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Want To Double Your Money? Delay Taking 000-00-0000 Benefits
I can share that a friend who's a bit older than myself started taking SS at 62. Knowing him, his business acumen and the cold logic which he would employ toward such an inquiry, he told me:
"If you wait to take SS at 65, it will take you 8 years to make up for what you left on the table!"
I'll be commencing SS at 62, myself, also. I'm in the Baby Boomer group that Uncle Sam wants to wait until 66 to get "full" benefit. My youngest brother---given his age--- must wait until 68!!! (By contrast, you can start taking the Canada Pension--- Canada's equivalent to SS--- at age 60.)
Reply to @PRESSmUP: I multiplied what I would receive at 62 times 52 which is the number of months gap until my full benefit age. That number is too large to discount. I would be close to 80 before I break even. My plan is to start taking at age 62. That gives me the chance to leave a similar amount in my personal retirement so it can hopefully grow with my investments at that time. That number is too good to pass up.
Ted, couldn't agree more. I didn't need the money but also took mine at 62 and in hindsight one of my better decisions ever. It enabled me to trade with so much less pressure and didn't have to draw down my taxable account as much for living expenses.
I think the breakeven rate is around 7% assuming average life expectancy. So if you think you can beat 7%, you should take Social Security at 62. If you invest more cautiously (e.g. in bank CD's, other low risk investments) then waiting may make more sense.
I am retired and age 65. I delayed mine to smooth my husband's finances if I should die because he loses his SS and half my pension when I die and he switches to my SS. With the increase due to my delay his income will be just a tad above our income at the time of my death. We aren't spending all our current income from his SS and our pensions and we don't have children/heirs. We haven't touched our substantial savings (substantial to us, maybe not to MFO) so far. We figure we could add my SS to our income at any point if we needed it. However, I keep a spreadsheet that I update each year to make sure that I still agree with my decision. There are pro's to the option of collecting earlier and just saving or investing the money but, so far, this is at least as good an option for our circumstance.
Reply to @Anna: The case for the higher earner in a couple postponing benefits is much more clear than postponing for a single, let alone the lower earner of a couple.
As you pointed out, when one half of a couple dies, the other takes the higher of the couple's SS benefits. Assuming no known health conditions, the odds are very good that at least one of them will live past 82 or so (the break even point). So there's a very high probability of using that higher income stream for many years - and thus one should boost it by deferring benefits.
Conversely, the odds of both spouses surviving past the break even point are much lower. If they're both in good health, have family histories of longevity, are upper income, etc., the odds tilt in favor of both living past the break even point, and postponing SS for both (if they have the resources to swing it) makes sense. Otherwise, it may make more sense for the lower-benefit spouse to take early benefits (age 62). What makes this choice even more compelling is that once the higher earning spouse reaches Full Retirement Age (FRA - somewhere between 65 and 67), this person can take 1/2 the full retirement benefits of the other spouse, but only if the latter has started drawing SS.
That latter analysis disregards the use of the money. If it isn't needed, there's a case to be made for deferring both spouse's benefits - it's the cheapest way to buy longevity insurance - just in case they do both live into their 80s or 90s, regardless of the odds.
>Reply to @msf: "What makes this choice even more compelling is that once the higher earning spouse reaches Full Retirement Age (FRA - somewhere between 65 and 67), this person can take 1/2 the full retirement benefits of the other spouse, but only if the latter has started drawing SS."
Thanks, I didn't mention this key point. My FRA is 66 and when I arrive I will be doing as you describe.
All of them I have run (just be aware) strongly advocate against most of the sentiments here. I am 67 soon, lower-earning wife a couple years younger, and I will file and suspend next year and my wife will begin spousal bens then. Then in 2-3 more years I will file for full bens.
I sense some posters may not have read Burns's article. If you haven't already made the decision, do not fail to read it. Not just sensible but a very clever solution. Many of those posting here are simply rationalizing suboptimal (in the long run) decisions made in the past, as we all do.
Comments
Can you describe the logic you used to help shape your decision?
thanks,
Press
"If you wait to take SS at 65, it will take you 8 years to make up for what you left on the table!"
I'll be commencing SS at 62, myself, also. I'm in the Baby Boomer group that Uncle Sam wants to wait until 66 to get "full" benefit. My youngest brother---given his age--- must wait until 68!!! (By contrast, you can start taking the Canada Pension--- Canada's equivalent to SS--- at age 60.)
nath
As you pointed out, when one half of a couple dies, the other takes the higher of the couple's SS benefits. Assuming no known health conditions, the odds are very good that at least one of them will live past 82 or so (the break even point). So there's a very high probability of using that higher income stream for many years - and thus one should boost it by deferring benefits.
Conversely, the odds of both spouses surviving past the break even point are much lower. If they're both in good health, have family histories of longevity, are upper income, etc., the odds tilt in favor of both living past the break even point, and postponing SS for both (if they have the resources to swing it) makes sense. Otherwise, it may make more sense for the lower-benefit spouse to take early benefits (age 62). What makes this choice even more compelling is that once the higher earning spouse reaches Full Retirement Age (FRA - somewhere between 65 and 67), this person can take 1/2 the full retirement benefits of the other spouse, but only if the latter has started drawing SS.
That latter analysis disregards the use of the money. If it isn't needed, there's a case to be made for deferring both spouse's benefits - it's the cheapest way to buy longevity insurance - just in case they do both live into their 80s or 90s, regardless of the odds.
Thanks, I didn't mention this key point. My FRA is 66 and when I arrive I will be doing as you describe.
There are some good timing/decisionmaking calculators, notably the AARP one:
http://www.aarp.org/work/social-security/social-security-benefits-calculator/
TRP has something similar, I believe.
All of them I have run (just be aware) strongly advocate against most of the sentiments here. I am 67 soon, lower-earning wife a couple years younger, and I will file and suspend next year and my wife will begin spousal bens then. Then in 2-3 more years I will file for full bens.