Another reason to claim Social Security at 62

[ivinsfan]

This still hurts and always will. One of if not my oldest and closest friend passed away unexpectedly in late June. We knew each other since I was 12. He would have turned 65 on 7/10. He came to visit me 4 days before he passed to say hello and thank me for helping him navigate his Medicare choices. He died from a massive heart attack, the one called the widow maker. His wife is a cardiac care nurse. No symptoms, her immediate CPR could not save him. He planned to retire at 67 and begin collecting SS at his FRA. He didn't make it to see one penny of SS.

On another note, as far as investing your SS if you take it at 62, is that really any different than spending it and lessoning your draw on your portfolio and leaving that same amount as your SS invested?

I'm sorry for your loss, some things just seem to come out of nowhere. Speaking of SS.. my little (67) YO brother died in May. Healthy, had an abdominal issue, had an exploratory surgery, after surgery had a heart issue needing to have a stent placed. After about 5 weeks in the ICU he died. Retired at 65...he and his spouse had planned for 2 SS checks and 2 pension checks to fund retirement. Now just 2 years into the plan 2 of those checks have disappeared. His FRA was 66 years and 4 months... I'm not certain if my bro collected SS but if he did he collected very very little money.

 

[shotgunner]

I'm sorry for your loss, some things just seem to come out of nowhere. Speaking of SS.. my little (67) YO brother died in May. Healthy, had an abdominal issue, had an exploratory surgery, after surgery had a heart issue needing to have a stent placed. After about 5 weeks in the ICU he died. Retired at 65...he and his spouse had planned for 2 SS checks and 2 pension checks to fund retirement. Now just 2 years into the plan 2 of those checks have disappeared. His FRA was 66 years and 4 months... I'm not certain if my bro collected SS but if he did he collected very very little money.

My sincerest condolences on the loss of your younger brother. I wish the best of luck going forward for his widow as well as you. My mother passed at 63, she didn't get to retire as a teacher. It left an impression and was a major impetus for me to try and retire early. I retired fully at age 58 and I have had 9 great years so far.

 

[jekbrown]

While the break even point is a purely mathematical equation, the decision about the value of the $ difference is certainly not. If you asked me 5 years ago, I probably would have said that even though I'm retiring at 55 (hopefully), I'd wait until FRA (67) to draw SS. That was before my wife got cancer. Now my opinion on the matter has certainly shifted, and I am more inclined to take it early and use it to pay the day to day bills and "live life" well while I keep more of my investment nestegg growing. It's a bold assumption that any of us will live to average life expectancy. A good chunk of us won't, and SS benefits blow if you die young.

 

[mountainsoft]

I don’t think there is a requirement that you must be over 65 years to move into an assisted living facility.

Nope. My daughter works at an assisted living facility and they had several residents in their 20's and 30's, mostly with mental disabilities though a few with physical limitations. However, I do think the newer residents are trending older now.

My mom lives in another assisted living facility. When she moved in seven years ago there were only a couple men in the whole place. Now there's probably a dozen or so guys there.

 

[pb4uski]

You mention factors such investment balances and beliefs about life expectancy, but calculators such as Opensocialsecurity.com don't take these into account, and it seems to me they should.

Are there more nuanced SS strategy calculators out there?

opensocialsecurity.com does take life expectancy into account. It defaults to the SS mortality table but there are other mortality tables that you can select or you can select an age at death for the analysis.

It doesn't need to factor investment balances into account because it calculated the expected present value of each possible claiming strategy. It adjusts the cash flows associated with each cohort for the probability of being alive to receive it and then discounts the expected cash flows using the real discount rate that you provide.

 

[pb4uski]

... In my situation, starting SS at 62 was the best route.

Well, we don't know yet. If you live to 100, and I hope that you do live to 100 then I don't see how starting SS at 62 was the best route. OTOH, if you die early then it was the best route. We only really know in retrospect... the rest is all just educated guesses, principally on how long we will live. For that, I'm an averages player.

 

[pb4uski]

Just a POV... since money is fungible you actually are 'saving' your SS money since you are not pulling out that amount from your other investments to live on...

IOW, getting a $1,000 check from SS means there is $1,000 not taken out of your existing savings... if you put that SS check into savings and take out $1,000 from another account it is the same thing...

I hear you and agree, but some of the posters seem to suggest that they are taking SS early and increasing their spending as a result, so for those posters withdrawals would be unchanged because of the increase in spending.

 

[motley]

No, not a misconception at all. If your personal inflation is less than the SS COLA then you come out with more spending power and vice versa. And the same would apply if you take SS at 62 or 70 or anywhere in-between.

P.S. and it is losing, not loosing.

Please, no grammar policing.

 

[street]

The utility of your $ as you get older is something not talked about enough in my opinion. Go-Go, Slow go and No Go years. If I asked Warren Buffett to be 20 years old but he would have a net worth of 10k or continue to be his current age with his current net worth, he would choose the latter all day long. I don't care if I somehow have more money coming in at age 82 because I waited to draw at 70. So, your wheelchair in the old folk's home will be a bit nicer than mine. Great. Less $ at 62 is of greater value to me than more $ at 82. Full disclosure: My current plan is to draw SS at age 65. Also disclosed is the fact that I'm fine if I never receive a penny of SS $. My first world problem will be too much income at that age.

Yep, I agree totally. For me breakeven is 82 and I will have more money at 82 yo than I will ever need. So, @ 62 I took it and spending it to live, and my stash keeps growing. This route makes more sense for me. and I know it isn't the route many take though.

 

[jazz4cash]

Well, we don't know yet. If you live to 100, and I hope that you do live to 100 then I don't see how starting SS at 62 was the best route. OTOH, if you die early then it was the best route. We only really know in retrospect... the rest is all just educated guesses, principally on how long we will live. For that, I'm an averages player.

We may not know from a dollars and cents standpoint but if someone needs the money at 62 from a quality of life standpoint how is it better to delay and suffer?

 

[Lorenzo]

opensocialsecurity.com does take life expectancy into account. It defaults to the SS mortality table but there are other mortality tables that you can select or you can select an age at death for the analysis.

I see now. A couple of others pointed that out to me above.

It doesn't need to factor investment balances into account because it calculated the expected present value of each possible claiming strategy. It adjusts the cash flows associated with each cohort for the probability of being alive to receive it and then discounts the expected cash flows using the real discount rate that you provide.

That's a good explanation, thanks! Present value is a very objective measure. I wonder if what @TheWizard was getting at in the post I originally commented on was that "higher income folks" with "higher levels of tax-deferred investments" feel wealthy and the wealthier one feels the more comfortable one might be claiming SS later rather than earlier? Maybe @TheWizard will elaborate on his reasoning for claiming at 62? I'm curious about everyone's reasoning, even unconventional, more subjective rationales.

 

[audreyh1]

We may not know from a dollars and cents standpoint but if someone needs the money at 62 from a quality of life standpoint how is it better to delay and suffer?

Clearly there are reasons to take at 62 and needing the money to live on is a big one.

 

[Lorenzo]

Clearly there are reasons to take at 62 and needing the money to live on is a big one.

The quandary for me is how to define "need." I don't need it now at age 62 for basic necessities, such as food, shelter, or even modest travel. I only "need" it to continue to fund physically demanding and relatively expensive (to me) activities that I have long enjoyed that I will almost certainly be unable or unwilling to do after age 70. Do I risk over-withdrawing from my nest egg now for that and defer SS to 70, do I take SS now and keep the withdrawals to a SWR, or do I just resign myself to a less exciting decade and find some new hobbies?

 

[camfused]

Are all the folks taking it at 62 not doing Roth conversions? In my calculations, this is a major factor for waiting until later. I would love to take SS at FRA, but my spreadsheet (with Roth conversions) says don't do it.

 

[audreyh1]

The quandary for me is how to define "need." I don't need it now at age 62 for basic necessities, such as food, shelter, or even modest travel. I only "need" it to continue to fund physically demanding and relatively expensive (to me) activities that I have long enjoyed that I will almost certainly be unable or unwilling to do after age 70. Do I risk over-withdrawing from my nest egg now for that and defer SS to 70, do I take SS now and keep the withdrawals to a SWR, or do I just resign myself to a less exciting decade and find some new hobbies?

I think many times folks have explained that you can spend the money early either way. Resigning yourself to a less exciting decade is not necessary.

 

[RetiredHappy]

Are all the folks taking it at 62 not doing Roth conversions? In my calculations, this is a major factor for waiting until later. I would love to take SS at FRA, but my spreadsheet (with Roth conversions) says don't do it.

I haven't done a single dollar of ROTH conversion because our tax bracket was already at 20+% tax bracket when we retired, me at 53 yo. The other consideration is that we would have to sell taxable holdings to pay taxes for any conversion, which would incur capital gains tax. It becomes a double whammy, which means that we would even pay more tax than being hit with higher tax bracket comes RMD time.

I am taking mine at 62 because I am the younger spouse and expect to outlive my husband. He started his SS at 70.

 

[TheWizard]

That's a good explanation, thanks! Present value is a very objective measure. I wonder if what @TheWizard was getting at in the post I originally commented on was that "higher income folks" with "higher levels of tax-deferred investments" feel wealthy and the wealthier one feels the more comfortable one might be claiming SS later rather than earlier? Maybe @TheWizard will elaborate on his reasoning for claiming at 62? I'm curious about everyone's reasoning, even unconventional, more subjective rationales.

I claimed SS at age 70, not 62.
For the gap years prior to age 70, I had a healthy amount of pension/annuity income, supplemented by withdrawals from my tax-deferred 403(b). Additionally, I did Roth conversions from that 403(b). These conversions were larger than they would have been had I taken SS earlier, to avoid getting into the next higher IRMAA tier.

Once I started SS four years ago at 70, I found I had more income than needed most months, so I have been investing that excess into stock index funds since then rather than doing withdrawals from portfolio...

 

[shotgunner]

Just a reminder the median life expectancy for a man is 74.8 years and 80.2 years for a woman. On average only half of us will go beyond that age.

 

[Lorenzo]

I think many times folks have explained that you can spend the money early either way. Resigning yourself to a less exciting decade is not necessary.

You mean the bond ladder strategy @pb4uski described in post #24 and the link in post #31 to a Bogleheads thread describing the same sort of thing using a savings account?

 

[TheWizard]

I haven't done a single dollar of ROTH conversions because our tax bracket was already at 20+% tax bracket when we retired, me at 53 yo. The other consideration is that we would have to sell taxable holdings to pay taxes for any conversion, which would incur capital gains tax. It becomes a double whammy, which means that we would even pay more tax than being hit with higher tax bracket comes RMD time.

I am taking mine at 62 because I am the younger spouse and expect to outlive my husband. He started his SS at 70.

I'm not sure that's completely optimal since LTCGs are taxed at 15% for many of us. And if you sell $20,000 of recently purchased specific lots, held more than one year, then likely less than 50% of that sale will be a gain, meaning less than $1500 Federal tax.

In contrast, 100% of RMDs are taxed as Ordinary Income in your marginal tax bracket, if you look at it that way: 24% for me and likely the same or higher for you.

So anyway...

 

[TheWizard]

Just a reminder the median life expectancy for a man is 74.8 years and 80.2 years for a woman. On average only half of us will go beyond that age.

That's true at birth, yes.
But for those of us already age 74, as I am, the conditional expectancy is higher...

 

[Lorenzo]

I claimed SS at age 70, not 62.
For the gap years prior to age 70, I had a healthy amount of pension/annuity income, supplemented by withdrawals from my tax-deferred 403(b). Additionally, I did Roth conversions from that 403(b). These conversions were larger than they would have been had I taken SS earlier, to avoid getting into the next higher IRMAA tier.

Once I started SS four years ago at 70, I found I had more income than needed most months, so I have been investing that excess into stock index funds since then rather than doing withdrawals from portfolio...

I totally misread what you said in post #90 as implying you chose to do the opposite of what you described "higher income folks" doing. Oops.

 

[Yipper]

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.

This is the biggest downside of the Advantage plans... everyone loves them when they're healthy but if (when?) you get something serious, it could wipeout the savings you (hopefully) banked on the Advantage plan.

 

[Texas Proud]

I hear you and agree, but some of the posters seem to suggest that they are taking SS early and increasing their spending as a result, so for those posters withdrawals would be unchanged because of the increase in spending.

I will agree that this can happen... but IMO they are deluding themselves..

Why not just plan on spending more money now and less later.. IOW, I am banking my SS and taking out more today to live how I want... the same results occur... also, can they spend that much extra? One of my sisters and her husband keep telling me they cannot spend what they have coming in... they both have pensions (hers is much better), both have SS and that is more than they spend... and they do spend A LOT...

 

[Texas Proud]

I'm sorry for your loss, some things just seem to come out of nowhere. Speaking of SS.. my little (67) YO brother died in May. Healthy, had an abdominal issue, had an exploratory surgery, after surgery had a heart issue needing to have a stent placed. After about 5 weeks in the ICU he died. Retired at 65...he and his spouse had planned for 2 SS checks and 2 pension checks to fund retirement. Now just 2 years into the plan 2 of those checks have disappeared. His FRA was 66 years and 4 months... I'm not certain if my bro collected SS but if he did he collected very very little money.

Sorry for your loss... but that is one of the reasons that if you do have a pension check you elect for spousal payments... that way you only lose the lower SS check..