Yeah, I meant to put in the age cutoff but forgot. There was an even better hack, where I could have claimed benefits at 66, had my wife collect half of them, and then turnoff benefits for me until 70, but that got cut off before I hit the right age.
There was a book about doing this, and Congress turned it off before too many people could use it.
Sort of. You could teach a class or two a week, do a full month’s consulting work but have the rest of the year off, open an Etsy store selling your home-made stuff like you always had a hankering to do, or do some low-paid work for a non-profit. Or you could just not be that highly paid to begin with. Some people on a low income do plan stuff too - there are many reasons to be on a lowish income; sometimes it’s just the sector you work in.
Agreed. I didn’t say that as well as I might have.
What I was aiming towards was that if one was used to high wage work, and wanted to continue doing that or other fairly high wage work part time, then you might be hard pressed to find somebody willing to employ (or 1099) you for so few hours per year as to not blow through the taxation threshold. So you’d be forced to choose a lower-wage part time job for more hours. But if used to a high wage in your full time work era, you may well value your free time higher than a low-wage job will pay.
The two curves may not cross for you at all.
Your suggestion of Etsy makes more sense. What I call a “Hobby for faint profit.” You’re painting pictures, knitting doggie blankets, creating novelty greeting cards, whatever, etc., mostly for your own satisfaction and if a few sell for a few bucks each, well bravo for you!
That’s probably the way a former mid- to high-wage now-retired worker can willingly make a smallish controllable amount of money and modulate it to avoid the tax pitfalls where they occur.
Here’s a blog post on the general topic of taxation of SS benefits and the potholes in net posttax income with increasing pre-tax income.
I think it’s partly because IRL I know a couple of people who had fairly high-paid jobs, enough to pay off their mortgage in their fifties (on their own, which is harder), and then get a “little job,” enough to top up their private pensions without attracting much in the way of taxes. One went to work in a shop a day a week, the other worked part-time in a friend’s cafe. They were jobs they both enjoyed, partly for the job, partly for the routine and the contact with people, but couldn’t have afforded to live on without their pension.
And that was before they were even eligible for the state pension. Their private pensions would have been higher if they’d waited, but this way they got the same amount per year by earning on top of their private pension, while working in a low-stress job they enjoyed and having plenty of time to enjoy themselves.
As a teacher I’ve also known plenty of retirees working literally a few hours a week as English language tutors, which is helpful, gives back to their community, and also earns them extra money that isn’t affected by tax. Plus many of the older people I’ve seen doing odd hours at non-profits won’t actually be using that money for their main living expenses. Actually, when I think about the older people I’ve known, an awful lot of them have “pocket money” jobs that are likely to actually pay around $13k.
Basically their pensions pay enough for the basics, so they have the freedom of choosing to take on something that isn’t a career, and they still end up better off for those few years than if they took their pension later.
In the very long term they might get less money, but that’s partly because spending those years with no job stress and plenty of time to look after themselves - but with a routine and something that keeps their minds and bodies active - probably, in itself, means they’re going to live longer.
The way I look at it is this:
Whether or not I have enough money now is my problem.
When I’m 90 with Alzeihemer’s, whether or not I have enough money is somebody else’s problem…
And if you’re 90 withOUT Alzheimer’s your plan is ???
I’m watching a bunch of my 75-80 yo residents run out of savings and/or term-limited private pensions and revert to SS-only. Which turns their “golden years” into “a lazy bare existence.” When the first of the couple dies and their SS check dries up, a forced sale and the survivor moving in with the kids or becoming a ward of the state beckons.
Being childless, I need to be able to pay for a tolerable elder living arrangement given worst-case high longevity with a mind intact enough to care about my condition.
Do you have a cite for this?
Please explain to me how, or show me where, the author accounts for the missing months of SS payments. Maybe I’m missing it.
mmm
I’ll get back to the original question.
I think the entire “work longer gets you more money” is a bit overplayed. Keep in mind that SS is very progressive benefit. You get much less as a percentage as you earn more money. I was surprised how little more you make as you earn more money.
In my case, if I look at taking money at 70 vice 62, I will have foregone about ~$225,000 by waiting until 70. That’s a lot of cash and will take me until about 76 to break even. Just going by my parents life, they did a lot of living between 65 and 75, and they were unable - physically and mentally - to do a lot after 75. So that money would have benefited them much better earlier. And, they just didn’t spend a lot of money after 75 anyway.
I think many, many articles on SS pound the table on the “wait to take SS because you’ll get more later” and don’t focus on the very long break even point.
I am leaning toward agreeing with you.
But as I get deeper into the book I feel it necessary to point out another piece of the author’s perspective on collecting SS later rather than sooner. He says:
- Social Security income protects against longevity risk by delivering a monthly income for the rest of your life, no matter how long you live.
- It also protects against inflation risk, since your benefits usually increase each year with the cost-of-living adjustment.
- Social Security protects against investment risk, too, since your benefits won’t decrease if the stock market crashes.
So, by postponing receiving SS benefits - and thus eventually receiving a larger amount - you are establishing a built-in safety precautions and making what will likely be your largest portion of retirement income more stable and not at the mercy of outside forces.
mmm
ETA: Of course, it all goes to shit if your parachute fails to open on your 70th birthday celebratory skydive. 
Ref @Spifflog 2 posts up:
While I agree you’ve hit upon the greater hedonic value of more retired time earlier during the more vigorous part of older age, I think this snip below misunderstands, or at least mischaracterizes, something very important.
The difference in SS monthly payment you’ll receive as between starting at 62 or starting at 70 is largely unaffected by your earned wages between 62 and 70. It’s affected almost entirely by simply waiting from age 62 to age 70 to collect.
IOW …
- Quit working at 62, start collecting at 62 versus starting collecting at 70 = 30-40% increase in monthly benefit if you wait.
- Keep working fulltime from 62 to 70 then start collecting. Get only ~3% more than scenario #1. Maybe even zero more depending on your salary history.
It sounds to me like you’re suggesting item 2 causes most of the increase you get from waiting. Not so. The lion’s share of the increase will happen whether you’re working or not.
A LOT of the advice about delaying collecting SS is aimed at people that do NOT need to either work or collect SS to feed themselves. It’s aimed at people who can retire from work, feed themselves from other income/assets, and also wait to take SS.
Nope. I was stating two different things.
I concur that waiting to take SS increases your monthly payment year after year. And the most significant driver in increasing your payment from 62 to 70 is just that -waiting - and increasing your percentage by roughly 7% per year.
But an additional point made frequently is that by working longer one trades in higher earning years for lower ones and that has significant impact as well. But my wife, who is over the cap, looked at working two additional years, and found that she would make a whopping $509 per year at age 62. So my comment that that additional money ($290K over two years in her case) will not changing the calculus is accurate.
That would be bad!
Not to come across like a nutcase, but I do increasingly worry about the solvency of the federal government. Not to get political, but by and large each President, no matter what the party increases the debt over that of their predecessor. Service on the debt in what, about 12% of the federal budget now? I wonder what happens when that percentage starts with a ‘2’ or ‘3’? At some point, we can’t write all the checks we’ve promised.
Agree completely, now that I get what your deeper point was. Thanks for setting me straight.
Some pundits certainly do argue that. And often inappropriately just as you say.
One group it might affect significantly is women. Women now approaching or already in their 60s often had enough “gap years” as stay-at-home-Moms with no work that even a fairly low wage job between 62 and 70 is displacing zero-wage years from earlier in their 35-year history. Even worse if they also had a 4-year degree or some grad school, further truncating their years of full time employment. For those folks there can be a lot of leverage to working, even part time, from 62 to 70. Not guaranteed to be so, but possibly so, and hence worth a detailed evaluation on an individual basis.
Another factor is that SS is highly progressive. For very low-wage workers their benefit is 90% of their pre-retirement average income. For folks just at the SS max it’s a marginal 15% of those last few dollars. For folks who earn well above the SS max, it amounts to an even smaller percentage of their working wages. The point being that for a high wage worker who was high wages most of their life, the extra years have small to nil impact on their benefits. But for somebody who’s been a low wage worker their whole life, a few solid good years between 62 & 70 will cover for any bad years in their history due to layoff, recession, injury, whatever. And do so at 90% of the wage they’re used to earning immediately pre-retirement. That bump might buy a lot of marginal utility in a person of modest means’ life.
Last of all, I think a lot of that standard advice implicitly assumes the 1960s career path that no longer exists for the current crop of near-retirees and early retirees. In the 1950s -1980s version of the USA my Dad retired from if you’ve worked at the plant since getting out of school, good bet every year has had a real pay raise and / or a promotion. If not forced out by a mandatory retirement clause, working at your best-ever real W-2 as long as possible can matter a lot.
OTOH, for the current 1990’s-2020’s version of the USA with stagnant or declining real wages for most, and lots of lateral job-hopping for little or promotion, not to mention career changes when your “good” job got off-shored and now you’re working a McJob instead, the conventional wisdom inherent in the standard advice is simply wrong. Or at least inapplicable.
As always in all things economic, the rich get richer and have it easier and the poor get poorer and have it harder. The folks with the high stable wages & steady jobs also tend to be the folks with lots of non-SS sources of retirement money. For whom the difference in SS claiming strategy and quit-working date affects which brand of new car they’ll be leasing, but not whether they can afford both groceries and heat and their medications in February.
My own biggest issue (and I may have mentioned this elsewhere, I’m not sure) is that I am a year and a half older than my wife. And she needs my benefits.
So, if I retire at 65, we will be paying for her insurance for 1 1/2 years, until she can get Medicare.
Does anyone have any notion of an idea how much health insurance costs monthly? Ballpark number, of course. I have no clue, not even sure how to find out
mmm
Look into COBRA to keep the insurance you now have - while paying more. I timed my retirement so that COBRA would cover my wife until she was eligible for Medicare. Overall it was a much better deal than anything I could get from ACA.
The other advantage is that I had no trouble keeping my doctor.
(I know I need to go to the source, but…)
Is it common for COBRA to be available to the spouse if the employee retires and accesses Medicare for himself?
If the employee’s health plan was subject to COBRA in the first place, then COBRA eligibility for qualified beneficiaries (spouses and dependent children) is mandated if the employee loses coverage for any reason other than gross misconduct. Yes, if the employee retires and/or goes on Medicare for himself, then COBRA coverage for the spouse will be available (may not be affordable, but will be available).
Small employers (generally, those with fewer than 20 employees on payroll) aren’t required to offer COBRA coverage to anybody at all; neither are health plans sponsored by churches, and there are I think a few other minor exceptions, but for anybody retiring from a bigger company this is available.
Right. I went on Medicare and my wife kept up the COBRA, no problem. Check to make sure it is available - nothing my work ever distributed mentioned it, but it was available, and my retirement package did mention it.
In COBRA you pay what your company used to pay, so affordability depends in part what you are paying now. A lot more expensive than Medicare, cheaper and better than ACA, and since it is for a short period, affordability is a bit less of an issue.
Hmm, everything I’m reading contradicts this (the cheaper part, not the better).
mmm
There is a lot of variety in ACA plans, including state to state variation. There’s a lot of difference between prices before and after the ACA subsidy if you qualify for the subsidy. There’s also a lot of variety in employer plans.
Deciding “which is cheaper” is definitely an impossible question. The only legit answer is “it depends”.
Deciding "Which is cheaper for mmm* based on which state they live in, who they work for, what’s their AGI, etc., is a potentially answerable question. Ditto for me or for Voyager.