Thinking About Taking Social Security at 62

[FireCat]

Hello all would love to hear from the board.
We have been retired for 5 years and have not tapped into any of our retirement accounts. Me age 58 government Pension w/cola capped at 3% so no SS or prospect of any of DW’s or survivor benefits. DW age 60 no pension but mine has a 66% survivor benefit. My pension puts us just under the 22% tax bracket by a couple thousand dollars. We are eligible to tap into DW’s IRA and Roth’s and next year my IRA and Roth’s. Along with taxable account we are just under 1 mil. All assets in index funds 70/30 equities to bonds.
We are comfortable, but I don’t want to line our coffins with gold bars nor do we need to worry about leaving money to our kids. We would rather spend and give money away to them, ourselves, and others while we are above ground. If all goes according to plan the last check to the undertaker will clear, but just barely.
My question is should we take DW’s SS at 62, her fra at 67, or 70? We want to boost our spending/living expenses by about $60k/year. My plan is if we take her SS at 62 we decrease the amounts needed from our retirement accounts for those first 5 years which could be really important and allow us to have more money not less to spend each year. Just my thinking . I know the benefits of taking SS later, but it’s not so clear cut. Her SS at 62 $15.5k/yr. 67 $21.8k/yr and 70 $27k/yr. My main goals are to preserve capital for spending and minimize taxes.

 

[SevenUp]

If you want to minimize taxes, delaying SS while you do Roth conversions may be useful.

See Open Social Security: Free, Open-Source Social Security Calculator for one perspective on when to take SS benefits. That won't consider Roth conversion effects, so it's a reasonable bet that the optimum if one included Roth conversions would be a later start date for SS (unless 70 is the suggested age).

 

[Dtail]

If you want to minimize taxes, delaying SS while you do Roth conversions may be useful.

See Open Social Security: Free, Open-Source Social Security Calculator for one perspective on when to take SS benefits. That won't consider Roth conversion effects, so it's a reasonable bet that the optimum if one included Roth conversions would be a later start date for SS (unless 70 is the suggested age).

+1

 

[RetireBy90]

I would say only you and DW can answer. Seems from the post you are in good shape and have cleared the first gate of having enough to live comfortably. After that, for me, it is a matter of balancing your priorities. I'm taking our early retirement years and some excess income to do Roth conversions. DW took her SS at FRA and I had always planned on waiting till 70, but as our finances in retirement are safe I'm starting to question why I should wait till 70 for extra $$ we don't need nor will we probably spend. I'm thinking of taking my SS at 68 and 4 months, 2 years after FRA. Only a bit before the 70 plan but once I start SS we won't need to take anything from retirement accounts. And as Mr Trump's brother showed us many only make it to 70 or less. Think of what is important to you besides how much $$ you can get from SS.

 

[iloveyoga]

I am taking mine when I turn 62. next year. I just want it.

 

[pb4uski]

....Her SS at 62 $15.5k/yr. 67 $21.8k/yr and 70 $27k/yr. My main goals are to preserve capital for spending and minimize taxes.

One way to frame the question is whether you/she would be willing to pay $124k for a COLA-adjusted life annuity of $11.5k a year starting at age 70?

Or pay $77.5k for a COLA-adjusted life annuity of $6.3k a year starting at age 67?

Another factor to consider is her health and family longevity.

Delaying SS actually allows you to maximize spending. For example, you have $1m in retirement savings and let's ignore your pension since it so common to both options. Let's assume a SWR of 4%.

If you take SS at 62 you'll have $55.5k a year available for spending... $40k from the portfolio and $15.5k from SS.

Let's say instead that you delay to age 70. At age 62, you carve out $216k fom your portfolio to provide $27k a year for 8 years from age 62-70. From the remaining $784k you can safely withdraw $31.4k a year from your $784k portfolio and $27k a year from your side fund for total spending of $58k a year. When you turn 70 the side fund is gone but is replaced by $27k of SS.

So if you delay SS you can safely spend $58.4k a year but if you don't you can only safely spend $55.5k a year.

 

[pb4uski]

I am taking mine when I turn 62. next year. I just want it.

That's a good reason that posters should rely on.

 

[Time2]

I am taking mine when I turn 62. next year. I just want it.

I'm taking mine at 70, so I can do Roth conversions in the 12% tax bracket for the next 5 years.

 

[pb4uski]

^^^^ Smart... I'm deferring for the same reason... SS would lower the headroom for 0% LTCG harvesting and/or low tax cost Roth conversions.

 

[RunningBum]

First off, when you take her SS probably doesn't make that much difference to your overall retirement financial picture. But I have a couple of comments based on the factors you stated.

... We would rather spend and give money away to them, ourselves, and others while we are above ground. If all goes according to plan the last check to the undertaker will clear, but just barely.

That's really hard to do, unless you know when you are going to die. If your goal is enjoy life and spend down your accounts, taking the higher SS benefit at 70 would give you longevity insurance. If you live long enough to spend down all of your money, wouldn't it be better to have the larger SS benefit along with your pension to live on?

My question is should we take DW’s SS at 62, her fra at 67, or 70? We want to boost our spending/living expenses by about $60k/year. My plan is if we take her SS at 62 we decrease the amounts needed from our retirement accounts for those first 5 years which could be really important and allow us to have more money not less to spend each year. Just my thinking . I know the benefits of taking SS later, but it’s not so clear cut. Her SS at 62 $15.5k/yr. 67 $21.8k/yr and 70 $27k/yr. My main goals are to preserve capital for spending and minimize taxes.

If you think that taking SS at 62 gives you more money to spend then you really don't understand the benefits of taking SS later. You can safely take more from your retirement account, knowing that larger SS benefit is coming later. At that point you take less from your retirement account every year. Is there some other reason why it's "really important" that you take less from your retirement accounts those first 5 years?

 

[nobody]

it all depends on your current situation, for me I will take mine as soon as I can. Not sure how long I will live to make up the difference and in reality the amount I get doesn't really impact my financial situation.

 

[ivinsfan]

As a side question why do you want to boost your spending by 60K a year? That's a pretty big number. It kinds of depends on how you spend that money. Move into a bigger nicer house in a HCOL area? Major travel?

Because you might not be spending the 60K every single year of the rest of the your life, it seems a bit short sighted to permanently reduce an income stream, but I have no idea what your actual budget is.

 

[pacergal]

It is such a personal decision. It is good to read information from others, but really, it comes down to your own comfort level regarding your finances, your budget and spending, and what you believe your future holds.
Based on our results from Open Social Security: Free, Open-Source Social Security Calculator, our results didn't vary too much from 62, FRA, or 70. For some people, it is a big difference.

 

[RetireBy90]

FireCat - Just one more comment from me, this question has risen to almost a religious level at times. Some are confident of the prudence of taking at 62 and some of waiting till 70. It is a personal decision and from your initial post it doesn't appear that when you start SS will have a large negative impact on your finances.

 

[ShokWaveRider]

SS - ER.Org's Favorite Topic...

 

[PatrickA5]

I get my first SS check in 21 days (age 62). DW most likely will delay to 70. I spent probably 10 years analyzing when to take SS via calculators, reading endless threads, running life expectancy calculators, etc. Then I re-re-re-calculated everything. I won't know until I'm dead if this will work out financially, but I do know that I'm happy that I've finally made a decision and feel at peace with it. Now, I just need to make it 21 more days!

 

[Sunset]

When OP dies, his DW will be getting a pension of approximately $49,000 plus her SS.

DW taking SS at age 70 would be far better for her if she lives longer.

OP is not affected by whatever age DW takes SS, as OP cannot collect it, so does not care as does not affect him if he lives longer.

The increase to spending of 60K appears designed to spend every penny of the $1 million savings in less than 20 yrs, as it's a 6% withdrawal rate.
The simple calculator below says taking out $60K per yr from $1M fund, will exhaust the fund by age 78. Note if you put in taking out $40K per year then it lasts to age 90, so it seems fairly accurate.

https://money.usnews.com/money/personal-finance/features/calculator#card

 

[Telly]

In the expenses looking into the future... any plans for Long Term Care? Self-insuring? A big wad of assets that can be tapped year after year sure can help. A pension, though looking great now, even inflation adjusted, may not satisfy the greedy needs of a hungry LTC monster.

 

[ivinsfan]

When OP dies, his DW will be getting a pension of approximately $49,000 plus her SS.

DW taking SS at age 70 would be far better for her if she lives longer.

OP is not affected by whatever age DW takes SS, as OP cannot collect it, so does not care as does not affect him if he lives longer.

The increase to spending of 60K appears designed to spend every penny of the $1 million savings in less than 20 yrs, as it's a 6% withdrawal rate.
The simple calculator below says taking out $60K per yr from $1M fund, will exhaust the fund by age 78. Note if you put in taking out $40K per year then it lasts to age 90, so it seems fairly accurate.

https://money.usnews.com/money/personal-finance/features/calculator#card

Did you base that 49K on his tax bracket comment, so you are thinking they have no other income presently then his pension? Also read through The OP again and noticed his is not eligible for any SS on his own record? I missed that the first time, I'd probably wait a little if I was his spouse.

 

[Sunset]

Did you base that 49K on his tax bracket comment, so you are thinking they have no other income presently then his pension? Also read through The OP again and noticed his is not eligible for any SS on his own record? I missed that the first time, I'd probably wait a little if I was his spouse.

I did base the estimated pension amount on his reference to his tax bracket. If his pension is not that high, then it's even worse for his spouse.

 

[iloveyoga]

That's a good reason that posters should rely on.

Just expressing my opinion. I have read countless posts with arguments both ways. Unless you know when you are going to die......so I just shared my opinion. I usually keep quiet on here but I don't appreciate your emoji.

 

[Chuckanut]

We are comfortable, but I don’t want to line our coffins with gold bars nor do we need to worry about leaving money to our kids.

If you have the funds to fiance your lifestyle between 62 and 70, and you don't care about leaving an estate, you can spend more money every year by taking SS at 70.

Here is the math.

Maximize SS how much you get to spend​

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any ... 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.


https://www.early-retirement.org/forums/f28/laurence-kotlikoff-maximize-my-ss-com-77660.html#post1604411

 

[Navigator]

It looks to me that in this case taking SS at either 62 or 70 are about equally good. There is a lot of uncertainty one has to deal with when deciding when to take SS, so there is no way to know what the best time to file is. One way to decide is to ask what the worst case scenarios are (e.g., one person dies early or lives a long life). If you would be fine under the worst case scenarios, just do whatever your initial gut reaction is.

 

[pb4uski]

Just expressing my opinion. I have read countless posts with arguments both ways. Unless you know when you are going to die......so I just shared my opinion. I usually keep quiet on here but I don't appreciate your emoji.

My point was a "I just want it" may work for you and that's fine with me but I'm not sure it is a reason that is particularly helpful to the debate.

 

[Big_Hitter]

My point was a "I just want it" may work for you and that's fine with me but I'm not sure it is a reason that is particularly helpful to the debate.

well there is something to be said for the "bird in the hand argument", one could predecease his/her SS start date...

of course, unless an underlying condition is known to or will eventually exist, I prefer to use the expected value approach with mortality and interest rates