Why people take SS at 62

[Brett_Cameron]

Take a look at the I-ORP calculator.

http://www.i-orp.com/

Your results may change when you examine how Social Security is taxed. You'll need to look at the Social Security "provisional" income to show that not all dollars are equal when it comes to taxation.

Let us know what you find out

In the tax estimation, I basically have modeled all of the IRS tax forms. This results in treatment of different sources of income in their own different ways with their own special tax rates. ( I am talking about pension, 401k, dividends, capital gains and social security). 85% of the SS will be taxable forever or until they change the rules based on my pension alone. I also don't intend to start drawing SS until I no longer expect to have any significant earned income anymore.
Since I have modeled all of the tax credits, deductions, exemptions, taxable social security, the tax rates, the tax brackets and AMT, the estimates will be close, until the rules change.

I have looked at the i-ORP and played with it some but do not understand how they are estimating the taxes. I will visit it again in the future when I have the time and inclination.

Thanks!

 

[BLS53]

Exactly the reason you diversify, to hedge your bets, so to speak !

I want no part of the nightmare on Wall Street. Been ERed solely on a military pension for 17 years, and I'm not worried about the government stopping payment. If things get that bad, the nation's on it's last legs, and all your investment portfolios will be worthless as well.

 

[BLS53]

rustward/BLS53,

The company I'm currently working for is making record profit margins and sales. The resultant reduction in benefits was entirely due to the profit taking of the evil doers in megaCorp II. That's the trouble nowadays, they've offshored so many jobs, they don't have to give a damn about employees, they just say "next". With reasonable competition for a skilled local workforce, they could not do it, as easily. They might try, but, if capitalism works correctly, workers would leave, go across the street and maximize their return(pay, benefits, etc) for their effort. In my opinion, that's why we need a return of tariffs to level the playing field for US workers vs low cost foreign competition. Yes, you will pay more for stuff bought at Wally's mart. Sorry.

And maybe you're missing my other point. In my opinion, "burning down" MY investment dollars and having a greater reliance on the government to provide me "longevity" insurance pretty much goes against ever fiber of my being. I believe it would be much harder for a government in the US to "garnish" individual retirement accounts than to "just change slightly" the future SS benefits of people not yet retired. I've seen it many times in my so-called career, a "tiered" benefit plan. One for current retirees and one for future retirees; that's how they "divide and conquer". Easy, squeezy. I believe any attempt to "nationalize" individuals personal retirements monies would be met with something no less than armed insurrection. So, given that statement, my longevity which probably is less than the "norm", and the current state of the SS system (which could turn dramatically worse if they are telling the truth, btw), we're taking it early.

I just have a different view on the dependability of the federal government than you do. They've never let me down. I can't say that about my experiences with private employers, nor Wall Street, after I retired from the Navy. I trust the federal government more than any other entity. I know that goes against the grain on this forum. But that's just me.

 

[Mulligan]

I just have a different view on the dependability of the federal government than you do. They've never let me down. I can't say that about my experiences with private employers, nor Wall Street, after I retired from the Navy. I trust the federal government more than any other entity. I know that goes against the grain on this forum. But that's just me.

I am with you BLS, for no other reason than I have no other choice. Life long career with a state pension and 2% cola. 10 years ago, I had no worries, and really still probably don't since the system is 90% prefunded and is a trust fund. However, cant totally get the what ifs out of my mind, so I have continued working part time to build up some personal money not dependent on my pension. Although working now p/t puts my mind at ease, in reality the only one who will benefit from my continued working are anyone in my will.

 

[Cut-Throat]

I thought sscritic summed up the decision quite well here.


Bogleheads • View topic - "Wait to Begin Social Security" ?

 

[Katsmeow]

I've never bought into the idea that if the government were to somehow reduce or eliminate SS for some people that someone who takes SS at 62 was more likely to keep getting benefits than the person who is the same age who hadn't yet taken benefits.

That said, I do think it is possible that benefits will be reduced or possibly means tested out of existence for some people. If you didn't take at 62 and were waiting for the higher benefits at age 70 it would be a real kick in the teeth to get to 69 and find out you were going to get reduced or even no benefits. I would much rather in that situation have been collecting for 7 years so that when the benefits got reduced or eliminated I at least had those benefits I had collected for the past several years.

I'm personally not sure on the 62 thing and I may wait until 66 but I'll look at the political landscape when I get to 62 and decide then.

 

[veremchuka]

In my opinion, that's why we need a return of tariffs to level the playing field for US workers vs low cost foreign competition.

OMG, ever hear of the Smoot-Hawley Tarrif Act? I've heard this topic discussed on many financial tv shows over many years on FNC, Fox Business and CNBC and from what I've heard this turned a really really bad recession into the Great Depression.

Smoot

 

[jime444]

Really, the Smoot-Hawley tariff act of 1930? It, btw, was a complete over-reaction to the times; record level tariff's and even so, it had negligable economic effect. Though, we are now off-topic, what I'm talking about leveling the playing field for manufacturing in the country and the associated environmental issues caused by low-cost labor countries. The last time I was in China, they were paying $0.68USD/hr to their labor and $3.98USD/hour to their engineers. no matter what you do, you cannot compete against that here in the states. period. It's a one way flow of cash out of the country,them buying back our debt and helping us dig a bigger and deeper hole. It's not even close to sustainable. We need to get the manufacturing sector back to 20+% of our economy, live within our means, and get our economic house in order, first. Then, we can help others.

 

[samclem]

The last time I was in China, they were paying $0.68USD/hr to their labor and $3.98USD/hour to their engineers. no matter what you do, you cannot compete against that here in the states.

You're raging against the rising tide. We cannot secure our prosperity with a wall of protectionism. We are very competitive with China despite the wage disparity due to other factors we have and they do not: Strong enforcement of IP laws, respect for property rights, a functioning justice system, etc. Chinese wages (and those of the developing world) will grow over time and our (along with the rest of the developed world) will decline, especially in a relative sense.
The trick is for us (and every country) to focus on those areas where we enjoy a comparative advantage. The Chinese build the IPads and make a few dollars apiece while Apple manufactures none of them and makes the lion's share of the revenue on every one.

 

[growing_older]

But do you understand that the trustees of the SS system have indicated that there will be a 25% reduction in SS payments as the trust fund runs out in 2033 -21 years from now?

This is untrue, or at best an incorrect restatement of the issue. When the trust fund runs out, the incoming revenue will only equal 75% of the outgoing obligations. No plan has been made by the trustees or anyone else to cut benefits to 75% on that date. Many plans have been discussed for what to do, including the idea of reducing benefits, increasing taxes, changing retirement ages, but to say that the trustees plan to reduce benefits on that date is projecting an opinion of future events as if it were fact. You may want to make plans based on this assumption, but it is speculation, nothing more. Many opinions differ about what choices will actually be made.

 

[gerntz]

After reading (and participating) in a number of these SS at 62 vs 70 threads I've come to understand that some people are born with the SS at 62 gene, some with SS at 70 gene and a very few misguided souls with an in between gene. Near as I can tell either side is totally impervious to the arguments of the other side and I do not believe that a single soul has been converted. Long live the 62'ers!!!!

LOL. Thanks. You're most likely 100% correct.

 

[SpencerM]

Sadly, those who are working still and plan to depend to any extent on SS in the future, are setting themselves up for disappointment. It is only a matter of how much disappointment and when.

No matter if at 62 or 70, SS should only be the fourth leg of your three leg retirement stool. The main three being personal investments, pensions, and aggressive debt elimination.

The best time (for the Government) for us to apply for SS payments is to wait until we are dead. The system was designed that way. It was just never designed to be a major part of retirement needs for the bulk of us - only a small safety net.

 

[Bestwifeever]

...
No matter if at 62 or 70, SS should only be the fourth leg of your three leg retirement stool. The main three being personal investments, pensions, [emphasis added] and aggressive debt elimination....

Good luck with that whole pension thing leg.

 

[W2R]

After reading (and participating) in a number of these SS at 62 vs 70 threads I've come to understand that some people are born with the SS at 62 gene, some with SS at 70 gene and a very few misguided souls with an in between gene. Near as I can tell either side is totally impervious to the arguments of the other side and I do not believe that a single soul has been converted. Long live the 62'ers!!!!

(emphasis mine)

I don't know. When I came to the ER Forum, I would have never considered taking SS at any age under 70. OK, I didn't take it at 62, but now I am thinking of taking it as early as 65.

Whether that is due to the discussions here, or due to some sort of primal greed, I do not know. But anyway, I might be in the process of being converted into one of those misguided souls...

 

[Mulligan]

(emphasis mine)

I don't know. When I came to the ER Forum, I would have never considered taking SS at any age under 70. OK, I didn't take it at 62, but now I am thinking of taking it as early as 65.

Whether that is due to the discussions here, or due to some sort of primal greed, I do not know. But anyway, I might be in the process of being converted into one of those misguided souls...

Mr. Bernanke told me to tell you, W2R, to please take it now and inject the money into the economy. He said if you do this and increase your measly 1.9% withdrawal rate, he might not have to intervene in the economy again.

 

[rescueme]

Good luck with that whole pension thing leg.

My last two pensions flew away like pixie dust in the wind ...

(1st one because vesting was 10 years and I left after eight).
(2nd one was replaced by a 401(k); I was only there a couple of years so they issued me a check for a few bucks (under ERISA rules at the time) and I rolled it to my TIRA).

At least I don't have to worry about "losing" one later in life (too many other things I can lose at this age )...

 

[gerrym51]

I plan on retiring at 63 and 1/2. I could make it to 70 without taking SS.

I will take it at 63 and 1/2.

just more comfortable with this and not taking out of my accounts.

assuming my wife and i live no older than 94 calculators say i will have enough money.

I might live to 100. odds are i will not. prudent to bet on 90.

there are other variables besides the extra money per month starting at 70. investment income on money you don't need to withdraw-inflation making future dollars less valuable-less taxes paid early on retirement account because you don't have to remove. all of these make the value difference of future dollars less appealing.

there is a difference but not as great as a direct dollar comparison seems.

 

[Chuckanut]

I've never bought into the idea that if the government were to somehow reduce or eliminate SS for some people that someone who takes SS at 62 was more likely to keep getting benefits than the person who is the same age who hadn't yet taken benefits.

That said, I do think it is possible that benefits will be reduced or possibly means tested out of existence for some people. <snip>

I agree. IF benefits are reduced at some future time, I think it is highly likely they would take into account the age at which people started to get benefits. People who started benefits at the 'normal' retirement age would face no adjustment. People who retired early would most likely face a somewhat bigger % cut. People who retired later than normal would face a somewhat smaller % cut. They need to keep these things actuarially equal.

I think it is more likely we will see an increase in the amount of SS taxed, as well as an increase in tax rates, perhaps even applying the 'payroll' tax to non payroll income. What one hand gives, the other takes away. What else is new?

 

[W2R]

Mr. Bernanke told me to tell you, W2R, to please take it now and inject the money into the economy. He said if you do this and increase your measly 1.9% withdrawal rate, he might not have to intervene in the economy again.

Well, gee, if "Helicopter Ben" requested that, then it is the least I can do.

 

[foxfirev5]

I agree. IF benefits are reduced at some future time, I think it is highly likely they would take into account the age at which people started to get benefits. People who started benefits at the 'normal' retirement age would face no adjustment. People who retired early would most likely face a somewhat bigger % cut. People who retired later than normal would face a somewhat smaller % cut. They need to keep these things actuarially equal.

I think it is more likely we will see an increase in the amount of SS taxed, as well as an increase in tax rates, perhaps even applying the 'payroll' tax to non payroll income. What one hand gives, the other takes away. What else is new?

Your assuming that future benefits would be a fair reflection of the current situation. I don't see that as realistic. If that were the case we could all make rational decisions based on the current situation. What we view as fair today may not be the same tomorrow.

 

[Cut-Throat]

Your assuming that future benefits would be a fair reflection of the current situation. I don't see that as realistic. If that were the case we could all make rational decisions based on the current situation. What we view as fair today may not be the same tomorrow.

If you understand politics, that's usually the way it works. It's very realistic based on history. What are you basing your opinion on?

 

[Mulligan]

I agree. IF benefits are reduced at some future time, I think it is highly likely they would take into account the age at which people started to get benefits. People who started benefits at the 'normal' retirement age would face no adjustment. People who retired early would most likely face a somewhat bigger % cut. People who retired later than normal would face a somewhat smaller % cut. They need to keep these things actuarially equal.

I think it is more likely we will see an increase in the amount of SS taxed, as well as an increase in tax rates, perhaps even applying the 'payroll' tax to non payroll income. What one hand gives, the other takes away. What else is new?

My guess aligns with yours. Nobody is probably willing to take the lead in cutting anyones benefits. I wouldn't be surprised if SS tax is tweaked up higher a bit, so the can is kicked further down the road a few years. Assuming that SS tax revenue is for the purpose of SS, they could eliminate this ridiculous temporary tax cut on current SS employee contributions. We have a looming shortage in the fund so we cut the contributions? I don't get it.

 

[explanade]

How about a poll for which age people planned to take or did take SS?

 

[Rustward]

I agree. IF benefits are reduced at some future time, I think it is highly likely they would take into account the age at which people started to get benefits. People who started benefits at the 'normal' retirement age would face no adjustment. People who retired early would most likely face a somewhat bigger % cut. People who retired later than normal would face a somewhat smaller % cut. They need to keep these things actuarially equal.

I think it is more likely we will see an increase in the amount of SS taxed, as well as an increase in tax rates, perhaps even applying the 'payroll' tax to non payroll income. What one hand gives, the other takes away. What else is new?

+1 and thanks -- this is kind of what I was trying to say in this post http://www.early-retirement.org/forums/f28/why-people-take-ss-at-62-a-62478.html#post1219805 but it didn't come out as clearly as you were able to explain it.

That said, I believe Congress will try to not reduce the benefits of anyone who is within a few years of being eligible to receive a benefit.

 

[foxfirev5]

If you understand politics, that's usually the way it works. It's very realistic based on history. What are you basing your opinion on?

Based on the last 50 + years of living. I'm not trying to to debate any issues its's simply my observations. While I appreciate everyone's opinion on this forum I doubt my strategy will change.