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It Might Be Better to Take Social Security at 66 Instead of 70. Here's Why

pedro47

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Sounds liked to TomPalm, has a good pension plan and he used that money to live on.
He used his social security funds to totally invest in mutual funds or stock for five years.
Also, he could be debt free no mortgage or credit card debts and in good health.

This person has a budget and loved to save and see his money grow IMHO.
 

VacationForever

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I started at age 65 with the logic that saving and investing the money for five years would be a winning strategy if I die before age 90. Or the other factor is if the government changes the rules, I will take what I can get right now while I can get it. My math below is not perfect and figures are ballpark. Someone with a computer program can probably figure out better numbers. But the basic info below shows saving money between age 65 and 70 and paying yourself back can change your breakeven point and provide a lump sum of cash to my beneficiaries should I die early. The numbers below are for my account. I didn’t work 35 years and did not reach the max payout.

Social Security invested at age 65 vs age 70

$2200 x 12 months x 5 years = $132,000 saved

$132,000 invested in a bond at 2.5% =$3300 year

Age 70 to 90, bond should payout $33,000 additional funds

$132,00 + $33,000 or a total of $164,000 extra at age 90

age 70 pays $8000 / yr more than age 65

at age 70, reduce $164,000 nest egg by $8000 yr so that payout is equal

20 years later nest egg is gone and 90 years old is my break even
—————

Payout is based on highest 35 years
Absolutely great way to approach it quantitatively.
 

VacationForever

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I am not understanding this. And what are you living on while you invest your SS check?

He did not invest his SS check. He is looking at forgone money by not drawing on SS early and it came to about 90 years old before losing by taking at 65.
 

tompalm

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I am not understanding this. And what are you living on while you invest your SS check?

Also, yes, the government can change the rules, but more than likely people of ages over FRA will be grandfathered in anyway. Of course, who knows?

Funny how many people with insurance annuities aren't bothered about handing over a ton of money to the insurance companies and waiting 10, 20 or 30 years to get their money each month. Yet they worry they won't get their SS money back. It's the same concept people.

This said, everyone has to do what they have to do. If you need the money, take it early. If you don't need the money, take it early and invest it and - heaven forbid- spend it or gift it!. If you don't need it presently, but will need it in the future, look at your individual situation, taxes, medical expenses, best guess on , etc. and deal with it from that perspective.

There are a lot of factors to consider. And actually several of them could work for the same individuals. There are lots of options and just a matter of preference in many cases. Whatever the decision, it is the right one.

If you drop dead before collecting, well......people also die in their 50's, 40's, 30's and younger. They don't get their money back either.

Living on rental income and a pension. Have not worked since 54 years old and could have waited longer to take social security, but took it at 65 and plan to save or invest the money. The point is, if you can wait until age 70 to get social security, you can take it earlier and invest the money and do better.
 

WinniWoman

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Passepartout

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There is no single 'right' time for everyone to start collecting SS. For me, it was age 62. For DW it was at FRA age 65. Neither of us has regretted the choices we made. For those whose health is good and have a family history of long-lived ancestors who haven't saved/invested from an early age, 70 might be the right time to collect the highest amount for a more comfortable retirement.

It seems that the premise of the key article (e.g. get it while there's something to collect) shines a light on the feeling that 'Full Faith & Credit' might not have the deep reputation it once did.

Jim
 

Big Matt

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A couple of things to consider.
1) if SS is an important part of your retirement strategy then work until you are 70 and take it then. If not, and you are retiring/retired, take it when you are first eligible. The income can be invested in other investments.
2) Consider cashing out of your 401k/IRA rapidly keeping your tax bracket low at 59 and a half or when you want to stop working. People are deferring tax today at very low (historically) tax rates. You don't want to get stuck paying more in tax when you are older and can't afford it. Again, you need to run the math on this one, but paying capital gains is much lower than the current tax rates and should remain that way long term.
3) Start a legitimate business that can be used to optimize expenses.
 

pedro47

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I also retired at age 54. Drew my first social security check at age 62. However, I went back to work part time at age 62 1/2. I Stop my SS check and repay every dollar back to social security. Worked 3 1/2 years and started growing social security again at age 66. My social security check increase about 8% each year that I did not collect SS.

My health was very good at age 66. The next year I develop high hypertension, diabetes, and some other medical problems.

Drawing Social Security to me is an individual decision.
 

pedro47

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Big Matt, you are correct, start drawing your deferred 401A/IRA early to avoid been in a high tax bracket later in life. I hope , I am stating this correctly.
 

WinniWoman

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Big Matt, you are correct, start drawing your deferred 401A/IRA early to avoid been in a high tax bracket later in life. I hope , I am stating this correctly.


That is correct. Also, doing Roth conversions before age 70 1/2 and paying the taxes early on so that your money in the Roth will grow and be tax free later in life. Also, if any money is leftover in the Roth your beneficiaries will inherit it tax free.
 

WinniWoman

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Living on rental income and a pension. Have not worked since 54 years old and could have waited longer to take social security, but took it at 65 and plan to save or invest the money. The point is, if you can wait until age 70 to get social security, you can take it earlier and invest the money and do better.


But you are not factoring in taxes and leaving the higher SS check to the spouse, as well as having to live on it along with your investments in the future. And- there is no guarantee you will do better than 8% investing it. In fact, I doubt it.
 

Sugarcubesea

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I got a paywall, but the window let me close it. I was able to read the article.

I turn 66 this year. I'm taking my retirement money while I can, because tomorrow isn't guaranteed. And politically, I don't trust anybody. :)

Dave

I have to be 67 to get to my full retirement age for SS. I’m thinking I might try and work till 66 and take it then. But since that’s a ways off I will see what changes are made between now and then.
 

Luanne

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I have to be 67 to get to my full retirement age for SS. I’m thinking I might try and work till 66 and take it then. But since that’s a ways off I will see what changes are made between now and then.
I never really thought much about retirement, like when I would do it. I might have worked longer than I did (I retired at 62) except that dh's job ended and we moved from California to New Mexico. If dh had continued working, and we'd stayed where we were, I probably would have worked until at least 65. But I was SO ready to leave.
 

VacationForever

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But you are not factoring in taxes and leaving the higher SS check to the spouse, as well as having to live on it along with your investments in the future. And- there is no guarantee you will do better than 8% investing it. In fact, I doubt it.
But he did regarding the 8%, hence he used $8K difference per year in his calculations. He is spending his SS checks when he starts drawing on it.

In our case, we did factor in leaving the higher SS check to surviving spouse, hence my husband takes his at 70 while I take mine at 62. We estimate that his SS benefits will cover about 30 years.
 
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jimf41

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There is an easy way to figure this out and it doesn't involve FA's or SS "experts" or calculators. If you take the money at 62 your break even point will be just about 80. One simple question resolves the whole dilemma. Do you want to have more money between 62 and 80 or more money after you turn 80? I have longevity in my family but nobody who lived past 85 had a particularly adventuresome or expensive life. I voted for the 18 years where I could and and still am enjoying it the most.

As an example my wife and I bought Vespa scooters about 10 years ago. We've had a ball on these things. We've taken them on trips to New England and driven all over the country roads on Long Islands north shore. My bride is having some balance problems and had to give hers up last year. She really misses it but she had 10 years riding it because we had the extra money to buy them. If I'd waited till 66 or 70 she never would have had the experience, we just wouldn't have had the extra money.

Life is not a dress rehearsal, best enjoy it as fully as you can as soon as you can.
 

WinniWoman

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There is an easy way to figure this out and it doesn't involve FA's or SS "experts" or calculators. If you take the money at 62 your break even point will be just about 80. One simple question resolves the whole dilemma. Do you want to have more money between 62 and 80 or more money after you turn 80? I have longevity in my family but nobody who lived past 85 had a particularly adventuresome or expensive life. I voted for the 18 years where I could and and still am enjoying it the most.

As an example my wife and I bought Vespa scooters about 10 years ago. We've had a ball on these things. We've taken them on trips to New England and driven all over the country roads on Long Islands north shore. My bride is having some balance problems and had to give hers up last year. She really misses it but she had 10 years riding it because we had the extra money to buy them. If I'd waited till 66 or 70 she never would have had the experience, we just wouldn't have had the extra money.

Life is not a dress rehearsal, best enjoy it as fully as you can as soon as you can.


Yes- but this applies to the money you saved during your working years also. If you have the assets you can still enjoy life BEFORE you decide to take SS.
 

WinniWoman

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But he did regarding the 8%, hence he used $8K difference per year in his calculations. He is spending his SS checks when he starts drawing on it.

In our case, we did factor in leaving the higher SS check to surviving spouse, hence my husband takes his at 70 while I take mine at 62. We estimate that his SS benefits will cover about 30 years.

I was always bad at math so I have a mental block on this one.

So I get his example: He takes SS at age 65 and invests the $2200 monthly SS check for 5 years until age 70 and eventually by age 90 he has $164,000, meaning he did not touch it. At age 70 he started using his SS check to live on I assume.

The other example- starting SS at age 70, which makes it $8000 more per year than it was at age 65 he says at age 90 he would have nothing left. But- what if at age 70 you took the extra $8000 more per year you were getting- living on the rest or spending it- and invested or saved it for 20 years? Then you would have $160,000 in that scenario all things being equal and that is just putting it in a money market fund.


So then it really doesn't matter when you take it- unless you die early. Am I getting this right? Maybe I am missing something. As I said- math is not my forte'.
 
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VacationForever

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I was always bad at math so I have a mental block on this one.

So I get his example: He takes SS at age 65 and invests the $2200 monthly SS check for 5 years until age 70 and eventually by age 90 he has $164,000, meaning he did not touch it. At age 70 he started using his SS check to live on I assume.

The other example- starting SS at age 70, which makes it $8000 more per year than it was at age 65 he says at age 90 he would have nothing left. But- what if at age 70 you took the extra $8000 more per year you were getting- living on the rest- and invested or saved it for 20 years? Then you would have $160,000 in that scenario all things being equal and that is just putting it in a money market fund.


So then it really doesn't matter when you take it- unless you die early. Am I getting this right? Maybe I am missing something. As I said- math is not my forte'.
Look at it in a different way. Because he takes SS at 65, he does not need to tap into his savings/investment during the 65 to 70 years of age and he lets the investment grow at 2.5% per year. He is not investing his SS check but rather he does not need to de-invest.

90 yo is the breakeven / tipping point. It means that he will be financially worse off by drawing SS at 65 if he lives beyond 90.

If your FA does his job properly he should also have done this exercise for you and your husband. Personally I wonder why he asked both of you live off savings and wait to draw SS at 70.
 

WinniWoman

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Look at it in a different way. Because he takes SS at 65, he does not need to tap into his savings/investment during the 65 to 70 years of age and he lets the investment grow at 2.5% per year. He is not investing his SS check but rather he does not need to de-invest.

90 yo is the breakeven / tipping point. It means that he will be financially worse off by drawing SS at 65 if he lives beyond 90.

If your FA does his job properly he should also have done this exercise for you and your husband. Personally I wonder why he asked both of you live off savings and wait to draw SS at 70.


The reason is because of the tax torpedo that will hit at 70 1/2 when we have to start taking mandatory RMD's.
He wanted us at first to use our taxable brokerage account to live off of (for 0% capital gains- again re taxes) until I pointed out that there were a lot of bond funds/etf's in there- not all. He did miss that. He wants us to keep a lot of the bond funds as we get older.

So he said to take a little from the brokerage account and a little from our traditional IRA's. (we could take just $20,000 from those to stay under the NYS tax) and then also do Roth conversions. Goal being to lower our RMD's in our 70's and beyond.

He said a lot of people are very surprised when in their 70's their SS checks start getting taxed a lot. This is his strategy to help with that.

As for the exercise regarding taking SS, I told him we planned for my husband to take it at age 70 and he agreed. Then he asked me if I would consider waiting until age 70 and I told him I would if he thought it was a good idea/or we could afford it. I of course, could decide to take it earlier, but I probably would not until at least my full retirement age. We can't live off one SS check anyway. Or even 2 reallywhen I factor in we have to pay the health insurance for me and Medicare for my husband, which he estimates could be a total of $1000 per month in premiums. (makes me sick).

Meanwhile, I still have the issue with my 2018 wages not being posted with SS so I will patiently wait until the end of the year to see what happens with that.
 
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artringwald

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Can you explain this further, please, if you don't mind? I was trying to explain this to our Financial Advisor last weekend, but I could not articulate it well. I would like to run this by him again.

Also, was the 22% increase you got in the Part B premium a significant amount of money? Isn't the Part B premium fairly low- like $135 or something like that? Are you saying the increase in SS benefits that you would get by waiting until age 70 would not offset the increase in Part B premiums?

One could say that if you take SS early and invested it, the funds and the gains from taking it early could match what you'd earn by delaying. Of course that depends on how long you live. At some point it's break even. When I decided to wait, I hadn't realized that my part B premiums might go up. It wasn't a significant amount, $105 to $135/month, but it was enough to swing me to start SS right away. However, the following year, COLA went up and Part B hardly changed, so we're both paying $135.50 now.
 

bluehende

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Another consideration would be the favorable treatment of capital gains. It might be better to delay SS and use capital gains for expenses. I have been doing this for years booking gains that I have no tax liability. When I have to book our 401k earnings I have no doubt my tax liability will be much higher. The more income I can book now the better. I have been fairly aggressive and realize I probably have not been aggressive enough. When I want to maintain market exposure I just buy something else.
 

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One could say that if you take SS early and invested it, the funds and the gains from taking it early could match what you'd earn by delaying. Of course that depends on how long you live. At some point it's break even. When I decided to wait, I hadn't realized that my part B premiums might go up. It wasn't a significant amount, $105 to $135/month, but it was enough to swing me to start SS right away. However, the following year, COLA went up and Part B hardly changed, so we're both paying $135.50 now.
The SS hold harmless rule only applies when COLA increase is less than Medicare increase.
 

WinniWoman

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Another consideration would be the favorable treatment of capital gains. It might be better to delay SS and use capital gains for expenses. I have been doing this for years booking gains that I have no tax liability. When I have to book our 401k earnings I have no doubt my tax liability will be much higher. The more income I can book now the better. I have been fairly aggressive and realize I probably have not been aggressive enough. When I want to maintain market exposure I just buy something else.


That is exactly what our FA told us and one reason he wants us to do it that way, though he somewhat altered it because of the bond funds in our brokerage acct. Also, I have a Dividend fund in our account that I hesitate to withdraw from. Not sure what to do with that but when the time comes I will ask him more about it. We have a Value stock fund in there also that I guess we could liquidate, though it is not that much money.

Any extra cash we have has to be set aside for when we move to possibly put towards our next home in case we do not have enough money from the sale of our current house.

I have to keep playing the lottery. I am not greedy. I just want $1000 per week for life. LOL!
 

SmithOp

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This is a good discussion bringing up important issues to consider. I appreciate everyones input since I’m approaching 66 end of this year, its making me weigh all options.

Fidelity has some free calculators to model retirement and SS income.

https://www.fidelity.com/calculators-tools/retirement-calculator/overview

Considerations:
Longevity / Health
Quality of life
Future Tax burden
Future investment rates
Future of SS payouts
Passing savings along to heirs
Marital status


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