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Collecting early means locking in a lower paymentfor the rest of your life – and for your spouse if she/he survives you...unless you pay it all back at age 66 and reset. I'm not so sure that many people have the [future] vision to realize this because all the see is the chance to collect. Of course many of life's events could dictate what you do (e.g. if you are eligible and have lost your job and can't find another one, etc.).
Just to retire as soon as you can start collecting SS at age 62 (and actually collecting it) just does not make any sense to me. Social Security has always been a supplement to pensions, sizeable savings and investments. If a retiree isn't prepared with much beyond what SS pays it's going to be mighty tough, and that's even more true when the lower payment is locked-in for life...
One reason for locking in early is that we have no idea how SS will change in the future. The idea is that if we lock it in, we'll be grandfathered in should future payouts drop. We already know SS will go through it's "surplus" sometime in the next 30 years and will collect about $0.74 for every $1 paid out. Something will have to change in the next 10 years to keep it solvent.
Another reason was stated by mathjak in another thread. If we want to leave a bigger legacy to our kids, we take early SS to keep our retirement investments larger. This is our main reason for taking SS at 62.
You said, "The second thing is that the early Social Security benefit amount will be permanently fixed for life with no increases for future inflation"
I have no idea where this is coming from. To the best of my knowledge, ALL Social Security benefits are adjusted for inflation. I checked the regs (in case I'm losing my mind, heheh) and it simply states that benefits are permanently reduced (as in a percentage of what you would have received if you elected full retirment). It does NOT mean benefits are frozen at a set amount, regardless of inflation. If this is what you thought, well, under those circumstances I'm certain most people would agree that electing early retirement benefits could be financial suicide.
One reason for locking in early is that we have no idea how SS will change in the future. The idea is that if we lock it in, we'll be grandfathered in should future payouts drop. We already know SS will go through it's "surplus" sometime in the next 30 years and will collect about $0.74 for every $1 paid out. Something will have to change in the next 10 years to keep it solvent.
Another reason was stated by mathjak in another thread. If we want to leave a bigger legacy to our kids, we take early SS to keep our retirement investments larger. This is our main reason for taking SS at 62.
That is why each individual based on their goals needs to have a plan specific to them. Our plan is to not touch our tax sheltered investments until we need to draw them down and to be able to leave taxable investments in place for our kids.
One reason for locking in early is that we have no idea how SS will change in the future. The idea is that if we lock it in, we'll be grandfathered in should future payouts drop. We already know SS will go through it's "surplus" sometime in the next 30 years and will collect about $0.74 for every $1 paid out. Something will have to change in the next 10 years to keep it solvent.
Social Security will no doubt have to be changed at some point, but it will likely only affect people that are not yet qualified to receive benefits. To make the decision to take SS benefits as early as possible because the plan's future is unknown is a weak excuse. We all know that SS is not simply just going to be thrown out with after millions of people have paid into the plan.
Quote:
Originally Posted by akck
Another reason was stated by mathjak in another thread. If we want to leave a bigger legacy to our kids, we take early SS to keep our retirement investments larger. This is our main reason for taking SS at 62.
Taking early SS does not necessarily allow tax-deferred retirement investments to grow larger. It all depends on how the investments are invested, and if the investments involve securities or bonds - whether they will increase or decrease, which in the case of securities and bonds would be a complete unknown.
But, that's just part of the [getting ready for early retirement] picture. It is very desirable if possible, after funding all non-taxable retirement funds, to have enough liquid savings set aside to live on between the time you take early retirement and when you turn age 66, when you can take full SS benefits with inflation adjustments for life. Surely you didn't retire without a sizable amount of liquid cash savings... It would most favorable to have enough cash in savings to live on until age 66. Then you wouldn't have to take early SS benefits at age 62 to get by. If you didn't plan for enough cash savings to get you by until age 66 maybe you decided to retire too soon in order to maximize the legacy you hope to leave your kids...
Still, you must also consider the 25% reduction in benefit amount if taken at age 62... That's a big hit over-time with a breakeven only around age 80 or so. I plan on living much longer than just 80!
Last edited by highcotton; 02-16-2010 at 08:13 PM..
You said, "The second thing is that the early Social Security benefit amount will be permanently fixed for life with no increases for future inflation"
I have no idea where this is coming from. To the best of my knowledge, ALL Social Security benefits are adjusted for inflation. I checked the regs (in case I'm losing my mind, heheh) and it simply states that benefits are permanently reduced (as in a percentage of what you would have received if you elected full retirment). It does NOT mean benefits are frozen at a set amount, regardless of inflation. If this is what you thought, well, under those circumstances I'm certain most people would agree that electing early retirement benefits could be financial suicide.
That was a little misleading... However, one of the many considerations Washington is looking at in changing the Social Security plan, other than increasing the full benefit retirement age, is to reduce or even eliminate the COLA for people choosing early SS benefits. No one knows if that will actually happen, but it would be a way for Washington to slow the stampede of early baby-boomer retirees.
Most proposals to change SS would exempt those 55 or older from the changes, under the theory that those within 10 years of retirement don't have enough time to adjust plans.
Some proposed changes to the plan to avert insolvency are:
- removing or raising the cap on annual contributions.
- raising the full retirement age (and even early retirement)
- changing the COLA calculation
- putting some contributions into personal accounts (with variable payouts)
- means testing benefits (reducing payouts if you have other assets/income)
Most proposals to change SS would exempt those 55 or older from the changes, under the theory that those within 10 years of retirement don't have enough time to adjust plans.
Some proposed changes to the plan to avert insolvency are:
- removing or raising the cap on annual contributions.
- raising the full retirement age (and even early retirement)
- changing the COLA calculation
- putting some contributions into personal accounts (with variable payouts)
- means testing benefits (reducing payouts if you have other assets/income)
The bolded one gets my vote.
Raise it to a million. There would be no tears from me. Let some of those bailed-out bankers and stockbrokers and their employers kick in some more.
The cap was $106,800 in 2009 (don't know if it's gone up for this year).
End rant
Question - has the raising of the cap kept up or passed annual inflation?
Last edited by Gandalara; 02-16-2010 at 09:21 PM..
Reason: Hamsters ate my punctuation :-)
That was a little misleading... However, one of the many considerations Washington is looking at in changing the Social Security plan, other than increasing the full benefit retirement age, is to reduce or even eliminate the COLA for people choosing early SS benefits. No one knows if that will actually happen, but it would be a way for Washington to slow the stampede of early baby-boomer retirees.
I woud bet you that it will never happen on the COLA and I see no one proposing that;point out a link to that specifc proposal.The last committee on socail security was headed by senator Breaux(D) and never came out with that. What they did come to a conclusion on was that it would take a redcution in benefits and/or a rise in payroll deduction like the last time they "fixed it". Democrats in congress clearly stated that it was fixed and that their was no problem until 2040 that needed to be addressed at that time. Nothing was done.Name the sentors or congressmen proposing that by name please.
The cap goes up a couple of thousand dollars every year. It seems a simple fix to just raise the cap, by a lot. I know I've hit the cap twice and it seems very arbitrary to suddenly get a much bigger check in December.
Now Medicare, that's the bear. But Soc. Sec. seems simple.
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