http://www.marketwatch.com/story/3-out-of-4-retirees-receiving-reduced-social-security-benefits-2015-05-05"Of course, the best way to maximize Social Security is to delay claiming benefits until “full retirement age,” which is
climbing gradually to 67, or beyond. A person due to receive a benefit of $1,000 at a full retirement age of 66 would receive only $750 at age 62 (the earliest age at which most people can claim benefits) – and $1,320 at age 70."
Note that underlined part. People will still need to take it earlier but (I'm guessing) when they do take it earlier and the full amount is 67 or later they will receive even less at 62.
This adds to my "give up hope of retiring early" thread.
From what I not see about my finances (having been retired for 9 years, starting at 51) I am feeling less flush. A the major change in that feeling is Obamacare. I was paying $3,000/year before OC. I will be paying $7,200 under OC. If, OC was the law before my retiring I may have had second thoughts.
Comments
Another thought is that by taking SS early, one does not have to use their tax deferred retirement savings, in the hope they will experience gains. In my calculations, if I take SS at FRA ,my break even age is 70 figuring the total amount received if I took it at 62.
The hardest nut seems to be covering healthcare costs yourself during these early retirement years prior to qualifying for Medicare at age 65.
Edit: Wait till you get to 65 and Medicare. In my opinion the greatest thing since sliced bread. But you have to get the supplemental policy that covers 100% of what Medicare doesn't pay.
I retired at 52. I also started work at age 15. For a lot of people, 35-40 years of work is enough. If you have saved all your life it is time to enjoy the fruits of your labor.
Blue Cross/ blue shield just notified me that the non OC plan I have will end in Dec. So, the only option is OC plans. My state does not supplement OC - I agree with that - OC costs will bankrupt states in the future. So from this year to next year I'm guessing on a $3,000 health insurance increase or 12,000+ until I'm 65.
Edit: I am paying then around $3600 annually for health insurance. But that is still far cheaper than the close to $7000 I was paying before Medicare kicked in. And that private policy had a $2500 deductible.
The title is misleading, because actuarially speaking, benefits (on a constant dollar basis) are the same regardless of when you start taking them. They are not reduced if you start them at age 62. Of course, if you take them earlier, you're spreading them over more years, so the rate at which you receive your benefits is reduced. (There are ancillary benefits, like spousal payments that are indeed reduced if you claim before FRA.)
@Junkster - New medicare supplemental policies starting in 2020 will not cover 100% of what Medicare doesn't pay. (You're grandfathered in, but Dex is not.) Specifically, "Under the doc-fix law, Medigap plans will no longer cover the annual Part B deductible for new enrollees ($147 this year). That will mean changes for Medigap "C" and "F" plans, the two most popular plan choices and the only ones that cover Part B deductibles. Starting in 2020, seniors would have to pay it themselves. "
That's from M*: What the Medicare 'Doc Fix' Means for Your Pocketbook
It's actually rather debatable whether Medicare supplemental insurance is even worth it (given that part A is 100% covered without it). Here's a column suggesting that these policies are cash cows for insurers. He overstates his case, but the numbers seem sound. IMHO, the main virtue of these policies is for catastrophic insurance (i.e. they cap out-of-pocket expenses).
Dex, when you were running the numbers at 51 for healthcare costs until Medicare, what did you plug in and what did you base them on? Was your nonjob private insurance inexpensive somehow?
Lots of impressive early retirees here! Way to go. I am delaying taking SS until 70, two years off, chiefly on principle, but have shaky confidence of living to wherever the lines cross, like 82 or whatever. Hope so. The best way to think of reduced vs max benefits is to look at the lines, as msf implies; see here, halfway down the page:
http://www.schwab.com/public/schwab/nn/articles/When-Should-You-Take-Social-Security
I have had a lot of arthritis surgeries under Medicare with supplement, also an umbrella managed Medicare plan w rx (forget what this is called, Preferred maybe), so it seems (seemed) like a wise idea to me, though I have not run the numbers. I am now cash at the dentist, though. Maybe I should look into going without supp.
I’m somewhat amazed at how many MFOers retired at so early an age. Contrary to earlier periods, nowadays older folks are and are planning to work longer.
You guys who opted for early retirement are swimming against the prevailing, but ever changing, tide. It’s great that you had the wherewithal to assemble the requisite financial resources to implement your preferences. Congratulations to all retirees of all ages!
The early retirement goal is an illustration of an eroding characteristic that contributed to our Nation’s original success story. I’m speaking of our famed hard work ethic. Mostly we came to America, not to extract riches from the soil and leave, but to toil the soil and build. We worked harder and longer than most others around the globe.
What was true in the past still remains true today, although to a lesser degree. Here’s a Link to a worldwide survey that lists annual hours worked by nation:
https://stats.oecd.org/Index.aspx?DataSetCode=ANHRS
Among developed nations, the US still works longer hours; compared to underdeveloped nations, that is not so. Note that our annual work hours have decreased slightly since 2000. But that’s not the trendline with our older population segment.
Today, approximately 80% of baby boomers anticipate that they will work beyond the normative retirement age. That’s likely to change because of our pernicious system of laws and rules. Remember that most laws are commands; they are prohibitive or compulsive by design with limiting options and opportunities. All this makes a retirement decision still more complex.
There are many personal reasons why the current trend is against early retirement. Work
tasks have become less physically and more mentally demanding that allows for a longer
work life. A worker may need the job to protect family financial security, or to keep healthy, or because he finds the job enjoyable and stimulating. This last reason seems especially attractive given today’s job market.
From a national perspective, a delayed retirement should also benefit the Nation’s prosperity and strength. Presumably, the retiree is incrementally adding more value in doing his assigned tasks than he is being paid. That’s a net increase in our GDP. Also, since he is presumably experienced at his job, his efficiency and effectiveness should be at a high profitable level. If it were not, an employee would choose a younger less talented individual who would command a lower salary.
It’s not altogether a bad thing that our aging population is migrating back to the workforce. Like most complex happenings, there are both pluses and minuses. But the current trend is clear: Our older folks are freely electing to rejoin that workforce for a variety of excellent reasons. Those of you who have chosen the “other path” have similarly made free choices to satisfy your own personal situations and preferences. More power to all our aging population.
By the way, the when to initiate SS benefits issue has no simple answer from my perspective. It depends on too many uncertain variables like how long you will actually live. The statistics can give you a rough number, but the actuality is something else entirely. As you might anticipate, I did Monte Carlo analyses on this matter without much final help. The uncertainties dominated any worthwhile insights. Make your best speculative guess and just do it.
I’ve enjoyed each and everyone’s story on this exchange. Each has its own logic and its own quirks. We’re all the same, yet we’re all so different. Thank you all for sharing.
Best Regards.
I'm still very OK financially. Part of this is because I'll get Medicaid in 5 years and Georgia does not tax retires' dividends/interest/SS/Pensions after 62(?). However, I am feeling less flush due to OC. I won't be changing my spending habits.
However, if I knew about the OC costs, I may have not stopped working or delayed it for a couple of years. It is just too much of an unknown for 14 years. Spending $2,400 Vs $7,200 and an unknown future is disconcerting.
This is just another reason why I don't think many will be able to do what I did in the future.
The week after I retire, I'm headed to Italy for 3 weeks.
There are perks for living below your means during your working career.
The cynical side of me begins to wonder if all these media spots that tell you to wait on SS is being run by the govt in hopes that there will be less payout? I cannot be the only one that has noticed we are inundated with this idea.
http://www.mutualfundobserver.com/discuss/discussion/20854/obamacar-aca-can-anyone-explain-the-income-rules-for-me
I may be able to get plans at $240/month with the subsidy.
this is because my income is 345% of the poverty line, over 400% and you don't get one.
you are eligible for an estimated subsidy of:
$2,737.2annually
$228.1 monthly
MFO Hall of Fame quote from PressmUP. And after your working career too.
For example, if you'd get $900/mo at age 62, and $1600/mo starting at age 70, would you be able to replace that extra $700 with a private annuity for the cost of the $900 checks that you received for eight years? The answer is no.
But as this FA Magazine page points out, "the reason that SS annuities are a better deal than those in the private markets is that SS can offer a product that is actuarially fair - the y are based on the life expectancy of the average person ... and SS does not have to worry about marketing costs or profits." Sort of like Vanguard, except Vanguard pays marketing costs.
Another reason aside from profits that private annuities cost more is adverse selection. People who buy annuities tend to have longer life expectancies, so the insurers have to charge more simply to cover that cost.
With SS, those people should be deferring benefits. But with 3/4 of people not only not deferring, but actually taking benefits before FRA, it's clear that many people are making the "wrong" decision - lots of people with personally long life expectancies are going for the earlier checks. (They often have other reasons, such as cash flow, for taking early benefits.)
Thus rather than costing SSA money, its seems that so many people starting benefits early actually saves the government money, statistically speaking. Thank you very much.
The winners, or at least the non-losers tend to be those who qualify for subsidies (and of course those who would not have qualified for reasonable rates or any insurance based on preexisting conditions).
Now, considering my net worth - my getting a subsidy doesn't make much sense.
Also, after seeing how his subsidy thing works, I don't think OC will be repealed. Too many people are getting something out of it.
If there is any plan, it is to get people more money and not have them and their spouse regret their decision in their 80s and 90s, I would think.