Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
So, I don't find the quote in the story; so will assume it is your quoted experience.
Soon, the A.I. will be of assistance with no attitude; the only attitude may come from the customer. 'Course, folks will have their own private area to meet with the A.I. via appropriate video/audio interface; and 1 free dosage of Versed in oral form will be available upon request with a signed waiver. The future will find much smoother functions in the area for the S.S. and citizens.
I have a decision to make about SS. I arranged with my employer to "semi"-retire working 3 days a week starting in July. To make up the difference in pay I have an option to start withdrawing from the nest egg to delay SS or take SS now (at 64 1/2).
I don't want to take SS early since it goes up 7-8% each year. And while working, I would have to give back $1 for every $2 I earn over $17,000. But you don't lose it exactly. Whatever I give back, at 66 I would start getting that money back in added monthly payments over the next 15 years. I know my financial guy is suggesting nest-egg withdrawals to prolong taking SS, but I almost think over my life time it's not going to matter much.
Anyone else have to make these decisions, take SS or hold out as long as possible?
@MikeM- Are you "semi-retiring" because you want more time for yourself, or because of a situation with your employer? If the latter, you could probably find part-time work to offset the income loss, but if the former, then I'm not at all sure. We put off our SS until as late as possible, but then we had pension income also. I suspect that every situation might be a little different, and therefore the "right" answer might require a fair amount of detailed personal info to be provided to whoever is going to be giving advice.
Perhaps @msf can help... he's probably about the best here on MFO for this sort of thing. In any case, the best of luck to you!
One more thing... it's my impression that "official" guidance from a local SS office may be quite variable, depending upon the depth of knowledge, interest and "attitude" of the person you wind up talking to. And sometimes that's just the luck of the draw, as in: "next, please".
Yes, in my case, I took SS at 63, not 62. From what I understand, my monthly SS payments are right around the middle, compared to minimum and maximum (which I believe to be $2,400.00 or thereabouts.) Perhaps more accurately, I'm getting half of what the current maximum is. A smart friend figured this out for himself. Never married, no kids. He took SS at 62, as early as possible. He told me that the amount left on the table while waiting to turn 65 (in his case, not 66 like me) would take you 8 years to make up, if you did not claim SS until "full retirement age." The monthly SS certainly makes our lives easier, combined with my pension which gets bumped up normally each year by approx 2%.
Perhaps we could have afforded for me to wait by drawing from the portfolio, but my wife was working her fingers to the bone. And in a couple of years, we'll be able to move to the desert southwest. In the meantime, we are able to travel, too.
@Old_Joe, I'm going to part time voluntarily, more time to do other things and I thought it a perfect way to ease into retirement. I was a little worried about being bored and missing the social aspect of work if I retired completely. My employer was very accommodating so I feel very lucky to have options.
I'm most curious about taking SS while earning a part time wage double the allowable $17,000 per year before they start holding back part of my SS, $1 for every $2 over the 17k. Taking SS now would per-long starting nest egg withdrawals to accommodate the life style I'm used to. On the other hand I could per-long taking SS and start an affordable 2-3% withdrawal rate to achieve the same life style goals. I did have a SS evaluation with a Schwab adviser via phone, and the recommendation was to delay SS and take nest egg withdrawals. I sit down with my local Schwab adviser in a couple weeks for a more comparative explanation.
@Derf, I'll be Medicare eligible in January of '19, so not so much worried about HC. My work is contract so I've been paying for my HC the last few years anyway.
@MikeM IMHO, the market isn't valued right now to deliver the 7-8% returns SS would, so in your shoes I'd certainly draw down the nest egg and delay the SS.
I have 2 young children and will be able to receive SS while they are in middle and high school.
My understanding is that I can collect up to 50% of my FULL benefits for each child while they are in school, up to 18 y/o.
I've been trying to determine if it benefits me to take SS early + 100 of my FULL benefits while my children are in school.
I cannot find a calculator to help with this. I've tried to perform the computations myself and it seems that the break-even is advantageous unless i live longer than projected.
Does anyone know of a calculator or better math that can help me determine the most cost effective move?
Any and all thoughts and suggestions are VERY welcome!!
Tough call for sure. Many unknowns like the solvency of SS itself. While I opted for early SS my situtaion was different in many ways. Mainly, I had a defined benefit pension to which I had added a guaranteed (flat) 3%* annual inflation rider. Adequate in itself for “survival” in the early going, SS was deemed “extra” income when it kicked in at 62.
However, in principal I think forgoing income early in order to have a higher income later makes good sense, I’m glad to have had the rider, which (guesstimate) has jacked up the pension money to around 50% more than it was in the late 90s when I retired. Can’t imagine surviving today on that early pension amount.
Big expenses over that period (like home renovation and new vehicles) were funded with home equity at low 3% mortgage rates leaving IRA savings to grow at substantially higher rates. The low mortgage rates seem to be ending, while there’s no guarantee that the investment markets will continue to climb.
Added thought (based on 20+ years in retirement) - As long as your IRA (or other) annual distributions remain relatively small compared to the total invested, you can afford to remain fairly aggressively invested. Even if you needed to withdraw 10% in a single year (an amount I consider absurdly high), the remaining 90% would remain part of the “longer term” investment pool and have some years to recover after a market swoon. Not sure what that adds to the discussion. but thought I’d toss it out.
*Note to the math geniuses - That 3% only applied to the initial pension amount. So the increase over 20 years wasn’t as great as the number might imply.
Hi @MikeM A few numbers from the math working with a friend last year to help make a determination. The dollar data was from the annual statement received from SS, "Your Social Security Statement". I presume you have received this annual statement, too, yes? Notes: --- what was paid into SS = $106,000 --- assuming they live until age 86..... had to choose to set a baseline
>>> Start SS at age 66 (their normal start) $2324/month = $27,888/year = $557,760 for 20 years (until age 86)
>>> Start SS at age 70 $3,068/month = $36,816/year = $589,056 for 16 years (until age 86)
---delay until age 70 provides a 32% increase in monthly amount.
Lastly, no calculation is included for C.O.L.A. adjustments over the years of draw. And, of course; as you stated, that everyone's monetary needs requires they own determinations.
It's great to read someone describing how reduced SS benefits while working are not really lost. In effect, the reduction in SS is a forced deferral until full retirement age (FRA).
The simplest situation is if you earn enough to completely wipe out your benefits until you reach FRA. You start getting your benefits at FRA, and SS calculates your benefits accordingly. By the time you reach 81 give or take, the extra money in your SS check has made up for the years between the time you would have taken SS (here 64½) and FRA. But it gets better, because you continue getting that extra amount so long as you live. (Remember that SS is inflation adjusted, so the future dollars are worth just as much as current dollars.)
If you "lose" 50% of your benefits because you're working, a similar adjustment is made so that you'll break even around age 81. It's almost as if SS calculated two benefits: half calculated based on an age 64½ retirement and half calculated on retiring at FRA. (According to Fidelity, at FRA you'd get all your benefits as though you'd retired midway between 64½ and FRA, but that should come out about the same as the split I described.)
Because of this "deferral" effect, the decision to defer or not to defer is not as momentous - some of it is being taken out of your hands.
Nevertheless, actively deferring benefits can have additional monetary benefits, especially but not exclusively if you live past the break even point (again, somewhere around 81). The problem with living longer (and that's a nice problem to have) is that one should take care not to outlive one's money. The less money one has coming from SS in later years, the more of one's nest egg one must set aside as "safe", just in case one lives to a ripe old age. That's forced, conservative self-insurance.
By deferring SS, one reduces the need to set aside so much of one's nest egg, just in case the "worst" thing happens. So I don't think of it so much as spending down one's nest egg in early (semi)retirement as freeing up that money to spend now.
All of that is contingent on not needing the SS checks now for living expenses. So if SS is essential, that changes the calculus. Otherwise, like others, I'm a strong advocate of deferral.
Another exception is if you have reason to believe that you are very likely not to live into your 80s (or, if you have a spouse, that neither of you will). Family history is most important here. Beyond that, there are demographics. Here's a Nov. 2016 research paper with three bullet points describing how education level and race correlate to longevity. It's easy to find other papers saying similar things about income/wealth vs. longevity.
One brief note about Medicare: If a single individual has income above $85K, including SS, tax-free income, and all taxable income, then there's a surcharge (called IRMAA) on Medicare premiums.
Lastly, no calculation is included for C.O.L.A. adjustments over the years of draw.
IMHO that means that the comparisons are automatically fair.
Wimpy may have offered to gladly pay you Tuesday for a hamburger today, but the rest of us know that a dollar is worth less next Tuesday than it is today. However, if we inflate that dollar (via a COLA adjustment), then next Tuesday's dollar is worth as much as a dollar today. COLA makes for an easy apples-to-apples dollar comparison.
It's only when we don't have COLA adjustments that we have to reduce the future dollar to present value by guessing an appropriate discount rate.
The 1975-82 COLAs were effective with Social Security benefits payable for June (received by beneficiaries in July) in each of those years. After 1982, COLAs have been effective with benefits payable for December (received by beneficiaries in January). Automatic Cost-Of-Living Adjustments received since 1975
July 1975 -- 8.0% July 1976 -- 6.4% July 1977 -- 5.9% July 1978 -- 6.5% July 1979 -- 9.9% July 1980 -- 14.3% July 1981 -- 11.2% July 1982 -- 7.4% January 1984 -- 3.5% January 1985 -- 3.5% January 1986 -- 3.1% January 1987 -- 1.3% January 1988 -- 4.2% January 1989 -- 4.0% January 1990 -- 4.7% January 1991 -- 5.4% January 1992 -- 3.7% January 1993 -- 3.0% January 1994 -- 2.6% January 1995 -- 2.8% January 1996 -- 2.6% January 1997 -- 2.9% January 1998 -- 2.1% January 1999 -- 1.3% January 2000 -- 2.5% (2) January 2001 -- 3.5% January 2002 -- 2.6% January 2003 -- 1.4% January 2004 -- 2.1% January 2005 -- 2.7% January 2006 -- 4.1% January 2007 -- 3.3% January 2008 -- 2.3% January 2009 -- 5.8% January 2010 -- 0.0% January 2011 -- 0.0% January 2012 -- 3.6% January 2013 -- 1.7% January 2014 -- 1.5% January 2015 -- 1.7% January 2016 -- 0.0% January 2017 -- 0.3% Januar...2018 __2.0
SS bases COLA on CPI-W figures (covering about 28% of the population), not the more familiar CPI-U figures (covering about 88% of the population). It uses 12 month figures from the end of Q3 in one year to the end of Q3 in the next. For example, the Jan 2018 COLA of 2.0% reflects the change in CPI-W from Q3 2016 through Q3 2017.
Thanks everyone. I appreciate all the input to this post. As mentioned, the professional advice I received is the same as all of your's, delay SS as long as possible. To me that means for as long as you don't need to withdrawal more than the 4% rule from retirement savings, or at least not much more.
@msf, this part I didn't know. I assumed there would be a drop in benefits once the delayed payback was met. Incorrect assumption based on what you are saying.
By the time you reach 81 give or take, the extra money in your SS check has made up for the years between the time you would have taken SS (here 64½) and FRA.
But it gets better, because you continue getting that extra amount so long as you live.
I assumed there would be a drop in benefits once the delayed payback was met. Incorrect assumption based on what you are saying.
I was delighted to run across the Fidelity page, because it seems to be very hard to find anything about how SSA recalculates your benefits.
If you think about it, the increase in benefits would have to run "forever". Otherwise, on average people would lose money. Those who lived to age 81 would break even, those who lived less would lose. No winners. Social Security is designed to be actually fair (on average, people should break even).
@MikeM - I chose to delay until age 70 but I was born before January 1, 1954 and am married so I could collect 1/2 spousal between age 66 (full retirement age) and age 70. My reason for delaying was to even out my husband's income if I should die and he loses half my pension and all of one of the two SS checks. I couldn't do it with his SS because he retired and started collecting at age 63 and we didn't know about the delaying schemes back then. I don't know if you are married and/or born before that date so I decide to mention it. As best I could tell 64.5 would put your birthday in December 1953.
You noted: "My understanding is that I can collect up to 50% of my FULL benefits for each child while they are in school, up to 18 y/o."
This is my broad understanding, too. I'll look around later for other info. The below link likely only supports some of what you already know. --- Have you a SS office nearby to help clarify your questions?
My broad view understanding: You are eligible for "x" SS $ to yourself, and that 50% more is available for the children against your amount. The "claim" would be set to your SS benefit for some or all of the additional money (2 children). An additional amount (not to exceed the 50% limit) could also be claimed towards your SS by your wife, being the mother of the children. You would receive your SS, each child would receive an SS payment and your wife (the mother) could also receive an SS payment (noting this 50% level of your monthly amount). You and wife/mother would have to claim receipt of the money on tax forms, but my understanding is that the children would not, due to the small amount and that they are minors with this for tax purposes. NOTE to check for you: google Ed Slott and then search his site for info about this. There should also be online public forums that discuss this. Take a search.
Thanks @Anna. Yes, married but born January '54, so missed the spousal benefit of taking 1/2 the spouses SS. That was pointed out to me by the adviser.
I'll checked the SS website, but I probably need to talk to someone at SS to get a specifics and a complete understanding to determine if it is to my benefit to do so!
@mcmarasco: I also had two dependent children when I started SS at FRA (65 and 10 months at the time). Their benefits stopped as soon as they graduated from HS. You will be asked each year by SS if you used all the kids' $ to support them; I answered yes even though I funded 529s with it. I think if you answer no, you might have to show SS where the surplus went. I think waiting until 70 for my benefit would have left a decent pile of dough on the table, but I never computed it at the time. IIRC, you won't get 50% per child when both are receiving benefits. As someone else said, I did not have to pay tax on the kids' SS, surely an advantage.
Excellent commentary @msf, as usual. No product in the market today has a guaranteed 8% annual return as the SS does between the FRA and 70. Unless one has very short life expectancy or no other income, the SS should be delayed.
Comments
Soon, the A.I. will be of assistance with no attitude; the only attitude may come from the customer.
'Course, folks will have their own private area to meet with the A.I. via appropriate video/audio interface; and 1 free dosage of Versed in oral form will be available upon request with a signed waiver.
The future will find much smoother functions in the area for the S.S. and citizens.
I don't want to take SS early since it goes up 7-8% each year. And while working, I would have to give back $1 for every $2 I earn over $17,000. But you don't lose it exactly. Whatever I give back, at 66 I would start getting that money back in added monthly payments over the next 15 years. I know my financial guy is suggesting nest-egg withdrawals to prolong taking SS, but I almost think over my life time it's not going to matter much.
Anyone else have to make these decisions, take SS or hold out as long as possible?
Perhaps @msf can help... he's probably about the best here on MFO for this sort of thing. In any case, the best of luck to you!
One more thing... it's my impression that "official" guidance from a local SS office may be quite variable, depending upon the depth of knowledge, interest and "attitude" of the person you wind up talking to. And sometimes that's just the luck of the draw, as in: "next, please".
Perhaps we could have afforded for me to wait by drawing from the portfolio, but my wife was working her fingers to the bone. And in a couple of years, we'll be able to move to the desert southwest. In the meantime, we are able to travel, too.
Derf
I'm most curious about taking SS while earning a part time wage double the allowable $17,000 per year before they start holding back part of my SS, $1 for every $2 over the 17k. Taking SS now would per-long starting nest egg withdrawals to accommodate the life style I'm used to. On the other hand I could per-long taking SS and start an affordable 2-3% withdrawal rate to achieve the same life style goals. I did have a SS evaluation with a Schwab adviser via phone, and the recommendation was to delay SS and take nest egg withdrawals. I sit down with my local Schwab adviser in a couple weeks for a more comparative explanation.
@Derf, I'll be Medicare eligible in January of '19, so not so much worried about HC. My work is contract so I've been paying for my HC the last few years anyway.
I have 2 young children and will be able to receive SS while they are in middle and high school.
My understanding is that I can collect up to 50% of my FULL benefits for each child while they are in school, up to 18 y/o.
I've been trying to determine if it benefits me to take SS early + 100 of my FULL benefits while my children are in school.
I cannot find a calculator to help with this. I've tried to perform the computations myself and it seems that the break-even is advantageous unless i live longer than projected.
Does anyone know of a calculator or better math that can help me determine the most cost effective move?
Any and all thoughts and suggestions are VERY welcome!!
Matt
Tough call for sure. Many unknowns like the solvency of SS itself. While I opted for early SS my situtaion was different in many ways. Mainly, I had a defined benefit pension to which I had added a guaranteed (flat) 3%* annual inflation rider. Adequate in itself for “survival” in the early going, SS was deemed “extra” income when it kicked in at 62.
However, in principal I think forgoing income early in order to have a higher income later makes good sense, I’m glad to have had the rider, which (guesstimate) has jacked up the pension money to around 50% more than it was in the late 90s when I retired. Can’t imagine surviving today on that early pension amount.
Big expenses over that period (like home renovation and new vehicles) were funded with home equity at low 3% mortgage rates leaving IRA savings to grow at substantially higher rates. The low mortgage rates seem to be ending, while there’s no guarantee that the investment markets will continue to climb.
Added thought (based on 20+ years in retirement) - As long as your IRA (or other) annual distributions remain relatively small compared to the total invested, you can afford to remain fairly aggressively invested. Even if you needed to withdraw 10% in a single year (an amount I consider absurdly high), the remaining 90% would remain part of the “longer term” investment pool and have some years to recover after a market swoon. Not sure what that adds to the discussion. but thought I’d toss it out.
*Note to the math geniuses - That 3% only applied to the initial pension amount. So the increase over 20 years wasn’t as great as the number might imply.
A few numbers from the math working with a friend last year to help make a determination.
The dollar data was from the annual statement received from SS, "Your Social Security Statement". I presume you have received this annual statement, too, yes?
Notes:
--- what was paid into SS = $106,000
--- assuming they live until age 86..... had to choose to set a baseline
>>> Start SS at age 66 (their normal start)
$2324/month = $27,888/year = $557,760 for 20 years (until age 86)
>>> Start SS at age 70
$3,068/month = $36,816/year = $589,056 for 16 years (until age 86)
---delay until age 70 provides a 32% increase in monthly amount.
Lastly, no calculation is included for C.O.L.A. adjustments over the years of draw. And, of course; as you stated, that everyone's monetary needs requires they own determinations.
Regards,
Catch
The simplest situation is if you earn enough to completely wipe out your benefits until you reach FRA. You start getting your benefits at FRA, and SS calculates your benefits accordingly. By the time you reach 81 give or take, the extra money in your SS check has made up for the years between the time you would have taken SS (here 64½) and FRA. But it gets better, because you continue getting that extra amount so long as you live. (Remember that SS is inflation adjusted, so the future dollars are worth just as much as current dollars.)
If you "lose" 50% of your benefits because you're working, a similar adjustment is made so that you'll break even around age 81. It's almost as if SS calculated two benefits: half calculated based on an age 64½ retirement and half calculated on retiring at FRA. (According to Fidelity, at FRA you'd get all your benefits as though you'd retired midway between 64½ and FRA, but that should come out about the same as the split I described.)
Because of this "deferral" effect, the decision to defer or not to defer is not as momentous - some of it is being taken out of your hands.
Nevertheless, actively deferring benefits can have additional monetary benefits, especially but not exclusively if you live past the break even point (again, somewhere around 81). The problem with living longer (and that's a nice problem to have) is that one should take care not to outlive one's money. The less money one has coming from SS in later years, the more of one's nest egg one must set aside as "safe", just in case one lives to a ripe old age. That's forced, conservative self-insurance.
By deferring SS, one reduces the need to set aside so much of one's nest egg, just in case the "worst" thing happens. So I don't think of it so much as spending down one's nest egg in early (semi)retirement as freeing up that money to spend now.
All of that is contingent on not needing the SS checks now for living expenses. So if SS is essential, that changes the calculus. Otherwise, like others, I'm a strong advocate of deferral.
Another exception is if you have reason to believe that you are very likely not to live into your 80s (or, if you have a spouse, that neither of you will). Family history is most important here. Beyond that, there are demographics. Here's a Nov. 2016 research paper with three bullet points describing how education level and race correlate to longevity. It's easy to find other papers saying similar things about income/wealth vs. longevity.
One brief note about Medicare: If a single individual has income above $85K, including SS, tax-free income, and all taxable income, then there's a surcharge (called IRMAA) on Medicare premiums.
Regards,
Ted
Wimpy may have offered to gladly pay you Tuesday for a hamburger today, but the rest of us know that a dollar is worth less next Tuesday than it is today. However, if we inflate that dollar (via a COLA adjustment), then next Tuesday's dollar is worth as much as a dollar today. COLA makes for an easy apples-to-apples dollar comparison.
It's only when we don't have COLA adjustments that we have to reduce the future dollar to present value by guessing an appropriate discount rate.
The 1975-82 COLAs were effective with Social Security benefits payable for June (received by beneficiaries in July) in each of those years. After 1982, COLAs have been effective with benefits payable for December (received by beneficiaries in January).
Automatic Cost-Of-Living Adjustments received since 1975
July 1975 -- 8.0%
July 1976 -- 6.4%
July 1977 -- 5.9%
July 1978 -- 6.5%
July 1979 -- 9.9%
July 1980 -- 14.3%
July 1981 -- 11.2%
July 1982 -- 7.4%
January 1984 -- 3.5%
January 1985 -- 3.5%
January 1986 -- 3.1%
January 1987 -- 1.3%
January 1988 -- 4.2%
January 1989 -- 4.0%
January 1990 -- 4.7%
January 1991 -- 5.4%
January 1992 -- 3.7%
January 1993 -- 3.0%
January 1994 -- 2.6%
January 1995 -- 2.8%
January 1996 -- 2.6%
January 1997 -- 2.9%
January 1998 -- 2.1%
January 1999 -- 1.3%
January 2000 -- 2.5% (2)
January 2001 -- 3.5%
January 2002 -- 2.6%
January 2003 -- 1.4%
January 2004 -- 2.1%
January 2005 -- 2.7%
January 2006 -- 4.1%
January 2007 -- 3.3%
January 2008 -- 2.3%
January 2009 -- 5.8%
January 2010 -- 0.0%
January 2011 -- 0.0%
January 2012 -- 3.6%
January 2013 -- 1.7%
January 2014 -- 1.5%
January 2015 -- 1.7%
January 2016 -- 0.0%
January 2017 -- 0.3%
Januar...2018 __2.0
https://www.bls.gov/opub/btn/volume-3/why-does-bls-provide-both-the-cpi-w-and-cpi-u.htm
@msf, this part I didn't know. I assumed there would be a drop in benefits once the delayed payback was met. Incorrect assumption based on what you are saying.
https://g.foolcdn.com/editorial/images/203039/ss-breakeven-no-return_large.png
If you think about it, the increase in benefits would have to run "forever". Otherwise, on average people would lose money. Those who lived to age 81 would break even, those who lived less would lose. No winners. Social Security is designed to be actually fair (on average, people should break even).
You noted: "My understanding is that I can collect up to 50% of my FULL benefits for each child while they are in school, up to 18 y/o."
This is my broad understanding, too. I'll look around later for other info. The below link likely only supports some of what you already know.
--- Have you a SS office nearby to help clarify your questions?
My broad view understanding: You are eligible for "x" SS $ to yourself, and that 50% more is available for the children against your amount. The "claim" would be set to your SS benefit for some or all of the additional money (2 children). An additional amount (not to exceed the 50% limit) could also be claimed towards your SS by your wife, being the mother of the children.
You would receive your SS, each child would receive an SS payment and your wife (the mother) could also receive an SS payment (noting this 50% level of your monthly amount).
You and wife/mother would have to claim receipt of the money on tax forms, but my understanding is that the children would not, due to the small amount and that they are minors with this for tax purposes.
NOTE to check for you: google Ed Slott and then search his site for info about this.
There should also be online public forums that discuss this. Take a search.
https://www.ssa.gov/planners/retire/applying7.html
Regards,
Catch
I'll checked the SS website, but I probably need to talk to someone at SS to get a specifics and a complete understanding to determine if it is to my benefit to do so!
humbledollar.com/2018/05/age-old-myths/
http://www.thestate.com/opinion/opn-columns-blogs/cindi-ross-scoppe/article179984561.html