schildi
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Post by schildi on Nov 15, 2019 0:13:23 GMT -5
Maximizing Social Security According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 can receive per month is:
$3,790 for someone who files at age 70. $3,011 for someone who files at full retirement age. $2,265 for someone who files at 62. So my question: why would somebody not take it at 62? I did a quick spreadsheet, and in almost all scenarios you'll be better off taking the payments early, unless you expect 0% returns/interest or living past 95. Overall, it looks like your odds are better taking early payments. Where is my mistake?
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Tiny
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Post by Tiny on Nov 15, 2019 1:26:51 GMT -5
I'm thinking for someone who has enough income above and beyond SS and that income can provide for the surviving spouse (in case of an untimely demise) it might make sense (a better quality to retirement during the early years) to take SS early.
I can see where not having enough non-SS income to retire or planning for income for a surviving spouse might make waiting to take SS more attractive. I don't think there's a one size fits all "correct" answer as to when to take SS. You need to know your numbers and how that effects a surviving spouse.
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giramomma
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Post by giramomma on Nov 15, 2019 8:04:40 GMT -5
My dad waited until full retirement age to draw on SS (and actually retire, period) because my mom pretty much did not work for most of their marriage. Mom worked before I came along, but it was at a job that didn't pay into SS. Waiting means more money for her when he passes. It was a gamble, but turned out to be a true assumption on their part that my mom would outlive my dad. Unfortunately, for my dad it meant not much time relaxing. He ended up with Stage IV cancer before he retired, based on symptoms. It took a very long time to get an actual diagnosis (like almost a year). At 74, he's living on very borrowed time now.
As for DH and I, we'll run the numbers to see who should draw and when.
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gs11rmb
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Post by gs11rmb on Nov 15, 2019 8:08:12 GMT -5
Maximizing Social Security According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 can receive per month is:
$3,790 for someone who files at age 70. $3,011 for someone who files at full retirement age. $2,265 for someone who files at 62. So my question: why would somebody not take it at 62? I did a quick spreadsheet, and in almost all scenarios you'll be better off taking the payments early, unless you expect 0% returns/interest or living past 95. Overall, it looks like your odds are better taking early payments. Where is my mistake?
Fear. I know the math says it's better to take the money early but what if you live to be 100 and have spent all your retirement savings? It would then be better to have $3,790 per month rather than $2,265. I'm not saying it's rational but fear often is irrational.
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gs11rmb
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Post by gs11rmb on Nov 15, 2019 8:11:34 GMT -5
I'm sorry about your dad giramomma. I know your relationship with your parents is strained but that's still news you didn't want to receive.
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TheOtherMe
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Post by TheOtherMe on Nov 15, 2019 8:39:07 GMT -5
My parents started drawing their Social Security at age 62. Mom died in 5 years ago at age 90. She received a lot more money than she paid in. Same with her pension. She had no regrets about her retirement age.
Dad draws SS and a pension. He says it was a mistake to take it at 62. He's 95. He has received a lot more $$$ than he paid in.
One of my dear friends waited until age 65. She didn't live to be 66, so she didn't get back what she had paid in. I don't think she had a way to know she had a brain tumor that would kill her.
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Tennesseer
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Post by Tennesseer on Nov 15, 2019 8:39:13 GMT -5
It is said, in the end, you pretty much end up at the end of your life (assuming one lives to average life span age) with having received the same amount of Social Security money whether you began taking it at 62 or at full retirement age. The roughly same amount of total money is just spread over a longer period of time if taken at 62.
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Cookies Galore
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Post by Cookies Galore on Nov 15, 2019 8:56:59 GMT -5
I know my dad is waiting until 70 to collect social security. My stepmom is eight years younger than him and either worked part-time or not at all during their 33 year marriage, so it's for her benefit. He retired when he was 58 and is now 67 and they're currently at their Florida condo, so I think he's doing pretty okay.
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hoops902
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Post by hoops902 on Nov 15, 2019 9:04:23 GMT -5
So I'll ignore some of the other factors involved around risk mitigation (for example, my dad didn't need the money so he didn't take it at 62, he used it as an insurance policy in case he died early, which he did, so that my mother who had much less projected SS income could have a much bigger payout. It doesn't make much difference since she doesn't need the money, but he also would have just put it in a savings account and not touched it anyways).
Here's a more mathematical breakdown. I'm using 66 as full retirement age here since it varies.
When you hit age 62, you have approximately 21.5 years left of life expectancy (average of male and female). Let's call it expectancy until 83. If you have simply an average life expectancy, you should take the payout at 66 mathematically if you expect 0% returns. That holds true from 0%-3.8% returns. If you expect greater than 3.8% returns on that money, you should take it at 62 and take the additional returns. You should never take it at 70 in this scenario.
But that's not really how YM works is it? We don't plan for "well as long as I die at an average age I guess I'll be fine". We're more conservative. So let's start with a female expectancy, since that's more conservative mathematically. Based on the tables, we have a 25% chance of living past 90. We have a 10% chance of living past 95.
If we use 90 and expect 0% return, we should take the payout at 70. That holds true from 0-2.5% returns. If we expect 2.6%-5.2% then we should take it at full retirement (66). Anything higher we should take it at 70.
If we use 95 as an appropriate age, we should take the payout at 70 if we expect 0-3.7% returns. If we expect 3.8%-5.9% then we should take it at 66. Anything higher we should take it at 70.
I'm not really sure based on this that the "math says" you should take it at 62. If you use conservative financial assumptions (meaning you project to live longer than average and expect to invest conservatively in retirement, the math says you should not be taking it at 62). I would say in general, the math says to take it at full retirement given more conservative life expectancy assumptions combined with conservative estimations of investment return in retirement. Ultimately it depends on your assumptions. If you make assumptions you'll only live to average life or make great returns, then you should take it earlier. If you assume you will live longer or get lower returns, you should take the money later. Ultimately, if you need the money in retirement, that's a place I'd rather be financially conservative with my assumptions.
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gs11rmb
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Post by gs11rmb on Nov 15, 2019 9:26:18 GMT -5
hoops902 I don't understand how you made your calculations but they seem to confirm my instinct that if my DH and I don't need to take social security at 62 then we should both wait at least until full retirement age. My DH is 54 so this is a decision to be made in the next decade. I'm 45 and, to be frank, I'll be surprised if social security isn't means-tested by the time I'm eligible.
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azucena
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Post by azucena on Nov 15, 2019 9:26:36 GMT -5
Copying this statement from Hoops - If you make assumptions you'll only live to average life or make great returns, then you should take it earlier. If you assume you will live longer or get lower returns, you should take the money later.
The differing amounts are figured to be actuarially equivalent. Meaning based on life expectancy as Hoops described above. So given you can make a somewhat informed guess on where you think you will live longer than expected, you can choose to take it early or delay. I'm not sure that it takes investment income into account. The kicker is that if you take it early, likely you need it to live on and are not able to invest it to make up some of the difference of taking it early vs the higher payment later.
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hoops902
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Post by hoops902 on Nov 15, 2019 9:39:28 GMT -5
Copying this statement from Hoops - If you make assumptions you'll only live to average life or make great returns, then you should take it earlier. If you assume you will live longer or get lower returns, you should take the money later.
The differing amounts are figured to be actuarially equivalent. Meaning based on life expectancy as Hoops described above. So given you can make a somewhat informed guess on where you think you will live longer than expected, you can choose to take it early or delay. I'm not sure that it takes investment income into account. The kicker is that if you take it early, likely you need it to live on and are not able to invest it to make up some of the difference of taking it early vs the higher payment later. It's not about investing THAT money though, it's about an assumption that you have some other money somewhere that you could KEEP invested rather than having to pull it out to live on. But that's the flip side too right? If you need the money to live on, you might have to take it earlier because you NEED the money then, regardless of what might be right "mathematically". There are a lot of things that are right mathematically that aren't right from a life-decision standpoint (the example I often use is "You can have a million dollars right now, or you can flip a coin and have $0 if you lose or two million and one dollars if you win". You should PROBABLY just take the mathematically poor choice of a million dollars. Your expected value is 50 cents less...but who cares?)
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tractor
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Post by tractor on Nov 15, 2019 9:46:20 GMT -5
My dad took his at 62 to help sustain an unsustainable lifestyle. Now at 77 his SS is much lower than it could have been and it’s not enough to cover even basic living expenses ( he has no other retirement $).
He gambled that he would die young, so far he lost..
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Gardening Grandma
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Post by Gardening Grandma on Nov 15, 2019 9:48:29 GMT -5
I took it at 62. By taking it at 62, I was able to leave my retirement savings alone to grow. Whatever you decide to do, it's a gamble.
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Deleted
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Post by Deleted on Nov 15, 2019 9:55:29 GMT -5
I have it plotted in my net worth/retirement predictor to begin taking at 70 and to have enough in savings to last until then.
Once I get a lot closer and know my net worth/expected SS payout I'll make a call on when to take.
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TheOtherMe
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Post by TheOtherMe on Nov 15, 2019 10:07:04 GMT -5
Since I retired as a federal employee under CSRS but have worked enough quarters to have earned a very small SS check.
However, the amount does not exceed the WEP reduction so others can enjoy the amount I paid in.
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Deleted
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Post by Deleted on Nov 15, 2019 10:11:07 GMT -5
You aren't just talking about drawing SS at age 62. You are talking about retiring at age 62 because your earnings impact your benefit negatively if you are still working. Even though I actually retired at the end of May, I would not have received any income from SS if I had begun drawing as of June 1 because I still received earnings that were over the monthly maximum to earn while on SS for June, July, and August. I just had to file a report of how much I intend to earn monthly until my full retirement age in 2020. It is only after I turn 66 (FRA) that my monthly earnings don't impact receiving SS. I contemplated waiting for FRA. It would have been a short wait--from September to February. But to do that, I would have had to draw $$$ from my retirement accounts to cover the monthly shortfall. Now drawing SS at FRA vs. waiting until 70 is worth considering but still isn't a financial slam dunk. Not only are there no income limits from still working (but there are taxes), previously you could draw off your spouse and let your own benefit grow until age 70. I think this is what both cronewitch and @athena53 may be doing. But this scenario no longer exists for those born on or after January 2, 1954. I never contemplated waiting until age 70 because of my husband's poor health. What I will receive (his benefit which he waited until 66 to begin) is higher than the benefit I would have received at age 70 on my own record. So why would we have given up 4 years of my benefits (assuming that he had lived until I was 70)? That is another factor that is never mentioned when discussing options. When to begin benefits is composed of many factors, which is why I hate all those articles.
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Value Buy
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Post by Value Buy on Nov 15, 2019 10:21:41 GMT -5
I believe you are failing to take inflation into the mix. Social Security does a poor job of actually calculating inflation correctly. We know the Federal government does a poor job of calculating inflation while we are still working. Think about it, when you are in your work years and personal financial situations costs go up more percentage wise in our situations that the government calculates as an annual rate of inflation. Same for Social security. Medicare is taken out automatically and many years that deduction is higher in dollar amount than in the actual increase in the monthly ss check. If you are going to outlive the actuarial tables, and do not have a huge pension or personal investment funds, that $3,000 a month check may not pay the bill covering basic needs 30 years down the road, but if you are taking the lower number due to early retirement you are in a huge hole. People taking early ss checks are usually people who are not investing that amount. You also have to consider if you keep working while collecting ss before your retirement date, the government taxes a percent of that ss payment as income. Are your real estate taxes and insurance going to be the same at 62 as when you are 70? At 80? If renting does your rent never increase? Are food costs going to be as cheap? How about local and state taxes, whether income or sales tax, or just the car license fees? It all creeps up every year....
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steph08
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Post by steph08 on Nov 15, 2019 10:27:24 GMT -5
You aren't just talking about drawing SS at age 62. You are talking about retiring at age 62 because your earnings impact your benefit negatively if you are still working. This was exactly my thought. A lot of people don't have enough money saved to completely retire at 62.
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Cookies Galore
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Post by Cookies Galore on Nov 15, 2019 11:14:23 GMT -5
You aren't just talking about drawing SS at age 62. You are talking about retiring at age 62 because your earnings impact your benefit negatively if you are still working. This was exactly my thought. A lot of people don't have enough money saved to completely retire at 62. Some people who have zero dollars saved retire at 62 and live off early SS. *cough*mom*cough* It makes my head hurt.
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Tiny
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Post by Tiny on Nov 15, 2019 12:22:48 GMT -5
FWIW: I'm considering living off my investments starting as early as 59.5 and as late as 62. I'm single so I just have to worry about me. I'll have access to a pension starting at 65. I should have plenty of income when I start living off my investments, and then once my pension starts I can choose to cut back on how much I pull from investments or not. I'm going to hold off taking SS as long as possible (until I'm 70?) and am considering it a annuity type thing, for my very old age. Odds are in my favor that my 'investments'/Pension will provide enough and I won't really need SS (my original "fund my retirement" plan didn't really take it into account.).
Being 70 is 15 years away... and then there's the years after 70... so there are a lot of far future financial unknowns.
I'm ok if I don't get back from SS all the money I paid into it. My mom lived on SS and a small pension for decades. I benefited from SS money when my dad died when I was 11. If I don't use the money I paid in - I'm hoping someone else in need will have gotten some benefit from it.
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teen persuasion
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Post by teen persuasion on Nov 15, 2019 12:22:56 GMT -5
Maximizing Social Security According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 can receive per month is:
$3,790 for someone who files at age 70. $3,011 for someone who files at full retirement age. $2,265 for someone who files at 62. So my question: why would somebody not take it at 62? I did a quick spreadsheet, and in almost all scenarios you'll be better off taking the payments early, unless you expect 0% returns/interest or living past 95. Overall, it looks like your odds are better taking early payments. Where is my mistake?
I would not take it at 62 (vs 70) because $2265 < $3790! For it to be an even comparison, you must assume there's additional savings, and you can either take low SS early + supplement with something from savings, or take 100% from savings until you take high SS at 70. Then the question becomes, which is better? Since SS is only partially taxed, max 85% but possibly lower, vs 100% taxed for ordinary income (like IRA or 401k withdrawals), it's better to have more of your income, relatively, come from SS than ordinary income. Also, larger ordinary income and investment income drives up the amount of SS subject to tax, so there's an added incentive to decrease taxable retirement account withdrawals when collecting SS, to decrease taxes. RMDs after age 70.5 may force larger withdrawals than you need, resulting in even higher taxes. Living off IRA/401k withdrawals before taking SS is a good way to both reduce future RMDs and increase future SS benefits. Even better is controlled Roth conversions done in low income years before taking SS. Those will reduce forced RMDs while moving the retirement savings to a never taxed again account.
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Tiny
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Post by Tiny on Nov 15, 2019 12:27:24 GMT -5
And are the majority of people's SS #'s really going to be $2265 up to $3790? Aren't those numbers generated by taking 35 years of of income at the maximum amount of SS taxable income? I've got 35 years of income - and it's all way below the maximum taxable income... and I'm at the highest amount of income I've ever earned now (at 55 yo). I expect my SS payout to be no where near $2265 a month at 70...
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hoops902
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Post by hoops902 on Nov 15, 2019 12:31:23 GMT -5
And are the majority of people's SS #'s really going to be $2265 up to $3790? Aren't those numbers generated by taking 35 years of of income at the maximum amount of SS taxable income? I've got 35 years of income - and it's all way below the maximum taxable income... and I'm at the highest amount of income I've ever earned now (at 55 yo). I expect my SS payout to be no where near $2265 a month at 70... It's probably not going to be the exact same amounts, but I would "assume" (because I don't honestly know) that the factors driving the numbers remain constant. So if you can get 60% of your money at 62 in this instance, I would assume the Age 62 vs Age 70 comparison in other instances would be 60% at as well. Maybe someone else knows better, but as long as the factors remain constant, the mathematical analysis will stay the same (i.e. If I can collect 60% of an amount now, and project it to grow at X%/year, and expect to receive those payments for Y years...the analysis is still valid...you could just as easily throw out the actual numbers and just use $60/month now vs $100/month later).
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alabamagal
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Post by alabamagal on Nov 15, 2019 12:55:22 GMT -5
Pretty sure DH will start drawing his SS at age 62 in 4 1/2 years. The he will switch over to getting 1/2 of mine when I retire, likely at 67 in 9 years.
Our situation is different than most in that my amount is more than double his, and I am 2 years younger. So he might as well start getting his as soon as possible, then we maximize when we start mine, probably as late as possible. Also DH has some chronic health issues, so likely to die before me.
I also have a pension from previous job that I was at 20 years. It is a good amount but my only option is to start at 65.
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MN-Investor
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Post by MN-Investor on Nov 15, 2019 13:04:42 GMT -5
My husband and I had planned on waiting until we were 70 to take social security. One - we knew we would get a guaranteed increase in our benefits. Two - we didn't need the money now. It would just increase our taxes. Three - we were planning on either doing Roth conversions or selling low basis stock during our low income years between DH's retirement and age 70. (By the way, that all changed when my sweetie passed away. Surviving spousal benefits do not increase over the years. It made sense to start taking that effective the month my sweetie died even if I didn't need the income now.)
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Post by The Walk of the Penguin Mich on Nov 15, 2019 13:07:02 GMT -5
Whether or not you take SS at 62 vs 67 vs 70 really depends upon a lot more factors than just money. I really do not think that there is a ‘one size fits all’ for this situation, because sooo many factors play into this.
Some of these factors include healthcare. Are you going to need to cover this until you hit 65? If so, you are looking at about $2000/mo/couple. This means that healthcare costs can run close to $100k. OOP during those 3 years.
Where is your income during this time coming from? Taxed accounts? Roth’s? Pulling on IRAs?
Do you have any other pensions? Even international pensions can have an impact upon SS (as we recently discovered).
What is your spouse’s SS? Do they draw on your record? How does this factor in?
Are you going to continue to work? This changes how SS is taxed.
These are all issues that TD and I are running into. It is enough to make your hair hurt!
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Apple
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Post by Apple on Nov 15, 2019 13:27:32 GMT -5
Age per month per year earnings by age 67 by age 70 by age 75 by age 79 by age 80 by age 83
62 2059 24708 123540 197664 321204 420036 444744 518868
67 2965 35580 106740 284640 426960 462540 569280
70 3688 44256 221280 398304 442560 575328
I'm a retirement spreadsheet nerd. I run my numbers after every COLA, to see that I'm on track to early retirement at 46, with full benefits/no penalties, if the chance is offered (though, ideally, I'd be able to retire at 51 with an early out offer).
This is part of my spreadsheet, with my numbers as of a few months ago (they should raise as I work more years, but I've been putting into SS since I was 15)
I'd make a lot more/month if I waited until 67 or 70. However, I would have to wait until age 79 for my overall earnings to catch up between withdrawal at age 62 and 67. I'd have to wait until age 83 for the earnings to catch up between withdrawal at age 67 and 70 (and just over 80 for the difference between 62 and 70). This is assuming 0% adjustment/gains.
I'm still thinking of withdrawing at age 62. I have no one I need to "save" a higher SS for. I'll have a pension and a well funded tsp. I could still choose to keep the money in tsp, or withdraw it, but if my house is paid off, my pension should cover all of my basic expenses either way (it would replace 25% of my income if I can retire at 46, 31% if I can get out at the ideal age of 51, and 36% if I have to wait until my MRA of 57).
Half of my family "dies old" (one line has been traced back through 11+ generations, and they all died in their 90s, even in the 1600s). I need to get in better shape if I want to achieve that for myself, but it's all a crapshoot when an accident could occur at any time.
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tskeeter
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Post by tskeeter on Nov 15, 2019 14:02:02 GMT -5
Maximizing Social Security According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 can receive per month is:
$3,790 for someone who files at age 70. $3,011 for someone who files at full retirement age. $2,265 for someone who files at 62. So my question: why would somebody not take it at 62? I did a quick spreadsheet, and in almost all scenarios you'll be better off taking the payments early, unless you expect 0% returns/interest or living past 95. Overall, it looks like your odds are better taking early payments. Where is my mistake?
I think that in most cases, people who take SS at 62 don’t have other investments. So, there is no investment return to be gained from taking SS early. A second consideration would be the impact of taking early SS vs withdrawing money from your IRA account. Driving up the value of your IRA account could force you to take RMD’s that put you into significantly higher tax brackets. Then there is the issue of Medicare surcharges on high income retirees. If your RMD’s and other income are too high, you might be penalized for your financial success. Lastly, it may be appropriate to factor in taxes on SS benefits into your payoff calculations. There are so many moving parts to this calculation that it would be really difficult to include every variable that affects the calculation. And even worse, some variables, such as tax rates and brackets, RMD rules, and the like, will probably change during your retirement. About all you can do make a rough estimate using the variables that you think are most relevant for your situation and go with it.
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hoops902
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Post by hoops902 on Nov 15, 2019 14:17:00 GMT -5
Maximizing Social Security According to the Social Security Administration (SSA) the maximum monthly Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2020 can receive per month is:
$3,790 for someone who files at age 70. $3,011 for someone who files at full retirement age. $2,265 for someone who files at 62. So my question: why would somebody not take it at 62? I did a quick spreadsheet, and in almost all scenarios you'll be better off taking the payments early, unless you expect 0% returns/interest or living past 95. Overall, it looks like your odds are better taking early payments. Where is my mistake?
I think that in most cases, people who take SS at 62 don’t have other investments. So, there is no investment return to be gained from taking SS early. A second consideration would be the impact of taking early SS vs withdrawing money from your IRA account. Driving up the value of your IRA account could force you to take RMD’s that put you into significantly higher tax brackets.Then there is the issue of Medicare surcharges on high income retirees. If your RMD’s and other income are too high, you might be penalized for your financial success. Lastly, it may be appropriate to factor in taxes on SS benefits into your payoff calculations. There are so many moving parts to this calculation that it would be really difficult to include every variable that affects the calculation. And even worse, some variables, such as tax rates and brackets, RMD rules, and the like, will probably change during your retirement. About all you can do make a rough estimate using the variables that you think are most relevant for your situation and go with it. While I agree with most of this, I think this part is probably an irrelevant piece to the puzzle. Let's say that rather than taking the SS money early, we withdraw the same amount from our IRA account. So from age 62 to 69, we would pull out 285K to meet the equivalent SS amount. At the time we hit age 70, our RMD distribution period is 27.4, meaning we have to take 3.65% of our money out that year (70 1/2 I know, just making it easy). The EXTRA money we end up taking in RMD that year then is 3.65%*285K, or $10,400. That's not enough to push you into a "significantly higher tax bracket" when accounting for the way the tables work. Ideally, our money in the IRA has grown beyond that, so we end up taking more money out than that because maybe that 285k has doubled in size through good investments. Ok, even better! We have to take out $20,800 which indeed might result in us paying more taxes...but that's a GREAT problem to have if we're paying more taxes because we made a lot more money. We've already established that money is growing VERY slowly as an imputed interest rate if we just let it sit in unclaimed SS. It's a bit of a Catch-22 situation. If you have SO much money in your IRA that you don't even need to take it out when you're at RMD age, because you don't need it to support yourself (which under your situation would mean you would want to wait on SS to deplete the IRA a little) then you're likely in a situation where you should actually ABSOLUTELY take the SS money early at 62, because you have enough money to invest more aggressively and try to grow that money. On the flip side, you should be more likely to take the money at 62 if you are shorter on funds and therefore being much more conservative in your investments because you need the money in a shorter timeframe.
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