At my age, full retirement age for Social Security purposes is 67. So five years past when I can start to draw on Social Security and only three years short of the age at which I would get the maximum benefits. Right now, my IRA/401(k)/pension is about ten times my gross salary, but the stock market is also about as high as it’s ever been. So I think I have a healthy balance, but who knows what will happen with the market?
BobLibDem makes good points. However, I took SS at 62. Mostly because I couldn’t figure out a rational way to equate current income to future income.
As I understand the SS law, by law SSA sets the age 62 benefit to equal the full benefit at age 80 plus or minus a year or so. That is, prior to age 80 you are coming out ahead by starting at age 62, after 80 you are losing in total lifetime SS income. In my case, living until 85 meant I would lose about 80K total lifetime earnings. OTOH, if I die before 80, I will have come out ahead. Not that it matters much if I am dead… Which was the puzzle for me. How do I compare the utility of higher total earnings prior to 80 to the lost earnings after 80 considering that I am not an immortal corporation or guaranteed to live until 100? Starting at 62 gives me more money earlier in retirement when I am more likely to enjoy it vs more money later in retirement-which I might not reach at all. I couldn’t find a rational way to figure that out. In my case I have long-term care insurance and HMO insurance so increased medical expenses when I am older aren’t much of a concern.
I spent a lot of yesterday researching this and there really isn’t a consensus. It’s, as we know, very situational. One thing that hasn’t yet been mentioned is the effect the income may have on whether or not you get an ACA subsidy. A lot of it is psychological.
Another thing that gets mentioned a lot is the future of SS. Almost no one thinks that SS will be eliminated but a number of people think that they might have a means test some day. You could wait until you’re 79 and then not get any because you had the discipline and good fortune to have a large savings.
This is where I always get confused by advice. Yes, if I wait to collect until 70 ( or even 67) from that age on, my income will be higher than it would have been if I had started collecting at 62. But for me, it’s not a matter of “stop working and collect at 62” vs. “work until 67 ( or 70) and start collecting”. I will not under any circumstances be working until I am 62 - I am already eligible to start collecting my pension and will have health insurance through my employer once I do. The only question is whether I will start collecting at SS at 62 or if I will wait - and I’m leaning toward collecting at 62, both because I will enjoy the higher income more at that age than I will at 70 and because even though my family history suggests I will probably reach 80, that doesn’t mean I won’t be hit by a bus at 65. ( and in that case, I won’t get anything from SS except the tiny death benefit)
I think that people with enough squirreled away to not need SS should lean towards taking it early and using it as fun money. If you are in danger of running out if you were to live a certain amount of time, you should wait and use it as an insurance policy as is the intent of the program.
Remember, claim it before your full retirement age and any other income (not just from work) you have can reduce your monthly SS benefit to the tune of $1 reduction for $2 earned, up to (I think) half your SS benefit. So check carefully into what other income sources you will have (not all sources reduce SS, and it can depend on what state you’re in, IIRC) prior to full retirement age and determine what impact they’ll have on your SS. Once you hit 67, that reduction to SS benefits doesn’t apply.
I haven’t done much research yet, so I didn’t know this, but this is very useful information. Thanks for posting it.
From the SS website
When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you’re self-employed. We include bonuses, commissions, and vacation pay. We don’t count pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits.
Taxability is another issue - but as far as I know, whether you have or haven’t reached full retirement age doesn’t affect taxability.
excellent. My own situation, with deferred compensation plans, nixed any plan to claim before 66 and a half for me
Ok , I’ve got one of those too, ( a 457, to be precise) but I don’t understand why that would prevent you from claiming SS before 66 and a half ( which I guess is your full retirement age.). It doesn’t decrease your benefits ( as deferred comp is counted by SS when it was earned not when it’s received*) and the deferred comp withdrawals will have the same effect on the taxability of your SS no matter what your age.
Or do you just mean you won’t need the SS early because you have the deferred comp to draw on and I’m over thinking this?
- That’s why the box for SS wages on my W2 is thousands more than my Box 1 wages that I pay income taxes on. Because SS counted it as income when I earned it and I paid SS taxes when I earned it - so they don’t count it again when I withdraw it.
@doreen apparently I’m not sure what I mean, I had best check my SS info again, run it past my retirement advisor some more. It seems I understand less than I thought I did. Which isn’t unusual . . .
Remember, depending on your life expectancy, you have a lot of years in the market even after your retire. Don’t assume you will be selling everything at 67. The market will go down eventually, but if you have set yourself up with a buffer of cash and some income producing investments you don’t have to panic about it.
I rode out the crash last year with not a drop of sweat, and I could have ridden out a much longer one.
When you get closer to retirement you should talk to an advisor about reducing volatility and increasing cash flow. If you have enough money to live on, you don’t even need to look at your statements during a downturn. That was Dan Ariely’s advice on Marketplace during the 2008 crash.
Oh, man, I’ve ridden out so many “crashes”… (well, mostly fender-benders).
Here’s the deal: your stocks go down, that’s not a problem… if you’re not selling today.
On the other hand, don’t get cocky if they go up… you’re not selling today.
You’re playing the long con…
Now I’ll admit, I do check my most beloved stocks once a week or so, and I do get cocky or panicked (one stock rocketed, split, kept climbing, plummeted, plummeted, leveled off… all in one week. It’s back to its usual two days’ of growth, one of loss now…)
But I really shouldn’t watch all that. It’s for the far distant future, not for some adrenaline-fueled day trading.
I look at the monthly statement, but mostly to think things like “gee, I made more money last month than I earned in 1980 when I started working at a really good job.” Or lost that much.
When I need to sell something to put it into cash, it’s on my schedule and I talk to my financial advisor to figure out what’s best to sell.
He loves us - we don’t call him in a panic when the market nosedives.
Odd that she used the word “should” vs “could”. Was there some aspect of your continuing to work that would somehow have REDUCED your pension?
Actually I could see that being an issue, if your retirement funding is like one of mine: it gets turned into an annuity based on the value at the time I retire. If the planner thought the market was gonna take a dive, locking in the annuity amount while it is higher is reasonable.
I speak to someone about once a year. I always say “Just let me know when I have to die”.
I got laid off by a large IT company about 4.5 years ago (let’s call them HAL 
).
As part of the retirement package, they included workshops with a ‘polish-your-resume and get on Linkedin’ company to help you find your next job. In one of the sessions they asked ‘What would you do if you could do any job’? I said ‘I would like to be a tour guide, but don’t know where to start’.
I sat down and the girl next to me said ‘I was a tour guide in my younger days. You need to talk to this government department, get these certifications etc’.
Hmmm. So I went home, mulled over it for a few days and then talked to the wife - and she said ‘Go for it’.
Si I did, tried a few flavours and eventually wound up as a wine tour guide. And it’s great. I work 2-3 days a week (in a good year - how do you reckon tour guiding went in 2020 
?). Don’t earn much - but I’m revenue neutral - ie we are still saving money (a little). Wife works full-time and still wants to, I do the cooking and cleaning, and my blood pressure is great. Had my 60th birthday a few weeks ago - had the big overseas holiday (well, Tasmania is very scenic and has extremely good and interesting wines). I’n very happy.
And I plan to keep on doing it as long as I want to. So the moral of the story is - have a go. Maybe you can do a dream job.
(Disclaimer: We are debt-free, and have plenty in our retirement savings. Obviously there is a balance that you have to ve bomfortable with).
I am beddy beddy ve bomfortable, tang gyou!
…
eta: Seriously, I’m making half of what I did before I retired, but spending maybe a quarter… and doing an eighth as much!