SS at 62 or 70?

[REWahoo]

I think you have to plan SS as a couple. I mean milk the system to your best advantage.

NO! No! No! That is so wrong...

What you need to do is jointly strategize so that you maximize your benefits as a couple. No need to milk the system.

 

[nun]

When I did the calculation the break even point was 83. As I don't need the longevity insurance of delaying SS until 70.5 my plan is to take it at 62.

 

[Ronstar]

In all the calculations, did you assume working from 62 to 67? I think that may make a difference.

I didn't assume working from 62 to 67 in the calcs. And I don't expect to work between 62 and 67. I believe that ss benefits are calc'd from the best 35 years of income. I have that covered, so I don't think my benefits would change much even if I did go back to work.

 

[Clone]

I believe that ss benefits are calc'd from the best 35 years of income. I have that covered, so I don't think my benefits would change much even if I did go back to work.

I have 35 strong years of earnings. I did the calculation to see what the impact would be if I earned the maximum for one more year. The monthly benefit at FRA would increase something like $10 per month.

We have some self employment income. That is all in my wife's name as she has a few zero years in her calculations.

 

[kimcdougc]

DH plans to get his at 62. I plan to wait and see whats going on when my 62nd birthday rolls around in 5 years.

 

[Clone]

The good news is that almost everyone is happy with whatever choice they make regarding when to start collecting - early or late.

My wife's parents would grouse about how a friend of theirs had talked them into taking Social Security at age 62. And how they would have had larger payments if they had waited.

They conveniently ignored that they were on the edge of being broke, and that the SS gave them a stable income to live on. They both died well before the breakeven point, such that it was the correct thing to do from the 'looking backwards' perspective. Monetarily, they did not really have a choice.

Much of the reason for the debate on this board is related to the apparent financial conditions where most folks here have the choice. Most likely, DW will take hers at 62. I will probably delay until at least FRA, if not 70. That provides a longevity hedge and an inflation hedge. If I croak early, she will benefit from the larger survivor benefit.

The reality is that we probably can not make a bad decision on when to take it. There may be a slight change in the total left to our heirs, but that is of minimal concern to us when we are no longer converting oxygen to CO2.

 

[Bestwifeever]

We split the difference and took it at our respective FRAs.

 

[CardsFan]

I have 35 strong years of earnings. I did the calculation to see what the impact would be if I earned the maximum for one more year. The monthly benefit at FRA would increase something like $10 per month.

I made the same calculations and got similar results. It's funny, though, when you tell someone that and they think you're crazy. Most people have no idea how SS is calculated.

As for when to take it, I'm in the "split the difference" crowd and planning on FRA. I have tried the Bedrock calculator, and it is pretty good to run scenarios, but the dang thing won't tell us when we are going to leave this planet.

 

[Lawrencewendall]

I originally planned to take SS at 62 (break-even was 76 at 67 or 78 at 70). Instead, I plan to postpone SS so I can pull from my 401(k) just keeping myself in the 15% bracket and rolling it into a ROTH. That will take me up to FRA. Each year I don't touch SS is a 8% raise. Sure beats the average market return.

 

[RunningBum]

If I may add #6 to my previous post:
6) You never know when the rules might change. Take the money and run!

I can't/won't argue with that one. The logic in me says that surely they'll grandfather in someone eligible but not yet collecting, or even it all out so the defer-ers aren't penalized, but we're dealing with politicians, so all bets are off. And the longer they kick the can down the road, the less forgiving they'll have to be when they do make an adjustment. I don't know how to quantify that risk in my calculations.

 

[pb4uski]

But that is one that you'll be able to see far ahead and respond to as necessary.

 

[RunningBum]

But that is one that you'll be able to see far ahead and respond to as necessary.

Was that in response to me? I'm not so sure. If the markets stay steady and I'm the road to deferring to 70, and at 68 I get strong wind that they are going to give a major haircut to everyone (but no extra reduction for those my age who had been collecting from 62 to 68), I doubt I'd ever make up the difference. I'm not very reliant on SS, but it would be nice to get the most out of it.

 

[pb4uski]

Sort of in response to you. My point is that if they are going to make changes that we'll see it coming in legislation and can respond accordingly if the new legislation is detrimental.

 

[rayvt]

Thought I'd calculate whether it would make more sense to take ss at 62 or 70.

According to SS,
my mo ss pmts at 62 yo = $2010
my mo ss pmts at 70 yo = $3522

For comparison, I thought I'd compare by taking ss at 62, saving the proceeds for the 8 years difference between the 2 options. Then calc a mo annuity pmt from the savings after 8 years. Then compare the sum of the 62yo ss + monthly return from the savings to the 70yo ss.

Given 8 years between 62 and 70, if I invest the $2010 pmts(less 15% for taxes) at 4% for 8 years, I get a value of $192,921.32 at age 70.

Calc’d in excel =2010*.85*(((1+0.0033)^96)-1)/.0033
where .0033 is the monthly interest rate (.04/12)

I then calc’d the monthly payments I would receive from the $192,921.32 lump sum, adjusting the number of payments in the formula so that the calc’d payment equaled the difference between the 62yo and 70yo monthly payments ($1512)

In excel = PMT(rate,periods,PV,FV)
So = PMT(.0033,167,192921.32,0) yields 167 payments of $1508.31.

167 months = 13 years, 11 months.

So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly $ than taking it at 62 and saving it until 70?

Does this make sense?

That's correct. All worked out in detail here, and you can plug in all sorts of different assumptions to examine what-if scenarios.

My SS early-or-late spreadsheet
https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0

 

[rayvt]

Note the hold harmess provision only came into play because of low inflation rates. If inflation beats 2% then it may be less of an issue. (note if you are on IRMAA i.e means tested part b, the hold harmless does not apply either)

The thing about not being protected by the hold-harmless is that your medicare premium ratchets up but never down. You will be paying that higher premium forever.

 

[Montecfo]

we don't really care about break even . we care about being as little dependent as we can be on markets , rates and sequence risk .

for those who want to cut back those risks the 69% bigger check at 70 than 62 cuts dependency a lot . ss has no sequence risk and no inflation risk either .

I get that you like the annuity features. So do I. But you also risk losing all of your "investment" in SS while you wait.

Not saying I disagree with your strategy. There really is no one answer. But mortality is always the risk on the other side.

For my part, I have a few years. But I am thinking DW draws early, and I draw late, as it maximizes longevity insurance for both or either of us. But especially for her, since I am the money manager.

 

[mathjak107]

i highly doubt that anything done to ss will not be grandfathered to those eligible already . that risk i consider minuscule .


if they cut or means test , odds are everyone will have it happen across the board not just those who delayed filing.

basically we have a choice with mortality risk or market,interest rate and inflation risk .\

being a healthy couple mortality risk is likely the better choice with two horses in the race with one bet .

 

[Sunset]

My feelings exactly.
It would be much easier to decide if you knew you were going to die before the break even point or not.....

You can force that choice to die earlier, but it seems extreme just to be right about taking SS early.

 

[Sunset]

The thing about not being protected by the hold-harmless is that your medicare premium ratchets up but never down. You will be paying that higher premium forever.

This is the one thing that really makes me concerned about waiting to 70, that is 5 years of medicare premiums that cut into the 8% per year increase, possibly reducing the SS increase to 7% effectively.

I'm assuming one only gets medicare at age 65 (I'm too young), so taking SS before age 65 probably does not help hold back the medicare premium until one actually gets medicare ??

 

[Mdlerth]

What you need to do is jointly strategize so that you maximize your benefits as a couple. No need to milk the system.

+1

In the same way that many distribute their savings into an AA, they are trying to maximize the utility of their portfolio. That is a different objective than concentrating on maximizing the dollar amount of it.

If the most important goal of your SS strategy is to squeeze the greatest number of dollars from the govt, then prepare to miss the goal unless you know in advance when you will die.

But if the most important goal is to make SS the most useful to you as a combination annuity/insurance asset, from what I read a couple is likely to find it best to take the lower earner's early and the higher earner's later.

 

[Fedup]

+1

In the same way that many distribute their savings into an AA, they are trying to maximize the utility of their portfolio. That is a different objective than concentrating on maximizing the dollar amount of it.

If the most important goal of your SS strategy is to squeeze the greatest number of dollars from the govt, then prepare to miss the goal unless you know in advance when you will die.

But if the most important goal is to make SS the most useful to you as a combination annuity/insurance asset, from what I read a couple is likely to find it best to take the lower earner's early and the higher earner's later.

Frankly I don't have a clue what you are saying here. But to me maximized benefits as a couple is the same as milking the system. I know I have a way with words.

 

[jane_sm1th73]

Thought I'd calculate whether it would make more sense to take ss at 62 or 70.

According to SS,
my mo ss pmts at 62 yo = $2010
my mo ss pmts at 70 yo = $3522

For comparison, I thought I'd compare by taking ss at 62, saving the proceeds for the 8 years difference between the 2 options. Then calc a mo annuity pmt from the savings after 8 years. Then compare the sum of the 62yo ss + monthly return from the savings to the 70yo ss.

Given 8 years between 62 and 70, if I invest the $2010 pmts(less 15% for taxes) at 4% for 8 years, I get a value of $192,921.32 at age 70.

Calc’d in excel =2010*.85*(((1+0.0033)^96)-1)/.0033
where .0033 is the monthly interest rate (.04/12)

I then calc’d the monthly payments I would receive from the $192,921.32 lump sum, adjusting the number of payments in the formula so that the calc’d payment equaled the difference between the 62yo and 70yo monthly payments ($1512)

In excel = PMT(rate,periods,PV,FV)
So = PMT(.0033,167,192921.32,0) yields 167 payments of $1508.31.

167 months = 13 years, 11 months.

So, unless my math is wrong, I would have to live to 84 yo before the take ss at 70 option makes more monthly $ than taking it at 62 and saving it until 70?

Does this make sense?

It makes sense.

BUT please remember that once you step out of straight employment, your ability to max out your 401(K)/Roth 401K also ceases unless you have your own business and are able to fund your own. (To be sure, as a business owner, your contribution limits can be MUCH higher if you can afford to carve out the max limits).

I'm terminally frugal and have a benign job. For me, it makes sense to hang around beyond FRA (66) to get the Roth 401(K) access. Not to mention, megacorp healthcare is less expensive than Medicare. The icing on cake - I've been a biz owner and would not touch those hours again with a ten foot pole at this stage of life. I'm getting into the "smell the roses" stage. I face it like a deer in the headlights, lol, which tells me I am way out of practice.

I am sure your mileage will vary. It just seems to me that there is more to the equation than the SS cash flow.

 

[Johanson]

i highly doubt that anything done to ss will not be grandfathered to those eligible already . that risk i consider minuscule .


if they cut or means test , odds are everyone will have it happen across the board not just those who delayed filing.

basically we have a choice with mortality risk or market,interest rate and inflation risk .\

being a healthy couple mortality risk is likely the better choice with two horses in the race with one bet .

Wasn't the last major change to SS about 30 years ago? If I remember correctly, everyone that was affected by it was under the age of 40 or 45. I highly doubt any new changes will affect anyone above the age of 50. I also think it's more likely that the maximum tax amount will keep rising.

Having said that, I plan on taking SS at age 70 unless things get real bad after I turn 62 with the market and my portfolio takes a huge hit. So my plan is to wait as long as it's feasible for me to wait.

 

[marko]

+1

If the most important goal of your SS strategy is to squeeze the greatest number of dollars from the govt, then prepare to miss the goal unless you know in advance when you will die.

But if the most important goal is to make SS the most useful to you as a combination annuity/insurance asset....

This may be the crux of all the discussions on this subject.

There are those who want to get the highest payout from SS regardless of how long it lasts for them.

Then there are those who view SS as a piece of their portfolio and want to maximize the life and/or value of the portfolio.

I'm in the latter camp. I view SS as an opportunity to reduce my own withdrawals and taxes and thus improve my portfolio's value over my lifetime.

 

[audreyh1]

i highly doubt that anything done to ss will not be grandfathered to those eligible already . that risk i consider minuscule .


if they cut or means test , odds are everyone will have it happen across the board not just those who delayed filing.

basically we have a choice with mortality risk or market,interest rate and inflation risk .\

being a healthy couple mortality risk is likely the better choice with two horses in the race with one bet .

That's pretty much the way I see it. That plus avoiding the higher ordinary income taxes for several years.

Well, our SS is not that much since we retired very early. Currently our income is mostly cap gains income, so we get a nice break of 0% tax on a chunk of it below the 15% tax bracket. SS would remove some of that tax break.