when to get social security

[Independent]

IMHO, The math says to take SS as early as you can.

My SS early-or-late comparison spreadsheet
https://spreadsheets.google.com/ccc?key=0AlyWRtMroxvgdDI2MlY0UDR4WFRQRFE0Tkw0d19pTnc&hl=en

I believe that the same theoretical approach would tell you that you should never buy any form of private insurance, because the expected benefits are always less than the premiums accumulated with interest.

 

[rayvt]

No, that's silly.
Insurance is not about making a profit. Insurance is for protecting you from the risk of a financial loss you cannot tolerate.

The discussions about what age to take SS are about which option is preferable for you. Since this is largely (but not completely) a financial risk/reward decision, you need to have information of things like the break-even period.

The option of "never take SS" is one that is certainly available---but nobody seriously considers it.
The option of "never joint SS" is not available.

 

[robjr100]

Flag this message Social Security Cuts Eyed by Deficit Commission ‘Especially Painful

This is from a AFL-CIO web site.
AFL-CIO NOW BLOG | Social Security Cuts Eyed by Deficit Commission ‘Especially Painful,’ Report Finds

Next month, Social Security, one of the nation’s most successful and important government programs, turns 75. It is the cornerstone of retirement security for tens of millions of Americans.
(Today, the U.S. House Ways and Means subcommittee on Social Security will examine the success of Social Security 75 years after President Franklin Roosevelt signed it into law. We’ll be covering the hearing.)

Next November, when the federal budget deficit commission makes its report, large chunks of that cornerstone may be chipped away if the panel recommends cutting Social Security benefits and raising the retirement age rather than addressing the real causes of the nation’s growing debt. (Click here to read AFL-CIO President Richard Trumka’s recent testimony before the federal deficit commission.)
A new study by the Center for Economic and Policy Research (CEPR) finds that if the benefit cuts and retirement age increases that have been most prominently suggested were adopted, they would have a substantially negative impact on low- and middle-income families. Says CEPR co-director Dean Baker:
There is a great deal of talk in policy circles about cutting Social Security, but very little discussion of the financial situation of those affected by the cuts….All of these proposals will result in significant cuts in income for low- and/or middle-income families.
Social Security benefits are the largest source of retirement income for most retirees. For six in 10 seniors, Social Security represents more than half of their income. In addition, nearly one-half of elderly unmarried women and widows, and one-third of all beneficiaries, have little other than Social Security and rely on its monthly benefit for 90 percent or more of their retirement income.
The report, “The Impact of Social Security Cuts on Retiree Income,” examined the most common proposals for reducing benefits for near or current retirees. Those cuts are: changing the way benefit increases are calculated, by adopting what is known as progressive price indexing (PPI); raising the retirement age to 70 years old in 2036; and reducing the cost of living adjustment (COLA) to 1 percent below inflation.
According to the report:

• The PPI formula would reduce benefits by 6.2 percent for a middle-income household with wage earners who were between ages 45 and 49 in 2007 and 9.6 percent for those between 40 and 44 years in 2007.
• Raising the retirement to 70 years old in 2036 would cut benefits by 4 percent for workers between the ages of 50 and 54 in 2007 and by 10 percent for workers 40-44 years in 2007.
• Reducing the COLA would result in a benefit cut of 12 percent for a retiree at age 75 and more than 20 percent at age 85. For low-income retirees between ages 55 and 75 in 2007, reducing the COLA equals a 14.6 percent reduction in income at age 85 and a 16.5 percent cut for workers who were between 40 and 44 years old in 2007.

Cutting benefits for middle- and low-income workers is “likely to be especially painful” for those “who are now approaching retirement,” according to the report.
Click here for the full report.
Click here, here and here for more from CEPR’s Dean Baker on the deficit commission. Baker also looks at the commission’s co-chairmen, Erskine Bowles, who sits on the board of Wall Street investment giant Morgan Stanley, and former Wyoming Republican Sen. Alan Simpson, long a proponent of cutting Social Security.

 

[robjr100]

Future of Social Security

Future of Social Security - C-SPAN Video Library

C-SPAN | Washington Journal
Barbara Kennelly talked about the current state of social security benefits and the future of the program. She responded to telephone calls and electronic communications.

Go to the 34:20 mark and listen closely.Outgoing members of congress will be voting(lame duck session) on cuts.So many won`t be around to be answer for what they vote for.

 

[Katsmeow]

A few comments....

1. I get frustrated with many articles that talk about strategies when there are a husband and wife. They generally seem to assume that the older spouse (assumed to be the husband) has higher social security benefits than the younger spouse (assumed to be the wife). I don't find much that talks about our situation -- I'm 7 years younger than DH but at full retirement age I would have higher benefits.

2. That said, in our case we had a particular reason for DH to take SS benefits at 62. It doesn't apply to most but for those it does apply to it can be vital. If you are 62 and have children under 18 they can receive half of our full retirement SS benefits (up to a family maximum) and your spouse with care of your child under 16 can receive benefits (assuming that spouse doesn't exceed the income limitation through their own income). In our case, DH taking SS benefits at 62 was extremely beneficial since we have 2 children under 18. If he waited to 66, the kids would be 18 or over and those benefits would never be received.

 

[rescueme]

2. That said, in our case we had a particular reason for DH to take SS benefits at 62.

Another example of why you just don't take the "commonly held belief" for whatever income product (which SS is).

I'll agree, you seem to have made the correct decision in your situation.

I'll also go out on a limb and say you're DH is a lucky guy. A younger (and apparently well-off) DW

 

[Independent]

No, that's silly.
Insurance is not about making a profit. Insurance is for protecting you from the risk of a financial loss you cannot tolerate.

The discussions about what age to take SS are about which option is preferable for you. Since this is largely (but not completely) a financial risk/reward decision, you need to have information of things like the break-even period.

The option of "never take SS" is one that is certainly available---but nobody seriously considers it.
The option of "never joint SS" is not available.

That's correct. Insurance makes sense because the utility of $1 of claims payment exceeds the utility of $1 of premium. And the reason for that is that claims are paid exactly when you "really need" the money, while premiums are paid when you're doing okay. Whether or not to buy private insurance depends on the relative utilities, there has to be a big enough difference to justify the insurance company's load.

SS pays more when you live a long time, and presumably could use the extra money, and less when you die young and don't need the extra. So the utility argument makes sense for SS as well (just as it does for a private SPIA). For lots of people on this board, the relative utilities are very close. For some people, there is enough difference to justify deferring SS on the utility argument alone. Since the SS early/late retirement factors aren't intended to have any load, it's possible that a fair number of people would be in the second category.

(I'm not sure what your last sentence means.)

 

[Alan]

(I'm not sure what your last sentence means.)

I think he meant to use the word "joining".

The option of "never [-]joint[/-] joining SS" is not available.

 

[bbbamI]

The math says to wait if you don't need it, but political considerations would likely say start collecting ASAP because it's extremely unlikely that any reforms that make SS a worse deal would go so far as to hit those already collecting.

But most likely they'll only screw people my age and below.

I had to look at your profile and see your age. This is one of the few times I'm glad I'm several years older....

(snip)A bird in the hand ....

Our thinking was that we should take that extra income now while we are young enough and healthy enough to enjoy it rather than draw down our investments. This will give the investments additional time to grow.

That's the way we feel.

DH will take it as soon as possible and so will I. Hey...gotta have something to look foward to when I pass the 60 marker....

 

[rayvt]

Typo. Yes, should have read "option of never joining SS is not available". Unlike insurance, which you can decide to buy or not.


SS pays more when you live a long time, and presumably could use the extra money, and less when you die young and don't need the extra.

Huh? SS doesn't pay more when you live a long time, regardless of whether you could use the extra money or not.
The SSA explains the difference in payments right on their web page. The total lifetime benefit payout is approximately the same no matter when you start--at 62 or at 70. Payout at 62 is smaller because you'll collect for more years. Payout at 70 is larger because you'll collect for fewer years.

For lots of people on this board, the relative utilities are very close. For some people, there is enough difference to justify deferring SS on the utility argument alone.
I confess I don't understand what you mean by "utility argument".

Did you look at the spreadsheet I posted? You plug in your own numbers, and your estimates for SS COLA and interest/gorwth rate, and it tells you when the 62 vs 66 break-even point is. Simple math, having nothing to do with "utility".

In general, the BE period is 16 to 20 years. That's too long for me.

 

[ziggy29]

I had to look at your profile and see your age. This is one of the few times I'm glad I'm several years older....

Yeah. It's not that I *want* to be older and lose 20+ years of my life, but sometimes I get kind of bummed about the economic deal folks my age and younger are likely to get compared to what, say, my parents' generation received.

But there's really nothing I can do about it other than to persevere and keep planning ahead. If I plan our finances for getting totally screwed and we only get moderately screwed, we'll be in good shape. Glass half full.

 

[Independent]

Typo. Yes, should have read "option of never joining SS is not available". Unlike insurance, which you can decide to buy or not.


SS pays more when you live a long time, and presumably could use the extra money, and less when you die young and don't need the extra.

Huh? SS doesn't pay more when you live a long time, regardless of whether you could use the extra money or not.
The SSA explains the difference in payments right on their web page. The total lifetime benefit payout is approximately the same no matter when you start--at 62 or at 70. Payout at 62 is smaller because you'll collect for more years. Payout at 70 is larger because you'll collect for fewer years.

For lots of people on this board, the relative utilities are very close. For some people, there is enough difference to justify deferring SS on the utility argument alone.
I confess I don't understand what you mean by "utility argument".

Did you look at the spreadsheet I posted? You plug in your own numbers, and your estimates for SS COLA and interest/gorwth rate, and it tells you when the 62 vs 66 break-even point is. Simple math, having nothing to do with "utility".

In general, the BE period is 16 to 20 years. That's too long for me.

Okay, the option we're talking about is whether to start benefits sooner or later, that choice is available to everyone.

IMO, the financial analysis is the same as you'd do for a private SPIA. Although you don't know how long you'll live when you buy an SPIA, you do know that if you live a long time it will turn out to provide a lot more total dollars than if you die young. That can be a very nice characteristic because if you live a long time you'll want more dollars (I mean total dollars, over your entire lifetime, not an increasing annual benefit) than if you die young. For some people, over some investment scenarios, those extra total dollars can be the difference between "making it" and not making it financially.

The "utility argument" is the same as the reasoning for any private insurance. Each dollar you get if the event you're insuring against happens (the house burning down) is more important to you than each dollar you give up when you pay a premium. You wrote about a loss "you cannot tolerate", I'd say that you can't tolerate it because it digs into the dollars that pay for the most important things you buy - like basic food. The difference may be tiny or it may be substantial, depending on how big the loss is relative to your whole financial position. That's why some people can handle bigger deductibles than others, and why some people can ignore the insurance aspect of SS but others need to take it seriously.

 

[Lazarus]

My wife is one year older than me. She can collect SS on her own although it’s a small amount.
Any drawback for her to collect for that year until I reach age 62 and she can begin collecting half of mine?

 

[rescueme]

My wife is one year older than me. She can collect SS on her own although it’s a small amount.
Any drawback for her to collect for that year until I reach age 62 and she can begin collecting half of mine?

The problem I see is that you can do this, but she won't collect "half" of your SS benefit.

Eligibility begins at age 62. The maximum spousal benefit is 50% of what your husband or wife receives. However, if you retire and claim the spousal benefit before your full retirement age (typically 66), the benefit will be less than 50%. This reduction in benefit depends on how many months before full retirement age you begin.

Of course, you should check with your local SS office for your specific situation (I don't represent them )....

 

[Lazarus]

I know Social Security has a "Full" retirement age and amount. But I look a it as a continually increasing amount beginning at age 62. If I waited till 70 it will be higher than the “Full” retirement amount.

A spouse at age 62 can get about 32.5 percent of the Full benefit of the partner that they are drawing off of.

So to clarify my question. My wife could draw on hers for a year. Then I could begin mine at age 62. So she could then begin to draw a spousal benefit off mine which would be larger than her amount.

Any drawback for having her draw hers for a year before I am eligible for mine?

 

[rescueme]

Any drawback for having her draw hers for a year before I am eligible for mine?

I'm going to direct you to ask the same question of "sscritic" on the BH forum:

Bogleheads :: Index

H/she is the recognized expert on all questions as related to SS and usually supplies your question with a detail answer, breaking down year by year, dollar by dollar and is very detailed in the analysis.

Rather than give you my opinion, I would rather you get the answer from a known "expert" on the subject...

 

[Finance Dave]

I am 62, and my opinion is that you and I are in an age group that is much less likely to be affected by SS changes than some of the younger age groups. Still, all the talk of SS change is pretty unnerving and I understand your concern.

My original plan was to wait until age 66 to claim my benefits. Right now I am taking it year by year. It's very similar to a game of chicken in some respects, and I don't want to be frightened into changing my plans unless there is a good reason to do so.

I think that if the full benefit amount was changed for those in our age group between now and our full retirement age, there would be a massive public reaction and outcry. Anything is possible but perhaps this is less likely than some scenarios (such as increased taxation of SS benefits).

I agree....I cannot see anyone in Congress reducing benefits for those in or near SS retirement age....too much political pressure. The only change that MIGHT come in this regard is tying increases to CPI rather than wage progression formula. This could affect everyone, but those at or near SS age would see the change slowly and it would be very minor. For example, if wages next year went up 3.2%, but the CPI went up 2.9%, you'd only get a 2.9% increase whereas today's formula gives you a 3.2% increase...thus a .3% loss...not very much. Over many years this can be a big deal.

There are many proposals being thrown around, here's one:
Womenstake: Anything to Avoid Raising Taxes on the Wealthy: Cut Social Security Benefits to Pay for the War?!

Also, IMO, the decision of when to take SS is so complex that I would never try to guide someone else. It depends on so many factors such as your health, financial needs, assumptions about interest rates, whether you are married, did your spouse work, who earned more; a whole littany of factors. Each person needs to look into the details for their specific situation and do what's best for them. There are even file and suspend methods, repay-restart methods, and so on....geesh.

As for me, given my specific circumstances, I plan to have my wife take at 62, and I will wait until full age (67 for me).

Good luck with your decision.

 

[HsiaoChu]

If you don't need the social security at age 62, take it anyhow but start banking the money. Suppose you made good money in your life time and you start taking it at 62, and they will give you 20K then, but if you wait until you are 70 they will give you 27K.

How long with it be before you will make more money by taking it at 70. Well.... (not even figuring any interest) for 8 years you will get 20K which you have saved each year and now at age 70 you have 160K+ saved(actually more like $180K see below). You will continue to get 20K each year. But how long will it take to make up the money you lost by not taking it early. At 82 you will have received $400,000+ in 20 years. If you waited until you were 70, then at 82, 12 years later, you will hAVE RECEIVED $324,000. IF YOU live to 87, you will have received your 20K for 25 years, and you will have received a total of $500,000++ during the 25 years since you retired at 62 and started taking SS of 20K. If you waited until 70 then you will have been receiving your $27K for 17 years and your total will be $459.

There chances of catching up before you die is very small. The SS system wants you to take it later because the money you will get will be less. Its simple to figure out, but few people can do this.

Suppose you save it from 62, and get into a serious financial bind and need $20K to fix your septic system of your retirement house. If you haven't taken it early and saved it, then you will have no money to draw on.

Your saving it above assumes also that you get no interest, but even at a lousy 2.5%, after receiving $160, you will have gotten a total of $179,000+ not 60.

The numbers just keep going up. Realistically you can never make more by waiting until age 70 if you didn't need it until 70, but saved it in an interest bearing CD account.

HsiaoChu

 

[Ronnieboy]

I know Social Security has a "Full" retirement age and amount. But I look a it as a continually increasing amount beginning at age 62. If I waited till 70 it will be higher than the “Full” retirement amount.

A spouse at age 62 can get about 32.5 percent of the Full benefit of the partner that they are drawing off of.

So to clarify my question. My wife could draw on hers for a year. Then I could begin mine at age 62. So she could then begin to draw a spousal benefit off mine which would be larger than her amount.

Any drawback for having her draw hers for a year before I am eligible for mine?

Good question, as I am in the same situation. My wife is 3 yrs older than me and I would think the best approach would be for her to take the $$ at 62, while I apply for spousal benefits and then at 62 or even waiting till 66 take mine and have her get 50% of that. Of course things will change by the time we get there, but as of right now all things holding steady, that is what we would do.

 

[rayvt]

Get it while the gettin's good.

http://www.nytimes.com/2010/07/31/your-money/31money.html?_r=2&scp=2&sq=social security&st=cse

Key quote: “One financial planner, who has dual citizenship in the United States and Greece, said he was not taking chances. ‘Having seen what happened in Greece, I feel even more strongly today that I should not count on any Social Security for me and my younger clients,’ said the planner, George Papadopoulos, 43, of Novi, Mich. ‘I will continue to tell clients not to highly rely on Social Security and think of any money coming their way as gravy.’”

 

[Dawg52]

Get it while the gettin's good.

More than likely what I will do and use it on med's and wild women.

 

[HsiaoChu]

More than likely what I will do and use it on med's and wild women.

I tried to pay my wife to be a wild woman but she politely refused numerous times. So it is not true that you get what you pay for.

 

[rayvt]

"Investments, IRAs, and 401(k) to live on;
company pension for trips to Europe or Bahamas;
Social Security for lap dances."

 

[Independent]

If you don't need the social security at age 62, take it anyhow but start banking the money. Suppose you made good money in your life time and you start taking it at 62, and they will give you 20K then, but if you wait until you are 70 they will give you 27K.

I'm not sure how old you are, but I can't figure out where you got the 20K and 27K.
Check out the Early and Delayed adjustments here:
Benefit Reduction for Early Retirement
Delayed retirement credits

 

[youbet]

I'm not sure how old you are, but I can't figure out where you got the 20K and 27K.
Check out the Early and Delayed adjustments here:
Benefit Reduction for Early Retirement
Delayed retirement credits

I think poster meant to say 20k at 62 and 27k at FRA, not 70.