Why claiming Social Security early could be more popular than ever this decade

[easyrider]

You can start Medicare at 65 and not collect Social Security until after that, 66, 67, 68, 69 and 70...

Sure, a person can wait until 70 but would want medical insurance, imo. His SS is used to pay his Medicare so he doesn't have private medical insurance anymore is the gist of it.

Bill

 

[VacationForever]

Sure, a person can wait until 70 but would want medical insurance, imo. His SS is used to pay his Medicare so he doesn't have private medical insurance anymore is the gist of it.

Bill

I don't think we are understanding each other. He was paying for private medical insurance and then switched to Medicare at 65. His medical cost would drop substantially as a result. He did not need to withdrawal his SS then. He could wait until his FRA or after. Unless you are saying that since he was self employed up until 65, with Medicare he immediately stopped work and as a result he needed an income, he then filed for SS to pay for his Medicare.

 

[BobSc]

The government and social security "experts" like those at Harvard want you to die before you ever claim social security.
That's why they advocate waiting.

In fact of the 78 million born during the boomer cohort years of 46 to 63, over 5 million have already died.
Lucky Social Security will not have to pay any benefits to those 5 million.

They want you to wait as long as possible to start collecting benefits and if you do live long enough to claim benefits, they want you to die as soon as possible, thus limiting payouts.

An interesting exercise is to take the amount of benefits you expect to receive at age 62 until a full retirement age of say 66 or even 70 and add them up.
It could be as much as $50,000 or more that you will receive during those years.

Then figure out the annual amount of your benefits at age 70 (which increase 8% per year until you claim benefits - in 4 years it would be about 32% more than your age 66 benefit).

Then subtract the early retirement age benefit from the age 70 benefit to calculate the difference.

Then divide the $50,000 (or whatever it is in your case) by the difference in benefits and see how many years you will have to live beyond age 70 in order to get the $50,000 you gave up by not claiming early.

Generally you will have to live at least until age 90 in order to break even.
If you die sooner you will leave money on the table.

(There are other factors to consider before making a decision. For example if you claim at age 62 but continue working then a portion of your benefits could be penalized. That will have an impact on the calculations above. At age 66 or 67 or whatever your full retirement age is you can earn without penalties.)

 

[Brett]

The government and social security "experts" like those at Harvard want you to die before you ever claim social security.
That's why they advocate waiting.

In fact of the 78 million born during the boomer cohort years of 46 to 63, over 5 million have already died.
Lucky Social Security will not have to pay any benefits to those 5 million.

They want you to wait as long as possible to start collecting benefits and if you do live long enough to claim benefits, they want you to die as soon as possible, thus limiting payouts.

An interesting exercise is to take the amount of benefits you expect to receive at age 62 until a full retirement age of say 66 or even 70 and add them up.
It could be as much as $50,000 or more that you will receive during those years.

Then figure out the annual amount of your benefits at age 70 (which increase 8% per year until you claim benefits - in 4 years it would be about 32% more than your age 66 benefit).

Then subtract the early retirement age benefit from the age 70 benefit to calculate the difference.

Then divide the $50,000 (or whatever it is in your case) by the difference in benefits and see how many years you will have to live beyond age 70 in order to get the $50,000 you gave up by not claiming early.

Generally you will have to live at least until age 90 in order to break even.
If you die sooner you will leave money on the table.

(There are other factors to consider before making a decision. For example if you claim at age 62 but continue working then a portion of your benefits could be penalized. That will have an impact on the calculations above. At age 66 or 67 or whatever your full retirement age is you can earn without penalties.)

The "break even" point is actually less than 90 but yes, waiting to claim social security can increase one's lifetime benefits
https://www.fool.com/retirement/2019/09/21/how-your-social-security-break-even-age-affects-wh.aspx

 

[easyrider]

I don't think we are understanding each other. He was paying for private medical insurance and then switched to Medicare at 65. His medical cost would drop substantially as a result. He did not need to withdrawal his SS then. He could wait until his FRA or after. Unless you are saying that since he was self employed up until 65, with Medicare he immediately stopped work and as a result he needed an income, he then filed for SS to pay for his Medicare.

He is self employed and still working. He has plenty of money and assets. He probably switched because it was better coverage for less money and used SS to pay the Medicare because it was easier for him, imo.

Bill

 

[AnnaS]

The government and social security "experts" like those at Harvard want you to die before you ever claim social security.
That's why they advocate waiting.

In fact of the 78 million born during the boomer cohort years of 46 to 63, over 5 million have already died.
Lucky Social Security will not have to pay any benefits to those 5 million.

They want you to wait as long as possible to start collecting benefits and if you do live long enough to claim benefits, they want you to die as soon as possible, thus limiting payouts.

An interesting exercise is to take the amount of benefits you expect to receive at age 62 until a full retirement age of say 66 or even 70 and add them up.
It could be as much as $50,000 or more that you will receive during those years.

Then figure out the annual amount of your benefits at age 70 (which increase 8% per year until you claim benefits - in 4 years it would be about 32% more than your age 66 benefit).

Then subtract the early retirement age benefit from the age 70 benefit to calculate the difference.

Then divide the $50,000 (or whatever it is in your case) by the difference in benefits and see how many years you will have to live beyond age 70 in order to get the $50,000 you gave up by not claiming early.

Generally you will have to live at least until age 90 in order to break even.
If you die sooner you will leave money on the table.

(There are other factors to consider before making a decision. For example if you claim at age 62 but continue working then a portion of your benefits could be penalized. That will have an impact on the calculations above. At age 66 or 67 or whatever your full retirement age is you can earn without penalties.)

I say this all the time............the government/social security want and hope people die before collecting.

I just realized there is no edit link. I was going to edit/correct my post - I did not add the family members "passed" before 60. No biggie

 

[MULTIZ321]

I say this all the time............the government/social security want and hope people die before collecting.

I just realized there is no edit link. I was going to edit/correct my post - I did not add the family members "passed" before 60. No biggie

Hi Anna.

The Edit link is Time Sensitive. Depending on when you posted, if you are still within the time-window,
Down at the bottom of your post in the lower Lefthand corner adjacent to the word Report will be Three small period dots and a down-arrow. Click on the dots and "Edit" will pop up. Click on "Edit" and make your changes. Then click on Save and you're finished.

Richard

 

[Sugarcubesea]

This could be the real issue. Many Americans were laid off prior to 65, have been scraping by and need the income to live.

I also have a friend who took early social security because they have a developmentally disabled adult child who will receive more social security once they start drawing it. The aggregate numbers came out better to take earlier than to wait.

That is my concern, I hope and pray I can stay at my company till 65 for the insurance. My financial planner has run the numbers and tells me if I retire and have to purchase insurance on my own a big chuck of my savings will go toward insurance.

 

[bbodb1]

For better or worse, this is the general plan we've come up with:

At 60, I can take teacher retirement. I'll do this but go find another job in a different segment of the working world.
I'm going to 'retire' at 62 and pull SS.
We'll invest every cent of SS I get (not sure how we'll invest this but perhaps a Roth IRA - the investment vehicle is still to be determined).
All of these funds will be invested.
The wife will continue to work (she has decent health insurance).
I'll 'work' enough to make at (or below) the max income one can make without having to pay back anything to SS.
We will continue to contribute to our HSA.
Both of us will 'retire' at 65 and stop working all together (if not before).
At present, we figure retire at 65 and see if the wife's HI policy would be less expensive to pick up for one year before we become Medicare eligible.

One reason I wanted to post this is due to the fact that articles suggesting a person work as long as they can to maximize SS benefits are correct - to an extent.
They never take into account that a person could invest these funds and likely do better over the same time period.

 

[easyrider]

They never take into account that a person could invest these funds and likely do better over the same time period.

Dave Ramsey did.

Bill

 

[farinc]

The government and social security "experts" like those at Harvard want you to die before you ever claim social security.
That's why they advocate waiting.

In fact of the 78 million born during the boomer cohort years of 46 to 63, over 5 million have already died.
Lucky Social Security will not have to pay any benefits to those 5 million.

They want you to wait as long as possible to start collecting benefits and if you do live long enough to claim benefits, they want you to die as soon as possible, thus limiting payouts.

An interesting exercise is to take the amount of benefits you expect to receive at age 62 until a full retirement age of say 66 or even 70 and add them up.
It could be as much as $50,000 or more that you will receive during those years.

Then figure out the annual amount of your benefits at age 70 (which increase 8% per year until you claim benefits - in 4 years it would be about 32% more than your age 66 benefit).

Then subtract the early retirement age benefit from the age 70 benefit to calculate the difference.

Then divide the $50,000 (or whatever it is in your case) by the difference in benefits and see how many years you will have to live beyond age 70 in order to get the $50,000 you gave up by not claiming early.

Generally you will have to live at least until age 90 in order to break even.
If you die sooner you will leave money on the table.

(There are other factors to consider before making a decision. For example if you claim at age 62 but continue working then a portion of your benefits could be penalized. That will have an impact on the calculations above. At age 66 or 67 or whatever your full retirement age is you can earn without penalties.)

cant the ROI change dramatically if you choose a spouse or child as a beneficiary of your SSN?

 

[geekette]

cant the ROI change dramatically if you choose a spouse or child as a beneficiary of your SSN?

You don't get to choose beneficiaries for your SS, it ends with you. You can do that with your actual financial accounts.

 

[CalGalTraveler]

Bird in the hand mentality? We received a $3000 insurance check for a payout of an accident. However the damages were double that amount. I think it was to lure people to accept it as the payout.

Of course if your are still working it doesn't make sense to take early payouts because you will lose much of it to taxes and forfeiture.

 

[WinniWoman]

Dave Ramsey did.

Bill

This past weekend I again asked our FA about me taking SS before age 70. (Hubby is waiting until then also and that is a given as he will have the higher check). He said absolutely not. That I should look at it as an insurance policy (which I do- like an annuity) and take it at age 70. The 8% increase he said is real and it would be hard to get a better , safe return than that investing ourselves.

He obviously looks at our entire financial picture specifically, so this advice is not for everyone.

Obviously, if someone really has no money and needs SS to live on than they should take it when they need to.

 

[easyrider]

This past weekend I again asked our FA about me taking SS before age 70. (Hubby is waiting until then also and that is a given as he will have the higher check). He said absolutely not. That I should look at it as an insurance policy (which I do- like an annuity) and take it at age 70. The 8% increase he said is real and it would be hard to get a better , safe return than that investing ourselves.

He obviously looks at our entire financial picture specifically, so this advice is not for everyone.

Obviously, if someone really has no money and needs SS to live on than they should take it when they need to.

You are right in that every ones situation is different. After really thinking about it we decided to take my wifes SS at 62 and mine probably at FRA or 70. She will be able to collect more by taking a part of mine when I do collect and if I die she would get my entire benefit. Her argument is that it doesn't matter as we have life insurance so we might as well take it at 62.

Bill

 

[turkel]

Father died at 58 thanks but regardless of need( which won’t exist ) I‘ll take mine at 62. Wait till 70, not a chance.

Too each their own and no FA will change my mind since I am a firm believer that each individual is their own best adviser mistakes included.

 

[AnnaS]

Hi Anna.

The Edit link is Time Sensitive. Depending on when you posted, if you are still within the time-window,
Down at the bottom of your post in the lower Lefthand corner adjacent to the word Report will be Three small period dots and a down-arrow. Click on the dots and "Edit" will pop up. Click on "Edit" and make your changes. Then click on Save and you're finished.

Richard

Thank you Richard. Did not realize this.

 

[VacationForever]

That is my concern, I hope and pray I can stay at my company till 65 for the insurance. My financial planner has run the numbers and tells me if I retire and have to purchase insurance on my own a big chuck of my savings will go toward insurance.

I think the question is whether you can afford to pay for it on your own and still have enough retirement savings left to live on for the rest of your retirement. I retired at 53 which means paying for private health insurance for 12 years. I put it in our budget.

 

[cman]

My biggest reason for wanting to retire at 62 and not a day later is there are things I will hopefully still be able to do at 62 that I am less likely to be able to be at 67

I'm thinking the same thing. At 62, I'm still active and healthy. I can still do the things that I want to do. At 72, I just don't see myself hiking Diamond Head, or kayaking the Grand Canyon. To use a football analogy, we're in the 4th quarter of life. I'm planning on about 8 years of "active" living. After that, I guess I'll have to readjust my expectations.

 

[bjones9942]

My break even point is at age 78. Given that I already have heart and lung issues at 62, it doesn't make much sense to delay collecting. Now that I'm living in México, my SS payment will more than meet my monthly expenses and my investments will be able to fund my travel plans.

 

[zinger1457]

One reason to delay SS is that many using ACA for their healthcare coverage (until Medicare kicks in) have to manage their income closely to stay below the MAGI limit so that they qualify for a subsidy. Adding SS into the equation would take away the subsidy for most, that can easily add up to $10K or more a year.

 

[geekette]

One reason to delay SS is that many using ACA for their healthcare coverage (until Medicare kicks in) have to manage their income closely to stay below the MAGI limit so that they qualify for a subsidy. Adding SS into the equation would take away the subsidy for most, that can easily add up to $10K or more a year.

That gets to be a tough one, because, remember, if one is eligible for ACA subsidy, it is counted as income. So the choice is between taking actual income or getting taxed on "income" never received. Obviously, money in an account is spendable on anything, while subsidy creates income that is earmarked as healthcare spending.

Personally, I would not be trying to stay below a certain income level only to be taxed as if you received more. I would find it more stressful to avoid actual income, but that's just me. If a person is happy living on the subsidy level, rock on, but best to get ducks in a row and not have expenses that are going to blow that plan.

 

[VacationForever]

That gets to be a tough one, because, remember, if one is eligible for ACA subsidy, it is counted as income. So the choice is between taking actual income or getting taxed on "income" never received. Obviously, money in an account is spendable on anything, while subsidy creates income that is earmarked as healthcare spending.

Personally, I would not be trying to stay below a certain income level only to be taxed as if you received more. I would find it more stressful to avoid actual income, but that's just me. If a person is happy living on the subsidy level, rock on, but best to get ducks in a row and not have expenses that are going to blow that plan.

There is no tax on ACA subsidy.

 

[geekette]

There is no tax on ACA subsidy.

There is. I was hit by it. It is as if you received that money as income and sent it to ins co. If your income is so low that the subsidy changes nothing, then it changes nothing.

eta.... actually, I think my issue is that my income went above subsidy level and may have triggered a penalty. It's not clear if it was the subsidy or cost sharing, but it was definitely the health insurance issue that nailed me unexpectedly.

 

[VacationForever]

There is. I was hit by it. It is as if you received that money as income and sent it to ins co. If your income is so low that the subsidy changes nothing, then it changes nothing.

eta.... actually, I think my issue is that my income went above subsidy level and may have triggered a penalty. It's not clear if it was the subsidy or cost sharing, but it was definitely the health insurance issue that nailed me unexpectedly.

I took the maximum subsidies, both for premium and cost sharing, and kept my income below the ceiling and I was not hit with any tax or payback.

If your income goes above the stated estimated income and ceiling, you have to pay back the subsidies for premium but not cost sharing.