When to start social security

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
mjdaniel
Posts: 111
Joined: Sat Jan 21, 2012 2:20 pm
Location: Temecula, CA

When to start social security

Post by mjdaniel » Sat Jan 11, 2014 1:52 pm

My wife turns 62 this June, and she was going to start receiving social security. I am currently 60 and I was not sure when I was going to start. I have been
reading everything I can online and started using free online calculators and was beginning to form a strategy, and then I found this article:
http://www.toolsformoney.com/social_security.htm which basically says no matter what your situation, begin collecting at 62. Could you folks take a look
and offer your opinions?

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: When to start social security

Post by dbr » Sat Jan 11, 2014 2:08 pm

I see delayed SS as a risk management tool to maximize "guaranteed" inflation adjusted income in the event one has a long life. It is a question of what fraction of one's income has a longevity guarantee, which SS has, compared to what fraction does not, which withdrawals from a portfolio do not. It is also a question of what fraction of an income stream is inflation indexes, which SS is, compared to what fraction is not, which a fixed pension is not. In short delaying SS is the best method available to increase the fraction of one's retirement income stream that is an inflation indexed annuity. A person who does not have or is not interested in this feature may be persuaded that the program IS actuarialy neutral and may just as well initiate earlier claiming.

A second issue is that some retirees have a grace period of low income between retirement and electing SS when there are opportunities for Roth conversions, unwinding deferred compensation, and so on, at least total tax cost.

bobbun
Posts: 159
Joined: Thu Jun 27, 2013 2:38 pm

Re: When to start social security

Post by bobbun » Sat Jan 11, 2014 2:25 pm

What a horrible article. The point might actually be true, but I would never risk a penny of my own money on a write-up like that one. So many vague and slippery assumptions, appeals to intuition, and appeals to ideology. I was especially amused when the article criticized the "experts" unwillingness to "crunch numbers", when the numbers crunched in the article up to that point were all completely pulled out of a hat.

You need to look at your own numbers, make only those assumptions that are reasonable for you, and make an informed decision. There will be tradeoffs and risks any way you decide, that's a given. If you ultimately do decide to start drawing SS at 62, hopefully you will have a more rational basis for doing so than that article.

User avatar
SteveNet
Posts: 288
Joined: Tue Jan 22, 2013 10:06 am

Re: When to start social security

Post by SteveNet » Sat Jan 11, 2014 2:34 pm

Perhaps do some of your own situational calculating, everyone's positions are unique, so one size doesn't fit all.

I would suggest to run your numbers through the ORP calculator. http://www.i-orp.com/

Come up with a plan for what you want, then try it out with ORP, taking SS at ages 62 through 70 and see what you would be more happy with.
Being frugal is hard to learn, but once learned is hard to stop.

User avatar
Toons
Posts: 13016
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: When to start social security

Post by Toons » Sat Jan 11, 2014 2:36 pm

I started @62 no regrets,enjoying the extra cash every month :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

ajcp
Posts: 645
Joined: Fri Dec 13, 2013 6:44 pm

Re: When to start social security

Post by ajcp » Sat Jan 11, 2014 2:37 pm

No matter how you look at it, using facts, logic, and math, you'll win on all fronts if you collect Social Security benefits ASAP, and you lose on all fronts the longer you wait. There's no scenario that results in having more money in any year by waiting (not even working and paying high ordinary income taxes on 85% of the benefits). So there's zero chance or way that you're better off by waiting using this stuff called arithmetic.
Except of course for the scenario where your investments don't get the 7-8% return that you're assuming. But if the chances of that are 0, then sure, I guess.

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: When to start social security

Post by sscritic » Sat Jan 11, 2014 2:37 pm

About as stupid as it gets. It discounts the difference in the benefits by the cost of living, but doesn't give the benefits the cost of living increases.

1.32 divided by .75 is 1.76 no matter when you do the division (for those with a FRA of 66). Division works the same way for those with an FRA of 67. 1.24 divided by .70 is 1.77 no matter how you cut it.

Ron
Posts: 6376
Joined: Fri Feb 23, 2007 7:46 pm

Re: When to start social security

Post by Ron » Sat Jan 11, 2014 3:23 pm

Since the OP is married, he should look at the options available to a married couple which was not discussed by the noted article.

For a single person it may make a little sense to wait (as sscritic pointed out). For a married couple, you may be giving up many thousands of $$$ by claiming at age 62, shown by using a calculator such as http://individual.troweprice.com/public ... urity-Tool for options available.

- Ron

User avatar
EternalOptimist
Posts: 829
Joined: Wed Nov 07, 2012 12:21 pm
Location: New York

Re: When to start social security

Post by EternalOptimist » Sat Jan 11, 2014 3:26 pm

I'm collecting since turning 62 two years ago and my wife started this month at age 62. This works for me and there is no looking back. I believe I've read that a majority of people collect at 62.
"When nothing goes right....go left"

gerntz
Posts: 466
Joined: Fri May 06, 2011 3:37 pm

Re: When to start social security

Post by gerntz » Sat Jan 11, 2014 3:49 pm

Toons wrote:I started @62 no regrets,enjoying the extra cash every month :happy
So you wouldn't enjoy another 8% a month had you started at 63?

User avatar
Toons
Posts: 13016
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: When to start social security

Post by Toons » Sat Jan 11, 2014 3:53 pm

gerntz wrote:
Toons wrote:I started @62 no regrets,enjoying the extra cash every month :happy
So you wouldn't enjoy another 8% a month had you started at 63?
Never thought about it that way. I guess I could have waited until I was 70 :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

nbseer
Posts: 180
Joined: Wed Jan 01, 2014 10:00 am
Location: New Jersey

Re: When to start social security

Post by nbseer » Sat Jan 11, 2014 4:07 pm

Another reason to wait for married couple where wife made much less money than the husband.. his taking at 62 permanently reduces the spousal benefit the wife would receive from her husband's higher payout.

Ron
Posts: 6376
Joined: Fri Feb 23, 2007 7:46 pm

Re: When to start social security

Post by Ron » Sat Jan 11, 2014 4:08 pm

EternalOptimist wrote:I believe I've read that a majority of people collect at 62.
That may be true, but my belief is that those people fall into two basic "camps":

1. I'm getting mine because it's owed to me, and I may die tomorrow.

I always look as money being for the living, not the dead. If I die tomorrow and don't get all "my" SS, so be it. I would rather have a bit more in the future if I wait, but more importantly my wife would have a much higher benefit if she lives longer than me.

2. It's simply a case of needing additional income now, not at some future date. This would be the case of an awful lot of folks who had left the workforce earlier than "normal" (e.g. FRA) age. If you need the money at age 62, than so be it; take it - it's there.

As for my wife/me? I turned FRA last week (66); wife will do the same in May. Around March 15th, we will go to the local SS office to submit necessary paperwork that will allow me to file/suspend and she will submit a restricted application to claim 50% of my FRA benefit upon her FRA in May. Both of us will be delaying SS until age 70. BTW, the only reason we're going to the SS office rather than do it on line is that we want to make sure that the applications are submitted correctly. Additionally, I have military service to be considered for additional credits (regardless if they count for much) which will require proof - my DD214, along with marriage license (for her restricted application) and any other documents required.

Claiming SS at any age between 62 and 70 depends on a lot based upon your personal situation - financial, legal partnership, logical, and somewhat based upon your "belief" about the SS system and your future. There is no right nor wrong answer to the question at hand, IMHO.

- Ron

Rich in Michigan
Posts: 175
Joined: Mon Jun 11, 2012 1:27 pm

Re: When to start social security

Post by Rich in Michigan » Sat Jan 11, 2014 4:17 pm

There are compelling reasons to collect either early or late depending on one's personal circumstances. You really have to consider your own priorities...spend your last buck on the day you die vs leave an estate...how much of your nest egg is needed in retirement, how big your portfolio is,etc. Everyone should run their own models.

I read this article about a year ago and found it fairly interesting. I don't believe I have ever seen it referenced here:

http://www.nysscpa.org/cpajournal/2006/ ... ls/p42.HTM

That being said, there are some good reasons to wait. As a matter of full disclosure, I am retired but have not started collecting SS. I may wait until 70, I may not. I have my own models that will tell me when to pull the trigger.

In general, if you are concerned about risk then the average person's risk comes not from leaving too little to their heirs but rather outliving their money. That is the most compelling reason to wait until 70 to initiate SS.

When all is said and done however, for most folks it won't matter much either way. If the SS break even age is in the 78-80 range, and if the actuarial tables say that a 62 year old will make it to 83, then you will only really be impacted by dying well before the break even age or by living well after it. If you expire a few years either side of that 83 mark you won't gain or lose a lot. All other things being equal...and they may NOT be equal depending upon your individual case...there is less risk of running out of $$$ plus the possibility of more lifetime SS earnings by waiting. But those other things that are not equal can easily make the case for early initiation.

Everyone's case B different.

User avatar
Toons
Posts: 13016
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: When to start social security

Post by Toons » Sat Jan 11, 2014 4:18 pm

Ron wrote:
EternalOptimist wrote:I believe I've read that a majority of people collect at 62.
That may be true, but my belief is that those people fall into two basic "camps":

1. I'm getting mine because it's owed to me, and I may die tomorrow.

I always look as money being for the living, not the dead. If I die tomorrow and don't get all "my" SS, so be it. I would rather have a bit more in the future if I wait, but more importantly my wife would have a much higher benefit if she lives longer than me.

2. It's simply a case of needing additional income now, not at some future date. This would be the case of an awful lot of folks who had left the workforce earlier than "normal" (e.g. FRA) age. If you need the money at age 62, than so be it; take it - it's there.

As for my wife/me? I turned FRA last week (66); wife will do the same in May. Around March 15th, we will go to the local SS office to submit necessary paperwork that will allow me to file/suspend and she will submit a restricted application to claim 50% of my FRA benefit upon her FRA in May. Both of us will be delaying SS until age 70. BTW, the only reason we're going to the SS office rather than do it on line is that we want to make sure that the applications are submitted correctly. Additionally, I have military service to be considered for additional credits (regardless if they count for much) which will require proof - my DD214, along with marriage license (for her restricted application) and any other documents required.

Claiming SS at any age between 62 and 70 depends on a lot based upon your personal situation - financial, legal partnership, logical, and somewhat based upon your "belief" about the SS system and your future. There is no right nor wrong answer to the question at hand, IMHO.

- Ron

+1 Well said Ron :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

mjdaniel
Posts: 111
Joined: Sat Jan 21, 2012 2:20 pm
Location: Temecula, CA

Re: When to start social security

Post by mjdaniel » Sat Jan 11, 2014 6:04 pm

I tried the TROWPRICE calculator suggested by Ron, and ran every goal/strategy available. I now have a better understanding of how each strategy relates to a specific goal. I have chosen one that I am going to utilize unless my situation changes. My wife will file at 62, receiving her own benefit. I will file at 66, receiving half my spouse's benefit. At 70, I will file and receive my own max benefit. Now, if I die before my wife, she gets the full max benefit. The goal I was looking for was maximizing the survivor benefit and receiving income early if possible. Thanks to all for the usual helpful comments.

SGM
Posts: 2746
Joined: Wed Mar 23, 2011 4:46 am

Re: When to start social security

Post by SGM » Sat Jan 11, 2014 10:52 pm

We plan on my taking my benefit at 70.
Spousal for the lower earner will be taken at her FRA. Then she will take her own higher benefit at 70.
The break even point is around 80-82. I haven't done the calculation lately. I am on to other things.
She is very healthy and has very long lived parents. I certainly would feel like a cad if I did not plan for her having the maximum widow's benefit she could receive.

I am not surprised that most people take SS at 62. If you need the money immediately or you have poor health take it early, but this article does not convince me of the efficacy of such a plan for people who do not need to take SS early. Inflation and return assumptions do not appear correct. One ought to be comparing the return against safe low yielding investments. Also consider that the inflation adjustments will be based on a higher monthly payment.

I do want to annuitize a relatively small portion of my portfolio. There are not better annuities available than SS. It is expensive to get an inflation adjusted security with a widow's benefit. Small amounts of my portfolio will be cost of living adjusted. The majority will depend on the vagaries of the market and some fixed income. SS is longevity insurance.

I am also attempting to have multiple income streams. SS is one I am trying to maximize.

Maybe most people do not feel they will live long enough to reach the break even point. I know of some highly educated and well remunerated retirees and soon to be retirees who did not or will not wait. I just scratch my head. I hope they are making the right decision for themselves. Some have pensions with colas and don't feel they need to wait before taking SS or their spouse need not wait. I don't agree but don't argue much with them and never say anything unless asked for my opinion.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain

The Wizard
Posts: 12353
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: When to start social security

Post by The Wizard » Sat Jan 11, 2014 11:01 pm

I agree with SGM that there's not anything worth arguing about here.
If I respond to these threads, I give my rationale but don't judge others.
If you need the money or are in ill health, then by all means, go with 62...
Attempted new signature...

riskreward
Posts: 106
Joined: Sat Jan 05, 2008 11:32 am

Re: When to start social security

Post by riskreward » Sun Jan 12, 2014 7:39 am

One thing that doesn't get discussed much are the tax ramifications. When SS is the preponderant source of income (vs more income from an IRA for instance), the amount of taxable SS is less.

You can use this calculator to show how much of SS will be taxed at the fed level. It can be a significant difference.

For example you can "what-if" by entering SS at 62 and higher IRA income vs SS at 70 and lower IRA income (because you used the IRA to fund expenses from 62 to 70.

Compare the AGI amounts in both cases, then reduce AGI by the std or itemized deduction to get to taxable income.

http://www.calcxml.com/calculators/how- ... y-be-taxed

ajcp
Posts: 645
Joined: Fri Dec 13, 2013 6:44 pm

Re: When to start social security

Post by ajcp » Sun Jan 12, 2014 7:54 am

The Wizard wrote:I agree with SGM that there's not anything worth arguing about here.
If I respond to these threads, I give my rationale but don't judge others.
If you need the money or are in ill health, then by all means, go with 62...
I don't think anyone is saying there aren't legitimate reasons to pick either side, just that that article is a bad illustration of the side it chose.

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: When to start social security

Post by sscritic » Sun Jan 12, 2014 7:58 am

ajcp wrote: I don't think anyone is saying there aren't legitimate reasons to pick either side, just that that article is a bad illustration of the side it chose.
I agree. I took "offer your opinions" to refer to the article, which was terrible, not to the subject, which gets beaten to death. My 2x4 is down to a toothpick, so I prefer to stick to criticism or praise of the article.

vested1
Posts: 1598
Joined: Wed Jan 04, 2012 4:20 pm

Re: When to start social security

Post by vested1 » Sun Jan 12, 2014 8:19 am

sscritic wrote:
ajcp wrote: I don't think anyone is saying there aren't legitimate reasons to pick either side, just that that article is a bad illustration of the side it chose.
I agree. I took "offer your opinions" to refer to the article, which was terrible, not to the subject, which gets beaten to death. My 2x4 is down to a toothpick, so I prefer to stick to criticism or praise of the article.

Exactly. The tone of the article seemed angry and defensive, as well as insulting to those with a different opinion. Worse still were the conclusions based on slanted assumptions of return which led me to believe the author was being purposely disingenuous for personal gain.

The Wizard
Posts: 12353
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: When to start social security

Post by The Wizard » Sun Jan 12, 2014 10:21 am

I didn't read that article before my reply yesterday, but I'm reading it now.
The article doesn't seem to have a DATE on it, so it's hard to know what the parameters were when it was written.
So far, I'd say IF the author's numbers were right, he might have a point.
1) he says "real" inflation is 6%, not the 3% the government comes up with. I think this is incorrect for 2013.
2) he says take SS early and invest the proceeds at 8% pre-tax or 7% after tax. A safe guaranteed 7%. Right...
3) he seems to say that the SS actuaries have it figured so that by waiting longer you collect less on average. This is contrary to the Actuarial Neutrality concept generally accepted as correct, but amended by slightly increasing longevity which makes it MORE advantageous to delay.
4) he has NOTHING in there about prevailing "safe guaranteed" interest rates, only that imaginary 7% mentioned above.

And finally, what puts this over the top is the paragraph toward the end where he exhorts the sheeple to ignore the Financial Porn out there and think for themselves. This, from the best Financial Porn I've read all week...
Attempted new signature...

Dandy
Posts: 5406
Joined: Sun Apr 25, 2010 7:42 pm

Re: When to start social security

Post by Dandy » Sun Jan 12, 2014 12:21 pm

You can look at various articles and math but to me it really comes down to this for me:
1. How much do you need SS now? Ask this at each age from 62 to 70.
If you need the money now there isn't much of a decision.
2. If you don't need the money why take it now vs later
Are there financial issues like paying off mortgage? poor health? or is it to enjoy life more e.g. travel etc
3. What are the trade offs of taking SS ?
a. Early-- more money from 62 to say 70 (8 years) - more fun or ability to eliminate debt
-- Less money for after age 70 and for surviving spouse
-- more taxable income until age 70 (less after) depends on how SS is taxed for your income.
-- makes Roth conversions more expensive? depends on how SS impacts tax bracket.
-- Less reliance on portfolio to fund living expenses until age 70 - (more after?)
b. Later-- More money from age 70 and more money for surviving spouse.
--More reliance on existing portfolio to fund retirement expenses till age 70 (less after?)
--Likely able to do Roth Conversion or other taxable things without exceeding a tax bracket
For married relatively healthy couples who don't need the money the key trade off is more money now (8) years
vs more money from 70 on for the longest surviving spouse. If you could afford it and not overly crimp you
retirement life style wouldn't you like the longest living spouse to have substantially more inflation adjusted money
if you waited 8 years? Forget about dying early and "missing out" on money/life style you could have had. Like always
you are making financial decisions on the best information you have at the time. that includes health/mortality.

The beauty is if you decide to wait and circumstances change - you can file and collect.

john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: When to start social security

Post by john94549 » Sun Jan 12, 2014 12:33 pm

Ron wrote: Additionally, I have military service to be considered for additional credits (regardless if they count for much) which will require proof - my DD214
My military service "extra credit" was already in the S/S calculation, no DD 214 required. Yes, it's a modest boost, but a boost nonetheless.

User avatar
EternalOptimist
Posts: 829
Joined: Wed Nov 07, 2012 12:21 pm
Location: New York

Re: When to start social security

Post by EternalOptimist » Sun Jan 12, 2014 12:45 pm

This decision has both rational and irrational components and is a very personal one. It's like telling someone which car to buy....huh?
"When nothing goes right....go left"

User avatar
englishgirl
Posts: 2473
Joined: Thu Mar 01, 2007 5:34 pm
Location: FL

Re: When to start social security

Post by englishgirl » Sun Jan 12, 2014 1:41 pm

Oh my, what a terrible article. I stopped reading, sorry. Any article on SS which includes "this is ALWAYS the best strategy" or assumes 8% return on investments or that you're withdrawing while in a 28% tax bracket is a bit suspect. And it says that financial experts don't crunch numbers. Umm, yeah.

So. Your new plan sounds good. What I have done is create a spreadsheet with all the numbers on claiming for my own benefit at different ages, claiming for spousal benefit, my spouse (heh, not that I'm married yet, I'm getting ahead of myself here :) ) claiming for his own benefit at different ages, him claiming for spousal benefit, etc. The numbers work out such that the optimal strategy as far as I can tell appears to be for me (the higher earner, the slightly older one, and the one with greatest expected longevity) to file and suspend at his FRA, for him to claim spousal benefit from FRA to 70, and for us both to claim for our own benefits (including delayed retirement credits) at 70. BUT, that assumes that everything is going swimmingly, and we're OK working to his age 67 or my age 70. There's also very much a non-monetary component - will we be healthy enough to be able to work that long? Will we WANT to work that long? Will we win the lottery? So that's why I keep ALL the numbers in the spreadsheet - we can adjust the strategy as needs/wants dictate.
Sarah

User avatar
SteveNet
Posts: 288
Joined: Tue Jan 22, 2013 10:06 am

Re: When to start social security

Post by SteveNet » Sun Jan 12, 2014 2:48 pm

I recently went thru this process to determine for myself when to start SS.
Besides the Numbers, there is the mental satisfaction (emotion) of being able to sleep at night.
Or not constantly being worried IF the markets produce enough revenue or not.

After reviewing my own spreadsheet with different versions of it for SS at ages 62/66/70. (and a few other variations), and using various other calc's (like ORP) I came to
the conclusion that delaying till 70 for myself and 66 for my spouse (non working) was the best option.
This pretty much took almost all the 'what if' scenarios out of the equation.
As I had enough in my taxable account to cover us for the next 10 years in the form of a CD ladder (age 60 now).

SS staying in the form it is now... I have the guarantee of certain SS income of my spouse at age 66 and myself at age 70 and at a much higher rate
than taking it early. So this actually lets me spend 'more' from 62 thru 70. EDIT...and more from 70 till whenever.

Is it possible that I 'could' have had more not doing this and investing the taxable account fully from age 62 thru lifetime? Of course...
But there is also the possibility that investments would NOT provide expected/wanted/needed returns with taking SS at 62.
I opted to reduce the 'risk' portion of my plan at my age and the relief of not dwelling on it and the markets is a HUGE relief now.

I might have died richer taking it at 62 but then I might have died poorer as well. The latter is the most concerning imo.
Of course there is NO one size fits all solution, each and everyone has different circumstances and account sizes etc etc...
Everyone has to do their own homework for their unique situation and decide...
Being frugal is hard to learn, but once learned is hard to stop.

Ron
Posts: 6376
Joined: Fri Feb 23, 2007 7:46 pm

Re: When to start social security

Post by Ron » Sun Jan 12, 2014 2:52 pm

john94549 wrote:My military service "extra credit" was already in the S/S calculation, no DD 214 required. Yes, it's a modest boost, but a boost nonetheless.
I have military service before 1968, where the credit will only be applied upon application for SS.

- Ron

chaz
Posts: 13601
Joined: Tue Feb 27, 2007 2:44 pm

Re: When to start social security

Post by chaz » Sun Jan 12, 2014 5:03 pm

I started @70, no regrets.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

montanagirl
Posts: 977
Joined: Thu Nov 19, 2009 4:55 pm
Location: Montana

Re: When to start social security

Post by montanagirl » Sun Jan 12, 2014 5:19 pm

The Wizard wrote:I didn't read that article before my reply yesterday, but I'm reading it now.
The article doesn't seem to have a DATE on it, so it's hard to know what the parameters were when it was written.
.
You can see by the format that the page is pretty old..the copyright notice is up to date, but the page was probably originally published in 1997.

I think maybe some of the assumptions are out of date.

Post Reply