## Social Security -- Take it at 62, 67 or 70

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
MarkRLV
Posts: 2
Joined: Wed Jul 31, 2019 4:55 pm

### Social Security -- Take it at 62, 67 or 70

I have seen a lot of discussion about delaying taking Social Security until age 70. If you assume that you are going to live to be 85 or greater, the typical thing I have seen is to add up all your payments from 62 to 85 and compare that to all your payments from 70 to 85. Generally, taking it at 70 is going to be better using this approach.

However, I would respectfully suggest that this is a flawed analysis. Without giving you my exact social security numbers, I determined my likely payments starting at both 62 and 70. For each year, I discounted that payment by (1+i)^n where i is some interest rate and n is the number of years away that payment is. For simplicity, I assumed I collected all the payments on the first day of the year. Having done this is a spreadsheet, I then changed the "i" variable until I found a value where the sum of the discounted payment is virtually the same. I found, for me, that "i" value was 3.35%.

So, if I were to get a \$1,000 payment next year, the value of that to me is \$1,000 / (1.0335)^1, or \$967.59. A \$1,000 payment two years into the future would be worth \$936.22.

While everyone's will be slightly different, and you might change you life expectancy to make it to 80, 90, 95, 100 or some other value, it seems pretty clear to me that taking Social Security at age 62 is the better way to go. For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.

Also, worst case scenario, I could die on my 70th birthday. Clearly then it would be better to take my payments from 62 to 70 since the sum of those payments, discounted or not, would be better than what I would get at age 70, which would be \$0. Granted, if I do make it to 100, then I would get a greater number of larger payments. Interestingly, the "cross over" point is right about life expectancy in my family -- the mid-80's.

Wouldn't you say that considering the time value of money is critical when considering if you want one income stream starting earlier or a higher income stream starting later? As my finance professor told me -- there are only two rules about money. More is preferred to less and sooner is preferred to later. Finance is the study of the trade off between those two things. However, the way we were taught to consider two different streams is to discount the payments at some interest rate and add the sum of the discounted payments, not the sum of the "raw" payments.

Quicken Social Security Optimizer makes this error as well.

Silk McCue
Posts: 4512
Joined: Thu Feb 25, 2016 7:11 pm

### Re: Social Security -- Take it at 62, 67 or 70

We have hundreds of threads on this subject and even have Mike Piper, a published author with a book on the subject as a member of this site. He created an excellent sophisticated free tool to help folks determine the optimal claiming strategy.

Claiming at 62 is almost never the right answer unless you are broke, sick and can’t work or going to die soon. That’s slightly overstated but it it makes my point.

Spend some time with this tool and see what you can learn from it.

http://opensocialsecurity.com/

Cheers

Big Dog
Posts: 1780
Joined: Mon Sep 07, 2015 4:12 pm

### Re: Social Security -- Take it at 62, 67 or 70

Mike Piper's opensocialsecurity is the way to go.

Mike includes the mortality tables by year and PV's all of that back to today. You can even change mortality table under the Advanced tab.

btw: if you are married, don't forget about spousal/survivor benefits.

Posts: 1696
Joined: Fri Apr 25, 2014 6:38 pm

### Re: Social Security -- Take it at 62, 67 or 70

MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm
I have seen a lot of discussion about delaying taking Social Security until age 70. If you assume that you are going to live to be 85 or greater, the typical thing I have seen is to add up all your payments from 62 to 85 and compare that to all your payments from 70 to 85. Generally, taking it at 70 is going to be better using this approach.

However, I would respectfully suggest that this is a flawed analysis. Without giving you my exact social security numbers, I determined my likely payments starting at both 62 and 70. For each year, I discounted that payment by (1+i)^n where i is some interest rate and n is the number of years away that payment is. For simplicity, I assumed I collected all the payments on the first day of the year. Having done this is a spreadsheet, I then changed the "i" variable until I found a value where the sum of the discounted payment is virtually the same. I found, for me, that "i" value was 3.35%.

So, if I were to get a \$1,000 payment next year, the value of that to me is \$1,000 / (1.0335)^1, or \$967.59. A \$1,000 payment two years into the future would be worth \$936.22.

While everyone's will be slightly different, and you might change you life expectancy to make it to 80, 90, 95, 100 or some other value, it seems pretty clear to me that taking Social Security at age 62 is the better way to go. For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.

Also, worst case scenario, I could die on my 70th birthday. Clearly then it would be better to take my payments from 62 to 70 since the sum of those payments, discounted or not, would be better than what I would get at age 70, which would be \$0. Granted, if I do make it to 100, then I would get a greater number of larger payments. Interestingly, the "cross over" point is right about life expectancy in my family -- the mid-80's.

Wouldn't you say that considering the time value of money is critical when considering if you want one income stream starting earlier or a higher income stream starting later? As my finance professor told me -- there are only two rules about money. More is preferred to less and sooner is preferred to later. Finance is the study of the trade off between those two things. However, the way we were taught to consider two different streams is to discount the payments at some interest rate and add the sum of the discounted payments, not the sum of the "raw" payments.

Quicken Social Security Optimizer makes this error as well.

Welcome to the forum. Your analysis is very interesting. I agree with you. My plan is to take SS on the very first day that that I am eligible - 62 years old.

Good Listener
Posts: 733
Joined: Wed Dec 30, 2015 5:24 pm

### Re: Social Security -- Take it at 62, 67 or 70

I think one thing that matters is how much Social Security actually contributes to your situation. Many bogleheads don't need or care about social security so they take it late. For those who do need it, if you die at 70 and you got through to 70 and haven't received anything, well so be it. But if you live to a hundred and have had a reduce payment for all those years, that may be an issue. It's sort of like Pascal's wager.

wolf359
Posts: 2144
Joined: Sun Mar 15, 2015 8:47 am

### Re: Social Security -- Take it at 62, 67 or 70

Social Security's official name is the Old Age, Survivors, and Disability Insurance Program (OASDI). It is designed to help prevent seniors from outliving their income and keeping them out of poverty.

It is not an investment. It is longevity insurance.

If you claim later and don't make it to breakeven, you will not have any regrets about claiming later. You will be dead. On the other hand, your spouse will be reduced to the higher of your two Social Security checks. Your claiming later still has a benefit, because SHE will be better off even if you had passed early.

If you claim early and live way past breakeven, you may have regrets if you run out of money and are reduced to living off of Social Security. When you pass, your surviving spouse will have to live on a greatly reduced SS check.

If your assets are high enough that you never run out of money, then it doesn't matter. But if it doesn't matter, you should probably maximize, just in case. Insurance that you have but didn't use isn't wasted -- it's peace of mind. (Especially because you already "paid" for it by paying into the system.)

Did you cancel your family's health insurance because you'll get a better return on the premiums if you pay for routine care out of pocket? Insurance isn't about return, it's about avoiding catastrophe. In the case of health insurance, it's cheaper to pay for routine care out of pocket, but an unexpected car crash or cancer could wipe you out.

In the case of Social Security, the risk you are insuring against is longevity, or outliving your income.

If you plan to wait, you always have the option to change your mind if circumstances change. But once you claim, you only have a limited window to undo your decision. Waiting is more prudent.
Last edited by wolf359 on Wed Jul 31, 2019 7:28 pm, edited 2 times in total.

celia
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Location: SoCal

### Re: Social Security -- Take it at 62, 67 or 70

You're right that the "break even" point is in the mid- to late-80s. That is how it works out actuarily. For each person who dies 5 years before that, there is another person who lives 5 years past that point.

Another way to look at it is that if you collect early and invest the monthly benefit (living off other savings), you can come out ahead.

But, I think the most important consideration, if you are married, is that one of you will most likely live longer than the other person. It could be a year longer or 20 years longer. You never know. But the survivor will have a better time living on just one SS benefit if it is larger. (SS is also adjusted for cost-of-living each year.) Therefore, consider that the earner with the higher monthly benefit can start their own SS at 70 for the benefit of the survivor. The other spouse can start whenever it works out best for them.

pezblanco
Posts: 634
Joined: Thu Sep 12, 2013 8:02 pm

### Re: Social Security -- Take it at 62, 67 or 70

MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm
I have seen a lot of discussion about delaying taking Social Security until age 70. If you assume that you are going to live to be 85 or greater, the typical thing I have seen is to add up all your payments from 62 to 85 and compare that to all your payments from 70 to 85. Generally, taking it at 70 is going to be better using this approach.

However, I would respectfully suggest that this is a flawed analysis. Without giving you my exact social security numbers, I determined my likely payments starting at both 62 and 70. For each year, I discounted that payment by (1+i)^n where i is some interest rate and n is the number of years away that payment is. For simplicity, I assumed I collected all the payments on the first day of the year. Having done this is a spreadsheet, I then changed the "i" variable until I found a value where the sum of the discounted payment is virtually the same. I found, for me, that "i" value was 3.35%.

So, if I were to get a \$1,000 payment next year, the value of that to me is \$1,000 / (1.0335)^1, or \$967.59. A \$1,000 payment two years into the future would be worth \$936.22.

While everyone's will be slightly different, and you might change you life expectancy to make it to 80, 90, 95, 100 or some other value, it seems pretty clear to me that taking Social Security at age 62 is the better way to go. For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.

Also, worst case scenario, I could die on my 70th birthday. Clearly then it would be better to take my payments from 62 to 70 since the sum of those payments, discounted or not, would be better than what I would get at age 70, which would be \$0. Granted, if I do make it to 100, then I would get a greater number of larger payments. Interestingly, the "cross over" point is right about life expectancy in my family -- the mid-80's.

Wouldn't you say that considering the time value of money is critical when considering if you want one income stream starting earlier or a higher income stream starting later? As my finance professor told me -- there are only two rules about money. More is preferred to less and sooner is preferred to later. Finance is the study of the trade off between those two things. However, the way we were taught to consider two different streams is to discount the payments at some interest rate and add the sum of the discounted payments, not the sum of the "raw" payments.

Quicken Social Security Optimizer makes this error as well.

1) I'll bet that your finance professor also said that "Sure money is better than average money". I.e. Guaranteed real return from a TIPS or nominal like in a Treasury bond is better than on average return from a stochastic investment like a stock. This is especially true after retirement when you may not and don't know how if you have a long investment horizon ...

2) Perhaps you should think of the payments from SS as being in REAL dollars. They go up with inflation and so we can easily make that the base of our analysis. Your analysis then can be used but just reinterpret it .... you need your investment portfolio to beat 3.35% real return. So if inflation is 2% then you need a return of 5.35% nominal over the period of your retirement until you leave this vale of tears. Given high evaluations, I'm not sure that is a complete slam dunk.

3) Supposedly the SS payments for a single person are somewhat close to actuarily neutral. I.e. the SS administration is indifferent if you as a single recepient takes it at 62 or at 67 or at 70. (I've read that is not actually true and that with the years it is actually a little out of whack and that actually it is biased towards the greater benefit being at 70 ... ) If it were actuarily neutral, then the benefit would be to wait (if your circumstances allow it) and then view it as a free "old age insurance". If you live a greater than average life time, you will certainly benefit and if you live a less than average, it doesn't matter anyway, does it?

MathWizard
Posts: 4058
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### Re: Social Security -- Take it at 62, 67 or 70

MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm
I have seen a lot of discussion about delaying taking Social Security until age 70. If you assume that you are going to live to be 85 or greater, the typical thing I have seen is to add up all your payments from 62 to 85 and compare that to all your payments from 70 to 85. Generally, taking it at 70 is going to be better using this approach.

However, I would respectfully suggest that this is a flawed analysis. Without giving you my exact social security numbers, I determined my likely payments starting at both 62 and 70. For each year, I discounted that payment by (1+i)^n where i is some interest rate and n is the number of years away that payment is. For simplicity, I assumed I collected all the payments on the first day of the year. Having done this is a spreadsheet, I then changed the "i" variable until I found a value where the sum of the discounted payment is virtually the same. I found, for me, that "i" value was 3.35%.

So, if I were to get a \$1,000 payment next year, the value of that to me is \$1,000 / (1.0335)^1, or \$967.59. A \$1,000 payment two years into the future would be worth \$936.22.

While everyone's will be slightly different, and you might change you life expectancy to make it to 80, 90, 95, 100 or some other value, it seems pretty clear to me that taking Social Security at age 62 is the better way to go. For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.

Also, worst case scenario, I could die on my 70th birthday. Clearly then it would be better to take my payments from 62 to 70 since the sum of those payments, discounted or not, would be better than what I would get at age 70, which would be \$0. Granted, if I do make it to 100, then I would get a greater number of larger payments. Interestingly, the "cross over" point is right about life expectancy in my family -- the mid-80's.

Wouldn't you say that considering the time value of money is critical when considering if you want one income stream starting earlier or a higher income stream starting later? As my finance professor told me -- there are only two rules about money. More is preferred to less and sooner is preferred to later. Finance is the study of the trade off between those two things. However, the way we were taught to consider two different streams is to discount the payments at some interest rate and add the sum of the discounted payments, not the sum of the "raw" payments.

Quicken Social Security Optimizer makes this error as well.

You are missing several things. Let's assume you do not have so much in tax deferred that you would always need to pay tax on 85% of SS benefits.

1) For a married couple, one whose family is quite long lived, and the other not, but who earned much more.

2) Taxation of benefits, and Roth conversions before age 70

3) Taxes for surviving spouse in a progressive tax system.

Peter Foley
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### Re: Social Security -- Take it at 62, 67 or 70

One also has to think in terms of spendable income, i.e., the after tax value of the social security. If there is other taxable income as part of the equation, one's SS benefit can cause that income to be taxed at a very high marginal rate.

MP123
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### Re: Social Security -- Take it at 62, 67 or 70

MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm
For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio.
Except that you will have to take that dollar out as an RMD after 70.

So often a good strategy is to spend down some of your investment portfolio while delaying SS which has the added benefit of reducing how much you'll be required to withdraw later. As well as increasing your SS amount of course

Vanguard Fan 1367
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### Re: Social Security -- Take it at 62, 67 or 70

I like the plan of delaying till 70 to take Social Security.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."

BigJohn
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### Re: Social Security -- Take it at 62, 67 or 70

wolf359 wrote:
Wed Jul 31, 2019 7:25 pm

Social Security's official name is the Old Age, Survivors, and Disability Insurance Program (OASDI). It is designed to help prevent seniors from outliving their income and keeping them out of poverty.

It is not an investment. It is longevity insurance.

If you claim later and don't make it to breakeven, you will not have any regrets about claiming later. You will be dead. On the other hand, your spouse will be reduced to the higher of your two Social Security checks. Your claiming later still has a benefit, because SHE will be better off even if you had passed early.

If you claim early and live way past breakeven, you may have regrets if you run out of money and are reduced to living off of Social Security. When you pass, your surviving spouse will have to live on a greatly reduced SS check.

If your assets are high enough that you never run out of money, then it doesn't matter. But if it doesn't matter, you should probably maximize, just in case. Insurance that you have but didn't use isn't wasted -- it's peace of mind. (Especially because you already "paid" for it by paying into the system.)

Did you cancel your family's health insurance because you'll get a better return on the premiums if you pay for routine care out of pocket? Insurance isn't about return, it's about avoiding catastrophe. In the case of health insurance, it's cheaper to pay for routine care out of pocket, but an unexpected car crash or cancer could wipe you out.

In the case of Social Security, the risk you are insuring against is longevity, or outliving your income.

If you plan to wait, you always have the option to change your mind if circumstances change. But once you claim, you only have a limited window to undo your decision. Waiting is more prudent.
One of the best responses on this question I’ve read on this forum. You have to think of SS as insurance not an investment unless you have so little you can’t wait or so much it doesn’t matter.

heyyou
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Joined: Tue Feb 20, 2007 4:58 pm

### Re: Social Security -- Take it at 62, 67 or 70

I'm doing what suits me for my SS start date, and I hope that others get to do, whatever suits them. Steadily seeking optimal can be a rocky path.

Small Savanna
Posts: 247
Joined: Sat Feb 09, 2019 2:27 am

### Re: Social Security -- Take it at 62, 67 or 70

The OP's point about discount rate isn't wrong, and there is no absolute right answer about what discount rate you should use. The posts about longevity insurance aren't wrong either. I think the most compelling reason to delay claiming is for the spousal survivor benefit. If you're single the argument for delaying is not so compelling, and if you're the lower earner in a two-earner couple you should strongly consider filing early.

Silk McCue
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### Re: Social Security -- Take it at 62, 67 or 70

heyyou wrote:
Wed Jul 31, 2019 8:23 pm
I'm doing what suits me for my SS start date, and I hope that others get to do, whatever suits them. Steadily seeking optimal can be a rocky path.
Blindly choosing a path (as many do) can lead to falling off a financial cliff 20 years down the road. Getting an education and making an informed decision based upon your full financial circumstances is the correct path.

Some folks just don’t want to deal with thinking about it and repeatedly declare I’m taking it as soon as I can. For them I say, Good luck with that.

Cheers
Last edited by Silk McCue on Wed Jul 31, 2019 8:46 pm, edited 1 time in total.

David Jay
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Location: Michigan

### Re: Social Security -- Take it at 62, 67 or 70

Mark, you are brand new to the forum but this topic has been discussed for - literally - decades. This topic always spirals down into a debate between two camps who are operating from two different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start determines where you end up.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

basspond
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### Re: Social Security -- Take it at 62, 67 or 70

We will be taking at 62. We both have similar work history. Remember the government figures that on average the amount will be the same for whatever time you decide to take.

Silk McCue
Posts: 4512
Joined: Thu Feb 25, 2016 7:11 pm

### Re: Social Security -- Take it at 62, 67 or 70

basspond wrote:
Wed Jul 31, 2019 8:46 pm
We will be taking at 62. We both have similar work history. Remember the government figures that on average the amount will be the same for whatever time you decide to take.
The surviving spouse from age 82 to 97 won’t give a flip about average dollars. They may very well wish that one of you had waited until at least FRA if not 70 in order to have a better financial quality of life.

I hope you have done serious analysis to reach your decision to claim at 62.

Cheers

mbres60
Posts: 994
Joined: Tue Jul 03, 2007 1:47 pm

### Re: Social Security -- Take it at 62, 67 or 70

I've been waiting to take it at 70. Don't need the money now. I just looked at Mike Piper's calculator and it says to take it at 69 and 5 months. I keep changing the scenarios but the only change is to occasionally be 69 and 4 months. Anyone know why it would not be 70? I entered info and said I was single because spouse is a retired Fed subject to WEP and GPO so will never be able to collect on my record.

willthrill81
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### Re: Social Security -- Take it at 62, 67 or 70

I find it funny that when people are talking about claiming SS benefits, they portray their remaining life expectancy as being very short. But when people talk about safe withdrawal rates, they portray themselves living to age 95 or older.

After having read a lot about this issue, my conclusion is that the 'best' strategy can usually be closely approximated as follows: delay SS as long as you can, but if you really need the benefits, just claim them. This seems to balance the use of SS benefits as longevity insurance with current spending needs fairly well.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Silk McCue
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### Re: Social Security -- Take it at 62, 67 or 70

mbres60 wrote:
Wed Jul 31, 2019 8:54 pm
I've been waiting to take it at 70. Don't need the money now. I just looked at Mike Piper's calculator and it says to take it at 69 and 5 months. I keep changing the scenarios but the only change is to occasionally be 69 and 4 months. Anyone know why it would not be 70? I entered info and said I was single because spouse is a retired Fed subject to WEP and GPO so will never be able to collect on my record.
Because the complex calculations underneath the covers say that is the statistically best performing option. Change the mortality table used under advanced options to 2017 CSO non smoker super preferred and you might just get 70.

The difference between total benefits for those two dates will be a very small number by the way.

Cheers

Vanguard Fan 1367
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### Re: Social Security -- Take it at 62, 67 or 70

wolf359 wrote:
Wed Jul 31, 2019 7:25 pm

Social Security's official name is the Old Age, Survivors, and Disability Insurance Program (OASDI). It is designed to help prevent seniors from outliving their income and keeping them out of poverty.

It is not an investment. It is longevity insurance.

If you claim later and don't make it to breakeven, you will not have any regrets about claiming later. You will be dead. On the other hand, your spouse will be reduced to the higher of your two Social Security checks. Your claiming later still has a benefit, because SHE will be better off even if you had passed early.

If you claim early and live way past breakeven, you may have regrets if you run out of money and are reduced to living off of Social Security. When you pass, your surviving spouse will have to live on a greatly reduced SS check.

If your assets are high enough that you never run out of money, then it doesn't matter. But if it doesn't matter, you should probably maximize, just in case. Insurance that you have but didn't use isn't wasted -- it's peace of mind. (Especially because you already "paid" for it by paying into the system.)

Did you cancel your family's health insurance because you'll get a better return on the premiums if you pay for routine care out of pocket? Insurance isn't about return, it's about avoiding catastrophe. In the case of health insurance, it's cheaper to pay for routine care out of pocket, but an unexpected car crash or cancer could wipe you out.

In the case of Social Security, the risk you are insuring against is longevity, or outliving your income.

If you plan to wait, you always have the option to change your mind if circumstances change. But once you claim, you only have a limited window to undo your decision. Waiting is more prudent.
Great post!! Well said! Thanks for taking the time to say what I think.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."

jjface
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### Re: Social Security -- Take it at 62, 67 or 70

Since the payments are inflation linked the time value of money has already been taken into account. I think what you are really saying is that if you take SS early then your portfolio will be so much larger than if you delay and have to withdraw extra money and therefore will continue earning a rate of return on that extra amount you have saved. Unfortunately what you are proposing has risk involved if you invest in risky assets like equities. And risk brings uncertainty. You can't say well If I can earn 6% I will be better off since you may end up losing x% instead. So what is usually done is to assume it is invested in safe assets and that will make delaying seem a lot better.

At the end of the day the decision when to take social security is a gamble. You don't know when you will die. That is why it is good to think of it as longevity insurance for both you and your spouse. The biggest risk is running out of money in old age. It is a nasty risk and is something I want to minimise. If you think of it like this then it is better to delay until 70. A lot of people focus on the risk of not getting the maximum amount possible. Which is a pretty tame risk in my opinion not worth worrying about. It is also something you can't control and will only know when it is too late.

However there are many other factors that could change your mind. One point to note is that you don't need to make a firm commitment when to take it ie by all means plan to take it at say 70 but factors may change. You are free to evaluate at any point between 62 and 70 and take it. For example you can plan all you want but if you are hit with a disease at 65 you might want to take it right away and enjoy what you can of it. Or if you are 65 and the market crashes 50% you may not have the stomach to withdraw from your depressed portfolio and therefore would benefit from taking it earlier.

And if you really have a hard time deciding then 67 is a nice middle ground. You can't really go too wrong with that. You can always say I wish I took it at 70 but at least I waited until 67!

basspond
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Joined: Wed Nov 27, 2013 4:01 am

### Re: Social Security -- Take it at 62, 67 or 70

Silk McCue wrote:
Wed Jul 31, 2019 8:53 pm
basspond wrote:
Wed Jul 31, 2019 8:46 pm
We will be taking at 62. We both have similar work history. Remember the government figures that on average the amount will be the same for whatever time you decide to take.
The surviving spouse from age 82 to 97 won’t give a flip about average dollars. They may very well wish that one of you had waited until at least FRA if not 70 in order to have a better financial quality of life.

I hope you have done serious analysis to reach your decision to claim at 62.

Cheers
Thanks for your concern. Over 100% of our retirement income will be coming from our non government investments so we will be fine if we don’t squeeze the maximum amount. I have been to too many funerals where the guest of honor was under 80.

LilyFleur
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### Re: Social Security -- Take it at 62, 67 or 70

Silk McCue wrote:
Wed Jul 31, 2019 8:53 pm
basspond wrote:
Wed Jul 31, 2019 8:46 pm
We will be taking at 62. We both have similar work history. Remember the government figures that on average the amount will be the same for whatever time you decide to take.
The surviving spouse from age 82 to 97 won’t give a flip about average dollars. They may very well wish that one of you had waited until at least FRA if not 70 in order to have a better financial quality of life.

I hope you have done serious analysis to reach your decision to claim at 62.

Cheers
Lots of Bogleheads don't really need Social Security. Additionally, not all Bogleheads are married nor do they intend to ever be married. So, what does it matter when they take SS? Lots of BHs have very complicated spreadsheets calculating their tax scenarios, Roth conversions, pensions, health care costs, etc., etc. They HAVE done very serious analysis and continue to do so.

The Mike Piper calculator does not take into account any of the large number of pre-existing health conditions that may already be present--it only has smoking and a self-rated general health indicator. Besides, there is no crystal ball.

Regardless, that calculator site seems to be a clever marketing tool for Mr. Piper's books. Kudos to him!

Northern Flicker
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### Re: Social Security -- Take it at 62, 67 or 70

I have seen a lot of discussion about delaying taking Social Security until age 70. If you assume that you are going to live to be 85 or greater, the typical thing I have seen is to add up all your payments from 62 to 85 and compare that to all your payments from 70 to 85. Generally, taking it at 70 is going to be better using this approach
Suppose at age 62 you would buy an inflation-corrected lifetime income annuity (SPIA). Your SS benefit is also such an instrument, but backed by the govt instead of backed by an insurance company.

Suppose you would pay a lump sum of X number of dollars to buy the annuity, which will have a payout of Y number of dollars per month.

If delaying social security to age 70 will give you an increase in payout that is greater than the age 62 payout by more than Y dollars per month, and/or X dollars of present value will more than make up for the SS you forgo from age 62 to age 70, then delaying SS to age 70 is a cost-effective way to simulate such an annuity purchase at age 62.

COLA’d annuities are expensive. Delaying SS is a cost-effective way to simulate them. Annuities are of interest to people who do not assume they know how long they will live. If someone and their spouse (if married) don’t live a long time, the annuity or delaying SS may not be a win, but they will not be around to worry about it.

msk
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### Re: Social Security -- Take it at 62, 67 or 70

I was at one time the Head Economist/Planner for my employer, a multinational (so I knew what assumptions we made regarding Present Value discounting, rates of return, etc.) and at another time I was on the Board of Trustees of our Pension Fund, so I also knew what returns the pension fund actually made historically and the actuarial tables we used. I retired 20 years ago and I was faced with the choice: take 25% of the COLA pension as cash up front (commutation) or leave it all as monthly, 25% higher, COLA pension. It is absolutely futile to redo the calculations as to which is more beneficial to you if you are "average". The pension fund (or the SS authorities) have already done that on the basis of the most up to date, statistically valid data and forecasts available. For the average recipient. Yes, you can bother with doing all kinds of fancy calculations if you have identified in what fashion you defer from "average". E.g. I knew that our pension fund had moderated its return on investment by having a large fraction in bonds (the fund had to pay existing pensioners without fail), but if I took the 25% cash option I could put it all in stocks and realize a better return. Forecast break even, for me, was whether I survived beyond 80. 20 years later at age 75 it turned out that I had made the right choice in opting for 25% cash up front. Took the cash, placed it all on one stock that went up 300% within a couple of years and enjoyed the free ride on indexing the next 17 years. So, all such calculations are appropriate ONLY if you assess yourself as non "average". Otherwise you are just wasting effort. Toss a coin. You could be non average by having a spouse who is, e.g., 20 years younger, etc. Or both parents died before they reached 70...

SGM
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### Re: Social Security -- Take it at 62, 67 or 70

I delayed my SS until 70 for several reasons. I valued the longevity insurance and expect my spouse to be long lived. I compared delaying SS to the return on safe investments like treasuries. I also could do Roth conversions while I delayed taking SS as RMDs would have added to my tax burden for years to come and are not needed.

I am optimistic and don't think I will drop dead immediately after taking an annuity. I also plan on buying a series of single premium immediate annuities over a span of several years between 70 and 80. In the long run I think delaying SS and doing Roth conversions will allow us to leaver a larger legacy.

gjlynch17
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### Re: Social Security -- Take it at 62, 67 or 70

MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm

However, I would respectfully suggest that this is a flawed analysis. Without giving you my exact social security numbers, I determined my likely payments starting at both 62 and 70. For each year, I discounted that payment by (1+i)^n where i is some interest rate and n is the number of years away that payment is. For simplicity, I assumed I collected all the payments on the first day of the year. Having done this is a spreadsheet, I then changed the "i" variable until I found a value where the sum of the discounted payment is virtually the same. I found, for me, that "i" value was 3.35%.

So, if I were to get a \$1,000 payment next year, the value of that to me is \$1,000 / (1.0335)^1, or \$967.59. A \$1,000 payment two years into the future would be worth \$936.22.

While everyone's will be slightly different, and you might change you life expectancy to make it to 80, 90, 95, 100 or some other value, it seems pretty clear to me that taking Social Security at age 62 is the better way to go. For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.
Even setting aside the longevity insurance provides, as you indicate, social security provides a "guaranteed"* 3.35% real return. The closest comparable investment is TIPS, and 30-year TIPS are currently yielding 0.72% so social security looks very attractive compared to that. Yes, you can take equity risk but at current valuations, a 3% real return on U.S. equities is realistic or even high according to some valuation models.

https://tinyurl.com/y25fsnyf

I am in my early 50s but if I could lock in 3%+ guaranteed real yields (last seen on TIPS over ten years ago during the Great Recession), I would lock in a significant portion of my portfolio on that.

* I use the term guaranteed in quotes as I know that social security is subject to political risk but I believe it is unlikely that persons at retirement age will be affected.

alter
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### Re: Social Security -- Take it at 62, 67 or 70

Claiming at 62 and investing all of it in VOO is going to beat every other option. The ones that say otherwise are more likely to die before collecting anywhere near as much. There is a 100% chance of dying and you don't control when. The smug guy waiting to collect at 70 might get hit by a drunk driver, collect zero SS, and his last words will still be trying to convince you he did the right thing.

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### Re: Social Security -- Take it at 62, 67 or 70

MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm
For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.
It's not that simple when the capitalized value of expected future social security payments for start-at-70 versus start-at-62 is included in asset allocation. See the example in this post which shows that even with an assumed 7% annual real return on stocks, as long as one lives beyond age 82, one is better off starting SS at 70 than at 62.

JeffAL
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### Re: Social Security -- Take it at 62, 67 or 70

Reminds me of the Marshmallow Test: https://www.theatlantic.com/family/arch ... st/561779/

wolf359
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### Re: Social Security -- Take it at 62, 67 or 70

alter wrote:
Thu Aug 01, 2019 5:33 am
Claiming at 62 and investing all of it in VOO is going to beat every other option. The ones that say otherwise are more likely to die before collecting anywhere near as much. There is a 100% chance of dying and you don't control when. The smug guy waiting to collect at 70 might get hit by a drunk driver, collect zero SS, and his last words will still be trying to convince you he did the right thing.
Someone who invests all of their social security check doesn't need it for support and basic living expenses. Should life circumstances change, and that person has to use it for support and basic living expenses, then their reduced check may not meet their needs. VOO in a taxable account is not protected against bankruptcy, civil actions, market disruption, or outright theft of assets. Social Security is.

Most people who take it at 62 are taking it because they need it. They actually spend all of it. The average person should delay taking it as long as they can, because they will be using that check for living expenses.

Only 2-4% of the population actually claims at 70.

One's decision to wait or collect early does not affect their life expectancy, their propensity to get hit by drunk drivers, or their smugness. In fact, the person who looks smug is usually the one holding the check or cash. Please state rational arguments, not attempt to belittle people with the opposite view.

Silk McCue
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### Re: Social Security -- Take it at 62, 67 or 70

alter wrote:
Thu Aug 01, 2019 5:33 am
Claiming at 62 and investing all of it in VOO is going to beat every other option. The ones that say otherwise are more likely to die before collecting anywhere near as much. There is a 100% chance of dying and you don't control when. The smug guy waiting to collect at 70 might get hit by a drunk driver, collect zero SS, and his last words will still be trying to convince you he did the right thing.
There is no evidence to back up this take early and invest approach. Plenty of analysis exists showing its fatal risks.

Planning to die at 70 is a losers game. Planning for the possibility of living into your 90s requires the 62 year old to think about the consequences a little more. Make the 95 year old you proud.

Cheers

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### Re: Social Security -- Take it at 62, 67 or 70

This decision is far more complex.

If you take SS before your FRA, there is the potential to be taxed on some of the payments.

How will taking SS at 62 affect payments to your spouse?

Like many, from way back, I assumed that the SS pyramid scheme would run out of money. Well, if we think of that as just the trust fund, well, I was right and it's soon to be depleted. But I didn't take into consideration the continued contributions coming in, so many of us will indeed be able to collect money from our kids' contributions, although at lower rates. So the thoughts of SS payments going to zero, assuming nothing changes, won't happen. I would absolutely put in place a reduction in payments in 2034 to understand the break even point for taking SS at various ages. To be even more accurate, forget about inflation and instead focus on how much tax is going to reduce any payments before FRA.
Bogle: Smart Beta is stupid

smitcat
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### Re: Social Security -- Take it at 62, 67 or 70

MathWizard wrote:
Wed Jul 31, 2019 7:34 pm
MarkRLV wrote:
Wed Jul 31, 2019 5:12 pm
I have seen a lot of discussion about delaying taking Social Security until age 70. If you assume that you are going to live to be 85 or greater, the typical thing I have seen is to add up all your payments from 62 to 85 and compare that to all your payments from 70 to 85. Generally, taking it at 70 is going to be better using this approach.

However, I would respectfully suggest that this is a flawed analysis. Without giving you my exact social security numbers, I determined my likely payments starting at both 62 and 70. For each year, I discounted that payment by (1+i)^n where i is some interest rate and n is the number of years away that payment is. For simplicity, I assumed I collected all the payments on the first day of the year. Having done this is a spreadsheet, I then changed the "i" variable until I found a value where the sum of the discounted payment is virtually the same. I found, for me, that "i" value was 3.35%.

So, if I were to get a \$1,000 payment next year, the value of that to me is \$1,000 / (1.0335)^1, or \$967.59. A \$1,000 payment two years into the future would be worth \$936.22.

While everyone's will be slightly different, and you might change you life expectancy to make it to 80, 90, 95, 100 or some other value, it seems pretty clear to me that taking Social Security at age 62 is the better way to go. For each social security dollar I collect, that is one dollar I do not have to take out of my investment portfolio. If the average return on the market is anything above 3.35%, that dollar will continue to grow over the following 8 years (from age 62 to age 70). If I make a modest 6% in the market, that is way better than the extra 3.35% (effective rate) that I am going to get from Social Security.

Also, worst case scenario, I could die on my 70th birthday. Clearly then it would be better to take my payments from 62 to 70 since the sum of those payments, discounted or not, would be better than what I would get at age 70, which would be \$0. Granted, if I do make it to 100, then I would get a greater number of larger payments. Interestingly, the "cross over" point is right about life expectancy in my family -- the mid-80's.

Wouldn't you say that considering the time value of money is critical when considering if you want one income stream starting earlier or a higher income stream starting later? As my finance professor told me -- there are only two rules about money. More is preferred to less and sooner is preferred to later. Finance is the study of the trade off between those two things. However, the way we were taught to consider two different streams is to discount the payments at some interest rate and add the sum of the discounted payments, not the sum of the "raw" payments.

Quicken Social Security Optimizer makes this error as well.

You are missing several things. Let's assume you do not have so much in tax deferred that you would always need to pay tax on 85% of SS benefits.

1) For a married couple, one whose family is quite long lived, and the other not, but who earned much more.

2) Taxation of benefits, and Roth conversions before age 70

3) Taxes for surviving spouse in a progressive tax system.
Very good summary , we found the same to be true.

smitcat
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### Re: Social Security -- Take it at 62, 67 or 70

willthrill81 wrote:
Wed Jul 31, 2019 8:56 pm
I find it funny that when people are talking about claiming SS benefits, they portray their remaining life expectancy as being very short. But when people talk about safe withdrawal rates, they portray themselves living to age 95 or older.

After having read a lot about this issue, my conclusion is that the 'best' strategy can usually be closely approximated as follows: delay SS as long as you can, but if you really need the benefits, just claim them. This seems to balance the use of SS benefits as longevity insurance with current spending needs fairly well.
After reading hundreds of these posts and many different situations I think your post captures the sunject perfectly.

Dandy
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### Re: Social Security -- Take it at 62, 67 or 70

Retirement is tricky. People often underestimate the differences from the accumulation years. Usually, there is a rapid loss of the ability to earn. And now you are withdrawing assets rather than investing contributions (or company matches). Retirement can last 30 years or more -- almost as long as a career.

You can do a lot of math to make the decision. My advice is if you can have a decent standard of living without taking Social Security early -- then wait -- especially if you are married and are the high lifetime earner. The reward for waiting is a significantly higher payment that is COLA protected and will last a lifetime for you or your spouse. It will also reduce the dollars needed from your investments from age 70 on. That could be 15 or 20 years -- or more.

If, during the wait to collect at age 70, you find it difficult to maintain an acceptable standard of living without depleting your portfolio excessively, then you can always collect SS at an age between 62 and 70. You will still get some benefit.

Life balance is important. You don't want to be living an unnecessarily austere life waiting to collect at age 70. The years before age 70 could be your best time. So, like most things there is a balance between risk and reward. It isn't always about the math.

GrowthSeeker
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### Re: Social Security -- Take it at 62, 67 or 70

wolf359 wrote:
Wed Jul 31, 2019 7:25 pm
On the other hand, your spouse will be reduced to the higher of your two Social Security checks. Your claiming later still has a benefit, because SHE will be better off even if you had passed early.
I did not know that. Thanks, I learned something today.

One scenario that perhaps invalidates the OP's analysis would be if the person taking SS at age 62 needed the money so badly that they spent it and it never became invested. OTOH, maybe this doesn't change the analysis itself, it just means these folks are investing at zero % which puts them in the group getting less than a 3+% return.
This is likely not the case for most Bogleheads.
Just because you're paranoid doesn't mean they're NOT out to get you.

3-20Characters
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### Re: Social Security -- Take it at 62, 67 or 70

OP, 62 may work for you but you’ve brought your analysis to the forum as a challenge to the “general advice” to delay SS*. In that respect, your argument fails for the many reasons pointed out in detail by others. Even without any counter argument, a case for taking SS at 62 that ignores, taxes on RMDs, Roth conversions, longevity benefits, and spousal survival benefits is not a compelling argument to me or to many others.

Edit: As in delay past 62 but necessarily until 70.
Last edited by 3-20Characters on Thu Aug 01, 2019 8:33 am, edited 1 time in total.

midareff
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### Re: Social Security -- Take it at 62, 67 or 70

Frankly, I think without knowing how long you will live an optimal SS question is impossible to answer. Personally, I started at 65 as I didn't want to sell down assets/liquidity/investments at that point in time. The result of that was being fully invested in Mr. Market for the last 6.5 years which made more money than the difference in age 65 to age 70 SS would ever make, but that's just luck.

willthrill81
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### Re: Social Security -- Take it at 62, 67 or 70

smitcat wrote:
Thu Aug 01, 2019 7:37 am
willthrill81 wrote:
Wed Jul 31, 2019 8:56 pm
I find it funny that when people are talking about claiming SS benefits, they portray their remaining life expectancy as being very short. But when people talk about safe withdrawal rates, they portray themselves living to age 95 or older.

After having read a lot about this issue, my conclusion is that the 'best' strategy can usually be closely approximated as follows: delay SS as long as you can, but if you really need the benefits, just claim them. This seems to balance the use of SS benefits as longevity insurance with current spending needs fairly well.
After reading hundreds of these posts and many different situations I think your post captures the sunject perfectly.
Thanks!
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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### Re: Social Security -- Take it at 62, 67 or 70

midareff wrote:
Thu Aug 01, 2019 8:28 am
Frankly, I think without knowing how long you will live an optimal SS question is impossible to answer. Personally, I started at 65 as I didn't want to sell down assets/liquidity/investments at that point in time. The result of that was being fully invested in Mr. Market for the last 6.5 years which made more money than the difference in age 65 to age 70 SS would ever make, but that's just luck.
Very good point. Thanks for sharing.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

alter
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### Re: Social Security -- Take it at 62, 67 or 70

wolf359 wrote:
Thu Aug 01, 2019 7:12 am
alter wrote:
Thu Aug 01, 2019 5:33 am
Claiming at 62 and investing all of it in VOO is going to beat every other option. The ones that say otherwise are more likely to die before collecting anywhere near as much. There is a 100% chance of dying and you don't control when. The smug guy waiting to collect at 70 might get hit by a drunk driver, collect zero SS, and his last words will still be trying to convince you he did the right thing.
Someone who invests all of their social security check doesn't need it for support and basic living expenses. Should life circumstances change, and that person has to use it for support and basic living expenses, then their reduced check may not meet their needs. VOO in a taxable account is not protected against bankruptcy, civil actions, market disruption, or outright theft of assets. Social Security is.

Most people who take it at 62 are taking it because they need it. They actually spend all of it. The average person should delay taking it as long as they can, because they will be using that check for living expenses.

Only 2-4% of the population actually claims at 70.

One's decision to wait or collect early does not affect their life expectancy, their propensity to get hit by drunk drivers, or their smugness. In fact, the person who looks smug is usually the one holding the check or cash. Please state rational arguments, not attempt to belittle people with the opposite view.
That was rational. Taking at 62 and investing all of it in VOO is going to beat every other option. It will also build up a small nest egg so when you die you'll be able to pass that onto family vs someone who just started collecting at 70, they pass zero on.

longinvest
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### Re: Social Security -- Take it at 62, 67 or 70

David Jay wrote:
Wed Jul 31, 2019 8:43 pm
Mark, you are brand new to the forum but this topic has been discussed for - literally - decades. This topic always spirals down into a debate between two camps who are operating from two different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start determines where you end up.
Here's a classic post associated to View B, but with an interesting twist which is to spend more at 62: Delay Social Security to age 70 and Spend more money at 62.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

Silk McCue
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### Re: Social Security -- Take it at 62, 67 or 70

alter wrote:
Thu Aug 01, 2019 9:02 am
That was rational. Taking at 62 and investing all of it in VOO is going to beat every other option. It will also build up a small nest egg so when you die you'll be able to pass that onto family vs someone who just started collecting at 70, they pass zero on.
Repeating this claim does not make it true. Investing in VOO (or anything) cannot reliably or predictably beat every other option. Claim early and investing is a proven risky & faulty strategy.

Cheers

Quirkz
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### Re: Social Security -- Take it at 62, 67 or 70

basspond wrote:
Wed Jul 31, 2019 8:46 pm
We will be taking at 62. We both have similar work history. Remember the government figures that on average the amount will be the same for whatever time you decide to take.
Sure, but the government is working by averages. The government doesn't know your personal situation.

For me, I have two living grandparents aged 94 and 102, and another that died aged 93. They also don't know that my wife is seven years younger than me and might draw down an extra decade at maximum dollars, even if I'm gone. In short, it's pretty clear waiting to 70 is the best bet for me.

alter
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### Re: Social Security -- Take it at 62, 67 or 70

Silk McCue wrote:
Thu Aug 01, 2019 9:11 am
alter wrote:
Thu Aug 01, 2019 9:02 am
That was rational. Taking at 62 and investing all of it in VOO is going to beat every other option. It will also build up a small nest egg so when you die you'll be able to pass that onto family vs someone who just started collecting at 70, they pass zero on.
Repeating this claim does not make it true. Investing in VOO (or anything) cannot reliably or predictably beat every other option. Claim early and investing is a proven risky & faulty strategy.

Cheers
Claiming you will live to x years is not predictable or reliable. VOO has a much more predictable and reliable track record of returns than you living to x more years.

smitcat
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### Re: Social Security -- Take it at 62, 67 or 70

alter wrote:
Thu Aug 01, 2019 9:52 am
Silk McCue wrote:
Thu Aug 01, 2019 9:11 am
alter wrote:
Thu Aug 01, 2019 9:02 am
That was rational. Taking at 62 and investing all of it in VOO is going to beat every other option. It will also build up a small nest egg so when you die you'll be able to pass that onto family vs someone who just started collecting at 70, they pass zero on.
Repeating this claim does not make it true. Investing in VOO (or anything) cannot reliably or predictably beat every other option. Claim early and investing is a proven risky & faulty strategy.

Cheers
Claiming you will live to x years is not predictable or reliable. VOO has a much more predictable and reliable track record of returns than you living to x more years.
In our case....
Claiming at 62 prevents us from effectively doing Roth conversions
Claiming at 62 will not leave one spouse with a larger SS payment
Claiming at 62 causes more tax issues later on
Claiming at 62 will leave us with less 'spendable' funds after taxes
YMMV