Best time for SS withdraw is age 67 not 70?

[B-Guy]

As a numbers guy, have you looked at taking from your nest egg as if you were receiving SS between 62-70, and then taking less from it once you start getting a larger benefit at 70?

Yes, we did and other scenarios also.

For us it is a good balance. A good portion of our assets are in income properties. We want to retain all the properties and not touch the 401K’s and IRA’s if possible until our will is realized, as the return on them has been better than anything else we currently have. Our estate will all go to various charity, something that is very important to us.

We can live comfortably with SS, a small pension and income off the properties. We can still travel, and enjoy other entertainment without touching any investments including emergency money in savings.

Maybe I am missing something, but we believe this will work well for us.

 

[RunningBum]

Yes, we did and other scenarios also.

For us it is a good balance. A good portion of our assets are in income properties. We want to retain all the properties and not touch the 401K’s and IRA’s if possible until our will is realized, as the return on them has been better than anything else we currently have. Our estate will all go to various charity, something that is very important to us.

We can live comfortably with SS, a small pension and income off the properties. We can still travel, and enjoy other entertainment without touching any investments including emergency money in savings.

Maybe I am missing something, but we believe this will work well for us.

Thanks for explaining. Given your goals, I don't think you are missing anything.

 

[COcheesehead]

Opensocialsecurity.com can add some clarity to what for some may be more complicated than for others. Ours shows my wife should take it at 65, me at 70, then she switches to spousal at that time.

 

[GravitySucks]

In my early planning stages I asked my daughters if they would like the chance of inheriting maybe a couple hundred thousand extra dollars versus the chance I may have to move in with them later.

We all agreed on my waiting till 70 after that conversation.

 

[rodi]

One more random consideration for 'when to take SS'. Medicare increases.

If your income is low enough to pay standard medicare at age 65, you can expect it to go up each year... but the increase is capped at the increase in SS for that year *if you are already taking SS*.

So an argument can be made for some people to take it starting at age 65 to reduce the exposure to medicare premium increases.

 

[Jimonlimon]

The basic actuarial information says I'll make it to 81 and my spouse will make it to 83; but one of us will probably make it to 91. Using our current health at 57 and family histories we will probably make it a bit longer. Based on those numbers the way to maximize lifetime benefits is for the one with a higher benefit to wait until 70 and the lower start at about 64.

That doesn't address when we will need the money. I have a very good pension so our needs age 80 to 110 will be well-covered by pension plus a lower SS benefit. We will have more wants early in retirement so it makes sense to draw earlier- more like 62 and 67. In addition to giving more early-retirement dollars, if we both croak early our kids will inherit more.

 

[Montecfo]

The best source to evaluate it is opensocialsecurity.com

However, stock returns are probably too volatile to be a valid measure.

I think much better way to look delaying is as purchasing a COLA adjusted life annuity. So for your friend, lets say that her monthly PIA at 67 is $2,000/month or $24,000 annually. If she delays until 70 her benefit grows 24%, to $29,760 annually, or is $5,760 per year higher. In order to get that additional $5,760 annuly, she has to forgo receiving $2,000/month for 3 years from age 67 to age 70, or $72,000.

$5,750/year divided by $72,000 is an 8% payout rate. In the commercial annuity marketplace, $72,000 will buy a fixed annuity benefit of $500/month or $6,000 annually for a 70 yo according to immediateannuities.com, an 8.33% payout rate.

So "buying" a life annuity from SSA with a 8% payout rate with a benefit that increases with inflation is a much better deal than buying a fixed annuity with a 8.33% payout rate.

Pb4uski-

Just curious: would the annuities you are comparing also have a terminal value of zero as SS does?

I have always liked this way of looking at it.

But it misses this question: is EITHER a good buy for me, for example.

 

[Out of Steam]

As Spock and rodi both mention - SS is designed to be actuarially neutral for the average individual. But what is average.

<snip>

However, Harvard Health states the life expectancy in the US is dropping, and the biggest contributors are COVID-19 and drug overdoses.

The majority of people here are above the average life expectancy due to finances and education, and could in theory benefit from delay. But COVID-19 and its impacts on the medical and long-term care systems have thrown a monkey wrench into those calculations in ways we don't know yet.

For example, I was diagnosed with a second autoimmune condition after a minor case of COVID last summer. I'm past 62 and have been delaying filing for Social Security, planning to reassess at 65. I will now almost certainly file no later than 66.

 

[Montecfo]

As several have said, there is no single answer. I think assuming stock market returns solve it in favor of claiming early makes little sense given variability of returns and short timing involved.

We have not claimed to this point. Our retirement plan always based on accumulating assets and assumed SS of zero. I expect we will both claim at FRA, but these decisions will be made based on conditions on the ground.

 

[Romer]

One more random consideration for 'when to take SS'. Medicare increases.

If your income is low enough to pay standard medicare at age 65, you can expect it to go up each year... but the increase is capped at the increase in SS for that year *if you are already taking SS*.

So an argument can be made for some people to take it starting at age 65 to reduce the exposure to medicare premium increases.

That is one of the reasons I am considering 65. My models all say we would be OK taking it anytime, thinking 65 is a good balance

So I would start Medicare in June 2026 (65th BD), could I defer taking SS as late as December and still be in this caveat? I know it (6 months)isn't a big difference, just wanting to understand when the next years rate increase comes into play.

We will revaluate every year. Only firm decision is to not take it at 62 (this year). I am maximizing Roth conversions before the 2026 tax rate increase and before the IRMAA Threshold comes into play in 2024 (63). Due to that likely won't be taking SS at 63 or 64 either. Looking at 65 - 70 and leaning towards 65.

 

[jldavid47]

I use SS payments to fund our healthcare which is $1859 per month for a bronze PPO with no subsidies and also pay income taxes. It depends on your particular situation but it made sense for us due to our tax bracket and the fact that SS is not taxed at the state level. So I just send quarterly payments back to the IRS with the balance of SS payments minus health insurance costs. We earn a lot of taxable interest income where there are no taxes withheld. The penalty this year is increasing to 7%.

That's great for you and it is certainly appropriate for your situation. What I objected to was what seemed to be a blanket statement that would apply to all. I still enjoy your posts.

 

[RunningBum]

One more random consideration for 'when to take SS'. Medicare increases.

If your income is low enough to pay standard medicare at age 65, you can expect it to go up each year... but the increase is capped at the increase in SS for that year *if you are already taking SS*.

So an argument can be made for some people to take it starting at age 65 to reduce the exposure to medicare premium increases.

Yes, but it is usually a temporary benefit that they will recover in a future year. If the next year your SS dollar amount increases more than your Medicare Part B premium, they keep the difference up to the amount hold harmless reduced your increase.

Assuming this hasn't changed in 5 years, this explains it.
https://www.fool.com/retirement/2018/06/09/heres-how-medicares-hold-harmless-provision-really.aspx

It is possible that in a long period of low inflation but higher inflation on medical costs that someone with a low SS benefit will never have that hold harmless amount recovered by the IRS. Seems very unlikely for someone with a higher SS benefit.

 

[audreyh1]

Running OpenSocialSecurity the lifetime income between DH starting soon (optimal), or waiting to 70, and me waiting to 70 both cases, is around 1% based on our inputs. This tells me it’s fine to use other criteria (such as tax impact) to make the call.

We will probably always pay some IRMAA.

 

[Romer]

Yes, but it is usually a temporary benefit that they will recover in a future year. If the next year your SS dollar amount increases more than your Medicare Part B premium, they keep the difference up to the amount hold harmless reduced your increase.

Assuming this hasn't changed in 5 years, this explains it.
https://www.fool.com/retirement/2018/06/09/heres-how-medicares-hold-harmless-provision-really.aspx

It is possible that in a long period of low inflation but higher inflation on medical costs that someone with a low SS benefit will never have that hold harmless amount recovered by the IRS. Seems very unlikely for someone with a higher SS benefit.

Thanks for the link. That was very helpful

 

[Sunset]

That is one of the reasons I am considering 65. My models all say we would be OK taking it anytime, thinking 65 is a good balance

So I would start Medicare in June 2026 (65th BD), could I defer taking SS as late as December and still be in this caveat? I know it (6 months)isn't a big difference, just wanting to understand when the next years rate increase comes into play.

We will revaluate every year. Only firm decision is to not take it at 62 (this year). I am maximizing Roth conversions before the 2026 tax rate increase and before the IRMAA Threshold comes into play in 2024 (63). Due to that likely won't be taking SS at 63 or 64 either. Looking at 65 - 70 and leaning towards 65.

My plan for SS is to take it when I turn 70. However, if I decide to take it earlier then it will be in January. Because there is some weird rule if you take it after January, you miss out on 1 year of SS increase, and never catch up.

(This is how I understand the rule, if I'm wrong please tell me).

 

[FI_RElater]

My plan for SS is to take it when I turn 70. However, if I decide to take it earlier then it will be in January. Because there is some weird rule if you take it after January, you miss out on 1 year of SS increase, and never catch up.

(This is how I understand the rule, if I'm wrong please tell me).

Here's a few threads from the Bogleheads site on the subject of delayed retirement credits:

https://www.bogleheads.org/forum/viewtopic.php?t=270053


https://www.bogleheads.org/forum/viewtopic.php?t=394133

their wiki on Social Security gives details:

https://www.bogleheads.org/wiki/Social_Security

 

[FI_RElater]

what we looked at was the needs for the surviving spouse:
if I pass first, only get 50% of my pension (there wasn't any higher level)____ If I'm the survivor, pension stays (possible bump?, don't know)

My PIA is slightly lower, but I'm older
I've already done Roth conversions and will be converting my last 401k into my IRA this year (I'd waited until now as my last conversion was last year and I didn't want to do pro-rata forever)

With the current inflation, and the higher SS... rather than using our taxable...I just started mine at 66 just before FRA. Spouse will take at 70.
(again, if I pass first, survivor will get my level of SS until they start at their higher SS at 70...)

The funds we don't use now for further deferral... would allow for offset of the loss of 50% of pension. (while we both survive and get SS and pension we would be pulling in over $100 k, then there's the additional (I use 3.5% versus 4.0%) from our taxable/IRA... which would be an additional $100k +...... so in either case ( both of us or just surviving spouse) we'll be in the 22%+ tax bracket from now on) [currently, before the SS kicks in, we've been below 2% wr.... so we will either be adding to the pile or needing to BTD, which we really haven't felt the need to do (yet?)]

The only "icing" is that much of the income is fully or partially COLA'd and that (as Rodi mentioned) increases in Medicare have "safe harbor" --- but remember, THAT's ONLY IF YOU AREN'T SUBJECT TO IRMAA !!! (so keep below the cliff)

 

[pb4uski]

Pb4uski-

Just curious: would the annuities you are comparing also have a terminal value of zero as SS does?

I have always liked this way of looking at it.

But it misses this question: is EITHER a good buy for me, for example.

Yes, they are life annuities so benefit payments end when the annuitant dies, just like SS.

 

[Montecfo]

Yes, they are life annuities so benefit payments end when the annuitant dies, just like SS.

Makes sense. So duration of life has a dramatic impact on the "investment".

So if in the market for a life annuity, it could be considered.

 

[daylatedollarshort]

I’ve always understood that SS is neutral from an actuarial stand point and you really need to evaluate after you pass as to what is best.
What if you plan to take it 67 but pass at 66?

That is the part many financial articles on when to take SS forget to include. They don't always multiply the expected benefits times the probability you will still be alive to collect.

 

[cyber888]

I'm taking SS at 62, because DW is at FRA and will get 50% of my Full retirement Amount.
I'm hoping that by take SS early, I can preserve my 401/403K and double my investment in 10 years.
Because in 10-11 years, Social Security could be cut by 20% if the US Government does nothing with the projected short-fall by the Year 2034.

 

[Jerry1]

Put this in the “it depends” bucket. I’m taking at 62, I think. At 61 I had a significant health event and qualified for disability. Financially speaking, that’s great because Disability pays me what I would get at FRA. Then, just before I turned 62, my prayers (and that of many good people) were answered and I gained back significant function. I just notified SS of my status and I expect they’ll be telling me I’m no longer eligible for disability. Sucks financially but I’ll take the better health any day. So, while my plan, prior to all this, was to wait until 70, I believe that when I get notice of disability being discontinued, I’ll immediately apply for SS. Given the speed of government, I’m guessing I’ll be about 62-1/2. While the health is much better, I can’t look myself in the mirror and think that my expected life span isn’t a lot less than originally planned. I’m just glad DW filed at FRA so that she’ll get my FRA if I pass first. So, when should one take SS? It depends and it’s very individual. But we all knew that - right.

 

[RetiredAt55.5]

Put this in the “it depends” bucket. I’m taking at 62, I think. At 61 I had a significant health event and qualified for disability. Financially speaking, that’s great because Disability pays me what I would get at FRA. Then, just before I turned 62, my prayers (and that of many good people) were answered and I gained back significant function. I just notified SS of my status and I expect they’ll be telling me I’m no longer eligible for disability. Sucks financially but I’ll take the better health any day. So, while my plan, prior to all this, was to wait until 70, I believe that when I get notice of disability being discontinued, I’ll immediately apply for SS. Given the speed of government, I’m guessing I’ll be about 62-1/2. While the health is much better, I can’t look myself in the mirror and think that my expected life span isn’t a lot less than originally planned. I’m just glad DW filed at FRA so that she’ll get my FRA if I pass first. So, when should one take SS? It depends and it’s very individual. But we all knew that - right.

I thought survivor benefits (in this case for DW), is based on when you start claiming benefits. IE, survivor benefits are reduced if the deceased spouse began claiming before FRA.

Caveat, I could be completely wrong. Open SS is recommending my wife start on her own record at 62, but I wait until 70. And she would still get the full (maximum) survivor benefit when I pass.

 

[Montecfo]

I'm taking SS at 62, because DW is at FRA and will get 50% of my Full retirement Amount.
I'm hoping that by take SS early, I can preserve my 401/403K and double my investment in 10 years.
Because in 10-11 years, Social Security could be cut by 20% if the US Government does nothing with the projected short-fall by the Year 2034.

Really? I thought that if you draw early spousal benefits would also be limited.

 

[daylatedollarshort]

Then, just before I turned 62, my prayers (and that of many good people) were answered and I gained back significant function. I just notified SS of my status and I expect they’ll be telling me I’m no longer eligible for disability.

That is amazing news! So glad to hear that.