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View Poll Results: At what age did you start receiving social security?
Before 62 13 8.84%
62 63 42.86%
63 6 4.08%
64 7 4.76%
65 11 7.48%
66 22 14.97%
67 4 2.72%
68 4 2.72%
69 1 0.68%
70 13 8.84%
After 70 3 2.04%
Voters: 147. You may not vote on this poll

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Old 08-26-2017, 05:12 PM
 
Location: SF, CA
1,518 posts, read 682,322 times
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Quote:
Originally Posted by Escort Rider View Post
O.K., I'll take the bait. How can anyone collect Social Security "before age 62"?
I think in cases of disability, one can collect SS regardless of age.
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Old 08-27-2017, 07:15 AM
 
Location: RVA
2,167 posts, read 1,266,787 times
Reputation: 4460
Quote:
Originally Posted by nicet4 View Post
In collecting while still working another thing to look at is federal taxes.

If I had retired at 66 my benefit was estimated to be $2,250 and I wondered what the break even point would be had I simply taken the benefits to the bank.

$2,250*48=$108,000.

By waiting to age 70 my estimated benefit will be $3,050 without a COLA so the difference is $800/month.

Based on this my break even point would be $108,000/$800=135 months or 11 years 3 months.

I have a wife and the chances of me hitting 81 appears to be a little more than 50% while the wive appears to be at least 60%. There appears to be about a 85% chance of one of us hitting the break even point.

Yeah, it would have been kind of nice to have an extra $108,000 in savings but would it really have been $108,000?

How much of my social security benefit may be taxed?

I won't count my wife's pension or social security we'll just go on my wages and if I had taken benefits at my FRA and continued working.

Wage income would be $70,000. SS benefits would have been $27,000 for a total income of $97,000 placing us in the 25% bracket.

According to the worksheet "Based on the worksheet provided in the most recent IRS Publication 915, your Social Security benefit(s) of $27,000 will be 85% taxable increasing your taxable income by $22,950 and creating a federal income tax liability of $5,738."

So that $27,000 saved every year would have been reduced to $21,263 or $1,772/month.

Instead of $108,000 my savings would have been $85,052. Based on that my "break even" point would be reduced to $85,052/$800=106.3 months or just under 9 years. The chances of either of us living to 79 appears to be better than 90% and for both of us to go that long it appears we got a 66% to 70% chance to make it.

For me it didn't make any sense at all to collect anything while I was working especially when you consider my wife is already getting benefits of 50% of my FRA benefits so that would have been hit at 25% as well! I was the very last to be able to file and suspend beating the deadline by six days. Once in a while I do get lucky.

Now to make full sense of it what happens if our combined benefits is $4,300? She has a small pension but it is wep'd. If this is all we have and I don't suffer any wage income what would be our income tax liability? "Based on the worksheet provided in the most recent IRS Publication 915, your Social Security benefit(s) of $47,300 will be 0% taxable increasing your taxable income by $0 and creating a federal income tax liability of $0."

Lemme tell you something, I sooooooooo love the idea of not paying any federal income tax I hope and pray I live to be 150 years old!

So the moral of the story is when calculating a "break even" make sure you take into account federal income taxes if you are still earning wages or other income that is subject to income taxes.

Request of MJ: I am not as good with financial numbers as you are but does this make sense to you?
Excelent analysis, and you are 100% correct. In your case it is a slam dunk. I don't know why anyone would work a decent job after FRA and collect SS. (Unless of course they know they are short lived or need the money to live). Why pass up increasing the amount one gets at only 85%. BTW, the "math" in mathjak has nothing to do with math. It is the first 4 letters of his name.
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Old 08-27-2017, 07:48 AM
 
Location: RVA
2,167 posts, read 1,266,787 times
Reputation: 4460
Quote:
Originally Posted by Cabound1 View Post
No offense taken. You must be misunderstanding, because I don't understand your response (could be the early morning hour and lack of coffee).

Just trying to point out that any given individual in their 60s (when these decisions are made) has a considerably less than 50% of living to 90. Way less in many cases.

Secondly, imo, most people fail to realize the opportunity cost of using their own monies (which could otherwise potentially grow into a sizable nest egg) for the period of delay.
I am certainly not trying to make the case that delayed filing is always the right answer. It is not. For many, probably most. It is moot for most, as they have no real choice. I am only pointing out that your arguments are not very valid, as far as the math being a reason. For one, think of the obvious. There are hundreds if not thousands of articles and analysis' by groups that specialize in just those types of calculations, of the benefits, financially of delayed filing, either by spending down assuming you can afford it, or working longer. Do you actually think that you, on your own, have better math and financial skills than they do? Why would you even try to second guess them? It makes no logical sense.

It has been shown over and over that the higher income from delayed filing with the compounded growth allows a higher income starting from age 62, and on, BECAUSE of the reduced need for the "larger" nest egg. It IS a straightforward ANNUITY. Again, "Break even" means NOTHING, IF you are unconcerned about the balance to heirs and are only concerned about INCOME. It really doesn't. What matters is what type of income, & what is your net amount after taxes. NO annuity has the tax advantages of delayed SS, even if you are single, especially if ones savings is tax deferred. To truly be able to spend down and delay filing SS, and start with the same income that you expect at filing age, requires at LEAST savings of around $750k, and be invested in the market. This automatically eliminates the vast majority of people.

Most, I daresay, would have pensions that allow them to absorb market variations, or substantially more than $750k, so a large amount is invested for much later, or for heirs. Even taking the "worst" case scenario, a high earner that expects $43k/yr at 70 from SS, (instead of say $24k at 62) so it appears to "cost" $344k from investments to delay, they are really simply using the difference of $43-$24= $19k/yr of their savings to live at a $43k lifestyle, that will cost ZERO from savings once they file. And the full amount is anywhere from tax free, to at most, only 85% taxed. So the real "cost" is only $192k to live a $43k income from age 62 on. Compared to $19k/yr for 12 extra years, even if only 20 years more if you only live to 82, of $228k. Actually a lot more, as the $43k from SS will be COLA, and taxed at a lower rate, while if you draw $19k/yr, you will have to increase that withdrawal rate to keep up, and pay full taxes if from tax deferred, AND manage those investments the whole time. Plus, they will still have to take RMDs on any tax deferred accounts, which are now reduced, and pay less taxes. Their income is higher from day one, with a shorter risk time period and less maintenance as they get older and may be less able to handle it.

Of course, at age 70, they WILL have less savings. But who cares, if they have a 70% higher COLA income. Most people do not start taking their RMD amounts at 62, unless they are fairly wealthy early retirees that have been living of an SWR for a very long time. Those outliers, having lived of their investments for many years are only concerned about the savings that Medicare will bring. Their SS is usualy not significant because they retired with far less than 35 years in the system, and by the fact that they are retired and living on their ample investments, are very tax oriented. When SS hits, they typically do take it at 62, as they tend to always invest for income and large savings.

This is a totally different retirement lifestyle from the more average person that goes from a regular paycheck with payroll and SS taxes,and accumulating savings, to living off those savings and a totally different tax scenario.

Basically it appears that one doesn't really benefit from delay filing if they are very wealthy (because it is moot, it is small potatoes to their income) or can't afford to. There are many reasons to file at 62. But a higher net income is definitely not one of them for those that it makes sense to consider as a choice.

Last edited by Perryinva; 08-27-2017 at 09:10 AM..
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Old 08-27-2017, 08:01 AM
 
71,626 posts, read 71,777,271 times
Reputation: 49225
the reality is most people don't have the option to retire and delay .

unless you can afford to lay out for the ss you are not collecting yet and do it safely without draining assets , it makes no sense to delay nor can you afford to delay.

delaying properly takes enough resources saved or other income sources ..

all delaying is like me saying to you , do you want to use my money up front for 8 years now , or lay out your own money now and later i will give you 70% more of my money in 8 years . your choice is use more of your own money for 8 years and less of your own money for decades.

but you need that money to lay out
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Old 08-27-2017, 08:47 AM
 
674 posts, read 839,522 times
Reputation: 1191
I know many couples that their pensions alone more than cover their expenses. They took SS at 62 which makes perfect sense for them.

We do not have pensions so we must make a careful, well researched plan on when to take SS.

At FRA my spouse will get about double I will get at FRA. Right now we are 64.5 and 62. Survivor benefits are important. Because DH was 62 prior to Jan 2016, one option is for me to file at 63.5 (when he turns FRA) and he can get 1/2 of mine. He then will file his own at 67.

I am trying to get a grip on whether this is our best solution, as we don't want to use too much of our own savings. He does limited contract work. Possibly another job here or there next year, but the jobs only give us about 30% of our yearly budget (including taxes).

If there's anyone with opinions please give them!
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Old 08-27-2017, 08:58 AM
 
Location: Greenville, SC
4,650 posts, read 3,704,540 times
Reputation: 8647
Quote:
Originally Posted by Perryinva View Post
Excelent analysis, and you are 100% correct. In your case it is a slam dunk. I don't know why anyone would work a decent job after FRA and collect SS. (Unless of course they know they are short lived or need the money to live). Why pass up increasing the amount one gets at only 85%. BTW, the "math" in mathjak has nothing to do with math. It is the first 4 letters of his name.
I'm still working in IT at 70, and will leave full time employment October 6th. I started collecting a small pension from a previous employer at age 65, and held off on collecting SS until this January, when it was maxed out. The pension and SS have been going into savings. I have no spouse or dependents, so that's not a factor for me. I have zero debts, and a buffer in savings against disasters. I've been cutting back on things for the last couple of years to reduce my expenses and meet my retirement budget. In doing my analysis, the notion of getting back what I put in before I die was never a factor -- when I'm dead, I'm not going to care about it -- what is important to me is knowing I have a certain income for the rest of my life. I'll be doing counseling work part time (and possibly some web design) to supplement the pension and SS.

For those looking at making a decision in the next few years, I believe there's no right and wrong answer. You have to look at your own situation and resources and make a decision that works for you. My own analysis was based on a "worst case" scenario of my living to 100 - not likely, but I don't want to be left destitute if I can help it.
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Old 08-27-2017, 09:19 AM
 
659 posts, read 325,222 times
Reputation: 1974
Mathjack
I have a new question about SS.

I believe I can afford to delay SS to FRA, if I needed to. I just turned 59 and my FRA is 66 and 8 months (almost 8 years). I have the cash and non-retirement investment assets to draw down and pay myself an income of 50K per year. I don't work.
However, I had ideas of taking SS when I am 65, eligible for Medicare, and will also receive a small pension of $465 per month. I'd also start distributions from my Retirement accounts.

My question is about the effect of not working on my SS estimated benefits.
Beginning this year, 2017, my earned income will be 0.

SS has calculated my numbers based upon me making estimated taxable earnings of $118, 500 per year until FRA:
Age 62: $2021 per month
Age 66 8 mos, FRA: $2867
Age 70: $3663

Should I expect to not receive these SS numbers, now that my income will be 0 for now on? Would taking SS at age 65 be significantly less than at 66 and 8 months?

I definitely am not planning to wait until age 70. Dad died at 76, Mom at 69. Grandparents all died in their 70s.
Thanks!
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Old 08-27-2017, 10:13 AM
 
13,044 posts, read 15,397,378 times
Reputation: 15299
I was thinking I would retire at 62 and start collecting, but decided I will wait to collect. If I retire at 62 I will wait at least 3 years to start collecting because we can afford for me to postpone collecting so it just makes sense to do that. But more likely I will just drop down to part time at 62 so I can keep our health insurance and then at 65 I will start collecting. We could get health insurance through my husband's employer but it's a lot more expensive than mine and the coverage isn't as good.
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Old 08-27-2017, 11:14 AM
 
1,066 posts, read 517,177 times
Reputation: 1824
Quote:
Originally Posted by Perryinva View Post
I am certainly not trying to make the case that delayed filing is always the right answer. It is not. For many, probably most. It is moot for most, as they have no real choice. I am only pointing out that your arguments are not very valid, as far as the math being a reason. For one, think of the obvious. There are hundreds if not thousands of articles and analysis' by groups that specialize in just those types of calculations, of the benefits, financially of delayed filing, either by spending down assuming you can afford it, or working longer. Do you actually think that you, on your own, have better math and financial skills than they do? Why would you even try to second guess them? It makes no logical sense.

It has been shown over and over that the higher income from delayed filing with the compounded growth allows a higher income starting from age 62, and on, BECAUSE of the reduced need for the "larger" nest egg. It IS a straightforward ANNUITY. Again, "Break even" means NOTHING, IF you are unconcerned about the balance to heirs and are only concerned about INCOME. It really doesn't. What matters is what type of income, & what is your net amount after taxes. NO annuity has the tax advantages of delayed SS, even if you are single, especially if ones savings is tax deferred. To truly be able to spend down and delay filing SS, and start with the same income that you expect at filing age, requires at LEAST savings of around $750k, and be invested in the market. This automatically eliminates the vast majority of people.

Most, I daresay, would have pensions that allow them to absorb market variations, or substantially more than $750k, so a large amount is invested for much later, or for heirs. Even taking the "worst" case scenario, a high earner that expects $43k/yr at 70 from SS, (instead of say $24k at 62) so it appears to "cost" $344k from investments to delay, they are really simply using the difference of $43-$24= $19k/yr of their savings to live at a $43k lifestyle, that will cost ZERO from savings once they file. And the full amount is anywhere from tax free, to at most, only 85% taxed. So the real "cost" is only $192k to live a $43k income from age 62 on. Compared to $19k/yr for 12 extra years, even if only 20 years more if you only live to 82, of $228k. Actually a lot more, as the $43k from SS will be COLA, and taxed at a lower rate, while if you draw $19k/yr, you will have to increase that withdrawal rate to keep up, and pay full taxes if from tax deferred, AND manage those investments the whole time. Plus, they will still have to take RMDs on any tax deferred accounts, which are now reduced, and pay less taxes. Their income is higher from day one, with a shorter risk time period and less maintenance as they get older and may be less able to handle it.

Of course, at age 70, they WILL have less savings. But who cares, if they have a 70% higher COLA income. Most people do not start taking their RMD amounts at 62, unless they are fairly wealthy early retirees that have been living of an SWR for a very long time. Those outliers, having lived of their investments for many years are only concerned about the savings that Medicare will bring. Their SS is usualy not significant because they retired with far less than 35 years in the system, and by the fact that they are retired and living on their ample investments, are very tax oriented. When SS hits, they typically do take it at 62, as they tend to always invest for income and large savings.

This is a totally different retirement lifestyle from the more average person that goes from a regular paycheck with payroll and SS taxes,and accumulating savings, to living off those savings and a totally different tax scenario.

Basically it appears that one doesn't really benefit from delay filing if they are very wealthy (because it is moot, it is small potatoes to their income) or can't afford to. There are many reasons to file at 62. But a higher net income is definitely not one of them for those that it makes sense to consider as a choice.
I honestly don't even know where to go with this, but I'll offer this....

I absolutely agree that it is a moot issue for those who cannot live on a 62 year old payout and whatever other income streams they have. And that's probably the biggest group of people in the US. They have to delay.

Let's go to the other side....those who approach 62 with your 750k number in liquid, investable assets and can easily live on the returns that 750k provides. Note I did not specifically mention annuities, just income producing liquid assets.

That is the group that it makes sense not delaying until 70, imo. And incidentally, that is the group that I was referring to in my original posts. Sorry if that wasn't clear. For those people it IS about the break even point because they are essentially asking a question about how to grow their nest egg. The question is basically "will I live past the break even point" . If the bet is no I won't, take SS and die with a bigger nest egg than if you had delayed. And if you look at some of the charts mathjak provided (maybe in another thread?) the breakeven point , even with the very conservative assumptions the Wall St gang has incentives to provide, the break even point is mid eighties.

Btw, I used to be part of that wall st gang. The numbers they provide are mathematically accurate, no disputing that. But whether explicitly stated or not, the calculations often involve confidence intervals, i.e., 95% chance of this happening, 90% chance of that happening, etc. If you are part of that second group I mentioned, where failure to make the right bet simply means a smaller nest egg and no lifestyle implications, why wouldn't you take a bet that has a greater than 50/50 chance of success?
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Old 08-27-2017, 11:21 AM
 
1,066 posts, read 517,177 times
Reputation: 1824
Quote:
Originally Posted by saralvr View Post
I know many couples that their pensions alone more than cover their expenses. They took SS at 62 which makes perfect sense for them.

We do not have pensions so we must make a careful, well researched plan on when to take SS.

At FRA my spouse will get about double I will get at FRA. Right now we are 64.5 and 62. Survivor benefits are important. Because DH was 62 prior to Jan 2016, one option is for me to file at 63.5 (when he turns FRA) and he can get 1/2 of mine. He then will file his own at 67.

I am trying to get a grip on whether this is our best solution, as we don't want to use too much of our own savings. He does limited contract work. Possibly another job here or there next year, but the jobs only give us about 30% of our yearly budget (including taxes).

If there's anyone with opinions please give them!
Yup. You put it much more succinctly than I.

Poorer people have to take it. Rich people can afford to take the much better than 50/50 chance that taking at 62 will lead to a greater net worth, and those stuck in between have a very hard, complex decision.

Oops... meant poorer people have to delay....classic example of the rich getting richer, imo

Last edited by Cabound1; 08-27-2017 at 11:40 AM..
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