Wait until 70 to take social security?

[Gabelli2020]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

[Mel Lindauer]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

Each year you wait past full retirement age to collect SS nets you 8% per year for the rest of your life. If you wait four years, you'll get about 32% more for the rest of your life. And your wife's survivor benefits would most likely be higher, too.

Pretty hard to get a guaranteed 8% on a risk-free investment. So, if you have a family history of longevity, it's probably a pretty good idea to wait, assuming you can afford to do so. On the other hand, if you're not in good health, or you can't afford to wait, you might consider taking SS earlier.

[FiveK]

See Open Social Security: Free, Open-Source Social Security Calculator and Claiming Social Security Early to Invest It: What Rate of Return (Discount Rate) Should We Assume?

There is no "correct" answer except in hindsight, but those should give you things to consider.

[David Jay]

What you are missing is that when one spouse passes, the surviving spouse receives the amount of the larger of the two benefits. So regardless of which spouse passes, the survivor will get the 2760/3607. The odds are very high that one spouse will live into their early 90s.

In our case, my wife (the low earner) filed at age 62 for cash flow (remember, that benefit is temporary). I am delaying to 69/70, depending on variables. You can do what-if scenarios at http://opensocialsecurity.com

[MJS]

Are you considering Roth conversions, or drawing down your 401/T-IRAs, to reduced your required minimum distributions (RMDs) at age 72 & beyond? Postponing Social Security simplifies doing conversions. You may also want to factor possible IRMAA cliffs into the next 20-30 years as the RMDs & SS increase each year.

[Johm221122]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

I'm not an expert at this but nobody can answer without more information. Your portfolio size,tax situation and goals for savings would be a big start

[Cactuscoug]

Pretty hard to get a guaranteed 8% on a risk-free investment.

Except it is not an 8% risk free investment return. It is an 8% risk free increase in cash flow. You are receiving the cash flow for less years. Actuarily, the numbers are quite similar.

[papiper]

With a younger wife with lower earnings, it's a lot better to wait if other conditions let you unless she has a low life expectancy. The future value from her point of view is huge. For you it's neutral if you live into your 80's. She also would start at 67 - no need to wait until she is 70 to take 1/2 of yours.

[Adfmacro]

Run the numbers but lower earner taking SS at 62 and higher earner waiting until 70 might not be a bad play. Since she has enough in SS on her own, it does not appear she will not need to concern herself with maximizing spousal benefits.

If you have a pension that does not have 100% survivor benefits, the delay in taking your SS until 70 may increase your wife’s peace of mind.

[retired early&luv it]

My situation does not directly apply, I am single so the complicating factors of how to time things with a spouse do not apply. I am retired, 66 and have no plans to draw Soc Sec until I am 70.

A few things you may consider are:

• In my case I have investment income that pushes me up into the high income penalty range for medicare premiums (IRMAA). Additional social security income in some years could push me into even higher medicare payment brackets.

• And Soc Sec payments in some years may push me into higher income tax brackets.

• I converted all of my IRA to a Roth by paying the taxes slowly over several years, if you have a retirement account and want to make a partial conversion to a Roth, having the extra Soc Sec income could raise your tax bracket.

There are a lot of finance experts that are suggesting investment income returns will be lower in the future than in the past. So, maybe I will time it right so that I will be drawing Soc Sec when drawing that extra income is less likely to penalize me for higher taxes and medicare in the future?

[SGM]

I delayed SS until 70. Over a 6 year period I did Roth conversions.

Having cost of living adjustments on a higher basis is good. DW has longevity in her family plus good health. I had the higher income . Roth conversions are very helpful as I wanted to lower taxable income and increase never taxed Roths. The Roths have increased greatly in value.

[JoeRetire]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

You may be missing:
- risk
- tax benefits
- longevity
- inflation protection
- survivor advantage

"Nonetheless, the decision to delay Social Security can be evaluated based on the implicit rate of return it creates by choosing to delay, and over longer time horizons – when clients may “need the money most” as they have more years of retirement expenses to cover in the first place – the return of the Social Security delay becomes quite compelling. In fact, the return is generally far superior to any risk-adjusted returns that can be achieved over comparable time periods by the available alternatives, whether investing in risk-free bonds, growth equities, or buying a commercially available annuity. And because the system is indexed to inflation, its real returns will be maintained even if inflation rises, and will only become better if longevity continues to increase as well. In fact, ultimately the decision to delay Social Security delivers the best results when there is either unexpected inflation, unusually long longevity, or especially bad market returns, which are the exact three scenarios that traditional portfolios are the least effective at managing, making the decision to delay Social Security the ultimate form of “anti-fragile” triple hedge!"

https://www.kitces.com/blog/how-delayin ... y-can-buy/

[montanagirl]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

[vested1]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

[illumination]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

It's not though a fair comparison of assuming 6% return in an investment account when you have to take real market risk to get that return whereas the increased SS amount you would receive by waiting is what I would rank as close to a "risk free" return.

If you don't have longevity concerns and don't need the money for living expenses, I would say delay to 70 makes the most sense. It's almost like getting a treasury bill with a rate of return you can't find anywhere else. It also locks you in for life with that increased payment stream.

[midareff]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

I retired and started SS @ age 64, later converted to age 65. When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall. I went with the bird in the hand philosophy dollars and I chose not to wait and use the liquidity in my taxable account. My conservative portfolio has returned > 9% since then so the 8% I missed out on has no meaning to me looking back. If I live to make it into the 100's I gladly say wrong call but I see no way of that happening.

[MathWizard]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

Roth conversions now are under the 10/12/22 bracket ranges.

That reverts to 10/15/25 in 2026 under current tax law. This means you can save 3% on the upper brackets if you do Roth conversions now. If you take SS now, that will likely add to your taxes.

[retire14]

We did a compromise. My wife took it at 66 and I am getting 1/2 of her amount. I am deferring mine until 70.

[tibbitts]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

What you're missing is that you can't invest the earlier amount at 6%. If you could invest it at 16% that would be even better but you can't do that either.

Really I think it comes down to your forecast for your life expectancy, which might be just as unreliable as anyone's forecast of future returns, unless you have a known medical condition that would weigh the choice heavily in favor of claiming as soon as possible.

You haven't mentioned other factors: effect on potential Roth conversions, IRMAA, NIIT, etc.

[jello_nailer]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

I retired and started SS @ age 64, later converted to age 65. When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall. I went with the bird in the hand philosophy dollars and I chose not to wait and use the liquidity in my taxable account. My conservative portfolio has returned > 9% since then so the 8% I missed out on has no meaning to me looking back. If I live to make it into the 100's I gladly say wrong call but I see no way of that happening.

Midareff. Are you saying by taking it early you used that SS money that would have been 8% bigger if you had waited, allowing the money you would have used from taxable to grow more, at 9%. So it was a net gain?

[protagonist]

Reposting a previous post of mine re: A similar question....If we think alike this might be helpful for you. OP, I think the answer to your question is simple.

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. On the other hand, if he lives a long time and 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. "Worry" is not simply quantifiable.

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.

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

[radiowave]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

I retired and started SS @ age 64, later converted to age 65. When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall. I went with the bird in the hand philosophy dollars and I chose not to wait and use the liquidity in my taxable account. My conservative portfolio has returned > 9% since then so the 8% I missed out on has no meaning to me looking back. If I live to make it into the 100's I gladly say wrong call but I see no way of that happening.

So OP will have to spend (2760 *12 *4) or 132,480 to increase annual SS payment (3607 - 2760) or 10,164 per year. So 132,480/10,164 = 13.0 years to break even not counting the compounded loss of taking the 132K out of investments for the 4 years.

Yes, I agree with other posters in the long run, deferring will come out ahead, but agree with Gabelli2020 on his point.

[JW-Retired]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

You are missing about everything.

First of all, S.S. is just more valuable money because it is tax less. If you don't have much other income S.S. isn't tax at all. Even if you have very high income 15% of your SS will never be Federally taxed. Maybe even more important, almost all the states don't tax any S.S. whatever your income.

For me that means my S.S. gets hit with a tax rate of only about half the rate of my pension.

Also, your 4 years younger wife is likely to outlive you for many years, and would switch to your much higher $3607 if you wait.
JW

[grabiner]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

Independent of the issue of risk, you need to do this comparison in inflation-adjusted dollars, because all these SS numbers are indexed for inflation. If your investments return 2% above inflation, the break-even point is the same whether inflation is 0 or 4%.

[Escapevelocity]

With a younger wife with lower earnings, it's a lot better to wait if other conditions let you unless she has a low life expectancy. The future value from her point of view is huge. For you it's neutral if you live into your 80's. She also would start at 67 - no need to wait until she is 70 to take 1/2 of yours.

I might be wrong, but from what I've researched you can't collect spousal benefit until the primary beneficiary begins collecting.

[ObliviousInvestor]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

The bolded part is incorrect. New years of earnings can be included and, if high enough relative to prior years, can increase your PIA -- regardless of whether you have or haven't filed.

[#Cruncher]

I’m 65, retired, approaching my full retirement at 66 and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607[.] ... When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, ... What am I missing?

Two things:

# 1: Age 90 may be slightly too soon to plan on. Based on the SSA 2017 Period Life Table there is a 51% chance at least one of a man / woman couple age 66 / 62 will live 26 years (to the man's age 92) -- as computed with my Longevity Estimator Excel file. [ a ] As shown in the following table [ b ], delaying the start of SS from Normal Retirement Age (NRA) of 66+2mo until 70 provides a 4.9% real internal rate of return (IRR) if benefits continue 26 years beyond NRA.

Code: Select all

Row Col A    Col B     Col C    Col D    Col E   Col F
  1           Born      1955
  2            NRA    66.167
  3            PIA     2,760
  4      Start age    66.167   70.000
  5        Pct PIA  100.000% 130.667%
  6         Mo Pmt     2,760    3,606
  7  Year      Age    Pmt/Yr   Pmt/Yr     Diff     IRR

Code: Select all

  8     1   67.167    33,120        0  (33,120)
  9     2   68.167    33,120        0  (33,120)
 10     3   69.167    33,120        0  (33,120)
 11     4   70.167    33,120    7,212  (25,908)
 12     5   71.167    33,120   43,272   10,152 
 13     6   72.167    33,120   43,272   10,152 
 14     7   73.167    33,120   43,272   10,152  (33.4%)
 15     8   74.167    33,120   43,272   10,152  (24.1%)
 16     9   75.167    33,120   43,272   10,152  (17.6%)
 17    10   76.167    33,120   43,272   10,152  (12.9%)
 18    11   77.167    33,120   43,272   10,152   (9.4%)
 19    12   78.167    33,120   43,272   10,152   (6.7%)
 20    13   79.167    33,120   43,272   10,152   (4.6%)
 21    14   80.167    33,120   43,272   10,152   (2.9%)
 22    15   81.167    33,120   43,272   10,152   (1.5%)
 23    16   82.167    33,120   43,272   10,152   (0.3%)
 24    17   83.167    33,120   43,272   10,152    0.6% 
 25    18   84.167    33,120   43,272   10,152    1.4% 
 26    19   85.167    33,120   43,272   10,152    2.1% 
 27    20   86.167    33,120   43,272   10,152    2.7% 
 28    21   87.167    33,120   43,272   10,152    3.2% 
 29    22   88.167    33,120   43,272   10,152    3.6% 
 30    23   89.167    33,120   43,272   10,152    4.0% 
 31    24   90.167    33,120   43,272   10,152    4.3% 
 32    25   91.167    33,120   43,272   10,152    4.6% 
 33    26   92.167    33,120   43,272   10,152    4.9% <==
 34    27   93.167    33,120   43,272   10,152    5.1% 
 35    28   94.167    33,120   43,272   10,152    5.3% 
 36    29   95.167    33,120   43,272   10,152    5.5% 
 37    30   96.167    33,120   43,272   10,152    5.6% 
 38    31   97.167    33,120   43,272   10,152    5.8% 
 39    32   98.167    33,120   43,272   10,152    5.9% 
 40    33   99.167    33,120   43,272   10,152    6.0% 
 41    34  100.167    33,120   43,272   10,152    6.1%

# 2: A 6% real return would only be possible with a portfolio largely composed of stocks. But I believe one shouldn't be assuming this. In my opinion you should instead be using the assumed real return from the bond portion of your portfolio. [ c ] In today's market that would be about 0%. So the 4.9% you'd likely receive by delaying until 70 makes it the clear cut choice.

1. The joint life expectancy is the one to use as David Jay mentions in this post.
2. To use this table with other ages, follow these steps:
   • Select All, Copy, and Paste ("Paste Special" and "Text" if necessary) the following at cell A1 of a blank Excel sheet:

     Code: Select all

     	Born	1955
     	NRA	=MIN(67,66+MAX(0,C1-1954)/6)
     	PIA	2760
     	Start age	=C2	70
     	Pct PIA	=IF(C4<$C2,1-(5/900)*MIN(36,($C2-C4)*12)-(5/1200)*MAX(0,($C2-C4)*12-36),1+(8/1200)*(C4-$C2)*12)	=IF(D4<$C2,1-(5/900)*MIN(36,($C2-D4)*12)-(5/1200)*MAX(0,($C2-D4)*12-36),1+(8/1200)*(D4-$C2)*12)
     	Mo Pmt	=ROUND($C3*C5,0)	=ROUND($C3*D5,0)
     Year	Age	Pmt/Yr	Pmt/Yr	Diff	IRR
     1	=C4+1	=12*C$6*MAX(0,MIN(1,$B8-C$4))	=12*D$6*MAX(0,MIN(1,$B8-D$4))	=D8-C8	=IRR(E$8:E8)
     =A8+1	=B8+1	=12*C$6*MAX(0,MIN(1,$B9-C$4))	=12*D$6*MAX(0,MIN(1,$B9-D$4))	=D9-C9	=IRR(E$8:E9)

   • Format for readability.
   • Copy row 9 down to row 41.
   • Revise assumptions as needed in cells C1, C3, C4, and D4.
3. ObliviousInvestor (creator of the excellent Open Social Security calculator) makes this argument with a nice analogy in his post, Re: Yet Another When to Take Social Security Thread.

   ... The idea is to keep the same level of risk, but have more Social Security and less bonds. ...

Edited 1:55 PM to properly line up columns in table.

[bikechuck]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

Each year you wait past full retirement age to collect SS nets you 8% per year for the rest of your life. If you wait four years, you'll get about 32% more for the rest of your life. And your wife's survivor benefits would most likely be higher, too.

Pretty hard to get a guaranteed 8% on a risk-free investment. So, if you have a family history of longevity, it's probably a pretty good idea to wait, assuming you can afford to do so. On the other hand, if you're not in good health, or you can't afford to wait, you might consider taking SS earlier.

I agree with this analysis with one exception. The SS Trust Fund is depleting so I do not consider waiting to be equivalent to "a risk free investment". That said I plan to wait until the age of 70 to take my benefit, it helps that my wife began her SS benefit at 64.5 and I am old enough to get half of her benefit based on her PIA while waiting. Meanwhile I hope that somehow, someway Congress pulls together in a bipartisan effort to sure up the system. However that is not a given.

[22twain]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Once you file, future earned income doesn't increase your benefit, only COLA does.

This is incorrect.
From the horse's mouth:

If you work after you begin receiving benefits, your additional earnings may increase your payment. If you had fewer than 35 years of earnings when we figured your benefit, you will replace a zero earnings year with new earnings. If you had 35 years or more, we will check to see if your new year of earnings is higher than the lowest of the 35 years (after considering indexing). We check additional earnings each year you work while receiving Social Security. If an increase is due, we send a notice and pay a one-time check for the increase and your continuing payment will be higher.

[tj]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

This is false. My mom filed for SS at 62 and has some earned income, the SSA recalculated her benefit because the tiny income she earns now still replaces a year of $0.00 when she was a SAHM. My understanding is they stop recalculating after you hit FRA, but I could be wrong.

[ObliviousInvestor]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

This is false. My mom filed for SS at 62 and has some earned income, the SSA recalculated her benefit because the tiny income she earns now still replaces a year of $0.00 when she was a SAHM. My understanding is they stop recalculating after you hit FRA, but I could be wrong.

They do not stop at FRA. No matter your age, no matter whether you have filed or not, additional earnings can increase your PIA.

[ResearchMed]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

The bolded part is incorrect. New years of earnings can be included and, if high enough relative to prior years, can increase your PIA -- regardless of whether you have or haven't filed.

Thanks for clarifying. I thought I had missed something.

Just to double check: DH is still working (age mid-70's), at well over the SS ceiling.
But when he started out, as a poor grad student, etc., there were quite a few years that his income was well below the ceiling. So if he can replace some relatively low-income years (relative to the ceiling, not just relative to "current salary", of course), his current SS benefits may (will?) increase slightly? I realize that after the second bend point, there's not that much gained to begin with.
But there might be 5-10 or maybe more years that are in process of being replaced.

And relative to the bigger discussion for OP, I'd then get that amount *if* I'm the survivor, given that my full SS benefits are lower than his.

RM

[vineviz]

I agree with this analysis with one exception. The SS Trust Fund is depleting so I do not consider waiting to be equivalent to "a risk free investment".

A depleting trust fund doesn’t change your calculated benefit. Only a change in the Social Security Act can do that.

[ObliviousInvestor]

Just to double check: DH is still working (age mid-70's), at well over the SS ceiling.
But when he started out, as a poor grad student, etc., there were quite a few years that his income was well below the ceiling. So if he can replace some relatively low-income years (relative to the ceiling, not just relative to "current salary", of course), his current SS benefits may (will?) increase slightly? I realize that after the second bend point, there's not that much gained to begin with.
But there might be 5-10 or maybe more years that are in process of being replaced.

And relative to the bigger discussion for OP, I'd then get that amount *if* I'm the survivor, given that my full SS benefits are lower than his.

Yes, additional earnings -- at any age at all and regardless of whether the person has filed or not -- can increase a person's PIA, if those new years of earnings "knock out" a lower year in the person's 35 highest years. (In this calculation, years prior to age 60 are adjusted, generally upward, based on the national average wage index. Years age 60 and later are not indexed but rather included at their face value.)

And yes, the increase in PIA that comes from those new earnings would increase anybody else's benefit that is based on that PIA -- spousal benefits, child benefits, widow(er) benefits, etc.

[vested1]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

The bolded part is incorrect. New years of earnings can be included and, if high enough relative to prior years, can increase your PIA -- regardless of whether you have or haven't filed.

I stand corrected. Of course you're right. I read the question wrong.

[infotrader]

Reposting a previous post of mine re: A similar question....If we think alike this might be helpful for you. OP, I think the answer to your question is simple.

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. On the other hand, if he lives a long time and 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. "Worry" is not simply quantifiable.

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.

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

Very well said. We should treat SS as an insurance policy.

[patrick013]

When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90).

So if you do not need the SS funds for consumption the earlier
investment scheme makes sense.

If you need the funds for extra consumption, visiting relatives,
going to the movies, or whatever the earlier funds wouldn't hurt.

If your investments/budget is otherwise stable, and your longevity
is high, waiting can be good. When I calc'd mine 80 was the break
even point for aggregate money rec'd when I wait till 70 to start.
Anything over that is extra in aggregate. SS at 70 usually amounts
to almost twice the amount that would be rec'd at the earliest
start date.

I would wait till 70. What to do with the extra money ? Extra
monthly income from 70 on...and neutral risk.

I don't think you've missed anything.

[Wrench]

Will the amount you get in SS recalculate every year based on earned income if you've already filed and are collecting, or is that precisely what does not happen anymore once you file?

Got in a heated discussion about this with a friend.

Once you file, future earned income doesn't increase your benefit, only COLA does. If you file before your FRA your SS benefit may be reduced depending on the amount of earned income you are receiving. There is no deduction from your benefit based on earned income after you reach FRA.

The bolded part is incorrect. New years of earnings can be included and, if high enough relative to prior years, can increase your PIA -- regardless of whether you have or haven't filed.

ObliviousInvestor is correct as per the SSA: https://www.ssa.gov/benefits/retirement ... rking.html
"You can work while you receive Social Security retirement or survivors benefits. When you do, it could mean a higher benefit for you and your family.

Each year, we review the records of all Social Security beneficiaries who have wages reported for the previous year. If your latest year of earnings is one of your highest years, we recalculate your benefit and pay you any increase you are due. The increase is retroactive to January of the year after you earned the money".

[GerryL]

I didn't notice that anyone has already pointed this out, but this does not have to be an either/or question: either claim at FRA or wait until 70. You may decide to delay and not claim SS at FRA, but then you can at any point after than opt to start claiming for a slightly higher benefit -- all the way up until 70, when the benefit would stop increasing.

So the question is really: Claim SS at FRA or delay until ...?


Note: I originally planned to take SS at the beginning of the year I would turn 70, that is 69 and 3 months. But as that date got closer, I decided I was fine waiting another 9 months. I did, however, claim a tiny pension at that point rather than letting it continue to grow until my 70th birthday.

[JoeRetire]

I retired and started SS @ age 64, later converted to age 65.

What does "converted" mean her?

When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall.

What does "overall total received" mean here?

[tj]

What does "overall total received" mean here?

I'm assuming the total SS benefit that you receive, comparing with starting at an initial date vs delaying and starting at some latter date.

[JoeRetire]

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.

As always, it depends. It may not be so obvious, nor so simple.

Delores might have a pension that meets all of her financial needs now, but has no COLA. In that case, she may be far off delaying her benefits 8 years until she is 70.

On the other hand, Rich may have a condition that makes it extremely unlikely he'll live past 70. In that case, he may be far better off taking his benefits now at 62.

It always depends. Always.

[JoeRetire]

What does "overall total received" mean here?

I'm assuming the total SS benefit that you receive, comparing with starting at an initial date vs delaying and starting at some latter date.

Then why would there be two different breakeven dates?

[protagonist]

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.

As always, it depends. It may not be so obvious, nor so simple.

Delores might have a pension that meets all of her financial needs now, but has no COLA. In that case, she may be far off delaying her benefits 8 years until she is 70.

On the other hand, Rich may have a condition that makes it extremely unlikely he'll live past 70. In that case, he may be far better off taking his benefits now at 62.

It always depends. Always.

I agree with you, Joe, there are sometimes extenuating circumstances, and one shoe does not fit all. Still, I think for the majority of us, the decision should be a simple one.

[grabiner]

I didn't notice that anyone has already pointed this out, but this does not have to be an either/or question: either claim at FRA or wait until 70. You may decide to delay and not claim SS at FRA, but then you can at any point after than opt to start claiming for a slightly higher benefit -- all the way up until 70, when the benefit would stop increasing.

So the question is really: Claim SS at FRA or delay until ...?

And a single man with average life expectancy gets the optimum expected value by claiming at 68 or 69, depending on interest rates. (The alternative risk-free return used in this calculation is investing the earlier SS payments in TIPS, because TIPS have known inflation-adjusted returns just as SS does.) A woman gets the optimal expected value by waiting all the way to 70.

I still recommend waiting until 70, though. Most people who are making this decision have above-average life expectancies (or know that they don't; 62-year-olds with heart disease or cancer know that they benefit from claiming early). And if the expected value is break-even, claiming later means that you will have more money if you have a longer lifespan and need to spend more money; expected value is only appropriate if the excess will be left to charity or to your heirs.

[Old Guy]

As I was approaching full eligibility at 65 plus I was unsure what to do until a colleague said to me: “You never know what’s going to happen.”

I took it as soon as I was eligible.

[chuckb84]

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.

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

Exactly this! I knowingly and with eyes wide open took SS at 62, because:

1. One dollar for a healthy 62 year old is more fun than extra money in your 80's. I knew I was signing up for less money, but more time in retirement, and a retirement that started when I was athletic and healthy.

2. SS is an income stream, not an asset. SS is not inheritable. I didn't want to drawdown savings and "make it up later" from bigger SS payments. What if I didn't live to make up the savings drawdown?

3. SS benefits, under current law, will drop by 25% in 2031. So getting benefits for longer before that date really changes all those break even calculations. I have no idea if this will actually happen, nor do we discuss hypothetical tax law changes here, but that's the current law.

[JoeRetire]

Exactly this! I knowingly and with eyes wide open took SS at 62, because:

1. One dollar for a healthy 62 year old is more fun than extra money in your 80's. I knew I was signing up for less money, but more time in retirement, and a retirement that started when I was athletic and healthy.

So you wouldn't have been able to retire at 62 if not for the social security income?

2. SS is an income stream, not an asset. SS is not inheritable. I didn't want to drawdown savings and "make it up later" from bigger SS payments. What if I didn't live to make up the savings drawdown?

Then you would be dead, and thus unable to care that you didn't live as long as expected.

3. SS benefits, under current law, will drop by 25% in 2031. So getting benefits for longer before that date really changes all those break even calculations. I have no idea if this will actually happen, nor do we discuss hypothetical tax law changes here, but that's the current law.

It only changes the break even calculations by a small amount. Those changes can be factored in.
I assume you calculated your break even age before you started taking benefits?

[midareff]

I’m 65, retired, approaching my full retirement at 66and 2 months. Take S.S. then and get $2760 a month or wait until 70 and get $3607 ?I live frugally, and don’t need the added money. When I run the numbers, investing the earlier amount at 6% leads to a head start the larger withdrawal doesn’t catch if similarly invested. ( Ran to age 90). Wife is 4 years younger, and would draw$1544 at 67 or $1914 at 70. What am I missing?

I retired and started SS @ age 64, later converted to age 65. When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall. I went with the bird in the hand philosophy dollars and I chose not to wait and use the liquidity in my taxable account. My conservative portfolio has returned > 9% since then so the 8% I missed out on has no meaning to me looking back. If I live to make it into the 100's I gladly say wrong call but I see no way of that happening.

Midareff. Are you saying by taking it early you used that SS money that would have been 8% bigger if you had waited, allowing the money you would have used from taxable to grow more, at 9%. So it was a net gain?

The SS monthly would have gained 8% annually, the money I didn't use to replace that benefit grew at over 9% annually and continues to do so through today, I'll be 73 next month.

[midareff]

I retired and started SS @ age 64, later converted to age 65.

What does "converted" mean her?

When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall.

What does "overall total received" mean here?

My employer had misrepresented how my final accrual payouts were going to be reported to the IRS which led to the IRS submitting a request to me for a penalty that exceeded the amount they paid for my year 64. Instead they offered to allow me to pay back that amount and restart SS at age 65.