Trying to understand the SS age 70 wait

[pb4uski]

Agree with you there. And it's a small amount of difference relative to the time. As if the government is enticing people to stretch to 70, well, honestly it must be more beneficial for them overall.

Actually, the discounts and premia are designed to be actuarially neutral, so it isn't at all beneficial for the government. In fact, it's been many years since the premia and discounts were updated so with better longevity and lower interest rates since the premia and discounts were decided, it is probably not beneficial for the government at all.

 

[RetireBy90]

Another thing to consider is pension offset VS pension elimination provisions. Yes. Collecting at 70

DW retired at 62 and started SS at FRA of 66. Her small pension included a SS offset till FRA which I had not expected or heard of before.
So one one hand you could say her SS was less as she collected some pre-SS if you will, or you could say the offset was not part of when to start question (my take). However, she spends the small pension as she wishes and her taking SS at FRA allowed her to replace the offset she “lost” and added some more vacation money to our spending options.

 

[bobandsherry]

Actually, the discounts and premia are designed to be actuarially neutral, so it isn't at all beneficial for the government. In fact, it's been many years since the premia and discounts were updated so with better longevity and lower interest rates since the premia and discounts were decided, it is probably not beneficial for the government at all.

As President Ronald Reagan once said, “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help. “.

 

[RunningBum]

As President Ronald Reagan once said, “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help. “.

And how does that apply here? You are hinting at some attempts at the government to influence when you take SS, without any evidence. And in response to a post that says there is none.

 

[pb4uski]

As President Ronald Reagan once said, “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help. “.

On point? Not!

If you don't have something relevant to say then why say anything at all?

 

[Broland]

I love this forum and the insights provided by so many informed, interesting and smart people. However, on this topic (which I always voraciously read when I see it pop up again and again since I have not yet started) I've come to a definitive conclusion ...

For most folks (barring certain personal circumstances that might "force the decision") "betting" on when to take SS is like betting the "over" on a sporting event. You won't know if you "win" until your score is surpassed (your target age you decided to start receiving it), OR, the clock has run out (you've expired).

Banter on ...

 

[MichaelB]

Interesting discussion, hopefully it will stay away from politics, especially the unhelpful kind ...

 

[RunningBum]

I love this forum and the insights provided by so many informed, interesting and smart people. However, on this topic (which I always voraciously read when I see it pop up again and again since I have not yet started) I've come to a definitive conclusion ...

For most folks (barring certain personal circumstances that might "force the decision") "betting" on when to take SS is like betting the "over" on a sporting event. You won't know if you "win" until your score is surpassed (your target age you decided to start receiving it), OR, the clock has run out (you've expired).

Not everyone is betting, with the idea to get the very most out of SS. Some of us view SS as longevity insurance. Others want to get what they and their employer put into the system.

 

[levindb]

Some folks have posted the historical market returns, but I will suggest that may not be the best way to look at things.

1. As we get older, we may use the Rule of 100, or the Rule of 120, to reduce our equities in favor of more fixed income/cash. That could cut your market returns by 50% to 70%.

2. Inflation will increase the amount of SSA benefit and people who wait longer will get that inflation benefit on a larger base. This also reduces the relative value of those market returns above.

Those 2 items will tend to reduce the value of investing the benefits you get at age 62, or reduce the lost earnings by drawing down your savings.

Finally, and could be most important, the survivor benefit after one passes may be the deciding factor for many people, since it is likely that one of the couple may live to their 90's.

The actual "breakeven" for a single person may not be that significant taken in isolation. It is market returns, asset allocation over time, inflation, longevity, and even health that have to be factored in with guesses that make this a very personal evaluation balanced against risk tolerance. Truly, YMMV

 

[rayvt]

It also showed that longevity permitting, I could make that difference back in approximately in 11+ more years. Delaying till 70 would be accretive starting at age 81.4.

Seeing the data sliced this way was helpful for me. Would love to hear any feedback on this.

Yes, this is the way to look at it. You get extra monthly money, but only after age 81.
The question you have to resolve is: When is the extra money more valuable to you, age 62 to 70 or 81 to death?

 

[RunningBum]

Yes, this is the way to look at it. You get extra monthly money, but only after age 81.
The question you have to resolve is: When is the extra money more valuable to you, age 62 to 70 or 81 to death?

Why is it so hard to understand that you can spend more of your own money from 62 to 70, knowing you've got that larger SS check coming at 70?

Use opensocialsecurity.com to find the present value of your SS benefit. Add it to your portfolio amount. Apply your WR% to this amount.

 

[pb4uski]

Yes, this is the way to look at it. You get extra monthly money, but only after age 81.
The question you have to resolve is: When is the extra money more valuable to you, age 62 to 70 or 81 to death?

Why is it so hard to understand that you can spend more of your own money from 62 to 70, knowing you've got that larger SS check coming at 70?

Use opensocialsecurity.com to find the present value of your SS benefit. Add it to your portfolio amount. Apply your WR% to this amount.

Exactly RB.... rayvt's whole notion that I see from many posters here is advocating taking SS early because they can spend more in their more active years from 62 to 70. Not only that, but by using more of your own money you will likely be reducing future RMDs that might put you in a higher tax bracket.

For most posters here, taking SS early so you can "spend more" is a false narrative... most posters here have well funded retirement plans and money is fungible.

Also, in most cases we are not talking about a lot of money in the whole scheme of things. Even if your PIA was the maximum, you would only forgo ~$223k to defer SS from 62 to 70 [$2,324*12*8] to get ~$19k/year [($3,895-$2,324)*12] more, COLA-adjusted, for life.

What I don't get is that for overall retirement planning many would say it is foolish to plan to only 90 because one "might live long" and you don't want to have to live on cat food in your 90s... but at the same time when it comes to SS that it is foolish to assume that you'll live past the breakeven point in your 80s so you should take SS early. It seems like talking out of both sides of the mouth to me.

... According to the Social Security Administration (SSA), the maximum Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2021 can receive per month is as follows:

• $3,895 for someone who files at age 70
• $3,113 for someone who files at full retirement age (FRA)
• $2,324 for someone who files at 62 ...

 

[Chuckanut]

One more time for those who missed it. You can spend more starting at age 62 by taking SS at 70.

Two caveats - (1) you don't care about leaving an estate (yes, a big IF for many). (2) You have the funds to finance your lifestyle from age 62 all the way through 69).

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

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[daylatedollarshort]

You can spend more now if your future benefits end up being the same or more as what they are planned to be today, which assumes the SS trust fund doesn't run out of money. The wild card is that the trust fund is running out of money, and we don't know yet what the fixes will be and how that will impact future benefits.

Many here are pretty convinced there will be zero changes for well off retirees. I've looked at a number of the fix proposals, and I think that it is unlikely future benefits will remain unchanged for higher income SS recipients.

 

[Andre1969]

One thing that often slips through the cracks during the 62-70 discussion is that you can do something very radical and compromise by taking SS in the mid 60's. Nobody is forced to wait until 70 once their 62nd birthday has come and gone.

On small advantage of taking SS at 70 is that you can change your mind and take it earlier if circumstances show that has become the better decision. Take SS at 62, and once the window of opportunity has passed to reverse the decision, and you are stuck for life.

IMHO, it's better to spend your time well enjoying life, rather than fussing too much about squeezing the last possible penny out of one's SS payments.

This is probably one of the best rationales I've ever heard for planning to take SS at 70...the fact that you can easily change your mind if you want, but if decide to take it earlier, and make good on that decision once you hit that age, it's not so easy to change your mind. It's so obvious now that I think about it, but, that thought had never crossed my mind before!

My plan had always been to take SS at 62. I had run all the scenarios through FireCalc, of taking it at every year from 62-70, and it made almost no difference in my chance of success, so I figured heck, might as well start taking it as soon as I can. Plus, there's always the unknown of what will happen to payouts down the road. I figured that the sooner I get on it, there's a better chance I might get grandfathered in, rather than a reduced benefit. Of course, that's all conjecture at this point.

Anyway, I'm 51, so even 62 is still a bit of a way off. I have a feeling what will ultimately happen is that when I hit 62, I look at my financial situation, the state of SS, and whatever gloom and doom forecasts are going on at the time. If it seems like a good time to take it then, I will. Otherwise, I'll hold off another year and then check again.

 

[target2019]

Interesting discussion, hopefully it will stay away from politics, especially the unhelpful kind ...

My first chuckle of the day! Is there any other kind?

But on topic...

Several mentioned that one can wait one more year (yes, OMY again). So I'll mention it again. If the decision is now here, in your face, it may be prudent to roll up your sleeves and continue in several of the discussions that pop up monthly.

And it actually plays out as waiting one more month (OMM). No one froces you to wait an entire year.

 

[Out-to-Lunch]

One more time for those who missed it. You can spend more starting at age 62 by taking SS at 70.

Two caveats - (1) you don't care about leaving an estate (yes, a big IF for many). (2) You have the funds to finance your lifestyle from age 62 all the way through 69).
[Emphasis added.]

I agree with listing these caveats. However, I think it is worth emphasizing that one does not know in advance whether claiming early or late will result in leaving a bigger estate (for a given level of spending).

 

[qwerty3656]

I agree with listing these caveats. However, I think it is worth emphasizing that one does not know in advance whether claiming early or late will result in leaving a bigger estate (for a given level of spending).

The caveats are not related to taking SS at 70 vs 62. The caveats are related to the specific proposal they made to take a big chunk of money (the sum of the SS payments from 62 to 70) and just put it into cash.

 

[pb4uski]

^^^ It is more spend it rather that put it into cash.... it could be that you are 100/0 and just do periodic withdrawals for spending.

I'm deferring SS but don't have any funds earmarked to carry us until 70.

If I was to have some dedicated funds, I'd probably create a CD ladder.

 

[pb4uski]

A relevant article on the subject that just crossed my inbox:

https://obliviousinvestor.com/socia...ance-approach-vs-maximizing-expected-outcome/

When it comes to Social Security planning, people often take one of two approaches:

• The insurance approach: Social Security is meant to be longevity insurance, so in order to get the most protection from it, I will delay until age 70.
• The maximizing approach: I want to get the most total dollars (or present value of dollars) from Social Security over my lifetime, so I will file at whatever age results in the highest expected sum. (Note: this second approach is what calculators such as Open Social Security are doing — recommending the filing age(s) that maximize the expected present value of dollars collected.)

In short, most people should be accounting for both perspectives in their planning. ...

 

[Markola]

^^^^^^ Very helpful. This article should be reposted every time this question pops up on the Forum, which seems to be weekly.

 

[Out-to-Lunch]

The caveats are not related to taking SS at 70 vs 62. The caveats are related to the specific proposal they made to take a big chunk of money (the sum of the SS payments from 62 to 70) and just put it into cash.

I guess we will have to agree to disagree over the origin of those caveats.

 

[all4j]

Take SS at 62, and once the window of opportunity has passed to reverse the decision, and you are stuck for life.

To hopefully shed a ray of hope for those feeling stuck...

Once you reach FRA, you do have an option to suspend. As with most features, there are no doubt some nuances that I won't attempt to highlight here.

Sequence of return risk is a big unknown when making the decision at 62. FRA for most comes about half way from 62 to 70. Doing a sanity check at FRA makes sense. Circumstances have likely changed -- maybe in a pleasant direction, maybe not.

I don't know this is really a strategy, but at least a toll in the toolbox for those who might otherwise have regret

 

[chassis]

Interesting analogies lately on SS:

- bond/fixed income allocation analogy: points toward maximizing present value of SS streams

- longevity insurance: points towards delaying SS to have the maximum annuity payment upon demise of the higher earner in a two person household

I espouse the former, the present value approach. Why? It maximizes the present value of my net worth. Why not the latter? I believe that insurance always is in the interest of the issuer (SSA) and not the insured.

 

[zaqxsw]

If you have a low earning spouse, it makes a difference how both of you file, plus your spouse's benefits never really go up after you reach your PIO, except as your PIO slowly goes up:

https://www.kitces.com/blog/why-it-rarely-pays-for-both-spouses-to-delay-social-security-benefits/

Just a heads up on anyone looking to file. SS is swamped. I filed three months in advance and it might happen on my effective date, but my DW filed for spousal benefits a week after I applied. It takes a phone appointment to file for spousal benefits. Her "phone" appointment is in two months! Yep, benefits are retroactive, but still, amazing...