My original plan to start drawing at 62 was made about when I was 55 and had done absolutely no planning for how I would “do” retirement. I was sick of my work situation and coming to realize that my career was no longer as important to me as it had been. So I was just looking at how I could retire as soon as possible. It was not thought through at all.
As I started to get closer to 60 and started to chart out how I would retire, I just kind of figured that I would need to start drawing at 62 in order to be able to retire at 62. The thought of having to put in the extra 5 years was not appealing to me. But that’s when I started investigating and seeing how my 401k and IRAs would pan out. That online seminar really stressed putting off drawing from social security until 70, and that made me wonder if I could not start drawing at 62.
I was told that if you have no or very low income, it’s best to start SS at 62. If you are still working, it’s best to hold off on SS because a portion of it becomes taxable if you earn over a certain amount. The break even point is, IIRC, some time in your early 80s and you might not live that long. There is also the present value of the money to consider. I am willing to have my mind changed but as a retiree, I plan on taking it as soon as I can.
You get 8% a year more for every year you delay until 70. That is hard to beat. My father lived to 95 and I’m healthier than he was, but some people with health conditions should take SS early.
I was able to do the hack of taking 1/2 my wife’s and waiting until 70 (later this year) to take mine. My wife will then get half mine which is more than her full benefit. That hack expires for those born after a given year though.
And of course if the alternatives are eating noodles for every meal or taking SS at 62, go ahead.
BTW I found the people at the local SS office really helpful. It took months to get an appointment, but it was worth not waiting in line for hours. And you can talk to them on the phone with callback, so you don’t have to stay on hold. That was pre-Covid.
What does inflation have to do with anything? The S&P averages more than 8%. Call it 4%. Whatever. If you take all of the money that you get from SS from 62 to 70 and invest it at whatever percent, you need to take that into account for your calculations. You can put part of it in a Roth. Or you can take nothing for eight years, if you live that long and start getting more.
I went from student debt to over two million in just under 30 years on my own. (And I am sure that you’ve also done well.) I’m not a financial dumbass and I am still not convinced.
Continuing my thoughts. You get 8% more per month if you hold off for eight years but there is the missed opportunity of not getting anything until then. This is not the same as earning 8% on your money for that time.
I took 1.08^8 and got 1.85. The guy who gets $1000 at 62 could get $1850 at 70. But he’d also collect that $1000 from age 62 to 70…eight years (i.e. 96 months) makes a $96,000 head start. The 70 year rate being $850 higher it would take 96,000/850, or almost 113 months, to catch up. 113 is 9 years 5 months. The number of dollars collected would match at age 79 years 5 months. But that only works if you’re not contributing—people who aren’t collecting it are probably working jobs, paying into SS more and increasing the benefit they’ll receive.
Gender, ethnicity, and other factors come into play for life expectancy.
says that $1000 in 2003 (18 years ago) would be like $1421.64 today.
I’ve also heard at some point in the future, people may get “haircuts” on their checks. To make the SSA budget numbers work they’ll just say “Sorry we’re reducing your benefits.”
Overall I think I’d be inclined to take it at 62. You can still work…
Since you done you understand risk. The 8% is risk free pretty much, the S&P isn’t especially in the short term. And having lots of money in somewhat higher risk investments makes it easier to delay getting SS.
You’ve been through downturns. Once you retire you have to fund your living by yourself. Better not to do that by having to sell at a lower market. Having a good SS cash flow allows you to ride out downturns more easily. And you can start collecting it whenever you want, no matter what the market is doing.
If your investments and SS can fund your life style out of dividends/interest once you retire your balance doesn’t mean a lot. You have enough to do that. It is a very pleasant feeling. Maximizing your account value is no longer the most important thing, unless you really want to give a lot to your kids. Which you will likely do anyway.
I hope to retire after 4 more years in the school system. The pension kicks in, and I’ll only be 60. Our house will be almost paid for, and is worth way more than when we bought it (there’s a Metro stop due to open before then, which will probably jack the price up even more). We’d like to move somewhere cheaper and near a river; the area around Harrisburg, PA on the Susquehanna appeals to us, and PA doesn’t tax pensions. We have enough money in annuities and other accounts to more than cover insurance until Medicare kicks in. I like working with kids, and am good at it, so I’ll probably volunteer at the local library or community center.
In general, the way SS is designed, if you have an average lifespan, as calculated by SS, you should be agnostic as to when you should start taking it. Thus, you should look at your own health as you approach retirement, as well as that of your parents, to determine how long you think you’re going to last, and use that as a guide of whether or not to take benefits early or late, assuming you can choose.
One thing mentioned before that you need to keep in mind as well is that your benefit amount is likely to go up in real terms as you replace your lean-earning early years with the career-peaking earnings of your last few years, assuming that’s what they are. Unless you have already hit the SS cap in 35 of your working years, continuing to work will most likely increase your benefit. If it doesn’t, then you really retired early and took a fill-in job after that.
For those that are surviving spouses from 2-income marriages, you can take your spouse’s SS benefit immediately, and then take your own at 70, and almost certainly be better off than taking your own immediately.
Yeah, I think I’m way more pessimistic than most in this thread. The more I see co-workers and acquaintances drop dead, including seemingly healthy ones who just crap out on the cancer lottery, the more paranoid I get. I do benefit from staying longer, but I don’t love my job. So for me it is purely more financial comfort vs. a shorter and potentially less fulfilling retirement.
No, as above . I’ve watched my parents decline physically at a nice steady clip despite actively working at staying healthy. I started to list their myriad medical issues and the list began to get unwieldy, but trust me it was long and mostly post-retirement . Father Time always wins.
I’ll likely take it at 62 precisely because I probably won’t really need to and as above I’m paranoid as fuck. I did the math once (probably a bit roughly) and I think the actuarial break-even was something like 74 or 75. Live longer and you start losing money.
Thing is that while I don’t expect to have a short live-span, I also am not counting on a long one. I honestly don’t think anyone should - it’s not entirely random, but it has large random elements that get larger every year you age. I’ve seen multiple healthy people ( even folks I’d consider stereotypical health nuts) drop dead in their 50’s of brain or pancreatic cancer or suffer crippling strokes. My step-brother very nearly bled out from a rare stomach cancer in his late 40’s that was just the result of some random shitty mutation. The fact that someone’s grandparents lived into their 90’s is certainly encouraging, but hardly worth betting the farm on in my book.
Even if you do live into your 90’s you’re unlikely to be vigorous at that point. You’re more likely to get more enjoyment from that SS money in your 60’s than in your 70’s. I take the reverse tack - hold out longer if you’re going to need the money. My mother waited until she was 70 and worked until then because that was going to be the bulk of her retirement support. For her it made perfect sense.
But I say if it is just extra money, take it as early as you can and enjoy it .
For sure. When my parents were my current age (63), they were both already dead. Both my grandfathers died before the age of 70 (66 & 69). And as a physician, I’ve seen so many apparently healthy people die young and unpleasantly of unexpected disease. Damon Runyon said “All life is 6 to 5 against”. He’s right.
As you say, the “implied ROI” on SS benefits taken early or late (~8%/yr) is meant to capture actuarial reality (likelihood of continued life) multiplied by an assumed risk-free rate of return. From SSA’s point of view they’re doing an annuitization so they break even no matter how long the bulk of us do or don’t live.
The assumed lifespans used by SS are now a bit out of date and are pessimistic for the average American. And those assumptions are further pessimistic for white-skinned, white collared, educated folks who don’t/didn’t smoke.
The risk-free interest rate assumed is way out of date and is wildly optimistic versus the risk-free rates available elsewhere.
Both of these mismatches mean the payout goes up significantly more each year than it actuarially should. Congress and SSA has not acted to keep the assumed return calcs current.
In e.g. 2000 there was not an actuarial advantage to waiting. As you say. But for the last 10-ish years there was/is a big advantage. What does future legislation, SSA policy changes, and interest rates hold for us all? Damn good question I cannot answer.
Good point.
The effect is not quite as big as a naïve comparison of your remembered income out of school vs now, because they correct that 30+ year ago income for inflation up to today. As well, any given year is only roughly 3% of the total. So the effect of replacing an old low-paying year with a current high-paying year is real, but it’s often just a small percentage change. Every penny helps, but the extra 8% for waiting is the larger influence except in very unusual earning histories.
A common professsional view of SS is that it’s an insurance program to cover for a particular major risk: out-living your assets. For those with few assets they hit that point real early, say as soon as they quit working. Perhaps around age 62. For those with lots of assets it may not come until 90, if ever. But knowing you won’t be starving at 90 if you have good luck on aging and bad luck on financing is, to me, very valuable.
Applying that POV to my personal situation …
I personally have a pile of assets, but other than SS, no material 3rd-party pension payout from anywhere. When those assets are gone, but for SS, I’m on the street. For me the incremental value of having a 30+% bigger SS payment starting at 70 that I could live (modestly) on outweighs the benefit of taking it earlier (age 65) and either spending it or reinvesting it. As between age 65 & age 62, if I can keep working I will since the work is pleasant and the pay utterly overwhelms what I would otherwise receive in SS by retiring early.
Folks in different circumstances as the health, income, pensions, assets, and mandatory retirement dates may well have different conclusions.
The physics is the same for everyone, but their own engineering will depend on their own needs and capabilities.
If you’re working and making a decent living at 62, you should hold off. In that case, part of your SS is taxable and at higher rate.
Since this is a retirement thread, I am concerned with the case of a person not earning much or any income at 62 and with significant assets most of which are in a retirement account.
At 62, I get the SS money tax free and for every dollar in SS, I don’t have to pull taxable income out of my IRA/401k. In addition, that non pulled out money continues to make tax free investment gains (on average) still sitting in the retirement account. This is instead of waiting eight years to get a higher monthly amount to break even around eight more years later. As stated, you might not live another sixteen years and it doesn’t take the tax implications into account so it’s probably effectively longer. Maybe I’m being dense but I still think in my case that I should take it early.
One more thing, and this may not be rational, I’ve read lots of articles from government sources recommending that we should wait. The government has skin in the game so they aren’t a neutral source. If they are telling me to wait, it’s for their benefit, not mine.
The only cancers people in my family get are environmental - like lung cancer. So I doubt that’s the way I’m going to go. Plus my father-in-law lived to almost 101, wrote music until 100, and had it performed, and had a girlfriend. That’s the way I’m planning to live my last days.
Still, being pessimistic about your life expectancy is a rational reason for taking SS early. I hop you’re proven wrong.
I retired at age 62 after 40 years in state government. I immediately went to work for a consulting engineering company for one of my former bosses. I was all set to live on pension + SS but these two years have been very lucrative for me.
My two cents:
Do not start drawing SS as soon as you can. You’ll be better off waiting for full retirement age or reasonably close to it. If you expect to live a long retirement, you will definitely need that extra SS.
Let your 401k be if you can. Mine has not quite doubled in the 2+ years since retirement. I expect a post-pandemic surge in the market and you want to make sure you’re still on board as the roller coaster goes up.
Constantly compute the implications of several potential retirement dates. Go so far as to compute how much you’re really have per month after taxes. Then ask yourself, is that increase in future income worth delaying your retirement? When the answer stops being yes, retire.
Pay down your debts. No sense in being retired if you’ll never pay those cards off.
I retired at the end of 2019 at 56 yo. We had always planned to retire “early”, without being sure yet what early was, but we kept expenses low and stayed debt free starting in our late 40s. I also deferred as much income as I could.
As far as actually making the decision goes, we used a financial advisor who made us sit down and project every expense and cash flow going forward. As part of that I assumed conservative returns (3% stock, 2% bonds, 0% on internal company stock), and was heavy-handed on expenses. Then for various reasons I worked one more year than planned, but that made me feel even better about it.
As far as retirement goes, other than being on a town committee I’m just learning some coding, working on our very old house, reading a ton of books (Goodreads says 81 last year), and hanging out with my wife…and it’s awesome.
. I’ve watched my parents decline physically at a nice steady clip despite actively working at staying healthy. I started to list their myriad medical issues and the list began to get unwieldy, but trust me it was long and mostly post-retirement 
. Father Time always wins.
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