Why Wouldn't I take Social Security Early for me and my Spouse

"I just think earning an 8% return on a fixed income instrument in my portfolio that is backed by the U.S. government is pretty dang awesome!"
Someone correct me if I am wrong, but that 8% often-quoted number only applies between FRA and age 70. Before FRA, the % number is considerably less.
 
Yes, 8% increase is only between FRA and 70. Between 62 and 65 it’s just 5% per year. It ramps up after 65.
 
"I just think earning an 8% return on a fixed income instrument in my portfolio that is backed by the U.S. government is pretty dang awesome!"
Someone correct me if I am wrong, but that 8% often-quoted number only applies between FRA and age 70. Before FRA, the % number is considerably less.
If your FRA is 67 and you take at 62, you get 70% of your PIA. There is a slight bend in the rate between the first three and the last two of those years, but in general the compound rate of return necessary to go from 0.7 to 1.0 in 5 years is (1.0/0.7) ^1/5) - 1 = .07394 or about 7.4% per year.


Edit to add: The 8% per year benefit for waiting from 67 to 70 is not compounded.
 
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"I just think earning an 8% return on a fixed income instrument in my portfolio that is backed by the U.S. government is pretty dang awesome!"
Someone correct me if I am wrong, but that 8% often-quoted number only applies between FRA and age 70. Before FRA, the % number is considerably less.
I worked up to 67 years old.
 
OP--
We have a similar situation as you, except we chose 100% joint survivor on both of our pensions, and we have three grandkids.
I looked at numbers up, down, and sideways, evaluated 62,66,70, looked at Roth conversions, etc.
We chose to take SS at 62. It's a personal decision and one you have to evaluate for yourself.

Do your research, check your numbers and calculations. Look at your personal reasons why you want to take SS now vs take money from your investment accounts.
You don't want to regret the decision later, although I believe there is a time frame where you can stop and pay back or stop and refile later, but do investigate that.
Pacergal, Thanks for your insights. I do think they closed that rule about payback rules for taking SS early. Being in the 22% tax bracket already so no ACA thresholds to worry about and no RMD issues as we will be spending down our IRA's first and RMD requirements will still have us in the same tax brackets most likely even if they change, but that is an assumption. Also my SS is a spousal benefit due to the recent repeal of GOP and WEP. So we don't have a significant worry with that being a factor. My basic math skills seem to fail me as it seems others don't agree that it is better to keep money in my investments for the 5 years till my spouse is 70 and then also have that money that I saved in my Retirement accounts continue to grow past those 5 years.
 
It is easier to take SS early when it prevents withdrawals from the nest egg. I've still got at least a decade to decide for myself, so I'll probably be going with the default full retirement age (65 I think?). The actuaries made this decision difficult, so I guess they did their job well.
 
This could be one reason to consider taking early:

1737301956529.png


Personally, I think they will print more money so as not to take the political hit, but if not, could be more impactful.

Flieger
 
Suppose you are the higher earning spouse and your spouse would receive little in the way of Social Security and let’s also assume your spouse is 5 to 10 years older, does it not make sense to take Social Security at 62? You may outlive your spouse and the additional your spouse would receive would favor taking it as early as possible I would think.
 
Do you have heirs to consider? Or charities that you want to support?

Given your good health delaying may maximize what they get.

Your longevity may be longer than you think. Check out https://www.longevityillustrator.org/ and Lifespan Calculator – Test Your Life Expectancy || NM
pb4uski --
Thank you for linking that Lifespan Calculator. I answered all the questions honestly and I'm going to live to be 98 !!
Congress better get busy beefing up the SS Trust Fund chop quick-like !!

I've always felt the General Rule of SS Claiming Strategy was.....Don't take it until you absolutely need it. There are tax advantages in that some of the payout is tax-free. There are also Spousal benefits to consider.
In my case, I delayed until my FRA date. My buddy claimed at 62 and he crowed about all the free money he was collecting......until now, when his COLA is on a much smaller base.
 
pb4uski --
Thank you for linking that Lifespan Calculator. I answered all the questions honestly and I'm going to live to be 98 !!
Congress better get busy beefing up the SS Trust Fund chop quick-like !!
Maybe Congress should start routing RMD taxes to the SS Trust Fund. Can you imagine what % of a remaining tIRA or 401(k) balance a 98 year old must pay? Think of the taxes on that!
 
We do have two kids, but no Grandkids if that happens that could change our picture a bit. I have enjoyed many of your insights over the years on this board. What I'm really trying to rap my head around is the math of taking it later vs. earlier. If I look at it through my Fireman's mind I see the numbers and not maybe looking at it like an accountant/investor. To me if we take SS early I will have more money no matter when I or my spouse dies. We take it at 62 for me and 65 for my spouse for 5 years we collect $165k. That's $165k that I can leave in my TIRA's, Roth's, etc. Those will will see growth most likely in those 5 years, but just looking at leaving that $165k invested for the break even point, of say 81 years, which would be 16 years I would reasonably expect a nice return of lets say 5% avg. out over that time frame.
If I take it later I have to pull $165K from my portfolio over 5 years and then have that much less earning power over the next 16 years although it would be offset a bit from the higher SS payments we would receive at 70 years old.

Really appreciate everyone's feedback thus far.
Perhaps this will be helpful. It looks at the differential cash flows of two scenarios... 62 vs 70 or 67/FRA vs 70 and then calculates the IRR at various attained ages based on the differential cash flows. I highlighted 92 because the longevity calculator suggests one or the other of us will live that long.

What the analysis suggests is that if you live to 92 that you would have to earn a real return of more than 4.39% to make taking at 62 beneficial... and that's a real return... so add 2-3% for inflation and that would be a 6.39-7.39% nominal return. So how lucky do you feel? There is a separate analysis that caculate IRRs based on differential cash flows of 67 vs 70. The numbers are based n $1,000/month of PIA (benefit at FRA) but the IRRs are relevant no matter what the PIA ... if your PIA was $3,000/month then all numbers would be 3 times those shown but the IRRs would be the same.

SS at 62​
SS at 70​
Difference​
Real IRR​
SS at 67​
SS at 70​
Difference​
Real IRR​
62​
9,000​
-9,000​
63​
9,000​
-9,000​
64​
9,000​
-9,000​
65​
9,000​
-9,000​
66​
9,000​
-9,000​
0​
67​
9,000​
-9,000​
12,000​
-12,000​
68​
9,000​
-9,000​
12,000​
-12,000​
69​
9,000​
-9,000​
12,000​
-12,000​
70​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
71​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
72​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
73​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
74​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
75​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
76​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
77​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
78​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
-5.19%​
79​
9,000​
14,880​
5,880​
-2.22%​
12,000​
14,880​
2,880​
-3.31%​
80​
9,000​
14,880​
5,880​
-1.12%​
12,000​
14,880​
2,880​
-1.79%​
81​
9,000​
14,880​
5,880​
-0.20%​
12,000​
14,880​
2,880​
-0.54%​
82​
9,000​
14,880​
5,880​
0.57%​
12,000​
14,880​
2,880​
0.49%​
83​
9,000​
14,880​
5,880​
1.23%​
12,000​
14,880​
2,880​
1.36%​
84​
9,000​
14,880​
5,880​
1.80%​
12,000​
14,880​
2,880​
2.09%​
85​
9,000​
14,880​
5,880​
2.29%​
12,000​
14,880​
2,880​
2.71%​
86​
9,000​
14,880​
5,880​
2.71%​
12,000​
14,880​
2,880​
3.25%​
87​
9,000​
14,880​
5,880​
3.09%​
12,000​
14,880​
2,880​
3.70%​
88​
9,000​
14,880​
5,880​
3.41%​
12,000​
14,880​
2,880​
4.10%​
89​
9,000​
14,880​
5,880​
3.70%​
12,000​
14,880​
2,880​
4.45%​
90​
9,000​
14,880​
5,880​
3.96%​
12,000​
14,880​
2,880​
4.75%​
91​
9,000​
14,880​
5,880​
4.19%​
12,000​
14,880​
2,880​
5.02%​
92
9,000
14,880
5,880
4.39%
12,000
14,880
2,880
5.26%
93​
9,000​
14,880​
5,880​
4.57%​
12,000​
14,880​
2,880​
5.46%​
94​
9,000​
14,880​
5,880​
4.73%​
12,000​
14,880​
2,880​
5.65%​
95​
9,000​
14,880​
5,880​
4.88%​
12,000​
14,880​
2,880​
5.82%​
96​
9,000​
14,880​
5,880​
5.01%​
12,000​
14,880​
2,880​
5.96%​
97​
9,000​
14,880​
5,880​
5.13%​
12,000​
14,880​
2,880​
6.09%​
98​
9,000​
14,880​
5,880​
5.24%​
12,000​
14,880​
2,880​
6.21%​
99​
9,000​
14,880​
5,880​
5.34%​
12,000​
14,880​
2,880​
6.32%​
100​
9,000​
14,880​
5,880​
5.43%​
12,000​
14,880​
2,880​
6.42%​
 
I've been reading SS threads here for almost 20 years. My takeaway on taking it at 62 is that it's a bell shaped curve: you either desperately need the money or you don't need it at all. It's those in the middle who need to decide.

I'm in the latter camp and took it at 62.
Between DW and I it provided us with an extra ~$50k per year to do more fun things.
Tax free in our state.
Reduced our portfolio draw.
Break even at about 83.
....and the looming possibility of a haircut in 5 years.
No regrets but at the end of the day it pretty much all comes out as a wash.
 
Suppose you are the higher earning spouse and your spouse would receive little in the way of Social Security and let’s also assume your spouse is 5 to 10 years older, does it not make sense to take Social Security at 62? You may outlive your spouse and the additional your spouse would receive would favor taking it as early as possible I would think.
Here's the situation DW and I are in. I will file at age 62.5 the day she turns 67. I will get the reduced rate and she'll get 50% of my Full Retirement rate. Her benefits would not increase if I waited til 67 and she'd be out those 4.5 years.
 
Edit to add: The 8% per year benefit for waiting from 67 to 70 is not compounded.
Assuming one has a 20-25 year anticipated lifespan at age 67, reasonable for someone in a position to consider this, you're also receiving the funds for 4 to 5% fewer years.
 
I've been reading SS threads here for almost 20 years. My takeaway on taking it at 62 is that it's a bell shaped curve: you either desperately need the money or you don't need it at all. It's those in the middle who need to decide.

I'm in the latter camp and took it at 62.
Between DW and I it provided us with an extra ~$50k per year to do more fun things.
Being that my Social Security will start in a few months at 65.5, I appear to have been very near the middle. I had committed to delaying only until the beginning of 2025, and postponing further only if we didn't find it financially limiting.

We decided that we were starting to fail that test, especially with regard to travel, and that pulling 4 to 4.5% annually in monthly payments didn't allow for paying non-routine expenses like home repair.
 
...My basic math skills seem to fail me as it seems others don't agree that it is better to keep money in my investments for the 5 years till my spouse is 70 and then also have that money that I saved in my Retirement accounts continue to grow past those 5 years.
What makes you so sure your investments will grow?

The sobering reality that FIRECalc shows is, there have been times when typical portfolios had negative growth for a long time, or severe negative growth for a shorter time, and if such a period of poor investment performance happens early in your retirement this will have a very large effect on your ability to fund your retirement from a portfolio.

By contrast, the increased lifetime income from waiting to claim SS is not subject to market risk.

You can enter your Social Security benefit details both ways in FIRECalc and see how it affects your odds of success.

As far as I've been able to tell, the age at which the lower-earning (lower-benefit) spouse starts taking SS matters much less than the age at which the higher-benefit spouse does, and it's hard to imagine a scenario where it's BETTER for the high-benefit spouse to claim any earlier than age 70 if your portfolio can carry you to that age and either spouse is likely to live a long time.
 
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...it's hard to imagine a scenario where it's BETTER for the high-benefit spouse to claim any earlier than age 70 if your portfolio can carry you to that age and either spouse is likely to live a long time.
DW and I are the same age. She would get no SS on her own, but half my PIA if we wait until age 67. If we wait until 70 she gets nothing for those 3 years. On my own the break even age for taking SS at 67 vs 70 is 82. Including my spouse pushes the break even age out to 89.

I had been pretty firmly in the camp of waiting until 70, but the repeal of GPO changes the calculation enough that I'm seriously considering taking SS at FRA.
 
After reading many of these posts over the years I'm still undecided for us. I just turned 62 and DW is 70. She will receive no SS from her own work record. Calculators say to claim now so we maximize total return, but as everyone has talked about, there are other considerations. We don't really need the extra money each month and she would get a larger check if I cross the bridge first. Like most folks, I could make arguments both ways for us.
 
After reading many of these posts over the years I'm still undecided for us. I just turned 62 and DW is 70. She will receive no SS from her own work record. Calculators say to claim now so we maximize total return, but as everyone has talked about, there are other considerations. We don't really need the extra money each month and she would get a larger check if I cross the bridge first. Like most folks, I could make arguments both ways for us.
Irip, As I understand the rules of SS the Spousal benefit maxes out at age 67 for the spouse that is receiving the benefit. Your spouse who is receiving the spousal benefit for maximum dollars takes it at her age of 67 and that is based on your FRA not your actual age. There is no increase to her spousal benefit past age 67.
 
Irip, As I understand the rules of SS the Spousal benefit maxes out at age 67 for the spouse that is receiving the benefit. Your spouse who is receiving the spousal benefit for maximum dollars takes it at her age of 67 and that is based on your FRA not your actual age. There is no increase to her spousal benefit past age 67.
Heh, heh, until you die! Then she gets YOUR SS (under most circumstances.) That will be a nice bump for DW (though she'll lose her much smaller amount in the process.)

She has said that the bump will not make up for my loss - - - but it will help. :facepalm:
 
What makes you so sure your investments will grow?

The sobering reality that FIRECalc shows is, there have been times when typical portfolios had negative growth for a long time, or severe negative growth for a shorter time, and if such a period of poor investment performance happens early in your retirement this will have a very large effect on your ability to fund your retirement from a portfolio.

By contrast, the increased lifetime income from waiting to claim SS is not subject to market risk.

You can enter your Social Security benefit details both ways in FIRECalc and see how it affects your odds of success.

As far as I've been able to tell, the age at which the lower-earning (lower-benefit) spouse starts taking SS matters much less than the age at which the higher-benefit spouse does, and it's hard to imagine a scenario where it's BETTER for the high-benefit spouse to claim any earlier than age 70 if your portfolio can carry you to that age and either spouse is likely to live a long time.
Engineernerd, Thanks for the reply. I have used Firecalc for the last 12-14 years and I always liked what it showed me. I am hoping that it is accurate. When I run my numbers it shows a basically identical outcome for both scenarios. My numbers are Spending $40,000 Portfolio $1,200,000, Duration 30 years. My input for taking SS for me $9k spousal benefit and spouse $23k now vs. taking in 5 years when my Spousal Benefit maxes out at 67 $13k and spouse age 70 $33k. with constant spending power and CPI at 3%. and a total market investment at 70/30. Both show we will end up with an avg. of $5.2 million with 100% success rate and a Max amount of $10 million give or take. So it didn't really give me any answers of which is better.

I do like the numbers though. Just not sure how reliable they will be.
 
Heh, heh, until you die! Then she gets YOUR SS (under most circumstances.) That will be a nice bump for DW (though she'll lose her much smaller amount in the process.)

She has said that the bump will not make up for my loss - - - but it will help. :facepalm:
I think you're missing my point. If you spouse is already 70 you should have already started her taking her spousal benefit based off your FRA of 67 even though you are not 67 she could have started taking the maximum allowed amount of 50% of your FRA at her FRA which might even be 66 years and change. After she reached her FRA her benefit is the same as it does not increase. I did my calc. on my SS account which outlines that the max spousal benefit for me is at my FRA age of 67 and does not increase each year beyond that aside from colas.
 
The sobering reality that FIRECalc shows is, there have been times when typical portfolios had negative growth for a long time, or severe negative growth for a shorter time, and if such a period of poor investment performance happens early in your retirement this will have a very large effect on your ability to fund your retirement from a portfolio.
This seems like a good illustration. There have been two 10 year periods of negative real returns in the lifetimes of most people here.


Ten years is a very substantial chunk of the retirement of most people.
 
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