early social security

[resolution]

My MIL asked me this weekend what is the best age to start taking social security. She and FIL went to a financial planner that is advising them to take the early social security at age 63 and invest it, that they will come out ahead doing this instead of waiting for normal retirement age.

They both have pensions and don't need the social security money. They are retired teachers for the deaf and blind, and can substitute for about $300 a day whenever they want, so if they took the SSA money early they would need to cut back to about 10K per year subbing.

I told her that I didn't know a hard and fast rule, but there was a break even point of taking it early and that it would depend how long they planned to live when they would hit the break even and start losing money. Their adviser told them that properly invested their investment gains would offset the lower amount over the long term. Does anyone have any thoughts on this? I am concerned their adviser is just wanting more money available for commissions. I am not worried that they will have any problems regardless of which way they go, but since she asked me for advice I have been thinking about it.

[Deleted]

They need to look at their last SS statement sheet to see what the break points are for their ages.

What rate of return was the Financial advisor quoting them? Is the financial advisor associated with a brokerage house?

Do your in-laws want to back off from substitute teaching? It sounds like they enjoy it and aren't really doing it for the money. I certainly wouldn't stop what I was enjoying so I could take more SS

[Gardening Grandma]

I agree that yhere is no hard and fast rule. (I took it early because the altetnative was to start drawing from my IRA - and I wanted to delay that as long as possible)
If your inlaws delay taking SS, they will collect more. That is guaranteed. If they take the reduced amount and invest it, there is no way to guarantee that they will come out ahead.

I'd ask their advisor if he can guarantee, in writing, that they would end up with more..... He can't.
The SS website has complete info and is user friendly.

[resolution]

Their adviser works for Prudential and they are not sure which products he gets commission on. They are paying him a fee for the consultation but they are also buying products through him. Some are from Prudential and others are not. MIL could not tell me off hand what he advised them to buy with the SSA money. They mostly met with him to set up long term care insurance and that is when they got the advice about taking social security. They both enjoy teaching and there are very few other subs available that can sign and are qualified to do the work with the developmentally disabled children that have multiple disabilities.

I will have DH tell her to look at the SSA statment sheet for the break points. I hadn't remembered that was on there.

[TheOtherMe]

It is a gamble, no matter what you do. I had a friend whose husband forced her to take it at 62. He later left her, so she was angry at him because she retired from her job early and took SS early. However, before she turned 65 she developed brain cancer and if she hadn't taken it early, she would never have seen a penny of it.

[alabamagal]

I would be concerned about anyone "guaranteeing" better returns. The general rule should be to delay taking it until you "need" the money. There may be certain situations that you would want to take it early. There are also some cases where you can maximize the amount of money you get. If they are in good health and expect to live long, and can earn some money substituting, that is what I would do.

[Plain Old Petunia]

Try this calculator:

www.money-zine.com/Calculators/Retirement-Calculators/Social-Security-Benefits-Calculator/

[robbase]

if you work while you correct Social Security, your SS is reduced for every dollar you earn above $14 K or something like that....they should look at the SS website for all the pertinent info

but why mess with aguaranteed thing like SS (at least for these people SS will be guaranteed, for future generations I suspect the money will dry up)

[qofcc]

There are a lot of factors that the calculators can help with, but another big factor is health. Early payments vs later payments are supposed to come out actuarially equal given the same life expectancy. If you expect to live longer than the SS Actuaries project, you'll usually come out ahead by waiting. If you are in poor health, you're usually better off taking it sooner unless you are trying to maximize spousal benefits.

[phil5185]

petunia100 - nice site, thank you. If you put 3% into the 'return' box the answers are all about the same. If you put in 5%, you are ahead to take the SS at age 62.

I did that calculation (approximately) about 10 yrs ago when I was 62, I took the early SS. I wanted to get the money 3 years early, invest it, and grow it to an amount larger than I would have received if I had waited 3 years to get the money. (In my case it worked great, the first yr was 2003 and the market return was 28%).

[Deleted]

We're planning on taking SS early as well. Our pensions are rather small so like GG we can delay taking our "own"
funds by using SS (isn't SS "our" money too?).

Without seeing your in laws whole picture it's really hard to give advice. Given their age you would think the recommendation would be to invest primarly in bonds to supplement their income. They'll be lucky if they average more than 3% per year right now without going into a higher risk scenerio.

[cronewitch]

I will take mine when I retire, I wouldn't give up earned income to take it earlier. You get more the longer you wait up to age 70, if you work past your full retirement date you can collect and work earning as much as you can. That is the only time I might think of collecting while working.

Never take financial advice from a sales person.....!!!!

[resolution]

I am going to forward them the calculator so they can figure out what is best for them. I like how you can enter different return rates based on the type of investment. The good thing is they are very sharp and are taking their time thinking things over rather than just investing where the adviser tells them.

[Artemis Windsong]

That is a sales person on commission.

I took SS early because it was there. And a few other reasons.

[ty]

I will take mine when I retire, I wouldn't give up earned income to take it earlier. You get more the longer you wait up to age 70, if you work past your full retirement date you can collect and work earning as much as you can. That is the only time I might think of collecting while working.

Never take financial advice from a sales person.....!!!!

Well, taking advice from a sales person may not be the best thing or smart, but that sales person may be passing advice from his or her own broker. nothing wrong in that. I gave advice to people looking to buy realestate even though I am not a realtor. A lot of the people passed the word around and it because somewhat a sort of a business for me. It all bean after I was talking to a colleague at work not to buy a Condo. Though you might think you own your condo, you are still paying a renters fee that the HOA can increase when the majority of the people vote for it. I have seen this done so the younger people can get rid of the old people they didn't like in their building. Very illegal and crooked. NEVER buy or invest in a Condo for numerous reasons. Number one reason is, you never know who your neighbor is going to be and you might end up stuck with a nuisance that will cost you attorney fees to resolve the problem neighbors.

As for retiring at the age of 70 instead of 63. You may want to rethink that. Right now, they are looking to put the retirement age to 73, and there is no guarantee that the funds will be available then. A lot of changes are coming to SS and Medicare, and a lot of people are retiring now just to collect before the doors are closed on them.

[DVM gone riding]

Generally if you have a long life expectancy in your family you are better off waiting, investing is a toss up and might or might not come out ahead. If your family dies young or you are ill take it early!!

[DVM gone riding]

if your SS is reduced because you make money it acts like you were delaying taking it so in essence you get the money back latter. I think it is reduced by $1 for every $2 you earn above a certain threshold. What I think really sucks is if you are over 65 and getting full SS but still making money you still have to pay FICA on the money you make but it won't increase what you get in SS at all, some how that totally doesn't seem fair.

[Phoenix84]

It should be easy to look at your most recent SS statement and calculate the break even age. You then have to really consider your health and chances of living past that age.

The other thing you need to consider is spouse benefits. If you are likely to leave a survivor who will live on your benefits, it's best to maximize the benefits.

[tskeeter]

Kari, I think the first question one should always ask is "will the person making this recommendation profit from the advice they are giving?". In this case, I think the answer is yes. To me, that makes the advice suspect.

Here's the way I look at the situation. Every year your in-laws delay taking SS increases their benefit by about 8%. Depending on their income level and some other factors, the SS may be tax free. 8% is a pretty good return on a safe, post retirement investment (many people look at 4% - 6% pretax). Why would you exchange what could be an 8% after tax return for a 6% pretax return?

Note that this isn't what Phil would do. Phil has amassed significant resources that allows him to do things that most other folks can not do. And Phil actively manages his own portfolio, so there isn't a financial adviser taking 1% or more off the top. As a result, Phil seems to generate returns in excess of 10% over an extended period of time. Phil could probably generate an after tax return in excess of the increase in SS benefits, but that won't be true for most people who are investing in investments that are appropriate for retirees.

My bottom line. I'd probably ignore the advice. I suspect that this planner has his interests, not your in-laws, as his top priority.

[april47]

I lucked out. When I went to take my SS early at 63&4months, the person I spoke to asked if I wanted mine or my late husbands. Mine would be only $10 more but if I took my husbands for the $10 less, I could still apply for mine later. Once I took mine I was stuck. So I am 64 now and intend on waiting untill 67 maybe even longer. According to his figures, at 66 it will be $300 more!

[Bluerobin]

I just signed up to take mine early!!! If I wait, they may raise the age again. I also have a small company pension and have been retired for a few years.