Why not take Social Security at 62

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Ron
Posts: 6574
Joined: Fri Feb 23, 2007 7:46 pm

Re: Why not take Social Security at 62

Post by Ron » Sun Nov 26, 2017 10:53 am

wrongfunds wrote:
Sun Nov 26, 2017 10:44 am
Just curious but how much do you think most BH couples annual SS benefit will be? I think you may be under estimating the size of the benefit for many BH especially those who have substantial savings as they likely held well paying jobs.
The numbers are around $35K for a professional person who has max earnings for most of her career. Assuming both have similar work history, the spouse should also get $35K. Unless there is a cap on the couple's combined SS benefit, the couple should be able to get $70K per year in SS benefits. This is not insignificant even for somebody with $4M in combined retirement/taxable account.

Somebody correct me any of the above assumptions are incorrect.
I/wife will start collecting our age-70 SS benefit within the first half of 2018; me in February, wife in June. Our combined SS income (for a full year) will be just over $70K/year, FWIW.

BTW, my wife will have collected over $60K total in (spousal) benefits based upon my PIA, since her FRA, before she starts her own SS benefit, so it's not like we haven't forgone SS income completely over the last few years. Unfortunately (and I don't agree with it), that window has closed for most folks.

- Ron

TG2
Posts: 197
Joined: Sat Nov 25, 2017 6:50 pm

Re: Why not take Social Security at 62

Post by TG2 » Sun Nov 26, 2017 11:02 am

flyingaway wrote:
Sun Nov 26, 2017 10:47 am
I think discussions like this (there are several threads) for anyone younger than 60 are purely academic. There are many things (social security and one's own situations) that could change in future years. My wife and I will consider this seriously at 61.5 and make our first decision at 62, and re-evaluate the situations year by year if we both do not claim at 62.
Well sure, but that's what most financially responsible people do! :)

Rule changes have forced me to change the plan twice already. Several years ago they eliminated the option to have a do-over, where you could claim early, invest the money, and pay it all back later. That would have essentially allowed me to invest SS money, keep the profits, repay the SS money as if I had never taken it, and refile at a higher benefit level. Now, I am age-eliminated from the option to file for spousal benefits at FRA while allowing mine to continue to grow until 70. Will it change again? Of course, but I don't foresee any change that would persuade me in my situation to delay again. If it does, I'll adjust at the time. That's no problem.

tampaite
Posts: 576
Joined: Wed Feb 18, 2015 9:29 pm

Re: Why not take Social Security at 62

Post by tampaite » Sun Nov 26, 2017 11:06 am

Deleting my messages on this forum
Last edited by tampaite on Mon Jun 03, 2019 8:45 am, edited 2 times in total.

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Sun Nov 26, 2017 11:09 am

tampaite wrote:
Sun Nov 26, 2017 9:59 am
Independent wrote:
Sat Nov 25, 2017 12:53 pm
That's a life expectancy at birth, it's irrelevant to someone who has already lived to 62. You want the a expectancy at 62.
so how would you know expectancy at 62? I'd say, it's still the same at birth.
If that were true, what would your life expectancy be if you are already 90, as that is past life expectancy at birth? A negative number?
In theory, theory and practice are identical. In practice, they often differ.

tampaite
Posts: 576
Joined: Wed Feb 18, 2015 9:29 pm

Re: Why not take Social Security at 62

Post by tampaite » Sun Nov 26, 2017 11:11 am

Deleting my messages on this forum
Last edited by tampaite on Mon Jun 03, 2019 8:45 am, edited 1 time in total.

Independent
Posts: 551
Joined: Tue Sep 22, 2009 1:09 pm

Re: Why not take Social Security at 62

Post by Independent » Sun Nov 26, 2017 11:24 am

tampaite wrote:
Sun Nov 26, 2017 9:59 am
Independent wrote:
Sat Nov 25, 2017 12:53 pm
That's a life expectancy at birth, it's irrelevant to someone who has already lived to 62. You want the a expectancy at 62.
so how would you know expectancy at 62? I'd say, it's still the same at birth.
How do you know life expectancy at birth? If you looked it up in a table somewhere, the same table has life expectancy at 62.

If you want to know how the people construct the tables -- they get a mortality rate for each age, assume some number of lives starting at some age (e.g. 100,000 newborns, or 100,000 reaching their 62nd birthday), then step their population forward one year at a time, using the annual mortality rates. They get a total number of years of life lived, then divide by the original size (and, make some adjustment for partial years). That's generally very close to the year when 50% of the original group is still alive, but not exactly the same.

This source has discussion of the methods, plenty of examples where you can match their math, and various results. https://www.ssa.gov/oact/NOTES/as120/TOC.html for the general population.

Table 11 has some examples that vary by year of birth and sex, https://www.ssa.gov/oact/NOTES/as120/Li ... #wp1004907

But, note that BH members who are trying to decide when to start SS aren't statistically the same as the general population. So those numbers should be adjusted.

Independent
Posts: 551
Joined: Tue Sep 22, 2009 1:09 pm

Re: Why not take Social Security at 62

Post by Independent » Sun Nov 26, 2017 11:36 am

wrongfunds wrote:
Sun Nov 26, 2017 10:44 am
Just curious but how much do you think most BH couples annual SS benefit will be? I think you may be under estimating the size of the benefit for many BH especially those who have substantial savings as they likely held well paying jobs.
The numbers are around $35K for a professional person who has max earnings for most of her career. Assuming both have similar work history, the spouse should also get $35K. Unless there is a cap on the couple's combined SS benefit, the couple should be able to get $70K per year in SS benefits. This is not insignificant even for somebody with $4M in combined retirement/taxable account.

Somebody correct me any of the above assumptions are incorrect.
There is a difference between "significant" and "used for necessities".

The $4M couple can take $160k per year in "safe" withdrawals. That is well above median income of working age married couples. It certainly pays for all the necessities of life plus a nice allowance for nice-to-have stuff.

That couple may find an additional $70k from SS "significant". And, they can spend all of it on nice-to-have stuff.

More important, for my point -- Suppose their combined benefit is $70k if they start at 70, or $40k if they start at 62. Suppose that in either case they make prudent decisions regarding their withdrawals from their $4k nest egg. How much difference will their starting date make to their lifestyle?

delamer
Posts: 9484
Joined: Tue Feb 08, 2011 6:13 pm

Re: Why not take Social Security at 62

Post by delamer » Sun Nov 26, 2017 12:14 pm

wrongfunds wrote:
Sun Nov 26, 2017 10:44 am
Just curious but how much do you think most BH couples annual SS benefit will be? I think you may be under estimating the size of the benefit for many BH especially those who have substantial savings as they likely held well paying jobs.
The numbers are around $35K for a professional person who has max earnings for most of her career. Assuming both have similar work history, the spouse should also get $35K. Unless there is a cap on the couple's combined SS benefit, the couple should be able to get $70K per year in SS benefits. This is not insignificant even for somebody with $4M in combined retirement/taxable account.

Somebody correct me any of the above assumptions are incorrect.
Your SSS numbers seem OK to me, based in the assumption of two maximum earning partners. Although $4 million in assets seems high -- although obviously not impossible -- unless you are talking about very high earners (like $200,000 plus each). To get max Social Security, you "only" need about $125,000 each.

Not sure that most posters here are in that position. There seem to be many who are part of a couple where one spouse was a much higher earner than the other.

But this all means that your main point still stands. For most couples or singles, even those with a large retirement assets, SS is a key component of their retirement income.

User avatar
David Jay
Posts: 7501
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Why not take Social Security at 62

Post by David Jay » Sun Nov 26, 2017 12:45 pm

wrongfunds wrote:
Sun Nov 26, 2017 10:44 am
Just curious but how much do you think most BH couples annual SS benefit will be? I think you may be under estimating the size of the benefit for many BH especially those who have substantial savings as they likely held well paying jobs.
The numbers are around $35K for a professional person who has max earnings for most of her career. Assuming both have similar work history, the spouse should also get $35K. Unless there is a cap on the couple's combined SS benefit, the couple should be able to get $70K per year in SS benefits. This is not insignificant even for somebody with $4M in combined retirement/taxable account.

Somebody correct me any of the above assumptions are incorrect.
Birth year of 1956 is the first year for which an individual can have, with 35 years of maximum SS earnings, a PIA over $3000.

If claiming at age 70 (assuming zero inflation so we don't have to discuss COLA) their benefit could exceed $3890 (FRA is 66yr 4mo), or $46,680 per year.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
Peter Foley
Posts: 5006
Joined: Fri Nov 23, 2007 10:34 am
Location: Lake Wobegon

Re: Why not take Social Security at 62

Post by Peter Foley » Sun Nov 26, 2017 12:47 pm

smitcat wrote:
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.
The analysis by the OP is flawed in that it does not take into consideration other aspects of one's finances as smitcat points out above.

At a minimum on must take into account one's current placement of assets (taxable, tax-deferred, and tax free) and consider the marginal tax rates that apply to SS income.
Last edited by Peter Foley on Sun Nov 26, 2017 5:44 pm, edited 1 time in total.

TravelforFun
Posts: 1962
Joined: Tue Dec 04, 2012 11:05 pm

Re: Why not take Social Security at 62

Post by TravelforFun » Sun Nov 26, 2017 1:48 pm

TG2 wrote:
Sat Nov 25, 2017 11:42 pm
TravelforFun wrote:
Fri Nov 24, 2017 10:14 pm
Real life example here:

I'm 65 and my wife is 61.

Our scheduled monthly SS benefits at 62, Full Retirement Age, and 70 for me and my wife are: $2,380, $2,684, $3,606 (mine); and $750, $1,018, $1,316 (my wife's)

Next year, my wife will file for her benefit when she turns 62 and receive $750. I will file a restricted application and receive the spousal benefit which is 1/2 of my wife's principle insurance amount (1/2 of $1,018 or $509). The reason I can do this is because I was born before January 2,1954.

Then I will file when I turn 70 and receive $3,606; and my wife will file for her spousal benefit and receive $1,074 (1/2 of my principle insurance amount minus her early filing penalty).

If I die first, my wife will receive the survivor's benefit of $3,606.

This is our game plan.

TravelforFun
Are you sure about that? My understanding is that the maximum spousal benefit is 50% of the other's PIA due to there being no delayed retirement credits for spousal benefits, but the spousal benefit can be reduced below that. If the one claiming spousal benefits claims early, their benefit percentage is reduced. But is it not also true that if the primary (for purposes of spousal benefits) claims early then the spousal benefits for the other are based on the primary's reduced benefit level? If you are at FRA when you claim spousal, would you not receive 50% of her reduced benefit, or $375? And if you were not yet at FRA it would be reduced a little more. Isn't that right? It makes no sense that you would get half of a benefit level that she had foregone by claiming early. The age of both spouses matters.
I’m very sure. If you spouse is receiving benefits and you claim claim spousal at FRA or later, you would get 1/2 of your spouse’s PIA whether you spouse has claimed early or not.

TravelforFun

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Sun Nov 26, 2017 2:35 pm

Peter Foley wrote:
Sun Nov 26, 2017 12:47 pm
smitcat wrote:
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.
The analysis by the OP is flawed in that it does not take into considerations other aspects of one's finances as smitcat points out above.

At a minimum on must take into account one's current placement of assets (taxable, tax-deferred, and tax free) and consider the marginal tax rates that apply to SS income.
Yes, that's what my retirement analyzer does when calculating sustainable after-tax spending.
In theory, theory and practice are identical. In practice, they often differ.

Call_Me_Op
Posts: 7427
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Why not take Social Security at 62

Post by Call_Me_Op » Mon Nov 27, 2017 8:45 am

tampaite wrote:
Sun Nov 26, 2017 9:59 am
Independent wrote:
Sat Nov 25, 2017 12:53 pm
That's a life expectancy at birth, it's irrelevant to someone who has already lived to 62. You want the a expectancy at 62.
so how would you know expectancy at 62? I'd say, it's still the same at birth.
No, once you make it to a ripe old age (like 62) and are way beyond infant mortality and other issues that befall younger folks your expected age at death is greater. For example, if life expectancy at birth is 78 and you reach 80, your life expectancy is not -2, it is more like another 10 years.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

dbr
Posts: 31236
Joined: Sun Mar 04, 2007 9:50 am

Re: Why not take Social Security at 62

Post by dbr » Mon Nov 27, 2017 8:52 am

Call_Me_Op wrote:
Mon Nov 27, 2017 8:45 am
tampaite wrote:
Sun Nov 26, 2017 9:59 am
Independent wrote:
Sat Nov 25, 2017 12:53 pm
That's a life expectancy at birth, it's irrelevant to someone who has already lived to 62. You want the a expectancy at 62.
so how would you know expectancy at 62? I'd say, it's still the same at birth.
No, once you make it to a ripe old age (like 62) and are way beyond infant mortality and other issues that befall younger folks your expected age at death is greater. For example, if life expectancy at birth is 78 and you reach 80, your life expectancy is not -2, it is more like another 10 years.
Your life expectancy at birth has not changed from what it was when you were born. Maybe that is what is confusing the original comment. As time goes on the life expectancy at birth of other people born in a different year might be different from yours.

The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Why not take Social Security at 62

Post by The Wizard » Mon Nov 27, 2017 9:44 am

dbr wrote:
Mon Nov 27, 2017 8:52 am

...Your life expectancy at birth has not changed from what it was when you were born. Maybe that is what is confusing the original comment. As time goes on the life expectancy at birth of other people born in a different year might be different from yours.
Actually, the life expectancy for your cohort, folks born in the same year, continues to increase each year for the surviving members.

It's called Conditional Probability, as in: What is my expected lifespan given that I have reached age 60 in nominal health?

Following table may be of interest to some:

https://www.ssa.gov/oact/STATS/table4c6.html
Attempted new signature...

wrongfunds
Posts: 2148
Joined: Tue Dec 21, 2010 3:55 pm

Re: Why not take Social Security at 62

Post by wrongfunds » Mon Nov 27, 2017 9:51 am

Conditional Probability
This is the concept which really needs to be understood. A proper stat/prob course will drill that in.

dbr
Posts: 31236
Joined: Sun Mar 04, 2007 9:50 am

Re: Why not take Social Security at 62

Post by dbr » Mon Nov 27, 2017 9:53 am

The Wizard wrote:
Mon Nov 27, 2017 9:44 am
dbr wrote:
Mon Nov 27, 2017 8:52 am

...Your life expectancy at birth has not changed from what it was when you were born. Maybe that is what is confusing the original comment. As time goes on the life expectancy at birth of other people born in a different year might be different from yours.
Actually, the life expectancy for your cohort, folks born in the same year, continues to increase each year for the surviving members.

It's called Conditional Probability, as in: What is my expected lifespan given that I have reached age 60 in nominal health?

Following table may be of interest to some:

https://www.ssa.gov/oact/STATS/table4c6.html
You didn't notice the trick in what I said. I referred specifically to the "life expectancy at birth" and specifically not to the conditional expectancy given being alive at a different age. The "life expectancy at birth" of a person is not changed by subsequent conditions. I am suggesting a possible reason the original comment may actually be correct.

Independent
Posts: 551
Joined: Tue Sep 22, 2009 1:09 pm

Re: Why not take Social Security at 62

Post by Independent » Mon Nov 27, 2017 10:05 am

The Wizard wrote:
Mon Nov 27, 2017 9:44 am
Actually, the life expectancy for your cohort, folks born in the same year, continues to increase each year for the surviving members.

It's called Conditional Probability, as in: What is my expected lifespan given that I have reached age 60 in nominal health?

Following table may be of interest to some:

https://www.ssa.gov/oact/STATS/table4c6.html
If I'm interested in cohort life expectancy, I'd use the next set of tables:
https://www.ssa.gov/oact/NOTES/as120/Li ... Tbl_7.html

But, SS tables aren't the best for Bogleheads.

nchunter
Posts: 33
Joined: Fri Sep 06, 2013 1:58 pm

Re: Why not take Social Security at 62

Post by nchunter » Mon Nov 27, 2017 10:27 am

One thought I've had with this, is the wife and I are high earners with relatively low expenses. My thought is SS at 62 for one of us(me) and delay hers until 67. However, my thought is we could probably live on SS and 2-3% of our portfolio in perpetuity and leave our two kids a big inheritance.
The one thing I don't understand when people run their analysis is that SS as an annuity does not pay to heirs(except spouse). So assuming we have $6-7 million portfolio(We are on track), I would prefer to leave that pile of money to my kids.
I am familiar with RMD's but would like to use the non transferable part of income i.e SS to pay everyday life expenses like groceries,power bill etc. Delaying gives me more purchasing power later on per se, but in the same regard I'm depleting my "pile of money".

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Mon Nov 27, 2017 10:30 am

Independent wrote:
Mon Nov 27, 2017 10:05 am
The Wizard wrote:
Mon Nov 27, 2017 9:44 am
Actually, the life expectancy for your cohort, folks born in the same year, continues to increase each year for the surviving members.

It's called Conditional Probability, as in: What is my expected lifespan given that I have reached age 60 in nominal health?

Following table may be of interest to some:

https://www.ssa.gov/oact/STATS/table4c6.html
If I'm interested in cohort life expectancy, I'd use the next set of tables:
https://www.ssa.gov/oact/NOTES/as120/Li ... Tbl_7.html

But, SS tables aren't the best for Bogleheads.
What I do in my analyzer is to start with the SS mortality tables, then adjust the mortality rates according to the (estimated) life insurance rating for the individual in question. By reverse-engineering insurance premiums I've found on the web (as well as from some other actuarial sources), it appears that mortality rates for the best risks are almost exactly half those of standard risks, and the inbetween ratings are about 60% to 75% of the standard mortality rates.

Then I accumulate the mortality for that individual until I reach the 50% (median) and 90% (maximum reasonable) lifespan estimates.
In theory, theory and practice are identical. In practice, they often differ.

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Mon Nov 27, 2017 10:33 am

nchunter wrote:
Mon Nov 27, 2017 10:27 am
One thought I've had with this, is the wife and I are high earners with relatively low expenses. My thought is SS at 62 for one of us(me) and delay hers until 67. However, my thought is we could probably live on SS and 2-3% of our portfolio in perpetuity and leave our two kids a big inheritance.
The one thing I don't understand when people run their analysis is that SS as an annuity does not pay to heirs(except spouse). So assuming we have $6-7 million portfolio(We are on track), I would prefer to leave that pile of money to my kids.
I am familiar with RMD's but would like to use the non transferable part of income i.e SS to pay everyday life expenses like groceries,power bill etc. Delaying gives me more purchasing power later on per se, but in the same regard I'm depleting my "pile of money".
That sounds like a reasonable analysis for people who have plenty of money.

In reality, the effects of the special taxation rules for Social Security combine with the "normal" taxation rules for other sources of income to make overall optimization quite complex. It is best to run the calculations for each possible date of taking SS, along with the tax impacts of other withdrawals, but of course that is a lot of calculations to do "manually", even with the help of a spreadsheet.
In theory, theory and practice are identical. In practice, they often differ.

TravelforFun
Posts: 1962
Joined: Tue Dec 04, 2012 11:05 pm

Re: Why not take Social Security at 62

Post by TravelforFun » Mon Nov 27, 2017 12:07 pm

nchunter wrote:
Mon Nov 27, 2017 10:27 am
One thought I've had with this, is the wife and I are high earners with relatively low expenses. My thought is SS at 62 for one of us(me) and delay hers until 67. However, my thought is we could probably live on SS and 2-3% of our portfolio in perpetuity and leave our two kids a big inheritance.
The one thing I don't understand when people run their analysis is that SS as an annuity does not pay to heirs(except spouse). So assuming we have $6-7 million portfolio(We are on track), I would prefer to leave that pile of money to my kids.
I am familiar with RMD's but would like to use the non transferable part of income i.e SS to pay everyday life expenses like groceries,power bill etc. Delaying gives me more purchasing power later on per se, but in the same regard I'm depleting my "pile of money".
There could be a tax advantage if you delayed. You could withdraw more from your tax-deferred assets prior to SS (up to the 25% bracket) and put that money away in taxable; and your RMD would be less when you reach that age. Excel can calculate the options.

TravelforFun

smitcat
Posts: 4636
Joined: Mon Nov 07, 2016 10:51 am

Re: Why not take Social Security at 62

Post by smitcat » Mon Nov 27, 2017 12:32 pm

technovelist wrote:
Mon Nov 27, 2017 10:33 am
nchunter wrote:
Mon Nov 27, 2017 10:27 am
One thought I've had with this, is the wife and I are high earners with relatively low expenses. My thought is SS at 62 for one of us(me) and delay hers until 67. However, my thought is we could probably live on SS and 2-3% of our portfolio in perpetuity and leave our two kids a big inheritance.
The one thing I don't understand when people run their analysis is that SS as an annuity does not pay to heirs(except spouse). So assuming we have $6-7 million portfolio(We are on track), I would prefer to leave that pile of money to my kids.
I am familiar with RMD's but would like to use the non transferable part of income i.e SS to pay everyday life expenses like groceries,power bill etc. Delaying gives me more purchasing power later on per se, but in the same regard I'm depleting my "pile of money".
That sounds like a reasonable analysis for people who have plenty of money.

In reality, the effects of the special taxation rules for Social Security combine with the "normal" taxation rules for other sources of income to make overall optimization quite complex. It is best to run the calculations for each possible date of taking SS, along with the tax impacts of other withdrawals, but of course that is a lot of calculations to do "manually", even with the help of a spreadsheet.
Or you could use the IORP calculator to do the comparisons quickly or for more details the RPM spreadsheet/calculator which will show you the results of various potential options.

smitcat
Posts: 4636
Joined: Mon Nov 07, 2016 10:51 am

Re: Why not take Social Security at 62

Post by smitcat » Mon Nov 27, 2017 12:36 pm

TravelforFun wrote:
Mon Nov 27, 2017 12:07 pm
nchunter wrote:
Mon Nov 27, 2017 10:27 am
One thought I've had with this, is the wife and I are high earners with relatively low expenses. My thought is SS at 62 for one of us(me) and delay hers until 67. However, my thought is we could probably live on SS and 2-3% of our portfolio in perpetuity and leave our two kids a big inheritance.
The one thing I don't understand when people run their analysis is that SS as an annuity does not pay to heirs(except spouse). So assuming we have $6-7 million portfolio(We are on track), I would prefer to leave that pile of money to my kids.
I am familiar with RMD's but would like to use the non transferable part of income i.e SS to pay everyday life expenses like groceries,power bill etc. Delaying gives me more purchasing power later on per se, but in the same regard I'm depleting my "pile of money".
There could be a tax advantage if you delayed. You could withdraw more from your tax-deferred assets prior to SS (up to the 25% bracket) and put that money away in taxable; and your RMD would be less when you reach that age. Excel can calculate the options.

TravelforFun
Yes - in our comparisons there is a tax advantage like you say. There is also more SS which is taxed at the 85% max so there can be savings on both sides of this equation dependent upon how much you have in which buckets (401K, after tax etc). These advantages can shine even brighter if one spouse is deceased earlier than the other.
It is worth actually calculating these options out with IORP or in more details with RPM.

User avatar
Lancelot
Posts: 247
Joined: Thu Jul 05, 2007 9:09 pm
Location: Philippines

Re: Why not take Social Security at 62

Post by Lancelot » Mon Nov 27, 2017 11:12 pm

susa wrote:
Sun Nov 26, 2017 9:13 am
When you buy Insurance, do you calculate a break-even for payout of same ?

https://youtu.be/aypdW_EUXOs
Enjoyed the video, thanks for sharing!

Per the video, "Less than 2% of Americans wait to take SS at age 70." From a contrarian point of view that could be a reason to consider delaying SS :sharebeer
No Where for Very Long...

User avatar
Lancelot
Posts: 247
Joined: Thu Jul 05, 2007 9:09 pm
Location: Philippines

Re: Why not take Social Security at 62

Post by Lancelot » Mon Nov 27, 2017 11:17 pm

TravelforFun wrote:
Mon Nov 27, 2017 12:07 pm
There could be a tax advantage if you delayed. You could withdraw more from your tax-deferred assets prior to SS (up to the 25% bracket) and put that money away in taxable; and your RMD would be less when you reach that age. Excel can calculate the options.

TravelforFun
Yes, I have been doing exactly that; my only regret is that I did not begin sooner with the 72-T loop hole.
No Where for Very Long...

User avatar
boglesmymind
Posts: 56
Joined: Sat Jan 09, 2010 9:10 pm

Re: Why not take Social Security at 62

Post by boglesmymind » Tue Nov 28, 2017 1:02 pm

I am 64 and not taking SS. My DW is 61. I fell in under the wire for the ability to take spousal benefits since I was born in 1953.
We plan on her applying at 63, and I will collect half of her FRA until I switch over to my benefit at 70. This scenario will work well for us
since our earnings were equal over the years making our benefit amount the same.

vested1
Posts: 1878
Joined: Wed Jan 04, 2012 4:20 pm

Re: Why not take Social Security at 62

Post by vested1 » Tue Nov 28, 2017 6:16 pm

boglesmymind wrote:
Tue Nov 28, 2017 1:02 pm
I am 64 and not taking SS. My DW is 61. I fell in under the wire for the ability to take spousal benefits since I was born in 1953.
We plan on her applying at 63, and I will collect half of her FRA until I switch over to my benefit at 70. This scenario will work well for us
since our earnings were equal over the years making our benefit amount the same.
You are probably aware of this, but if she filed a month before you turned 66 (FRA) you could file a restricted application and get 1/2 of the amount she would have received had she waited until her own FRA (PIA). By waiting until she turns 63 you may be losing some months of the restricted application benefit, depending our your respective birthdays. Determine the amount she would receive by waiting until 63 (5% higher than age 62 for life or until you die) and compare it to one year of 1/2 of her PIA to see if it's worth it for you. One less year of restricted application benefits (3 instead of 4) is what you would be giving up.

meens888
Posts: 21
Joined: Wed Aug 09, 2017 7:30 pm

Re: Why not take Social Security at 62

Post by meens888 » Tue Nov 28, 2017 8:58 pm

Statistically, if you are able to make it to 65, the average age of death is 80 for men and 82 for women. Additionally, for those who make it to 80 a significant percentage will make it to 85.

SGM
Posts: 3062
Joined: Wed Mar 23, 2011 4:46 am

Re: Why not take Social Security at 62

Post by SGM » Wed Nov 29, 2017 5:24 am

The financial risk in retirement is not dying early but living for a long time. My choice was claiming SS between 66 and 70. There was no thought of taking SS early as I was enjoying work and making a good income. Using the time between retiring and claiming to convert to Roth accounts was an added bonus. DW was able to take a spousal benefit at her FRA and delay her own benefit until 70 so we will have a total of 60k coming during those 4 years. That comes to about half of what I had given up by delaying my SS from 66 to 70.

4 years of delay will possibly have an effect of increasing SS income for the next 40 years. It also made it cheaper to convert the Roth accounts which may become part of a legacy. All in all I think delay will increase our portfolio and legacy over the years.

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Wed Nov 29, 2017 8:58 am

SGM wrote:
Wed Nov 29, 2017 5:24 am
The financial risk in retirement is not dying early but living for a long time. My choice was claiming SS between 66 and 70. There was no thought of taking SS early as I was enjoying work and making a good income. Using the time between retiring and claiming to convert to Roth accounts was an added bonus. DW was able to take a spousal benefit at her FRA and delay her own benefit until 70 so we will have a total of 60k coming during those 4 years. That comes to about half of what I had given up by delaying my SS from 66 to 70.

4 years of delay will possibly have an effect of increasing SS income for the next 40 years. It also made it cheaper to convert the Roth accounts which may become part of a legacy. All in all I think delay will increase our portfolio and legacy over the years.
This is true to some extent. But for married couples who depend largely on Social Security rather than their own assets, the worst case is for one spouse to die early in retirement and the other to live a long time with only one Social Security benefit.
In theory, theory and practice are identical. In practice, they often differ.

dbr
Posts: 31236
Joined: Sun Mar 04, 2007 9:50 am

Re: Why not take Social Security at 62

Post by dbr » Wed Nov 29, 2017 9:16 am

technovelist wrote:
Wed Nov 29, 2017 8:58 am
SGM wrote:
Wed Nov 29, 2017 5:24 am
The financial risk in retirement is not dying early but living for a long time. My choice was claiming SS between 66 and 70. There was no thought of taking SS early as I was enjoying work and making a good income. Using the time between retiring and claiming to convert to Roth accounts was an added bonus. DW was able to take a spousal benefit at her FRA and delay her own benefit until 70 so we will have a total of 60k coming during those 4 years. That comes to about half of what I had given up by delaying my SS from 66 to 70.

4 years of delay will possibly have an effect of increasing SS income for the next 40 years. It also made it cheaper to convert the Roth accounts which may become part of a legacy. All in all I think delay will increase our portfolio and legacy over the years.
This is true to some extent. But for married couples who depend largely on Social Security rather than their own assets, the worst case is for one spouse to die early in retirement and the other to live a long time with only one Social Security benefit.
I think the original structure of SS was intended to protect widows (in those days it would be mostly women) who had never worked and depended on their husbands for livelihood.

User avatar
susa
Posts: 559
Joined: Sat Oct 06, 2007 4:30 pm
Contact:

Re: Why not take Social Security at 62

Post by susa » Wed Nov 29, 2017 9:19 am

technovelist wrote: .. for married couples who depend largely on Social Security rather than their own assets, the worst case is for one spouse to die early in retirement and the other to live a long time with only one Social Security benefit.
What happens in these scenarios:

Assumptions: Difference between survivor benefits and spousal benefits; Spousal retirement benefits provide a maximum 50 percent of the other spouse's primary insurance amount (PIA), while a surviving spouse's benefit provide a maximum benefit of 100 percent of the deceased worker's retirement benefit.

1. Neither spouse has filed for SS, both are over 62 but less than 70. Higher earner dies before filing.
a) Surviving spouse files for spousal benefits immediately even though less than age 70.
b) Surviving spouse files for survivor benefits but waits to file for spousal benefits until age 70.
c) Surviving spouse files for both spousal and survivor benefits.
d) Something else. What ?

2) Lower earner spouse files at 62. Higher earner does nothing. Higher earner dies before age 70 before filing.
See above a) to d)

bighatnohorse
Posts: 190
Joined: Thu Oct 13, 2016 4:04 pm

Re: Why not take Social Security at 62

Post by bighatnohorse » Wed Nov 29, 2017 9:23 am

You might want to both yourself and spouse to take the SAGE cognitive test under doctor's guidance.
Poor SAGE results may mean long term care is in the future.
Then decide if you want the money now or later.

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Wed Nov 29, 2017 9:46 am

susa wrote:
Wed Nov 29, 2017 9:19 am
technovelist wrote: .. for married couples who depend largely on Social Security rather than their own assets, the worst case is for one spouse to die early in retirement and the other to live a long time with only one Social Security benefit.
What happens in these scenarios:

Assumptions: Difference between survivor benefits and spousal benefits; Spousal retirement benefits provide a maximum 50 percent of the other spouse's primary insurance amount (PIA), while a surviving spouse's benefit provide a maximum benefit of 100 percent of the deceased worker's retirement benefit.

1. Neither spouse has filed for SS, both are over 62 but less than 70. Higher earner dies before filing.
a) Surviving spouse files for spousal benefits immediately even though less than age 70.
b) Surviving spouse files for survivor benefits but waits to file for spousal benefits until age 70.
c) Surviving spouse files for both spousal and survivor benefits.
d) Something else. What ?

2) Lower earner spouse files at 62. Higher earner does nothing. Higher earner dies before age 70 before filing.
See above a) to d)
This is complex in itself, but is only part of the question, which is how to optimize sustainable retirement spending. The answer to that question depends on assets and asset locations, assumptions about returns and inflation, and ages and health statuses of the spouses (among other factors).

I don't know of any publicly available tool that takes all of these factors into account, so I wrote my own retirement analyzer to figure it out.
In theory, theory and practice are identical. In practice, they often differ.

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Wed Nov 29, 2017 9:54 am

dbr wrote:
Wed Nov 29, 2017 9:16 am
technovelist wrote:
Wed Nov 29, 2017 8:58 am
SGM wrote:
Wed Nov 29, 2017 5:24 am
The financial risk in retirement is not dying early but living for a long time. My choice was claiming SS between 66 and 70. There was no thought of taking SS early as I was enjoying work and making a good income. Using the time between retiring and claiming to convert to Roth accounts was an added bonus. DW was able to take a spousal benefit at her FRA and delay her own benefit until 70 so we will have a total of 60k coming during those 4 years. That comes to about half of what I had given up by delaying my SS from 66 to 70.

4 years of delay will possibly have an effect of increasing SS income for the next 40 years. It also made it cheaper to convert the Roth accounts which may become part of a legacy. All in all I think delay will increase our portfolio and legacy over the years.
This is true to some extent. But for married couples who depend largely on Social Security rather than their own assets, the worst case is for one spouse to die early in retirement and the other to live a long time with only one Social Security benefit.
I think the original structure of SS was intended to protect widows (in those days it would be mostly women) who had never worked and depended on their husbands for livelihood.
Yes, originally only women could get the widow's benefit. Dependent widowers were made eligible in 1962, but it wasn't until 1975(!) that a Supreme Court case made the rules the same for widows and widowers. (https://en.wikipedia.org/wiki/History_o ... ted_States)
In theory, theory and practice are identical. In practice, they often differ.

User avatar
dm200
Posts: 22910
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Why not take Social Security at 62

Post by dm200 » Wed Nov 29, 2017 9:55 am

I think the original structure of SS was intended to protect widows (in those days it would be mostly women) who had never worked and depended on their husbands for livelihood.
My understanding and belief as well. While less common today, this situation is still very common.

TravelforFun
Posts: 1962
Joined: Tue Dec 04, 2012 11:05 pm

Re: Why not take Social Security at 62

Post by TravelforFun » Wed Nov 29, 2017 10:50 am

boglesmymind wrote:
Tue Nov 28, 2017 1:02 pm
I am 64 and not taking SS. My DW is 61. I fell in under the wire for the ability to take spousal benefits since I was born in 1953.
We plan on her applying at 63, and I will collect half of her FRA until I switch over to my benefit at 70. This scenario will work well for us
since our earnings were equal over the years making our benefit amount the same.
And when you switch over to your benefit at 70, your wife could be eligible for spousal benefit which may be higher than her own benefit Check the numbers.

TravelforFun

neilpilot
Posts: 2914
Joined: Fri Dec 04, 2015 1:46 pm
Location: Memphis area

Re: Why not take Social Security at 62

Post by neilpilot » Wed Nov 29, 2017 11:17 am

TravelforFun wrote:
Wed Nov 29, 2017 10:50 am
boglesmymind wrote:
Tue Nov 28, 2017 1:02 pm
I am 64 and not taking SS. My DW is 61. I fell in under the wire for the ability to take spousal benefits since I was born in 1953.
We plan on her applying at 63, and I will collect half of her FRA until I switch over to my benefit at 70. This scenario will work well for us
since our earnings were equal over the years making our benefit amount the same.
And when you switch over to your benefit at 70, your wife could be eligible for spousal benefit which may be higher than her own benefit Check the numbers.

TravelforFun
Doubtful, since spousal is based on FRA benefits. Read the OP's post: "since our earnings were equal over the years making our benefit amount the same"

User avatar
Ged
Posts: 3839
Joined: Mon May 13, 2013 1:48 pm
Location: Roke

Re: Why not take Social Security at 62

Post by Ged » Wed Nov 29, 2017 11:36 am

I am skeptical as to whether family history of longevity matters. The studies on that have shown a quite weak correlation. Personal health history is much more important.

https://www.sharecare.com/health/longev ... t-lifespan

There are various claims that the SS benefit vs age is actuarially neutral for a single beneficiary over the entire cohort it serves. However with a married couple the odds of one partner outliving the tables increases quite a bit. That partner will of course receive the larger benefit of the two partners after one partner is gone.

While I may or may not outlive my statistical estimate I am placing my bet that between myself and my wife one of us is going to outlive. Also my wife, having the smaller benefit claimed as soon as she retired.

This is why I think the OP's concept is incorrect for a married person. Married people should delay taking the larger benefit if it is financially feasible for them to do so.

For a single person it doesn't seem to be as clear-cut that there is an advantage to delaying.

TravelforFun
Posts: 1962
Joined: Tue Dec 04, 2012 11:05 pm

Re: Why not take Social Security at 62

Post by TravelforFun » Wed Nov 29, 2017 11:46 am

neilpilot wrote:
Wed Nov 29, 2017 11:17 am
TravelforFun wrote:
Wed Nov 29, 2017 10:50 am
boglesmymind wrote:
Tue Nov 28, 2017 1:02 pm
I am 64 and not taking SS. My DW is 61. I fell in under the wire for the ability to take spousal benefits since I was born in 1953.
We plan on her applying at 63, and I will collect half of her FRA until I switch over to my benefit at 70. This scenario will work well for us
since our earnings were equal over the years making our benefit amount the same.
And when you switch over to your benefit at 70, your wife could be eligible for spousal benefit which may be higher than her own benefit Check the numbers.

TravelforFun
Doubtful, since spousal is based on FRA benefits. Read the OP's post: "since our earnings were equal over the years making our benefit amount the same"
You’re right. I didn’t catch that last sentence.

TravelforFun

User avatar
praxis
Posts: 525
Joined: Sun Sep 06, 2009 1:51 pm

Re: Why not take Social Security at 62

Post by praxis » Wed Nov 29, 2017 11:50 am

Tamarind wrote:
Tue Nov 21, 2017 7:48 am

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.
This statement helps me see: If I will invest my SS rather than spend it, can I beat 8%/year guaranteed? If I'm not going to spend it and I can't be pretty sure I can beat the 8%/year I receive by waiting by investing it, I should wait. Like I plan to do.

Thanks for the clarity, Tamarind.

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Wed Nov 29, 2017 12:30 pm

praxis wrote:
Wed Nov 29, 2017 11:50 am
Tamarind wrote:
Tue Nov 21, 2017 7:48 am

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.
This statement helps me see: If I will invest my SS rather than spend it, can I beat 8%/year guaranteed? If I'm not going to spend it and I can't be pretty sure I can beat the 8%/year I receive by waiting by investing it, I should wait. Like I plan to do.

Thanks for the clarity, Tamarind.
But it's really not 8% a year, guaranteed or otherwise.

You get one year less of the original benefit for each year you delay.

This means that it takes many years (10-15) to catch up to where you would have been if you took it earlier, and you may never catch up depending on how long you live.
In theory, theory and practice are identical. In practice, they often differ.

smitcat
Posts: 4636
Joined: Mon Nov 07, 2016 10:51 am

Re: Why not take Social Security at 62

Post by smitcat » Wed Nov 29, 2017 12:39 pm

technovelist wrote:
Wed Nov 29, 2017 12:30 pm
praxis wrote:
Wed Nov 29, 2017 11:50 am
Tamarind wrote:
Tue Nov 21, 2017 7:48 am

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.
This statement helps me see: If I will invest my SS rather than spend it, can I beat 8%/year guaranteed? If I'm not going to spend it and I can't be pretty sure I can beat the 8%/year I receive by waiting by investing it, I should wait. Like I plan to do.

Thanks for the clarity, Tamarind.
But it's really not 8% a year, guaranteed or otherwise.

You get one year less of the original benefit for each year you delay.

This means that it takes many years (10-15) to catch up to where you would have been if you took it earlier, and you may never catch up depending on how long you live.
And part or all of that 8% is tax free so you need to calculate that.
As well as the inflation adjustment(s) on the increases.
As well as Roth conversions if they are in the plan.
And survivor if it applies.

If any and/or all of these allow you to spend easier early on than you have your answer.

User avatar
#Cruncher
Posts: 2865
Joined: Fri May 14, 2010 2:33 am
Location: New York City
Contact:

Re: Why not take Social Security at 62

Post by #Cruncher » Wed Nov 29, 2017 3:12 pm

In original post:
chipperd wrote:
Tue Nov 21, 2017 6:00 am
Current age:50
Projected Social Security at 67: $19,300/year or $1608/month
...
Total lifetime Social Security collected with a life expectancy of 85 years:
...
Taken at age 62 earning 3%/year: $447,516
Taken at age 67 earning 3%/year: $460,941
The following table shows this in a different way.
  • Instead of the future value at age 85, it shows the present value (PV) at age 62.
  • Besides 62 and 67 it also shows the values when starting benefits at ages 63-66 and 68-70.
  • It shows the values for all die ages from 75 through 100, not just 85.
  • Instead of the absolute values for starting SS at ages 63 or greater, it shows the difference in PV versus starting at age 62.
For example, if benefits started at age 62 and the single recipient dies at age 85, 23 years (276 months) of benefits would have a PV of $224,776 when discounted at 3%. [2] If benefits started at age 67, the PV would be $6,620 more. [3]

Code: Select all

         PV     ------------------------ PV versus Age 62 ----------------------------
Die      62       63       64       65       66       67       68       69       70    <- start age
Age    70.00%   75.00%   80.00%   86.67%   93.33%  100.00%  108.00%  116.00%  124.00%  <- % of PIA [1]

Code: Select all

 75   145,617   (3,874)  (9,202) (13,370) (19,435) (27,306) (35,537) (45,829) (58,083)
 76   154,642   (3,229)  (7,912) (11,221) (16,426) (23,438) (30,638) (39,898) (51,121)
 77   163,401   (2,604)  (6,661)  (9,136) (13,507) (19,684) (25,883) (34,142) (44,364)
 78   171,901   (1,997)  (5,447)  (7,112) (10,673) (16,041) (21,268) (28,556) (37,807)
 79   180,150   (1,407)  (4,268)  (5,148)  (7,924) (12,506) (16,790) (23,135) (31,443)
 80   188,156     (835)  (3,125)  (3,242)  (5,255)  (9,075) (12,444) (17,875) (25,267)
 81   195,925     (280)  (2,015)  (1,392)  (2,665)  (5,745)  (8,227) (12,769) (19,274)
 82   203,465      258     (938)     403     (152)  (2,513)  (4,133)  (7,814) (13,457)
 83   210,783      781      108    2,146    2,287      623     (161)  (3,005)  (7,812)
 84   217,884    1,288    1,122    3,836    4,654    3,666    3,694    1,661   (2,334)
 85   224,776    1,780    2,107    5,477    6,952    6,620    7,436    6,190    2,983 
 86   231,465    2,258    3,062    7,070    9,181    9,487   11,066   10,586    8,143 
 87   237,956    2,722    3,990    8,615   11,345   12,268   14,590   14,851   13,150 
 88   244,255    3,172    4,889   10,115   13,445   14,968   18,010   18,991   18,010 
 89   250,369    3,608    5,763   11,571   15,483   17,588   21,329   23,008   22,726 
 90   256,302    4,032    6,610   12,983   17,460   20,131   24,549   26,907   27,303 
 91   262,060    4,443    7,433   14,354   19,380   22,599   27,675   30,691   31,745 
 92   267,648    4,843    8,231   15,685   21,242   24,993   30,709   34,363   36,055 
 93   273,071    5,230    9,006   16,976   23,050   27,318   33,653   37,927   40,239 
 94   278,334    5,606    9,758   18,229   24,804   29,573   36,510   41,385   44,299 
 95   283,441    5,971   10,487   19,445   26,507   31,762   39,282   44,742   48,239 
 96   288,398    6,325   11,196   20,625   28,159   33,886   41,973   47,999   52,063 
 97   293,209    6,668   11,883   21,771   29,763   35,948   44,584   51,160   55,774 
 98   297,877    7,002   12,550   22,882   31,319   37,949   47,119   54,228   59,375 
 99   302,408    7,325   13,197   23,961   32,829   39,891   49,578   57,205   62,870 
100   306,805    7,639   13,825   25,008   34,295   41,775   51,965   60,095   66,262
If benefits stop at age 85, the PV is maximized by starting at age 68. However, I think 3% is somewhat high for a discount rate that's applied to SS benefits. As I explained in my other post, I think 1% or 2% are better discount rates for inflation-indexed cash flows as secure as SS benefits. The following table is the same as the one above except it uses a 1.5% discount rate instead of 3%.

Code: Select all

         PV     ------------------------ PV versus Age 62 ----------------------------
Die      62       63       64       65       66       67       68       69       70    <- start age
Age    70.00%   75.00%   80.00%   86.67%   93.33%  100.00%  108.00%  116.00%  124.00%  <- % of PIA

Code: Select all

 75   159,643   (2,970)  (7,628) (11,079) (16,751) (24,593) (32,991) (43,928) (57,343)
 76   170,682   (2,181)  (6,051)  (8,450) (13,071) (19,861) (26,998) (36,673) (48,827)
 77   181,558   (1,405)  (4,498)  (5,861)  (9,446) (15,201) (21,095) (29,526) (40,438)
 78   192,271     (639)  (2,967)  (3,310)  (5,874) (10,609) (15,279) (22,486) (32,173)
 79   202,825      114   (1,459)    (797)  (2,356)  (6,086)  (9,549) (15,551) (24,031)
 80   213,222      857       26    1,678    1,109   (1,630)  (3,905)  (8,718) (16,011)
 81   223,465    1,589    1,489    4,117    4,523    2,760    1,655   (1,988)  (8,110)
 82   233,555    2,309    2,931    6,519    7,887    7,084    7,132    4,643     (326)
 83   243,494    3,019    4,351    8,886   11,200   11,344   12,528   11,175    7,342 
 84   253,286    3,719    5,749   11,217   14,464   15,540   17,844   17,609   14,896 
 85   262,933    4,408    7,127   13,514   17,679   19,674   23,080   23,948   22,337 
 86   272,435    5,087    8,485   15,777   20,847   23,747   28,239   30,193   29,668 
 87   281,797    5,755    9,822   18,006   23,967   27,759   33,321   36,345   36,889 
 88   291,019    6,414   11,140   20,201   27,041   31,711   38,327   42,405   44,003 
 89   300,103    7,063   12,438   22,364   30,070   35,605   43,259   48,375   51,012 
 90   309,053    7,702   13,716   24,495   33,053   39,440   48,117   54,256   57,916 
 91   317,870    8,332   14,976   26,594   35,992   43,219   52,903   60,050   64,717 
 92   326,555    8,952   16,216   28,662   38,887   46,941   57,618   65,757   71,417 
 93   335,111    9,563   17,439   30,699   41,739   50,608   62,263   71,380   78,018 
 94   343,540   10,166   18,643   32,706   44,548   54,220   66,839   76,919   84,520 
 95   351,843   10,759   19,829   34,683   47,316   57,779   71,346   82,375   90,925 
 96   360,023   11,343   20,997   36,631   50,043   61,285   75,787   87,751   97,235 
 97   368,081   11,918   22,149   38,549   52,729   64,738   80,161   93,046  103,452 
 98   376,019   12,485   23,283   40,440   55,375   68,140   84,470   98,263  109,575 
 99   383,839   13,044   24,400   42,301   57,982   71,492   88,716  103,401  115,608 
100   391,543   13,594   25,500   44,136   60,550   74,793   92,898  108,464  121,551 
When discounted at 1.5% instead of 3%, benefits running through age 85 are maximized when one waits one more year and starts them at age 69. If one wants to provide for the case of collecting benefits until age 87 or later, the PV is maximized by delaying until age 70.
  1. The original poster is age 50 so his normal retirement age (NRA) is 67 at which time he is entitled to his primary insurance amount or PIA. This SSA table shows the % of the PIA if one starts collecting early at age 62-66. After NRA, the benefit increases 8% each year until age 70.
  2. Here is the formula for the age 62 benefit using the Excel PV function:
    224,776 = PV(3% / 12, 12 * 23, -70% * 1608, 0, 1)
  3. The table's age 67 value is consistent with the $460,941 age 85 future value from the original post.
    460,941 = (224776 + 6620) * (1 + 3% / 12) ^ (12 * 23)

User avatar
praxis
Posts: 525
Joined: Sun Sep 06, 2009 1:51 pm

Re: Why not take Social Security at 62

Post by praxis » Wed Nov 29, 2017 3:14 pm

smitcat wrote:
Wed Nov 29, 2017 12:39 pm
technovelist wrote:
Wed Nov 29, 2017 12:30 pm
praxis wrote:
Wed Nov 29, 2017 11:50 am
Tamarind wrote:
Tue Nov 21, 2017 7:48 am

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.
This statement helps me see: If I will invest my SS rather than spend it, can I beat 8%/year guaranteed? If I'm not going to spend it and I can't be pretty sure I can beat the 8%/year I receive by waiting by investing it, I should wait. Like I plan to do.

Thanks for the clarity, Tamarind.
But it's really not 8% a year, guaranteed or otherwise.

You get one year less of the original benefit for each year you delay.

This means that it takes many years (10-15) to catch up to where you would have been if you took it earlier, and you may never catch up depending on how long you live.
And part or all of that 8% is tax free so you need to calculate that.
As well as the inflation adjustment(s) on the increases.
As well as Roth conversions if they are in the plan.
And survivor if it applies.

If any and/or all of these allow you to spend easier early on than you have your answer.
SO if my benefit is $12,000/year at MY FRA (66), and I delay until 70, I "lose" 4 X $12K or $48,000. My benefit is increased, though, by (let's make it simple here) 8%/year. That brings my annual benefit to (about) $14,000/year AFTER age 70. Bad news: At $2000 more per year, starting at age 70, it will take 24 years to make up the $48,000. that I chose not to take between 66 and 70. Good news: I get a larger check for the rest of my life. The actuarial table says at my current age (69) I will live 17 more years. Even with good genes and good odds, and I beat that by 5 years, I still won't come out "better" than applying for my benefit at FRA. What is my motive to wait until 70? Have I got my numbers wrong?

smitcat
Posts: 4636
Joined: Mon Nov 07, 2016 10:51 am

Re: Why not take Social Security at 62

Post by smitcat » Wed Nov 29, 2017 4:01 pm

praxis wrote:
Wed Nov 29, 2017 3:14 pm
smitcat wrote:
Wed Nov 29, 2017 12:39 pm
technovelist wrote:
Wed Nov 29, 2017 12:30 pm
praxis wrote:
Wed Nov 29, 2017 11:50 am
Tamarind wrote:
Tue Nov 21, 2017 7:48 am

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.
This statement helps me see: If I will invest my SS rather than spend it, can I beat 8%/year guaranteed? If I'm not going to spend it and I can't be pretty sure I can beat the 8%/year I receive by waiting by investing it, I should wait. Like I plan to do.

Thanks for the clarity, Tamarind.
But it's really not 8% a year, guaranteed or otherwise.

You get one year less of the original benefit for each year you delay.

This means that it takes many years (10-15) to catch up to where you would have been if you took it earlier, and you may never catch up depending on how long you live.
And part or all of that 8% is tax free so you need to calculate that.
As well as the inflation adjustment(s) on the increases.
As well as Roth conversions if they are in the plan.
And survivor if it applies.

If any and/or all of these allow you to spend easier early on than you have your answer.
SO if my benefit is $12,000/year at MY FRA (66), and I delay until 70, I "lose" 4 X $12K or $48,000. My benefit is increased, though, by (let's make it simple here) 8%/year. That brings my annual benefit to (about) $14,000/year AFTER age 70. Bad news: At $2000 more per year, starting at age 70, it will take 24 years to make up the $48,000. that I chose not to take between 66 and 70. Good news: I get a larger check for the rest of my life. The actuarial table says at my current age (69) I will live 17 more years. Even with good genes and good odds, and I beat that by 5 years, I still won't come out "better" than applying for my benefit at FRA. What is my motive to wait until 70? Have I got my numbers wrong?
"Have I got my numbers wrong?
Yes - they are wrong. For a very good detailed explanation far better than I can do look at numbercrunchers post right above this one.
If you just want to eyeball the numbers take your $12,000/year example and gross it up by 8% for 4 years (about 32%) which would then make it about $12,000 X 1.32 = $15,840/year. Then you can adjust for PV and taxes and longevity and a spouse if that applies.

User avatar
praxis
Posts: 525
Joined: Sun Sep 06, 2009 1:51 pm

Re: Why not take Social Security at 62

Post by praxis » Wed Nov 29, 2017 4:22 pm

smitcat wrote:
Wed Nov 29, 2017 4:01 pm
praxis wrote:
Wed Nov 29, 2017 3:14 pm
smitcat wrote:
Wed Nov 29, 2017 12:39 pm
technovelist wrote:
Wed Nov 29, 2017 12:30 pm
praxis wrote:
Wed Nov 29, 2017 11:50 am


This statement helps me see: If I will invest my SS rather than spend it, can I beat 8%/year guaranteed? If I'm not going to spend it and I can't be pretty sure I can beat the 8%/year I receive by waiting by investing it, I should wait. Like I plan to do.

Thanks for the clarity, Tamarind.
But it's really not 8% a year, guaranteed or otherwise.

You get one year less of the original benefit for each year you delay.

This means that it takes many years (10-15) to catch up to where you would have been if you took it earlier, and you may never catch up depending on how long you live.
And part or all of that 8% is tax free so you need to calculate that.
As well as the inflation adjustment(s) on the increases.
As well as Roth conversions if they are in the plan.
And survivor if it applies.

If any and/or all of these allow you to spend easier early on than you have your answer.
SO if my benefit is $12,000/year at MY FRA (66), and I delay until 70, I "lose" 4 X $12K or $48,000. My benefit is increased, though, by (let's make it simple here) 8%/year. That brings my annual benefit to (about) $14,000/year AFTER age 70. Bad news: At $2000 more per year, starting at age 70, it will take 24 years to make up the $48,000. that I chose not to take between 66 and 70. Good news: I get a larger check for the rest of my life. The actuarial table says at my current age (69) I will live 17 more years. Even with good genes and good odds, and I beat that by 5 years, I still won't come out "better" than applying for my benefit at FRA. What is my motive to wait until 70? Have I got my numbers wrong?
"Have I got my numbers wrong?
Yes - they are wrong. For a very good detailed explanation far better than I can do look at numbercrunchers post right above this one.
If you just want to eyeball the numbers take your $12,000/year example and gross it up by 8% for 4 years (about 32%) which would then make it about $12,000 X 1.32 = $15,840/year. Then you can adjust for PV and taxes and longevity and a spouse if that applies.
Thanks. I underestimated my benefit at 70. Sorry I wasn't clear. My larger question is, if I focus on net benefits received, then waiting until 70 to begin is not a very good bet. Correct? I'm almost 69. It's unlikely I will live long enough to pay me for the 4 years I suspended my benefits, even with the increased benefit at 70. I will study numbercrunchers post again. But I believe I will make an appt at our local SS ofc and begin payments. I was certain that my previous calculations had the break even age about 77 or 78. And as I did not need the SS payments for expenses, I was choosing to let it "grow" at about 8% + COLA. I don't think leaving more than $12,000/year on the table makes good sense at my age. Disagree?

technovelist
Posts: 2918
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

Re: Why not take Social Security at 62

Post by technovelist » Wed Nov 29, 2017 6:06 pm

praxis wrote:
Wed Nov 29, 2017 4:22 pm
smitcat wrote:
Wed Nov 29, 2017 4:01 pm
praxis wrote:
Wed Nov 29, 2017 3:14 pm
smitcat wrote:
Wed Nov 29, 2017 12:39 pm
technovelist wrote:
Wed Nov 29, 2017 12:30 pm


But it's really not 8% a year, guaranteed or otherwise.

You get one year less of the original benefit for each year you delay.

This means that it takes many years (10-15) to catch up to where you would have been if you took it earlier, and you may never catch up depending on how long you live.
And part or all of that 8% is tax free so you need to calculate that.
As well as the inflation adjustment(s) on the increases.
As well as Roth conversions if they are in the plan.
And survivor if it applies.

If any and/or all of these allow you to spend easier early on than you have your answer.
SO if my benefit is $12,000/year at MY FRA (66), and I delay until 70, I "lose" 4 X $12K or $48,000. My benefit is increased, though, by (let's make it simple here) 8%/year. That brings my annual benefit to (about) $14,000/year AFTER age 70. Bad news: At $2000 more per year, starting at age 70, it will take 24 years to make up the $48,000. that I chose not to take between 66 and 70. Good news: I get a larger check for the rest of my life. The actuarial table says at my current age (69) I will live 17 more years. Even with good genes and good odds, and I beat that by 5 years, I still won't come out "better" than applying for my benefit at FRA. What is my motive to wait until 70? Have I got my numbers wrong?
"Have I got my numbers wrong?
Yes - they are wrong. For a very good detailed explanation far better than I can do look at numbercrunchers post right above this one.
If you just want to eyeball the numbers take your $12,000/year example and gross it up by 8% for 4 years (about 32%) which would then make it about $12,000 X 1.32 = $15,840/year. Then you can adjust for PV and taxes and longevity and a spouse if that applies.
Thanks. I underestimated my benefit at 70. Sorry I wasn't clear. My larger question is, if I focus on net benefits received, then waiting until 70 to begin is not a very good bet. Correct? I'm almost 69. It's unlikely I will live long enough to pay me for the 4 years I suspended my benefits, even with the increased benefit at 70. I will study numbercrunchers post again. But I believe I will make an appt at our local SS ofc and begin payments. I was certain that my previous calculations had the break even age about 77 or 78. And as I did not need the SS payments for expenses, I was choosing to let it "grow" at about 8% + COLA. I don't think leaving more than $12,000/year on the table makes good sense at my age. Disagree?
The best after-tax results will depend on your other assets and income streams as well as your health status (the latter for estimating your current life expectancy), especially because of the special tax status of SS payments.
In theory, theory and practice are identical. In practice, they often differ.

wrongfunds
Posts: 2148
Joined: Tue Dec 21, 2010 3:55 pm

Re: Why not take Social Security at 62

Post by wrongfunds » Wed Nov 29, 2017 6:09 pm

The actual number is $16.32K. 8% compounded over 4 years is 36%

Now you are looking at extra $4.3K Looking at the break even point, that would be (12x4)/4.3 = 11 years. If you plan to exit this world before 81 years old, then take the SS at FRA rather than waiting for 4 years.

Your 24 year calculation is quite wrong. With the 11 years as the correct number, may be you can evaluate your impending decision in different light.

Post Reply