Does It Ever Make Sense to Work and Collect Soc. Sec? (benefits, best)

[Perryinva]

Originally Posted by GeoffD

The most you can get at age 70 if you have 35 high income work years is about $45k. To retire at age 62, you’d need about $400k to replace the Social Security income. Anybody in the 80th percentile for wealth can do that. Most people who accrued that kind of wealth are looking at at least a $35k age 70 Social Security check which would take $300k to replace. Somewhat better than “very few” but well beyond the reach of the median 62 year old.....

Exactly. But it’s still not chump change by any means. And for a someone that steadily saved and sacrificed by LBYM for those same 35 years and finally reached their say, $1M nest egg, it is a pretty hard pill to swallow to then turn around and start living on it and reducing it by 40% in order to delay the “reward” another 8 years. . It is far easier to talk about it than actually do it.

While I too am in a similar position to do as you, I doubt I will have the intestinal fortitude to delay until 70; 67 or 68 is more likely. SS will still be a large percentage of our income in order to maintain our same lifestyle, which was always my objective. I will know better once I start actually living it in about 800 days.

[selhars]

Originally Posted by GeoffD

To retire at age 62, you’d need about $400k to replace the Social Security income.

I just want to make sure I have this correct:
Are you saying that a person with 400K at age 62 can retire -- AND delay?

Let's presume no debt, a paid off house -- in a major metro area.

[mathjak107]

it still should not represent more than 35% to 40% of total portfolio value . a house is irrelevant . it is only based on savings regardless of what you own , if you will be using more than that percentage than it is not a safe thing to do

[selhars]

I only asked to be clear about what was stated.

Personally, I don't think 400K is enough to retire on and delay.
But that may not have been what was intended.

I was taught....always ask to be sure you understand what the other person is really saying before you comment -- especially if you might disagree Sort of a let's make sue we're on the same page with the stipulations and ground rules -- before we start branching off into tangents, kind of thing.

I can't tell you how many times I hear people headed down the road to a friendly debate, when person A is taking about something that person B didn't even say or intend to convey.

[mathjak107]

400k may not be enough to delay . but it is not for us to decide since we don't know their draw they need . for me it isn't even enough for us to retire not just delay . .

the only thing we can say is they shouldn't delay if it is more than 35-50% of that 400k. that holds true whether they own a home or live in a tent or rent .

the concern is not their budget but only that they spend to far down delaying . whether they can retire comfortably on 400k and ss is up to them .

[Perryinva]

He only stated it would cost $400k to delay (assuming a max SS of around $50k combined) AND still live as if the income was the same as expected at age 70, but starting 8 years earlier. The idea being that one could place a bucket of cash in a safe investment, say a CD ladder, and predictably withdraw the same amount that they would get from SS, compensated for inflation, from day one of age 62 retirement. When that bucket was empty, there would be no change in income, as then SS would begin paying that same amount from then on. It makes zero reference to how much one has saved overall.

The beauty of that approach is that one can change their mind at any time in the process. If one had a million saved, and put $400k in that bucket (actually less is required due to compounding interest, but 400k is a round number ), then from age 62, one would base their additional withdrawal rate on the remaining $600k, not a million.

So using the same roughly average SS of $14k/yr @ 62, numbers I mentioned above, if the commonplace 4% withdrawal is used, it can be seen that the net income will usually be higher from age 62 on by delaying to 70. For an age 70 filer, MFJ, assuming the spouse collects 1/2 FRA at their FRA, means they need $36k for first 4 years, and $24k for next 4 years, so a 2% CD ladder means about $220k is needed to fund the SS delay. So for an age 62 filer, MFJ, assume $21k SS + $40k (4% of $1MIL) =$61k . For age 70 filer, $36k SS + $31k (4% of $780k) = $67k/yr from day one, age 62.

This is a simplistic look at it because ages of spouses change when and how much, as well as taxes, both before and after filing. The age 70 filer will pay higher taxes from 62 to 70, if all sources of income are tax deferred. But then will pay lower taxes than the age 62 filer from age 70 on, because more of their income is tax free SS, and less is RMD mandated.

It also assumes that someone that worked enough to only have $1200/mo HAS enough savings to comfortably put $220k in a separate safe account. If they only have $400k saved, then the numbers are less convincing. Age 62: 21k + $16k= $37k/yr. Age 70: $36k + $7k= $43k. But now neither cohort pays any taxes at those incomes so the difference is actually less.

[mathjak107]

yes .....

when i ran my delaying in retirement in firecalc i did it in 2 steps .

i figured the first 8 years spending . took the balance left then recalculated with the remaining balance and 8 years less .

[Perryinva]

One has to know what numbers are meaningful. If we look at percents, the second delay example with $400k saved looks like a slam dunk as the age 70 filer amount is 6k/37k or 16% higher vs 6k/61k is 10% higher for the $1M saver. But it’s still both a 500/mo difference, which is more significant for the $37k income person than the $61k income person. But “sacrificing” 55 % of your savings is significantly harder to do than 22%. 55% of the bulk emergency nest egg is traded for $500/mo, leaving just $180k. It is also more difficult to sustain a 60/40 AA and make the same percent return to carry the 4% WR, with a small $180k portfolio vs a $780k portfolio where a larger percentage can be invested in riskier higher return equities because those funds will not be needed until closer to end of life. Lower income retirees will be far less likely to chance their savings in the stock market than higher income retirees that had already spent many years in the market and made much/most of their nest egg by investing vs saving.

A max SS earner is also looking at larger absolute income numbers (a $25k SS@62 vs a $44k SS@70), and tax ramifications which make it easier to delay because the net payback is higher. And if one happens to be single, in poor health or a family history of no longevity, the incentive to delay is also less.

[selhars]

BUMPING THIS UP WITH A NEW QUESTION about the earrings limit for early retirees who continue to work....

Is there a special earnings limit for the year a person retires PRE-FRA?

For example,
-- 62/63 year old person retires early in year -- end of February
-- has already made more than the usual earnings limit (likely @20K for '22).

.....is there a special "year of retirement" earnings limit for that person, pre-FRA?

Or does that person have to wait to get out of that calendar year, to file if they don't want any benefit withheld (based on what they already made before they even retired.)


(I always see so much about a special earrings limit for the year a person reaches FRA. What about before that if the person already made more than the limit before they retired?)
-- Could be a caveat about possibly renting early in the year

Hope this gets seen was hoping not to start a new thread.

[mathjak107]

All limits are calculated once you file ..money prior does not count