Check back with an update when you get to 62.

Two of my closest friends since Jr. High days have noticeably slowed down and we are in our late 60's. One of them has been treated for lymphoma. A close friend since college had surgery for skin cancer this year at 65. Finally a very close friend since grade school died suddenly in June of a heart attack three weeks shy of his 65th bday. I feel good, no significant issues yet but I have changed in the last 10 years due to aging and I can feel it when I do strenuous things. Maybe I will be the lucky one in my circle, but the lightning bolts are starting to strike very close. I am confident I will continue to change and not for the better. Either choice, taking at it 62 or taking it at 70 is a gamble. One of those choices has a greater chance you won't be able to enjoy it as much or for as long or worse you may never see a dime of it. Those of us who were fortunate enough to ER before 62 were mainly gambling with our money. When the question of when to take SS comes we add our very life (both time and health) to that gamble. The choice to take it early was easy for me. Good luck to all going forward.
 
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It's not a flaw nor is anyone being punished. It is income, just like any other income, and in this country we pay taxes on income. You are correct, however, that the conservative approach to retirement planning is to assume that 85% of your benefit will be taxed.
Just my opinion, but to me we could help our current SS only people by increasing it beyond average SS benefit, and by eliminating all SS from the calculation so that only those with "other income" reaching those limits (beyond SS) start getting SS taxed.

I know that may not seem fair and there is the argument that "one should save outside of SS", but at the end of the day, Seniors who are trying to make it on SS have been left behind. Trying to not get political, but there have been a LOT of giveaways for able bodied, etc while very little help to Seniors.

*The above would not help me and probably everyone on this forum. I've also been a proponent to remove the SS contribution limit which I have been the beneficiary of for MANY years.

Flieger
 
My father took it at 62 and literally dropped dead at 73 while on the 18th hole of a golf course. Good thing he did not wait until 70.
 
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