Why not take Social Security at 62

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chipperd
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Why not take Social Security at 62

Post by chipperd » Tue Nov 21, 2017 6:00 am

Hi all,
Although this decision is a ways off for me, I am doing a little math and research regarding when it's "best" to take Social Security. Most of what I find on the web says to wait at least until age 67 (my full benefit age). I am having a difficult time making the math justify most of what I read, and as is typical for me it seems, it seems like I will buck the trend and take Social Security at 62, but please check my work.
Current age:50
Projected Social Security at 67: $19,300/year or $1608/month
Projected Social Security at 62: $13,510/year or $1125/month

Total lifetime Social Security collected with a life expectancy of 85 years:
Taken at age 62 earning 4%/year: $509,784
Taken at age 67 earning 4%/year: $509,164
or
Taken at age 62 earning 3%/year: $447,516
Taken at age 67 earning 3%/year: $460,941

This was done with simple interest calculators, although I suspect if done with a fairly conservative portfolio using a Monte Carlo calculator (which I will do next), the math would really point to taking Social Security at 62. Given the above and that assumption, along with the added security of a monthly check starting at age 62, why wouldn't I take the earned benefit early?
Please poke reasonable, math-based holes in this idea for me.
Thanks,
Chipperd

JeffAL
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Re: Why not take Social Security at 62

Post by JeffAL » Tue Nov 21, 2017 6:35 am

What if you live to 95?

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Re: Why not take Social Security at 62

Post by amitb00 » Tue Nov 21, 2017 6:43 am

Longer you live, better it is to delay. In fact some folks delay to 70 years to get higher benefits for rest of life.

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Re: Why not take Social Security at 62

Post by andypanda » Tue Nov 21, 2017 7:00 am

I retired the day before I turned 62 and didn't apply for SSA retirement until 66. With my father living until he was 89 and my mother until she was weeks from 92, I thought I'd better wait. I considered waiting until 70, but decided what the heck.

When I attempted to calculate the various options at different ages I ran into trouble when it came to figuring possible cost of living increases year after year - if there were any at all. I finally decided - to use your example - that if there was going to be, say, a 1% increase when I was 67 I'd rather have 1% of $1608 and not 1% of $1125.

My fishing buddy took his at 62 without a second thought. He is the first male anyone can remember on his father's side of the family to live to 62.

John

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Re: Why not take Social Security at 62

Post by nisiprius » Tue Nov 21, 2017 7:08 am

1) I think you are absolutely right to start poking at this and calculating numbers for yourself.

2) The goal of retirement planning is to secure a good fit between income and needs at various ages, not necessarily to extract the largest number of dollars from the government. I always get beaten up for saying this, because there are innumerable small details in which it is not quite correct), but Social Security is intended to be actuarially neutral. That is, the rough general idea is that the government calculates Social Security payments in such a way that it is not supposed to matter much to the government when you take Social Security. I believe that there is a huge amount of overplanning and overthinking that goes on with regard to Social Security, because in order to calculate which of several roughly equal scenarios is best, you need to make assumptions that are unrealistically precise, regarded predicting the future.

3) I personally did start Social Security at age 62, because I'd been laid off, my unemployment was about to run out and I hadn't gotten a single job interview in six months, and I didn't feel like having an income gap when I could close it easily. Immediately after filing, I landed an excellent consulting job that paid so much that the earned income rules reduced my actual payments to zero... which, due to a provision in Social Security that many people don't understand, resulted in my benefits at full retirement age being raised to... well, anyway, the overall effect is that it was about the same as if I'd waited until full retirement age. What's my point? In the real world, "man plans and God laughs."

4) I think the universal advice to "wait for full retirement age" and/or "wait for age 70 if you can" is probably correct but grossly oversimplified. Everything depends on assumptions and, in particular, what else you would be doing for income if Social Security weren't coming in. One of the biggest but most difficult assumptions involve the future of Social Security. Since we are talking about planning, not predicting, two rational bases for planning are to assume that current estimated/promised benefits will be paid, or that Congress will never fix the problems and benefits will need to be cut by, I think the current number they are talking about is 29% starting in 2030? You would not be the first person to say "a bird in the hand is worth two in the bush, I'll start taking payments as soon as I can."

5) My advice is that if you are going to go in for this kind of calculation, I think you'd better use a computer spreadsheet.

Now the bad news. I'm having trouble reproducing your calculations. Here's what I did, and you'll need to be just as explicit about what you did. I think the easiest thing to do is show you my actual spreadsheet and then explain the calculations behind it.

Image

I assume your birthday is at the beginning of the year, and that the entire first year's Social Security payment is made at the beginning of the year in which you turn 62. (I'm not going to bother to dig out the exact rules, there's something like an eight week delay between your birthday and the first payment hitting the checking account, and it's made on a Wednesday depending on--never mind. Nor, at the moment, am I going to do everything month by month).

The first column shows the payments you will receive under a "wait until age 67" scenario, using the number you provided. The first payment is made early in the year you turned 67. For a "life expectancy of 85" I assume that means you live nearly all of that year, i.e. you die at the end of the year in which you turn 85.

I assume that the payment goes straight into a bank account, isn't spent, and earns either 3% or 4% interest annually. And, finally, I assume that the "total" we look at is the total just after you get your age-85 payment, i.e. at the beginning of that year.

The second column over shows a compound interest calculation of what each year's payment grows to. Because of my assumptions, the age-85 payment doesn't grow at all, and thus adds $19,300 to the bank account. The age-84 payment went in a year before and thus earned either 3% or 4% interest, and thus grew to either $19,879 or $20,072. The age-83 payment earned 3% or 4% twice, compounded, and so forth all the way back. In each case it is a compound interest calculation. The age 67 payment of $19,300, for example, earned 3% compounded annually for 18 years, and thus grew to $19,300 "+3%" 18 times = $19,300*(1.03)^18 = $32,856.

Now, the interesting thing is that in my calculations, the grand total came out just a bit higher for the delay-to-age-67 case. To be specific, at the 3% interest the total was 4.2% higher if you delayed; at 4%, 1.14% higher. I regard these difference as "lost in the noise."

There are a gazillion opportunities to be "off by one" and I might have screwed up.

To me, the real take-home in my calculation (if they are correct) is not "which was higher," but "how little difference there was."

Of course, the results are hugely sensitive to any number of things (where did you get those $19,300 and $13,510 numbers, by the way), one being life expectancy. Obviously the longer a life expectancy you assume, the greater the benefit of waiting. Why do I say obviously? Well, if you assume that you live to age 63, then you receive $13,100 if you take Social Security at age 62 and $0 if you take it at age 67. On the other hand, if you assume that you live to age 969, then, just about any way you calculate it, the benefit of receiving 902 payments of $19,300 is going to dwarf the benefit of receiving 907 payments of $13,100.
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Re: Why not take Social Security at 62

Post by cinghiale » Tue Nov 21, 2017 7:24 am

nisiprius wrote:
On the other hand, if you assume that you live to age 969, then, just about any way you calculate it, the benefit of receiving 902 payments of $19,300 is going to dwarf the benefit of receiving 907 payments of $13,100.
Excellent and balanced evaluation of the when-to-take-Social-Security conundrum. Thank you.

And... a nice Methuselah allusion tossed in at no extra charge!
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Re: Why not take Social Security at 62

Post by Jack FFR1846 » Tue Nov 21, 2017 7:33 am

You'd want to be very realistic. Where you're 50, you'll take SS at earliest in 2029. In another 5 years, the trust fund is expected to run out of money and drop payments by 25%, so waiting is less of a "no brainer" than it is for other long lived family members who are older. If you're making a spreadsheet, drop the expected payments in 2034 by 25%.

What your situation is matters. Make a spreadsheet where you take SS at various ages and see where the break even point is. Are you leaving a spouse with the remainder of your SS when you die? That amount is based on when you take SS. What about strategy to reduce RMDs and affect medicare payments? If you're not taking SS, you would likely be pulling money out of other accounts, reducing the eventual RMD numbers.

Lots of moving parts and you really need to decide for yourself. You're not bucking the trend by taking the job at 62, except in Bogleheads. It's the most common age where people take SS.
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Re: Why not take Social Security at 62

Post by nisiprius » Tue Nov 21, 2017 7:35 am

P.S. chipperd, you didn't mention your marital status. Assumptions about who takes what when, and the spousal benefit and the survival benefit, factor in heavily.

[Added: this might be wrong, see this post below. Also, it's a little hard to explain stuff that I don't understand myself :) but before you retire, everything you earn is adjusted by a factor that represents average salary growth, or something like that. That is, in calculating your benefit, a salary of $50,000 that you earned twenty years ago is multiplied by the amount that salaries have grown in the last twenty years... and historically, salaries have grown faster than inflation. (Maybe not lately). After you retire, Social Security benefits are indexed directly to inflation, using an index called CPI-W which is very close to, but not exactly the same as CPI-U which is what is normally used as the "inflation" number. The point is: until you claim Social Security, there is an indexing factor related to average income growth and it (probably) grows faster than the indexing factor that is used after you claim.

Which brings up yet another unpredictable, imponderable factor. Some economists believe--and I think it's at least credible--that the current rules for calculating CPI-U overestimate inflation by a small amount, and that it should be calculated in a different way, called the "chained CPI" or "C-CPI-U." I assume the same thing is true of CPI-W although I've seen few references to C-CPI-W. The difference isn't huge, in back calculations of past inflation it's been on the order of 0.25%, i.e. when CPI-U calculates an annual inflation of 3%, C-CPI-U only calculates 2.75%. Naturally, people who are receiving CPI-based payments want the existing system retained, while people who are paying them (the government) would prefer to see the "chained" CPI used. Nobody knows changes might occur in Social Security over the next fifteen years. Changes happen. For example, The present system of automatically indexing it to inflation occurred within my own lifetime! Replacing CPI-W with an index that results in slightly smaller cost-of-living increases wouldn't be too surprising.

Anyway, I say, wait until you are 62 to make the decision, and take it then if you need it. I don't think filing at age 62 is a huge mistake. On the other hand, I would not take it at age 62 just to be clever if you don't need it, because all of the most sophisticated calculations and analyses really do seem to suggest it's better to wait. (I don't mean unsophisticated analyses like "it must be better because it's bigger," or "it must be better because the total number of dollars, assuming no interest, is larger.")
Last edited by nisiprius on Tue Nov 21, 2017 2:30 pm, edited 1 time in total.
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Re: Why not take Social Security at 62

Post by oldcomputerguy » Tue Nov 21, 2017 7:41 am

I'm retired and 62 years old. Before I punched out, I considered this question from various angles. I did not consider the question from a point of any percentage of return, because I plan to spend my Social Security draw and not invest it. (For simplicity's sake, I do not consider COLAs here.)

Given your numbers, if you start drawing at age 62, by the time you reach age 67 you will have drawn $67,500 (your monthly benefit at age 62 times sixty months). If you wait until age 67 to start drawing, it would take you approximately 11 years and 8 months drawing at the higher rate to make up what you missed out on by not drawing between age 62 and age 67. At "break-even" point, you would be approximately age 78 and 8 months. So with your premise of life expectancy of age 85, you come out better in the long run waiting.

An additional factor would involve whether you plan to work up until you draw Social Security. Retiring at age 62 rather than continuing to work until age 67 means you miss out on five years of salary, which is likely higher than your Social Security benefit during those years. In addition, f you contribute to a workplace 401(k) or an IRA, then that is five years' worth of contributions you will miss out on (which means five years less time in the market).
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Re: Why not take Social Security at 62

Post by Call_Me_Op » Tue Nov 21, 2017 7:42 am

The OP's analysis is overly simplistic. You cannot just look at total dollars received. A dollar received today has an expected value in 10 years that is greater than a dollar received 5 years from now. So you should account for the fact that if you take social security early but do not need the money, that money can be invested.
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Re: Why not take Social Security at 62

Post by basspond » Tue Nov 21, 2017 7:44 am

I am taking the earliest I can. Several factors has made our decision easier.

1. The rates are based on actual life expectancies and is adjusted for any changes so according to statistics it will be hard to beat the grim reaper. Look at obituaries, what I have seen is over 50% are less then 80 years old.
2. SS will be less then 30% of what our income needs will be in retirement.
3. Will be using SS to increase our tax efficiencies.
4. We will both be claiming separately, we would probably delay if we were claiming spousal benefit and if there was more than 5 years difference in our ages.
5. DW wants to make sure we don't leave anything on the table before we are on it.
6. We took into account Net Present Value of early withdrawals.
Last edited by basspond on Tue Nov 21, 2017 8:01 am, edited 2 times in total.

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Tamarind
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Re: Why not take Social Security at 62

Post by Tamarind » Tue Nov 21, 2017 7:48 am

Family longevity also matters a lot. If you are getting your longevity off a table, that median is concealing a lot of variation that matters to you.

If you look at your parents and grandparents and their siblings, what ages did they live to? How was their health at 50? How's your own health?

If you have a spouse with a lower benefit, you'll need to consider their longevity as well. They might get the benefit instead of you.

More broadly, if you are going to invest every dollar of your social security rather than spend it, it doesn't really matter what you choose to do because you have no need for it.

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Re: Why not take Social Security at 62

Post by Dottie57 » Tue Nov 21, 2017 7:55 am

I can fully pay for retirement between now and 67 or 70. After SS I will need about 20k from portfolio. Many of my family lived into 90's. I am better off if I live to 95 or 99 with higher SS.

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Re: Why not take Social Security at 62

Post by Bigfish » Tue Nov 21, 2017 7:58 am

I ran the numbers through FireCalc at various ages I take SS, it really did not affect the outcome.

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Re: Why not take Social Security at 62

Post by longinvest » Tue Nov 21, 2017 8:00 am

Here's a different way to look at the problem: Delay Social Security to age 70 and Spend more money at 62.
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Re: Why not take Social Security at 62

Post by TheTimeLord » Tue Nov 21, 2017 8:07 am

Personally, I think this more a question of why you are taking it than the math because the math is pretty well established and the vast majority of us don't know how long we will live. So why are you taking it early? Does taking it early enable you to do something you value a lot and don't expect to do if you delay? If so then I get considering. Why would you wait? Do you have real longevity in your family, even with your portfolio do your expenses look tight in retirement, do you fear not being able to afford good LTC if you need it? If so then I get considering delaying. I see one's motivation driving this decision just as much as the math does. Bottomline you need to make a decision you can live with the consequences of.
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Re: Why not take Social Security at 62

Post by dm200 » Tue Nov 21, 2017 8:31 am

IF you can afford it - to me - wait as long as possible (age 70) to take SS retirement. The amount will be larger, it will have very high "asset protection", some degree of tax benefits and you will be less likely to run out of money if you live a long time.

I believe this is even more true if you are female - since females, on average, have a longer life expectancy and SS retirement pays males and females the same dollar amount.

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Re: Why not take Social Security at 62

Post by teen persuasion » Tue Nov 21, 2017 8:42 am

Tamarind wrote:
Tue Nov 21, 2017 7:48 am
Family longevity also matters a lot. If you are getting your longevity off a table, that median is concealing a lot of variation that matters to you.

If you look at your parents and grandparents and their siblings, what ages did they live to? How was their health at 50? How's your own health?

If you have a spouse with a lower benefit, you'll need to consider their longevity as well. They might get the benefit instead of you.

More broadly, if you are going to invest every dollar of your social security rather than spend it, it doesn't really matter what you choose to do because you have no need for it.
All of these points echo my views.

My mom is 77, dad is 87, and both are healthy and enjoying life. They both have older siblings, in their nineties, who are also active and healthy (no one in healthcare facilities of any kind). My maternal grandmother's sister lived to 102. So I plan for longevity.

Our income has been relatively low, so I'd like to do everything I can to maximize our SS payments. As a SAHM for 20 years, and only working part-time now, my benefit will be primarily spousal benefits, so DH's benefits are most important.

We also like to use the time before age 70 to convert traditional IRAs to Roth.

The nice thing is that even though I plan in this way now, if details change, and we need the SS income, we can apply at any time between age 62 and 70. So essentially I'm planning to wait as long as possible, whatever that means.

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Re: Why not take Social Security at 62

Post by aristotelian » Tue Nov 21, 2017 8:45 am

Actuarily, it makes no difference. If you have average life expectancy, there is no reason to think you will come out ahead or behind. However, from a tax efficiency perspective, in my opinion it makes sense to delay as long as possible and deplete/convert your tax deferred investments. If you claim at 62, that is going to use up most of your space in the 10-15% bracket, forcing you to pull from your deferred accounts at 25% or more.

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Re: Why not take Social Security at 62

Post by dm200 » Tue Nov 21, 2017 8:46 am

While serious illness and death can be a "surprise" at any age, I think many folks in that 62-70 age range may underestimate how long they will live.

Having lower other income and assets in these elder years (over age 65 or so), and relatively more from SS retirement may qualify you for other benefits, such as real estate deferral or exemption, Medicare part B and/or Part D fees, etc.

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Re: Why not take Social Security at 62

Post by stlrick » Tue Nov 21, 2017 8:47 am

There is nothing wrong with the analysis. What is wrong is the assumption that "total payout by age 85" defines the "best" social security outcome. I consider social security one component of my longevity insurance. It is part of the system I will have in place just in case I live to 95 or 100. Insurance can be costly. In setting up longevity insurance, delaying social security is one of the best trade-offs available (in terms of the cost for increasing the benefit).

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Re: Why not take Social Security at 62

Post by TheTimeLord » Tue Nov 21, 2017 8:51 am

Would anybody's opinion change if we were in a bear market and the money was going to be invested in the market?
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Re: Why not take Social Security at 62

Post by nisiprius » Tue Nov 21, 2017 8:54 am

stlrick wrote:
Tue Nov 21, 2017 8:47 am
...There is nothing wrong with the analysis...
I agree completely that the problem is in the assumptions, not the analysis. But in fact I can't reproduce his numbers. That is, I just accept his $19,300 and $13,510 as given, and his 3% and 4% as given, and I can't get the same totals he gets. Can you?
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Re: Why not take Social Security at 62

Post by smitcat » Tue Nov 21, 2017 8:55 am

You can play with the Bedrock capital SS calculator but be careful with where you set the variable inputs for inflation and discount as well as ages....
http://www.bedrockcapital.com/ssanalyze/

We will likely be delaying SS as long as possible (70/64) for a number of reasons:
- Roth conversions
- best eventual younger spousal benefits
- after tax income estimated at each age

If you want to get a real good look at what your 'spendable' amount of income will be utilizing various choices of ages and SS selection I have found that the IORP will help get you some great comparisons very quickly. Once you have a few potential thoughts on your future plan utilizing the RPM calculator will add greater details and comparisons to those choices - just a little harder to load up and get going.

As far as using your own spreadsheet we tried that and it was futile - it started out simple, then we added columns for inflation, then added columns for after tax impact , then we tried to adjust for how it affected the overall tax/conversion plans and between all that and varied ages for myself and my spouses demise the spreadsheets became useless.
The tools above already exist, they are robust and they can yield good output(s) assuming they have accurate input(s).

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Re: Why not take Social Security at 62

Post by Case59 » Tue Nov 21, 2017 9:03 am

basspond wrote:
Tue Nov 21, 2017 7:44 am
I am taking the earliest I can. Several factors has made our decision easier.

1. The rates are based on actual life expectancies and is adjusted for any changes so according to statistics it will be hard to beat the grim reaper. Look at obituaries, what I have seen is over 50% are less then 80 years old.
2. SS will be less then 30% of what our income needs will be in retirement.
3. Will be using SS to increase our tax efficiencies.
4. We will both be claiming separately, we would probably delay if we were claiming spousal benefit and if there was more than 5 years difference in our ages.
5. DW wants to make sure we don't leave anything on the table before we are on it.
6. We took into account Net Present Value of early withdrawals.
I particularly like number 5.

I took SS at 62, also, primarily because (1) Money now is more useful to me than the hypothetical increase at age 82 (what I calculated as my cross-over point if I delayed to age 70, including NPV of taking early), and (2) I don't trust the government not to take away or tax away the benefit in coming years for upper-income people. (Apologies for the political comment, but this did indeed factor into my decision).
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Re: Why not take Social Security at 62

Post by Mlm » Tue Nov 21, 2017 9:04 am

I'm almost 63 but I plan to wait until at least 65 or 66 (FRA) to collect. One reason is the health care subsidies I am able to receive by managing my income. That's bout $7K in nontaxable benefits. At FRA my SS and a few small pensions will cover my daily needs and that's a very comforting feeling. I was just reading this excellent article which looks at many considerations that can go into your decision.

https://www.onefpa.org/journal/Pages/Wh ... lysis.aspx

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Re: Why not take Social Security at 62

Post by goblue100 » Tue Nov 21, 2017 9:08 am

Do you have a spouse, and if so, what is her age and expected benefit? I think that can change the math a lot. For a single 62 year old male you have about a 40% chance of making it to 85 and about 1 in 5 will make it to 90.
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Re: Why not take Social Security at 62

Post by stlrick » Tue Nov 21, 2017 9:09 am

nisiprius wrote:
Tue Nov 21, 2017 8:54 am
stlrick wrote:
Tue Nov 21, 2017 8:47 am
...There is nothing wrong with the analysis...
I agree completely that the problem is in the assumptions, not the analysis. But in fact I can't reproduce his numbers. That is, I just accept his $19,300 and $13,510 as given, and his 3% and 4% as given, and I can't get the same totals he gets. Can you?
Nisiprius:
I'm replying just in case the "Can you?" question was actually directed to me. No, I can't reproduce the numbers, because I didn't try. I assumed they were correct. Just shows that we all make assumptions.
Rick

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Re: Why not take Social Security at 62

Post by flyingaway » Tue Nov 21, 2017 9:11 am

If you are 50, I suggest you to wait until you are 60 to do the calculation and until 62 to do serious considerations.

The reason is that many things could be changed in 12 years. Social security may be changed, your situations may be changed, your views may be changed.

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Re: Why not take Social Security at 62

Post by kramer » Tue Nov 21, 2017 9:14 am

Where can I get this guaranteed real 3% to 4% return mentioned by the OP? Sign me up! In the meantime, I will have to pay a *huge* premium on TIPs to even get 2% real ... point being that Social Security is effectively a guaranteed return and you need to use the real rates that you would receive for those guaranteed investments ....

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Re: Why not take Social Security at 62

Post by walker46 » Tue Nov 21, 2017 9:20 am

Luckily this doesn’t apply to many people but if you have a disabled son or daughter whose disability was diagnosed before the age of twenty-two, when you begin to draw social security their disability benefits will switch from the SSI (Supplemental Security Income) program which is minimal to the SSDI program (Social Security Disability Program) which is based on the parent’s earnings. For a parent with a history of average to above average earnings this will pay the son or daughter substantially more money than the SSI program and will likely more than make up for the hit that the parent takes for taking Social Security early.

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Re: Why not take Social Security at 62

Post by The Wizard » Tue Nov 21, 2017 9:34 am

People with modest retirement savings should probably take SS whenever they stop full-time work, whether 62 or some years later.
This helps maintain their lifestyle.

People with "large" tax-sheltered accumulations should delay SS to age 70 to give them time to spend down some of the tax-deferred accumulation and do Roth conversions, without the extra SS income pushing them into a higher bracket.

You need a multi-year spreadsheet to project your income, including Roth conversions and RMDs, to see what makes most sense for you...
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Re: Why not take Social Security at 62

Post by Tamarind » Tue Nov 21, 2017 9:41 am

TheTimeLord wrote:
Tue Nov 21, 2017 8:51 am
Would anybody's opinion change if we were in a bear market and the money was going to be invested in the market?
No. If a retiree really has enough other funds to take SS and invest it all rather than using the SS income to delay withdrawals from tax-advantaged accounts, then 62 or 67 or 70 makes little difference.

If a retiree did spend the SS to hold on to tax-advantaged savings, then those savings balances would decrease anyway due to the hypothetical bear (and benefit from increased expected returns at the end of the bear).

A retiree with reason to expect a shorter or longer lifespan might choose to adjust their AA. More conservative if they are near "enough" for their span, less conservative if they are likely to leave a lot behind.

Post tax dollars are fungible, and the goal is to have enough, rather than the max possible.

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Re: Why not take Social Security at 62

Post by westrichj312 » Tue Nov 21, 2017 9:50 am

My strategy is to take it as soon as eligible weather you need it or not. You never know how long your going to live, sometimes its the right choice sometimes it's not. If's strickly a bet on how long your going to live!

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Re: Why not take Social Security at 62

Post by rennale » Tue Nov 21, 2017 9:53 am

As an unscientific comment I have observed no evidence that family longevity history is in any way meaningful in assessing one's own potential lifespan.

I've been to too many funerals where a parent has survived long enough to bury a child. (Surely life's cruelest blow.)

And on the other hand my parents were brought up in the inter-war years, lived with rationing during WWII and after (in the UK), smoked heavily for much of their adult lives, drank significantly for all their adult lives, never did a day's exercise after leaving school, didn't care a fig about their diet, and never went for preventative medical care. Their lives were so different to mine that trying to draw any longevity conclusions based on theirs is surely a waste of time. Although, I suppose, all the modern advice and standards by which we live today should give me some hope for having a longer life - although they made 79 and 84, which is not altogether shabby.

Anyway, I too find myself looking at the obituary columns to check the ages, but mostly I use a bell curve centered on the SS actuarial tables because one has to start somewhere...

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Re: Why not take Social Security at 62

Post by friar1610 » Tue Nov 21, 2017 9:55 am

I'm 72 and my wife (71) and I each took SS at 62. At that time I had been retired for 4 years. Virtually all of the money has been invested or saved. I haven't tracked those investments/savings closely enough to tell you what that money is worth now.

I have a nice inflation-adjusted pension which is why we didn't need to use very much of the SS money for living expenses. I have been and will continue to be in the 25% bracket.

Although taking SS early has not been a horrible mistake, if I had to do it over again I'd probably hold off until at least my normal retirement age (67+). The sole reason is that if I go to that big retirement home in the sky before my wife it would provide her a better survivor benefit. As it is, she will be fine, but not having to hit the portfolio as hard would mean that she could leave more to our kids and charity. I was not smart enough about that when I made the decision.
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Re: Why not take Social Security at 62

Post by smitcat » Tue Nov 21, 2017 9:57 am

The Wizard wrote:
Tue Nov 21, 2017 9:34 am
People with modest retirement savings should probably take SS whenever they stop full-time work, whether 62 or some years later.
This helps maintain their lifestyle.

People with "large" tax-sheltered accumulations should delay SS to age 70 to give them time to spend down some of the tax-deferred accumulation and do Roth conversions, without the extra SS income pushing them into a higher bracket.

You need a multi-year spreadsheet to project your income, including Roth conversions and RMDs, to see what makes most sense for you...
"People with "large" tax-sheltered accumulations should delay SS to age 70 to give them time to spend down some of the tax-deferred accumulation and do Roth conversions, without the extra SS income pushing them into a higher bracket."

That is probably the simplest and most accurate summary I have seen - I like it.
For those that do not care to go through the extensive calculations I think that it works well.

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Re: Why not take Social Security at 62

Post by SGM » Tue Nov 21, 2017 10:11 am

We chose to delay SS to age 70 for the following reasons:

1. We value the insurance aspect of having higher SS should one or both of us live a long time. DWs parents both lived to be over 100.
2. COLA on the higher SS will be greater.
3. Use the time between retirement and collecting SS to convert tIRAs to Roth IRAs.
4. We have enough savings to delay without skimping.
5. We compared delaying SS to treasuries not to the stock market returns.
6. Delaying SS compares favorably to buying a SPIA.

Heard in the duck blind this weekend: One of the younger guys was talking about his $10k in credit card debt that he declined to pay down even though he has the savings to do so. I felt bad for one retiree who took SS early and must work at least a day a week and had to sell his boat in order to continue hunting. I don't talk about finances but just enjoy the comradery and try to keep warm. I have a reputation for being a good shot. No reason to spoil the fun by "holding forth."

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Re: Why not take Social Security at 62

Post by dodgy55 » Tue Nov 21, 2017 10:19 am

When I was approaching my 65th B'day I made similar calculations as to whether I should begin SS at 65, 67 or 70. One of the factors I used was
( and I know this sounds kooky) how I would feel if I died prior to my break-even date. Some individuals would feel-"so what I'm dead, it does not matter"; while others would feel quite the opposite. In the end it came down to not wanting to pay into the system for 40 years and not be able to collect part of it. So I opted to enroll at 67.
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Re: Why not take Social Security at 62

Post by dbr » Tue Nov 21, 2017 10:22 am

As has become evident the answer depends on what you are trying to do.

It is a general principle of all planning that the resolution of any dilemma at one level of a plan lies in reviewing and understanding how one arrived at the end of the preceding step of the plan.

In this case there are the two clear alternatives of the plan being to have obtained maximum total payout at the end of some hypothetical age compared to having optimally managed longevity risk.

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Re: Why not take Social Security at 62

Post by neilpilot » Tue Nov 21, 2017 10:22 am

dodgy55 wrote:
Tue Nov 21, 2017 10:19 am
When I was approaching my 65th B'day I made similar calculations as to whether I should begin SS at 65, 67 or 70. One of the factors I used was
( and I know this sounds kooky) how I would feel if I died prior to my break-even date. Some individuals would feel-"so what I'm dead, it does not matter"; while others would feel quite the opposite. In the end it came down to not wanting to pay into the system for 40 years and not be able to collect part of it. So I opted to enroll at 67.
How would my wife feel if I died prior to my break-even date and I didn't delay until 70?

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Re: Why not take Social Security at 62

Post by Sandtrap » Tue Nov 21, 2017 10:31 am

Something to be said for taking SS to help cover Medicare part B and/or Part D fees, etc. when that time comes. If one's medicare is not much but enough to cover medicare supplementals, then that's one less monthly expense to deal with.

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Re: Why not take Social Security at 62

Post by vested1 » Tue Nov 21, 2017 10:34 am

longinvest wrote:
Tue Nov 21, 2017 8:00 am
Here's a different way to look at the problem: Delay Social Security to age 70 and Spend more money at 62.
This long, and now locked thread changed my life, so much so that I felt compelled to send a thank you PM to the OP which was never answered. His profile says he was active recently, but his last post was in 2014. It could be that he became discouraged when some argued with his logic, which I found flawless.

An argument including "breakeven" is flawed IMHO, because cumulative SS is not a lump sum, but rather, tax favored COLA protected income and outstanding longevity insurance. I wonder at times how many who say they will file early and invest the after tax benefit of SS actually do that, and of those who do, how many actually realize 8% gain after fees each and every year for the rest of their lives. I also wonder how many 70+ year old recipients who filed at age 62 regret that they are not getting approx 50% more every time the check hits their bank. I wonder how their widows feel when that reduced check hits the bank as well.

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Re: Why not take Social Security at 62

Post by 22twain » Tue Nov 21, 2017 10:52 am

Bigfish wrote:
Tue Nov 21, 2017 7:58 am
I ran the numbers through FireCalc at various ages I take SS, it really did not affect the outcome.
I tried it myself just now, comparing claiming SS at 64 (next year, $23K) versus 70 ($35K in today's dollars) and looking at the "worst case" portfolio balance. Claiming at age 70 starts to come out ahead in my mid to late 80s, and is about $170K ahead at ages 93 and 98. Not a huge difference.

Neverthless, my wife and I are both waiting till 70 to claim, because then our combined SS (hers will be nearly equal to mine) will be more than enough to cover our current expenses plus the extra taxes we'll probably be paying on the SS plus RMDs. So until major expenses pop up (medical or otherwise) we won't actually need to spend any of our portfolio, just reinvest the RMDs. Of course, before claiming SS we'll have to spend part of our portfolio, probably about 10% at most. She's a few years older than I am, so her SS will kick in earlier.
Last edited by 22twain on Tue Nov 21, 2017 11:51 am, edited 1 time in total.

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Re: Why not take Social Security at 62

Post by Nowizard » Tue Nov 21, 2017 10:58 am

The statistics for different ages of starting SS are readily available. However, they must be evaluated in context of a specific situation. In our case the two most important factors were our predicted longevity and the fact that we would not need the payments immediately. We both worked to FRA, and started SS immediately at that point. Mathematics revealed that investing the proceeds at a reasonable rate of return for the additional five years between 65 and 70 would result in the greatest return if our parameters were accurate.

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Re: Why not take Social Security at 62

Post by dm200 » Tue Nov 21, 2017 11:14 am

Many financial planners/advisors really push age 62 - BUT they have a bias because they want you to be able to invest and hold investments where they receive compensation.

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Re: Why not take Social Security at 62

Post by neilpilot » Tue Nov 21, 2017 11:28 am

vested1 wrote:
Tue Nov 21, 2017 10:34 am

This long, and now locked thread changed my life, so much so that I felt compelled to send a thank you PM to the OP which was never answered. His profile says he was active recently, but his last post was in 2014. It could be that he became discouraged when some argued with his logic, which I found flawless.

An argument including "breakeven" is flawed IMHO, because cumulative SS is not a lump sum, but rather, tax favored COLA protected income and outstanding longevity insurance. I wonder at times how many who say they will file early and invest the after tax benefit of SS actually do that, and of those who do, how many actually realize 8% gain after fees each and every year for the rest of their lives. I also wonder how many 70+ year old recipients who filed at age 62 regret that they are not getting approx 50% more every time the check hits their bank. I wonder how their widows feel when that reduced check hits the bank as well.
I mostly agree with your post. My strategy is also to wait until 70, while my wife (who has a lower SS benefit) filed at 66 and I'm taking spousal against her benefit.

However, your statement "how many actually realize 8% gain after fees each and every year" points to a common misconception of those who propose delaying SS. The delay does not equate to an annual 8% gain of early invested benefits, since the delay only increases the future benefit at a loss of earlier payments. If there was such a thing as a safe guaranteed annual net gain of 8% the delay strategy, i would not have considered the delay to 70 nearly as favorable.

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Re: Why not take Social Security at 62

Post by dm200 » Tue Nov 21, 2017 11:45 am

While I (still) lean towards delay vs taking at age 62, I had a different experience with in-laws.

Decades ago, when my wife's parents were in their 60's, they chose to take SS fairly early - and I was concerned that they should have waited to get more over their lifetime. They were of very modest income and assets. With 20/20 hindsight - the earlier SS retirement income enable them to have a somewhat better (but still modest) lifestyle - and, due to several health issues/risks, both died in their 70's.

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Re: Why not take Social Security at 62

Post by vested1 » Tue Nov 21, 2017 11:59 am

neilpilot wrote:
Tue Nov 21, 2017 11:28 am
vested1 wrote:
Tue Nov 21, 2017 10:34 am

This long, and now locked thread changed my life, so much so that I felt compelled to send a thank you PM to the OP which was never answered. His profile says he was active recently, but his last post was in 2014. It could be that he became discouraged when some argued with his logic, which I found flawless.

An argument including "breakeven" is flawed IMHO, because cumulative SS is not a lump sum, but rather, tax favored COLA protected income and outstanding longevity insurance. I wonder at times how many who say they will file early and invest the after tax benefit of SS actually do that, and of those who do, how many actually realize 8% gain after fees each and every year for the rest of their lives. I also wonder how many 70+ year old recipients who filed at age 62 regret that they are not getting approx 50% more every time the check hits their bank. I wonder how their widows feel when that reduced check hits the bank as well.
I mostly agree with your post. My strategy is also to wait until 70, while my wife (who has a lower SS benefit) filed at 66 and I'm taking spousal against her benefit.

However, your statement "how many actually realize 8% gain after fees each and every year" points to a common misconception of those who propose delaying SS. The delay does not equate to an annual 8% gain of early invested benefits, since the delay only increases the future benefit at a loss of earlier payments. If there was such a thing as a safe guaranteed annual net gain of 8% the delay strategy, i would not have considered the delay to 70 nearly as favorable.
I think we agree but I likely stated it incorrectly. My wife and I are delaying until next year at 65/66 when she will file for her own and I will file a restricted application, getting half of what she would have received at her FRA of 66 (PIA). Most who use breakeven arguments ignore the restricted application amount which will add up to over 50k from my age 66 to age 70, which in turn negates a portion of the breakeven argument. Unfortunately for the OP, those rules no longer apply for someone his age.

The reduction in benefits of PIA graduate monthly from age 62 to FRA, and maintain 8% yearly from 66 in monthly increments until 70 (age 67 for the OP). The 8% I mentioned earlier was an over-simplification in an attempt to not get into the weeds. Those who file early with the intent to invest all of the proceeds tend to ignore the taxes due and think of a relatively short term (optimistic) gain to justify their decision. The increased amount at age 70 is for lifetime and is not affected by the vagaries of the markets, which was my main point on that aspect.

Everyone's situation is different however, and the decision should be removed from emotion, especially for those distrustful of the government. If we only had a crystal ball we would be more certain of our decision. I prefer to play the odds of extreme longevity throughout our families along with having enough savings to afford the delay.

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Re: Why not take Social Security at 62

Post by Artsdoctor » Tue Nov 21, 2017 12:01 pm

dm200 wrote:
Tue Nov 21, 2017 11:14 am
Many financial planners/advisors really push age 62 - BUT they have a bias because they want you to be able to invest and hold investments where they receive compensation.
Yes! We just experienced this very phenomenon. Our friends use a financial advisor who takes his annual fee based on the portfolio balance. He recommended starting social security at 62 for both of them, and the reason was problematic ("you paid in all of those years and you want to get it back!"). Obviously, spending down the portfolio prior to initiating social security benefits would decrease the advisor's fee so there's an inherent conflict there. Our friends do not have a financial reason for starting social security early (I've worked with them on legacy planning so I have an idea of what sort of figures we're talking about). It's this very conflict which is causing them to question their relationship with the advisor (finally).

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