Social security at 62 vs 70
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Social security at 62 vs 70
It seems to be conventional wisdom on the forum that delaying social security until age 70 is a superior strategy to taking it earlier. I'm hoping someone can explain to me why that is. I'm an early retiree at age 52, and according to the SSA calculator, taking SS at 62 gets me $1701 per month, and delaying until age 70 gets me $2878 per month. If I take SS at age 62 and assume a modest rate of return from investing it (2%) I have to live to age 84 for the numbers to work in favor of delaying SS until 70. I can see pros and cons to either approach, so what am I missing that makes delaying SS so attractive?
Re: Social security at 62 vs 70
The critical issue is that SS is a life annuity. That means it is insurance against living too long. The critical issue is how to maximize the income that will be available if one lives to a very advanced age.
A consequence to taking on longevity insurance is the same as the consequence for any insurance; if you don't need the insurance, you will have wasted your premium. Those who die prematurely do not much benefit from SS and especially do not benefit from delaying.
The question is what kind of bets you want to make about how long you will live.
A consequence to taking on longevity insurance is the same as the consequence for any insurance; if you don't need the insurance, you will have wasted your premium. Those who die prematurely do not much benefit from SS and especially do not benefit from delaying.
The question is what kind of bets you want to make about how long you will live.
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Re: Social security at 62 vs 70
Here's a simple explanation: Delay Social Security to age 70 and Spend more money at 62
Last edited by longinvest on Mon Oct 14, 2013 2:06 pm, edited 2 times in total.
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Re: Social security at 62 vs 70
Living past 84?
More seriously, delaying SS is nothing more than delaying when you purchase an annuity. Think of it as SS gives you $X at age 62 that can be used to purchase either a SPIA or a SPDA that takes affect at 70 (or earlier if you want...) If you're the statistically average person you should receive the same (inflation/return-adjusted) dollars either way. So then the question becomes one of what happens if you're not the statistically average person?
You could die before your actuarially calculated time. If that happens and you took SS at 62, you've collected more than if you'd taken it later and thus have a larger legacy to leave.
Or you could die after your actuarially calculated time. If that happens and you took SS at 62, you're having to fund much of those extra years yourself and will have a smaller legacy (remember, payout up until your actuarially expected age of death is the same!). Perhaps even exhausting your non-SS assets and living on that smaller SS payment until you're 95. And there's a big difference in what $1700/month and $2800/month will let you afford...
Personally out of "leaving less behind" and "outliving my assets", the latter is the risk that I believe has the harshest consequences. I think other people believe this as well. Hence the conventional wisdom to delay.
More seriously, delaying SS is nothing more than delaying when you purchase an annuity. Think of it as SS gives you $X at age 62 that can be used to purchase either a SPIA or a SPDA that takes affect at 70 (or earlier if you want...) If you're the statistically average person you should receive the same (inflation/return-adjusted) dollars either way. So then the question becomes one of what happens if you're not the statistically average person?
You could die before your actuarially calculated time. If that happens and you took SS at 62, you've collected more than if you'd taken it later and thus have a larger legacy to leave.
Or you could die after your actuarially calculated time. If that happens and you took SS at 62, you're having to fund much of those extra years yourself and will have a smaller legacy (remember, payout up until your actuarially expected age of death is the same!). Perhaps even exhausting your non-SS assets and living on that smaller SS payment until you're 95. And there's a big difference in what $1700/month and $2800/month will let you afford...
Personally out of "leaving less behind" and "outliving my assets", the latter is the risk that I believe has the harshest consequences. I think other people believe this as well. Hence the conventional wisdom to delay.
Re: Social security at 62 vs 70
there are many posts on this board giving a range of disparate views. i suggest you search
Re: Social security at 62 vs 70
62 vs. 70? I chose 62 because of reasons relating to health. I also had the thought that if after paying into SS for 44 years money was available to me at 62 why should I say 'no thanks, I'll wait' with the hope that I'd live 8 more years before drawing the first dollar and then continue to be alive for 14 more years so that I'd break even . I have no regrets taking SS early because there are no guarantees in life.
To quote John Lennon--"Life is what happens while you're busy making other plans."
To quote John Lennon--"Life is what happens while you're busy making other plans."
Re: Social security at 62 vs 70
Is there anything you want to do that you are passing up because you decided to delay SS to age 70? If there is, then one should think about what one is doing. For many people delaying SS does not imply any less enjoyment of life now. For some people it does, and that should affect the decision.
Re: Social security at 62 vs 70
If you are single it is a bit more straightforward. Providing for surviving spouse adds benefit as AFAIK that is not considered in the break-even point.
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Re: Social security at 62 vs 70
Missing:matonplayer wrote: If I take SS at age 62 and assume a modest rate of return from investing it (2%) I have to live to age 84 for the numbers to work in favor of delaying SS until 70.
(1) Your numbers are a little off toward making delay less favorable. The ratio of the age 70 to the 62 amounts should be 1.77 (for FRA age = 67). Your number is 2878/1701 = 1.692.
(2) You can only invest the after tax portion of your SS check. If you have enough income to live on to save all your SS you probably won't be in the zero tax bracket.
(3) If married, you need to analyze considering yourself/spouse as one unit. Lower earner claims early and higher earner claims late and takes spousal while delaying. When one dies, the surviving spouse is left with the highest earner's SS payment amount. That is the major driver favoring delay for married people. IMO, for single people delay isn't so no-brainer attractive.
(4) the old age insurance aspect that dbr mentioned.
JW
Retired at Last
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Re: Social security at 62 vs 70
Good point. I have not taken my spouse's benefit options into account.BL wrote:If you are single it is a bit more straightforward. Providing for surviving spouse adds benefit as AFAIK that is not considered in the break-even point.
Re: Social security at 62 vs 70
What you are missing, which a surprising number of intelligent people miss, is that if you have decent retirement savings then SS is essentially longevity insurance. It protects the "floor" of your retirement portfolio, the worst case outcome. It does the best job of that at the lowest cost compared to market options when delayed to 70. That's its big advantage.
Those who mistakenly claim it doesn't matter whether you do it at 62 or 70 because it is actuarially the same fail to understand this concept. Deferring portfolio spending by drawing SS at 62 is riskier than drawing on your portfolio at 62 and deferring SS until 70 as the later case provides more longevity insurance than the former.
Despite 62 and 70 giving the same actuarial expected return (mean return) drawing at 62 is more volatile in that both the best and worst case portfolio outcomes expand. Since most people are guarding against the downside more than the potential upside deferring SS in general is better.
There are of course exceptions, terminally ill 62 year olds would be one. Another would be someone with no retirement savings or income at all at 62 who doesn't have a choice in the matter. But in the more general case in which you have savings to spend until 70 deferring SS gives the best path to portfolio success. Don't fall for the "it's all the same" or "my family dies young" arguments as neither are really relevant and miss the point in almost all cases.
Those who mistakenly claim it doesn't matter whether you do it at 62 or 70 because it is actuarially the same fail to understand this concept. Deferring portfolio spending by drawing SS at 62 is riskier than drawing on your portfolio at 62 and deferring SS until 70 as the later case provides more longevity insurance than the former.
Despite 62 and 70 giving the same actuarial expected return (mean return) drawing at 62 is more volatile in that both the best and worst case portfolio outcomes expand. Since most people are guarding against the downside more than the potential upside deferring SS in general is better.
There are of course exceptions, terminally ill 62 year olds would be one. Another would be someone with no retirement savings or income at all at 62 who doesn't have a choice in the matter. But in the more general case in which you have savings to spend until 70 deferring SS gives the best path to portfolio success. Don't fall for the "it's all the same" or "my family dies young" arguments as neither are really relevant and miss the point in almost all cases.
Re: Social security at 62 vs 70
That is the main reason I am delaying. The spouse is 5 years younger and expected to live even older. Delaying maximizes her payment for many more years after I am gone.matonplayer wrote:Good point. I have not taken my spouse's benefit options into account.BL wrote:If you are single it is a bit more straightforward. Providing for surviving spouse adds benefit as AFAIK that is not considered in the break-even point.
Re: Social security at 62 vs 70
I agree with all the replies above, esp DBR and THX1138's posts.thx1138 wrote:What you are missing, which a surprising number of intelligent people miss, is that if you have decent retirement savings then SS is essentially longevity insurance. It protects the "floor" of your retirement portfolio, the worst case outcome. It does the best job of that at the lowest cost compared to market options when delayed to 70. That's its big advantage.
Those who mistakenly claim it doesn't matter whether you do it at 62 or 70 because it is actuarially the same fail to understand this concept. Deferring portfolio spending by drawing SS at 62 is riskier than drawing on your portfolio at 62 and deferring SS until 70 as the later case provides more longevity insurance than the former.
Despite 62 and 70 giving the same actuarial expected return (mean return) drawing at 62 is more volatile in that both the best and worst case portfolio outcomes expand. Since most people are guarding against the downside more than the potential upside deferring SS in general is better.
There are of course exceptions, terminally ill 62 year olds would be one. Another would be someone with no retirement savings or income at all at 62 who doesn't have a choice in the matter. But in the more general case in which you have savings to spend until 70 deferring SS gives the best path to portfolio success. Don't fall for the "it's all the same" or "my family dies young" arguments as neither are really relevant and miss the point in almost all cases.
I plan on deferring until 70.
I don't know how long I'll live. Medical care keeps getting better and better. And so, I want some sort of inflation adjusted annuity to provide a floor.
((That was a great movie - by the way: http://www.imdb.com/title/tt0066434/))
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Re: Social security at 62 vs 70
If you are planning on living less than 84 years of age for the rest of your portfolio too, I would counsel you that you or your spouse might live well into their 90s. I think anyone here that has their retirement plan set to live less than 84 years of age would be risking running out of money. Having money left in your portfolio as well as a larger social security check in your late 80s would be added security.matonplayer wrote:It seems to be conventional wisdom on the forum that delaying social security until age 70 is a superior strategy to taking it earlier. I'm hoping someone can explain to me why that is. I'm an early retiree at age 52, and according to the SSA calculator, taking SS at 62 gets me $1701 per month, and delaying until age 70 gets me $2878 per month. If I take SS at age 62 and assume a modest rate of return from investing it (2%) I have to live to age 84 for the numbers to work in favor of delaying SS until 70. I can see pros and cons to either approach, so what am I missing that makes delaying SS so attractive?
If you do not have a large enough Portfolio to live on until age 70, you should probably take the early social security at age 62.
Re: Social security at 62 vs 70
We will delay until 70 exactly for the reason that it is excellent longevity insurance. Also my spouse makes significantly less so it is likely she'll claiming her spousal benefit someday and delaying allows it to be larger. We'd rather draw down the portfolio in a period of our choosing and then let an annuity and social security protect us in the event we live longer than expected.
We will re-evaluate delaying once we reach full retirement age, if not having social security is adversely affecting our lifestyle we'll probably claim but definitely will not be claiming early.
We will re-evaluate delaying once we reach full retirement age, if not having social security is adversely affecting our lifestyle we'll probably claim but definitely will not be claiming early.
Re: Social security at 62 vs 70
Now exactly how long are your going to live? That is, of course, that ulitmate question.
If you die before you start taking it at any age you get nothing of course. This isn't a savings account that you are drawing on.
In this case the difference between 62 and 70 is about $1,177 a month or about $14,124 a year. (Once you have reached age 70.)
On a million dollar portfolio that is 0.014%. When you look at that in terms of market up/down on a $1M portfolio over the course of a year you can gain and lose that in 1 day.
Use the government's money (OPM) and let your portfolio ride.
If you die before you start taking it at any age you get nothing of course. This isn't a savings account that you are drawing on.
In this case the difference between 62 and 70 is about $1,177 a month or about $14,124 a year. (Once you have reached age 70.)
On a million dollar portfolio that is 0.014%. When you look at that in terms of market up/down on a $1M portfolio over the course of a year you can gain and lose that in 1 day.
Use the government's money (OPM) and let your portfolio ride.
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Re: Social security at 62 vs 70
There are many very good discussions about this issue on here, many well worth reading. They will pop up if you do a search.
This was one excellent thread.
http://www.bogleheads.org/forum/viewtop ... 0&t=102609
This was one excellent thread.
http://www.bogleheads.org/forum/viewtop ... 0&t=102609
Re: Social security at 62 vs 70
Assuming you are not impacted by GPO (Government Pension Offset).Mick wrote:
That is the main reason I am delaying. The spouse is 5 years younger and expected to live even older. Delaying maximizes her payment for many more years after I am gone.
http://www.socialsecurity.gov/retire2/gpo.htmYour Noncovered Pension May Affect Your Benefits As Spouse or Widow/Widower
If you receive a pension from a government job in which you did not pay Social Security taxes, some or all of your Social Security spouse's, widow's or widower's benefit may be offset due to receipt of that pension. This offset is referred to as the Government Pension Offset, or GPO.
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Re: Social security at 62 vs 70
Sorry your math is faulty. The number is actually 1.4% additional per year that is inflation adjusted, and can pass to a spouse. People argue whether 3 or 4 percent a year is the correct SWR. Adding another 1.4% SWR a year is real money! Delaying S.S. also lets you spend more money in your 60s when you want to be more active. I can tell you have not given this matter much thought. If you want to see how you get to spend more money in retirement by delaying to age 70, read the following thread.derosa wrote:Now exactly how long are your going to live? That is, of course, that ulitmate question.
If you die before you start taking it at any age you get nothing of course. This isn't a savings account that you are drawing on.
In this case the difference between 62 and 70 is about $1,177 a month or about $14,124 a year. (Once you have reached age 70.)
On a million dollar portfolio that is 0.014%. When you look at that in terms of market up/down on a $1M portfolio over the course of a year you can gain and lose that in 1 day.
Use the government's money (OPM) and let your portfolio ride.
http://www.bogleheads.org/forum/viewtop ... y#p1489452
Re: Social security at 62 vs 70
It must be said that generalizations are made all the time - these can be dangerous.matonplayer wrote:It seems to be conventional wisdom on the forum that delaying social security until age 70 is a superior strategy to taking it earlier. I'm hoping someone can explain to me why that is. I'm an early retiree at age 52, and according to the SSA calculator, taking SS at 62 gets me $1701 per month, and delaying until age 70 gets me $2878 per month. If I take SS at age 62 and assume a modest rate of return from investing it (2%) I have to live to age 84 for the numbers to work in favor of delaying SS until 70. I can see pros and cons to either approach, so what am I missing that makes delaying SS so attractive?
This topic, logically, should be a decision that is based on personal facts (DNA, habits, savings, wants/wishes, etc. etc). As I posted in another thread, SS maximum benefits approximate each other as follows.
1. Some people have NO CHOICE... 62 or bust.YDNAL wrote:This is what I get using maximum SS benefits for 2013 and adjusting for 2.5% annual inflation.
http://ssa-custhelp.ssa.gov/app/answers ... de]Benefit Age 62 66 70 Approximation
Through Age 81 589,469 589,081 554,581 62 ≈ 66
Through Age 82 664,172 678,227 661,392 62 ≈ 70
Through Age 84 742,657 771,885 773,609 66 ≈ 70[/code]
2. Others, with a choice, may see 62-70 as perhaps MOST productive years in retirement, and they wish to do all important things they wish to do.
3. Now, looking at your numbers and keeping it apples to apples, you either burn $2878 monthly, adjusted for inflation, for 8 years from your own savings -- or -- burn $1177 ($2878 - $1701) in hope that reduced consumption will prove beneficial to you and/or your estate. You need to evaluate YOUR personal circumstances and make your decision accordingly.
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
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Re: Social security at 62 vs 70
this may be off-topic, and I'm certainly not an expert on Social Security, but I just wanted to remind married folks to consider increasing lifetime Social Security benefits by investigating the following strategies:
(1) "claim and switch" (e.g. lower earning spouse starts own benefits at 62; higher earner files for spousal benefit at FRA (66 for most); then at 70 higher earner switches to own benefits. or
(2)"file and suspend" (e.g. higher earner claims at FRA,& spouse immediately files for spousal benefit. The higher earner suspends payment until 70 (to get higher payments). The goal should be to maximize lifetime earnings for the couple, but also to ensure that the younger spouse's survivor benefits are maximized.
As always, the discussion in the Wiki is excellent (thanks to the authors!) & there are links to good sites which describe claiming strategies. There are also paid sites which evaluate various strategies, but I haven't used them so I am unwilling to list them. Other Forum members may have information on the fee-based services to share with married Forum members. As the Wiki correctly notes, please be sure to consider taxation issues if either of you is still working.
Having some social security payments coming in to the family while you wait makes it easier to forego payments until age 70 & reap the benefits described above by other posters.
(1) "claim and switch" (e.g. lower earning spouse starts own benefits at 62; higher earner files for spousal benefit at FRA (66 for most); then at 70 higher earner switches to own benefits. or
(2)"file and suspend" (e.g. higher earner claims at FRA,& spouse immediately files for spousal benefit. The higher earner suspends payment until 70 (to get higher payments). The goal should be to maximize lifetime earnings for the couple, but also to ensure that the younger spouse's survivor benefits are maximized.
As always, the discussion in the Wiki is excellent (thanks to the authors!) & there are links to good sites which describe claiming strategies. There are also paid sites which evaluate various strategies, but I haven't used them so I am unwilling to list them. Other Forum members may have information on the fee-based services to share with married Forum members. As the Wiki correctly notes, please be sure to consider taxation issues if either of you is still working.
Having some social security payments coming in to the family while you wait makes it easier to forego payments until age 70 & reap the benefits described above by other posters.
Re: Social security at 62 vs 70
There are heated discussions on this topic as you may know. Count me in the delay if you can camp. Many put a lot of emphasis on the breakeven point at say mid 80s. My feeling for delay if you can afford it is that starting at age 70 you and your spouse will have higher and inflation indexed income for the life of who lives longer.
For me the delay is from 62 to 70. I have to wait and fund 8 years before getting the benefit. I am in reasonably good health, have the means to fund the 8 years and still have a decent standard of living. If circumstances change e.g. health or finances I can always take it at any age between 62 to 70. So, it isn't a one time option. So I am delaying with the goal of 70 but I'm not stuck with it. The idea of having more income (and less reliance on my portfolio) from age 70 on appeals to me. I'm able and willing to fund this decision and don't feel I am sacrificing my standard of living.
Not everyone can or if they can agrees with this approach. Many like to increase their income during their early and healthy retirement years. Some really can't afford to fund a wait to collect for 4 or 8 years. We only live once and need to make critical decisions without knowing how healthy we will be or long we will live. My only advice is don't put all the emphasis on what age the break even point is.
For me the delay is from 62 to 70. I have to wait and fund 8 years before getting the benefit. I am in reasonably good health, have the means to fund the 8 years and still have a decent standard of living. If circumstances change e.g. health or finances I can always take it at any age between 62 to 70. So, it isn't a one time option. So I am delaying with the goal of 70 but I'm not stuck with it. The idea of having more income (and less reliance on my portfolio) from age 70 on appeals to me. I'm able and willing to fund this decision and don't feel I am sacrificing my standard of living.
Not everyone can or if they can agrees with this approach. Many like to increase their income during their early and healthy retirement years. Some really can't afford to fund a wait to collect for 4 or 8 years. We only live once and need to make critical decisions without knowing how healthy we will be or long we will live. My only advice is don't put all the emphasis on what age the break even point is.
Re: Social security at 62 vs 70
One thing that has not been mentioned yet is that with the current interest rates being as low as they are that that favors delaying when you start social security.
The adjustments for social security payment amounts at various ages was set to be actuarially neutral when interest rates were higher but they have not been adjusted to reflect todays interest rates.
The adjustments for social security payment amounts at various ages was set to be actuarially neutral when interest rates were higher but they have not been adjusted to reflect todays interest rates.
Re: Social security at 62 vs 70
I think the break even at 84 or so is a poor way of looking at SS. Also, waiting is much more of a sure thing than taking SS early just to invest it. Some use the delay to lower their taxable income so they can do Roth conversions without pushing themselves into a higher tax bracket.
If you can afford to wait and have a spouse and both are in good health -- any delay will get a higher inflation adjusted income from the date you start to collect for the longest living of you or your spouse. So, if you delay to age 70 the higher benefit that goes for 14 years? to break even at 84. If both are healthy the longest surviving spouse will likely exceed 84 years of age by several years.
So, if you can't afford to wait, have health issues and/or poor family health genes waiting to collect is more of an issue. Also, if you are very focused on maximizing shorter term income to enjoy your early retirement collecting early is more your choice. If you take it early to enjoy life more just make sure you understand the trade offs. Sometimes the lure of early money can be very tempting.
The beauty of the decision to delay is that you can collect if circumstances change. For all practical purposed once you collect early your decision has been made.
If you can afford to wait and have a spouse and both are in good health -- any delay will get a higher inflation adjusted income from the date you start to collect for the longest living of you or your spouse. So, if you delay to age 70 the higher benefit that goes for 14 years? to break even at 84. If both are healthy the longest surviving spouse will likely exceed 84 years of age by several years.
So, if you can't afford to wait, have health issues and/or poor family health genes waiting to collect is more of an issue. Also, if you are very focused on maximizing shorter term income to enjoy your early retirement collecting early is more your choice. If you take it early to enjoy life more just make sure you understand the trade offs. Sometimes the lure of early money can be very tempting.
The beauty of the decision to delay is that you can collect if circumstances change. For all practical purposed once you collect early your decision has been made.
Re: Social security at 62 vs 70
You can explore the effect of different claiming strategies using FIRECALC, and I highly recommend it. I think you will consistently find that for a give success rate and starting portfolio value, you can generate a greater income stream starting at age 62 if you delay claiming SS until 70. Thus, you have a higher guaranteed inflation adjusted minimum floor (ie longevity insurance for yourself and your spouse) and more money to spend now. I think it is clear that delaying until 70 is a no brainer, unless you are sure you are terminally ill.
Re: Social security at 62 vs 70
My wife is 64 and I am 62 and the higher earner.I plan on working until 70 and my wife is retired.My plan is to delay both until 70 to maximize payments since we should not be touching our investments because I am still working.At 70 with the 2 max payments we will have most of our expenses covered by our combined SS of about 5000.Is there any reason for my wife to claim early?
K.I.S.S........so easy to say so difficult to do.
Re: Social security at 62 vs 70
And when you pass on SS, your decision is also made. If you 68 and the doctor tells you have 6 months to live, you will never get back those 6 years of SS that you could have collected. Is it worth taking that risk to collect a few more dollars if you make it to 86 while avoiding the medicaid nursing home?
From a money point of view it doesn't really matter (in general. If you have a younger spouse, smoke, are obese, and so on you can have a better estimate of you risk of dying young/living long). From a risk management, taking SS late reduces your risk of running out of money at the expense of having less assets when you die (i.e. you spend them down between 62-70). Personally I think that is the right tradeoff but there is a lot of personal preference in there.
From a money point of view it doesn't really matter (in general. If you have a younger spouse, smoke, are obese, and so on you can have a better estimate of you risk of dying young/living long). From a risk management, taking SS late reduces your risk of running out of money at the expense of having less assets when you die (i.e. you spend them down between 62-70). Personally I think that is the right tradeoff but there is a lot of personal preference in there.
Dandy wrote:I think the break even at 84 or so is a poor way of looking at SS. Also, waiting is much more of a sure thing than taking SS early just to invest it. Some use the delay to lower their taxable income so they can do Roth conversions without pushing themselves into a higher tax bracket.
If you can afford to wait and have a spouse and both are in good health -- any delay will get a higher inflation adjusted income from the date you start to collect for the longest living of you or your spouse. So, if you delay to age 70 the higher benefit that goes for 14 years? to break even at 84. If both are healthy the longest surviving spouse will likely exceed 84 years of age by several years.
So, if you can't afford to wait, have health issues and/or poor family health genes waiting to collect is more of an issue. Also, if you are very focused on maximizing shorter term income to enjoy your early retirement collecting early is more your choice. If you take it early to enjoy life more just make sure you understand the trade offs. Sometimes the lure of early money can be very tempting.
The beauty of the decision to delay is that you can collect if circumstances change. For all practical purposed once you collect early your decision has been made.
Re: Social security at 62 vs 70
As a retired teacher, I will be impacted by GPO (Government Pension Offset). I have no survivor rights to my husband's social security. He will be 67 this fall and tentatively plans to take SS immediately after his birthday. The downside of this is our IPS says make ROTH conversions annually at least until 70 to reduce RMDs, so in the back of our minds, we think he should wait to take SS at 70. But then we remember the GPO. We have saved enough to supplement my pension in a money market so we could delay without touching the portfolio, but..... It all feels like 6 of one and half dozen of the other.
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Re: Social security at 62 vs 70
Its a lot more dollarsfreddie wrote:And when you pass on SS, your decision is also made. If you 68 and the doctor tells you have 6 months to live, you will never get back those 6 years of SS that you could have collected. Is it worth taking that risk to collect a few more dollars if you make it to 86 while avoiding the medicaid nursing home?
A lot
do a risk analysis
would you prefer to buy a 1/100 chance of a 1000 dollar payoff today or a guaranteed pay of $300 5 years from now. adjust numbers to fit.
your statistical life expectancy is available from many sources. If you have no special knowledge of your bad health you will find that deferring SS is very sensible
Re: Social security at 62 vs 70
That's so misleading it is almost wrong. This is the insidious part of the logic that makes so many people fail to understand how deferring is almost always the correct solution except in some very special cases.freddie wrote:From a risk management, taking SS late reduces your risk of running out of money at the expense of having less assets when you die (i.e. you spend them down between 62-70).
If you defer you will leave *more* assets if you die older. That's the half that is missing from the quote above that makes a seemingly correct statement very misleading.
Deferring you will indeed leave fewer assets if you die young, but since you died young you will already leave a bunch of assets regardless of the deferral decision. By deferring you reduce the best case outcome (best case for your heirs that is).
The critical part is that in the case you live longer you will leave more assets when you defer. That is you make the worst case better for your heirs.
Deferring SS reduces the volatility of the final estate. That is likely a big benefit to your heirs. Even more importantly it reduces the case of a negative estate - that is your heirs having to support you.
P.S. What brought this thread back? The thread is dead! Long live the thread!
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Re: Social security at 62 vs 70
My wife is the sole surviving stay at home spouse in the United States. She has not worked outside the home in more than 35 years and does not have a sufficiently long work history to file on her own work record. I filed for SS at 63 when I retired. She did not file for SS when she reached 62.
Does the same debate about filing SS at either 62 or 70 apply to her case?
Does the same debate about filing SS at either 62 or 70 apply to her case?
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Re: Social security at 62 vs 70
Lets run some math. Your choices are 1500/month at 62 or 2600 at 70. Assume I spend 2600/month and have 500k
4% real
Take it early
age 70 563k
age 84 739k
age 90 850k
by taking it late
age 70 394k
age 84 629K
age 90 768K
For 2%
early
70 472k
84 448k
90 430k
late
70 316k
84 400k
90 442k
To end up with more money you need to live til 90 and have 2% real returns. More money. More risk.
4% real
Take it early
age 70 563k
age 84 739k
age 90 850k
by taking it late
age 70 394k
age 84 629K
age 90 768K
For 2%
early
70 472k
84 448k
90 430k
late
70 316k
84 400k
90 442k
To end up with more money you need to live til 90 and have 2% real returns. More money. More risk.
thx1138 wrote:That's so misleading it is almost wrong. This is the insidious part of the logic that makes so many people fail to understand how deferring is almost always the correct solution except in some very special cases.freddie wrote:From a risk management, taking SS late reduces your risk of running out of money at the expense of having less assets when you die (i.e. you spend them down between 62-70).
If you defer you will leave *more* assets if you die older. That's the half that is missing from the quote above that makes a seemingly correct statement very misleading.
Deferring you will indeed leave fewer assets if you die young, but since you died young you will already leave a bunch of assets regardless of the deferral decision. By deferring you reduce the best case outcome (best case for your heirs that is).
The critical part is that in the case you live longer you will leave more assets when you defer. That is you make the worst case better for your heirs.
Deferring SS reduces the volatility of the final estate. That is likely a big benefit to your heirs. Even more importantly it reduces the case of a negative estate - that is your heirs having to support you.
P.S. What brought this thread back? The thread is dead! Long live the thread!
Re: Social security at 62 vs 70
Your example (besides the crazy exaggeration) is backwards. You have 100% chance of getting your 500 dollars if you take the money now. You have an 80% chance of getting your 700 dollars if you put it off 8 years. You can pick your risk. Would you rather risk getting 0 dollars or getting 200 dollars less in the future. It makes sense to take that risk when your worried about the 25% of the cases where you live past 88 and not the 25% were you die before 80. You can decide which you fear more.
Is it a lot more dollars? Sure if you live to 90. Is it a lot less dollars? Sure if you die at 70. Die around 84+-2 years and your talking small sums of money.
Is it a lot more dollars? Sure if you live to 90. Is it a lot less dollars? Sure if you die at 70. Die around 84+-2 years and your talking small sums of money.
Professor Emeritus wrote:Its a lot more dollarsfreddie wrote:And when you pass on SS, your decision is also made. If you 68 and the doctor tells you have 6 months to live, you will never get back those 6 years of SS that you could have collected. Is it worth taking that risk to collect a few more dollars if you make it to 86 while avoiding the medicaid nursing home?
A lot
do a risk analysis
would you prefer to buy a 1/100 chance of a 1000 dollar payoff today or a guaranteed pay of $300 5 years from now. adjust numbers to fit.
your statistical life expectancy is available from many sources. If you have no special knowledge of your bad health you will find that deferring SS is very sensible
- Cut-Throat
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Re: Social security at 62 vs 70
What you don't seem to get that when you are retired, the goal is to SPEND more money, not to 'end up with more money'.freddie wrote:Lets run some math. Your choices are 1500/month at 62 or 2600 at 70. Assume I spend 2600/month and have 500k
To end up with more money you need to live til 90 and have 2% real returns. More money. More risk.
I can tell that you really don't understand the issue. Take a few minutes and look at the first post in this thread.
http://www.bogleheads.org/forum/viewtop ... y#p1487956
Re: Social security at 62 vs 70
I believe a lot of this is psychological.So many people want the money now because it is there and they earned it.Instant gratification.If you do not need it be patient, which is getting harder to do in our society that is based on instant everything.....
Last edited by hoops777 on Tue Apr 29, 2014 2:46 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.
Re: Social security at 62 vs 70
freddie you are right until 90. cut-throat is right after 90
- Cut-Throat
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Re: Social security at 62 vs 70
Nope!.....Your Math as well as your understanding is wrong.gerrym51 wrote:freddie you are right until 90. cut-throat is right after 90
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Re: Social security at 62 vs 70
What's more amazing is that many folks (a lot of them on this forum ) delay spending for decades by putting their current salary in a 401(k) or IRA. That's nothing than a form of delayed gratification, and these are the same folks that wish to claim SS at age 62.hoops777 wrote:I believe a lot of this is psychological.So many people want the money now because it is there and they earned it.Instant gratification.If you do not need it be patient, which is getting harder to do in our society that is based on instant everything.....
For SS, you're talking about an eight year span from minimum to maximum payments and for most folks (according to SS) it's a give it to me as soon as I can get it - even if they do have alternatives for retirement income.
So be it. Why did my wife/me delay (I've already filed/suspended; wife get's her spousal SS starting next month)? Simply because we would rather die with money, than live without it and the fact is that money is for the living, not the dead. Regardless of any afterlife, I'm sure we won't be kicking ouselves if we decided not to take SS at age 62.
FWIW,
- Ron
Re: Social security at 62 vs 70
freddie wrote:Lets run some math. Your choices are 1500/month at 62 or 2600 at 70. Assume I spend 2600/month and have 500k
4% real
Take it early
age 70 563k
age 84 739k
age 90 850k
by taking it late
age 70 394k
age 84 629K
age 90 768K
To end up with more money you need to live til 90 and have 2% real returns. More money. More risk.
Freddie, I get different numbers than you posted. Of course 4% real return, assuming 3% annual inflation, will grow the account balance as you take less money early on.Cut-Throat » Tue Apr 29, 2014 5:02 pmNope!.....Your Math as well as your understanding is wrong.gerrym51 wrote:freddie you are right until 90. cut-throat is right after 90
- 1. Regardless, the figures get to about *equal* through about age 84.
2. You are then waaaaay off when extended to age 90, 95, 100.
(note) I used 3% inflation in annual consumption, and 4% *real* return (as you suggested) at the end of each period.
Code: Select all
62 70
$1,500 $2,600
$500,000 $500,000
Age Consume Balance Consume Balance
62 $13,200 $506,272 $31,200 $487,552
63 $13,596 $512,383 $32,136 $473,633
64 $14,004 $518,314 $33,100 $458,154
65 $14,424 $524,046 $34,093 $441,023
66 $14,857 $529,557 $35,116 $422,144
67 $15,302 $534,825 $36,169 $401,413
68 $15,761 $539,826 $37,254 $378,725
69 $16,234 $544,535 $38,372 $353,967
70 $16,721 $548,926 $39,523 $327,022
71 $17,223 $552,971 $340,103
72 $17,740 $556,641 $353,707
73 $18,272 $559,904 $367,855
74 $18,820 $562,727 $382,569
75 $19,385 $565,076 $397,872
76 $19,966 $566,914 $413,787
77 $20,565 $568,203 $430,338
78 $21,182 $568,902 $447,552
79 $21,818 $568,967 $465,454
80 $22,472 $568,355 $484,072
81 $23,146 $567,017 $503,435
82 $23,841 $564,904 $523,572
83 $24,556 $561,962 $544,515
84 $25,293 $558,136 $566,296 <-- about *equal* balances
85 $26,051 $553,368 $588,948
86 $26,833 $547,596 $612,506
87 $27,638 $540,757 $637,006
88 $28,467 $532,781 $662,486
89 $29,321 $523,599 $688,986
90 $30,201 $513,134 $716,545
91 $31,107 $501,309 $745,207
92 $32,040 $488,039 $775,015
93 $33,001 $473,240 $806,016
94 $33,991 $456,819 $838,256
95 $35,011 $438,680 $871,787
96 $36,061 $418,724 $906,658
97 $37,143 $396,844 $942,924
98 $38,257 $372,930 $980,641
99 $39,405 $346,866 $1,019,867
100 $40,587 $318,530 $1,060,662
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: Social security at 62 vs 70
You just made our decision a lot easier, YDNAL. I have never seen a comparison of options like that before.
Re: Social security at 62 vs 70
My approach is Game Theory:
You choose "you claim early" or "you claim late" (62 and 70). God chooses "you die early" or "you die late" (before and after the 84 life expectancy). Both choices are continuous, but in-between values give in-between results, so extremes are most enlightening.
Outcomes:
Claim early/die early and claim late/die late: you've correctly predicted your longevity and maximized your benefits. Win!
Claim late/die early: you've spent down your savings. Your heirs get less. SS Trust Fund keeps more. You don't care, you're dead.
Claim early/die late: you're spending down your savings. Eventually, your heirs will have to support you. You're miserable.
Since only "claim early" risks in misery, "claim late" is the optimal choice.
Assumptions: Same lifestyle in all cases. You can afford to claim late. Your heirs can support themselves, are not eyeballing your estate and can even support you if you lose the game.
You choose "you claim early" or "you claim late" (62 and 70). God chooses "you die early" or "you die late" (before and after the 84 life expectancy). Both choices are continuous, but in-between values give in-between results, so extremes are most enlightening.
Outcomes:
Claim early/die early and claim late/die late: you've correctly predicted your longevity and maximized your benefits. Win!
Claim late/die early: you've spent down your savings. Your heirs get less. SS Trust Fund keeps more. You don't care, you're dead.
Claim early/die late: you're spending down your savings. Eventually, your heirs will have to support you. You're miserable.
Since only "claim early" risks in misery, "claim late" is the optimal choice.
Assumptions: Same lifestyle in all cases. You can afford to claim late. Your heirs can support themselves, are not eyeballing your estate and can even support you if you lose the game.
Re: Social security at 62 vs 70
Bumping this up for future reading.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
Re: Social security at 62 vs 70
Our plan is file and suspend and lower earning takes a spousal at 66 switches to her own SS at 70. She gains about 200 monthly at 70. Spousal at 66 is a little higher than her own at 66. I take my own SS at 70.
There is a excellent chance one or both of us will live beyond 90.
My delay from 66 to 70 will cost about $111K. A non inflation adjusted SPIA would cost about 25% more than that to get me the delta of close to $800 a month between age 66 and 70. I am sure an inflation adjusted SPIA would cost considerably more than that. There is nothing exact about those calculations, but delaying SS would be a lot cheaper than taking SS at 66 or 62 for that matter and making up for the difference with an inflation or non inflation adjusted SPIA. Obviously the non inflation adjusted SPIA while more expensive than delaying SS also puts you further behind over a period with any inflation.
The other advantage of delaying SS is using the interim period to convert to Roth IRAs while at a lower tax rate.
There is a excellent chance one or both of us will live beyond 90.
My delay from 66 to 70 will cost about $111K. A non inflation adjusted SPIA would cost about 25% more than that to get me the delta of close to $800 a month between age 66 and 70. I am sure an inflation adjusted SPIA would cost considerably more than that. There is nothing exact about those calculations, but delaying SS would be a lot cheaper than taking SS at 66 or 62 for that matter and making up for the difference with an inflation or non inflation adjusted SPIA. Obviously the non inflation adjusted SPIA while more expensive than delaying SS also puts you further behind over a period with any inflation.
The other advantage of delaying SS is using the interim period to convert to Roth IRAs while at a lower tax rate.
Re: Social security at 62 vs 70
$309/month increase for waiting until 70 collect social security.longinvest wrote:Here's a simple explanation: Delay Social Security to age 70 and Spend more money at 62
Sorry but my time during my golden/retired years are worth way way more than that. I'm collecting SS as soon as I can get it. My savings and investing during my working lifetime will be over 90% of my annual retirement spending anyway.
I honestly do not see very little reason to wait 8 years just to collect a few more bucks.
- ObliviousInvestor
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Re: Social security at 62 vs 70
What do you mean by the bolded section? (The point of the linked-to post is that delaying Social Security actually allows greater spending -- thereby presumably allowing you to enjoy your "golden/retired years" even more than otherwise.)ginmqi wrote:$309/month increase for waiting until 70 collect social security.longinvest wrote:Here's a simple explanation: Delay Social Security to age 70 and Spend more money at 62
Sorry but my time during my golden/retired years are worth way way more than that. I'm collecting SS as soon as I can get it. My savings and investing during my working lifetime will be over 90% of my annual retirement spending anyway.
I honestly do not see very little reason to wait 8 years just to collect a few more bucks.
+1YDNAL wrote:Freddie, I get different numbers than you posted.
With a 2% real return, I get a breakeven of age 83ish. To get a breakeven of ~age 90, I have to use a 5% real return.
Last edited by ObliviousInvestor on Wed Apr 30, 2014 7:31 am, edited 1 time in total.
Mike Piper |
Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Re: Social security at 62 vs 70
It helps protect a portfolio against "old age".ginmqi wrote:
I honestly do not see very little reason to wait 8 years just to collect a few more bucks.
Re: Social security at 62 vs 70
Yes, there is always a fundamental disconnect between the view that SS is an investment that returns money and a form of insurance against running out of income in old age. Which of these is the better view for the individual depends on that persons own circumstances and priorities. The decision can be strongly dependent on how much need one has for income at age 62 and on one's expectations for longevity. It can also be the case that people well endowed for retirement could very well see no reason to wait, just as someone in serious need of money early in retirement might not wait.red5 wrote:It helps protect a portfolio against "old age".ginmqi wrote:
I honestly do not see very little reason to wait 8 years just to collect a few more bucks.
Re: Social security at 62 vs 70
Sounds like you think not collecting SS = not retiring. That's not what we're talking about.ginmqi wrote:Sorry but my time during my golden/retired years are worth way way more than that.
In your case, taxation of SS is an even bigger reason to delay and spend down/Rothify your portfolio between 60 and 70.
Re: Social security at 62 vs 70
I honestly do not see a reason not to delay if you are able to. (I was tempted to use a triple negative).ginmqi wrote:
I honestly do not see very little reason to wait 8 years just to collect a few more bucks.
In the OP's case, delaying to 70 results in $1,177 a month or $14,124 a year more. In my case it results in $1,439 a month or $17,268 a year more. Hardly a "few more bucks". I'm also taking spousal at 66 in 4 years of $1,000 a month or $12,000 a year, for $48,000 in spousal benefits between 66 and 70.
Those who advocate taking benefits as soon as possible using the rationale of "if I die at" (fill in the blank) make it sound like the date of their death is predictable. Death doesn't care if you delay and neither will you when you're dead, because… you're dead. If you're married you might as well attempt to make things easier for your spouse by ensuring a larger benefit if possible. If you cheat death by a few years you can toast him/her on the way out with a better brand of scotch.
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Re: Social security at 62 vs 70
There are more reasonsred5 wrote:It helps protect a portfolio against "old age".ginmqi wrote:
I honestly do not see very little reason to wait 8 years just to collect a few more bucks.
Taxes and Roth conversions are two as FNK has mentioned.
John