Social security should you take early if you don’t need the money?

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Doubleeagle4me
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Social security should you take early if you don’t need the money?

Post by Doubleeagle4me » Mon May 13, 2019 5:49 pm

If you don’t need the money should you take SS at say 65 instead of 70? I’d have to pay tax on it but I could invest it or use it instead of dipping into my investments. I’m retired.

retire2022
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Re: Social security should you take early if you don’t need the money?

Post by retire2022 » Mon May 13, 2019 6:04 pm

Op

It depends on whether or not you have retirement savings and or pension and your risk tolerance

It also helps to provide your current portfolio holding and asset allocation and age.

As it stands your question does not provide useful response.

protagonist
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Re: Social security should you take early if you don’t need the money?

Post by protagonist » Mon May 13, 2019 6:09 pm

Hi, doub. This comes up from time to time.

My simple answer to this dilemma that I posted in a previous similar thread:

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $30K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. If he runs out of money before he dies, he can still live much more comfortably on $30K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math.

He who dies with the most toys does not always win. He who dies happily and in peace does.

Bacchus01
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Re: Social security should you take early if you don’t need the money?

Post by Bacchus01 » Mon May 13, 2019 6:16 pm

RMDs play a big role here. If your RMDs our you into a higher tax bracket on the SS, you might want to claim early and increase your long-term post-tax benefit.

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Re: Social security should you take early if you don’t need the money?

Post by nbseer » Mon May 13, 2019 7:45 pm

Be aware of the 'tax torpedo', especially if you are fortunate to have a pension and a large amount in a pre-tax IRA. Add a delayed and increased SS to that at age 70 and you will get slammed when you have to start taking RMDs.

I started taking SS at 65, to use for paying the tax on Roth conversions, and also to allow my much-lower earning DW to begin receiving spousal benefits based on my larger earnings. Instead of delaying SS, I am delaying pension, which increases the longer I wait to start it.

I did not have any after-tax money to pay the Roth conversion tax, so figured I would start SS for that purpose.

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Watty
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Re: Social security should you take early if you don’t need the money?

Post by Watty » Mon May 13, 2019 8:04 pm

It is really an "it depends" question and it could go either way.

For some people with lots of money it will make sense to delay Social Security until they are 70 so that they can do Roth conversions and take capital gains in a lower tax bracket between the ages of 62 and 70. In addition to paying less in income taxes that could also lower the amount of estate taxes that you pay if you exceed those limits.

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Re: Social security should you take early if you don’t need the money?

Post by bberris » Tue May 14, 2019 5:22 am

Bacchus01 wrote:
Mon May 13, 2019 6:16 pm
RMDs play a big role here. If your RMDs our you into a higher tax bracket on the SS, you might want to claim early and increase your long-term post-tax benefit.
On the other hand, if you delay social security you extend your taxed IRA withdrawals over a longer period, and more likely to be in a lower tax bracket. RMD's would be lower. By delaying you are essentially swapping income from your IRA for SS income. Since you would also be maximizing your social security income, the taxes will be lower overall. A maximum of 85 % of social security income is taxed by the feds, and some states treat it favorably compared to IRA income also.

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Re: Social security should you take early if you don’t need the money?

Post by kacang » Tue May 14, 2019 5:49 am

OP - as mentioned, there are nuances that will affect the answer; several good points have already been made. If you are married, you should also consider your spouse's SS timing. Also, are you subject to WEP? The open social security tool may be a good place to start.

Bronco Billy
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Re: Social security should you take early if you don’t need the money?

Post by Bronco Billy » Tue May 14, 2019 6:19 am

I will start my SS in a couple of months at 66. My health is not so great and figured to take it now. I don't know if that's the right decision but the one i made.
It's a POOR woman that cannot support ONE man.

Dandy
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Re: Social security should you take early if you don’t need the money?

Post by Dandy » Tue May 14, 2019 6:27 am

my view is if you and any spouse are in good health and can support your life style without taking SS early then wait. Having a decent COLA monthly income from SS at age 70 takes a lot of pressure/risk off the table. If things change during the wait - then don't wait -- kind of wait and see.

It is true that RMDs combined with a higher SS at 70 might put you in a different bracket. I'm probably in that situation at age 71. But, I value that my pension and higher SS almost meets the income needs of my current lifestyle. I don't have to rely on my portfolio much at all. We sleep well and are gifting "early inheritance" to our kids. Market plunges like we are currently experiencing aren't much of a worry. I don't like them but don't feel they will have any material effect on our lifestyle.

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Re: Social security should you take early if you don’t need the money?

Post by Bacchus01 » Tue May 14, 2019 6:30 am

bberris wrote:
Tue May 14, 2019 5:22 am
Bacchus01 wrote:
Mon May 13, 2019 6:16 pm
RMDs play a big role here. If your RMDs our you into a higher tax bracket on the SS, you might want to claim early and increase your long-term post-tax benefit.
On the other hand, if you delay social security you extend your taxed IRA withdrawals over a longer period, and more likely to be in a lower tax bracket. RMD's would be lower. By delaying you are essentially swapping income from your IRA for SS income. Since you would also be maximizing your social security income, the taxes will be lower overall. A maximum of 85 % of social security income is taxed by the feds, and some states treat it favorably compared to IRA income also.
Yep, could be. There is no one answer.

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Re: Social security should you take early if you don’t need the money?

Post by carolinaman » Tue May 14, 2019 7:38 am

Generally speaking in your situation deferring to 70 is usually the best option. Delaying SS to age 70 provides great longevity insurance as it maximizes your benefit which is inflation adjusted annually. Buying such an annuity would be much more expensive than deferring SS. People who believe they will die early should take it sooner. The breakeven point for maximizing your benefit is living until early 80s. Those who have sound reason to believe they will not live that long should take SS earlier.

The Wizard
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Re: Social security should you take early if you don’t need the money?

Post by The Wizard » Tue May 14, 2019 7:56 am

I suppose if you have a few hundred thousand dollars a year income in retirement to start with, then the additional $20k to $40k from SS won't matter much.

So take it early and use it to automatically pay your highest tier Medicare IRMAA bill...
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TheTimeLord
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Re: Social security should you take early if you don’t need the money?

Post by TheTimeLord » Tue May 14, 2019 8:11 am

protagonist wrote:
Mon May 13, 2019 6:09 pm
Hi, doub. This comes up from time to time.

My simple answer to this dilemma that I posted in a previous similar thread:

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $30K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. If he runs out of money before he dies, he can still live much more comfortably on $30K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math.

He who dies with the most toys does not always win. He who dies happily and in peace does.
Is it possible Rich would have more peace of mind if he took SS earlier and had a regular check coming in instead of drawing on his savings. Especially since for many seeing your savings balance dwindle in early retirement is stressful.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Topic Author
Doubleeagle4me
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Re: Social security should you take early if you don’t need the money?

Post by Doubleeagle4me » Tue May 14, 2019 8:12 am

That’s what I was thinking

The Wizard
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Re: Social security should you take early if you don’t need the money?

Post by The Wizard » Tue May 14, 2019 8:20 am

TheTimeLord wrote:
Tue May 14, 2019 8:11 am

...Is it possible Rich would have more peace of mind if he took SS earlier and had a regular check coming in instead of drawing on his savings. Especially since for many seeing your savings balance dwindle in early retirement is stressful.
That depends on the details.
If Rich has a million-plus in tax deferred, then spending it down a bit while delaying SS can make a lot of sense.

Remember, this thread is about higher income retirees for whom the SS benefit is small change...
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TheTimeLord
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Re: Social security should you take early if you don’t need the money?

Post by TheTimeLord » Tue May 14, 2019 8:28 am

The Wizard wrote:
Tue May 14, 2019 8:20 am
TheTimeLord wrote:
Tue May 14, 2019 8:11 am

...Is it possible Rich would have more peace of mind if he took SS earlier and had a regular check coming in instead of drawing on his savings. Especially since for many seeing your savings balance dwindle in early retirement is stressful.
That depends on the details.
If Rich has a million-plus in tax deferred, then spending it down a bit while delaying SS can make a lot of sense.

Remember, this thread is about higher income retirees for whom the SS benefit is small change...
I was just commenting on the conclusions Protagonist drew in the scenario he presented.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

JW-Retired
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Re: Social security should you take early if you don’t need the money?

Post by JW-Retired » Tue May 14, 2019 9:03 am

protagonist wrote:
Mon May 13, 2019 6:09 pm
Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $30K/yr if they wait to age 70.
Isn't the difference really closer to double? ..... they would get 70% of PIA for age 62 & 132% of PIA if they delay until 70. That would be $37.7K each at 70.
JW
Retired at Last

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Re: Social security should you take early if you don’t need the money?

Post by The Wizard » Tue May 14, 2019 9:22 am

JW-Retired wrote:
Tue May 14, 2019 9:03 am
protagonist wrote:
Mon May 13, 2019 6:09 pm
Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $30K/yr if they wait to age 70.
Isn't the difference really closer to double? ..... they would get 70% of PIA for age 62 & 132% of PIA if they delay until 70. That would be $37.7K each at 70.
JW
Regardless, that story of Rich and Delores is rather OT for this thread, which is about retirees who already have way sufficient income from other sources and "don't need the money" from SS...
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Re: Social security should you take early if you don’t need the money?

Post by smitcat » Tue May 14, 2019 10:28 am

JW-Retired wrote:
Tue May 14, 2019 9:03 am
protagonist wrote:
Mon May 13, 2019 6:09 pm
Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $30K/yr if they wait to age 70.
Isn't the difference really closer to double? ..... they would get 70% of PIA for age 62 & 132% of PIA if they delay until 70. That would be $37.7K each at 70.
JW
"Isn't the difference really closer to double? ..... they would get 70% of PIA for age 62 & 132% of PIA if they delay until 70. That would be $37.7K each at 70."

Of course that makes sense for delaying as well as these potential benefits:
- spend 401K in the meantime and reduce RMD's
- time for Roth conversions
- spouse with lower SS may benefit from higher spousal SS
- total tax advantage after collecting SS
- potentially beneficial to heirs

These are the problems with these scenarios …
- you cannot figure the best solution while only looking at SS
- the best solution is not what you have in $$ but what you can spend or leave to heirs after taxes
- your exact personal data varies the best solution, what works best for someone else will likely not be best for your situation
- your exact goals and your estimates for the future financial returns affect these solutions greatly

Tools that help you turn these problems into data that you can change can choose between include:
- Extended IORP
https://www.i-orp.com/SocSec/extended.html
- RPM calculator spreadsheet
https://www.bogleheads.org/wiki/Retiree_Portfolio_Model
- Your fovorite tax software

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Re: Social security should you take early if you don’t need the money?

Post by protagonist » Tue May 14, 2019 1:52 pm

nbseer wrote:
Mon May 13, 2019 7:45 pm
Be aware of the 'tax torpedo', especially if you are fortunate to have a pension and a large amount in a pre-tax IRA. Add a delayed and increased SS to that at age 70 and you will get slammed when you have to start taking RMDs.

I started taking SS at 65, to use for paying the tax on Roth conversions, and also to allow my much-lower earning DW to begin receiving spousal benefits based on my larger earnings. Instead of delaying SS, I am delaying pension, which increases the longer I wait to start it.

I did not have any after-tax money to pay the Roth conversion tax, so figured I would start SS for that purpose.
But your SS income is also growing at a secure rate of 8%/year in the interim. I would happily pay more tax on over 40% more income (cf. taking SS at 65 vs 70). I don't know what the tax code will be in the future, but I wouldn't want the tax tail to wag the dog.

On the other hand if you need the money, as Delores did in my example, or in your case if you feel a need to do a Roth conversion and need the SS income to pay your taxes, then taking SS earlier makes sense.

Unlike many in this forum, I am on the fence about Roth conversion, given the upfront costs, the reduction in amount of funds left invested (to grow with time following a large up front tax bill), and uncertainty about future tax codes. Plus my own inertia. That said, I also (sadly) have a much smaller amount of my nest egg tax-deferred than I suspect many do here (only about 20% of my total portfolio), and thus the potential tax benefit of conversion would likely be less for me than for others.
Last edited by protagonist on Tue May 14, 2019 2:10 pm, edited 2 times in total.

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Re: Social security should you take early if you don’t need the money?

Post by tampaite » Tue May 14, 2019 2:02 pm

Deleting my messages on this forum
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protagonist
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Re: Social security should you take early if you don’t need the money?

Post by protagonist » Tue May 14, 2019 2:08 pm

tampaite wrote:
Tue May 14, 2019 2:02 pm
Doubleeagle4me wrote:
Mon May 13, 2019 5:49 pm
If you don’t need the money should you take SS at say 65 instead of 70? I’d have to pay tax on it but I could invest it or use it instead of dipping into my investments. I’m retired.
Really depends on your health and family history. Did most of them in the extended family live into their 90s - yes? then take at 70. Did some of them die in their 80s or sooner - yes? then take at 65

Since you never said anything about your financial situation, this is the best advise.
Things I have read recently suggest that family longevity is a much smaller predictor of your own life expectancy than previously thought (such as this: https://www.statnews.com/2018/11/06/lif ... -database/) "Scientists reported on Tuesday that genes accounted for well under 7 percent of people’s life span, versus the 20 to 30 percent of most previous estimates."

What does have a huge impact is wealth (at least in the USA and probably around the world- the median lifespan in Monaco is around 90). And I suppose wealthy ancestors tend to have wealthy offspring. A huge confounding variable.
Last edited by protagonist on Tue May 14, 2019 2:10 pm, edited 1 time in total.

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ruralavalon
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Re: Social security should you take early if you don’t need the money?

Post by ruralavalon » Tue May 14, 2019 2:10 pm

Doubleeagle4me wrote:
Mon May 13, 2019 5:49 pm
If you don’t need the money should you take SS at say 65 instead of 70? I’d have to pay tax on it but I could invest it or use it instead of dipping into my investments. I’m retired.
If in good health it is probably better to delay taking Social Security. This also depends on whether or not you need the Social Security benefits early on.
Last edited by ruralavalon on Tue May 14, 2019 2:12 pm, edited 1 time in total.
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Re: Social security should you take early if you don’t need the money?

Post by tampaite » Tue May 14, 2019 2:11 pm

Deleting my messages on this forum

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