Thinking out loud about Social Security

Discussion in 'Finance, Investments, and Careers' started by Russ Smith, Dec 31, 2017.

  1. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    The recent GOP talk about trying to raise the age for full benefits and some other stuff has gotten me to thinking about this.

    I have always planned on deferring until 67 and possibly even 70 to get the most. For some reason SS locked me out of my account and while I wait for them to send me a new code, by US mail!, they gave me some estimates. At 62 I'd get just over 20K a year in benefits, at 67 it's 28K. It's always seemed like a no brainer to me to wait the 5 years and get 25% more per year but I'm now starting to think that might not make sense?

    The idea is if you take it at 62, by the time you reach 67 in this scenario you have received just over 100K in benefits. you can always bank and invest some of that if you don't need it all, or you can use that as your primary income use your IRA's and savings as secondary. The extra 8k a year means it takes about 12 years at the higher rate to break even waiting for 67 over 62, which means you are 79 years old when you finally pass the point where 67 really means more money over the long haul.

    The whole reason the SS experts advise you to wait of course is they want more money in the Social Security "pool." If everyone starts taking out at 62 they pay in less, if they work another 5 years they pay in another 5 years of FICA. That is they tell you we don't want you to miss out on that extra 25% per month but what it really is, is they want your extra 5 years of FICA to beef up the pool to pay the current people on SS.

    I'm not trying to be greedy here but I'm also not yet at an age(52) where it seems practical to me to be making life decisions on things that will happen after I'm 79 years old. I don't have kids so maybe that's part of it, but it just seems to me like maybe it makes more sense to file at 62, have 5 years when i'm "younger" where I have that extra 20K a year(before tax) to help me enjoy living?

    the other idea would be to wait until 65 and file then because my girlfriend would be 62 then so we'd both start at the same time, but then I "lose" about 60K in benefits those 3 years I'm not claiming.

    Just curious what others think, apparently lots of people do file at 62 and I've always assumed that was a mistake or people who planned poorly but now I'm wondering if they just did the same math I'm doing and came to the conclusion they'd rather have the 100K?
     
  2. Linderbee

    Linderbee Let's GO, CARDINALS! Contributor

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    This may be a silly question, but you can collect SS & still work, right? I see elderly door greeters, etc. If I were you, I'd keep on working, take SS at 62. Invest that money and the gap becomes even greater than it would be at age 79.
     
  3. AZ Native

    AZ Native Living is Easy with Eyes Closed Contributor

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    Linderbee likes this.
  4. Linderbee

    Linderbee Let's GO, CARDINALS! Contributor

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    I figured there had to be something, but I didn't know what it was.
     
  5. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Yes there's a limit to how much you can earn and if you earn over that they reduce your benefits. My dad didn't file until 70, he's 82 now and still working so his get reduced. The primary reason he did it is his wife can use the rule that allows the spouse to receive the higher benefit of their own, or their spouse, to get his benefits. He's older than her so he waited so it would be almost a life insurance for her. If he passed away, she can collect his benefit so by waiting until 70 he made sure she can collect the highest amount.

    I guess in my case that might make some sense too we'd have to get married for her to be eligible but then if I don't need the benefits and wait until 70, she'd then be eligible to get my benefit which will be higher. But I'm still not sure that makes sense given that would be a 8 year wait so that makes the difference 160K, and that's off their estimate I suspect my benefits are actually a bit higher than she estimated over the phone(20K a year).

    I can see why people are concerned about the long term viability of social security though, if you do the math there are lots of reasons to just start taking it at 62.
     
  6. Bada0Bing

    Bada0Bing Don't Stop Believin'

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    It depends on how long you live. I built a spreadsheet a while back to calculate the break even point. I remember it took a loooong time to break even, so my conclusion was to take the money as soon as possible. A bird in the hand...
     
  7. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Right because I'd rather have the money when I'm young enough to enjoy it.

    I think the main reason to defer is if you earn more than your spouse you can increase the amount they would get if you die first. I messed up before, they don't get the full amount they lose part of it. in My case if I waited to 70 I think I'd get about 3000 a month but if married my spouse would only get 2500 something like that
     
  8. AZ Native

    AZ Native Living is Easy with Eyes Closed Contributor

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    I retired 11 years ago after working 35 years for Social Security. I usually avoid talking about it because it is actually a very complicated program and I don't want to give advice to someone and have it turn out bad. Why, because no one knows the future, how long will you live, how long will your spouse live, one or both of you may become disabled due to injury or health and not be able to have the quality of life to travel and enjoy it etc.

    If you gave me the exact dates you and your spouse will die or become disabled, your future wages from that point, I could tell you what you should do and be fairly accurate. But no one knows this, so any advice you get is pretty much worthless. EVERY situation is different, there is no one size fits all.

    After I retired I actually attended a workshop about Social Security just for the heck of it. The guy had never worked at SSA and was giving advice that would have gotten me fired. It was so bad, but people ate it up because they don't trust the government, but will listen to this clueless clown (sorry, he was probably a nice guy, but had no idea what he was talking about).

    I temper my opinion because I have dealt with this first hand. The husband is going to work until whatever age to get more $ and dies before that or his wife dies before him etc..

    I have had widows tell me "I wish he would have retired earlier and we could have traveled and enjoyed life, but no, he died and I am alone without being able to do those things with him". The extra $ she gets is no consolation for all they missed together.

    I have had men come in who kept working well after 65 so their widow would get more $ but their wife passed first and they to lament not enjoying travel and retirement with the love of their life.

    I literally could write a book about this and not tell 1/100 of the stories.

    I always told my employees not to tell people when to retire. Just explain all their options and let them decide what is best for them and what they are comfortable with. Otherwise they will be back in the office saying "they told me to do that and it was bad advice based on my situation now". And they would be right.

    Again, no one knows what is best for you. Gather all the facts, decide what you think is best for you, and cross your fingers. Also, as BadaOBing suggested, don't leave money on the table. Good luck and peace to you.
     
    Last edited: Jan 6, 2018
  9. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Very interesting thanks for posting.

    I agree it's not a one size fit all decision.

    It's really only because of the GOP talk about "fixing" SS that I'm even talking about it now.
     
  10. Jersey Girl

    Jersey Girl Stand down Contributor

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    Thanks for sharing that.

    My dad retired about two years ago, at 63. My mom waited til 65. They saved and planned and are in a comfortable position financially and in decent health. They travel all the freaking time. I think it's great.

    I plan to retire at 65. Like you said, who knows how much time you'll have?
     

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