FOR many retirees, Social Security benefits are seen as hot money on the table, to be devoured as soon as possible. But as with preparing and savoring a fine meal, a careful approach and delayed gratification may yield the highest rewards from the program.
Many financial planners advise that you wait as long as possible before receiving benefits. Despite this, a sizable number of Americans who have reached 62 — 41 percent of men and 46 percent of women — apply for Social Security at 62, the earliest age at which you can take payments. The way Social Security works, this will lock in the lowest possible payment for life.
Social Security at 62? Let’s Run the Numbers
- JMacDonald
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Social Security at 62? Let’s Run the Numbers
NY Times article about when to take Social Security: http://www.nytimes.com/2014/05/15/busin ... ecurity%2F
Best Wishes, |
Joe
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Re: Social Security at 62? Let’s Run the Numbers
Not much new in that article, eh?
Attempted new signature...
Re: Social Security at 62? Let’s Run the Numbers
Everyone has different circumstances ...but for me....
Time is more valuable than money. Taking SS at 62.
burt
Time is more valuable than money. Taking SS at 62.
burt
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Re: Social Security at 62? Let’s Run the Numbers
What does time have to do with it, you don't have to take SS to retireburt wrote:Everyone has different circumstances ...but for me....
Time is more valuable than money. Taking SS at 62.
burt
John
Re: Social Security at 62? Let’s Run the Numbers
As more boomers approach retirement we see more of these offerings, don't we? 10 years ago we saw numerous "how much should I save for retirement" articles.
For BHs it's "nothing new here folks. Just keep on movin".
For BHs it's "nothing new here folks. Just keep on movin".
Part-Owner of Texas |
|
“The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
Re: Social Security at 62? Let’s Run the Numbers
There are so many variables that there is no one rule fits all. I have seen math tht says deplete portfolio and take SS at 70 and I have seen lots of mitigating factors aginst that. IMHO you are batting on the break even point which is in the 78 or 79 year old range, and living that long has no guarantee.
For me, I started 2 yers ago at 64, made good money on th extra I could leave in the portcolio and then paid back year one and restarted at 65 (their request).
If I, m still kicking at 80 I'll work the numbers and see who really got who. ..... as if I will GAS then.
For me, I started 2 yers ago at 64, made good money on th extra I could leave in the portcolio and then paid back year one and restarted at 65 (their request).
If I, m still kicking at 80 I'll work the numbers and see who really got who. ..... as if I will GAS then.
Re: Social Security at 62? Let’s Run the Numbers
Yes, if you have sufficient assets, you could just skip SS.Johm221122 wrote:What does time have to do with it, you don't have to take SS to retireburt wrote:Everyone has different circumstances ...but for me....
Time is more valuable than money. Taking SS at 62.
burt
John
burt
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Re: Social Security at 62? Let’s Run the Numbers
Just save enough to last from the day you want to retire until 70, then SS should be plentyburt wrote:Yes, if you have sufficient assets, you could just skip SS.Johm221122 wrote:What does time have to do with it, you don't have to take SS to retireburt wrote:Everyone has different circumstances ...but for me....
Time is more valuable than money. Taking SS at 62.
burt
John
burt
John
- Cut-Throat
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Re: Social Security at 62? Let’s Run the Numbers
Yes, if your portfolio is meager and you need the money, then you are pretty much forced to take SS early at 62.burt wrote: Yes, if you have sufficient assets, you could just skip SS.
burt
Some just do not have a choice.
Re: Social Security at 62? Let’s Run the Numbers
I don't spend any time thinking about what I could have had if I had waited to take Social Security at a later age.
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: Social Security at 62? Let’s Run the Numbers
You got it. Congratulations.Toons wrote:I don't spend any time thinking about what I could have had if I had waited to take Social Security at a later age.
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
burt
Re: Social Security at 62? Let’s Run the Numbers
It is one the horrible ones. Notice how they didn't run the numbers:) Yes you get 8% more by waiting. You also get 1 less year of payments. For the married white college aged nonsmoking woman, delaying is a good bet. For the single black, overweight, male, smoker who has had 2 heart attacks, taking the money has a lot going for it. I would guess for about 30% of the population (smokers, people with diabetes and history of strokes and heart attacks,...) taking it at 62 makes a ton of sense if you goal is to maximize your SS payout not your risk.
The Wizard wrote:Not much new in that article, eh?
Re: Social Security at 62? Let’s Run the Numbers
Toons wrote:I don't spend any time thinking about what I could have had if I had waited to take Social Security at a later age.
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
ditto
Re: Social Security at 62? Let’s Run the Numbers
took it at 62 now 70gerrym51 wrote:Toons wrote:I don't spend any time thinking about what I could have had if I had waited to take Social Security at a later age.
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
ditto
sam
Re: Social Security at 62? Let’s Run the Numbers
I think the numbers are,:
For a single male it's a break even thing to delay claiming SS.
For a couple, it's a very good deal (because of the higher joint life expectancy).
For a couple who both have SS entitlements, it's a great deal because one can delay while the other claims.
For the couple where the wife is much younger and the husband has a higher SS entitlement, it is such an insanely good deal that no jury in the land will ever convict.
Take a look at Mike Piper's 100-page mini-book:
http://www.amazon.com/Social-Security-M ... B009K7ZNDS
L.
For a single male it's a break even thing to delay claiming SS.
For a couple, it's a very good deal (because of the higher joint life expectancy).
For a couple who both have SS entitlements, it's a great deal because one can delay while the other claims.
For the couple where the wife is much younger and the husband has a higher SS entitlement, it is such an insanely good deal that no jury in the land will ever convict.
Take a look at Mike Piper's 100-page mini-book:
http://www.amazon.com/Social-Security-M ... B009K7ZNDS
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Social Security at 62? Let’s Run the Numbers
+2. Took mine at 62.5.burt wrote:You got it. Congratulations.Toons wrote:I don't spend any time thinking about what I could have had if I had waited to take Social Security at a later age.
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
burt
All the Best, |
Joe
Re: Social Security at 62? Let’s Run the Numbers
I think this mostly depends on your cash flow situation at the time of retirement. If delaying benefits will have a significant impact on your nest egg in the early years then I would question the blanket advice that it is always best to delay. In my own case of trying to decide to delay from age 68 to 70, my spreadsheet figures don't suggest that this is a good idea.
Re: Social Security at 62? Let’s Run the Numbers
For a couple the best claiming strategy very often involves one of the spouses starting social security at 62 so a large percentage of the people that start at 62 are actually doing the smart thing.Many financial planners advise that you wait as long as possible before receiving benefits. Despite this, a sizable number of Americans who have reached 62 — 41 percent of men and 46 percent of women — apply for Social Security at 62
Re: Social Security at 62? Let’s Run the Numbers
How can it not be a good idea?hljockey wrote:I think this mostly depends on your cash flow situation at the time of retirement. If delaying benefits will have a significant impact on your nest egg in the early years then I would question the blanket advice that it is always best to delay. In my own case of trying to decide to delay from age 68 to 70, my spreadsheet figures don't suggest that this is a good idea.
Where else can you buy an inflation-indexed annuity that returns 8% ??
Of course, if you and your spouse both plan to die in the next few years ...
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Social Security at 62? Let’s Run the Numbers
We need more gymnasts who understand straddles. Point your feet out to the side in both directions.
Buy life insurance and a fixed annuity. Win either way.
Buy life insurance and delay social security. Win either way.
Buy life insurance, a fixed annuity, and social security. You have three legs, but you win three ways from Sunday.
Sure there is a cost, but once you have your straddle fixed, you can stop worrying.
Buy life insurance and a fixed annuity. Win either way.
Buy life insurance and delay social security. Win either way.
Buy life insurance, a fixed annuity, and social security. You have three legs, but you win three ways from Sunday.
Sure there is a cost, but once you have your straddle fixed, you can stop worrying.
Re: Social Security at 62? Let’s Run the Numbers
taking it at 62 = mistake at 81. call me a fool, but i kinduv like the idea that it's a bet i'd like to lose ....
Re: Social Security at 62? Let’s Run the Numbers
If filing a joint return, and you and your spouse have a combined income that is more than $44,000, up to 85 percent of your benefits may be taxable.
So would taking SS at 62 provide some tax benefits ? Is it possible you might pay less taxes on both SS and RMD's at age 70 by taking SS at 62?
I ran some numbers. Full disclosure: I suck at math. But it looks like taking SS at 62 could result in zero taxes on SS for 8 years or $150,352 tax free.
Scenario 1: Delay till age 70
Assuming $1,000,000 in IRA:
Age 70 Req.Min.Dist. = $36,496
Delayed SS to Age 70 = $35,250
Income for that year* = $71,746
* the $71,746 assumes no other taxable income and thus 25% tax bracket:
Your Social Security benefit of $35,250 will be 41% taxable increasing your taxable income by $14,603 and creating a federal income tax liability of $3,651.
Scenario 2: Take SS at age 62
Now assume you take SS at 62 and get only $18,794. Also assume you earn $20,000 in taxable dividends for that year:
Your Social Security benefit of $18,794 will be 0% taxable increasing your taxable income by $0 and creating a federal income tax liability of $0.
So, over the 8 years until age 70 that looks like $150,352 tax free. Right?
So would taking SS at 62 provide some tax benefits ? Is it possible you might pay less taxes on both SS and RMD's at age 70 by taking SS at 62?
I ran some numbers. Full disclosure: I suck at math. But it looks like taking SS at 62 could result in zero taxes on SS for 8 years or $150,352 tax free.
Scenario 1: Delay till age 70
Assuming $1,000,000 in IRA:
Age 70 Req.Min.Dist. = $36,496
Delayed SS to Age 70 = $35,250
Income for that year* = $71,746
* the $71,746 assumes no other taxable income and thus 25% tax bracket:
Your Social Security benefit of $35,250 will be 41% taxable increasing your taxable income by $14,603 and creating a federal income tax liability of $3,651.
Scenario 2: Take SS at age 62
Now assume you take SS at 62 and get only $18,794. Also assume you earn $20,000 in taxable dividends for that year:
Your Social Security benefit of $18,794 will be 0% taxable increasing your taxable income by $0 and creating a federal income tax liability of $0.
So, over the 8 years until age 70 that looks like $150,352 tax free. Right?
Last edited by Bustoff on Sun May 18, 2014 6:58 am, edited 1 time in total.
- ObliviousInvestor
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Re: Social Security at 62? Let’s Run the Numbers
Thanks for recommending the book!Leeraar wrote:I think the numbers are,:
For a single male it's a break even thing to delay claiming SS.
For a couple, it's a very good deal (because of the higher joint life expectancy).
For a couple who both have SS entitlements, it's a great deal because one can delay while the other claims.
For the couple where the wife is much younger and the husband has a higher SS entitlement, it is such an insanely good deal that no jury in the land will ever convict.
Take a look at Mike Piper's 100-page mini-book:
http://www.amazon.com/Social-Security-M ... B009K7ZNDS
L.
Also, just an additional point of clarification: The super-good deal available to married couples is specific to having the higher-PIA spouse delay benefits. While having this spouse delay benefits is a better deal than having an unmarried person delay benefits (because it's a joint lifetime annuity), having the lower-PIA spouse delay benefits is a worse deal than having an unmarried person delay benefits (because it's a first-to-die annuity).
It's very much a case-by-case sort of thing, but as a base-case analysis, the following research article from Prudential explains why many people will benefit from a tax perspective from delaying Social Security:Bustoff wrote:So would taking SS at 62 provide some tax benefits?
http://research.prudential.com/document ... ov2012.pdf
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? Let’s Run the Numbers
The key factor for me is how reliable the government is to pay me SS. I think that there is a high chance it will be means tested or cut in the future. If you are already drawing it you have a lower probability of having it taken away.
- jeffyscott
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Re: Social Security at 62? Let’s Run the Numbers
It is not an 8% return. An annuity that pays me $1080 per month starting at age 69 is not 8% more valuable than an annuity that pays me $1000 starting at age 68. Even if the 68 year old would collect for 20 years, the 19 years of benefits for the 69 year old are only 2.6% greater if the difference is 8%.Leeraar wrote:Where else can you buy an inflation-indexed annuity that returns 8% ??
Also I don't think there is any compounding ...so one year delay would be an 8% increase, $12,000 would go to $12,960 but an additional year would increase it by another $960, rather than 8% of $12,960. If so, then by the third year the increase is about 6.9%, rather than 8%.
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Re: Social Security at 62? Let’s Run the Numbers
U R confusing compound vs cumulative return. SS adjustments over four years (FRA of 66 to age 70) is 8% x 4 years, or an increase of 32% over the base amount at FRA.jeffyscott wrote:Also I don't think there is any compounding ...so one year delay would be an 8% increase, $12,000 would go to $12,960 but an additional year would increase it by another $960, rather than 8% of $12,960. If so, then by the third year the increase is about 6.9%, rather than 8%.
You can't compare taking it at age 67 (8% increase) and multiply that return vs. the subsequent year and so on or as you are doing, specifying it as a cumulative return, which it is not.
While I'll agree that those that need the money should take it at 62, I'll also agree that it may not make sense for a single person delaying it from FRA until age 70. However, for total spousal benefits it does make a big difference in the possible total benefits returns received, beyond the increased life annuity if the higher SS receipient passes first.
You can run the numbers in your own situation using: http://individual.troweprice.com/public ... urity-Tool
- Ron
Re: Social Security at 62? Let’s Run the Numbers
Mike- Thank you for the reference to the article. Correct me if I'm wrong, but do you think the Prudential analysis goes out of its way to make its point.ObliviousInvestor wrote:It's very much a case-by-case sort of thing, but as a base-case analysis, the following research article from Prudential explains why many people will benefit from a tax perspective from delaying Social Security:Bustoff wrote:So would taking SS at 62 provide some tax benefits?
http://research.prudential.com/document ... ov2012.pdf
They compared a retiree who took Social Security at 70 but had to take $25,000 less in IRA withdrawals in order to reduce the SS taxes vs. the other retiree who took Social Security at 62, but also starts taking IRA withdrawals at 62 rather than 70.
In my example you could collect SS of $18,794 at 62, plus have $20,000 of dividend income (so there would be no need for IRA withdrawals) and still pay zero taxes.
Last edited by Bustoff on Tue May 20, 2014 4:50 am, edited 3 times in total.
Re: Social Security at 62? Let’s Run the Numbers
As one of the big bosses at work likes to say, "it's all about the numbers".Leeraar wrote:How can it not be a good idea?hljockey wrote:I think this mostly depends on your cash flow situation at the time of retirement. If delaying benefits will have a significant impact on your nest egg in the early years then I would question the blanket advice that it is always best to delay. In my own case of trying to decide to delay from age 68 to 70, my spreadsheet figures don't suggest that this is a good idea.
Where else can you buy an inflation-indexed annuity that returns 8% ??
Of course, if you and your spouse both plan to die in the next few years ...
L.
If I don't take SS @ 68 my nest egg will decrease by $72k in the next two years while I delay (3k * 12 * 2). Projecting that out to my life expectancy amounts to a lot of money on the spreadsheet even using very conservative figures for returns and inflation. And I mean several hundred thousand $.
Same thing with my wife who is 17 years younger. If she takes $800 at age 62, our joint SS income of $3800/month up to the end of my life looks a lot better than if she delays until 67 to get $1240. If there was an increase in the survivor benefit by delaying it would be a better deal but there is not. The figures remain unchanged when I die whether I delay or not.
So that's why I don't like the blanket statement that it is always best to delay. I understand the reasoning but everybody's situation is different. The $3800 annuity with a COLA is fine for us as we intend to retire overseas in my wife's native homeland and that will probably be more than enough to cover our living expenses all by itself.
And then there is the threatened reduction to 75% of benefits when the trust fund runs out which I haven't even factored into my numbers. If that happens, I'm pretty sure that taking earlier will look even better.
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Re: Social Security at 62? Let’s Run the Numbers
The biggest effect for Bogleheads is probably what early SS allows your portfolio to do by not removing the money. This is likely the bigger determinant than when you die (if you were able to look back and determine your outcome when comparing the two scenarios as some of you have referenced). At either extreme (not removing funds during a bear or strong bull) you may be better off but Goldilocks could make waiting look better. Nonetheless, enjoy your retirement and don't look back.
- Cut-Throat
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Re: Social Security at 62? Let’s Run the Numbers
OK, here are the Numbers !hljockey wrote: As one of the big bosses at work likes to say, "it's all about the numbers".
Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.
Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.
Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.
Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.
The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.
No need for any stupid 'break even analysis'.
If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.
Re: Social Security at 62? Let’s Run the Numbers
exoilman wrote:gerrym51 wrote:Toons wrote:I don't spend any time thinking about what I could have had if I had waited to take Social Security at a later age.
I do know that I have received about 20k in payments since I turned 62 and have enjoyed spending every penny of it...No regrets whatsoever,the plan is working
ditto [/quot
took it at 62 now 70
sam
U.S. Average life expectancy is 78.5Quote from SSA: Getting less per month is better than waiting and sinking into debt or financial ruin. Yes, you'll be getting less, but you'll also start collecting earlier, and you might be surprised how long it takes to make up the difference.
The government uses the example of someone who can receive $750 a month at 62 or $1,000 a month at a full retirement age of 66. A person starting early earns $3,000 less a year, but he or she also has collected $36,000 in benefits by age 66.
It will take 12 years, until age 78, to make up that difference.
My CPA once told me, on average people only collect social security for about 6 years. He died at 63. I don't know if that number is correct or not, but it made an impression on me. I'm now at an age where I'm reading my friend's obituaries. While I know people in their 80s, there are not many of them left.
Husband retired at 65 and took social security at full retirement. I took it at 62.
If you don't need it, one could save and invest the money.
In situations where there is a much younger spouse; the higher earner waiting until 70 may make good sense.
Last edited by SnapShots on Sun May 18, 2014 8:53 am, edited 1 time in total.
the best decision many times is the hardest to do
Re: Social Security at 62? Let’s Run the Numbers
How are you at taxes?Bustoff wrote:If filing a joint return, and you and your spouse have a combined income that is more than $44,000, up to 85 percent of your benefits may be taxable.
So would taking SS at 62 provide some tax benefits ? Is it possible you might pay less taxes on both SS and RMD's at age 70 by taking SS at 62?
I ran some numbers. Full disclosure: I suck at math. But it looks like taking SS at 62 could result in zero taxes on SS for 8 years or $150,352 tax free.
You have a married couple age 70 who not only don't take the bonus standard deduction for being over 65, they don't take the regular standard deduction or any exemptions for themselves.
$14,600 + $7,800 = $22,400
taxable income is 36,496 + 14,603 - 22,400 = $28,699Scenario 1: Delay till age 70
Assuming $1,000,000 in IRA:
Age 70 Req.Min.Dist. = $36,496
Delayed SS to Age 70 = $35,250
Income for that year* = $71,746
You are required to use the tax tables.
Tax on 28000 is 3311
Tax on 29000 is 3461
additional tax per $1000 is $150. (not 25%)
Re: Social Security at 62? Let’s Run the Numbers
Why did the $20,000 of dividends disappear when the couple got to 70? Did they sell all their stocks and buy a yacht at age 69?Bustoff wrote: In my example you could collect SS of $18,794 at 62, plus have $20,000 of dividend income (so there would be no need for IRA withdrawals) and still pay zero taxes.
Re: Social Security at 62? Let’s Run the Numbers
Where have you read that it is best for the younger lower earning spouse to delay? Not around here, not as a blanket statement. Just read Mike in this thread.hljockey wrote: Same thing with my wife who is 17 years younger. If she takes $800 at age 62, our joint SS income of $3800/month up to the end of my life looks a lot better than if she delays until 67 to get $1240. If there was an increase in the survivor benefit by delaying it would be a better deal but there is not. The figures remain unchanged when I die whether I delay or not.
So that's why I don't like the blanket statement that it is always best to delay.
Seems pretty clear to me. Worse means worse, as in not as good, as in not good at all in this case.having the lower-PIA spouse delay benefits is a worse deal than having an unmarried person delay benefits
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Re: Social Security at 62? Let’s Run the Numbers
SnapShots wrote: U.S. Average life expectancy is 78.5
.
of no importance at all
Your life expectancy at age 62 is 21 years for men and 23 for women on average
http://www.ssa.gov/oact/STATS/table4c6.html
and this include a whole lot of people who already know they have reduced life expectancy. For those without such knowledge at age 62 , estimates differ but cluster around 25 years.
Re: Social Security at 62? Let’s Run the Numbers
Thanks for the info Cut-Throat but I had already read that thread in its entirety.Cut-Throat wrote:OK, here are the Numbers !hljockey wrote: As one of the big bosses at work likes to say, "it's all about the numbers".
No offense intended, but those figures started to overload the circuitry in my brain in much the same was as an annuity salesman did a few years ago and I have a tendency to tune out at that point. Probably an age thing.
I like my own spreadsheet better (actually it's a fancy C++ program I wrote myself).
- jeffyscott
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Re: Social Security at 62? Let’s Run the Numbers
Sure I can, each annual (or monthly) decision to start taking it or not is independent. At 66 I am comparing $X per month starting now vs. $1.08X starting one year later. At 69, I am comparing $Y per month starting now vs. $1.069Y starting one year later.Ron wrote:U R confusing compound vs cumulative return. SS adjustments over four years (FRA of 66 to age 70) is 8% x 4 years, or an increase of 32% over the base amount at FRA.
You can't compare taking it at age 67 (8% increase) and multiply that return vs. the subsequent year and so on or as you are doing, specifying it as a cumulative return, which it is not.
Anyway, the more important point is an 8% increase in benefits delayed by 1 year is not an 8% return.
Re: Social Security at 62? Let’s Run the Numbers
Ron and jeffy agreed; they just didn't see it. Read below the lines, not just on their surface.
- Wildebeest
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Re: Social Security at 62? Let’s Run the Numbers
The average life expectancy for a 62 year old woman is 22 years old per SSA table if I read the table correctly. The average life expectancy for 84 year old woman is 7 1/2 years.SnapShots wrote:U.S. Average life expectancy is 78.5
My CPA once told me, on average people only collect social security for about 6 years. He died at 63. I don't know if that number is correct or not, but it made an impression on me. I'm now at an age where I'm reading my friend's obituaries. While I know people in their 80s, there are not many of them left.
Husband retired at 65 and took social security at full retirement. I took it at 62.
If you don't need it, one could save and invest the money.
In situations where there is a much younger spouse; the higher earner waiting until 70 may make good sense.
I do think that the average Boglehead woman has a much longer life expectancy than is indicated by these tables because of wealth, soundness of mind and discipline.
I agree that is "All about the numbers". Taking SS at 70 makes the most sense unless you do not have a spouse and will expire shortly.
The Golden Rule: One should treat others as one would like others to treat oneself.
Re: Social Security at 62? Let’s Run the Numbers
sscritic wrote:How are you at taxes?Bustoff wrote:If filing a joint return, and you and your spouse have a combined income that is more than $44,000, up to 85 percent of your benefits may be taxable.
So would taking SS at 62 provide some tax benefits ? Is it possible you might pay less taxes on both SS and RMD's at age 70 by taking SS at 62?
I ran some numbers. Full disclosure: I suck at math. But it looks like taking SS at 62 could result in zero taxes on SS for 8 years or $150,352 tax free.
You have a married couple age 70 who not only don't take]the bonus standard deduction for being over 65, they don't take the regular standard deduction or any exemptions for themselves.
I used the calculator below, do you think it didn't apply the deductions?
http://www.calcxml.com/calculators/how- ... n=#results
$14,600 + $7,800 = $22,400Scenario 1: Delay till age 70
Assuming $1,000,000 in IRA:
Age 70 Req.Min.Dist. = $36,496
Delayed SS to Age 70 = $35,250
Income for that year* = $71,746
taxable income is 36,496 + 14,603 - 22,400 = $28,699
What is the 14,603 ?
You are required to use the tax tables.
Tax on 28000 is 3311
Tax on 29000 is 3461
additional tax per $1000 is $150. (not 25%)
Thank goodness for sscritic!
Last edited by Bustoff on Tue May 20, 2014 4:58 am, edited 2 times in total.
Re: Social Security at 62? Let’s Run the Numbers
Bustoff wrote: What is the 14,603 ?
Now add your other income and subtract your standard deduction and exemptions.Bustoff earlier wrote:Your Social Security benefit of $35,250 will be 41% taxable increasing your taxable income by $14,603
Re: Social Security at 62? Let’s Run the Numbers
I used the calculator below in my original example, I don't know why it wouldn't have applied the standard deductions and exemptions.sscritic wrote:Bustoff wrote: What is the 14,603 ?Now add your other income and subtract your standard deduction and exemptions.Bustoff earlier wrote:Your Social Security benefit of $35,250 will be 41% taxable increasing your taxable income by $14,603
http://www.calcxml.com/calculators/how- ... n=#results
Re: Social Security at 62? Let’s Run the Numbers
We agree as to what part of your example SS is taxable. What we don't agree on is the marginal tax rate to be applied to your last dollars of taxable income. Don't you take deductions and exemptions on your own return before figuring out taxable income?
What is on lines 40, 41, 42, and 43 of your 1040? I get to subtract twice. Don't you?
Deductions and exemptions have nothing to do with what part of your SS is taxable, but they do have something to do with the tax you pay on it.
What is on lines 40, 41, 42, and 43 of your 1040? I get to subtract twice. Don't you?
Deductions and exemptions have nothing to do with what part of your SS is taxable, but they do have something to do with the tax you pay on it.
Re: Social Security at 62? Let’s Run the Numbers
Bustoff wrote:I used the calculator below in my original example, I don't know why it wouldn't have applied the standard deductions and exemptions.sscritic wrote:Bustoff wrote: What is the 14,603 ?Now add your other income and subtract your standard deduction and exemptions.Bustoff earlier wrote:Your Social Security benefit of $35,250 will be 41% taxable increasing your taxable income by $14,603
http://www.calcxml.com/calculators/how- ... n=#results
i have used this calculator in the past-in my calculation by taking ss at 62(me and the wife) i save about 2500 a year in taxes when the wife and i both have to do rmd's in 7 years.
the problem i see is that the ss brackets are not indexed for inflation
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Re: Social Security at 62? Let’s Run the Numbers
Wow that is one heck of an investmenthljockey wrote:
If I don't take SS @ 68 my nest egg will decrease by $72k in the next two years while I delay (3k * 12 * 2). Projecting that out to my life expectancy amounts to a lot of money on the spreadsheet even using very conservative figures for returns and inflation. And I mean several hundred thousand $.
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at a 3% rate of return over inflation i get 72 k turning into about 108K in 14 years
What are your assumptions?
- Cut-Throat
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Re: Social Security at 62? Let’s Run the Numbers
Math is Math, and coming up with your own spreadsheet does not mean you can come up with 'Your own Math'hljockey wrote:
Thanks for the info Cut-Throat but I had already read that thread in its entirety.
No offense intended, but those figures started to overload the circuitry in my brain in much the same was as an annuity salesman did a few years ago and I have a tendency to tune out at that point. Probably an age thing.
I like my own spreadsheet better (actually it's a fancy C++ program I wrote myself).
Re: Social Security at 62? Let’s Run the Numbers
Good article. I like that it discussed the tax impact of large RMDs, which seems often not to be included much, if at all, in these discussions.ObliviousInvestor wrote:It's very much a case-by-case sort of thing, but as a base-case analysis, the following research article from Prudential explains why many people will benefit from a tax perspective from delaying Social Security:Bustoff wrote:So would taking SS at 62 provide some tax benefits?
http://research.prudential.com/document ... ov2012.pdf
Kevin
If I make a calculation error, #Cruncher probably will let me know.
- Nestegg_User
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Re: Social Security at 62? Let’s Run the Numbers
to calculate break point, use table "Effect of Early or Delayed Retirement" fromSSA: http://www.ssa.gov/OACT/ProgData/ar_drc.html
{LadyGeek -- table should be in wiki}
so for us, break point self-only is: .725*(n+8)*P = n*1.28*P (where P is PIA) so break point gives n= 10.45 additional year (80.45 years or ~80 1/2 yrs old)
where for joint (if spousal is able to be taken) [.725 *(n+8)*P] + .725/2*3*P = 1.28*n*P + 1.28/2*3*P where break point gives n= 8.95 additional year (78.95 yrs or ~79 yrs old)
run the numbers for your specific case to see your break even
{LadyGeek -- table should be in wiki}
so for us, break point self-only is: .725*(n+8)*P = n*1.28*P (where P is PIA) so break point gives n= 10.45 additional year (80.45 years or ~80 1/2 yrs old)
where for joint (if spousal is able to be taken) [.725 *(n+8)*P] + .725/2*3*P = 1.28*n*P + 1.28/2*3*P where break point gives n= 8.95 additional year (78.95 yrs or ~79 yrs old)
run the numbers for your specific case to see your break even
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Re: Social Security at 62? Let’s Run the Numbers
These calculations make a lot of sense to me.Cut-Throat wrote:OK, here are the Numbers !hljockey wrote: As one of the big bosses at work likes to say, "it's all about the numbers".
Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.
Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.
Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.
Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.
The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.
No need for any stupid 'break even analysis'.
If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.
Re: Social Security at 62? Let’s Run the Numbers
My timeline, as a solo retired person:
Age 62-65
Control income to maximize ACA subsidy and cost-sharing benefits. (Saves me $15,000 /year.)
Collecting Social Security would slam this window shut.
Age 66-69
Roth convert (in low tax bracket).
Collecting Social Security would shut this window.
Age 70
Enjoy maximized Social Security (and no RMDs).
Age 62-65
Control income to maximize ACA subsidy and cost-sharing benefits. (Saves me $15,000 /year.)
Collecting Social Security would slam this window shut.
Age 66-69
Roth convert (in low tax bracket).
Collecting Social Security would shut this window.
Age 70
Enjoy maximized Social Security (and no RMDs).