Boston_Bulldog
Confused about dryer sheets
I am currently 55 and DW is 57. We are a couple years away from a happy retirement. I just ran some Social Security retirement estimates for both of us and then ran a few simple models of taking the Social Security benefit at ages 62, 63, 64, 65, 66, 67 or 70. The short summary of my findings was that it is either better to take the benefit at age 62 or age 70...but nothing in between. I have often heard "wait until you reach 67", but my calculations do not support this. I have posted the model in a PDF here:
https://pdfhost.io/v/zv9u7qjc6_Social_Security_Modelerxlsx.pdf
Assumptions and Findings
As you know, based on your age, there is a "full benefit" age. For me, my full benefit comes at age 67. If I take the benefit early, e.g., age 62, there is a reduction schedule. Alternatively, if I take the benefit at 70, there is a relatively large increase of 8% a year for every year above full retirement age. The reduction schedule for those born 1960 or after is:
Age Percent of Full Benefit Monthly Benefit
62- 70.00%
63- 75.00%
64- 80.00%
65- 86.67%
66- 93.33%
67- 100.00%
70- 124.00%
The attached PDF shows an assumed full retirement benefit of $2,000 a month. I then show the cumulative earnings for every year, if you take it at 62, 63, 64, etc. I run this through age 100. I added a modest assumed rate of return of 3% on the money (impact of rate of return will be explained later).
My findings are you are better off taking the benefit at age 62 if you are going to live through age 76. If you live to age 77 or higher, you are better off taking the benefit beginning at age 70. THERE IS NO SCENARIO WHERE YOU ARE BETTER OFF TAKING THE BENEFIT AT AGE 63, 64, 65, 66 OR 67.
If you increase the assumed rate of return/interest rate (on SS income received) to a higher rate of return, it makes the age 62 distribution more advantageous into the later years. For instance, if you make the assumed rate of return 7% (vs. 3%), you are better off taking benefit at age 62 vs. 70 until age 82. Again, there is never a scenario that you are better off taking the benefit at age 63, 64, 65, 67.
This also doesn't factor in an early death, which would almost always make the age 62 benefit a better option.
I am sure there have been other discussions on this topic and I am sure I might be missing something in my thinking. If I am wrong in my assumptions, I would appreciate some feedback.
Please review the model and provide feedback.
Thanks!
I posted a spreadsheet and some commentary (above) a couple of weeks ago for which I have some revisions. Unfortunately, the Forum does not allow me to modify a previous post or take in down, so I am going to post a new sheet in the next post with some commentary.