Would it be better to take Social Security at 62?

[rayvt]

What part of "Financial Independence" is it that you don't retire (early!) without having enough money?

I may be the only one, but I don't understand this question.

It was in response to "...not outliving your money is likely the most important consideration..." (#290)

Financially Independent means "... a state where an individual or household has accumulated sufficient financial resources to cover its living expenses without having to depend on active employment or work to earn money in order to maintain its current lifestyle."
ref: google wikipedia, investopedia, etc.

Therefore, "Financial Independence" means that you do not need any Social Security income above the age 62 amount.


Obviously my comment was a bit obscure. I have a hard view on what financially independent means. If you have to play games with SS income, that means you are not F.I.

Especially when then is a non-zero risk of the government curtailing SS payouts in the future.

 

[pb4uski]

FIRE and when to take SS are so totally different questions. ...

I'm appalled at the number of people that I run into whose mindset is that if you retire/stop working that you must start SS. The idea of living off of retirement savings after retiring and starting SS at some later time doesn't even cross their minds.

 

[rayvt]

I ask chatGPT, it wrote several paragraphs, but it concluded with,

"In essence, the responder seems to be emphasizing that the very essence of the FIRE movement is retiring early but doing so only when an individual has achieved financial independence, negating the need to wait until 70 or until Social Security becomes a necessity."
In essence, the responder seems to be emphasizing that the very essence of the FIRE movement is retiring early but doing so only when an individual has achieved financial independence, negating the need to wait until 70 or until Social Security becomes a necessity.

HOLY CRAP!! chatGPT is scary. It stated my position better than I did. Scary smart.(?)

...express critical perspective...

Yup. Better wording than the typical "rayvt is being a curmudgeon again."

 

[pb4uski]

HOLY CRAP!! chatGPT is scary. It stated my position better than I did. Scary smart.(?)


Yup. Better wording than the typical "rayvt is being a curmudgeon again."

I find your description of "rayvt is being a curmudgeon again." easier to understand.

 

[rayvt]

Maybe I should have asked chatGPT about the detailed rules of doing an IRA 60-day rollover of an in-kind stock distribution instead of spending hours googling and reading IRS publications.

 

[pb4uski]

Perhaps, but in my experience with AI you need to take the results with a grain of salt. I had one recent experience where Bard suggested that there was a 7-day rollover rule for tIRA withdrawals if you redeposit the exact same amount within 7-days that there were unlimited rollover, but upon further research I can't find anythin on it or even get Bard (now called Gemini) to recreate it.

I find it more useful where I think I know the answer to confirm it. But it does do a nice job of organizing available data and is much better than a listing of 20 links that may or may not be relevant to the question.

 

[ERD50]

It was in response to "...not outliving your money is likely the most important consideration..." (#290)

Financially Independent means "... a state where an individual or household has accumulated sufficient financial resources to cover its living expenses without having to depend on active employment or work to earn money in order to maintain its current lifestyle."
ref: google wikipedia, investopedia, etc.

Therefore, "Financial Independence" means that you do not need any Social Security income above the age 62 amount.


Obviously my comment was a bit obscure. I have a hard view on what financially independent means. If you have to play games with SS income, that means you are not F.I.

Especially when then is a non-zero risk of the government curtailing SS payouts in the future.

I feel that the reason you are getting push-back on this is, you are using the term as if it has a precise definition. Sure, you can quote a definition, but it's just not so cut-and-dried in real life. I'd say that definition is a starting point for discussion, not the end-all be-all.

This isn't like 2+2=4. "Financial Independence" involves the future, so there are unknowns. How much buffer/margin an individual is comfortable with is a personal decision. And some people may not have much opportunity to keep working and build up their nest egg.

Therefore, "Financial Independence" means that you do not need any Social Security income above the age 62 amount.

What if I entered a scenario into FIRECalc or FICalc that showed taking SS at 62 resulted in 2% failure, but taking at 70 provided 0% failures? Then I meet your definition, but needed to wait.

-ERD50

 

[pb4uski]

I think the reality is that if you are FI taking SS at FRA you are also FI taking SS at 62 or 70... IOW, whether you are FI or not isn't hugely sensitive to when you take SS so at the end of the day it is a distinction without a difference.

I ran 3 FIRECalc scenarios. Default values except added $24k SS at 62 assuming subject is currently 62 year old. First I started with $24k SS starting in 2024 (62) and solved for safe spending at 95% of $54,287 so I changed spending to $54,000.

SS at 62: 95.1% success rate and $54,287 of safe spending
SS at 67: 100% success rate and $57,239 of safe spending
SS at 70: 99.2% success rate and $56,744 of safe spending

IMO, all of those are so close they are within the margin of error so it ends up being a distinction without a difference.

 

[Gumby]

It was in response to "...not outliving your money is likely the most important consideration..." (#290)

Financially Independent means "... a state where an individual or household has accumulated sufficient financial resources to cover its living expenses without having to depend on active employment or work to earn money in order to maintain its current lifestyle."
ref: google wikipedia, investopedia, etc.

Therefore, "Financial Independence" means that you do not need any Social Security income above the age 62 amount.


Obviously my comment was a bit obscure. I have a hard view on what financially independent means. If you have to play games with SS income, that means you are not F.I.

Especially when then is a non-zero risk of the government curtailing SS payouts in the future.

Thanks for clearing that up. From my personal point of view, I probably would not have retired when I did if the difference between starting SS at 62 and 70 was a substantial factor in computing my success rate. I would have felt that was cutting things too close.

 

[Mountain Climber]

But that is rare. Besides, if the doctor tells you at 65 that you have X months to live is your first thought really going to be... oh, boy, I'm glad (or wish) that I started SS at 62!

True, but there are some situations which may change your plan for taking SS as late as possible. An unexpected, completely out-of-the-blue open-heart double bypass (CAD) made me "flip the switch" within a month of the surgery!!

 

[Koolau]

You are NOT the only one!

Very few of us can be certain we have enough. It's almost always a mixture of probabilities and a leap of faith.

-ERD50

Yeah, even folks who retire LATE may have the same anxieties. YMMV

 

[Koolau]

Maybe I should have asked chatGPT about the detailed rules of doing an IRA 60-day rollover of an in-kind stock distribution instead of spending hours googling and reading IRS publications.

I'd rather ask it whether to "Keep or pay-off the mortgage" before FIRE.

 

[Koolau]

To me, the 62 vs 70 for SS was never about whether I was FI or not. It was about maximizing "something" by manipulating my SS date. In my case, it was maximizing survivor benefit for DW. I've mentioned before that she and I intentionally increased my pension payout beginning at 58 by lowering her survivor benefit from 50% to 25%. To compensate for this, I did SS at 70. Nothing to do with FI as such. It was a strategic part of my FIRE plan. YMMV

 

[Time2]

I'd rather ask it whether to "Keep or pay-off the mortgage" before FIRE.

LOL
I'm not even going to ask chatGPT, it's circuits might over heat.

 

[latexman]

In my case, it was maximizing survivor benefit for DW.

Me too.

 

[Bigdawg]

To me, the 62 vs 70 for SS was never about whether I was FI or not. It was about maximizing "something" by manipulating my SS date. In my case, it was maximizing survivor benefit for DW. I've mentioned before that she and I intentionally increased my pension payout beginning at 58 by lowering her survivor benefit from 50% to 25%. To compensate for this, I did SS at 70. Nothing to do with FI as such. It was a strategic part of my FIRE plan. YMMV

And this^ is why the 62-70 question is different for not only each couple but for each person. No survivor beni for me or DW. Our career earning will be almost identical. Her's may be a tad larger depending on when she actually pulls the plug. No need for a larger payout to cover LTC later because we have (will have) a total of 7 COLA pensions. The only thing our SS will go for is vacation/discretionary spending. I'm noticing my neighbors (age 74 & 73) are transitioning from GO-GO to slower GO time in their lives. Personally (planning on) taking it at 65 to coincide with medicare. I am suggesting to the DW (she is 6 years younger) wait until 70 because I'm projecting her having 10-15 at the end without me. When folks on here give their reasons for taking SS at a certain age, it makes sense to me. It fits for them.

 

[LateToFIRE]

And this^ is why the 62-70 question is different for not only each couple but for each person. No survivor beni for me or DW. Our career earning will be almost identical. Her's may be a tad larger depending on when she actually pulls the plug. No need for a larger payout to cover LTC later because we have (will have) a total of 7 COLA pensions. The only thing our SS will go for is vacation/discretionary spending. I'm noticing my neighbors (age 74 & 73) are transitioning from GO-GO to slower GO time in their lives. Personally (planning on) taking it at 65 to coincide with medicare. I am suggesting to the DW (she is 6 years younger) wait until 70 because I'm projecting her having 10-15 at the end without me. When folks on here give their reasons for taking SS at a certain age, it makes sense to me. It fits for them.

Hmmm, I've been all over the map on this question. Just this morning I was stress testing my numbers. Was planning to wait until 67, but now thinking about age 65, as you said to coincide with Medicare, but also that's about when all the other moving pieces in our financial picture should settle into a nice stable routine and it'd just be nice to not have to think about it anymore. In my case it'll be a benefit of ~$40K at 65 vs ~$50K at 67. And yes, even putting physical/medical issues aside, I'm noticing GO-GO to Slower-GO seems to occur mid-late 70's. Just a desire to stay closer to home, keep life simple.

 

[Midpack]

I'm appalled at the number of people that I run into whose mindset is that if you retire/stop working that you must start SS. The idea of living off of retirement savings after retiring and starting SS at some later time doesn't even cross their minds.

None of the guys I play golf with waited, much less waited until age 70. They’re mystified that I’ve waited, and shocked at what the max benefit is at age 70 (they had no idea). Most of them have a sizable pension of some sort, so SS isn’t crucial. As you note, it didn’t even occur to most of them.

Had this discussion with a couple guys Friday, and one guy told me the breakeven age for waiting was 87. That’s nonsense unless you score outsized returns after claiming at 62. Ironically most of them don’t know anything about investing, they use retail FAs, and there’s no chance any of them would be 100% equities. I usually stay silent when investing comes up, though well off, they’re all comically unaware of financial planning.

It all comes down to need and projected longevity. This take it and invest early debate is moot for most. Another example of finding a source that tells you what you want to hear, easier than ever in the internet age.

 

[mathjak107]

None of the guys I play golf with waited, much less waited until age 70. Most of them have a pension of some sort. As you note, it didn’t even occur to most of them.

Had this discussion with a couple guys Friday, and one guy told me the breakeven age for waiting was 87. That’s nonsense unless you score outsized returns after claiming at 62. Ironically most of them don’t know anything about investing, they use retail FAs, and there’s no chance they’d be 100% equities.

It all comes down to need and projected longevity. This take it and invest early debate is moot for most.

for us it wasn’t take it and invest it ..it was a case of stopping the bleeding of our own invested dollars being used to support us .

on top of our normal draw we would take , we were fronting our selves the social security too we were not getting.

we were pulling out an extra 50k a year to compensate for the ss checks on top of the normal draw from our accounts .

at 65 we said enough of this and filed.

today our portfolio grew enough so our income is higher at 71 now then had we delayed to70-and continued pulling out the money we weren’t .

for us if worked out well but other outcomes it may not .it can take up to age 90 for delaying ss to equal a 5% real return from a balanced portfolio

“ Since benefits not paid from 62 to 70 represents forgone investment opportunity, Mr. Kitces said it is critical to account for inflation, which he assumes to be 3%, and a time-value-of-money factor, which he assumes is 6% based on a balanced portfolio rate of return.

Using those assumptions, he calculates it would take 22 years to recover from the decision to delay collecting $750 per month in Social Security benefits. But beyond 84, the decision to delay Social Security continues to accrue exponentially, not just in the form of the higher delayed benefits but continuing cost-of-living adjustments.


Mr. Kitces noted the break-even point is sensitive to the return assumption used — the higher the rate of return, the longer the break-even period. Conversely, with more conservative return assumptions, the break-even point is reached more quickly.

“Those who reach age 90 (which would be the 28th year after delaying) have generated the equivalent of a 5% real rate of return in what is essentially a government-backed bond,” he wrote.

The payments produced by Social Security also dominate the nominal or real payments available from a comparable fixed or inflation-adjusted annuity, Mr. Kitces added. “This appears due primarily to the assumptions that are embedded in the Social Security formulas and benefits, many of which were built when longevity was shorter and interest rates were higher,” he explained.

Mr. Kitces concluded that the decision to delay Social Security is far superior to any risk-adjusted returns that can be achieved over comparable periods by the available alternatives, including risk-free bonds, growth-oriented equities or annuities.

“Ultimately, the decision to delay Social Security delivers the best results when there is either unexpected inflation, unusually long longevity or especially bad market returns, which are the exact three scenarios that traditional portfolios are the least effective at managing,” he wrote.

“Making the decision to delay Social Security,” Mr. Kitces wrote, “is the ultimate form of ‘anti-fragile’ triple hedge.”


https://www.investmentnews.com/reti...itces argued that delaying Social,Kitces said.

 

[jazz4cash]

I'm appalled at the number of people that I run into whose mindset is that if you retire/stop working that you must start SS. The idea of living off of retirement savings after retiring and starting SS at some later time doesn't even cross their minds.

It was the same for my mega-corp pension. Several co-workers were wide-eyed when I described waiting until ‘62 to get a higher payout. Nobody bothers to read the plan prospectus.

 

[LateToFIRE]

for us it wasn’t take it and invest it ..it was a case of stopping the bleeding of our own invested dollars being used to support us .

on top of our normal draw we would take , we were fronting our selves the social security too we were not getting.

we were pulling out an extra 50k a year to compensate for the ss checks on top of the normal draw from our accounts .

at 65 we said enough of this and filed.

today our portfolio grew enough so our income is higher at 71 now then had we delayed to70-and continued pulling out the money we weren’t .

for us if worked out well but other outcomes it may not .it can take up to age 90 for delaying ss to equal a 5% real return from a balanced portfolio

“ Since benefits not paid from 62 to 70 represents forgone investment opportunity, Mr. Kitces said it is critical to account for inflation, which he assumes to be 3%, and a time-value-of-money factor, which he assumes is 6% based on a balanced portfolio rate of return.

Using those assumptions, he calculates it would take 22 years to recover from the decision to delay collecting $750 per month in Social Security benefits. But beyond 84, the decision to delay Social Security continues to accrue exponentially, not just in the form of the higher delayed benefits but continuing cost-of-living adjustments.


Mr. Kitces noted the break-even point is sensitive to the return assumption used — the higher the rate of return, the longer the break-even period. Conversely, with more conservative return assumptions, the break-even point is reached more quickly.

“Those who reach age 90 (which would be the 28th year after delaying) have generated the equivalent of a 5% real rate of return in what is essentially a government-backed bond,” he wrote.

The payments produced by Social Security also dominate the nominal or real payments available from a comparable fixed or inflation-adjusted annuity, Mr. Kitces added. “This appears due primarily to the assumptions that are embedded in the Social Security formulas and benefits, many of which were built when longevity was shorter and interest rates were higher,” he explained.

Mr. Kitces concluded that the decision to delay Social Security is far superior to any risk-adjusted returns that can be achieved over comparable periods by the available alternatives, including risk-free bonds, growth-oriented equities or annuities.

“Ultimately, the decision to delay Social Security delivers the best results when there is either unexpected inflation, unusually long longevity or especially bad market returns, which are the exact three scenarios that traditional portfolios are the least effective at managing,” he wrote.

“Making the decision to delay Social Security,” Mr. Kitces wrote, “is the ultimate form of ‘anti-fragile’ triple hedge.”


https://www.investmentnews.com/reti...itces argued that delaying Social,Kitces said.

You probably said, but wondering what your SS plan is?

 

[mathjak107]

You probably said, but wondering what your SS plan is?

my wife took it almost 9 years ago at 62 … i am two years older and took it at 65 .

i still worked one day a week so i made to much to file earlier .

my fra was 66 but in the year you will be fra i was allowed 3x as much so 65 worked .

plus running a balanced portfolio all these years

 

[statsman]

I'm certain we did not "optimize" our SS plan. For some people, having SS earlier reduced their stress level. That's my DW. She chose to start at 65 to coincide with starting Medicare (as mentioned by others on this thread).

Our work records were similar, and my SS payment at 65 (soon!) will be about 7% higher than her current payment. But DW is 6+ years older than I am, so a survivor benefit hasn't been a consideration for me to wait longer.

I've run the numbers on opensocialsecurity.com, and the difference between me starting at 65 and starting at 70 is less than $20K. My modest non-COLA pension (and I do mean modest compared to some of the numbers I've seen here) is enough to cover that difference in less than a year. I figure this low delta is based on DW having already started at 65.

 

[mathjak107]

kitces raised some valid points .

if the biggest bucks were all we wanted then 100% equities with early ss would win easy .

but obviously for most it isn’t about the biggest balance .

delaying ss he says is the perfect triple hedge against all the things portfolios are not . inflation , longevity and poor markets .

like any hedge there is a cost to that hedge .

since most of us won’t live to 90 to equal a 5% real return from ss the early ss and investing would likely win .

but for a small price we can hedge all that investing sucks at even if we don’t live to get that 5% from ss

 

[Wile E. Coyote]

for us it wasn’t take it and invest it ..it was a case of stopping the bleeding of our own invested dollars being used to support us .

on top of our normal draw we would take , we were fronting our selves the social security too we were not getting.

we were pulling out an extra 50k a year to compensate for the ss checks on top of the normal draw from our accounts .

at 65 we said enough of this and filed.

today our portfolio grew enough so our income is higher at 71 now then had we delayed to70-and continued pulling out the money we weren’t .

for us if worked out well but other outcomes it may not .it can take up to age 90 for delaying ss to equal a 5% real return from a balanced portfolio

“ Since benefits not paid from 62 to 70 represents forgone investment opportunity, Mr. Kitces said it is critical to account for inflation, which he assumes to be 3%, and a time-value-of-money factor, which he assumes is 6% based on a balanced portfolio rate of return.

Using those assumptions, he calculates it would take 22 years to recover from the decision to delay collecting $750 per month in Social Security benefits. But beyond 84, the decision to delay Social Security continues to accrue exponentially, not just in the form of the higher delayed benefits but continuing cost-of-living adjustments.


Mr. Kitces noted the break-even point is sensitive to the return assumption used — the higher the rate of return, the longer the break-even period. Conversely, with more conservative return assumptions, the break-even point is reached more quickly.

“Those who reach age 90 (which would be the 28th year after delaying) have generated the equivalent of a 5% real rate of return in what is essentially a government-backed bond,” he wrote.

The payments produced by Social Security also dominate the nominal or real payments available from a comparable fixed or inflation-adjusted annuity, Mr. Kitces added. “This appears due primarily to the assumptions that are embedded in the Social Security formulas and benefits, many of which were built when longevity was shorter and interest rates were higher,” he explained.

Mr. Kitces concluded that the decision to delay Social Security is far superior to any risk-adjusted returns that can be achieved over comparable periods by the available alternatives, including risk-free bonds, growth-oriented equities or annuities.

“Ultimately, the decision to delay Social Security delivers the best results when there is either unexpected inflation, unusually long longevity or especially bad market returns, which are the exact three scenarios that traditional portfolios are the least effective at managing,” he wrote.

“Making the decision to delay Social Security,” Mr. Kitces wrote, “is the ultimate form of ‘anti-fragile’ triple hedge.”


https://www.investmentnews.com/reti...itces argued that delaying Social,Kitces said.

I think you should post a link to where they can see his whole write up and everything he said about social security.

..."Which means that ultimately, delaying Social Security benefits provides superior risk-adjusted returns to equities and portfolio investing in the long run, both with the current system and even if it’s not otherwise “fixed” as well. Obviously, this is not true in the short run– as noted earlier, it takes more than 15 years to breakeven at all. Yet if the retiree’s time horizon was that short, the proper investment would not likely be equities anyway. In scenarios where there is a long-time horizon, and the retiree wishes to hedge longevity by owning a portfolio with long-term growth assets, the reality is that delaying Social Security becomes the superior “long-term growth asset” for the retiree. In other words, spending portfolio assets to delay Social Security becomes the equivalent of liquidating a “low” return asset to buy a “higher” return one instead!...

https://www.kitces.com/blog/how-del...ong-term-investment-or-annuity-money-can-buy/