My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

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The529guy
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Re: My dad is taking Social Security at 62, why would anyone not?

Post by The529guy »

David Jay wrote:
marcopolo wrote:Not sure why you would ignore [inflation] in setting up the scenarios, but then consider inflation in the context of evaluating the scenarios.
^^^ This!
Indeed, very puzzling.
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#Cruncher
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by #Cruncher »

House Blend in [url=https://www.bogleheads.org/forum/viewtopic.php?p=3379798#p3379798]this post[/url] wrote:... I would quantify how much better (or worse) delayed SS is compared to immediate SS in the tax-deferred scenario. Next do the same calculation in the Roth scenario.
I'm perplexed, House Blend. In my previous post I already did that. Either you didn't realize it, or I'm misunderstanding your question. [*][/color]

Here is the table from that post again. To hopefully make it clearer, I've expanded the headings to indicate that "Pre Tax" also refers to the Roth withdrawal case (since we're assuming there is no tax in that case) and "After Tax" refers to the Traditional IRA withdrawal case with taxes considered. I've also added columns showing the cumulative cash flows and the difference in Internal Rates of Return (IRR).

Code: Select all

     ------ Pre Tax & Roth ------    ------ TIRA After Tax ------
Age  Cash Flow  Cumulative    IRR    Cash Flow  Cumulative    IRR     Diff

Code: Select all

 62   (20,000)    (20,000)            (21,907)    (21,907)
 63   (20,000)    (40,000)            (21,907)    (43,814)
 64   (20,000)    (60,000)            (21,907)    (65,721)
 65   (20,000)    (80,000)            (21,907)    (87,628)
 66   (20,000)   (100,000)            (21,907)   (109,535)
 67   (20,000)   (120,000)            (21,907)   (131,442)
 68   (20,000)   (140,000)            (21,907)   (153,349)
 69   (20,000)   (160,000)            (21,907)   (175,256)
 70    15,200    (144,800)             19,524    (155,732)
 71    15,200    (129,600)             19,524    (136,208)
 72    15,200    (114,400)             19,524    (116,684)
 73    15,200     (99,200)             19,524     (97,160)
 74    15,200     (84,000)             19,524     (77,636)
 75    15,200     (68,800)             19,524     (58,112)
 76    15,200     (53,600)             19,524     (38,588)
 77    15,200     (38,400)             19,524     (19,064)
 78    15,200     (23,200)  (1.8%)     19,524         460    0.0%     1.9%
 79    15,200      (8,000)  (0.6%)     19,524      19,984    1.2%     1.8%
 80    15,200       7,200    0.5%      19,524      39,508    2.2%     1.7%
 81    15,200      22,400    1.3%      19,524      59,032    3.0%     1.7%
 82    15,200      37,600    2.0%      19,524      78,556    3.6%     1.6%
 83    15,200      52,800    2.7%      19,524      98,080    4.2%     1.5%
 84    15,200      68,000    3.2%      19,524     117,604    4.7%     1.5%
 85    15,200      83,200    3.6%      19,524     137,128    5.1%     1.5%
 86    15,200      98,400    4.0%      19,524     156,652    5.5%     1.4%
 87    15,200     113,600    4.4%      19,524     176,176    5.8%     1.4%
 88    15,200     128,800    4.7%      19,524     195,700    6.0%     1.4%
 89    15,200     144,000    4.9%      19,524     215,224    6.3%     1.3%
 90    15,200     159,200    5.2%      19,524     234,748    6.5%     1.3%
 91    15,201     174,401    5.4%      19,524     254,272    6.7%     1.3%
 92    15,202     189,603    5.6%      19,524     273,796    6.8%     1.3%
 93    15,203     204,806    5.7%      19,524     293,320    7.0%     1.3%
 94    15,204     220,010    5.9%      19,524     312,844    7.1%     1.2%
 95    15,205     235,215    6.0%      19,524     332,368    7.2%     1.2%
 96    15,206     250,421    6.1%      19,524     351,892    7.3%     1.2%
 97    15,207     265,628    6.2%      19,524     371,416    7.4%     1.2%
 98    15,208     280,836    6.3%      19,524     390,940    7.5%     1.2%
 99    15,209     296,045    6.4%      19,524     410,464    7.6%     1.2%
100    15,210     311,255    6.5%      19,524     429,988    7.6%     1.2%
Let me explain the columns. (Refer to my previous post for more information.)
  • Pre Tax & Roth
    • Cash Flow: The difference in SS benefit between starting at age 62 and at age 70. For the first eight years it represents the SS benefit that one is forsaking if one waits until age 70. For subsequent years it is the additional benefit one receives by waiting until 70.
    • Cumulative: The running total of the differences.
    • IRR: The Internal Rate of Return calculated with the Excel IRR function applied to the range of cells from age 62 through each possible life expectancy age in succession beginning with 78. For example, if one died just before turning age 82, the IRR would be 1.3%. Note: since SS is inflation-indexed, these are real returns comparable to the yield on TIPS.
  • TIRA After Tax
    • Cash Flow: The difference in SS benefit and federal tax between starting at age 62 and at age 70. For example if one claims at age 62, one would get $20,000 and pay $5,095 tax. On the other hand if one delayed, from age 62 - 69 one would forsake the $20,000 and also pay $7,072 in tax (higher because of funding the SS absence with TIRA withdrawals). Therefore the Cash Flow for these years is -$21,907 (0 - 7002 - 20000 + 5095). If one delays, starting at age 70 one gets $35,200 in SS and pays $771 in tax. The Cash Flow for these years is therefore +$19,524 (35200 - 771 - 20000 + 5095).
    • Cumulative: The running total of the difference, just as for Pre Tax (Roth).
    • IRR: The Internal Rate of Return calculated same way as in the Pre Tax case. For example, if one died just before turning age 82, the IRR would be 3.0%.
  • Diff: The IRR for the TIRA After Tax case less the IRR for the Pre Tax & Roth case. For example, if one died just before turning age 82, it would be 1.7% (3.0% - 1.3%).
House Blend in same post wrote:Having done that, my question is whether the advantage of delaying in the Roth scenario looks better or worse than it does in the tax-deferred scenario.
Since the Pre Tax & Roth case's IRR is smaller for every life expectancy beginning with age 78, I'd say delaying is not as advantageous as in the TIRA After Tax case. (It would only be "better" -- i.e., not as bad -- if one died before age 73 or so.)

Edited to add following footnote:
* I'd been expecting you to comment, House Blend, on the astounding result (at least it astounded me!) that when funding a $50,000 after tax income with the $20,000 of SS, the federal tax is $5,095; but when funding it with $35,200 of SS, the tax is only $771. In other words, postponing the start of SS reduces one's federal tax over $4,000 every year beginning at age 70. I thought you might ask about the effect on my analysis of the underlined part of the following:
the Wiki in [url=https://www.bogleheads.org/wiki/Taxation_of_Social_Security_benefits]Taxation of Social Security benefits[/url] wrote:There are two relevant base amounts; unlike most income limits in the tax code, they are not adjusted for inflation. The lower base is $25,000 if you are single, $32,000 if married filing jointly. The upper base is $34,000 if you are single, $44,000 if married filing jointly.
Last edited by #Cruncher on Wed May 24, 2017 3:45 pm, edited 1 time in total.
my name
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by my name »

CnC wrote: He is looking forward to taking Social Security at 62. I personally think it is a good idea
Here is why I - and 2% of retirees - delay until age 70. NOTE: I turn 70 later this year. Like your Dad, I am single. I have had good health and have had other funds to live on. Note one SS strategy for a couple is to begin the SS of the lower SS spouse at age 62, and let the higher amount SS grow until age 70 then switch over to that one.

I say to forget the math and emotions, fear SS will change, at least for those over 55. I view SS as insurance - in case I live.

You would gain about 33% if you wait until 66, and another 33% if you wait until 70. If I had begun at age 62 I probably would have no idea where the money went, many need that money to spend on living costs or buy a new car or use it for extras like travel. So instead of spending the money from age 62, I start at 70 with $40,000 a year for the rest of my life. If inflation happens, it is better at increasing $40,000 than the $22,000 I'd have if I began at 62. I also wanted to max the SS amount as it will help pay for any long term care. You'll get into a nicer facility with $40,000 than $22,000. And that breakeven point is pretty close, about a decade away.
rai
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by rai »

my name wrote:
CnC wrote: Note one SS strategy for a couple is to begin the SS of the lower SS spouse at age 62, and let the higher amount SS grow until age 70 *then switch over to that one*.
I am unsure what you mean by then switch over to that one.

Isn't once you start to collect you are set from then onwards?

---—

I do have a question regarding married with both being high earners (near max SS)

My wife is 1967 and I'm 1965 and so if both our SS would be near max and we don't need any because we saved but would like to get what's ours.

So if we were to split the difference would it make sense (assuming we both retire at 61) for myself to collect early at 62 and wife to wait for 70 or the other way around? (Wife at 62 and myself at 70). I'm not clear of the math if it makes more sense for me to collect early since I'm getting to 62 first but we have to wait a full 9-10 years for my wife to reach 70, or if it's better to wait for my wife to reach 62 and not have as many years until I reach 70 when we'd be collecting two checks.

I know maybe I'm over thinking and maybe it's better for both of us to collect at FRA or some time before or after. But I like the idea of getting something sooner. I know it's the instant gratification thing that makes a lot of people file earlier.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by hulburt1 »

Not sure now after listing to everyone. I have enough to live to 100 without SS. I still live like I have little money. Sense I turned 62 I take what I would get from SS and use it. I will do the same with my wife when she retires. We will wait until 70 and get 44,000 a year. we live now on 60000. We have saved 2.2m. So we could take out more. I'm also putting some into Roth. My plan is to have enough to have 1000 a month tax free
for 15 years. I'm at 6years now. I would like a better computer with spell check.
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burt
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by burt »

Regarding taking SS at age 62 or delaying until age 70.
I think I may pick door #3.
Delay SS until FRA (Full Retirement Age) at age 66 and enjoy the extra $700/month.

edit:
And who knows, maybe I want to do part time work before FRA at age 66.
I most certainly would want to avoid the steep penalty for working while drawing early SS before FRA.

burt
smitcat
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

rai wrote:
my name wrote:
CnC wrote: Note one SS strategy for a couple is to begin the SS of the lower SS spouse at age 62, and let the higher amount SS grow until age 70 *then switch over to that one*.
I am unsure what you mean by then switch over to that one.

Isn't once you start to collect you are set from then onwards?

---—

I do have a question regarding married with both being high earners (near max SS)

My wife is 1967 and I'm 1965 and so if both our SS would be near max and we don't need any because we saved but would like to get what's ours.

So if we were to split the difference would it make sense (assuming we both retire at 61) for myself to collect early at 62 and wife to wait for 70 or the other way around? (Wife at 62 and myself at 70). I'm not clear of the math if it makes more sense for me to collect early since I'm getting to 62 first but we have to wait a full 9-10 years for my wife to reach 70, or if it's better to wait for my wife to reach 62 and not have as many years until I reach 70 when we'd be collecting two checks.

I know maybe I'm over thinking and maybe it's better for both of us to collect at FRA or some time before or after. But I like the idea of getting something sooner. I know it's the instant gratification thing that makes a lot of people file earlier.
Have you tried using one of the better SS calculators? They will take these variable and turn them into numbers that you can compare which will likely make your choices easier I like the Bedrock one here....
http://www.bedrockcapital.com/ssanalyze/

Please note that setting the variables within the calculator will change your results and sometimes in a large way - you can set COLA, Discount rate, and expected age of death as well as when to take each SS for one or both of a couple. Results arte pretty easy to read in the summary and you can easily print each run if you like.
rai
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by rai »

smitcat wrote:
rai wrote:
my name wrote:
CnC wrote: Note one SS strategy for a couple is to begin the SS of the lower SS spouse at age 62, and let the higher amount SS grow until age 70 *then switch over to that one*.
I am unsure what you mean by then switch over to that one.

Isn't once you start to collect you are set from then onwards?

---—

I do have a question regarding married with both being high earners (near max SS)

My wife is 1967 and I'm 1965 and so if both our SS would be near max and we don't need any because we saved but would like to get what's ours.

So if we were to split the difference would it make sense (assuming we both retire at 61) for myself to collect early at 62 and wife to wait for 70 or the other way around? (Wife at 62 and myself at 70). I'm not clear of the math if it makes more sense for me to collect early since I'm getting to 62 first but we have to wait a full 9-10 years for my wife to reach 70, or if it's better to wait for my wife to reach 62 and not have as many years until I reach 70 when we'd be collecting two checks.

I know maybe I'm over thinking and maybe it's better for both of us to collect at FRA or some time before or after. But I like the idea of getting something sooner. I know it's the instant gratification thing that makes a lot of people file earlier.
Have you tried using one of the better SS calculators? They will take these variable and turn them into numbers that you can compare which will likely make your choices easier I like the Bedrock one here....
http://www.bedrockcapital.com/ssanalyze/

Please note that setting the variables within the calculator will change your results and sometimes in a large way - you can set COLA, Discount rate, and expected age of death as well as when to take each SS for one or both of a couple. Results arte pretty easy to read in the summary and you can easily print each run if you like.
Thanks a bunch, didn't know about these calculators.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair
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House Blend
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by House Blend »

#Cruncher wrote:
House Blend in [url=https://www.bogleheads.org/forum/viewtopic.php?p=3379798#p3379798]this post[/url] wrote:... I would quantify how much better (or worse) delayed SS is compared to immediate SS in the tax-deferred scenario. Next do the same calculation in the Roth scenario.
I'm perplexed, House Blend. In my previous post I already did that. Either you didn't realize it, or I'm misunderstanding your question. [*][/color]
OK, yes I now understand better what you were calculating.

Of course a big difference between my back of the envelope example and your calculation is that my tradeoff was marginal: a one time hit of $2000 vs. $160/yr. Yours (claiming at 62 or 70) involves large amounts of SS income: $20K per year for 8 years in exchange for an extra $15,200/yr starting 8 years later.

One has to expect that the large income tradeoffs will straddle multiple marginal tax rates (and they do). By keeping things marginal, I was angling for having only one rate applied to both the $2000 and the $160/yr.

Another consequence of having the "purchase" take 8 years is that it is more essential to account for the future value of money. It appears that you are doing the calculation in real dollars, but if your retirement account can be expected to return (say) 3% real per year, then that means that a withdrawal of 2017 dollars in 2018 is 3% cheaper. Equivalently, one should account for how much is left in the retirement account if it is growing 3% real/yr. (Or some other rate.)
Edited to add following footnote:
* I'd been expecting you to comment, House Blend, on the astounding result (at least it astounded me!) that when funding a $50,000 after tax income with the $20,000 of SS, the federal tax is $5,095; but when funding it with $35,200 of SS, the tax is only $771. In other words, postponing the start of SS reduces one's federal tax over $4,000 every year beginning at age 70. I thought you might ask about the effect on my analysis of the underlined part of the following:
the Wiki in [url=https://www.bogleheads.org/wiki/Taxation_of_Social_Security_benefits]Taxation of Social Security benefits[/url] wrote:There are two relevant base amounts; unlike most income limits in the tax code, they are not adjusted for inflation. The lower base is $25,000 if you are single, $32,000 if married filing jointly. The upper base is $34,000 if you are single, $44,000 if married filing jointly.
Yes, I wasn't going to mention that those base amounts are in nominal dollars. ;-)
The result is that if you are in or below the SS tax hump, enough inflation can push you all the way through and above the hump. Unfortunately one has to make assumptions about inflation to model this.

For example with 15% inflation, the $20K SS will become $23K nominal, and you need about $41,400 nominal ordinary income ($36K real) to net $50K real after tax. This moves you from being inside the SS tax hump to being above it. Once you stay above the hump, then things become simpler (and different from your calculation), since 85% of the SS income is taxable.

Claiming SS late pushes the tax hump to a higher point, so that less of the SS income is taxable if you are in it. But it's not necessarily a free lunch, since it has to be balanced against paying more income tax in the pre-SS years. Real vs. nominal is an issue here too.
Diogenes
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by Diogenes »

smitcat wrote:
Diogenes wrote:This never fails to be an interesting topic. Let's try this:

My business partner will retire at age 62, about three years from now. Given his set of circumstances, he feels his spouse, who retired this year at age 59, should claim her SS at 62. We have discussed this a few times as he feels I should know the answer, but it seems hard to fault his logic. Here goes:

He: has a sizable full cola lifetime pension that he is collecting now from prior government service, plus partnership income that will end at retirement. Neither plan to need to touch their tax deferred portfolio until RMD requires it. Although he qualifies for SS due to work before and after that, due to WEP and GPO he plans not to file for SS until FRA. Because of the pension, he will not have low income years to do Roth conversions.
She: has a sizable SS benefit from a long private/ non-government career and tax deferred accounts, but wishes her 'own' money until RMD's at 70 1/2. Both are in good health.
Plan: she will take SS at 62, he will wait until FRA.

He asked me to point out something significant that he is missing. Since there is a nice dinner involved with this wager, I'm turning to my expert colleagues at BH to save me from picking up the check...
Is he overlooking something?
The best method to win the bet is to load his information into any reasonable calculator/simulator and see what amount of funds he will be able to spend each year not the total amount if funds he will collect. Delaying SS will often yield higher returns in funds you can spend dependent upon the input that you provide the calculator - we like both IORP and the RPM but there are others that can do similar tasks.
Without loading the exact account details and variables for your business partner into a calculator there can be no comparisons.
Good ideas. Still, it appears that IORP and RPM don't account for the tax consequences of withdrawing $ now from IRA's for the wife's cash flow needs if SS is deferred to FRA or 70. Also looked at SSAnalyze as recommended, but it also does not appear to take tax rate into account.
With the pension keeping them in the 25-28 percent bracket forever, and the RMDs starting at 70 being around 100K, it seems that there would little reason to defer even more SS income until 70, which would also require pre-RMD withdrawals to cover cash flow. Conversion to existing Roths meanwhile would likewise be out due to the tax rate.
The only advantage I can see for her to not use SS payments at 62 as a substitute for withdrawal from an IRA of the same amount is if she plans to return to work in any meaningful fashion between 62 and 66. Thoughts?
smitcat
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

Diogenes wrote:
smitcat wrote:
Diogenes wrote:This never fails to be an interesting topic. Let's try this:

My business partner will retire at age 62, about three years from now. Given his set of circumstances, he feels his spouse, who retired this year at age 59, should claim her SS at 62. We have discussed this a few times as he feels I should know the answer, but it seems hard to fault his logic. Here goes:

He: has a sizable full cola lifetime pension that he is collecting now from prior government service, plus partnership income that will end at retirement. Neither plan to need to touch their tax deferred portfolio until RMD requires it. Although he qualifies for SS due to work before and after that, due to WEP and GPO he plans not to file for SS until FRA. Because of the pension, he will not have low income years to do Roth conversions.
She: has a sizable SS benefit from a long private/ non-government career and tax deferred accounts, but wishes her 'own' money until RMD's at 70 1/2. Both are in good health.
Plan: she will take SS at 62, he will wait until FRA.

He asked me to point out something significant that he is missing. Since there is a nice dinner involved with this wager, I'm turning to my expert colleagues at BH to save me from picking up the check...
Is he overlooking something?
The best method to win the bet is to load his information into any reasonable calculator/simulator and see what amount of funds he will be able to spend each year not the total amount if funds he will collect. Delaying SS will often yield higher returns in funds you can spend dependent upon the input that you provide the calculator - we like both IORP and the RPM but there are others that can do similar tasks.
Without loading the exact account details and variables for your business partner into a calculator there can be no comparisons.
Good ideas. Still, it appears that IORP and RPM don't account for the tax consequences of withdrawing $ now from IRA's for the wife's cash flow needs if SS is deferred to FRA or 70. Also looked at SSAnalyze as recommended, but it also does not appear to take tax rate into account.
With the pension keeping them in the 25-28 percent bracket forever, and the RMDs starting at 70 being around 100K, it seems that there would little reason to defer even more SS income until 70, which would also require pre-RMD withdrawals to cover cash flow. Conversion to existing Roths meanwhile would likewise be out due to the tax rate.
The only advantage I can see for her to not use SS payments at 62 as a substitute for withdrawal from an IRA of the same amount is if she plans to return to work in any meaningful fashion between 62 and 66. Thoughts?

Diogenes - in this last post you have added more details - estimated tax rates and RMD estimates that will assist in your modeling. I have used both the long form of IOPR as well as RPM and both of them will help determine the tax consequences you are asking about I am more familiar running many scenarios with IORP and simulating proposed annuities and various SS age filings while recording (printing or charting) the resultant taxes each year that IORP produces on one of the output charts. On a couple of the simulations that we were most interested in we then took those tax estimates and ran a few years through our tax software for simulation as well - our results were very close . YMMV
Diogenes
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by Diogenes »

Smitcat,

You're absolutely right, I was not trying the long form iORP. Took a look and it asks for a great deal more information than I have. Sent it to him to figure out!
Truth and clarity are important in all things...
smitcat
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

Diogenes wrote:Smitcat,

You're absolutely right, I was not trying the long form iORP. Took a look and it asks for a great deal more information than I have. Sent it to him to figure out!
If you want to look at comparing variables that you introduce also consider using the 'fixed payout plus inflation' option on the IORP as it will remove the variables of payouts per year when comparing things like Roth converts.
highercall
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by highercall »

I know a fellow who took social security at 62 and invested it in the total stock market. He lived off his investments, dividends, interests, ect. His reason was that historically the market returned 8%(same as delaying social security) although not guaranteed, but at least if he died before taking social security at 70 he would have some additional money for his heirs. And if it did return 8% he did not lose anything by taking it early.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by itstoomuch »

highercall wrote:I know a fellow who took social security at 62 and invested it in the total stock market. He lived off his investments, dividends, interests, ect. His reason was that historically the market returned 8%(same as delaying social security) although not guaranteed, but at least if he died before taking social security at 70 he would have some additional money for his heirs. And if it did return 8% he did not lose anything by taking it early.
This worked for us in this bull market of 8 years.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
namajones
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Re: My dad is taking Social Security at 62, why would anyone not?

Post by namajones »

Trader/Investor wrote: Fri May 19, 2017 12:45 pm Sorry about your Mom. That right there should be your answer. I took SS at 62 and will never regret it. I am now 70. You can do the fancy math and all but nothing is a given in life especially how long we will live. I have too many former classmates that are now 6 ft under and I can pretty much guarantee you they all expected to live to 80 and beyond. A few of the closer ones I knew never took SS because they were convinced to maximize their SS by taking it as late as possible. With SS it is best to take the money ASAP and run.
This resonates with me--and apparently many others:

"Among Social Security retired-worker beneficiaries, nearly half claim their retirement benefits as early as possible, and almost all of them claim at some point before their full retirement age (FRA) (Muldoon and Kopcke 2008; Song and Manchester 2007a)."

https://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p21.html
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by corn18 »

Why wait? Longevity insurance for my wife who is 4 years younger than me and has no SS benefits on her own. That combined with a 55% survivor benefit on my pension = a huge income cut for her if I die.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by KlangFool »

CnC wrote: Fri May 19, 2017 1:07 pm
If he listened to convention wisdom he would still be working and not got to spend any time in retirement with his wife. So there was not much that was going to change his mind. We talked and agreed money buys a 60 year old a lot more enjoyment than it does an 80 year old
CnC,

Whether to withdraw social security at 62 years old has nothing to do with whether to retire at 62 years old. A person could retire at 62 years old and live on his portfolio and then withdraw social security at 67/70 year sold.

If someone could not retire without withdrawing the social security at 62 years old, then, no discussion is needed. However, if someone could live on their portfolio and withdraw social security at 67/70 years old, it could be advantageous.

If your plan is to support your father and fill the gap, you may have to think about this too.

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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by hand »

Social Security provides different benefits depending on how you use it and when you die:

If you take early:
1) Immediate cashflow to allow an increase to early retirement spending
2) Small amount of longevity insurance
2) Maximize lifetime benefit if you die early

If you take late:
1) Much larger amount of longevity insurance
2) Maximize lifetime benefit if you die late
3) Potentially maximize lifetime benefit if your spouse outlives you
4) Allow advanced financial moves such as Roth IRA Conversion

Many people prioritize / need the immediate cash flow when they stop working and take immediately.
For others (typically those who have enough retirement savings to support early retirement spending) the increased longevity insurance and spousal protection are more important.
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Re: My dad is taking Social Security at 62, why would anyone not?

Post by Silk McCue »

namajones wrote: Wed Jun 02, 2021 4:22 am
This resonates with me--and apparently many others:

"Among Social Security retired-worker beneficiaries, nearly half claim their retirement benefits as early as possible, and almost all of them claim at some point before their full retirement age (FRA) (Muldoon and Kopcke 2008; Song and Manchester 2007a)."

https://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p21.html
This was a four year old dead thread. SMH

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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by Nowizard »

As with all things financial, personal circumstances ultimate dictate the best decisions. We all look for absolutes with complex issues where there are none, one of the problems leading to accepting "advice" from assertive people who may know more about trends but less about us as individuals. In short, one can make the decision for early SS based on financial need or psychological comfort when financial need does not exist. Obvious factors include assets, income, personal health, comfort/discomfort with waiting, etc. This site will give a variety of good suggestions to aid in determining the decision which is his ultimately.

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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by #Cruncher »

hand wrote: Wed Jun 02, 2021 7:38 amSocial Security provides different benefits depending on how you use it and when you die: If you take early:
1) Immediate cashflow to allow an increase to early retirement spending
...
This is a common misconception. As long as one has a moderate sized portfolio of bonds that need not be touched if one started Social Security at age 62, one can delay starting SS and still spend the same amount. As KlangFool points out two posts back, until the later starting age, the age 62 benefit can be replaced by selling down that portfolio.

Here is an example that uses a bond portfolio of $200,000 at age 62 to fund delaying until age 70. (All dollar amounts are assumed to be in age 62 constant dollars.)

Code: Select all

Row        Col A       Col B      Col C      Col D    Formula in column B
  1         Born        1960
  2          NRA      67.000 (Normal Retirement Age) =MIN(67,66+MAX(0,B1-1954)/6)
  3          PIA       2,500 (Primary Insurance Amt)
  4  Bond growth     (0.30%) (*)
  5       Claim:       Early       Late
  6          Age          62         70
  7        % PIA     70.000%   124.000%              =IF(B6<$B2,1-(5/900)*MIN(36,($B2-B6)*12)-(5/1200)*MAX(0,($B2-B6)*12-36),1+(8/1200)*(B6-$B2)*12)
  8      Benefit      21,000     37,200              =12*$B3*B7
  9          Age     -- Bond Balance --      Diff

Code: Select all

 10           62     200,000    200,000
 11           63     199,400    178,400    (21,000)
 12           64     198,802    156,865    (41,937)
 13           65     198,205    135,394    (62,811)
 14           66     197,611    113,988    (83,623)
 15           67     197,018     92,646   (104,372)
 16           68     196,427     71,368   (125,059)
 17           69     195,838     50,154   (145,684)
 18           70     195,250     29,004   (166,247)
 19           71     194,664     45,117   (149,548)
 20           72     194,080     61,181   (132,899)
 21           73     193,498     77,198   (116,300)
 22           74     192,918     93,166    (99,752)
 23           75     192,339    109,087    (83,252)
 24           76     191,762    124,959    (66,803)
 25           77     191,187    140,784    (50,402)
 26           78     190,613    156,562    (34,051)
 27           79     190,041    172,292    (17,749)
 28           80     189,471    187,976     (1,496)
 29           81     188,903    203,612     14,709 
 30           82     188,336    219,201     30,865 
 31           83     187,771    234,743     46,972 
 32           84     187,208    250,239     63,031 
 33           85     186,646    265,688     79,042 
When delaying from age 62 to 70, $21,000 is withdrawn from the bond portfolio each year to replace the forsaken SS benefit. This causes the bond portfolio to fall to only $29,000 by age 70. But thereafter the additional $16,200 of the higher age 70 benefit is added to the portfolio each year. This causes its balance to surpass by age 81 what it would have been with SS claimed at 62. All the while one is spending the same whether one starts SS at 62 or at 70.

* -0.30% is the current default growth rate assumed by the excellent Open Social Security calculator. It is the 20-year constant maturity TIPS rate for 5/28 from the Daily Treasury Real Yield Curve Rates.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by rich126 »

Obviously if you die early and you want to leave a larger estate to heirs then taking social security early would be better but none of know that stuff ahead of time (usually).

Like others here, I have a couple of MYGAs (3 yrs) that I will use to help with spending in my first 5-8 years of retirement so I will likely delay social security to a minimum of 65 if not 67 or 70. Personally I don't expect to be alive in my 80s (and honestly I never expected to make it past 40 but did so you never know!).
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by namajones »

#Cruncher wrote: Wed Jun 02, 2021 12:02 pm But thereafter the additional $16,200 of the higher age 70 benefit is added to the portfolio each year. This causes its balance to surpass by age 81 what it would have been with SS claimed at 62. All the while one is spending the same whether one starts SS at 62 or at 70.
This assumes one makes it to 81. It also assumes that the bond spend-down to allow the higher SS payout is desired in one's overall goal. If the goal is to leave maximum portfolio to non-spousal beneficiaries, then not spending down that bond bundle might be desirable.

These SS considerations are all so personal, and then on top of that you have emotions, which can make all of the math calculations and what-if scenarios irrelevant in a second.

To me the best reason to delay is if you have a spouse and especially a younger spouse and/or very young kids. If you're single and expect to stay that way, heck, take it at 62 and go have some fun.

Personally I have the means to delay SS until 70 or beyond if they allowed that, but I doubt I will just because I don't want to eat in to my savings or investments that much in order to do so.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by corn18 »

One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by namajones »

corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
Absolutely.

The good thing about SS is that you can claim it at any time, any month. It's not a 62/66/70 thing.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by KlangFool »

corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
corn18,

As per my understanding, there are at least 4 combinations of taking SS early. It is not one.

A) Taking your own SS early.

B) Taking SS benefit early based on your spouse.

C) Your spouse taking her own SS early

D) Your spouse taking SS benefit early based on you

If I am wrong, please correct me.

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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
That is very interesting - I have read the opposite in a few places one of them is here....
"Delaying the Social Security to age 70 not only increased their probability of achieving their goals by 10%+ but it also extended their earliest year of running out of money by five years in their worst period of investment returns."
Link:
https://ballastplan.com/insight-into-fi ... -security/
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by corn18 »

KlangFool wrote: Wed Jun 02, 2021 2:30 pm
corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
corn18,

As per my understanding, there are at least 4 combinations of taking SS early. It is not one.

A) Taking your own SS early.

B) Taking SS benefit early based on your spouse.

C) Your spouse taking her own SS early

D) Your spouse taking SS benefit early based on you

If I am wrong, please correct me.

KlangFool
I should be more clear with my assertion. I am the only one with SS benefits, wife has none on her own. And I am 4 years older. Best strategy is for me to delay until 70 and her take take her spousal @ her age 67 (my age 71).
smitcat wrote: Wed Jun 02, 2021 3:32 pm
corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
That is very interesting - I have read the opposite in a few places one of them is here....
"Delaying the Social Security to age 70 not only increased their probability of achieving their goals by 10%+ but it also extended their earliest year of running out of money by five years in their worst period of investment returns."
Link:
https://ballastplan.com/insight-into-fi ... -security/
Same for this. My calculations are based on a great COLA pension, so I really don't need the extra SS. I haven't run other scenarios.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by Godot »

corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
Intriguing. If true, I would assume this theory been written about a fair deal.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by sureshoe »

rich126 wrote: Wed Jun 02, 2021 12:42 pm Obviously if you die early and you want to leave a larger estate to heirs then taking social security early would be better but none of know that stuff ahead of time (usually).
I think if someone is debating their ability (or inability) to delay social security, the last thing they should be worrying about are their heirs. I don't think you're advocating that, but geesh - to heck with the heirs. :)
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by randomguy »

smitcat wrote: Wed Jun 02, 2021 3:32 pm
corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
That is very interesting - I have read the opposite in a few places one of them is here....
"Delaying the Social Security to age 70 not only increased their probability of achieving their goals by 10%+ but it also extended their earliest year of running out of money by five years in their worst period of investment returns."
Link:
https://ballastplan.com/insight-into-fi ... -security/
It is all about the assumptions. The 2 that jump out at me are
-4% inflation is 30% above historical numbers and like 100% more than what we have been running
-Both parties living to 100 is a 1% event

and I think they both favor delaying SS.

You can also debate if 4% real for a a retirement portfolio is ok. The historical number has been a bit under 6 for a 50/50 portfolio. Being 50% more conservative and then throwing those numbers into a MC can give you extra pessimistic results. And MC results are very subject to implementation (i.e. mean reversion coding) and inputs (i.e.

And it should be pointed out in this example we are talking about delaying 3-4 years. The effects of delaying 8 years might be more dramatic. I don't have a hard time imagining that a 62 year old person in 2000 would have done better taking SS instead of having do to 100-110k withdrawals from their portfolio for 8 years.

If you can't run a couple dozen cases to see how the outputs change when you change the inputs it is hard to figure out what you are really seeing.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by Wiggums »

2stepsbehind wrote: Sun May 21, 2017 11:02 am OP, your father may want to check out the following concerning potential claiming strategies:https://www.onefpa.org/journal/Document ... Shuart.pdf

Curious what people think about this article. In particular "Table 2" would suggest that if a widow(er) only has a $500 worker benefit, but a $2000 widow(er)'s benefit, they should take the worker's benefit for two years and then switch to the widow(er)'s benefit whereas I'm guessing the advice on Bogleheads would be to wait it out until full retirement age. Is there a website that would map out where the break even point is on that?
https://www.financialplanningassociatio ... Shuart.pdf
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

randomguy wrote: Wed Jun 02, 2021 4:21 pm
smitcat wrote: Wed Jun 02, 2021 3:32 pm
corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
That is very interesting - I have read the opposite in a few places one of them is here....
"Delaying the Social Security to age 70 not only increased their probability of achieving their goals by 10%+ but it also extended their earliest year of running out of money by five years in their worst period of investment returns."
Link:
https://ballastplan.com/insight-into-fi ... -security/
It is all about the assumptions. The 2 that jump out at me are
-4% inflation is 30% above historical numbers and like 100% more than what we have been running
-Both parties living to 100 is a 1% event

and I think they both favor delaying SS.

You can also debate if 4% real for a a retirement portfolio is ok. The historical number has been a bit under 6 for a 50/50 portfolio. Being 50% more conservative and then throwing those numbers into a MC can give you extra pessimistic results. And MC results are very subject to implementation (i.e. mean reversion coding) and inputs (i.e.

And it should be pointed out in this example we are talking about delaying 3-4 years. The effects of delaying 8 years might be more dramatic. I don't have a hard time imagining that a 62 year old person in 2000 would have done better taking SS instead of having do to 100-110k withdrawals from their portfolio for 8 years.

If you can't run a couple dozen cases to see how the outputs change when you change the inputs it is hard to figure out what you are really seeing.
"If you can't run a couple dozen cases to see how the outputs change when you change the inputs it is hard to figure out what you are really seeing."
I have ...and in our case it is much more likely that later SS is favorable.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by Inframan4712 »

Godot wrote: Wed Jun 02, 2021 4:00 pm
corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
Intriguing. If true, I would assume this theory been written about a fair deal.

Longevity calculators indicate we both may live to 92 or 93.

My experience with SSA.GOV -> OpensocialSecurity -> Firecalc:

1. If I and my wife take SS early, we end up with 15-17% LESS total lifetime money received from Social Security.
2. BUT, taking the reduced amount early in FireCalc decreases the portfolio success by only 1%.
3. Importantly, the final portfolio value range is LARGER (more negative and more positive) if we defer social security, so perhaps portfolio volatility is increased by deferring social security, and success is only slightly increased.

Still a few years from SS eligibility, but plan to keep deferring SS as long as possible. In the event of a prolonged downturn, once we've nearly exhausted fixed income, will start taking Social Security to replace that fixed income, even if that means taking "early."
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by delamer »

sureshoe wrote: Wed Jun 02, 2021 4:07 pm
rich126 wrote: Wed Jun 02, 2021 12:42 pm Obviously if you die early and you want to leave a larger estate to heirs then taking social security early would be better but none of know that stuff ahead of time (usually).
I think if someone is debating their ability (or inability) to delay social security, the last thing they should be worrying about are their heirs. I don't think you're advocating that, but geesh - to heck with the heirs. :)
There’s a difference between “debating their ability to delay” versus trying to pick the best strategy.

My guess would be most on this forum are in the latter category. For many, many people, though, there’s no debate — they need the Social Security check as soon as they no longer have a paycheck.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by rob »

Ron wrote: Fri May 19, 2017 2:10 pm 5. Finally, I/we look at SS (along with our other retirement income) as reducing income risk as we get older. It means that more income will be coming from "set and forget" sources - not requiring constant monitoring of our investments to ensure we know where the next paycheck is coming from.
That's interesting and something I had not considered... thanks for the thought! Edit: Also help on the loss of facility as we all age...
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by JoeRetire »

randomguy wrote: Wed Jun 02, 2021 4:21 pm I don't have a hard time imagining that a 62 year old person in 2000 would have done better taking SS instead of having do to 100-110k withdrawals from their portfolio for 8 years.
I have a hard time imagining that a 62 year old person in 2000 could get 100-110k per year in social security benefits.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by JoeRetire »

delamer wrote: Wed Jun 02, 2021 5:28 pmFor many, many people, though, there’s no debate — they need the Social Security check as soon as they no longer have a paycheck.
I'm sure that's true. Sadly, many of those are the same people who could most use the additional lifetime benefits gained by delaying.
Where possible, they should be delaying the date at which they no longer have a paycheck.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by sureshoe »

delamer wrote: Wed Jun 02, 2021 5:28 pm
sureshoe wrote: Wed Jun 02, 2021 4:07 pm
rich126 wrote: Wed Jun 02, 2021 12:42 pm Obviously if you die early and you want to leave a larger estate to heirs then taking social security early would be better but none of know that stuff ahead of time (usually).
I think if someone is debating their ability (or inability) to delay social security, the last thing they should be worrying about are their heirs. I don't think you're advocating that, but geesh - to heck with the heirs. :)
There’s a difference between “debating their ability to delay” versus trying to pick the best strategy.

My guess would be most on this forum are in the latter category. For many, many people, though, there’s no debate — they need the Social Security check as soon as they no longer have a paycheck.
I would like to see a poll, but my guess is that's a bad assumption. You have a lot of people on here who frequently discuss early retirement, Roth laddering, etc.

For pure financial positioning, most people are better waiting. But, I'm mostly agreeing with you that if someone is tight on money, I understand taking it. I really empathize with someone in that spot.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by sureshoe »

JoeRetire wrote: Wed Jun 02, 2021 6:14 pm
randomguy wrote: Wed Jun 02, 2021 4:21 pm I don't have a hard time imagining that a 62 year old person in 2000 would have done better taking SS instead of having do to 100-110k withdrawals from their portfolio for 8 years.
I have a hard time imagining that a 62 year old person in 2000 could get 100-110k per year in social security benefits.
Considering the max is $36k :)

But maybe what they mean is taking about $13k/year?
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by sixtyforty »

If you throw math at this problem or financial calculators they will almost always suggest delaying SS as a better financial decision. OTOH, this is not a binary decision between 62 and 70. One could reach 62 and decide they don't need the extra payment and wait until 63 to re-evaluate and so on. The amount increases each year and it might make more sense for someone, for example, to take it at 65, based on their situation at that time. You have time to decide.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

sureshoe wrote: Thu Jun 03, 2021 7:30 am
delamer wrote: Wed Jun 02, 2021 5:28 pm
sureshoe wrote: Wed Jun 02, 2021 4:07 pm
rich126 wrote: Wed Jun 02, 2021 12:42 pm Obviously if you die early and you want to leave a larger estate to heirs then taking social security early would be better but none of know that stuff ahead of time (usually).
I think if someone is debating their ability (or inability) to delay social security, the last thing they should be worrying about are their heirs. I don't think you're advocating that, but geesh - to heck with the heirs. :)
There’s a difference between “debating their ability to delay” versus trying to pick the best strategy.

My guess would be most on this forum are in the latter category. For many, many people, though, there’s no debate — they need the Social Security check as soon as they no longer have a paycheck.
I would like to see a poll, but my guess is that's a bad assumption. You have a lot of people on here who frequently discuss early retirement, Roth laddering, etc.

For pure financial positioning, most people are better waiting. But, I'm mostly agreeing with you that if someone is tight on money, I understand taking it. I really empathize with someone in that spot.
"But, I'm mostly agreeing with you that if someone is tight on money, I understand taking it. I really empathize with someone in that spot."
And that is the reason why most folks take SS as soon as possible.
goblue100
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by goblue100 »

sixtyforty wrote: Thu Jun 03, 2021 9:03 am If you throw math at this problem or financial calculators they will almost always suggest delaying SS as a better financial decision. OTOH, this is not a binary decision between 62 and 70. One could reach 62 and decide they don't need the extra payment and wait until 63 to re-evaluate and so on. The amount increases each year and it might make more sense for someone, for example, to take it at 65, based on their situation at that time. You have time to decide.
This makes a lot of sense. If you want an inflation protected longevity hedge, delaying is an excellent way to get one. If you have so much or so little money a longevity hedge is not an issue, then take it when you want or need to, it is a neutral decision.
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nisiprius
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by nisiprius »

Translating the Rubaiyat of Omar Khayyam, Edward FitzGerald wrote:Some for the Glories of This World; and some
Sigh for the Prophet's Paradise to come;
Ah, take the Cash, and let the Credit go,
Nor heed the rumble of a distant Drum!
Every back-of-the-envelope calculation I've done personally for myself has always led to the conclusion that taking Social Security at age 62 is well within the range of things a sane person might do. More generally, it is perfectly sane to claim whenever it is convenient and fits your life situation. That, by the way, is exactly what an insurance expert and forum contributor, the late "Mephistophles" advised. But not what "Bobcat2" advises.

In my case, I lost my job at about age 62, and after six months had been unable to secure a rejection letter, much less a job interview, so claiming Social Security was a good fit to my personal situation.

The financial experts who make detailed projections seem to find that in most situations, spending down savings and delaying claiming for as long as possible is theoretically better. But the projections depend on a lot of predictions, and my gut feeling is that the difference in outcome is small compared to the uncertainty of the real world.

The elephant in the room is what assumption to make regarding the future of Social Security. You can't avoid a judgement on whether or not Congress will act before 2037, when the trust fund is currently predicted to run out if nothing is done. That would mean roughly cutting benefits to ⅔ of what is currently promised. Because fixing the problem is not difficult or expensive, it all boils down to a political choice. I think there was at least one thread in this forum about a study that found it was still advantageous to wait, although of course less so, even if you assume a benefit cut--but the point is that findings are sensitive to assumptions and predictions.

If you start working after claiming early, and don't do anything, and exceed the earned income limit, your benefits get dinged. But what is very poorly understood is that this is temporary and balanced by a benefits increase when you do reach full retirement age (FRA). I know this is true from personal experience. I also know that it can be unnerving because a) poorly-informed SSA reps had told me that I was wrong, and b) instead of kicking in smoothly as a benefits increase right away, there was about a nine-month delay until some batch run got processed, and it kicked in almost a year late together with lump-sum retroactive payment.

If you claim early and don't actually need the money, you aren't forced to spend it. There's nothing at all stopping you from reinvesting it into anything you like. For example, you could invest it into stocks and intentionally shift from the ultraconservative investment that is Social Security into a higher-risk asset.

Finally, stuff happens. If you choose to defer claiming, figure out what will remind you to do it years later! How stupid that sounds. But I personally knew a 73-year-old who had never claimed, because he was still working and getting what he felt was enough income, had just never thought to do anything about it. I stood behind his chair at his desk and said "I am not moving until you onto the Social Security site and claim." It took less than thirty minutes, including the time it look him to phone his estranged wife and get some facts he said he'd forgotten about her and their marriage.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by whereskyle »

nisiprius wrote: Thu Jun 03, 2021 9:31 am
Translating the Rubaiyat of Omar Khayyam, Edward FitzGerald wrote:Some for the Glories of This World; and some
Sigh for the Prophet's Paradise to come;
Ah, take the Cash, and let the Credit go,
Nor heed the rumble of a distant Drum!
Every back-of-the-envelope calculation I've done personally for myself has always led to the conclusion that taking Social Security at age 62 is well within the range of things a sane person might do. More generally, it is perfectly sane to claim whenever it is convenient and fits your life situation. That, by the way, is exactly what an insurance expert and forum contributor, the late "Mephistophles" advised. But not what "Bobcat2" advises.

In my case, I lost my job at about age 62, and after six months had been unable to secure a rejection letter, much less a job interview, so claiming Social Security was a good fit to my personal situation.

The financial experts who make detailed projections seem to find that in most situations, spending down savings and delaying claiming for as long as possible is theoretically better. But the projections depend on a lot of predictions, and my gut feeling is that the difference in outcome is small compared to the uncertainty of the real world.

The elephant in the room is what assumption to make regarding the future of Social Security. You can't avoid a judgement on whether or not Congress will act before 2037, when the trust fund is currently predicted to run out if nothing is done. That would mean roughly cutting benefits to ⅔ of what is currently promised. Because fixing the problem is not difficult or expensive, it all boils down to a political choice. I think there was at least one thread in this forum about a study that found it was still advantageous to wait, although of course less so, even if you assume a benefit cut--but the point is that findings are sensitive to assumptions and predictions.

If you start working after claiming early, and don't do anything, and exceed the earned income limit, your benefits get dinged. But what is very poorly understood is that this is temporary and balanced by a benefits increase when you do reach full retirement age (FRA). I know this is true from personal experience. I also know that it can be unnerving because a) poorly-informed SSA reps had told me that I was wrong, and b) instead of kicking in smoothly as a benefits increase right away, there was about a nine-month delay until some batch run got processed, and it kicked in almost a year late together with lump-sum retroactive payment.

If you claim early and don't actually need the money, you aren't forced to spend it. There's nothing at all stopping you from reinvesting it into anything you like. For example, you could invest it into stocks and intentionally shift from the ultraconservative investment that is Social Security into a higher-risk asset.

Finally, stuff happens. If you choose to defer claiming, figure out what will remind you to do it years later! How stupid that sounds. But I personally knew a 73-year-old who had never claimed, because he was still working and getting what he felt was enough income, had just never thought to do anything about it. I stood behind his chair at his desk and said "I am not moving until you onto the Social Security site and claim." It took less than thirty minutes, including the time it look him to phone his estranged wife and get some facts he said he'd forgotten about her and their marriage.
Since you mentioned some scary (mis)conceptions about social security running out of money and cutting benefits to roughly 2/3, I think the following is in order:

https://www.google.com/amp/s/feeds.aarp ... f_amp=true

Your post of course includes many accuracies (as usual), but I think the linked article is in order because it highlights three things:

1. The social security SURPLUS is currently estimated to run out in 2035.

2. If the government does nothing between now and then, Social Security is estimated to be able to cover the costs of 79% of all benefits through simultaneous contributions into the program alone.

3. This has happened before. Social security nearly depleted its reserves in 1983, and the government took action by raising the FRA, raising the payroll tax, and taxing benefits, leading to the surplus the program enjoys today.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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David Jay
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by David Jay »

nisiprius wrote: Thu Jun 03, 2021 9:31 amEvery back-of-the-envelope calculation I've done personally for myself has always led to the conclusion that taking Social Security at age 62 is well within the range of things a sane person might do. More generally, it is perfectly sane to claim whenever it is convenient and fits your life situation.
And that fits perfectly into my advice in my “after I am gone” letter. I tell my spouse to use BH as a source of financial advice, with the understanding that if all the long-time-BHers agree, the advice is probably correct. If there is wide disagreement (as with SS claiming strategies), it probably doesn’t matter much. Or to use your words, it fits “well within the range of what a sane person would do”.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by smitcat »

nisiprius wrote: Thu Jun 03, 2021 9:31 am
Translating the Rubaiyat of Omar Khayyam, Edward FitzGerald wrote:Some for the Glories of This World; and some
Sigh for the Prophet's Paradise to come;
Ah, take the Cash, and let the Credit go,
Nor heed the rumble of a distant Drum!
Every back-of-the-envelope calculation I've done personally for myself has always led to the conclusion that taking Social Security at age 62 is well within the range of things a sane person might do. More generally, it is perfectly sane to claim whenever it is convenient and fits your life situation. That, by the way, is exactly what an insurance expert and forum contributor, the late "Mephistophles" advised. But not what "Bobcat2" advises.

In my case, I lost my job at about age 62, and after six months had been unable to secure a rejection letter, much less a job interview, so claiming Social Security was a good fit to my personal situation.

The financial experts who make detailed projections seem to find that in most situations, spending down savings and delaying claiming for as long as possible is theoretically better. But the projections depend on a lot of predictions, and my gut feeling is that the difference in outcome is small compared to the uncertainty of the real world.

The elephant in the room is what assumption to make regarding the future of Social Security. You can't avoid a judgement on whether or not Congress will act before 2037, when the trust fund is currently predicted to run out if nothing is done. That would mean roughly cutting benefits to ⅔ of what is currently promised. Because fixing the problem is not difficult or expensive, it all boils down to a political choice. I think there was at least one thread in this forum about a study that found it was still advantageous to wait, although of course less so, even if you assume a benefit cut--but the point is that findings are sensitive to assumptions and predictions.

If you start working after claiming early, and don't do anything, and exceed the earned income limit, your benefits get dinged. But what is very poorly understood is that this is temporary and balanced by a benefits increase when you do reach full retirement age (FRA). I know this is true from personal experience. I also know that it can be unnerving because a) poorly-informed SSA reps had told me that I was wrong, and b) instead of kicking in smoothly as a benefits increase right away, there was about a nine-month delay until some batch run got processed, and it kicked in almost a year late together with lump-sum retroactive payment.

If you claim early and don't actually need the money, you aren't forced to spend it. There's nothing at all stopping you from reinvesting it into anything you like. For example, you could invest it into stocks and intentionally shift from the ultraconservative investment that is Social Security into a higher-risk asset.

Finally, stuff happens. If you choose to defer claiming, figure out what will remind you to do it years later! How stupid that sounds. But I personally knew a 73-year-old who had never claimed, because he was still working and getting what he felt was enough income, had just never thought to do anything about it. I stood behind his chair at his desk and said "I am not moving until you onto the Social Security site and claim." It took less than thirty minutes, including the time it look him to phone his estranged wife and get some facts he said he'd forgotten about her and their marriage.
"In my case, I lost my job at about age 62, and after six months had been unable to secure a rejection letter, much less a job interview, so claiming Social Security was a good fit to my personal situation."
Makes sense ...and the most common reason to claim early.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by vanbogle59 »

corn18 wrote: Wed Jun 02, 2021 1:43 pm One thing I found in my models is that taking SS early can greatly reduce the impact of SORR. You have to know / expect to be in a downturn to make it beneficial, but man does it make a huge difference. Maybe that's market timing, but if you are looking at a six one way half dozen another scenario, taking it early can reduce SORR a lot.
I think this supports what I intend to do.

Let's say I had a $1M portfolio and 20K in SS and retired at 62.
I would declare my income 4% of the 1M and all of SS = 60k. Take all of this year's "salary" from the portfolio and delay. Don't peek for a year :-).

It was a great year for VTSAX! Now I have 1.2M in the portfolio. Delay SS another year. Take all of this year's "salary" from the portfolio.
Repeat...
It was a horrible year for VTSAX! Now I have .7M in the portfolio. Start SS! And I need less than 40K from my portfolio to keep my spending power.

Delaying holds the promise of higher payouts.
It also allows the luxury of turning on a fixed income stream if your variable portfolio gets a headache.

Should help me sleep better when the paychecks stop.
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Re: My dad is taking Social Security at 62, why would anyone not? (If they already quit working)

Post by randomguy »

sureshoe wrote: Thu Jun 03, 2021 7:31 am
JoeRetire wrote: Wed Jun 02, 2021 6:14 pm
randomguy wrote: Wed Jun 02, 2021 4:21 pm I don't have a hard time imagining that a 62 year old person in 2000 would have done better taking SS instead of having do to 100-110k withdrawals from their portfolio for 8 years.
I have a hard time imagining that a 62 year old person in 2000 could get 100-110k per year in social security benefits.
Considering the max is $36k :)

But maybe what they mean is taking about $13k/year?

Nobody said anything about getting 110k from social security. I have no clue where the heck that came from. In the example the choices were either take 110k from the portfolio or take SS early and take a lessor amount from the portfolio. Given the higher portfolio return than SS return, it seems likely that the 2000 retiree would have done much better taking SS early. They took on risk and it paid off.
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