Another reason to claim Social Security at 62

[jebmke]

Everything loses value to inflation -- except maybe fixed nominal liabilities

 

[DayVee B]

All I know is my break even is somewhere around 79 so I'm going to claim at 62. Claiming early also means it's less I'll need to take out of my nest egg. I'd rather take what I can get now and not unplug what I'd saved and let that grow, leaving more for my kids. If I plan to take at 67 (or 70) but I'm gone before my break even date I've just lowered my kids inheritance and let Uncle Sam become a beneficiary.

 

[pb4uski]

Without going into too much personal detail, my mother is on an Advantage Plan, and was a very low medical services user until recently. She thought it was a great deal. No medications, and only an annual physical. At 85, now there are conditions needing treatment, monitoring, and medication. Along with that, she is looking into assisted living, which is going to increase housing expenses significantly.

So it sounds like your DM's more expansive use of medical services is bringing higher deductibles into play? But my understanding is that those deductible max out at $8-9k a year. Is that what you are referrng to?

 

[Trailwalker]

So it sounds like your DM's more expansive use of medical services is bringing higher deductibles into play? But my understanding is that those deductible max out at $8-9k a year. Is that what you are referrng to?

AFAIK, you are right. She doesn't show me her out-of-pocket medical/drug expenses. The assisted living that she is looking at is $4300/month,including meals. That will be a significant change from a low-cost, paid-for condo. This all goes to the larger point that no go years can be just as expensive as the go go years.

 

[pb4uski]

True, which is why having a 77% larger SS benefit by taking at 70 rather than 62 might come in handy. With a $30,000 PIA and FRA of 67 if you take at 62 you would get $1,750/month towards that $4,300/month assisted living cost whereas if you take at 70 then you would be getting $3,100/month towards that $4,300/month assisted living cost.

 

[teej1985]

I'm reminded of this post.

Delay Social Security to age 70 and Spend more money at 62 - Bogleheads.org

 

[pb4uski]

I'm reminded of this post.

Delay Social Security to age 70 and Spend more money at 62 - Bogleheads.org

Yup. Same basic idea.

 

[RetiredAt55.5]

You also have to be alive for an entire month to get benefits for that month. If you die on the second to the last day of the month and get a check next month on whichever Wednesday is yours (you only get paid for a month after the month is over), your estate will have to pay it back.

I've seen conflicting information about the final payment handling.

My mother passed on July 17th. She received a payment via ACH on July 24th. On July 30th, they reversed the ACH payment.

I had thought the estate would get to keep that payment since SSA is a month behind, so the July 24th payment was for the month of June.

 

[euro]

All I know is my break even is somewhere around 79 so I'm going to claim at 62. Claiming early also means it's less I'll need to take out of my nest egg. I'd rather take what I can get now and not unplug what I'd saved and let that grow, leaving more for my kids. If I plan to take at 67 (or 70) but I'm gone before my break even date I've just lowered my kids inheritance and let Uncle Sam become a beneficiary.

I agree and for the most part, I'm ok with that. In my case, I'm confident that there is enough left over for the kids and if Uncle Sams gets a piece of the action then so be it.

 

[anethum]

I've seen conflicting information about the final payment handling.

My mother passed on July 17th. She received a payment via ACH on July 24th. On July 30th, they reversed the ACH payment.

I had thought the estate would get to keep that payment since SSA is a month behind, so the July 24th payment was for the month of June.

I went through this idiocy last year with Truist Bank, which erroneously reversed my mom's final S.S. payment as well as a federal retiree payment. It took nearly 6 months but I got the funds restored. If you call Social Security, after likely a very long wait, you can explain the situation and if the person does things correctly, they will email you a link to a form you can print out. (The first time I called, I was sent a link for the wrong form.) You have to snail-mail the form back, or take it to a Social Security office. The form asks for information about survivors. Eventually, my sibling and I each received half of our mother's final S.S. payment.

FWIW, OPM (which handles federal pensions) does it differently. Eventually, they sent the money back to Truist Bank. However, OPM had sent Truist a form that Truist needed to fill out first. Truist just sat on that form. I was able to get someone at OPM (even harder to reach a human there than at S.S.) to phone a person at Truist whose number I had. Eventually, someone at OPM called me to tell me the claim had finally been approved but would take 2 to 3 more weeks for the deposit to happen. She added that she had 15 nearly identical cases on her desk at the moment, all involving Truist Bank.

 

[RetiredAt55.5]

I went through this idiocy last year with Truist Bank, which erroneously reversed my mom's final S.S. payment as well as a federal retiree payment. It took nearly 6 months but I got the funds restored. If you call Social Security, after likely a very long wait, you can explain the situation and if the person does things correctly, they will email you a link to a form you can print out. (The first time I called, I was sent a link for the wrong form.) You have to snail-mail the form back, or take it to a Social Security office. The form asks for information about survivors. Eventually, my sibling and I each received half of our mother's final S.S. payment.

FWIW, OPM (which handles federal pensions) does it differently. Eventually, they sent the money back to Truist Bank. However, OPM had sent Truist a form that Truist needed to fill out first. Truist just sat on that form. I was able to get someone at OPM (even harder to reach a human there than at S.S.) to phone a person at Truist whose number I had. Eventually, someone at OPM called me to tell me the claim had finally been approved but would take 2 to 3 more weeks for the deposit to happen. She added that she had 15 nearly identical cases on her desk at the moment, all involving Truist Bank.

Thanks for the reply! My moms bank is also Truist ...

I'm surprised Truist would've initiated a reversal so quickly since I haven't notified them yet of my mom's passing.

 

[Chuckanut]

I'm reminded of this post.

Delay Social Security to age 70 and Spend more money at 62 - Bogleheads.org

Very true if the underlying assumptions fit an individual’s wants.

 

[RunningBum]

All I know is my break even is somewhere around 79 so I'm going to claim at 62. Claiming early also means it's less I'll need to take out of my nest egg. I'd rather take what I can get now and not unplug what I'd saved and let that grow, leaving more for my kids. If I plan to take at 67 (or 70) but I'm gone before my break even date I've just lowered my kids inheritance and let Uncle Sam become a beneficiary.

But if you live past your breakeven date you've just lowered your kids inheritance by taking at 62.

 

[Koolau]

One other issue specific to our situation was that I had saved "too much" in my 401(k) and NOT taking SS early "forced" me to take more each year from my 401(k) though it wasn't mandatory at the time (no RMD yet.) SO, when RMDs came along, my 401(k) was a bit more manageable, tax wise. That strategy wouldn't be needed by everyone but w*rked for us (along with Roth conversions.) YMMV

 

[jebmke]

But if you live past your breakeven date you've just lowered your kids inheritance by taking at 62.

Once you get past the people who have no alternative but to start early, the population divides into two camps. One camp just can't live with the fact that they may die before "getting their money back." The other camp looks at the longevity insurance implied in delaying and weights that with other factors. I'm sort of in the second camp. Setting aside the spousal benefit question, once I'm dead, all my cares are over.

 

[bobandsherry]

Ah, the age-old debate! It’s like arguing whether pineapple belongs on pizza—everyone's got their opinion, and few are likely to change their minds. Those in Camp "X" will stick with their guns, those in Camp "Y" will dig in their heels, and the rest will just scroll by.

Let’s face it: nobody’s packing a crystal ball. Predicting inflation, investment returns, interest rates, spending habits, or even when we’re going to check out of this life? Yeah, good luck with that! And when you factor in whether you need Social Security to get by or just want to draw it, the whole thing becomes a giant game of “what if.” With so many variables, and decades of compounding to consider, your careful plan can quickly turn into a wild goose chase. It’s like trying to solve a Rubik’s Cube blindfolded—technically possible, but you’re in for a heck of a time.

In the end, what works for one person might not be the magic solution for everyone. For many, the difference between "X" and "Y" might not even make a dent in their day-to-day life, and could just end up padding the nest egg for those who outlive us. So, maybe the real question is: who’s getting that extra pizza slice in the end?

 

[jldavid47]

I am with Midpack too. I never accepted payback age as a good way to analyze. Postponing yields 8% increase per year vs. whatever CPI-W increase formula yields (will never be 8% yr over yr). It’s all very personal and almost no one is truly “average”. Inflation adjustments rarely totally match an individuals personal rate. Plus, they don’t it take back if expenses deflate. Hold out if you can but take it when you need it.

"Take it when you need it" is the only valid answer to the question. The only way you can optimize SS from a financial perspective is if you know exactly when you are going to die. Since none of us know that, calculating "breakeven" ages is simply mental masturbation - it might feel good while you're doing it but it ultimately accomplishes nothing useful. The only other consideration is if you have a spouse and you want to maximize spousal benefits just in case you die first. In that case, you wait as long as possible.

 

[jldavid47]

But if you live past your breakeven date you've just lowered your kids inheritance by taking at 62.

So what?

 

[Gumby]

...The only other consideration is if you have a spouse and you want to maximize spousal benefits just in case you die first. In that case, you wait as long as possible.

Not always. The young wife was a teacher. She is not eligible for Social Security on her own, and due to the GPO, she does not get a spousal benefit and will not get a survivor benefit. When I die, the social security money to this household stops entirely. So I took at 62 to maximize the portfolio for her use after I'm gone, whenever that may occur.

You are correct that the "break even" calculation should not be dispositive. However, I do want people to know how to do it properly should they wish.

 

[skipro33]

According to this life expectancy chart, someone aged 62 today will live another 18 years, putting them out to age 80. Considering that we can't take it with us, and we likely won't be physically or mentally able to really enjoy spending money for enjoyment the last couple years of life, that leaves 16 years of 'fun-money'. Maybe less. But unlikely more years that you would have desire to spend those dollars on yourselves to make for a higher quality of life.

https://www.health.ny.gov/health_care/medicaid/publications/docs/adm/06adm-5att8.pdf

I just know too many people who died in their 70's and too many people in the later 80's who can't tie their own shoes, let alone enjoy spending money of entertaining endeavors. The window of years we have to maximize the improvement to our lives lies somewhere between 62 and disability. I'm one who is willing to leave less in my accounts and not spend those final days regretting having a large sum but no memories to regale.

 

[ls99]

Took SS at 62. Cash in hand for me was worth more than future sums. Did not try to figure breakeven.

 

[AudiDudi]

DW took SS at 62. When I turned 66, I drew spousal which was 50% of what DW would have received had she waited til 66 - not 1/2 of her then current benefit (SS called it a "husband benefit"). I filed for mine at 70 so DW will get a nice 75+% raise should I pass 1st. IF she passes 1st, I just lose the amount she was receiving.

 

[youbet]

Not always. The young wife was a teacher. She is not eligible for Social Security on her own, and due to the GPO, she does not get a spousal benefit and will not get a survivor benefit. When I die, the social security money to this household stops entirely. So I took at 62 to maximize the portfolio for her use after I'm gone, whenever that may occur.

You are correct that the "break even" calculation should not be dispositive. However, I do want people to know how to do it properly should they wish.

My circumstances and strategy as well. Plus, I included the time value of the early money as part of the break-even calculation.

 

[skipro33]

True, which is why having a 77% larger SS benefit by taking at 70 rather than 62 might come in handy. With a $30,000 PIA and FRA of 67 if you take at 62 you would get $1,750/month towards that $4,300/month assisted living cost whereas if you take at 70 then you would be getting $3,100/month towards that $4,300/month assisted living cost.

$1750 per month at age 62, compounded at 5% for 8 years (age 70) equates to around $206,000. Bank it and there's $30,000 per year for the next 7 years on a draw-down towards that $4,300 a month assisted living cost. Add the continuing $1750 per month/$21,000 per year SS draw for $51,000 per year/$4,250 per month. That's just $50 a month shy of funding the whole bill compared to $3,100 monthly in SS waiting til age 70.

I doubt anyone is going to survive 7+ years in assisted living.

 

[RetiredHappy]

$1750 per month, compounded at 5% for 5 years equates to around $120,000. Bank it and there's $20,000 per year for the next 7 years on a draw-down towards that $4,300 a month assisted living cost. Add the continuing $1750 per month/$21,000 per year SS draw for $41,000 per year. That's just $900 a month shy of funding the whole bill compared to $3,100 monthly in SS waiting til age 70.

I doubt anyone is going to survive 7+ years in assisted living.

It's easy to survive 7+ years in assisted living. Anyone over 65 years can move into an assisted living facility. You might be thinking of skilled nursing facilities - many don't survive for 7+ years in those.