Another Social Security question

Say I quit working at age 65, but don’t need to take any social security distributions for awhile. I’m able to delay taking payment from them until I’m 70. Will my expected future payments still continue to go up the longer I put it off even though I’m not continuing to pay in for those five years?

Definitely something you should rely on someone from Social Security to answer for you. I found pretty easy to talk to them on the phone. I find their web site convoluted so I call.

You will be enrolled in Medicare the month you turn 65. You have a certain time window to decide about Medicare Part B and about a supplemental or advantage plan. Be sure you understand precisely about those windows and choices in coverage so you don’t end up high and dry later. Some of the best policies will only accept you without exclusions in a certain time period after your Medicare starts.

@JohnT has a great thread going on Medicare-check that out.

I asked my accountant that exact question and he said yes, the SS payment amount is based on when you start taking payments, not when you stop working.

See here:

Delayed Retirement Credits

Social Security retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond full retirement age.

The benefit increase stops when you reach age 70.

Yes. Social Security benefit amounts are calculated based on your highest 35 years of earnings (indexed for inflation), and it doesn’t matter to them whether you peaked early in your career and went downhill or the reverse. You earn “delayed retirement credits” (the increase in future benefits) for any month after you hit your full retirement age, are thereby eligible for retirement benefits, and do not receive those benefits.

Why wouldn’t you want to start taking Social Security now? It will take a long time before the total amount of money you get evens out, and while I really hate to say this, there is no guarantee that you will live to be 70.

There’s no guarantee, but essentially you are gambling, and based on your own health and your family history, you can make some predictions. For most people, the breakeven age (taking SocSec at 70 rather than at 66/67) is somewhere in their early 80s; as retirees tend to live longer, that can be an important consideration. If you are likely to live into your 90s, for example, that extra benefit can add up to tens of thousands of dollars. Another consideration might be survivor benefits, if you are the higher-earning spouse and want to give the maximum possible benefit for your widow(er), taking into consideration his/her own life expectancy and salary history.

Terrible advice without actually running the numbers. Run a spreadsheet with the numbers. You can get your personal amounts at each age from the SS website. Unless we’re already in bad health, most of us will more than recoup that money.

I’m doing the exact thing mentioned in the OP now, and my expected payout does go up. At the moment I’m getting half my wife’s SS, later this year when I hit 70 I’ll take mine and she’ll take half mine which is greater than hers. The window for doing that might have closed already.
And I echo the recommendation to talk to someone from SS. Since what we did was a bit complicated we made an appointment to go to the nearest office (which is very close to us) and talk to people. Both times they went the women we spoke to were great.
There is a long lag time for them answering the phone, but they’ll call you back when ready so you don’t have to stay on hold.

I do have the mailing from the SSA showing the theoretical payouts for each age, should I choose to start taking payments at those ages. But if they base payouts on your highest 35 years of earnings, and I would have earned the most between ages 65 and 70 had I kept working, won’t that take down the amounts of payout?

The rhetorical question is why don’t you need the SS money earlier. In my case I could have delayed taking it and lived on investments. By taking SS, the investments were left in the market and have grown nicely, even with the Covid drop last year.

This is mostly to show that there is more to consider than maximizing payments from SS. There is no one-size-fits-all.

It is more than most people. It is the law. The calculation can’t be exact but the SS requires that the break-even point is 80 years old for everyone taking benefits prior to their full retirement age. The complicating factor is a spouse. Since survivors benefits accrue to the spouse. This assumes the spouse lives past 80-and is eligible for survivors benefits. In the OPs case, the OP has reached full retirement age (or will soon) and early withdrawals won’t be an issue. Waiting to start collecting is, as others have said, a bet on one’s health.

Your years of earnings are indexed for inflation when calculating payouts, but yes, if you would have earned promotions and other pay increases (over and above cost-of-living adjustments) between 65 and 70, yes, retiring at 65 means those increases aren’t available to be factored into your payouts, reducing your benefits.

However, do remember that SocSec is weighted to return more to lower-income people. For example, the maximum earnings subject to SocSec taxes and hence available to be figured into your payout is $142,200 (for 2021); anything beyond that doesn’t help you. The formula for figuring payouts, for someone first eligible for retirement in 2021, is the sum of

(a) 90 percent of the first $996 of his/her average indexed monthly earnings, plus

(b) 32 percent of his/her average indexed monthly earnings over $996 and through $6,002, plus

(c) 15 percent of his/her average indexed monthly earnings between $6,002 and $11,850.

I can perhaps hold off taking distributions because my husband (who is still working) will turn 70 in a couple of months and he can start taking his own SS distributions. That means our income will go up, and maybe I can stop working. But if I can hold off taking my SS distributions for awhile, the monthly benefits will go up year by year.

I think I have it figured out, due to your advice and reading the fine print on my SSA printout. If I stop working at 65 and hold off, the SS benefits will continue to go up, until I’m 70. They are based on averaging out my highest earning 35 years, NOT the most recent 35 years. If I continue to work between 65 and 70, I am unlikely to see much in the way of raises and so continuing to work won’t increase my monthly SS benefits much, if at all.

At least, that’s how I’ve worked it out. Do I have it wrong?

No, it sounds like you’ve got a pretty good handle on it.

The one thing that I haven’t seen mentioned is what happens if the spouses have very different salary histories. If you’ve always worked fairly low-paying jobs and your husband earned a lot more, it will be worthwhile running the numbers to see whether the spousal benefit (1/2 of what he would have received at full retirement age [66]) is more than your benefit on your own record, either now or when you’re 70. In some cases where there is a substantial difference in your earnings history, you’ll come out ahead if he starts taking at 70 and you go ahead and start taking at 65 anyway, because SocSec will pay you the benefit you earned and then top it up to half of his regular benefit.

This is incorrect. Enrolling in Medicare is not automatic. You must do it yourself.

You have a seven month window to enroll for Medicare (three months before, the month you turn 65, and three months after). If you fail to enroll with Medicare within the window, you will be permanently penalized with higher premiums.

Unless you have a good excuse, such as having group health insurance coverage through your own or your spouse’s employer.

Considering the OP’s nym, I’d say it was a pretty good bet. :slightly_smiling_face:

Teela Brown was a member of the crew recruited by Puppeteer Nessus for an expedition to the Ringworld. Her sole qualification was that she was descended from “lucky” ancestors, six generations of whom were born as a result of winning Earth’s Birthright Lottery. The consequence of her state was that she’d led such a charmed and worry-free life that she was emotionally immature and unprepared for “harsh reality.” The Puppeteer saw this as a kind of artificial selection, tending to breed for a psionic power of good luck. He hoped Teela would bring luck and success to the entire expedition.

Yeah, there is often a good argument NOT to take SocSec at age 62, since there are earning limitations.

But 65 or 66 or so, it is time.

If you’re still working at 65 or 66 (or for that matter 85), you’ll still be paying income taxes on those benefits, and that needs to be figured into your calculations too, along with your likely tax situation after you stop working. If you’re going to have to pay 30% of those benefits to the tax man while working, for example, but can expect your marginal rate in retirement to be 10% (e.g.), that will change the break-even point on when you get more money by waiting. Even something like whether you live in a state that taxes SocSec benefits at the state level, and whether you will continue to do so after you stop working, can make a difference.