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The Best Reason Not to Wait to Take Social Security

ace2000

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Wait until 70 or collect sooner? What's the worst scenario for each case? If you wait until 70 and you and your spouse both die young, you may not have "maximized" the amount you got from the government, but who cares? You're both dead. :shrug: If you collect sooner, and one of you lives a very long time, you may not have enough money to live on. :eek: That's what scares me.

You've described it perfectly. Each person has to make their own best decision accordingly.
 

Conan

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I don't know what the cut-off is but SS is tax free up to some level of income. Above that it is taxable. $14,000 sounds low to me.
George

It's easy to confuse the Social Security earnings test with the rules on when and to what extent Social Security payments incur income tax.

The earnings test only applies to people taking benefits prior to normal retirement age (currently 66). It's a temporary reduction to what they can receive, and the reduced payments are in effect restored to them in later years. The current threshold is $15,720, that is, the amount they can earn from work/self-employment before having their benefits reduced.
http://www.ssa.gov/planners/retire/whileworking2.html

Separate and apart from that, Social Security recipients whose "combined income" exceeds $25,000 (single return) or $32,000 (joint return) incur income tax on up to 85% of what they receive in Social Security benefits. Combined income is the sum of adjusted gross income, tax exempt income, and half of their Social Security benefits.
https://faq.ssa.gov/link/portal/340.../Must-I-pay-taxes-on-Social-Security-benefits
 
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VacationForever

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The husband has to be at full retirement age (FRA), before the wife can collect the spousal benefit. If the wife is less than FRA, she could collect sooner, but at reduced benefit. If the husband doesn't want to start collecting until later than the FRA, he can do a file and suspend so his wife can start collecting her spousal benefit.

Reverse the genders above if the husband wants to collect spousal benefit from his wife.

Yea, spouse has to be at FRA. It also depends on both PIA. In my case, SS office told us that because my PIA is high, I cannot collect half of my husband's amount till my FRA, in which the amount is less than on my own at 62. The only reason to do so is to wait to collect on my own account at 70. I intend to stop working or go into semi retirement in the next couple of years. My husband is bit older than me. Looking at breakeven of collecting earlier vs. later for me, collecting at 62 is what makes sense to us.
 

artringwald

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DRI: The Point at Poipu, 3 deeded weeks, 1 of which is in The Club.

Conan

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Yea, spouse has to be at FRA. It also depends on both PIA. In my case, SS office told us that because my PIA is high, I cannot collect half of my husband's amount till my FRA, in which the amount is less than on my own at 62. The only reason to do so is to wait to collect on my own account at 70.

That's right. In other words, because you (in this case, the wife) have a valuable earnings record of your own, you can't start taking 50% of your husband's benefit until you are age 66. If you did, you wouldn't be able to switch to your own benefit later on.

Separate from that is deciding whether your husband should start taking his benefit at age 62, 66, 70 or any age in between. If he starts taking at age 62, that's the benefit that you'll start getting 50% of when you reach age 66. Alternatively, you could start taking your own benefit when you reach age 62 or any later year but that means never getting 50% of his benefit.

Wouldn't it be best for your husband to start collecting at age 66 (if he wanted to wait even longer, he could file and suspend at age 66 and defer his own benefit to age 70). Meanwhile you would start getting 50% of his benefit starting when you reach age 66, and you would switch to your own full benefit when you reach age 70.

So eventually the two of you will be collecting two full benefits - - 100% of his benefit (calculated from whatever age he started collecting) and 100% of your age 70 benefit.

When one of you dies, the survivor will continue to get the greater of 100% of his benefit (calculated from whatever age he started collecting) or 100% of the benefit you started taking at age 70.
 

Passepartout

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So eventually the two of you will be collecting two full benefits - - 100% of his benefit (calculated from whatever age he started collecting) and 100% of your age 70 benefit.

And don't forget that in the year each of you reach age 70.5 you are subject to mandatory minimum distributions from your IRA/401k retirement accounts.

Jim
 

x3 skier

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And don't forget that in the year each of you reach age 70.5 you are subject to mandatory minimum distributions from your IRA/401k retirement accounts.

Jim

I hate that but I understand why it is done.:wall:

Cheers
 

pedro47

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And don't forget that in the year each of you reach age 70.5 you are subject to mandatory minimum distributions from your IRA/401k retirement accounts.

Jim

Now that is a good reason to start taking Social Security at age 67.
 

VacationForever

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That's right. In other words, because you (in this case, the wife) have a valuable earnings record of your own, you can't start taking 50% of your husband's benefit until you are age 66. If you did, you wouldn't be able to switch to your own benefit later on.
Actually we were advised that I could start taking spousal (50%) benefit at my FRA which would be less than on my own at 62, and then take my own benefit at 70. I would not do that as it means I forgo taking benefits between 62 to 67 and then continue to take reduced benefits between 67 to 70.

Separate from that is deciding whether your husband should start taking his benefit at age 62, 66, 70 or any age in between. If he starts taking at age 62, that's the benefit that you'll start getting 50% of when you reach age 66. Alternatively, you could start taking your own benefit when you reach age 62 or any later year but that means never getting 50% of his benefit.

Again, this makes no sense in our case. Basically I will never take 50% of his benefits. Because he is "carrying two lives", it makes sense in our case for him to take at 70.

Wouldn't it be best for your husband to start collecting at age 66 (if he wanted to wait even longer, he could file and suspend at age 66 and defer his own benefit to age 70). Meanwhile you would start getting 50% of his benefit starting when you reach age 66, and you would switch to your own full benefit when you reach age 70.

Again, my benefit at 62 is higher than half of his at my 67. I am not allowed to start taking on my own account at 62 if I ever want to take half of his benefit at 67.

So eventually the two of you will be collecting two full benefits - - 100% of his benefit (calculated from whatever age he started collecting) and 100% of your age 70 benefit.
The breakeven of taking early vs. late is 85 years old. Unlikely that my husband will still be alive when I turn 85 - although I would like to lose in my gamble, which means I should be taking on my account at 62.


When one of you dies, the survivor will continue to get the greater of 100% of his benefit (calculated from whatever age he started collecting) or 100% of the benefit you started taking at age 70.

See response inline.
 

taterhed

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although you can't plan for what doesn't exist....

All the think-tank and white-paper solutions on SS reform pretty clearly spell out the future of SS benefits: (enhanced) Means Testing and chained-CPI. (others too--raising payroll tax caps, retirement age etc... but these shouldn't apply to us old codgers)

For those with a significant flow of income in retirement, enhanced means-testing (read taxation) reduces the incentive to wait. Chained CPI calculation means less growth over time and, again, even less reason to wait. Plug in the age-70 mandatory dist. for IRA's/FERS etc... and you have a potential to get slammed on your withholdings/tax bracket at age 70.

Finally, as I think the article pointed out, there is no-longer a 'pay-back' rule for the SS benefits (well, 6 months) so reasons to wait--especially for men--become less and less obvious.

That's just my humble view. Maybe our leadership will prove me wrong. :wall:
 

Conan

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That's right. In other words, because you (in this case, the wife) have a valuable earnings record of your own, you can't start taking 50% of your husband's benefit until you are age 66. If you did, you wouldn't be able to switch to your own benefit later on.
Actually we were advised that I could start taking spousal (50%) benefit at my FRA which would be less than on my own at 62, and then take my own benefit at 70. I would not do that as it means I forgo taking benefits between 62 to 67 and then continue to take reduced benefits between 67 to 70.

Your adviser and I are saying the same thing. FRA=Full Retirement Age, which is what I mean when I say age 66. If you're born in 1960 or later your FRA is 67 and you should read my example as referring to 67. (FRA for people born from 1955 to 1959 is 66 and some months.) As you say, FRA is the age at which you can start taking the spousal (50%) benefit and still be allowed to switch to your own benefit at 70.

It's true that means no benefits for you from age 62 to 67, but I don't think it's fair to say it also means "reduced benefits" between 67 to 70. Since your own unclaimed social security is continuing to build during those years, what you call reduced benefits I call found money.

Separate from that is deciding whether your husband should start taking his benefit at age 62, 66, 70 or any age in between. If he starts taking at age 62, that's the benefit that you'll start getting 50% of when you reach age 66. Alternatively, you could start taking your own benefit when you reach age 62 or any later year but that means never getting 50% of his benefit.

Again, this makes no sense in our case. Basically I will never take 50% of his benefits. Because he is "carrying two lives", it makes sense in our case for him to take at 70.

No, because you can get 50% of his benefit during those years and he can still put off collecting his own benefit to his age 70. That's what "file and suspend" means. So yes, it makes sense in your case for him to take at 70, but you can still take the 50% spousal benefit while waiting to file for your own benefit at your age 70.

Wouldn't it be best for your husband to start collecting at age 66 (if he wanted to wait even longer, he could file and suspend at age 66 and defer his own benefit to age 70). Meanwhile you would start getting 50% of his benefit starting when you reach age 66, and you would switch to your own full benefit when you reach age 70.

Again, my benefit at 62 is higher than half of his at my 67. I am not allowed to start taking on my own account at 62 if I ever want to take half of his benefit at 67.

Your benefit at 62 may be higher than half of his at your 67, but if your benefit at 62 is, say $1,000/month and you defer taking your benefit to age 70, it will then be something like $1,700/month. Plus you get 50% of his benefit from 67 to 70--the found money I was referring to.


So eventually the two of you will be collecting two full benefits - - 100% of his benefit (calculated from whatever age he started collecting) and 100% of your age 70 benefit.
The breakeven of taking early vs. late is 85 years old. Unlikely that my husband will still be alive when I turn 85 - although I would like to lose in my gamble, which means I should be taking on my account at 62.

Married couples have two horses in the race. If your husband is alive when you turn 85, you'll each still be collecting your own age 70 benefits. If he is not alive when you turn 85, you'll get his age 70 benefit for the rest of your life.


When one of you dies, the survivor will continue to get the greater of 100% of his benefit (calculated from whatever age he started collecting) or 100% of the benefit you started taking at age 70.
Please see above.
 

VacationForever

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Please see above.

I had mentioned that my husband is older and he turns 70 even before I turn 62. So there is no benefit in filing and suspending in our case. Also, it makes no financial sense for us to hold off my SS till I turn 70.
 

x3 skier

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Thank you, Brett, I had never heard of tontines before.

There's a hilarious 1969 British film with Peter Sellers, Michael Caine and other greats, "The Wrong Box" about a tontine. Being a period film set in the 1800's, it never gets old for me. It's based on a Robert Louis Stevenson story of the same name.

Cheers
 

MULTIZ321

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There's a hilarious 1969 British film with Peter Sellers, Michael Caine and other greats, "The Wrong Box" about a tontine. Being a period film set in the 1800's, it never gets old for me. It's based on a Robert Louis Stevenson story of the same name.

Cheers

Thanks x3skier for the recommendation- - - sounds like a funny movie with a great cast.

You were close on the year - for those trying to look it up it's 1966.

Best regards,

Richard
 

Brett

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There's a hilarious 1969 British film with Peter Sellers, Michael Caine and other greats, "The Wrong Box" about a tontine. Being a period film set in the 1800's, it never gets old for me. It's based on a Robert Louis Stevenson story of the same name.

Cheers

And there is the Simpson's episode about a tontine
 

GetawaysRus

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I think the wife has to be at full retirement age, however, in order to collect on her husband's.

Social Security is such a darn complex topic that I think it's best to get your info from reliable sources rather than TUG. There's too much opportunity for well-meaning misinformation.

Anyway, if I understand things right, mpumilia is correct. A wife should wait until her FRA to collect a spousal benefit on the husband's benefit. If she files to collect a spousal benefit before her FRA, she will fall into the "deeming" trap. This means that she will be "deemed" as taking her own SS benefit early (at the same time she takes the spousal benefit), and therefore she will lose the opportunity to delay her own benefit until later (and have it increase by 8% per year).

I'm making my way through a book: Get What's Yours: the secrets to maxing out your Social Security, by Kotlikoff, Moeller, and Solman. Look it up on Amazon and you'll find that it is quite popular. I have also played around with the free AARP online SS calculator (even though these authors criticize it, and for some good reasons), and now I'm starting to understand the recommendations that the online calculator made for my wife and I.
 

GetawaysRus

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Wait until 70 or collect sooner? What's the worst scenario for each case? If you wait until 70 and you and your spouse both die young, you may not have "maximized" the amount you got from the government, but who cares? You're both dead. :shrug: If you collect sooner, and one of you lives a very long time, you may not have enough money to live on. :eek: That's what scares me.

Just in case I do live a very long time, I'm going to wait until I'm 70 to collect. I'll do a file and suspend at 66 so my wife can start collecting her spousal benefit. Fortunately, I won't need the extra money before I'm 66. I can understand why people collect early if they really have to have the extra income.

Sounds like you've read that same book that I just mentioned in the above post. The authors discuss this same approach.

The AARP online SS calculator also recommended the same approach for me. I (husband) am the higher earner. I file and suspend. My wife takes a spousal benefit at her FRA. When we each hit 70 (if God permits it), we then take our own (maximized) benefit.
 
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WinniWoman

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Sounds like you've read that same book that I just mentioned in the above post. The authors discuss this same approach.

The AARP online SS calculator also recommended the same approach for me. I (husband) am the higher earner. I file and suspend. My wife takes a spousal benefit at her FRA. When we each hit 70 (if God permits it), we then take our own (maximized) benefit.

This is our plan as well- so far anyway. Hubby (the higher earner) will retire at 66 (his FRA). File and suspend SS. Take a lump sum pension amount from his job, which is not a large amount of money, but better then nothing. I am 2 years younger. I will retire at 65 so I have Medicare at least. I will wait until age 67 (my FRA) and claim spousal benefits. Then, at age 70 we will both claim our full benefits.

This is all provided we are still employed and healthy. A BIG "IF". We don't even feel like we can make it through this year, we are so tired of work-the exhausting schedule and commuting!
 

VacationForever

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This is our plan as well- so far anyway. Hubby (the higher earner) will retire at 66 (his FRA). File and suspend SS. Take a lump sum pension amount from his job, which is not a large amount of money, but better then nothing. I am 2 years younger. I will retire at 65 so I have Medicare at least. I will wait until age 67 (my FRA) and claim spousal benefits. Then, at age 70 we will both claim our full benefits.

This is all provided we are still employed and healthy. A BIG "IF". We don't even feel like we can make it through this year, we are so tired of work-the exhausting schedule and commuting!

Would your SS strategy be the same if you stop working at 62?
 

WinniWoman

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Would your SS strategy be the same if you stop working at 62?

That's a whole 'nother ball game. If my husband is still working when I turn 62, then there is no strategy- I would not start taking my SS and we would tighten up the ship.


If we BOTH lost our jobs before the master plan- well- all bets are off. The house goes up for sale. We will be in deep poo poo with no health insurance and no pensions (hubby's small pension does not pay out until FRA) or other income, other than our savings and short term unemployment checks.

If one of us kicks the bucket and the other isn't working.......don't know :eek:

OOPs- forgot about life insurance! If one of us passes before age 65, we have that. So- yeah- possible the surviving spouse could hold off on taking Social Security if he/she so desires. This is where serious math would have to be done to see if it would be worth it to wait.

Need to get a financial planner very soon- on my to do list.....
 
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GetawaysRus

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There remains a very large wild card in the mix. It's called the government.

Will there be any changes to Social Security? It's no secret that the current system is financially non-sustainable.

Will there be any changes in income taxes? It's no secret that the Federal government is deep in the financial hole.

So even though I also do my best to plan what's ahead, I remain concerned. We are all vulnerable to potential health issues, inflation, and the government.
 

WinniWoman

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There remains a very large wild card in the mix. It's called the government.

Will there be any changes to Social Security? It's no secret that the current system is financially non-sustainable.

Will there be any changes in income taxes? It's no secret that the Federal government is deep in the financial hole.

So even though I also do my best to plan what's ahead, I remain concerned. We are all vulnerable to potential health issues, inflation, and the government.

That's for sure! Life is what happens while you're making other plans!
 
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