If you are not working, why would someone wait until 70 to collect Social Security?

[ziggy29]

I usually just opt-out of this discussion because I'm a long way away from the first decision point at age 62 (I figure the rules won't be the same then, so why bother wasting brain cells on it now). But I've kind of HAD to spend mental energy because all of the planning tools require you to select or at least accept some idea for how SS will play-out.

Same for me. I won't be 62 for another 11+ years. I'm pretty sure there will be significant changes by then, and not for the better. The main question is, will I be old enough to be "grandfathered" out of the watered down deal the younger folks are sure to get when the "reforms" are enacted.

I don't spend a lot of time on it yet. I'm not going to line up to kick the field goal when I expect the goalposts will be moved before I kick the ball. I have, however, tried to consider a few possibilities and make at least a little bit of a plan for them should they occur, so no "blindsides" will make or break me or delay full retirement or change when I take SS.

 

[bmcgonig]

From what I have seen posted here, people will go through your sensical suggested calculations and say "the chances of me dying at 70, 80, etc... are zero, and the chance of me living till 100 is 100%". Heck, people even thought of life after death, well not quite but something like a head transplant.

So, it's back to their original premise of delaying till 70.

I don't think that's true at all from what I've seen. I think people consider the POSSIBILITY of living a long life and then say taking it at 70 is good insurance. I don't really see people assessing the PROBABILITY of living to a ripe old age as high.


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[MichaelB]

One of the points missing in this discussion, especially as framed in the OP, is that although Social Security is part pension, it's primary purpose is as pension insurance or supplement. The reason to take it at age 62, is because it is needed.

The reason to defer is that it is not needed at age 62 and, at that age, it takes on an additional attribute, as longevity insurance. The value of that supplement grows, in real terms, from age 62 through 70, which is motive to defer.

 

[NW-Bound]

I don't think that's true at all from what I've seen. I think people consider the POSSIBILITY of living a long life and then say taking it at 70 is good insurance. I don't really see people assessing the PROBABILITY of living to a ripe old age as high.

I was exaggerating there, but many do have a more optimistic outlook of their longevity.

I don't, but will most likely delay mine for the already mentioned reason.

It's OK if people undercollect and they can afford it. It saves SS for people who really need it.

 

[Ready]

I read an entire book on social security by Laurence Kotlikoff and I still find the topic of social security to be complex and confusing.

Based on what we know about the OP, he does not have enough to live off his assets, his prospects for future employment are unlikely, and he has a weight problem. These facts certainly point to a conclusion that claiming at 62 may be wise.

There are so many circumstances that each of us must consider before we make the decision. Whether we have sufficient assets, have a spouse, have longevity in the family, and on and on. There is no right or wrong answer.

And yes, the government consider the decision to be actuarially neutral. But that is because they go by average mortality rates. Each of us must consider our own situations individually, because we do not all fit into the average case.


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[target2019]

It is true that an overweight person may have a shorter life span, but that is not 100% true. Everyone probably knows an exception. One grandmother was born into a large impoverished family. She was always very overweight. She died at 92, and spent the last ten years in my mother's home. She was very inactive as I recall.

 

[Big_Hitter]

to mitigate actuarial ruin

 

[Texas Proud]

I guess you did not read the reasons people were waiting until 70 or you would not ask... this question has been asked many times and answered many times... the big thing is do you need the money or not...

But, a good number of people have wives.... some wives did not work... some have younger spouses and women tend to live longer... so even if you are the same age it is still the same... taking it when you turn 70 will leave more money for the spouse...

Not the same if the woman is the primary bread winner, but in a way it is since SS does not take sex into consideration on their calculation...

 

[MBSC]

You're asking a question in a greatly skewed audience, I believe. Many on this forum have sufficient assets that they can wait for the amount to grow.

+1

Percentage who start collecting SS at:

Age 62: 48 percent of women and 42 percent of men.
Age 63: 8 percent of women and 7 percent of men.
Age 64: 8 percent of women and 7 percent of men.
Age 70: 4 percent of women and 2 percent of men.

Reference: The Most Popular Ages to Sign Up for Social Security | Retirement | US News

In order to identify the characteristics of individuals claiming at various ages, we use SSA's MINT6 data to examine nondisabled beneficiaries in 2014 who started receiving benefits at age 62, at their FRA, and after their FRA (that is, ages 67 to 70). We find that individuals who claimed benefits at age 62 had lower levels of education than those who claimed at their FRA or later. As Chart 4 shows, 45 percent of individuals who claimed benefits at age 62 had only a high school diploma compared with 35 percent in the older claiming-age groups. In addition, about 40 percent of individuals who claimed at their FRA or later had either a bachelor's or graduate degree, compared with less than a quarter of those who claimed at age 62.

Beneficiaries who claimed at their FRA or later were also much more likely to have had high individual non-Social Security income (Chart 5). Almost 60 percent of beneficiaries in those claiming-age groups had individual income in the two highest quintiles. Because those individuals had other sources of income outside of Social Security (including earnings, defined benefit pension income, and asset income) to help them maintain their standard of living, it makes sense that they would have claimed benefits later. For individuals who claimed at age 62, about 40 percent had individual income in the two highest quintiles. That proportion represents high individual-income persons who could have possibly afforded to wait past age 62 to claim Social Security benefits, but claimed at age 62 anyway.

Reference: https://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p21.html

 

[Souschef]

I was the first year I had to wait 2 months to FRA. I just did a quick calculation and found that If I had waited until age 70, the break even point would be at age 82.
But that does not take into account the Present Value of the money I would get at age 65 as opposed to age 70. That would push the crossover point out further.

 

[Which Roger]

2) If you use your own savings and invested assets to pay for your lifestyle for the eight years from age 62-70, you will have less money to invest and support your lifestyle and needs later in life. (For example, many posters say they are doing a 7-8 percent annual distribution to pay expenses per year from age 62 to age 70 and then plan on cutting it down to 3-4 percent when they start collecting Social Security at age seventy.

I would be hesitant to use such a high initial withdrawal rate, but I don't think most on this forum who will wait until 70 are doing that. It seems that the more common case is starting with something like 4-5% and lowering it to 2-3% at age 70.

Also, there is an underlying assumption in many of the SS discussions on this forum that the goal is to maximize one's expected payout. That is not my goal. My goal is to maximize my chance on not dying broke. If I wait until age 70 to file, and I die before then, I will not receive a single penny from SS, but I will be dead so I won't lose any sleep over it. If, on the other hand, I live until 110, I will be very happy that I waited to file.

 

[marko]

I read an entire book on social security by Laurence Kotlikoff and I still find the topic of social security to be complex and confusing.

I've said it before: the people who pulled this thing together are truly evil geniuses. The whole set up is so deliciously devious! (but in a good way)

It's one of the most incredible mazes ever built; each door opens to a whole new set of positives and negatives.

 

[NW-Bound]

+1

Percentage who start collecting SS at:

Age 62: 48 percent of women and 42 percent of men.
Age 63: 8 percent of women and 7 percent of men.
Age 64: 8 percent of women and 7 percent of men.
Age 70: 4 percent of women and 2 percent of men.

Reference: The Most Popular Ages to Sign Up for Social Security | Retirement | US News

Reference: https://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p21.html

I will read the referenced article later, but notice that the percentages do not add up to 100%. Many people are not eligible, do not want to claim, or die before they do?

PS. Just notice that the ages between 64 and 70 were missing.

I've said it before: the people who pulled this thing together are truly evil geniuses. The whole set up is so deliciously devious! (but in a good way)

It's one of the most incredible mazes ever built; each door opens to a whole new set of positives and negatives.

That's the government is really good at.

I once worked with a database that is encoded using a standard in FIPS (Federal Information Processing Standard). Man, it is an extremely convoluted file format to store data that could and should be done in a much more efficient and transparent manner. I spent quite a bit of time to write a program to convert about 100 gigabytes of this data (in Zip'ed form, no less) into a format to which we could readily do random access. This was a huge geospatial database.

Bureaucrats really know how to create work for themselves.

A few years later, found out that even they could hack it no more, abandoned it to use a more straightforward format similar to what I had done myself. I guess other agencies using the same data cried out "who's the fool who came up with this?"

We are now back to SS withdrawal strategies...

 

[dallas27]

That's the plan, but if the market crashes, I may have no choice but to rush to the SS office.

Which I posit is, in fact, the optimal time to start SS.


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[Choices]

You gotta do what is best for you, at that time, in that space. I collected at 62; DH will collect a restricted spousal at 66 and collect on his own earnings at age 70.
YMMV
Different strokes. You have some time to decide what is best for you and a multitude of programs you can run.

 

[Sunset]

......
So who are these people who are pushing so hard to try to convince people to wait and and not collect Social Security until you are seventy (70) years old. Are they writing these articles to really help you because they want you to get more money from the Social Security trust fund over your life? I suspect it is the financial service industry, who want you to work longer and put more money into your Fidelity Mutual Fund and 401k, 403B and IRA Accounts....

Darn, you found me out.
I'm really a shill for the gubermint.
Every time I post and tell folks to wait until age 70 to collect SS, the boys in dark suits show up at my door with another briefcase full of greenbacks.
So please take it at age 70

 

[samclem]

Much has been written on this board about this issue, you can read it and make your own assessments based on your own situation. Some things to keep in mind:
1) It's not about life expectancy or averages. You need to build a sturdy plan tha will work even if things >don't< go according to the statistically most likely events. In this regard, the two "deviations from expected/historical averages" that can most significantly affect your life are a) living longer than you might expect and b) real (i.e. inflation-adjusted) investment returns that are significantly lower than recent history. Both of these are not exceptionally "freakish, in fact many people believe the latter is now very likely. So, if you don't get the "expected--average" results on these two curves, which SS claiming strategy leaves you better off?
2) It's not about choosing a claiming strategy that results in the highest expected number of dollars. It's about choosing the claiming strategy that results in the best overall "utility". As an example, if you work out your sample budget and the bare-bones number comes out to $2000 per month, then working things so that you can have a guaranteed lifetime inflation-adjusted income of $2K is really important. If you get $500 more than that, it is nice, but if you get $500 less than that it hurts a >lot<. Each dollar above that $2K/mo has "decreasing utility," but each dollar below that has increased utility, and losing them hurts more and more. Just doing the SS math to get the "most expected money" ignores the very real difference in utility cost of being wrong.
3) On a less analytical note: If you die younger than average (and expected), it might have been better --in retrospect-- to have taken SS at age 62 (and you also should have spent all your savings so that your last penny was spent while you were on your way to the morgue). But few of us can predict these things--and once you are dead, there are no regrets. But if you live longer than 80 and started your SS at 62, you >will< be aware of that significantly smaller inflation-adjusted SS check that will be coming in every month. So, the cost of "betting wrong" on the longevity issue is clear only when looking back, but in only one case will you actually be able to do that looking back (and be living with the result), in the other you won't. "If a tree falls in the forest and no one hears it . . . "

 

[Bestwifeever]

Most retired people collect long before 70 so perhaps there's not much convincing to be done to not collect at 70 and hence not so many impassioned arguments about it (but they definitely are a lot of them on these boards). E.G., almost everyone I know (well off, broke, married, single, financially savvy, economic nitwit) admits when asked that they collected at 62 but they don't talk about it or discuss why they decided to collect early. DH and I collected at FRA (my first deposit to come in 17 days woohoo) because we did. I don't think most people care about what other people do re collecting SS, but there certainly are many factors to consider in one's individual circumstances.

 

[fritz]

It would be great if some people who started collecting Social Security at age 62 but did not need the money all that much, could help me defend the concept of collecting benefits at that age. There are tons of posts and articles talking about the glories of waiting until you are seventy. We have already heard those arguments.

Help me out, why would someone collect benefits at age 62 if you did not need the money right then?

It all depends on what you'd like to do in retirement. Retirement is as individual as fingerprints. Possibly increase your annual spending - betting on a larger SS check to cover it with the 8% increases, etc, etc, etc......

My wife and I both took SS @ 62. We are very fortunate to not require SS in order to retire. Together we pull close to what I'd get at 70 - this will last until one of us passes (think about that).... She worked very little and 1/2 of my SS is larger than hers. This keeps our investment withdrawals to a minimum. Helps us with the ACA subsidies. Paid little to no Federal taxes for 7 years in retirement so far (but don't pull from retirement accounts). The day will come though, and we have a tentative plan. Not pulling on investments allows us to leave them to accumulate for the future (anticipate inflation, unfavorable SS adjustments, and leaving inheritances). Studies (believe Kitches) have shown that if retirement money is left invested conservatively, while pulling SS early (instead of waiting until 70), the breakeven is beyond 85 years of age. I ran the numbers for us, and our stash should grow to where the withdrawal on those extra accumulated funds will outperform the extra SS we'd get (and we'd still have the extra funds that generate it to pass on to our children when we die (unlike SS that goes away when we do). We all think we're gong to live into our 90's, but actuarial statistics don't favor it.....

 

[rodi]

For a single, generic person, collecting at 62, FRA, and 70 are actuarily neutral.... Meaning you'll get the same amount of money out, overall, if you die at the statistically average time.

BUT - there are variations and we're not all single and generically neutral.

In our household we chose to have DH take SS at 62 - that's because we have minor children that could also collect on his benefit until age 18. That swayed the actuarily neutral calculations aside and made the math show 62 as best.

In many households one earner had/has substantially higher earnings, while the spouse has no or small earnings. In those cases the spousal benefits will sway the calculations. Others are divorced (after more than 10 years of marriage) and can collect spousal benefits on their ex's data at FRA, giving them more financial resources to grow their own benefit by delaying.

Another factor for those with large #'s in their tax deferred savings (IRA/401k/TSP) is RMDs. It can make sense to spend down the tax deferred a bit before RMDs start - and increase the SS benefit for age 70. SS is taxed at most at 85% - where RMDs are taxed at 100%.... Again - the math has to be calculated on an individual basis.

We, personally, have not decided at what age I'll collect - since it's still 7 years (and 1 month) till I can collect early, and 11 1/2 years till my FRA. A lot will depend on how our portfolio is doing, inflation rates, etc.... We'll relook at things when I'm closer to age 62.

 

[Sue J]

I will be 62 in 6 months. My plan is to not take SS until I start Medicare at 65 because 16% of my SS would be lost to increased Obamacare premiums in addition to 15% Federal tax on 85% of my SS benefit. Considering that, I can wait 3 years.

So far, we don't need the money to live month to month.


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[Happyras]

This thread was very timely. But I am reading it after I filed electronically today. I turned 61 and 9 months yesterday. No, we do not need the cash flow. Maybe that is why we decided to take it now. Who knows when we will pass, but a few more cruises/year in Suite class is nice without having to liquidate our investments.

Our sub-s business is showing a large net profit (retained earnings) increasing every year that we have to pay tax on. SS is covering part of that liability without taking IRA $$ out at 33% marginal rate, only 85% will be taxed effectively a 28% rate. I also took my first pension early at age 55, but kept working. I am now taking my second pension at 61.75 with no regrets for the reduction in payments. I am holding on my one small pension to 65, as it is small enough at age 65. My wife is doing the same in one year, but she retired 10 years ago.

I have a very complicated and involved spread sheet with a tab for SS benefit cash flows adjusted for an anticipated ROI. Breakpoint is around 4.5% total return adjusted for inflation. At age 95 the difference in accum cash flow is 7.5%, not much of a reward for a lot of risk to dying sooner.

My DW won't look at my calculations, I still am an engineer, and she is a doctor, but we are both retired. The motivation beyond the ROI is really the uncertainty that we would collect either due to passing, or reduced benefits due to NW or income from other sources in the future.

On the other side of this my sister in-law and her husband both took it at 62, but they had no other income to live on, and he is in the hospital a lot more than most. So there are two extremes both leading to the same choice.

 

[W2R]

(1) Statistics tell us that women often do live longer than men. Yet we are thrown into the same heap and the actuarial data is obtained from that. So, right from the get-go, women may be better off waiting and men may be better off not waiting. I am female.

(2) My mother lived to a week or so short of 98, and we have several in the family who lived to over 100.

(3) If I started divorced spousal SS at 66 (FRA), my own SS could continue to grow until age 70 while I collected divorced spousal SS. This may not be true any more, but it was for me.

(4) Most importantly, for me SS is old age insurance.
It will provide reliable, COLA'd income direct deposited to my checking account like clockwork every month. No need to rebalance or to be concerned about the market. None of us last forever.

As we grow older and move into the dependence of extreme old age, the lowering of risk becomes way more important than the enhancement of yield IMO.

 

[brewer12345]

DW and I are 19 years out from the earliest collection date. It has been interesting reading all of this, but I cannot help but suspect that I will get the usual "Boomer shaft" when it comes to SS. I now understand the big picture of the rules as they are now, but whether they will remain so for me is a matter for the yarrow sticks and the I Ching. Complicating matters for us is the fact that I have a small pension that I can tap as early as age 50 but which I can use 401k funds to buy additional pension credits whenever I like once I am on payout. I will probably be tempted to hire a pension actuary to figure out the optimal choices when the time comes.

 

[SteveNU]

I'm 4 years older than DW and have a non cola pension with 100% survivors benefit. My SS at 62 along with my pension will cover our expenses. We are pulling from our savings now to bridge the gap before I can start drawing SS.

When DW turns 62 she can take her SS spousal benefit and we will use that and our investments for fun money. We will just let our savings grow and it will be there for any LTC needs we may have or if not then the kids will get a nice chunk of change when we are gone!

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