Social security. Take it at 62 [Motley Fool article]

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Leesbro63
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

tj wrote: Thu Oct 15, 2020 8:40 pm
ObliviousInvestor wrote: Thu Oct 15, 2020 6:52 pm
fsrph wrote: Thu Oct 15, 2020 6:50 pm
Johm221122 wrote: Thu Oct 15, 2020 6:20 am
Leesbro63 wrote: Thu Oct 15, 2020 6:12 am What happens to people collecting SS Disability? When does that convert to retirement SS? Must they accept the low age 62 amount? Can they keep getting the disability amount until collecting the big age 70 retirement amount?
When you reach full retirement age you'll be automatically be converted. Not 70
Say you're receiving SSDI and reach full retirement age. Can you then defer your regular SS till 70 years old to capture the 8% per year gain in benefits?

Francis
Yes. When you reach FRA your disability benefit is converted to a retirement benefit. At that point, it's just a normal retirement benefit, and you have the option to voluntarily suspend it, as would anybody age FRA-70 who is receiving a retirement benefit.
Anybody? If you take it at 62, you can then suspend it from 67 to 70 and benefit from that?
I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
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gr7070
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Re: Social security. Take it at 62 [Motley Fool article]

Post by gr7070 »

willthrill81 wrote: Fri Oct 16, 2020 9:52 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am
willthrill81 wrote: Fri Oct 16, 2020 9:38 am
gr7070 wrote: Fri Oct 16, 2020 9:34 am
Leesbro63 wrote: Fri Oct 16, 2020 8:38 am

This makes no sense to me. Why would you take it at 62 if you DON'T need the money (assuming good health)? Is that a typo?
Because the biggest benefit of delaying (for someone who doesn't need the money now) is the reduced risk of running out of money. If one has enough money that that risk (running out) is near zero, which for many Boglehead's that is the case, then that benefit of delaying no longer exists.

If the biggest benefit of delaying no longer exists then don't delay. And taking early removes the risk of delaying.

So the subgroup of people who don't need the money now or later (read Boglehead's) most risk is mitigated by claiming early.
How is there ever less risk by claiming early? What's the 'risk of delaying'?
One gets none or less. Which also results in others getting none or less.
Would you please elaborate?
By delaying, if one dies before they claim they get none, and if they died before the break even they received less.
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willthrill81
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Re: Social security. Take it at 62 [Motley Fool article]

Post by willthrill81 »

gr7070 wrote: Fri Oct 16, 2020 9:57 am
willthrill81 wrote: Fri Oct 16, 2020 9:52 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am
willthrill81 wrote: Fri Oct 16, 2020 9:38 am
gr7070 wrote: Fri Oct 16, 2020 9:34 am

Because the biggest benefit of delaying (for someone who doesn't need the money now) is the reduced risk of running out of money. If one has enough money that that risk (running out) is near zero, which for many Boglehead's that is the case, then that benefit of delaying no longer exists.

If the biggest benefit of delaying no longer exists then don't delay. And taking early removes the risk of delaying.

So the subgroup of people who don't need the money now or later (read Boglehead's) most risk is mitigated by claiming early.
How is there ever less risk by claiming early? What's the 'risk of delaying'?
One gets none or less. Which also results in others getting none or less.
Would you please elaborate?
By delaying, if one dies before they claim they get none, and if they died before the break even they received less.
I see. Thanks.

That approach would only be consistent with the first goal I pointed out here.
“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 [Motley Fool article]

Post by smitcat »

thinker wrote: Fri Oct 16, 2020 9:32 am
smitcat wrote: Fri Oct 16, 2020 9:18 am
thinker wrote: Fri Oct 16, 2020 9:10 am
Leesbro63 wrote: Fri Oct 16, 2020 8:38 am This makes no sense to me. Why would you take it at 62 if you DON'T need the money (assuming good health)? Is that a typo?
Investing what you don't need over the years is likely to exceed the result of waiting to take a larger monthly payment at a later date. For example: https://esimoney.com/a-case-for-claimin ... ity-early/
Unless you have larger Roth conversions that can be done while you are delaying. The goal should be to optimize the total money you can spend and not the total that would represent pre tax.
Could you expand on that? That is, why would the tax impact be greater with SS than with a Roth conversion? Thanks.
When you delay SS you ofen have much larger ability to convert your TIRa to a Roth - there are a number of calculators which can help with these comparisons.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by wander »

gr7070 wrote: Fri Oct 16, 2020 9:40 am One gets none or less. Which also results in others getting none or less.
+1. My distant cousin died a few years ago at 67 after collecting SS checks for one year. The cancer came out of nowhere, and he died 2-3 months after it was detected.
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willthrill81
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Re: Social security. Take it at 62 [Motley Fool article]

Post by willthrill81 »

wander wrote: Fri Oct 16, 2020 10:02 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am One gets none or less. Which also results in others getting none or less.
+1. My distant cousin died a few years ago at 67 after collecting SS checks for one year. The cancer came out of nowhere, and he died 2-3 months after it was detected.
Pick your poison: get what you can while you can or run the risk of outliving your money.
“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 [Motley Fool article]

Post by ObliviousInvestor »

Leesbro63 wrote: Fri Oct 16, 2020 9:55 am I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
Yes to both. Not sure how to state that any more clearly.

This is literally the point of voluntary suspension by the way -- for somebody who filed early to then suspend benefits at FRA in order to get DRCs. (There will still be a reduction for filing early, but now there will be DRCs increasing the monthly benefit amount.)

For somebody who has reached FRA and hasn't filed yet, there's no need for voluntary suspension. They just get DRCs automatically because they haven't filed yet.

Edited to add: If you're interested in reading more about voluntary suspension, see here:
Conditions for voluntary suspension:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409110
Voluntary suspension reinstatement:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409130
Last edited by ObliviousInvestor on Fri Oct 16, 2020 10:11 am, edited 1 time in total.
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smitcat
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Re: Social security. Take it at 62 [Motley Fool article]

Post by smitcat »

gr7070 wrote: Fri Oct 16, 2020 9:57 am
willthrill81 wrote: Fri Oct 16, 2020 9:52 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am
willthrill81 wrote: Fri Oct 16, 2020 9:38 am
gr7070 wrote: Fri Oct 16, 2020 9:34 am

Because the biggest benefit of delaying (for someone who doesn't need the money now) is the reduced risk of running out of money. If one has enough money that that risk (running out) is near zero, which for many Boglehead's that is the case, then that benefit of delaying no longer exists.

If the biggest benefit of delaying no longer exists then don't delay. And taking early removes the risk of delaying.

So the subgroup of people who don't need the money now or later (read Boglehead's) most risk is mitigated by claiming early.
How is there ever less risk by claiming early? What's the 'risk of delaying'?
One gets none or less. Which also results in others getting none or less.
Would you please elaborate?
By delaying, if one dies before they claim they get none, and if they died before the break even they received less.
Please make sure you have evaluated what amount of funds you can actually spend/leave after potential Roth conversions rather than just the funds that are in the account.
smitcat
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Re: Social security. Take it at 62 [Motley Fool article]

Post by smitcat »

wander wrote: Fri Oct 16, 2020 10:02 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am One gets none or less. Which also results in others getting none or less.
+1. My distant cousin died a few years ago at 67 after collecting SS checks for one year. The cancer came out of nowhere, and he died 2-3 months after it was detected.
By knowing the age of your death (and your spouse) it is much easier to figure out the best method - for the rest of us I recommend looking at various scenarios and picking from the results you get.
Leesbro63
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

ObliviousInvestor wrote: Fri Oct 16, 2020 10:06 am
Leesbro63 wrote: Fri Oct 16, 2020 9:55 am I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
Yes to both. Not sure how to state that any more clearly.

This is literally the point of voluntary suspension by the way -- for somebody who filed early to then suspend benefits at FRA in order to get DRCs. (There will still be a reduction for filing early, but now there will be DRCs increasing the monthly benefit amount.)

For somebody who has reached FRA and hasn't filed yet, there's no need for voluntary suspension. They just get DRCs automatically because they haven't filed yet.
Thank you for this "news to me" information. For the benefit of others, I try to avoid (or I'll define) abbreviations here and looked up DRC...it's "Delayed Retirement Credit". That term is news to me too!

Thank you, ObliviousInvestor.
Last edited by Leesbro63 on Fri Oct 16, 2020 10:51 am, edited 1 time in total.
tj
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Re: Social security. Take it at 62 [Motley Fool article]

Post by tj »

ObliviousInvestor wrote: Fri Oct 16, 2020 10:06 am
Leesbro63 wrote: Fri Oct 16, 2020 9:55 am I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
Yes to both. Not sure how to state that any more clearly.

This is literally the point of voluntary suspension by the way -- for somebody who filed early to then suspend benefits at FRA in order to get DRCs. (There will still be a reduction for filing early, but now there will be DRCs increasing the monthly benefit amount.)

For somebody who has reached FRA and hasn't filed yet, there's no need for voluntary suspension. They just get DRCs automatically because they haven't filed yet.

Edited to add: If you're interested in reading more about voluntary suspension, see here:
Conditions for voluntary suspension:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409110
Voluntary suspension reinstatement:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409130
I find this interesting. How come nobody ever models this scenario? If you claim at 62, suspend at 67 and restart at 70, would the monthly benefit amount be higher than if you just delayed to 65? If so, you'd get use of the funds in your early 60s at the expense of the late 60's, this seems like it could be useful to a lot of people.
Leesbro63
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

tj wrote: Fri Oct 16, 2020 10:34 am
ObliviousInvestor wrote: Fri Oct 16, 2020 10:06 am
Leesbro63 wrote: Fri Oct 16, 2020 9:55 am I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
Yes to both. Not sure how to state that any more clearly.

This is literally the point of voluntary suspension by the way -- for somebody who filed early to then suspend benefits at FRA in order to get DRCs. (There will still be a reduction for filing early, but now there will be DRCs increasing the monthly benefit amount.)

For somebody who has reached FRA and hasn't filed yet, there's no need for voluntary suspension. They just get DRCs automatically because they haven't filed yet.

Edited to add: If you're interested in reading more about voluntary suspension, see here:
Conditions for voluntary suspension:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409110
Voluntary suspension reinstatement:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409130
I find this interesting. How come nobody ever models this scenario? If you claim at 62, suspend at 67 and restart at 70, would the monthly benefit amount be higher than if you just delayed to 65? If so, you'd get use of the funds in your early 60s at the expense of the late 60's, this seems like it could be useful to a lot of people.
Agreed, I've never seen this modeled or discussed. And with all due respect to ObliviousInvestor, something smells just not right here.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by ObliviousInvestor »

tj wrote: Fri Oct 16, 2020 10:34 am
ObliviousInvestor wrote: Fri Oct 16, 2020 10:06 am
Leesbro63 wrote: Fri Oct 16, 2020 9:55 am I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
Yes to both. Not sure how to state that any more clearly.

This is literally the point of voluntary suspension by the way -- for somebody who filed early to then suspend benefits at FRA in order to get DRCs. (There will still be a reduction for filing early, but now there will be DRCs increasing the monthly benefit amount.)

For somebody who has reached FRA and hasn't filed yet, there's no need for voluntary suspension. They just get DRCs automatically because they haven't filed yet.

Edited to add: If you're interested in reading more about voluntary suspension, see here:
Conditions for voluntary suspension:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409110
Voluntary suspension reinstatement:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409130
I find this interesting. How come nobody ever models this scenario? If you claim at 62, suspend at 67 and restart at 70, would the monthly benefit amount be higher than if you just delayed to 65? If so, you'd get use of the funds in your early 60s at the expense of the late 60's, this seems like it could be useful to a lot of people.
I can't speak for anybody else, but the calculator that I wrote does model such scenarios when relevant.

As far as why people don't recommend it very often, it's because it's a pretty bad strategy. Let's try an example using the ages you provided.

FRA = 67
PIA = $1,000

If the person files at 65, their benefit is 86.6666% of their PIA, rounded down, or $866 per month.

If the person files at 62, their benefit is 70% of their PIA, or $700 per month. If they then suspend from 67-70, they'd get 36 DRCs, so their benefit as of age 70 would be 124% of their initial benefit. That is, 700 x 1.24 = $868.

Those two monthly benefit amounts ($866 vs $868) are quite similar. And in the "file at 62 but then suspend from 67-70" scenario, the person does indeed get some money sooner. Great!

But there's a point we've left out.

The 60 months of benefits they collected (from 62 to 67) were at $700, for a total of $42,000 by age 70. If they had waited until 65, the 60 months would be at $866, for a total of $51,960 by age 70.

Point being, just filing at 65 (rather than at 62 and later suspending) gives the person almost $10,000 more by age 70. And the monthly benefits are almost identical after age 70.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by gr7070 »

willthrill81 wrote: Fri Oct 16, 2020 9:59 am
gr7070 wrote: Fri Oct 16, 2020 9:57 am
willthrill81 wrote: Fri Oct 16, 2020 9:52 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am
willthrill81 wrote: Fri Oct 16, 2020 9:38 am

How is there ever less risk by claiming early? What's the 'risk of delaying'?
One gets none or less. Which also results in others getting none or less.
Would you please elaborate?
By delaying, if one dies before they claim they get none, and if they died before the break even they received less.
I see. Thanks.

That approach would only be consistent with the first goal I pointed out here.
And the second.
willthrill81 wrote: Fri Oct 16, 2020 9:37 am The three common but disparate goals I've seen with regard to when to start SS benefits are these: (1) take benefits as early as possible to 'get what you can while you still can', (2) take benefits as early as possible and invest them in hopes to achieve a better return than delaying, and (3) delay taking benefits for as long as possible in order to maximize one's 'longevity insurance'.

The best strategy depends on one's goal.
Leesbro63
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

ObliviousInvestor wrote: Fri Oct 16, 2020 11:02 am I can't speak for anybody else, but the calculator that I wrote does model such scenarios when relevant.

As far as why people don't recommend it very often, it's because it's a pretty bad strategy. Let's try an example using the ages you provided.

FRA = 67
PIA = $1,000

If the person files at 65, their benefit is 86.6666% of their PIA, rounded down, or $866 per month.

If the person files at 62, their benefit is 70% of their PIA, or $700 per month. If they then suspend from 67-70, they'd get 36 DRCs, so their benefit as of age 70 would be 124% of their initial benefit. That is, 700 x 1.24 = $868.

Those two monthly benefit amounts ($866 vs $868) are quite similar. And in the "file at 62 but then suspend from 67-70" scenario, the person does indeed get some money sooner. Great!

But there's a point we've left out.

The 60 months of benefits they collected (from 62 to 67) were at $700, for a total of $42,000 by age 70. If they had waited until 65, the 60 months would be at $866, for a total of $51,960 by age 70.

Point being, just filing at 65 (rather than at 62 and later suspending) gives the person almost $10,000 more by age 70. And the monthly benefits are almost identical after age 70.
For someone in fair or poor health, can't you almost have your cake and eat it too by taking at 62. If you die, you had that money while you were alive. And if you live to 65 and appear that you'll make it to 70, you can suspend and get the higher longevity insurance value at age 70. Right?
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Re: Social security. Take it at 62 [Motley Fool article]

Post by tj »

ObliviousInvestor wrote: Fri Oct 16, 2020 11:02 am
tj wrote: Fri Oct 16, 2020 10:34 am
ObliviousInvestor wrote: Fri Oct 16, 2020 10:06 am
Leesbro63 wrote: Fri Oct 16, 2020 9:55 am I, too, would like more clarity/confirmation from ObliviousInvestor or someone else on two points here:

1. Can someone receiving Social Security Disability (SSD) through Full Retirement Age (FRA) suspend at FRA and end up getting the higher benefit at age 70? Really? This sound possible, but I've never heard this before.

2. Can "ANYONE" (as stated in the quote above) receiving Social Security, specifically someone who claimed it as a retirement benefit at age 62, suspend at FRA, then get the bigger benefit at age 70. This just sounds totally not correct.
Yes to both. Not sure how to state that any more clearly.

This is literally the point of voluntary suspension by the way -- for somebody who filed early to then suspend benefits at FRA in order to get DRCs. (There will still be a reduction for filing early, but now there will be DRCs increasing the monthly benefit amount.)

For somebody who has reached FRA and hasn't filed yet, there's no need for voluntary suspension. They just get DRCs automatically because they haven't filed yet.

Edited to add: If you're interested in reading more about voluntary suspension, see here:
Conditions for voluntary suspension:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409110
Voluntary suspension reinstatement:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0202409130
I find this interesting. How come nobody ever models this scenario? If you claim at 62, suspend at 67 and restart at 70, would the monthly benefit amount be higher than if you just delayed to 65? If so, you'd get use of the funds in your early 60s at the expense of the late 60's, this seems like it could be useful to a lot of people.
I can't speak for anybody else, but the calculator that I wrote does model such scenarios when relevant.

As far as why people don't recommend it very often, it's because it's a pretty bad strategy. Let's try an example using the ages you provided.

FRA = 67
PIA = $1,000

If the person files at 65, their benefit is 86.6666% of their PIA, rounded down, or $866 per month.

If the person files at 62, their benefit is 70% of their PIA, or $700 per month. If they then suspend from 67-70, they'd get 36 DRCs, so their benefit as of age 70 would be 124% of their initial benefit. That is, 700 x 1.24 = $868.

Those two monthly benefit amounts ($866 vs $868) are quite similar. And in the "file at 62 but then suspend from 67-70" scenario, the person does indeed get some money sooner. Great!

But there's a point we've left out.

The 60 months of benefits they collected (from 62 to 67) were at $700, for a total of $42,000 by age 70. If they had waited until 65, the 60 months would be at $866, for a total of $51,960 by age 70.

Point being, just filing at 65 (rather than at 62 and later suspending) gives the person almost $10,000 more by age 70. And the monthly benefits are almost identical after age 70.
That makes sense! Thanks for spelling it out.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by ObliviousInvestor »

Leesbro63 wrote: Fri Oct 16, 2020 11:04 am
ObliviousInvestor wrote: Fri Oct 16, 2020 11:02 am I can't speak for anybody else, but the calculator that I wrote does model such scenarios when relevant.

As far as why people don't recommend it very often, it's because it's a pretty bad strategy. Let's try an example using the ages you provided.

FRA = 67
PIA = $1,000

If the person files at 65, their benefit is 86.6666% of their PIA, rounded down, or $866 per month.

If the person files at 62, their benefit is 70% of their PIA, or $700 per month. If they then suspend from 67-70, they'd get 36 DRCs, so their benefit as of age 70 would be 124% of their initial benefit. That is, 700 x 1.24 = $868.

Those two monthly benefit amounts ($866 vs $868) are quite similar. And in the "file at 62 but then suspend from 67-70" scenario, the person does indeed get some money sooner. Great!

But there's a point we've left out.

The 60 months of benefits they collected (from 62 to 67) were at $700, for a total of $42,000 by age 70. If they had waited until 65, the 60 months would be at $866, for a total of $51,960 by age 70.

Point being, just filing at 65 (rather than at 62 and later suspending) gives the person almost $10,000 more by age 70. And the monthly benefits are almost identical after age 70.
For someone in fair or poor health, can't you almost have your cake and eat it too by taking at 62. If you die, you had that money while you were alive. And if you live to 65 and appear that you'll make it to 70, you can suspend and get the higher longevity insurance value at age 70. Right?
Yes, for a person in poor health it often makes sense to file at 62 (obvious exception being the higher earner in a married couple). And if the person then ends up in better health later, yes, suspending from FRA until 70 could make sense.

But barring a change in inputs along the way (i.e., a change in health), this strategy (filing early with the intention of suspending later) doesn't make sense, because the price paid for that early access to money is so high.
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Leesbro63
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

ObliviousInvestor wrote: Fri Oct 16, 2020 11:09 am
Leesbro63 wrote: Fri Oct 16, 2020 11:04 am
ObliviousInvestor wrote: Fri Oct 16, 2020 11:02 am I can't speak for anybody else, but the calculator that I wrote does model such scenarios when relevant.

As far as why people don't recommend it very often, it's because it's a pretty bad strategy. Let's try an example using the ages you provided.

FRA = 67
PIA = $1,000

If the person files at 65, their benefit is 86.6666% of their PIA, rounded down, or $866 per month.

If the person files at 62, their benefit is 70% of their PIA, or $700 per month. If they then suspend from 67-70, they'd get 36 DRCs, so their benefit as of age 70 would be 124% of their initial benefit. That is, 700 x 1.24 = $868.

Those two monthly benefit amounts ($866 vs $868) are quite similar. And in the "file at 62 but then suspend from 67-70" scenario, the person does indeed get some money sooner. Great!

But there's a point we've left out.

The 60 months of benefits they collected (from 62 to 67) were at $700, for a total of $42,000 by age 70. If they had waited until 65, the 60 months would be at $866, for a total of $51,960 by age 70.

Point being, just filing at 65 (rather than at 62 and later suspending) gives the person almost $10,000 more by age 70. And the monthly benefits are almost identical after age 70.
For someone in fair or poor health, can't you almost have your cake and eat it too by taking at 62. If you die, you had that money while you were alive. And if you live to 65 and appear that you'll make it to 70, you can suspend and get the higher longevity insurance value at age 70. Right?
Yes, for a person in poor health it often makes sense to file at 62 (obvious exception being the higher earner in a married couple). And if the person then ends up in better health later, yes, suspending from FRA until 70 could make sense.

But barring a change in inputs along the way (i.e., a change in health), this strategy (filing early with the intention of suspending later) doesn't make sense, because the price paid for that early access to money is so high.
Good info, thank you!
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Re: Social security. Take it at 62 [Motley Fool article]

Post by willthrill81 »

gr7070 wrote: Fri Oct 16, 2020 11:04 am
willthrill81 wrote: Fri Oct 16, 2020 9:59 am
gr7070 wrote: Fri Oct 16, 2020 9:57 am
willthrill81 wrote: Fri Oct 16, 2020 9:52 am
gr7070 wrote: Fri Oct 16, 2020 9:40 am

One gets none or less. Which also results in others getting none or less.
Would you please elaborate?
By delaying, if one dies before they claim they get none, and if they died before the break even they received less.
I see. Thanks.

That approach would only be consistent with the first goal I pointed out here.
And the second.
willthrill81 wrote: Fri Oct 16, 2020 9:37 am The three common but disparate goals I've seen with regard to when to start SS benefits are these: (1) take benefits as early as possible to 'get what you can while you still can', (2) take benefits as early as possible and invest them in hopes to achieve a better return than delaying, and (3) delay taking benefits for as long as possible in order to maximize one's 'longevity insurance'.

The best strategy depends on one's goal.
Trying to get money before you die is not necessarily the same as taking the benefits early so you can buy something like stocks. The goals are different.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by chipperd »

Ben Mathew wrote: Thu Oct 15, 2020 12:12 pm [ quoted post removed by admin LadyGeek]

Yes. But the core of Social Security is a robust pay-as-you-go system that takes money from current workers and distributes it directly to current retirees. This does not require a fund, and can cover 76% of currently promised benefits.

The fund that is at risk of running out exists only because of demographic bumps. A larger cohort will need to set some money aside to fund its own retirement. Those funds are projected to run out in 2034 unless changes are made. Presumably this will be addressed by cutting benefits and/or raising taxes, and is not really an existential crisis for the Social Security program as a whole. The more worrying possibility for some people is that benefits becomes means tested or the formulas are changed so that high income retirees lose a substantial portion of their promised benefits even as the program survives largely unscathed for most people.

But taking Social Security a few years early won't eliminate that risk. Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. Then we are talking only of a few years at the higher benefit level, not the whole retirement.

I will also note that Social Security appears to be psychologically important for many people. Now that pensions are mostly gone, it is the only thing that provides a measure of certainty for many people. Even people with multi-million dollar portfolios seem to greatly value social security even though the payouts are fairly small compared to what they can expect to safely withdraw from their portfolios. So I think the program is popular and unlikely to be gutted.
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Last edited by chipperd on Fri Oct 16, 2020 11:31 am, edited 1 time in total.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Seasonal »

gr7070 wrote: Fri Oct 16, 2020 9:34 am
Leesbro63 wrote: Fri Oct 16, 2020 8:38 am
wander wrote: Fri Oct 16, 2020 8:10 am If you don't need money, take it at 62 doesn't look like a bad deal. For example, if a person will get $1,000 a month at full retirement age, at 62 he gets $750 a month. By the time he is 66, he will be ($750 x 12 x 4) $36,000 ahead. Time is what people don't have much at retirement, so extra money for travel is nice.
This makes no sense to me. Why would you take it at 62 if you DON'T need the money (assuming good health)? Is that a typo?
Because the biggest benefit of delaying (for someone who doesn't need the money now) is the reduced risk of running out of money. If one has enough money that that risk (running out) is near zero, which for many Boglehead's that is the case, then that benefit of delaying no longer exists.

If the biggest benefit of delaying no longer exists then don't delay. And taking early removes the risk of delaying.

So the subgroup of people who don't need the money now or later (read Boglehead's) most risk is mitigated by claiming early.

Yes, there is a subgroup of Boglehead's who are too risk averse to acknowledge running out is unlikely.
For the very risk averse, knowing that you have a larger SS payment to fall back on for your entire life is worthwhile. You might think you have more than enough, but investments might crash at the wrong time.

A countervailing consideration is the possibility of SS benefits being cut. I'd doubt they would cut benefits for those over 65, but you never know. As far as I know, recent proposals for cutting SS have exempted those over 65.

As discussed, without knowing your lifespan and the politics of SS, it's hard to know what's best.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Seasonal »

Ben Mathew wrote: Thu Oct 15, 2020 12:12 pm ...The more worrying possibility for some people is that benefits becomes means tested or the formulas are changed so that high income retirees lose a substantial portion of their promised benefits even as the program survives largely unscathed for most people....
The taxation of benefits for those with higher incomes is means testing.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by tj »

Seasonal wrote: Fri Oct 16, 2020 11:32 am
Ben Mathew wrote: Thu Oct 15, 2020 12:12 pm ...The more worrying possibility for some people is that benefits becomes means tested or the formulas are changed so that high income retirees lose a substantial portion of their promised benefits even as the program survives largely unscathed for most people....
The taxation of benefits for those with higher incomes is means testing.
That's extremely minor compared to a robust means testing, e.g. Earn income over X, receive no SS benefits.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by LadyGeek »

This is a "no politics" forum. As a reminder, the future of Social Security requires changes in legislation, a political process (off-topic as proposed legislation). See: [url=rules#rule-4a]Politics and Religion[/url]
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
Please stay on-topic, which is deciding to take Social Security at 62.

Means-testing is also off-topic (socio-economic status).
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JoeRetire »

tj wrote: Thu Oct 15, 2020 8:40 pm
ObliviousInvestor wrote: Thu Oct 15, 2020 6:52 pm
fsrph wrote: Thu Oct 15, 2020 6:50 pm
Johm221122 wrote: Thu Oct 15, 2020 6:20 am
Leesbro63 wrote: Thu Oct 15, 2020 6:12 am What happens to people collecting SS Disability? When does that convert to retirement SS? Must they accept the low age 62 amount? Can they keep getting the disability amount until collecting the big age 70 retirement amount?
When you reach full retirement age you'll be automatically be converted. Not 70
Say you're receiving SSDI and reach full retirement age. Can you then defer your regular SS till 70 years old to capture the 8% per year gain in benefits?

Francis
Yes. When you reach FRA your disability benefit is converted to a retirement benefit. At that point, it's just a normal retirement benefit, and you have the option to voluntarily suspend it, as would anybody age FRA-70 who is receiving a retirement benefit.
Anybody? If you take it at 62, you can then suspend it from 67 to 70 and benefit from that?
Yes you can. You'll get delayed retirement credits for each of the months you delay.
So, your benefit at 62, plus 8% for each year from 67 to 70.
Last edited by JoeRetire on Fri Oct 16, 2020 12:14 pm, edited 1 time in total.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JoeRetire »

Dandy wrote: Thu Oct 15, 2020 8:40 pm For a married person in decent health I think what should tip the balance as to whether to take SS at 62 or wait is whether at 62 you need the SS or just want the SS.
I think there's a bit more to it than that. For example, in some cases, it makes sense for the lower earner to start at 62. When in doubt, check with https://opensocialsecurity.com/
If, while waiting you have to go into debt, drain your savings excessively or have to pass on a key bucket list item it can make sense to take SS early.
What is a "key" bucket list item?
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JoeRetire »

Leesbro63 wrote: Fri Oct 16, 2020 10:52 am Agreed, I've never seen this modeled or discussed. And with all due respect to ObliviousInvestor, something smells just not right here.
You are surprised because you don't understand the Social Security rules anywhere near as much as Mike Piper (ObliviousInvestor) does.
He's an expert (wrote the book, built the tool), you are not.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Dandy »

What is a "key" bucket list item?
If you and your spouse always dreamed of touring Europe just after you retired -- that might be considered a bucket list item.

I believe the term refers to something you really want to do before you kick the bucket aka die.

My post was referring to the higher earner of a couple deciding whether taking it early was a need or want.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

JoeRetire wrote: Fri Oct 16, 2020 12:12 pm
Leesbro63 wrote: Fri Oct 16, 2020 10:52 am Agreed, I've never seen this modeled or discussed. And with all due respect to ObliviousInvestor, something smells just not right here.
You are surprised because you don't understand the Social Security rules anywhere near as much as Mike Piper (ObliviousInvestor) does.
He's an expert (wrote the book, built the tool), you are not.
You’re right. I did know this, but the dots didn’t connect. He IS “thee” S.S. expert extraordinaire!
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JackoC »

Seasonal wrote: Fri Oct 16, 2020 11:30 am
gr7070 wrote: Fri Oct 16, 2020 9:34 am
Leesbro63 wrote: Fri Oct 16, 2020 8:38 am
wander wrote: Fri Oct 16, 2020 8:10 am If you don't need money, take it at 62 doesn't look like a bad deal. For example, if a person will get $1,000 a month at full retirement age, at 62 he gets $750 a month. By the time he is 66, he will be ($750 x 12 x 4) $36,000 ahead. Time is what people don't have much at retirement, so extra money for travel is nice.
This makes no sense to me. Why would you take it at 62 if you DON'T need the money (assuming good health)? Is that a typo?
Because the biggest benefit of delaying (for someone who doesn't need the money now) is the reduced risk of running out of money. If one has enough money that that risk (running out) is near zero, which for many Boglehead's that is the case, then that benefit of delaying no longer exists.
If the biggest benefit of delaying no longer exists then don't delay. And taking early removes the risk of delaying.
So the subgroup of people who don't need the money now or later (read Boglehead's) most risk is mitigated by claiming early.
Yes, there is a subgroup of Boglehead's who are too risk averse to acknowledge running out is unlikely.
For the very risk averse, knowing that you have a larger SS payment to fall back on for your entire life is worthwhile. You might think you have more than enough, but investments might crash at the wrong time.

A countervailing consideration is the possibility of SS benefits being cut. I'd doubt they would cut benefits for those over 65, but you never know. As far as I know, recent proposals for cutting SS have exempted those over 65.

As discussed, without knowing your lifespan and the politics of SS, it's hard to know what's best.
Starting with lifespan, SS timing is 'actuarially fair' with regard to a past baseline of total US population life expectancy. If you are a member of this forum without known serious health problems it's likely your life expectancy is higher than that baseline. It correlates with socio-economic level and others things which are pretty obviously concentrated in generally LE+ direction on this forum. Point is, when you are going to die is usually unknown till the final stages of a bad situation, but the LE probability distribution you are part of doesn't include various groups of people with very different life situations than you just because they happen to live in the same country as you. Nobody would assume a worldwide actuarial table applies to them. Trying out personalized LE calculators might give you a better idea of the LE of people actually like you.

The hyper sensitivity to 'politics' is particularly unfortunate on this topic since it prevents presenting arguments on an important point. All I can say is that prospect of benefit cuts in SS do not factor into my 62/70 decision at all. The chance of program changes making any difference, as somebody already in between those two ages, is zero for practical purposes IMO. That's as opposed to people say 35 years old looking at the future of national public old age pensions, in many countries not only the US. That's a different story.

Waiting to 70 is about risk management of extreme long life, assuming you can afford to wait (and perhaps some of the supposed other arguments against waiting are really: anyway, I can't afford to). If your assets are such that that's no risk of running out I'd say mainly you shouldn't care, as opposed to having any strong preference. But given the wide range of uncertainty of the distant future (there is still a distant future in your 60's *if* a person of high LE who ends up living much longer than LE) I think there's a fair slice of investors who can afford to wait for whom SS isn't trivial. Waiting to 70 gives you a larger amount of a unique asset (federal govt risk, CPI adjusted lifetime-perpetual stream) to combat longevity risk.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Big Dog »

Starting with lifespan, SS timing is 'actuarially fair' with regard to a past baseline of total US population life expectancy.
Small nit: the table is unisex, so not really 'actuarially fair' to women or men. But your broader point is spot-on, as the SS mortality tables are based on total US pop, which includes those in ill health and those that practice unhealthy habits (smoking, drug use, too much eating/drinking...)...
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Re: Social security. Take it at 62 [Motley Fool article]

Post by willthrill81 »

JoeRetire wrote: Fri Oct 16, 2020 12:00 pm
tj wrote: Thu Oct 15, 2020 8:40 pm
ObliviousInvestor wrote: Thu Oct 15, 2020 6:52 pm
fsrph wrote: Thu Oct 15, 2020 6:50 pm
Johm221122 wrote: Thu Oct 15, 2020 6:20 am

When you reach full retirement age you'll be automatically be converted. Not 70
Say you're receiving SSDI and reach full retirement age. Can you then defer your regular SS till 70 years old to capture the 8% per year gain in benefits?

Francis
Yes. When you reach FRA your disability benefit is converted to a retirement benefit. At that point, it's just a normal retirement benefit, and you have the option to voluntarily suspend it, as would anybody age FRA-70 who is receiving a retirement benefit.
Anybody? If you take it at 62, you can then suspend it from 67 to 70 and benefit from that?
Yes you can. You'll get delayed retirement credits for each of the months you delay.
So, your benefit at 62, plus 8% for each year from 67 to 70.
I'm completely unfamiliar with this. So someone could start benefits at 62 and then suspend them from age 67 to 70 in order to increase the initial benefit by 24% (8% x 3 years)?

What would be the purpose of this approach? I doubt that this is an 'actuarial loophole'.

I suppose that if a retiree encountered a poor sequence of returns that taking benefits at 62 could help to reduce portfolio withdrawals, and if the portfolio sufficiently recovered five years later, the retiree could suspend in order to boost the benefit.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by whomever »

"If your assets are such that that's no risk of running out I'd say mainly you shouldn't care, as opposed to having any strong preference."

It depends on what you are trying to optimize. For example, I think the general rule for couples with a bequest motive is that the low earner claims at 62 and the other at 70.

My wife and I don't have kids, and so no bequest motive. We're both waiting til 70, even though that isn't optimal from either a tax or maximize-the-estate perspective. We're doing it because, in our state, each spouse gets to keep their SS even if the other spouse ends up with a long stay in a nursing home.

One of us spending 20 years in a nursing home is one of those low-probability, high stakes things that you can't insure away with LTCI. By waiting, at least the healthy spouse is less likely to end up eating cat food.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by wolf359 »

chipperd wrote: Fri Oct 16, 2020 11:26 am
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Because it's stated in the law. If no action is taken and the trust fund runs out, all payments are reduced to match the inflow.

Obviously, if Congress adjusts the law, they may grandfather in people who are already claiming or take other actions. But that's if the law is changed. Without changes, the cuts go across the board, to any current and future payments.

Here's an official from 2005 that references this: https://www.ssa.gov/policy/docs/policyb ... 05-01.html

I recall it being in the annual trustees report a few years ago, but although it's inferred in this year's report, I couldn't find where it's explicitly stated.
If you want to look yourself, it's here: https://www.ssa.gov/oact/tr/2020/tr2020.pdf
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Re: Social security. Take it at 62 [Motley Fool article]

Post by bighatnohorse »

runner3081 wrote: Sun Oct 11, 2020 12:44 pm At the end of the day, you are betting on when you die.

You won't know that until... well, you die... And then it won't matter.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Godot »

willthrill81 wrote: Fri Oct 16, 2020 6:31 pm
JoeRetire wrote: Fri Oct 16, 2020 12:00 pm
tj wrote: Thu Oct 15, 2020 8:40 pm
ObliviousInvestor wrote: Thu Oct 15, 2020 6:52 pm
fsrph wrote: Thu Oct 15, 2020 6:50 pm

Say you're receiving SSDI and reach full retirement age. Can you then defer your regular SS till 70 years old to capture the 8% per year gain in benefits?

Francis
Yes. When you reach FRA your disability benefit is converted to a retirement benefit. At that point, it's just a normal retirement benefit, and you have the option to voluntarily suspend it, as would anybody age FRA-70 who is receiving a retirement benefit.
Anybody? If you take it at 62, you can then suspend it from 67 to 70 and benefit from that?
Yes you can. You'll get delayed retirement credits for each of the months you delay.
So, your benefit at 62, plus 8% for each year from 67 to 70.
I'm completely unfamiliar with this. So someone could start benefits at 62 and then suspend them from age 67 to 70 in order to increase the initial benefit by 24% (8% x 3 years)?

What would be the purpose of this approach? I doubt that this is an 'actuarial loophole'.

I suppose that if a retiree encountered a poor sequence of returns that taking benefits at 62 could help to reduce portfolio withdrawals, and if the portfolio sufficiently recovered five years later, the retiree could suspend in order to boost the benefit.
From SSA: https://www.ssa.gov/benefits/retirement ... spend.html

Suspending Your Retirement Benefit Payments

If you have reached full retirement age, but are not yet age 70, you can ask us to suspend your retirement benefit payments. By doing this, you will earn delayed retirement credits for each month your benefits are suspended which will result in a higher benefit payment to you.

If you qualify for benefits as a Survivor, your full retirement age may be different.
Before you make a request to suspend your benefits, keep in mind that:

If you apply for benefits and we have not yet made a determination that you are entitled, you may voluntarily suspend benefits for any month you have not received a payment.
If you are already entitled to benefits, you may voluntarily suspend retirement benefit payments up to age 70. Your benefits will be suspended beginning the month after you make the request.
We pay Social Security benefits the month after they are due. If you contact us in June and request that we suspend benefits, you will still receive your June benefit payment in July.
You do not have to sign your request to suspend benefit payments. You may ask us orally or in writing.
If your benefit payments are suspended, they will automatically start again the month you reach age 70.
If you change your mind and want the payments to start before age 70, just tell us when you want your benefits reinstated.
Voluntary suspension begins no earlier than the month after the month of the request. We may accept advance requests for voluntary suspension; however, suspension cannot begin earlier than:
The month after the month of the request.
Your full retirement age.
Your month of entitlement to benefits (for initial claims only).
If you voluntarily suspend your retirement benefit and you have others who receive benefits on your record, they will not be able to receive benefits for the same period that your benefits are suspended. However, a divorced spouse will be able to continue receiving benefits.
If you voluntarily suspend your retirement benefit, any benefits you receive on someone else’s record will also be suspended. Your Medicare Part B premiums cannot be deducted from your suspended benefits.
If you request voluntary suspension we will only permit benefit reinstatement the month after your request.
For more information on voluntary suspension, read the Filing Rules for Retirement and Spouses Benefits.

Before You Make Your Decision

If you suspend your retirement benefits:

The Centers for Medicare & Medicaid Services (CMS), will bill you for future Part B premiums, if you are enrolled in Medicare Part B (supplemental medical insurance) .
These premiums can’t be deducted from your suspended retirement benefits, or your suspended spouse or ex-spouse’s benefits. If you do not pay the premiums timely, you may lose your Part B Medicare coverage. (You will have the option of automatically paying the bill from an account at your bank or financial institution.)

If you also receive Supplemental Security Income (SSI) benefits, suspending your retirement benefits will make you ineligible for SSI.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by smitcat »

whomever wrote: Fri Oct 16, 2020 8:26 pm "If your assets are such that that's no risk of running out I'd say mainly you shouldn't care, as opposed to having any strong preference."

It depends on what you are trying to optimize. For example, I think the general rule for couples with a bequest motive is that the low earner claims at 62 and the other at 70.

My wife and I don't have kids, and so no bequest motive. We're both waiting til 70, even though that isn't optimal from either a tax or maximize-the-estate perspective. We're doing it because, in our state, each spouse gets to keep their SS even if the other spouse ends up with a long stay in a nursing home.

One of us spending 20 years in a nursing home is one of those low-probability, high stakes things that you can't insure away with LTCI. By waiting, at least the healthy spouse is less likely to end up eating cat food.
"We're both waiting til 70, even though that isn't optimal from either a tax or maximize-the-estate perspective."
We will likely wait till 70 ourselves - FWIW ...waiting will help us greatly with Roth conversions which will optimize taxes as well as spendable dollars along with estate values. YMMV
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Taz »

I think we are going to split the difference, especial since my military pension will be reduced when I die. We are the same age. I'll claim at 62 (or so depending on Roth conversions) and she will wait until 70. Our assumptions are that my wife will live longer and our individual benefits are roughly the same. Our situation is also that we will not have to rely on SS to make ends meet.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by chipperd »

wolf359 wrote: Fri Oct 16, 2020 9:31 pm
chipperd wrote: Fri Oct 16, 2020 11:26 am
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Because it's stated in the law. If no action is taken and the trust fund runs out, all payments are reduced to match the inflow.

Obviously, if Congress adjusts the law, they may grandfather in people who are already claiming or take other actions. But that's if the law is changed. Without changes, the cuts go across the board, to any current and future payments.

Here's an official from 2005 that references this: https://www.ssa.gov/policy/docs/policyb ... 05-01.html

I recall it being in the annual trustees report a few years ago, but although it's inferred in this year's report, I couldn't find where it's explicitly stated.
If you want to look yourself, it's here: https://www.ssa.gov/oact/tr/2020/tr2020.pdf
Thanks for citing that information. I'll check it out.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JoeRetire »

willthrill81 wrote: Fri Oct 16, 2020 6:31 pm I'm completely unfamiliar with this. So someone could start benefits at 62 and then suspend them from age 67 to 70 in order to increase the initial benefit by 24% (8% x 3 years)?
https://www.ssa.gov/benefits/retirement ... spend.html
What would be the purpose of this approach?
To allow the recipient to change their mind, correct a mistake, or react to changed circumstances, I guess.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JoeRetire »

Taz wrote: Sat Oct 17, 2020 6:10 am I think we are going to split the difference
I don't understand a "split the difference" strategy. Have you checked out https://opensocialsecurity.com/ ?
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MikeG62
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Re: Social security. Take it at 62 [Motley Fool article]

Post by MikeG62 »

willthrill81 wrote: Fri Oct 16, 2020 9:37 am
The three common but disparate goals I've seen with regard to when to start SS benefits are these: (1) take benefits as early as possible to 'get what you can while you still can', (2) take benefits as early as possible and invest them in hopes to achieve a better return than delaying, and (3) delay taking benefits for as long as possible in order to maximize one's 'longevity insurance'.

The best strategy depends on one's goal.
This is a good way to frame the discussion.

I'd add that I tend to think most people (non-Booglehead's that is, which represent the overwhelming majority of the population) simply default to beginning their benefit at age 62 because they see the option of getting that monthly check beginning at 62 as too compelling to pass up. They don't do math or do breakeven analyses. They see money they can access and they go and access it. So for those who keep saying "most people" begin their benefit at age 62, this should be kept in mind. Most people also live paycheck to paycheck or live to the edge of their means. Not the same thing as saying most people who have done the math and considered all factors begin their benefit at age 62. It may be true, but there is not way to get at that data.

The tax implications of beginning benefits early (impact on the ability to do Roth conversions being one) should also be considered. For others it could impact ACA subsidies. So there is another factor.

I was talking to my Dad a while back and he mentioned that he began taking SS at age 62. When I asked why, his response was that he needed the money to cover his (and my Mom's) expenses in retirement. In other words, he could not afford to delay to FRA. I could not help but wonder with that being the case whether he should then have retired as early as he did (late 50's) if he needed to begin collecting SS at age 62. My Dad is now 87 (and my mom is 84). Can't help but think he's past the breakeven point.

Our plan is for my wife to begin taking her benefit at FRA while I was begin at age 70. We don't need the money to cover our expenses from age 62 to age 70. Whether we will need the larger benefit to help cover our expenses when we are in our mid to late 80's or 90's (should we be fortunate enough to live that long), is hard to say. It's certainly more possible than our needing the money beginning at age 62. The longevity insurance aspect of delaying is particularly attractive to me (perhaps the single largest factor driving our plan).
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JackoC
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JackoC »

wolf359 wrote: Fri Oct 16, 2020 9:31 pm
chipperd wrote: Fri Oct 16, 2020 11:26 am
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Because it's stated in the law. If no action is taken and the trust fund runs out, all payments are reduced to match the inflow.

Obviously, if Congress adjusts the law, they may grandfather in people who are already claiming or take other actions. But that's if the law is changed. Without changes, the cuts go across the board, to any current and future payments.
I think that's 'form over substance'. In real life setting 'existing law' as the default can be the clearly wrong choice. And this is the obvious example: Congress simply allowing an across the board cut of SS benefits the year the 'trust fund' technically runs out of money is an *extremely* unlikely outcome, 'existing law' or not. There are uncertainties down the road for SS like every other rich country public pension plan, and every other aspect of life for that matter (perhaps even rich country govt debt itself at some point, that's not literally 0% risk just because 'existing law' says they have to pay it :happy ). But across the board cuts to SS on a projected trust fund exhaustion date is just not a realistic basis for a personal plan.
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Taz
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Taz »

JoeRetire wrote: Sat Oct 17, 2020 6:42 am
Taz wrote: Sat Oct 17, 2020 6:10 am I think we are going to split the difference
I don't understand a "split the difference" strategy. Have you checked out https://opensocialsecurity.com/ ?
I ran our rough numbers through it. It had me taking it at 65 and her at 70. My calculated breakeven is (of course) 85. However, I don't know of anyone on my side of the family who lived beyond 86. I also considered that taking it at 62 would "frontload" the early years considering the reduction of pension -- just in case. I still have 5 years to decide.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by tibbitts »

JackoC wrote: Sat Oct 17, 2020 7:53 am
wolf359 wrote: Fri Oct 16, 2020 9:31 pm
chipperd wrote: Fri Oct 16, 2020 11:26 am
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Because it's stated in the law. If no action is taken and the trust fund runs out, all payments are reduced to match the inflow.

Obviously, if Congress adjusts the law, they may grandfather in people who are already claiming or take other actions. But that's if the law is changed. Without changes, the cuts go across the board, to any current and future payments.
I think that's 'form over substance'. In real life setting 'existing law' as the default can be the clearly wrong choice. And this is the obvious example: Congress simply allowing an across the board cut of SS benefits the year the 'trust fund' technically runs out of money is an *extremely* unlikely outcome, 'existing law' or not. There are uncertainties down the road for SS like every other rich country public pension plan, and every other aspect of life for that matter (perhaps even rich country govt debt itself at some point, that's not literally 0% risk just because 'existing law' says they have to pay it :happy ). But across the board cuts to SS on a projected trust fund exhaustion date is just not a realistic basis for a personal plan.
An across-the-board decrease might be one of the least likely outcomes, and I would agree with that, but here on the forum we're limited to discussing current law. Otherwise every other post right now would be about proposed tax policies.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by ncbill »

MikeG62 wrote: Sat Oct 17, 2020 7:09 am I was talking to my Dad a while back and he mentioned that he began taking SS at age 62. When I asked why, his response was that he needed the money to cover his (and my Mom's) expenses in retirement. In other words, he could not afford to delay to FRA. I could not help but wonder with that being the case whether he should then have retired as early as he did (late 50's) if he needed to begin collecting SS at age 62. My Dad is now 87 (and my mom is 84). Can't help but think he's past the breakeven point.
Many times one doesn't have a choice as to when they retire.

I just buried a close relative whose department was outsourced when they were age 60...cashed in their pension to make it to SS at age 62.

I have other relatives who worked physically demanding blue-collar jobs until they also took SS at age 62...they were "just plumb wore out."

Breakeven for them would be in their mid-80s and given their health problems, many caused by their jobs, none of them are likely to make it that far.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by Leesbro63 »

ncbill wrote: Sat Oct 17, 2020 8:43 am Breakeven for them would be in their mid-80s and given their health problems, many caused by their jobs, none of them are likely to make it that far.
Yet SOME of them likely will make it and wish they had that bigger SS check as longevity insurance. But I get it that some jobs wear you out by age 62. It's odd that they didn't raise the EARLY retirement age with the FULL retirement age. If 64 was the earliest people could take it, even the large percentage who live hand to mouth would mostly reset their thinking and plans to get them to 64 instead of 62. Conversely, as the FRA went from 65 soon to 67, why didn't the deferral age rise from 70 to 72?
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Re: Social security. Take it at 62 [Motley Fool article]

Post by JackoC »

tibbitts wrote: Sat Oct 17, 2020 8:43 am
JackoC wrote: Sat Oct 17, 2020 7:53 am
wolf359 wrote: Fri Oct 16, 2020 9:31 pm
chipperd wrote: Fri Oct 16, 2020 11:26 am
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Because it's stated in the law. If no action is taken and the trust fund runs out, all payments are reduced to match the inflow.

Obviously, if Congress adjusts the law, they may grandfather in people who are already claiming or take other actions. But that's if the law is changed. Without changes, the cuts go across the board, to any current and future payments.
I think that's 'form over substance'. In real life setting 'existing law' as the default can be the clearly wrong choice. And this is the obvious example: Congress simply allowing an across the board cut of SS benefits the year the 'trust fund' technically runs out of money is an *extremely* unlikely outcome, 'existing law' or not. There are uncertainties down the road for SS like every other rich country public pension plan, and every other aspect of life for that matter (perhaps even rich country govt debt itself at some point, that's not literally 0% risk just because 'existing law' says they have to pay it :happy ). But across the board cuts to SS on a projected trust fund exhaustion date is just not a realistic basis for a personal plan.
An across-the-board decrease might be one of the least likely outcomes, and I would agree with that, but here on the forum we're limited to discussing current law. Otherwise every other post right now would be about proposed tax policies.
Political jib-jabbing is annoying, no doubt. And most people reading are probably sophisticated enough to realize when 'existing law' is a ridiculous assumption and ignore conclusions based on it. But not necessarily everyone. Encouraging wrong assumptions also has a downside for a forum which wishes to be seen as authoritative.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by MikeG62 »

ncbill wrote: Sat Oct 17, 2020 8:43 am
MikeG62 wrote: Sat Oct 17, 2020 7:09 am I was talking to my Dad a while back and he mentioned that he began taking SS at age 62. When I asked why, his response was that he needed the money to cover his (and my Mom's) expenses in retirement. In other words, he could not afford to delay to FRA. I could not help but wonder with that being the case whether he should then have retired as early as he did (late 50's) if he needed to begin collecting SS at age 62. My Dad is now 87 (and my mom is 84). Can't help but think he's past the breakeven point.
Many times one doesn't have a choice as to when they retire.
That's true. But many times one does have a choice as well.

Some people retire simply because they think they reached an age where one retires. For example, had a conversation with the sister of my brother-in-law a few years ago. She was asking me how I enjoyed being retired. During that discussion she said "next year I turn 65 so I think I'm going to retire...after all that's when people typically retire". No thought about whether she could afford it. AFAIK, she is still working. Thankfully it appears she figured out the numbers did not work before she made a huge mistake.

Another example. In the process of helping my sister-in-law transition her assets to Vanguard after having gone through an ugly divorce a year ago. I've been participating in the discussions she is having with a VG Personal Advisor to help her get up to speed and make sure she understands what she is being told. She started these discussions indicating she wanted to retire at 60 (she is 53 now). She does not have the financial wherewithal to retire at 60 or anything close to 60. The VG rep has told her as much. Current plan is to target 65 and see how things go over the next 12 years.
ncbill wrote: Sat Oct 17, 2020 8:43 am I have other relatives who worked physically demanding blue-collar jobs until they also took SS at age 62...they were "just plumb wore out."
My Dad was an aerospace engineer. An intellectually demanding job for sure, but not physically demanding.
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Re: Social security. Take it at 62 [Motley Fool article]

Post by smitcat »

tibbitts wrote: Sat Oct 17, 2020 8:43 am
JackoC wrote: Sat Oct 17, 2020 7:53 am
wolf359 wrote: Fri Oct 16, 2020 9:31 pm
chipperd wrote: Fri Oct 16, 2020 11:26 am
"Even if someone starts at age 62 and benefits are adjusted a few years later, I would expect that their benefits will be impacted as well--that they won't be grandfathered in. "
Why would you be so certain of that? I don't agree at all. Please provide rationale.
Because it's stated in the law. If no action is taken and the trust fund runs out, all payments are reduced to match the inflow.

Obviously, if Congress adjusts the law, they may grandfather in people who are already claiming or take other actions. But that's if the law is changed. Without changes, the cuts go across the board, to any current and future payments.
I think that's 'form over substance'. In real life setting 'existing law' as the default can be the clearly wrong choice. And this is the obvious example: Congress simply allowing an across the board cut of SS benefits the year the 'trust fund' technically runs out of money is an *extremely* unlikely outcome, 'existing law' or not. There are uncertainties down the road for SS like every other rich country public pension plan, and every other aspect of life for that matter (perhaps even rich country govt debt itself at some point, that's not literally 0% risk just because 'existing law' says they have to pay it :happy ). But across the board cuts to SS on a projected trust fund exhaustion date is just not a realistic basis for a personal plan.
An across-the-board decrease might be one of the least likely outcomes, and I would agree with that, but here on the forum we're limited to discussing current law. Otherwise every other post right now would be about proposed tax policies.
If someone wanted to do research on what is most likely to occurr they could just look at the past - its not nearly the first change to happen.
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