Another reason to claim Social Security at 62

[motley]

If you are stuck with a Mediare Advantage HMO plan or Medicaid, then you have no choice because there is a limited list of nursing homes that they will pay for. However, if you are on a Supplement plan, which pays for the first x number of days, you can pick and choose, and if that period runs out and you are now private pay, you can pick the best ones out there. When you live in a big city, there are many options. Now, if you live in rural or small town, then it is more limited.

I can't speak to big cities, but I can speak to medium-sized ones, and no, you don't necessarily have a choice, regardless of what plan you have. There are only so many rooms available. If the better one/one you want is full up, guess what, you're not going there.

 

[Texas Proud]

Will you not have 40 quarters under your belt when you retire? How many people do you know that didn't when they retired?

Not that they would get any SS anyhow, but most teachers do not get 40 qtrs...

My DW will not... she substitutes so no qtrs...

States do not have to be in SS...

 

[GenXguy]

Will you not have 40 quarters under your belt when you retire? How many people do you know that didn't when they retired?

I do, way more than that. I'm talking about the single people that don't, and I know some.

 

[pb4uski]

That was exactly what Congress intended, a slow transition to everyone having 85% of their SS benefit subject to taxation...

I think a better approach to taxing SS would be individualized based on your benefits compared to contributions the same way life annuities are taxed. The SSA knows your contributions (it's on your SSA statement) and your benefits so they could redesign the 1099-SSA to report benefits as they currently do, but also the taxable amount. Since it would be customized for each recipient, it would be more fair.

Also, with that approach there would be no need to adjust for inflation.

 

[pb4uski]

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.

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.

On the last part, it depends. If you live long then your heirs will be better off of you take SS later. Another important factor is the after-tax investment return.

You are stuck in the mud thinking that if you delay SS that you will deny yourself by spending less if you are not collecting SS. It's just not true. You can withdraw what you would receive in SS at 62 from your portfolio from ages 62 to 70 to get over the phycological hurdle.

 

[pb4uski]

Not sure. She will not discuss money with me.

You don't need to have her share with you in order to know. At one extreme, if she didn't pay in for 40 quarters to have SS on her own work record, his taking at 62 permanently reduced the benefit that she "inherits" from him for the rest of her life. On the other hand, if her PIA based on her own work record was equal or more than his PIA, then his decision to take early at 62 didn't impact her at all and arguably may have benefitted her in that their retirement savings withdrawals may have been lower (assuming that their spending didn't increase because he was collecting SS). And all sorts of in between.

 

[gianmatt]

It's not like I'm scraping by, and claiming SS early allows me to live it up. I'm going to spend what I want to spend no matter what. For me, it's simply a question of do I take more from the portfolio and wait on SS, or less from the portfolio and add SS to that, and in what combination? And it's not as simple as saying "my portfolio will grow more if I leave it alone." That is entirely dependent on portfolio size as well as how much of one's expenses will be covered by SS/pension. If I wait until 70, and my SS covers all my expenses, then my portfolio goes mostly untouched from then on. There's a point where my total assets will be higher than if I claimed SS early. I know it doesn't sound intuitive, but it's true.

The SS decision is highly personal, and there can be good reasons for taking it at any age. The people who say "no - 62 is the only correct age, case closed" aren't considering the different circumstances that different people have. The same goes for people who say "waiting until 70 is the only correct answer." There is no one correct answer.

 

[jazz4cash]

I think a better approach to taxing SS would be individualized based on your benefits compared to contributions the same way life annuities are taxed. The SSA knows your contributions (it's on your SSA statement) and your benefits so they could redesign the 1099-SSA to report benefits as they currently do, but also the taxable amount. Since it would be customized for each recipient, it would be more fair.

Also, with that approach there would be no need to adjust for inflation.

That's an interesting idea. It could be a battle royale to sort out the details.

 

[skipro33]

On the last part, it depends. If you live long then your heirs will be better off of you take SS later. Another important factor is the after-tax investment return.

That's assuming we continue to spend the way we are doing in our 'active' years. I can assure you, barring any major medical expenses, I will be spending appreciably less as I age than I do now and I spend less now than I did in my 50's when I first retired.

 

[pb4uski]

Some may find this interesting. It compares taking at 62 vs 70 assuming a FRA of 67 and $1,000 per month PIA with the difference invested at a real rate of return of 2%, 3% or 4%. The age 62 benefit is 70% the PIA and the age 70 benefit is 124% of the PIA. The real IRR are based on the differential cash flows.

So if you expect to live to 82, then the differential cash flows provide a real return of 2.20%.. pretty good. Obviously if you die young then your real internal rate of return is minimal or negative and if you live long then it is a good decision. Since the analysis is based on differential cash flows it is objective and doesn't include coulda, shoulda, wouldas like if I claimed early I would have lived it up more or I'll spend less in my slow-go or no go years or whatever.

The returns are all real because the cash flows are presumed to increase annually for inflation.

Real interest​	rate​	​	​	2.00%​	3.00%	4.00%	Real
Age​	Claim at 62​	Claim at 70​	Difference​	Balance​	Balance​	Balance​	IRRs​
62​	8,400​	​	-8,400​	8,484​	8,525​	8,566​	N/A​
63​	8,400​	​	-8,400​	17,137​	17,306​	17,475​	N/A​
64​	8,400​	​	-8,400​	25,963​	26,350​	26,741​	N/A​
65​	8,400​	​	-8,400​	34,966​	35,666​	36,377​	N/A​
66​	8,400​	​	-8,400​	44,149​	45,261​	46,398​	N/A​
67​	8,400​	​	-8,400​	53,515​	55,144​	56,820​	N/A​
68​	8,400​	​	-8,400​	63,069​	65,323​	67,660​	N/A​
69​	8,400​	​	-8,400​	72,814​	75,808​	78,932​	N/A​
70​	8,400​	14,880​	6,480​	67,726​	71,506​	75,481​	N/A​
71​	8,400​	14,880​	6,480​	62,536​	67,074​	71,892​	N/A​
72​	8,400​	14,880​	6,480​	57,242​	62,510​	68,160​	N/A​
73​	8,400​	14,880​	6,480​	51,843​	57,809​	64,278​	N/A​
74​	8,400​	14,880​	6,480​	46,335​	52,967​	60,240​	N/A​
75​	8,400​	14,880​	6,480​	40,717​	47,979​	56,042​	N/A​
76​	8,400​	14,880​	6,480​	34,987​	42,842​	51,675​	N/A​
77​	8,400​	14,880​	6,480​	29,143​	37,551​	47,134​	-3.19%​
78​	8,400​	14,880​	6,480​	23,181​	32,101​	42,411​	-1.65%​
79​	8,400​	14,880​	6,480​	17,100​	26,487​	37,499​	-0.40%​
80​	8,400​	14,880​	6,480​	10,898​	20,705​	32,390​	0.62%​
81​	8,400​	14,880​	6,480​	4,571​	14,750​	27,078​	1.48%​
82​	8,400​	14,880​	6,480​	(1,882)​	8,616​	21,552​	2.20%​
83​	8,400​	14,880​	6,480​	(8,464)​	2,298​	15,806​	2.81%​
84​	8,400​	14,880​	6,480​	(15,178)​	(4,209)​	9,830​	3.33%​
85​	8,400​	14,880​	6,480​	(22,026)​	(10,912)​	3,615​	3.77%​
86​	8,400​	14,880​	6,480​	(29,011)​	(17,816)​	(2,849)​	4.16%​
87​	8,400​	14,880​	6,480​	(36,136)​	(24,927)​	(9,571)​	4.50%​
88​	8,400​	14,880​	6,480​	(43,403)​	(32,251)​	(16,562)​	4.80%​
89​	8,400​	14,880​	6,480​	(50,815)​	(39,795)​	(23,833)​	5.06%​
90​	8,400​	14,880​	6,480​	(58,376)​	(47,566)​	(31,395)​	5.29%​
91​	8,400​	14,880​	6,480​	(66,088)​	(55,569)​	(39,259)​	5.49%​
92​	8,400​	14,880​	6,480​	(73,954)​	(63,813)​	(47,437)​	5.67%​
93​	8,400​	14,880​	6,480​	(81,978)​	(72,303)​	(55,943)​	5.83%​
94​	8,400​	14,880​	6,480​	(90,162)​	(81,049)​	(64,789)​	5.97%​
95​	8,400​	14,880​	6,480​	(98,510)​	(90,057)​	(73,989)​	6.10%​
96​	8,400​	14,880​	6,480​	(107,024)​	(99,335)​	(83,557)​	6.22%​
97​	8,400​	14,880​	6,480​	(115,709)​	(108,892)​	(93,508)​	6.32%​
98​	8,400​	14,880​	6,480​	(124,568)​	(118,735)​	(103,856)​	6.41%​
99​	8,400​	14,880​	6,480​	(133,604)​	(128,873)​	(114,619)​	6.50%​
100​	8,400​	14,880​	6,480​	(142,820)​	(139,316)​	(125,812)​	6.57%​

 

[RunningBum]

"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.

Nope. It means that for those 19 years you don't know which way was best because you haven't died yet. Once you got past the breakeven, you do know that taking at 70 was better.. If you didn't make it to breakeven, it's a moot point because you aren't alive for it to matter.

 

[motley]

Nope.

In my example, yep.

 

[TheWizard]

That's assuming we continue to spend the way we are doing in our 'active' years. I can assure you, barring any major medical expenses, I will be spending appreciably less as I age than I do now and I spend less now than I did in my 50's when I first retired.

Maybe.
When I retired in 2013, I started doing foreign travel trips that were mostly hiking related and not too expensive.
Now I've started switching to river cruises which are quite a bit expensive.
YMMV, as a famous poster once said...

 

[HI Bill]

... the real key is longevity...if you live till 90 you clearly wait till 70...85 it gets more debatable and for me if I die at 85, taking SS at 66 would be deal...

The greater question is when are the $ provided by SS more valuable? After 81 or so, you're more likely to lessen travel, spending on clothes, and many other things. If taking SS earlier gets you a higher quality of life earlier, it may be worth considering... In my case, I'd take it at FRA if not for my wife's potential future reduction in spousal benefits.

 

[AudiDudi]

DW and I were about equal earners and about 9 months difference in age with SS at 62 about a $10 difference. She insisted on filing at 62. We were in the age group (born before 1/1/54) that could still do a spousal restricted filing. When I turned 66 I filed for spousal and let mine grow til age 70. My break even point is at 77 as I collected north of $50k in sposal benefits before filing for mine. What I find amazing is that within 18 months of filing for mine at age 70, I had collected more than I and my employers had contributed. And we wonder why it is in trouble!

 

[retAm]

Some may find this interesting. It compares taking at 62 vs 70 assuming a FRA of 67 and $1,000 per month PIA with the difference invested at a real rate of return of 2%, 3% or 4%. The age 62 benefit is 70% the PIA and the age 70 benefit is 124% of the PIA. The real IRR are based on the differential cash flows.

So if you expect to live to 82, then the differential cash flows provide a real return of 2.20%.. pretty good. Obviously if you die young then your real internal rate of return is minimal or negative and if you live long then it is a good decision. Since the analysis is based on differential cash flows it is objective and doesn't include coulda, shoulda, wouldas like if I claimed early I would have lived it up more or I'll spend less in my slow-go or no go years or whatever.

The returns are all real because the cash flows are presumed to increase annually for inflation.

Real interest​	rate​	​	​	2.00%​	3.00%	4.00%	Real
Age​	Claim at 62​	Claim at 70​	Difference​	Balance​	Balance​	Balance​	IRRs​
62​	8,400​	​	-8,400​	8,484​	8,525​	8,566​	N/A​
63​	8,400​	​	-8,400​	17,137​	17,306​	17,475​	N/A​
64​	8,400​	​	-8,400​	25,963​	26,350​	26,741​	N/A​
65​	8,400​	​	-8,400​	34,966​	35,666​	36,377​	N/A​
66​	8,400​	​	-8,400​	44,149​	45,261​	46,398​	N/A​
67​	8,400​	​	-8,400​	53,515​	55,144​	56,820​	N/A​
68​	8,400​	​	-8,400​	63,069​	65,323​	67,660​	N/A​
69​	8,400​	​	-8,400​	72,814​	75,808​	78,932​	N/A​
70​	8,400​	14,880​	6,480​	67,726​	71,506​	75,481​	N/A​
71​	8,400​	14,880​	6,480​	62,536​	67,074​	71,892​	N/A​
72​	8,400​	14,880​	6,480​	57,242​	62,510​	68,160​	N/A​
73​	8,400​	14,880​	6,480​	51,843​	57,809​	64,278​	N/A​
74​	8,400​	14,880​	6,480​	46,335​	52,967​	60,240​	N/A​
75​	8,400​	14,880​	6,480​	40,717​	47,979​	56,042​	N/A​
76​	8,400​	14,880​	6,480​	34,987​	42,842​	51,675​	N/A​
77​	8,400​	14,880​	6,480​	29,143​	37,551​	47,134​	-3.19%​
78​	8,400​	14,880​	6,480​	23,181​	32,101​	42,411​	-1.65%​
79​	8,400​	14,880​	6,480​	17,100​	26,487​	37,499​	-0.40%​
80​	8,400​	14,880​	6,480​	10,898​	20,705​	32,390​	0.62%​
81​	8,400​	14,880​	6,480​	4,571​	14,750​	27,078​	1.48%​
82​	8,400​	14,880​	6,480​	(1,882)​	8,616​	21,552​	2.20%​
83​	8,400​	14,880​	6,480​	(8,464)​	2,298​	15,806​	2.81%​
84​	8,400​	14,880​	6,480​	(15,178)​	(4,209)​	9,830​	3.33%​
85​	8,400​	14,880​	6,480​	(22,026)​	(10,912)​	3,615​	3.77%​
86​	8,400​	14,880​	6,480​	(29,011)​	(17,816)​	(2,849)​	4.16%​
87​	8,400​	14,880​	6,480​	(36,136)​	(24,927)​	(9,571)​	4.50%​
88​	8,400​	14,880​	6,480​	(43,403)​	(32,251)​	(16,562)​	4.80%​
89​	8,400​	14,880​	6,480​	(50,815)​	(39,795)​	(23,833)​	5.06%​
90​	8,400​	14,880​	6,480​	(58,376)​	(47,566)​	(31,395)​	5.29%​
91​	8,400​	14,880​	6,480​	(66,088)​	(55,569)​	(39,259)​	5.49%​
92​	8,400​	14,880​	6,480​	(73,954)​	(63,813)​	(47,437)​	5.67%​
93​	8,400​	14,880​	6,480​	(81,978)​	(72,303)​	(55,943)​	5.83%​
94​	8,400​	14,880​	6,480​	(90,162)​	(81,049)​	(64,789)​	5.97%​
95​	8,400​	14,880​	6,480​	(98,510)​	(90,057)​	(73,989)​	6.10%​
96​	8,400​	14,880​	6,480​	(107,024)​	(99,335)​	(83,557)​	6.22%​
97​	8,400​	14,880​	6,480​	(115,709)​	(108,892)​	(93,508)​	6.32%​
98​	8,400​	14,880​	6,480​	(124,568)​	(118,735)​	(103,856)​	6.41%​
99​	8,400​	14,880​	6,480​	(133,604)​	(128,873)​	(114,619)​	6.50%​
100​	8,400​	14,880​	6,480​	(142,820)​	(139,316)​	(125,812)​	6.57%​

Hi I am new here, retired. In the early 2000, I wanted see what would it take to make up the difference in taking SS at 62 vs 70. From very rough calculation and i-bonds at 2% fixed, I could replace the difference with a simple $1000 per month of i-bonds for 25 years. Has anyone done an actual real numbers comparison with creating your own annuity with i-bonds. Unfortunately this is very variable because the fixed rate changes every 6 months but inflation for SS and i-bonds are fairly close. Some food for thought.

 

[motley]

I forget if I mentioned this before, but something else to consider is that taking SS earlier one could invest it and make that much more money as well.

 

[teej1985]

DW and I were about equal earners and about 9 months difference in age with SS at 62 about a $10 difference. She insisted on filing at 62. We were in the age group (born before 1/1/54) that could still do a spousal restricted filing. When I turned 66 I filed for spousal and let mine grow til age 70. My break even point is at 77 as I collected north of $50k in sposal benefits before filing for mine. What I find amazing is that within 18 months of filing for mine at age 70, I had collected more than I and my employers had contributed. And we wonder why it is in trouble!

Did you inflation adjust your and your employer's contributions?

 

[pb4uski]

Hi I am new here, retired. In the early 2000, I wanted see what would it take to make up the difference in taking SS at 62 vs 70. From very rough calculation and i-bonds at 2% fixed, I could replace the difference with a simple $1000 per month of i-bonds for 25 years. Has anyone done an actual real numbers comparison with creating your own annuity with i-bonds. Unfortunately this is very variable because the fixed rate changes every 6 months but inflation for SS and i-bonds are fairly close. Some food for thought.

Check out tips ladder.com

 

[pb4uski]

I forget if I mentioned this before, but something else to consider is that taking SS earlier one could invest it and make that much more money as well.

Like in post #385?

 

[youbet]

It is called "Schwab Private Client Services"

And the next step is "Schwab Private Wealth Services" which starts at ten million.

 

[shotgunner]

Hi I am new here, retired. In the early 2000, I wanted see what would it take to make up the difference in taking SS at 62 vs 70. From very rough calculation and i-bonds at 2% fixed, I could replace the difference with a simple $1000 per month of i-bonds for 25 years. Has anyone done an actual real numbers comparison with creating your own annuity with i-bonds. Unfortunately this is very variable because the fixed rate changes every 6 months but inflation for SS and i-bonds are fairly close. Some food for thought.

How many 25 year periods would the S&P 500 not outperformed the I bonds? I suspect that would have left a lot of money on the table.

 

[jekbrown]

My spreadsheet factors in Roth conversions, taxes, the SS haircut, IRMAA, a house sale, paying taxes via IRA withdrawals, etc. It is pretty complex. I am always maximizing for net worth at age 90 (I had to pick a number, and based on our parents' lifetimes, 90 seems reasonable), due to our desire to pass as much as possible on to our DD.

Anyway, it always says to take SS at 70, no mater whatever other what-ifs I tinker with. Just for fun, I changed the ages to 67 (FRA) for both of us (since we are 65 and 66, any earlier does not matter anymore). The difference at age 90 was $98K, or 1.18% less than both age 70 withdrawals. And, if I change it to me (the higher SS amount) at 70 and DW at 67, the difference is $58K, or .71% less than both age 70 withdrawals.

So, those are just not huge numbers, especially if you divide them by about 2.4, for projected inflation. I am sticking with 70 for both of us, for now, but I can see how some folks would say it does not matter that much, and want to have the comfort of that monthly check earlier.

Plug in death at 69 and run the numbers.

 

[pb4uski]

How many 25 year periods would the S&P 500 not outperformed the I bonds? I suspect that would have left a lot of money on the table.

But this is an 8 year period from age 62 to age 70. The poster would like to set up a ladder to provide inflation adjusted cash flows for that 8 year period.

A conventional 8-year ladder with bonds maturing each yer for 8 years woud probably be retty close, but an 8-year TIPS ladder would be spot on. Also see tipsladder.com.

For example, if you were turning 62 and wanted $36,000 a year of inflation adjusted income for 8 years you could invest $302,026 and be guaranteed of $36,000 a year of inflation adjusted income for 8 years.

 

[pb4uski]

Plug in death at 69 and run the numbers.

If your health is questionable then I agree, but a healthy 62 year old is very unlikely to die from 62 to 69. Why would one not go with the averages?