Age to Take Social Security: The Ideal and the Reality

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gerntz
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Re: Age to Take Social Security: The Ideal and the Reality

Post by gerntz »

eog wrote:I think it is naïve to think that most people have the option of waiting till 70 to collect SS. You either have to be in a profession that will allow you to work till 70 or you will need to have saved enough to cover the gap from the time you retire to age 70. Most on this board are lucky enough to be able to make that decision, I don't think the construction worker that has been laying brick his whole life really cares if the total return of his social security is higher if he delays his retirement till 70.
Unless you win the lottery or born to wealth, I don't think there is much luck involved. It's about choices: education, work profession, spending/savings. Being a bricklayer & that choice impacting how long he works & when he takes SS is a choice. I assure you I far from being born into wealth.
gerntz
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Re: Age to Take Social Security: The Ideal and the Reality

Post by gerntz »

Bacchus01 wrote:I honestly don't fully understand the "wait" decision from a financial standpoint. You are taking a lot of risk by not taking the money. And the payback timeline for a breakeven analysis for most people is in their early 80s, which is at roughly the current mortality age for men/women. The IRS expects to pay you the same, regardless. By waiting, you are gambling AGAINST the mortality tables/statistics. I guess that seems very unbogleheadish to me.
If married, the survivorship benefit gain for waiting is big.

I also think those that bet on exceeding the mortality tables have data & plans that help them do so such that they on average exceed the table. I.e., I'd bet those that take SS at 70 live longer than those that take it at 62 and may even live longer once they start taking SS.
downshiftme
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Re: Age to Take Social Security: The Ideal and the Reality

Post by downshiftme »

Bacchus01 wrote:
I honestly don't fully understand the "wait" decision from a financial standpoint. You are taking a lot of risk by not taking the money. And the payback timeline for a breakeven analysis for most people is in their early 80s, which is at roughly the current mortality age for men/women. The IRS expects to pay you the same, regardless. By waiting, you are gambling AGAINST the mortality tables/statistics. I guess that seems very unbogleheadish to me.
At the risk of repeating the oft repeated. I DO want to bet against the mortality tables. My life is NOT an optimization problem where I'm trying to maximize my take from SS. My life is my ONE and only, and I want to make sure that I am financially okay whether I live a longer or shorter life than the actuarial average. If I live shorter than expected, I will leave money on the table by not claiming SS early, but I already had enough money to bridge to at least age 70, so (being dead) I don't care that much. My heirs may be slightly annoyed, but they will still get plenty. If I live longer than expected, I will be glad to have the extra SS income from waiting. Really, this is the only case I care about, since it's the only case where I am still living. This is the only longevity bet that I want to make.

Instead of viewing SS as an income optimization problem or a pension, try viewing it as longevity insurance. If you can afford to not take the money as soon as you are able, then it's good insurance for living longer than actuarial average, the case I really care about.
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warowits
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Re: Age to Take Social Security: The Ideal and the Reality

Post by warowits »

I am a long way from the decision, but here is my take.

If I take it at 62, and something goes very wrong with my investments, I absolutely cannot live on that income.
If I take it at 67-70, I can live on just that income, though that isn't the plan.

My dad took it late, not quite 70 but late, because he was staying in the family business longer to ensure a safe transition. He had not really been thinking about the SS benefits of waiting but when he realized what his SS check was going to be you could tell it really changed his outlook on retirement. Now he literally does not have to worry about not being able to pay the bills for the rest of his life, or moms life for that matter. Even if he spends every dime from his portfolio, he can still get by. That is peace of mind.
alfaspider
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Re: Age to Take Social Security: The Ideal and the Reality

Post by alfaspider »

gerntz wrote:
Bacchus01 wrote:I honestly don't fully understand the "wait" decision from a financial standpoint. You are taking a lot of risk by not taking the money. And the payback timeline for a breakeven analysis for most people is in their early 80s, which is at roughly the current mortality age for men/women. The IRS expects to pay you the same, regardless. By waiting, you are gambling AGAINST the mortality tables/statistics. I guess that seems very unbogleheadish to me.
If married, the survivorship benefit gain for waiting is big.

I also think those that bet on exceeding the mortality tables have data & plans that help them do so such that they on average exceed the table. I.e., I'd bet those that take SS at 70 live longer than those that take it at 62 and may even live longer once they start taking SS.
I think it makes little sense to base your situation on the average. The "average" includes chain smokers, alcoholics, people on their 3rd bypass surgery, as well as former olympians who still run sub 3 hour marathons. While nobody knows for sure how long they will live, you probably have a rough idea at 62 as to whether the average is the most likely outcome for you.
hawkfan55
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Re: Age to Take Social Security: The Ideal and the Reality

Post by hawkfan55 »

At the risk of repeating the oft repeated. I DO want to bet against the mortality tables. My life is NOT an optimization problem where I'm trying to maximize my take from SS. My life is my ONE and only, and I want to make sure that I am financially okay whether I live a longer or shorter life than the actuarial average. If I live shorter than expected, I will leave money on the table by not claiming SS early, but I already had enough money to bridge to at least age 70, so (being dead) I don't care that much. My heirs may be slightly annoyed, but they will still get plenty. If I live longer than expected, I will be glad to have the extra SS income from waiting. Really, this is the only case I care about, since it's the only case where I am still living. This is the only longevity bet that I want to make.
Instead of viewing SS as an income optimization problem or a pension, try viewing it as longevity insurance. If you can afford to not take the money as soon as you are able, then it's good insurance for living longer than actuarial average, the case I really care about.
Downshift, I totally understand your point of view. Some, who have the resources to bridge the gap between age 62 and whenever they start taking their SS payment, feel as you do. The SSA increases the recipient's payment by approx. 8% per year to make up the difference you would have received had you started SS at age 62. SS is actuarially neutral. According to a recent Centers for Disease Control and Prevention report, the average American is expected to live to age 78.8 years , a statistically significant drop of 0.1 year from last year. Women can still expect to live longer than men: 81.2 years vs. 76.3 years.

Social Security provides a cost of living adjusted payment to all recipients, regardless of whether you start payments at 62, 70 or anywhere in between. I would suggest that those who wait to receive the largest payment possible, might be the one's trying to optimize their SS benefits. There are benefits to waiting such as bringing tax deferred moneys into Roth at lower tax rates to reduce RMDs, etc. Those who take their benefits at age 62 may need the funds to maximize their enjoyment of early retirement years or to conserve their retirement savings. Everyone's situation is different. This is not a situation where there is a right or wrong answer. In the case of SS, each individual is right regardless of when they start their benefits!
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oxothuk
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Re: Age to Take Social Security: The Ideal and the Reality

Post by oxothuk »

dbr wrote:I know a number of people who have taken SS at 62. They didn't have much choice if they wanted any income at all.
Here are three scenarios. In all cases I 'm assuming the person doesn't already have some life-shortening illness.
1) Age 62 and SS benefit is enough to live on (retiring to a trailer in the woods). Recommendation - go ahead and enjoy it.
2) Age 62 and SS benefit is not enough to live on, and person has no other investments beyond emergency fund (if that). Recommendation - wait to collect and keep working in the meantime (even if not in preferred occupation).
3) Age 62 and SS is not enough to live on, and person DOES have other investments beyond emergency fund. Recommendation - wait to collect and spend down investments in the meantime.
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One Ping
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Re: Age to Take Social Security: The Ideal and the Reality

Post by One Ping »

hawkfan55 wrote: SS is actuarially neutral. According to a recent Centers for Disease Control and Prevention report, the average American is expected to live to age 78.8 years , a statistically significant drop of 0.1 year from last year. Women can still expect to live longer than men: 81.2 years vs. 76.3 years.
I believe, broadly speaking, SS is intended to be actuarially neutral for a single individual. At any given time whether this is true or not depends on the discount rate one uses to compute the value of the benefit.

It is not true that SS is actuarially neutral for a couple, since their joint life expectancy is longer than that of either of the individual persons. This means that the largest SS benefit of the two for a couple (spousal benefit) will likely be paid for a longer period than the longest life expectancy of either of them individually.

The SSA periodic life table shows the life expectancy for 62 year old males and females to be 20.0 and 22.8 years respectively (death ages of 82.0 and 84.8 respectively). For 70 year olds the death ages are 84.2 and 86.4 respectively. Joint life expectancy for a 70 year old couple is 21.7 years or joint death age of 92.6. For 62 year old couple it's 91.9.

One Ping

Edited for clarity.
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10YearPlan
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Re: Age to Take Social Security: The Ideal and the Reality

Post by 10YearPlan »

I do not plan to wait until 70. My rationale is that:
1. The amount SS covers means I have to take less out of my investments early on, which
2. Allows my investments to grow during those years, which means
3. I have effectively self-insured for longevity, assuming the market cooperates (and I know that is a big assumption)

That said, we don't live much past our mid-70s on my side of the family. So longevity insurance is not my primary driver. Mostly I want to make my early retirement years that much more comfortable, and taking SS on time or early allows me to do that.

My DH and I have been neck in neck from a salary history standpoint, so I am not sure that any of the higher earning spouse strategies will work for us. So one of us will probably take it at 62 and the other at 67 (FRA).
alfaspider
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Re: Age to Take Social Security: The Ideal and the Reality

Post by alfaspider »

hawkfan55 wrote:According to a recent Centers for Disease Control and Prevention report, the average American is expected to live to age 78.8 years , a statistically significant drop of 0.1 year from last year. Women can still expect to live longer than men: 81.2 years vs. 76.3 years.
Life expectancy from birth is not relevant to a 62 year-old.
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Re: Age to Take Social Security: The Ideal and the Reality

Post by longinvest »

Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Bacchus01
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Bacchus01 »

alfaspider wrote:
gerntz wrote:
Bacchus01 wrote:I honestly don't fully understand the "wait" decision from a financial standpoint. You are taking a lot of risk by not taking the money. And the payback timeline for a breakeven analysis for most people is in their early 80s, which is at roughly the current mortality age for men/women. The IRS expects to pay you the same, regardless. By waiting, you are gambling AGAINST the mortality tables/statistics. I guess that seems very unbogleheadish to me.
If married, the survivorship benefit gain for waiting is big.

I also think those that bet on exceeding the mortality tables have data & plans that help them do so such that they on average exceed the table. I.e., I'd bet those that take SS at 70 live longer than those that take it at 62 and may even live longer once they start taking SS.
I think it makes little sense to base your situation on the average. The "average" includes chain smokers, alcoholics, people on their 3rd bypass surgery, as well as former olympians who still run sub 3 hour marathons. While nobody knows for sure how long they will live, you probably have a rough idea at 62 as to whether the average is the most likely outcome for you.

Ok. But I think that's gambling. Gambling with some insider knowledge, but still gambling a bit. And it's hardly the average. I think everyone thinks they are better than average, and half of them end up being wrong.
Chadnudj
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Chadnudj »

The Wizard wrote:A very shallow article, this one.
Nowhere does it mention that the average lifetime payout total is roughly the same, no matter what age you claim at, and especially for men, who have decreased life expectancy vs women...
This ignores, however, survivor factors (i.e. a male higher earner may be better off waiting until 70 to claim to maximize the benefit for his potentially longer-living wife, etc.)
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calmaniac
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Re: Age to Take Social Security: The Ideal and the Reality

Post by calmaniac »

One Ping wrote:
hawkfan55 wrote: SS is actuarially neutral.
I believe, broadly speaking, SS is intended to be actuarially neutral for a single individual......

It is not true that SS is actuarially neutral for a couple, since their joint life expectancy is longer than that of either of the individual persons.

One Ping
One Ping wins the prize. :moneybag I want my wife to have my maximum benefits if she outlives me.

Second prize to the many posters who describe the 70 yo SS benefit as "longevity insurance"

Useful thread, thanks y'all!
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Ron »

https://www.yahoo.com/news/oldest-ameri ... tml?ref=gs

And the first person to receive SS (Ida Mae Fuller)? Lived to age 100 https://en.wikipedia.org/wiki/Ida_May_Fuller

"Longevity insurance"? You never know...

- Ron
Last edited by Ron on Tue Dec 13, 2016 7:55 am, edited 1 time in total.
dbr
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Re: Age to Take Social Security: The Ideal and the Reality

Post by dbr »

oxothuk wrote:
dbr wrote:I know a number of people who have taken SS at 62. They didn't have much choice if they wanted any income at all.
Here are three scenarios. In all cases I 'm assuming the person doesn't already have some life-shortening illness.
1) Age 62 and SS benefit is enough to live on (retiring to a trailer in the woods). Recommendation - go ahead and enjoy it.
2) Age 62 and SS benefit is not enough to live on, and person has no other investments beyond emergency fund (if that). Recommendation - wait to collect and keep working in the meantime (even if not in preferred occupation).
3) Age 62 and SS is not enough to live on, and person DOES have other investments beyond emergency fund. Recommendation - wait to collect and spend down investments in the meantime.
4) Age 62 and SS is not enough to live on, there are no savings and investments, and the person is unemployable due to physical and/or mental disabilities. Recommendation -- take SS and seek additional help from any resources that can be found. I know four people in these circumstances within the narrower circle of my acquaintances.
alfaspider
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Re: Age to Take Social Security: The Ideal and the Reality

Post by alfaspider »

Bacchus01 wrote:
alfaspider wrote:
gerntz wrote:
Bacchus01 wrote:I honestly don't fully understand the "wait" decision from a financial standpoint. You are taking a lot of risk by not taking the money. And the payback timeline for a breakeven analysis for most people is in their early 80s, which is at roughly the current mortality age for men/women. The IRS expects to pay you the same, regardless. By waiting, you are gambling AGAINST the mortality tables/statistics. I guess that seems very unbogleheadish to me.
If married, the survivorship benefit gain for waiting is big.

I also think those that bet on exceeding the mortality tables have data & plans that help them do so such that they on average exceed the table. I.e., I'd bet those that take SS at 70 live longer than those that take it at 62 and may even live longer once they start taking SS.
I think it makes little sense to base your situation on the average. The "average" includes chain smokers, alcoholics, people on their 3rd bypass surgery, as well as former olympians who still run sub 3 hour marathons. While nobody knows for sure how long they will live, you probably have a rough idea at 62 as to whether the average is the most likely outcome for you.

Ok. But I think that's gambling. Gambling with some insider knowledge, but still gambling a bit. And it's hardly the average. I think everyone thinks they are better than average, and half of them end up being wrong.
You are gambling to an extent no matter when you take SS.

I think you SHOULD use average, but use average for your demographic- not all demographics. Life insurance companies don't write policies based on the life expediency for everyone- they write policies for the life expectancy of your demographic. Their life expectancy tables for a non-smoker with normal bio-indicators, no chronic conditions, and normal weight look a lot different from their tables for obese smokers with sky-high blood pressure and diabetes.
protagonist
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Re: Age to Take Social Security: The Ideal and the Reality

Post by protagonist »

If you wait until age 70, and the break even point is age 81 (as posted above), if you die between 70 and 81 you will die happy and none the wiser, thinking until the last minute that you made the right decision.

On the other hand, if you live past 81 and you chose to start taking benefits at age 62, you will be kicking yourself all the way to the grave.

So the choices are:
1. Wait until age 70 to claim benefits and die happy, no matter how long you live, or
2. Take benefits early and feel stupid from age 81 onwards.

I opt for happiness over wealth. And I can afford to wait. So I will go for choice #1. Simple.
Maverick3320
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Maverick3320 »

drawpoker wrote:
SGM wrote:We have chosen to insure against outliving our savings and chose delaying SS until 70. ..... If you want to protect you and your spouse against running out of savings later in life then delay is a better tactic......
Altho I am single, not part of a couple., I agree 100 percent on your views here.

Everything I am reading and hearing is that - Medigap policy premium costs (along with most everything else re medical expenses) are going to be WAY HIGHER when I am in my seventies and eighties. Didn't have any issue-age rated Plan F policies available from any companies in my state when I turned 65. Just figuring in general inflation in all the other areas of cost of living, utilities, taxes, insurance, food, entertainment, etc I truly believe I am smarter to wait to 70 for the (much) bigger monthly check.

It is true, as others have rightly pointed out here, that it is not indeed a true 32% extra between FRA at 66 and delaying until age 70. Yes, the factoring of the value of lost checks between 66 and 70 must be figured in any true analysis of values.

But, since I H A T E math problems like a bad rash and will do almost anything to avoid them, I will just stick with my gut feeling instead - better to wait until 70- get the larger income during the worst of the golden years when you will probably need more dough .... :?: :?:
The flip side of rising living/medical costs is the rising chance that Social Security either increases contributions, or decreases payouts (or a combination of both).
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Ged
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Ged »

Cody wrote:Don't forget the benefit of the "restrictive application". I'm doing that (taking half of my wife's full retirement benefit) while I wait to take my SS.
I am doing the same, plus I am delaying my benefit until age 70. The actuarial calculations are based on a single individual, but with two people and the resulting increased likelihood one out of two will beat the average it seems like the best bet.

Of course this depends on having the financial flexibility to handle the gap between retirement and starting the benefit.
retire57
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Re: Age to Take Social Security: The Ideal and the Reality

Post by retire57 »

I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).

It's a complex decision and, like some game show, you only have one shot at getting it right!
retire57
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Re: Age to Take Social Security: The Ideal and the Reality

Post by retire57 »

10YearPlan wrote:I do not plan to wait until 70. My rationale is that:
2. Allows my investments to grow during those years, which means
3. I have effectively self-insured for longevity, assuming the market cooperates (and I know that is a big assumption).
The problem with that is by delaying SS you are guaranteed an 8% annual return. Can you get that in the market? Probably not. That's why we will wait.
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Wakefield1 »

retire57 wrote:I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).

It's a complex decision you only have one shot at getting it right!
Actually you have a lot of chances,you can decide again every year(take it now or wait?) or even every couple of months,over and over until you are 70!
corysold
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Re: Age to Take Social Security: The Ideal and the Reality

Post by corysold »

alfaspider wrote:
hawkfan55 wrote:According to a recent Centers for Disease Control and Prevention report, the average American is expected to live to age 78.8 years , a statistically significant drop of 0.1 year from last year. Women can still expect to live longer than men: 81.2 years vs. 76.3 years.
Life expectancy from birth is not relevant to a 62 year-old.
Great point. I believe, if my memory serves, that the average 65 year old lives another 20.2 years.

So if you make it to 65, on average you are going to make it to 85.
retire57
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Re: Age to Take Social Security: The Ideal and the Reality

Post by retire57 »

Wakefield1 wrote:
retire57 wrote:I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).

It's a complex decision you only have one shot at getting it right!
Actually you have a lot of chances,you can decide again every year(take it now or wait?) or even every couple of months,over and over until you are 70!
Great point!
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David Jay
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Re: Age to Take Social Security: The Ideal and the Reality

Post by David Jay »

Wakefield1 wrote:
retire57 wrote:I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).

It's a complex decision you only have one shot at getting it right!
Actually you have a lot of chances,you can decide again every year(take it now or wait?) or even every couple of months,over and over until you are 70!
I was just going to say that 62 or 70 is not a binary choice. I have projected finances for FRA (66.5 at my age), 68 and 70. I will decide based on actual circumstances when to start benefits (68 is my current preferred choice).

[edit] I am the high wage earner, so my wife will take her benefit at FRA, mine will be delayed based on conditions.
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Dutch
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Dutch »

longinvest wrote:Old, but interesting thread: Delay Social Security to age 70 and Spend more money at 62.
I can certainly recommend that thread.

It had a big impact on my - early - retirement planning.
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Dutch
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Dutch »

retire57 wrote:I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).
There is an excellent chance - you don't have to leave it to chance, it can be by design - that delaying SS will lower your life-time tax bill.

This in addition to all the other benefits mentioned in this thread for delaying SS.
hawkfan55
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Re: Age to Take Social Security: The Ideal and the Reality

Post by hawkfan55 »

The problem with that is by delaying SS you are guaranteed an 8% annual return. Can you get that in the market? Probably not. That's why we will wait.
Guaranteed 8% Annual Return less payments that would have been paid from 62 to 70, assuming one waits till 70 to start Social Security.
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nova1968
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Re: Age to Take Social Security: The Ideal and the Reality

Post by nova1968 »

Your health situation and an assessment of how long you expect to live would be the more important factor. I believe withdrawing from retirement accounts at age 62 or earlier would be the first step and then as you approach your 70s the max SS withdrawal would be feasible.
dbr
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Re: Age to Take Social Security: The Ideal and the Reality

Post by dbr »

hawkfan55 wrote:
The problem with that is by delaying SS you are guaranteed an 8% annual return. Can you get that in the market? Probably not. That's why we will wait.
Guaranteed 8% Annual Return less payments that would have been paid from 62 to 70, assuming one waits till 70 to start Social Security.
This is a misuse of the term return. The statement is that the amount of the SS benefit increases by about 8% for each year of delay, as an average. A person who wants to value the benefit in terms of total capital received does indeed have to account for years of benefits not paid.
TravelforFun
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Re: Age to Take Social Security: The Ideal and the Reality

Post by TravelforFun »

David Jay wrote:
Wakefield1 wrote:
retire57 wrote:I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).

It's a complex decision you only have one shot at getting it right!
Actually you have a lot of chances,you can decide again every year(take it now or wait?) or even every couple of months,over and over until you are 70!
I was just going to say that 62 or 70 is not a binary choice. I have projected finances for FRA (66.5 at my age), 68 and 70. I will decide based on actual circumstances when to start benefits (68 is my current preferred choice).

[edit] I am the high wage earner, so my wife will take her benefit at FRA, mine will be delayed based on conditions.
Depending on your and your wife's FRA and PIA, consider having your wife files for her benefit at 62, you file for spousal at your FRA, then you file for your own benefit at 70, and your wife files for spousal at her FRA.
Nowizard
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Re: Age to Take Social Security: The Ideal and the Reality

Post by Nowizard »

One factor that is frequently not discussed in depth occurs when a person does not need the income from SS at Full Retirement Age. Those individuals invest the proceeds and returns extend the time when total payouts for FRA and age 70 equate. This may be more of a positive for those who reached FRA age at 65 rather than at a later date. I have not run numbers for obtaining SS at age 62.

Tim
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Re: Age to Take Social Security: The Ideal and the Reality

Post by David Jay »

TravelforFun wrote:
David Jay wrote:
Wakefield1 wrote:
retire57 wrote:I also wonder what the prognostication is for people with tax-deferred assets, considering RMDs begin at age 70 1/2. (Of course you don't have to spend the RMD).

It's a complex decision you only have one shot at getting it right!
Actually you have a lot of chances,you can decide again every year(take it now or wait?) or even every couple of months,over and over until you are 70!
I was just going to say that 62 or 70 is not a binary choice. I have projected finances for FRA (66.5 at my age), 68 and 70. I will decide based on actual circumstances when to start benefits (68 is my current preferred choice).

[edit] I am the high wage earner, so my wife will take her benefit at FRA, mine will be delayed based on conditions.
Depending on your and your wife's FRA and PIA, consider having your wife files for her benefit at 62, you file for spousal at your FRA, then you file for your own benefit at 70, and your wife files for spousal at her FRA.
I believe that the survivor's benefit is reduced if the surviving spouse started their retirement benefit before FRA. I would welcome a correction, as it would mean a (small) stipend from 62 to FRA.

[edit] After researching it, only spousal benefit is reduced if retirement benefit is taken before FRA. Survivor's benefit is NOT reduced. So now I need to go re-do my spreadsheets :(
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