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Take Social Security Early? Or Wait?

Take Social Security Early? Or Wait?
Benefits grow the longer you wait to take Social Security. What's the best age to start receiving benefits?

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But wouldn't that be throwing away 96 months x $2,364 = $226,944.00?

It's true you wouldn't be getting the monthly amount for all those years compared to if you started payments at age 70 but at age 70 your benefit will be $4,464 per month instead of only $2,364.  If you live long enough,  you'll make up for those months you didn't receive and then some.  Do you think you'll live longer than age 82?  If so,  you'll make it ahead in the long run.

In reply to Pamela, that option to stop receiving Social Security and restart by paying back what you received ( along with interest) may not be available anymore ( depending on year started) a lot of changes occurred in the last few years around the time they started those rises in Medicare premiums, plus changed the FRA ages depending on year of birth.
Most of these changes are occurring already and it doesn’t help that the younger generations want to start working later and retire earlier. I had to start explaining to my children who are both in their 30s how benefits are figured. We all have to understand how our working life income decides our Social Security benefits. I personally cursed the almost 20 years of working two jobs to support my family but in the end I got a higher Social Security benefit. We all who are retired need to insist that Congress and Biden leave what little we do get out of being taxed by federal tax.

@maria rose posted:

I know people are going to look at it as the first comment made on this—take it ASAP. But those people are not looking at the long range picture. You have to choose based on your life expectancy and I am not talking about the illusion of a long life. And not all of us have big savings put away in non-taxable sources because of life circumstances so I am going to base my answer on reality income. If you know that you have physical health problems ( not mental) and your job is causing you pain and stress, you should definitely phase yourself out of the job early at least the hands-on part. You also have to look at phasing down your expenses and eliminate all unnecessary costs. You should be doing this within the five years of possible early retirement so that anytime from age 62 on you could retire and live on your retirement income which remember is going to be less than working income. Even if married, don’t figure your Social Security benefits on spousal benefits look at it on your earned income, which if you didn’t work much means that you are getting very little. Don’t assume you earned more. Also check the life expectancy of your family and plan accordingly based on your lifestyle and health habits. But don’t take the easy lazy way out and get the benefits early unless you are satisfied with the your permanent choice, as there’s no reversing the decision.

Actually you CAN reverse your decision, but in order to do so you must first pay back  Social Security all of the money that they have sent you since you began collecting SSI. For most of us, that would seem or actually BE an impossible task, STILL, it IS an important choice to take note of. If after only a few months you find the smaller amount of SSI not enough of an income to live on, paying it back and waiting a few more years could make a big difference in your future lifestyle. So I would suggest saving up at least 4 to 6 months, (12 months is much better), of Living Expenses prior to claiming SSI so that you can exercise this option if you need to.

Taking social security is a personal decision and is not the same for everyone.  There is no cookie cutter answer.  Decisions on when to take social security is based on age, health, financial income needs, and tax concerns to name a few.  How long are you going to live (i.e. what is your health condition or family history)? What is your retirement income requirement for social security?  Does this push the individual to work longer? Is there a need to have higher income for your spouse in the event of your death (assumes your spouse has the lower SS payment)? If you are still working at age 62, you need to realize that taking SS can be reduced if your income is over $18,600, so I may not benefit you to take it until your full retirement age (FRA).  You can still work past your FRA, take SS, and not get penalized.  Does delaying SS push you into the next tax bracket and are you ok with that?  As someone has already stated, once you make the decision, there are few exceptions to reverse this option.  Consider consulting a tax professional or a financial advisor before making a decision that you might have to live with for the remaining living period.

Not something I guess I have though of much at my age but just looking at the basic math and calculating a lifespan of 80 years, 65 years old seems to be the time when you get the most value. The increase in income from 62 years to 65 years makes it worth the wait in my opinion but after that, I don't know that the increase is enough to make me want to wait longer.

That being said, taking it at 62 would entirely depend on the situation with a big factor being my health at the time. Just because I want to live to 80, the reality is that I won't know until I get closer to then.

But regardless, I don't think I would wait any longer than 65 or 66 at the latest



Here is what the numbers look like on a spreadsheet:

SS calculations

The trouble with your calculations is that there is a maximum SS benefit. i.e.
"The $3,895 maximum Social Security benefit in 2021 is more than double the average benefit and provides a generous $46,740 in annual income. While this may sound like a nice amount of money as a senior, very few people end up maxing out their Social Security checks. Oct 30, 2021".
Also, the number of people that would receive the highest level of benefit is less than 20% of wage earners. If $3895 is double the average benefit, that means the average benefit is $1947.
So your numbers are close to what I calculated below but I included the cap.
"By waiting until after age 62, when they first become eligible for retirement benefits, they stand to increase their benefits by 8% per year up to age 70. Oct 15, 2021"
Based on the 8% increase per year, the numbers look like this:
62: 2364
63: 2553
64: 2757
65: 2977
66: 3216
67: 3473
68: 3751
69: 3895
70: 3895

With the 8% increase per year, it is up to the individual person to decide if they can beat that in the stock market, keeping in mind that you would actually have less to invest due to SS being taxed income. So really you would need to make more than 8% in investments to beat the SS standard increase. And that doesn't take into account the COLA increase that SS recipients sometimes get.

Not something I guess I have though of much at my age but just looking at the basic math and calculating a lifespan of 80 years, 65 years old seems to be the time when you get the most value. The increase in income from 62 years to 65 years makes it worth the wait in my opinion but after that, I don't know that the increase is enough to make me want to wait longer.

That being said, taking it at 62 would entirely depend on the situation with a big factor being my health at the time. Just because I want to live to 80, the reality is that I won't know until I get closer to then.

But regardless, I don't think I would wait any longer than 65 or 66 at the latest



Here is what the numbers look like on a spreadsheet:

SS calculations

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  • SS calculations

For quite a while I had "decided" to take my SS at my Full retirement age even while continuing to work and just pay taxes on the combined amount. I figured I would invest it or build up my savings.
After talking to my financial advisor a few times, I have to admit that my thinking on this has changed. (Note: She was totally against taking it early in my case.)  I think my earlier thinking was "Take it because I didn't trust something" or before it runs out and gets cut. My financial advisor has shown me and convinced me that the likelihood of me earning 7-8% per year (the amount that SS grows each year you wait) is slim to none.
So my "current" revised plan is:  I'm still planning to work until 69 or so, so I'm going to hold off taking my SS until I retire. As a compromise with myself I decided to start my pension in Jan of 2022 since waiting wouldn't increase the amount very much. That makes me feel like I'm getting started on retirement and I can save or invest that pension money. Then waiting to take my SS until 69 or 70.  The best of both worlds for me.

I can see the argument that we all know our birth date but don't know our expiration date, but if you make it to age 62 do you think *you* will live until you are 80 years old?  I believe many people take the money as early as possible because they need the income and have no other choice.  But if you have the luxury of deciding, the higher monthly amount will eventually be better if you live long enough. 

Breaking down the math between age 62 and age 67 (full retirement age for anyone born after 1960), it's true you'll receive $2,364 each month for twelve months for those 5 years earlier which totals $141,840 dollars ($2,364 per month for 12 months times 5 years).  But at age 67, that extra $1,204 per month will allow you to break even if you live another 118 months (9.8 years).  And every month that you live beyond that, is extra you wouldn't have by taking the earlier payments.  I'd personally rather have the extra $14,448 per year for another decade or two! 

I know people are going to look at it as the first comment made on this—take it ASAP. But those people are not looking at the long range picture. You have to choose based on your life expectancy and I am not talking about the illusion of a long life. And not all of us have big savings put away in non-taxable sources because of life circumstances so I am going to base my answer on reality income. If you know that you have physical health problems ( not mental) and your job is causing you pain and stress, you should definitely phase yourself out of the job early at least the hands-on part. You also have to look at phasing down your expenses and eliminate all unnecessary costs. You should be doing this within the five years of possible early retirement so that anytime from age 62 on you could retire and live on your retirement income which remember is going to be less than working income. Even if married, don’t figure your Social Security benefits on spousal benefits look at it on your earned income, which if you didn’t work much means that you are getting very little. Don’t assume you earned more. Also check the life expectancy of your family and plan accordingly based on your lifestyle and health habits. But don’t take the easy lazy way out and get the benefits early unless you are satisfied with the your permanent choice, as there’s no reversing the decision.

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