Why did you take SS at FRA instead of delaying until 70?

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Miriam2
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Why did you take SS at FRA instead of delaying until 70?

Post by Miriam2 »

Despite my being "forever 21," the Social Security Administration says I am now in the realm of Full Retirement Age [FRA] :shock: It's decision time.

For those who took or will take your SS at FRA and did not delay to 70 - or perhaps took early before FRA, or originally delayed to 70 but changed your mind before 70 - why did you take earlier instead of delaying until 70? What was your reasoning?

We read a lot about the reasons for delaying SS, but what are the sensible, good or necessary reasons for taking at FRA and "giving up" the extra amount that would be received at 70?
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by JW-Retired »

Why any particular time? I have no idea why FRA is special in terms of how much you get when you finally do claim SS . You get a fairly similar boost in SS benefit for every single month you delay between age 62 and age 70. I think It only varies from 5/12ths of one percent to 5/9ths 2/3rds of one percent of your PIA per month. Mostly it's 5/9ths or 2/3rds. If you want the maximum benefit with a cola and survivor benefits then delay as long as possible. If you need income ASAP then claim now.

FRA is important in terms of being a threshold for allowing you to take spousal benefits in lieu of your own, but that doesn't seem relevant to your question.
JW
ps: I delayed to 70 for the cola and the SS survivor benefit.
Last edited by JW-Retired on Sat Jul 18, 2015 8:08 am, edited 1 time in total.
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celia
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by celia »

Many people take it early because they don't know they have a choice. Those who are informed may also start early or at FRA either because they need the money now or because their health tells them they probably won't live that long. Those are very good reasons, don't you think?
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BL
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by BL »

As I understand it, you can file and suspend at FRA so that, if at age 69, you need or want that money, you can get it all the way back to FRA, rather than a 6-month retroactive timeframe.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by john94549 »

We did the 62=>spousal=>defer to 70. My wife, the higher earner by a tad, gets her spousal while collecting DRC's.

As I suspected, collecting my S/S at 62 (rather than tapping 60/40 IRA funds) was a calculated risk. Mind you, I'm 68, so do the math. Harvesting 60/40 IRA funds for living expenses back at the market's most recent nadir, not prudent.* On top of that, there were certain tax benefits. CA exempts all S/S from state income tax, and federal taxes but 85%. IRA withdrawals would have been taxed in full. For us, the math was fairly simple.

In addition, we were able to continue to craft an IRA CD ladder during this period, thanks to the cash flow from S/S.

*I will candidly admit to a bit of market-timing here, as I did not want to sell equities in late 2008 - early 2009. Ironically enough, as I recall, I filed for S/S right about when the market bottomed, in March of 2009. Turned 62 in May of 2009.
Last edited by john94549 on Fri Jul 17, 2015 11:33 pm, edited 4 times in total.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by nbseer »

I'm planning on taking SS at my FRA of 66, DW (older than me and already taking SS) would then get spousal benefit. I will get a union pension that increases approx. 12% for every year I delay past 65.. so I will take the SS to live on from 66 til 70, do TIRA conversions to Roth during that time. At 70 will start taking pension which, along with SS, will cover living expenses. Then will have to deal with rmd's and the so-called 'tax torpedo" :oops:
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by OutInThirteen »

I plan to start SS benefits at 62, in just seven months. My spouse will take spousal benefits at 62 less than two years later (no benefits due based on own earnings). We would prefer to not spend down assets that will go to our two children when we finally kick the bucket. SS does not hold much value to us as longevity insurance because my two COLA'd pensions (with 100% and 50% survivor continuance), my spouse's non-COLA'd pension, and SS survivor benefits will more than exceed my spouse's living expenses should I go first, including the bump in taxes due to filing single. Besides, I can always suspend my benefits at FRA and collect DRC's until age 70 if desired.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by retiredjg »

I starting taking SS at 62. I gave some consideration to delaying and decided against it.

It was not clear to me that delaying SS for a single person has as much benefit as delaying for a couple. In a couple there are 2 chances to outlive the "break-even" age while a single person only has one chance. My relatives have mostly not lived to the break-even age so I decided that a bird in the hand was the better choice for me.

If I live past the break-even age, I'll collect less total from SS than if I had delayed. But my savings should be larger than if I had delayed SS because I'm spending less of it for a bunch of years.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Independent »

I was planning to wait until 70, but will now probably start around 68 1/2.
This is due to changes in my spouse's health.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by robertalpert »

EDIT:
If you are currently working and just reached FRA this month, then waiting till the end of this calendar year may prevent social security benefit reduction this year. Drawing social security next calendar year, there would be no redution in social security benefits in response to earned income.
A PM from a good source tells me that this is not correct. One can take social security from the month of reaching FRA and not have benefits reduced. Thank you to the PM source.



If you are still contributing to your portfolio and have no need to draw on your investments to pay bills, then you may benefit by waiting till you approach age 70.
Last edited by robertalpert on Sat Jul 18, 2015 7:59 pm, edited 2 times in total.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by basspond »

I will be taking at 62. SS will make up a third or even less of my retirement income so I don't care about living past the break even point, I want to before and after.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by kolea »

I don't really care about maximizing total return from SS, rather I want to maximize my cash flow in the years in which I can best use it. I put a lot more emphasis on having sufficient income to travel and so forth in the ages 65-75 (or so) than I do when we are older than 75. I am 64 and don't know when I will take SS but it will based on cash/income needs rather than "break even" considerations.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by jdb »

Took earlier this year upon semi retirement at 67 even though thankfully did not need income and could have waited till age 70 for higher monthly amount. Why? Purely for psychological (as opposed to logical) reasons, wanted to see monthly payments direct deposited into bank account. No regrets. Sometimes not all about maximizing returns.
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BL
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by BL »

http://ftp.ssa.gov/planners/retire/whileworking2.html
has details on working while drawing SS:
If you will reach full retirement age in 2015, the limit on your earnings for the months before full retirement age is $41,880.

Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by nisiprius »

INTRODUCTION: It's become popular to do elaborate analyses of claiming strategies, which can become infinitely complex for married couples with 401(k)s and traditional IRAs due to the tax interactions between taxable distributions and Social Security taxability. I think the financial community has seen this as a business opportunity because they can point out how complicated it is, say "you can't possibly understand or calculate this yourself without elaborate computer models" (probably true) "and therefore you ought to pay us to do it" (maybe, or, then again, maybe not!)

The elephant in the room is future sustainability--do we plan on receiving 100% of promised benefits (optimistic, but issues are easy to fix), 75% (official guess if "nothing is done," and the "easy-to-fix" issues aren't been fixed), 0% (standard scare number which, I can personally assure you, people have been predicting since the 1950s)? Then there are uncertainty of future tax laws--and personal longevity. All these uncertainties are a gazillion times bigger than the variations that come out of the models. If bobcat2 or some other expert I respect says something like, statistically waiting until age 70 is, I dunno, 10% better grand total overall by some measure, I say "yeah, 10% ± 50%."

Stupid "break-even" calculators based on simple dollar totals, ignoring both interest and inflation, don't make things any better.

Most of the stuff I see simply points out how much bigger the monthly payments are if you wait until 70, ignoring the actuarial detail that--however long you live--you will be collecting those payments for 8 years longer if you claim at 62 than at 70. Naturally, the serious advice sources do take actuarial factors into account, but the decision is a lot tougher than saying "So, which would you rather have, $1,200/month or $2,000/month?"

Personally, I figure Social Security is intended to be actuarially neutral--the government figures the benefits as best it can so that it doesn't make any different to them when you claim--and that's, well, close enough for government work.

WHAT WE DID: So, here are the actual personal reasons why my wife and I decided to make what was quite likely a suboptimal choice. We have no regrets.

I claimed in my early sixties. Why? I was laid off, and when I had been searching for a job for five months without getting a single interview, I decided I'd better arrange for the Social Security payments to start coming in when the unemployment payments were about to stop.

My wife claimed in her early sixties. Why? She wanted to cut back on her hours to assist in caring for an ailing member of her extended family, her employer initially said he didn't want to keep her on part-time, so she figured she was retiring.

We were both influenced by a belief that it's roughly actuarially neutral so claiming age doesn't matter much. And to our personal circumstances we added a mildly gloomy philosophy of "Ah, take the Cash, and let the Credit go, Nor heed the rumble of a distant Drum!" We both know people who paid into Social Security, and died between age 62 and FRA without ever claiming, and, sorry, just didn't want that to happen to us.

Look, I'm as superstitious as the next guy. Around the late 1990s I had an irrational tiny nagging anxiety that I wouldn't get to make it into the next millennium--John O'Hara, 1905-1970, wrote about the slight sadness felt by people who know they are probably "trapped within one century." After I experienced the thrill of seeing the odometer turn over on the year, I then started to fret about the possibility of never getting any money at all from Social Security. Whew! That worry is now gone.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by cfs »

The when and why is based on your personal decision.

Concur with our Shipmate Celia, on taking early because you need the money now or think you probably won't live that long based on health issues. Concur with our Shipmate RetiredJg, when you have a good number of relatives not living past your SS break-even age then you have to make a decision. The way I see it, if I make it to "the 62-66 break-even point" I will give high fives to my living relatives, and if I make it to "the 62-70 break-even point" the chances are that I would not be able to do anything with money at that point.

Conversations about when to take the SS is always a good one. Again, the when and why is based on your personal decision.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by ubermax »

I claimed the year before FRA and my DW at FRA - our numbers tumbled out OK at the time and we just didn't overthink or overanalyze it .
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Old Guy »

I took it at full retirement age and while I was still working for two reasons: 1. I liked having the extra money coming in and 2. Who knew what was going to happen? So I wanted the money while I could use it. Because I was a retired Fed the difference in in income between the two dates was probably fairly minimal.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by drawpoker »

I plan on waiting to take it at 70. Primarily because longevity runs in my ancestors, both parents lived well into their nineties, so am thinking same fate is likely for me.

Right now total of all my Medicare premiums is running at 27 % of monthly income. Add in the other stuff, car and HO insurance, and it is over 30%. That kinda worries me. The difference in SSA benefits between taking it at FRA and waiting to 70 might bring down this percentage, dunno, What with inflation, it might not. Am not counting on it, anyway.

Others have told me I am a fool; that with RMD's starting a year after I turn 70, I will have plenty of income, nothing to worry about.

But I still worry, since I think it is very possible we will be in a bear, not a bull, market in the years 2019 and 2020.

No matter how large your nest egg I think it is only natural for people to worry about out-living their money. For people like me, no pension or retiree health benefits, getting the max from SSA seems a good strategy.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by mptfan »

JW Nearly Retired wrote:Why any particular time? I have no idea why FRA is special in terms of how much you get when you finally do claim SS
One reason why FRA is special is because once you reach FRA, your earnings no longer reduce your benefits not matter how much you earn, whereas your benefits may be reduced if you start taking them before you reach FRA depending on how much you make. That makes your FRA date special.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by montanagirl »

I am 66 and planning to delay, because my earnings record is poor and my benefit would be only 1300. Also I get spousal.

When I was working I experimented with my 401k savings rate to see just what kind of takehome I needed to get by, with an eye on trying to match it up with my eventual SS. That worked well, because now I know 1300 isn't enough. I get over 100 more a month for each year I wait, and if I make it to 70 it will be 1800, which is more than I ever took home from my job due to my high savings rate and average salary.

Also I view SS as somewhat more dependable than the markets, so I will spend my IRA first and do Roth conversions.

But I am watching for any changes in the law and in the markets. I could bail and claim old age at 67 or 68 depending how things are going.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by bengal22 »

IMHO, At the end of the day, our decision when to take Social Security will mean very little to my end game. I am currently 63 and my plan is to take it at 66 and my wife will start her spousal(at 64). I have crunched a few scenarios(5) and the optimum is probably me filing and suspending until 70 and my wife claiming spousal at 66. But who knows or cares. When I turn 70 I will have a good pension, RMD's, and our social security will be taxed significantly. So, rather than crunch and factor all factors into the mix, I am splitting the difference and taking it at 66. The only thing I like about waiting until 70 is the fact that when one of us dies, the survivor will have quite a bit more income.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Abe »

I started taking SS at 62.

Why? A bird in the hand is worth two in the bush.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Alan S. »

Filed at 68 and 7 months instead of waiting till 70. Reasons:

1) Used prior years for all the Roth conversions I wanted to do, so this was no longer a reason to reduce other income.
2) Did not want to extend the break even age any further.
3) Used a Dec effective date as this minimizes the forfeited current year amount, and coordinates well with Reason 1.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by MP173 »

My plan is to take SS at age 70, working as long as possible and using SS as longevity insurance rather than as a retirement income stream. This plan is written in pencil and thus can be changed based on current situations. My wife plans on retiring at age 62 and we will assess her situation at that time.

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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Leesbro63 »

I recently heard a James Lange podcast where he quoted SS expert Lawrence Kotlikoff. Kotlikoff says it doesn't matter if you delay to age 70 and die before break even at about age 84....YOU'RE DEAD! His point is that the big risk is living...longevity....and that if you can delay to 70, doing so is a great deal on longevity insurance. That being said, I agree with others that uncertainty regarding future taxation and other issues that can't be discussed here might sour this good deal on longevity coverage. But if I were 66 today, I'd defer, if I could, to age 70
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by derosa »

There are many reasons why people choose to take early. Over 95% take it before 70. So it is not 100% a financial calculation. All the articles focus on the financial calculation. Thats what they need to write about isn't it? Shame people to make them feel bad that they did.

We both took it at 62. Use OPM - Other People's Money. Let my portfolio continue on.

Yes there is a difference between waiting till 70 and starting early. But in the scheme of things that amount of money isn't really that large is it? The market has a couple down days and you have more than lost that amount. The market has some up days and you are way ahead of the annual SS amount difference.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by nodenuff2 »

I started at 64. Wife started at 62. Why? 1. Cash flow worked better. 2. We wanted to maximize what we are leaving to our heirs ( hopefully 2 generational at least).3 Once started our government has a hard time in reducing benefits. 4. Pension and our SS covers our monthly expenses so we have some play money each month. So far no regrets. One day some expert can pour over our situation and use it as a teaching moment on mistakes motto make but it works for us.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Leesbro63 »

derosa wrote:There are many reasons why people choose to take early. Over 95% take it before 70. So it is not 100% a financial calculation. All the articles focus on the financial calculation. Thats what they need to write about isn't it? Shame people to make them feel bad that they did.

We both took it at 62. Use OPM - Other People's Money. Let my portfolio continue on.

Yes there is a difference between waiting till 70 and starting early. But in the scheme of things that amount of money isn't really that large is it? The market has a couple down days and you have more than lost that amount. The market has some up days and you are way ahead of the annual SS amount difference.
This appears to be faulty thinking. None of us really know what the stock market will do longer term. The fact that stocks might have a few bad days is irrelevant.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by BTDT »

Kind of disappointing that so few of the posters actually read the question, and answered why they chose to take SS at FRA versus 70 :oops:
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by island »

BTDT wrote:Kind of disappointing that so few of the posters actually read the question, and answered why they chose to take SS at FRA versus 70 :oops:
Huh? That is the question.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by mptfan »

Leesbro63 wrote:I recently heard a James Lange podcast where he quoted SS expert Lawrence Kotlikoff. Kotlikoff says it doesn't matter if you delay to age 70 and die before break even at about age 84....YOU'RE DEAD!
It DOES matter if you spend down your portfolio more quickly by the age of 70 than you would had you taken social security earlier because your heirs will get less.

The decision regarding when to start taking social security, between the ages of 62 and 70, has risks and potential benefits on both sides. If you start taking social security early, then you run the risk that you may live to an old age (generally past age 82) and get less benefits (less longevity insurance). If you start taking social security later, up to age 70, you run the risk that you may spend down your portfolio more quickly than you would have if you had taken social security earlier, and in that case, if you die before the break even point (generally age 82) then your heirs will get less than they would have had you started taking social security earlier.

Many people need to take social security earlier than age 70 in order to maintain their lifestyle so it's a moot point for them. For the rest, the decision boils down to which of the two risks I described you are more willing to accept.
Last edited by mptfan on Sun Jul 19, 2015 3:02 pm, edited 2 times in total.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by MrTimewise »

BTDT wrote:Kind of disappointing that so few of the posters actually read the question, and answered why they chose to take SS at FRA versus 70 :oops:
Good point, but I found so many of the responses interesting anyway.
Alan S. wrote:Filed at 68 and 7 months instead of waiting till 70. Reasons:

1) Used prior years for all the Roth conversions I wanted to do, so this was no longer a reason to reduce other income.
2) Did not want to extend the break even age any further.
3) Used a Dec effective date as this minimizes the forfeited current year amount, and coordinates well with Reason 1.
Alan's response is likely going to be my future. I'm 66 years/9 months at this moment and I'm delaying to accumulate DRCs. I will continue delaying as I work full time at a higher income level than I had received for several years in the near past (non-indexed years). My spouse (66 years/8 months at this moment) started her retirement benefits exactly at 66 years. She actually retired from full time work at 64 years/7 months, immediately after which she started receiving a monthly pension (now at $820). This pension does not reduce her SS retirement benefits.

I'm actually receiving spousal benefits on her account because I filed a restricted application at the same time my spouse filed for her RIB. When working the numbers using my PIA and her PIA (we were both at FRA when we filed) it turned out that my unreduced full spousal (50% of her PIA) gives us $110 more per month than would the excess spousal benefit she could get if I filed and suspended. When I do eventually begin to receive my RIB, I will stop receiving spousal from my wife's account. At that same point in time, my wife will then begin receiving spousal benefits from my account. The "extra $110" will be lost at that time, of course, but my DRCs will more than balance that out. I do not have any pension at all from any other source...just a very small Roth fund that would be gone in a matter of months...which is why I see no work retirement date in my future.

Nevertheless, I'm trying to think ahead, so I read this thread with interest. I may decide to replace a 13 year old car early next year and if we finalize that decision soon it is likely that I'll start claiming retirement benefits in December. As Alan pointed out, December is a great month to stop DRCs if you're not waiting all the way until 70 (see other threads as to why). Collecting my RIB at that time would make car payments flow nicely without dipping into my very modest savings.

We have only one son who has a higher income than we ever had, so the need to leave him with an inheritance is minimized. We have a large comfortable home in a rural "bedroom community" of Chicago. We are lacking nothing, We enjoy great restaurants on a regular basis, with friends and just the two of us. We are healthy (OK...I've got two stents in place now). My parents passed away in their mid seventies. My spouse's father died at 80 due to pneumonia he contracted at the hospital; her mother is alive at 94.

Thus, I'm likely to follow in Alan S's tracks. Or, to paraphrase Monty Python, "We're making it up as we go along." :happy
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by ObliviousInvestor »

MrTimewise wrote:
BTDT wrote:Kind of disappointing that so few of the posters actually read the question, and answered why they chose to take SS at FRA versus 70 :oops:
Good point, but I found so many of the responses interesting anyway.
Also, FRA is only 1 month out of a 96 month window. Limiting the discussion strictly to people who claimed exactly at FRA wouldn't allow for much discussion at all as nearly everybody claims before or after FRA.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Jazztonight »

Miriam2 wrote:For those who took or will take your SS at FRA ...why did you take earlier instead of delaying until 70? What was your reasoning?
That's what I see as the OP's question. Here are my two answers:

1. I took SS at FRA (66). I had already been semi-retired for 13 years, and was tired of working even 2 days a week. I had other things to do and I wanted to spend more time doing them instead of working in the office (seeing patients). I had a life outside the office and did not want to think about earning a living anymore.

2. The big question is: "What is enough." The issue was, if I took SS at my FRA, would I have enough to live a lifestyle that was comfortable and satisfying? I looked carefully at my financial situation and the answer was "yes." DW and I go on regular vacations. We have no debt or mortgage. I certainly don't need any more "stuff."

I'm happy with the decision I made.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by BTDT »

ObliviousInvestor wrote:
MrTimewise wrote:
BTDT wrote:Kind of disappointing that so few of the posters actually read the question, and answered why they chose to take SS at FRA versus 70 :oops:


Good point, but I found so many of the responses interesting anyway.
Also, FRA is only 1 month out of a 96 month window. Limiting the discussion strictly to people who claimed exactly at FRA wouldn't allow for much discussion at all as nearly everybody claims before or after FRA.
Good point Mike - I was thinking of age 66 versus 70 and overlooked the one month window of FRA. :oops:

FWIW I am 68 and waiting for 70 so didn't provide an input. I also enjoy you blog :sharebeer
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by nisiprius »

mptfan wrote:
JW Nearly Retired wrote:Why any particular time? I have no idea why FRA is special in terms of how much you get when you finally do claim SS
One reason why FRA is special is because once you reach FRA, your earnings no longer reduce your benefits not matter how much you earn, whereas your benefits may be reduced if you start taking them before you reach FRA depending on how much you make. That makes your FRA date special.
Many, many people do not understand how the earned income limit works. I can't tell if you do... but...

Before FRA, earned income over the limit temporarily reduces your benefits. At FRA, a calculation is performed (called, as it happens, the ARF) and your monthly benefits now become greater than they would have been had you not worked (but less than if you'd waited). The withheld benefits are not lost--it's not a confiscation or a punishment for working, it's an adjustment because you aren't actually fully retired. A second adjustment that works in your favor is then made when you reach FRA--again, because you weren't fully retired.

For example, if you assume that FRA is 66, and that work between 62 and 66 results in the reduction of your total benefits to 50% of what they would have been, the reason is that you are considered to be only 50% retired. When you hit 66, they say, "well, you were only 50% retired, so instead of continuing with the benefits appropriate to retirement at age 62, we will increase them to what they'd have been if you'd been fully retired at age 64." That's not mathematically correct but it illustrates the principle.

And it really does work that way because that's what I did--although I found that due to the vagaries of data processing batch scheduling, I didn't actually receive the increase until nearly a year after FRA, together with a retroactive lump sum payment.
Last edited by nisiprius on Sun Jul 19, 2015 6:28 pm, edited 1 time in total.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by ObliviousInvestor »

BTDT wrote:
ObliviousInvestor wrote:
MrTimewise wrote:
BTDT wrote:Kind of disappointing that so few of the posters actually read the question, and answered why they chose to take SS at FRA versus 70 :oops:


Good point, but I found so many of the responses interesting anyway.
Also, FRA is only 1 month out of a 96 month window. Limiting the discussion strictly to people who claimed exactly at FRA wouldn't allow for much discussion at all as nearly everybody claims before or after FRA.
Good point Mike - I was thinking of age 66 versus 70 and overlooked the one month window of FRA.
I think this happens pretty often, at least in part due to the way in which we tend to simplify things (for the sake of concise discussion) to 62, FRA, 70 -- when there are really 96 different points at which a person could claim retirement benefits. (And I'm as guilty as anyone of doing this.)
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Nowizard »

Based on the amount I would receive at FRA, it would take until approximately age 83 to recoup the foregone amounts between FRA and initiation of benefits. We are fortunate enough to have not needed the assets at that time, the very reason many say to delay receiving benefits. However, it is necessary to add in earnings on invested amounts in these circumstances to obtain the accurate age at which benefits delayed would be equivalent to benefits received plus earnings, minus taxes. Seemed like a pragmatic and logical decision in our case even though investment earnings were unknown at the time.

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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Toons »

I started taking SS Oct.2012.
Why?
I wanted to spend the money on activities I enjoy,RV travel,Golf,,,and share some with family.
So far No regrets whatsoever on my decision.
It was the right one for me. :happy
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by itstoomuch »

Needed the money. Insurances (Medical, LTCi) and out-of-pocket dental was causing us to take on passbook loans and small IRA withdrawals, to even out cashflow. Although I knew that we could get more SS monthly benefits by taking SS at 66 or 70, I felt that our IRA and investment funds/vehicles had a lot more growth in years beyond 2010 and in 2012. :| I was right. :?

However, in todays environment, If I had adequate retirement funds and risk management program, I'd delay SS til 66 or 70. :greedy
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by mptfan »

nisiprius wrote:Many, many people you understand how the earned income limit works. I can't tell if you do... but...
I do understand that the reduction is temporary and goes away once you reach FRA. But the fact remains that the FRA date is special because your benefits may be reduced before that date if you have earned income, whereas after that date they are not.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Miriam2 »

OP here - I very much appreciate all your thoughtful replies and your reasoning for making your decision not to delay your SS.

Thank you nisiprius for your very poignant description of what you went through in making your decision. Of your many thoughts, this is the snag or block for me:
nisiprius wrote:Most of the stuff I see simply points out how much bigger the monthly payments are if you wait until 70, ignoring the actuarial detail that--however long you live--you will be collecting those payments for 8 years longer if you claim at 62 than at 70. Naturally, the serious advice sources do take actuarial factors into account, but the decision is a lot tougher than saying "So, which would you rather have, $1,200/month or $2,000/month?"
My indecision is that:
By collecting those payments for 4 years longer by claiming at 66 instead of 70, I can put that money to good use for those 4 years. But my good use is not food on the table and mortgage payments, it is paying off expenses and loans, repairing the house perhaps to sell, and building up an emergency fund. It doesn't make sense to me to pay interest on loans, have house needing repairs and an inadequate emergency fund, for extra SS down the road.

But, by delaying until 70, I will be responsibly "thinking ahead" to the future when I am very old and could then really use the extra monthly SS benefits because I delayed my SS and "got what's mine." It will be over $900 more a month. That's not peanuts.

In other words, Kotlikoff's book "Get What's Yours" scared me. He wrote that it is our "reptilian self" that cannot wait for goodies that takes their SS at 66, but it is our rational "prefrontal self" that is being responsible by delaying for the goodies until 70. He actually wrote that it is our "fiduciary responsibility" to "all our future selves" to delay. (pgs. 18-19)

I realize he is being over-dramatic, but since, if given the marshmallow test, I would put off 1 marshmallow today for 2 tomorrow, this SS decision has been difficult for me.

I very much appreciate learning how others made their decision not to delay. :happy
Last edited by Miriam2 on Sun Sep 06, 2015 1:21 am, edited 2 times in total.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by nisiprius »

I am afraid I have lost my respect for Kotlikoff after his over-the-top alarmism, first in Close Your Brokerage Account!, and more recently in The latest Social Security horror story. His stuff is so full of spin and sensationalism that it's hard to judge the value of whatever kernels of truth may be in it.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by SeeMoe »

:dollar #1.) Since the money(SS) is there, take it ! Who can guarantee age 70 or ever 63, Etc,..? We retired early with good pensions and investments, so taking SS soon as available was a gift that we invested in Vanguard until RMD's began . Now we invest only the RMD's,..33.
Why ? Because of the above explanation,..Somwhy not take this heavily(SS) subsidized money and invest it ? If one U.S. We're to be called home, then only one SS check will be in the mail . This way 2 are working for us now !
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by AAA »

Alan S. wrote:Filed at 68 and 7 months instead of waiting till 70. Reasons:
...
2) Did not want to extend the break even age any further.
...
I could be wrong, but my understanding is that the break even point is the same no matter when you file. So if you waited until 70, you would be missing payments for another 1 year and 5 months, but your benefit at age 70 would be higher such that the break even point is the same. Of course, after the break even point you would end up with more total benefits than if you filed earlier.

Would appreciate if someone more knowledgable than me would confirm or refute.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by JW-Retired »

SeeMoe wrote::dollar #1.) Since the money(SS) is there, take it ! Who can guarantee age 70 or ever 63, Etc,..? We retired early with good pensions and investments, so taking SS soon as available was a gift that we invested in Vanguard until RMD's began . Now we invest only the RMD's,..33.
I think you might mean you invest the after-tax portion of the RMDs. Did you take into account that RMD payments are taxed much more than SS payments? Few states tax SS at all. More important, depending on your incomes, RMDs could be federally taxed at a marginal rate of double or triple or more times what SS marginal dollars are taxed at.

Suggest you run your personal numbers through TaxCaster and see what marginal tax rates you are paying on the two kinds of income. Add $1000 to each kind separately and see what happens? Hint, the usual marginal brackets of 15% or 25% or 28%..... don't apply. Often not even close. But see what you get and let us know. :beer
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by Leesbro63 »

nisiprius wrote:I am afraid I have lost my respect for Kotlikoff after his over-the-top alarmism, first in Close Your Brokerage Account!, and more recently in The latest Social Security horror story. His stuff is so full of spin and sensationalism that it's hard to judge the value of whatever kernels of truth may be in it.
Good post, Nisiprius. That being said, his point is still valid...by waiting till age 70 you are buying longevity insurance. And that dying before the breakeven age of about 84 isn't the only thing to consider. I do agree that when financial "gurus" sensationalize, it diminishes their credibility.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by longinvest »

(Disclosure: I'm not of retirement age.)

For someone with no bequest motives, it is difficult to disagree with this 2012 thread: Delay Social Security to age 70 and Spend more money at 62. Yes, more money at 62 by delaying. That's something I like!

Another way to look at it is that SS is by far the cheapest inflation-indexed life annuity one can "buy" by delaying it. It really makes no sense, mathematically, for someone to buy a single premium immediate annuity (SPIA) if one does not plan to delay SS to 70.
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Re: Why did you take SS at FRA instead of delaying until 70?

Post by ObliviousInvestor »

AAA wrote:
Alan S. wrote:Filed at 68 and 7 months instead of waiting till 70. Reasons:
...
2) Did not want to extend the break even age any further.
...
I could be wrong, but my understanding is that the break even point is the same no matter when you file. So if you waited until 70, you would be missing payments for another 1 year and 5 months, but your benefit at age 70 would be higher such that the break even point is the same. Of course, after the break even point you would end up with more total benefits than if you filed earlier.

Would appreciate if someone more knowledgable than me would confirm or refute.
The exact break-even date depends on what discount rate you're using. But there can be many different break-even points, because you can make so many different comparisons. (That is, you can compare claiming at any one month from 62 to 70 to claiming at any other month in that window.)

For example, assuming an FRA of 66:

If we compare claiming at 62 vs claiming at 70, and we use an inflation-adjusted discount rate of 0% (i.e., we're assuming that early-received benefits are keeping up with but not outpacing inflation), break-even occurs at age 80 and 6 months.

But if we compare claiming at 62 vs. claiming at 62 and 1 month, using the same inflation-adjusted discount rate of 0%, break-even occurs at age 77 and 9 months.

And if we compare claiming at 66 vs. claiming at 66 and 6 months, using an inflation-adjusted discount rate of 0%, break-even occurs at age 79.

In general, if you're making the decision on a month-by-month basis (i.e., "Should I claim now or wait another month?"), the break-even point for each monthly decision will be at a slightly older age than it was for the prior monthly decision.
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