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OP, I think you are asking the right questions in your search for the "correct" option for you. Your numbers are in the ballpark of what SS administration gave me for retirement income at various decision points. The challenge with retirement decisions is that they are so dependent on individual needs and preferences. After reading through the responses in the thread, let me throw out some considerations.
When I had the SS administration figure my benefits with the assumption I would retire at 57 instead of working to the different retirement points (62, 65, FRA, 70), the difference went from approximately $1850 to 2385 to 2425 to 2810. It didn't go up at each point as far as I was expecting, and if I use the online calculator (which assumes you continue working and at the same wage rate), the numbers look very different, and skew to waiting to 70 as a good option, and was several hundred per month higher than the actual SS administration projections from a rep at SS. I have 35 years of creditable work, so continuing to work gives me marginal increases in monthly SS benefits - if I had a few years at 0, then it would matter more.
The % ROI by delaying SS is a good rate compared to other market options and risk exposure, but the total monthly benefit may be too little to matter - if it adds $50 per month or less (but it represents a 5% ROI) because of your earning history, does that make a big difference in lifestyle? If it adds $300 per month or more it might (or it might not if you have significant assets and the tax implications that come with it). If you have to forgo 4-5 years of monthly payments to get the additional $300, and financially you can invest those payments, you may find the $300 isn't nearly as significant (or is by far the best option). You need to be aware of both the % ROI, the gross dollar amounts that the % represents, and the tax implications on your SS income, along with the opportunity cost of money paid now vs yield received later to make an informed decision for your particular situation. It is a complex set of factors to consider - and I am sure there are more considerations than what I have outlined here.
SS has weighted the payments to the current mortality tables starting with the assumption you reach the age of 65 ( https://www.ssa.gov/planners/lifeexpectancy.html ), meaning at the statistical age of death (84 for men, 86 for women), no matter when you start drawing SS, you will get the essentially the same total benefit. I come from a family that dies of cancer in their forties or lives to mid nineties - at 58, I am planning on being here for about 8-12 years longer than the 84 expected by the SS administration - so if no other considerations come into play, waiting until 70 to draw, will maximize my benefit. If you come from a family with heart disease and most relatives die at 70, that probably needs to be considered in your planning of how to maximize you SS benefit - and 62 is probably your best option. Of course genetics is not a certainty, but is a reasonable consideration in planning.
Having read this forum for a while now, I know MJ has significant assets in retirement accounts (with spend down requirements), and tax considerations for SS income play into his asset spend down plan and delayed draw. If you have no assets, but are healthy, then the longer you work and the later you draw SS the better from an income stream standpoint. And then you have people like me: My assets are vehicles and equity in my house, but I have a significant monthly pension (with full health insurance benefits for myself and my wife, and the wife gets 55% of my pension if I predecease her) that has allowed me to retire comfortably last year at 57. If I take SS at 62, using the SS payment, I can pay off my mortgage before I hit FRA, so at FRA i avoid a $1500 per month mortgage payment that would carry out to my 86th birthday, so between cost avoidance ($1500/mo. mortgage) and actual SS income ($1854 projected - not including my spouses benefits) my net monthly income works best starting at 62 vs. 65 vs FRA vs 70. When I do MY numbers for MY situation (and SS projections for benefit amounts), I have to live to 94 to offset waiting until 65 or FRA to draw SS, and 91 to offset waiting to draw at 70. and because I basically have no assets, but do have an income stream, my SS tax implications stay constant when ever I start to draw SS.
There are as many reasons draw early as there are to wait to FRA as there are to delay until 70. The key is to research how the options affect YOUR personal situation, and if the income stream affords what your goals are for lifestyle in retirement. So far, I find we spend far less than I expected to in retirement (my budget was high), but I am sure there are folks out there that will spend more, or the same as what they plan.
FYI I have a sister who is retired and living on spousal benefits from an ex (I think it's $1200) and is waiting until 70 to draw her SS benefit to increase her income stream (she's 67 now). She is in subsidized senior housing, and does ok and is very happy - she takes an occasional trip to FL and MT to see siblings (2-3 per year). I think she jumps to approximately $2300 when she draws on her own behalf at 70. It works for her.
This from kitces.com:
"The decision of whether to delay Social Security benefits is a trade-off: give up benefits now, in exchange for higher payments in the future. If the higher payments are received for enough years – dubbed the “breakeven period” – the retiree can more than recover the foregone benefits early on, even after adjusting for inflation and the time value of money.
With couples, however, the decision to delay is more complex. Earning delayed retirement credits can not only boost an individual’s own retirement benefit, but increases the potential survivor benefit as well… which means the breakeven can be reached as long as either member of the couple remains alive long enough! Which makes delaying benefits even more appealing, as the odds of at least one member of a couple remaining alive is better than the single life expectancy of either member in particular.
However, delaying retirement to generate a larger survivor benefit is a moot point if the survivor already has a larger benefit of their own.In fact, a higher-earning spouse makes it less valuable to delay at all, as the other person’s survivor benefit may overwrite the delayed benefit altogether, and thus the couple loses if either member of the couple passes away too soon!
Which means ultimately,the ideal strategy for most couples is for the higher-earning spouse to delay as long as possible (which benefits them as long as either remain alive) but to start the lower-earning spouse’s benefits as early as possible, as delaying both is only beneficial in the less likely scenario that both of them remain alive into their 90s and beyond!"
Thoughts?
DC
This from kitces.com:
"The decision of whether to delay Social Security benefits is a trade-off: give up benefits now, in exchange for higher payments in the future. If the higher payments are received for enough years – dubbed the “breakeven period” – the retiree can more than recover the foregone benefits early on, even after adjusting for inflation and the time value of money.
With couples, however, the decision to delay is more complex. Earning delayed retirement credits can not only boost an individual’s own retirement benefit, but increases the potential survivor benefit as well… which means the breakeven can be reached as long as either member of the couple remains alive long enough! Which makes delaying benefits even more appealing, as the odds of at least one member of a couple remaining alive is better than the single life expectancy of either member in particular.
However, delaying retirement to generate a larger survivor benefit is a moot point if the survivor already has a larger benefit of their own.In fact, a higher-earning spouse makes it less valuable to delay at all, as the other person’s survivor benefit may overwrite the delayed benefit altogether, and thus the couple loses if either member of the couple passes away too soon!
Which means ultimately,the ideal strategy for most couples is for the higher-earning spouse to delay as long as possible (which benefits them as long as either remain alive) but to start the lower-earning spouse’s benefits as early as possible, as delaying both is only beneficial in the less likely scenario that both of them remain alive into their 90s and beyond!"
Thoughts?
DC
My thoughts are this. DW and I are what I would consider typical and atypical. Typical in that we are both healthy. My career income exceeded her by about 1/3 for SS computations. We are also atypical in that we have resources that include retirement accounts for her as well as me. Like many here we are looking at our options when it comes to when we take SS. Right now we are planning on both taking SS at FRA. We are 6 months apart in age. We might though wait for 70. It is possible we might take one of our benefits at 62 (DW's) or I might take spousal (if still available at our FRA). For now we are planning a spend down of assets to help us postpone taking and lower RMD's as well as try to keep our SS tax rate lower. We might not be able to.
as i mentioned many times , for many with choices , it isn't about the dollars difference as much as the fact they are largely dependent on markets ,rates and inflation for their income and outcome . .
a 69% larger ss check can diversify away from that if you are so inclined . you can remove some market and inflation risk and diversify it with longevity risk .
as i mentioned many times , for many with choices , it isn't about the dollars difference as much as the fact they are largely dependent on markets ,rates
I'm not sure you hear what many have been saying mathjack. Sure, if you are looking at it as a chart your numbers can easily determine the different payouts over time. They will never be able to tell you how much time you have though.
Moreover, the spreadsheets have no cell for joy. How much is it worth to be able to spend more time with your family? To be able to look at your life and feel you've been a success - you've reached that point in life where you deserve to slow down and appreciate what you've accomplished.
I like what was said about workaholism, I think that's what some take offense to here the insinuation that those who wish to retire are not ambitious enough. Personally I'm continuing to work past FRA but I'm ready to slow down to part time pretty soon and I'm saving every SS dollar so when I do stop working I'll have that 75 or 80,000 cash to fix up my condo on Maui. That right there is worth more to me than knowing at age 88 that I'm now in the black and receiving $200 extra each month.
Mathjack, with your username I suspect that, for you, the joy comes from knowing you have a plan that will maximize your SS dollars. I understand that people are different and that's a good thing. Me, I'm more a romantic
Dave
nope , my actual plan does not maximize dollars although i had one run that does . our actual in use plan is one that optimizes our balance of market dependency with the guaranteed income of social security for as long as my wife or i live .
if we die ,well dead is dead , so our plan is only based on what if we live . we want a certain level of guaranteed income and we want to hold our portfolio to comfortable levels of volatility providing the balance of the level of income we need . the more guaranteed income we have the less volatile our portfolio has to be .
How is it possible that someone could collect "spousal benefits" from a ex spouse? I don't get that one.....
Can someone explain?
My sister was married over ten years (it was more like 24 years), there may be other legal agreements in place in the divorce decree that I am unaware of, but she eligible to collect as a spouse under her ex's SS claim/payout. Once she hit FRA, and her ex was drawing SS, she applied for spousal benefits - this was before rules changes went into effect WRT applying and suspending benefits to maximize SS payment while pulling out spousal benefits, so I don't know how that would impact this situation if you were to start collecting today or in the future. She is currently drawing spouse benefits, but has not applied for SS benefits under her earnings history - she plans to do that at 70, in 3 more years.
as i mentioned many times , for many with choices , it isn't about the dollars difference as much as the fact they are largely dependent on markets ,rates and inflation for their income and outcome . .
a 69% larger ss check can diversify away from that if you are so inclined . you can remove some market and inflation risk and diversify it with longevity risk .
If my comment above misrepresented you or your thoughts, my apologies, that was not the intent. I was just explaining to the OP that there are many variables that have to be considered in order to make the correct or best decision for your own personal situation.
My sister was married over ten years (it was more like 24 years), there may be other legal agreements in place in the divorce decree that I am unaware of, but she eligible to collect as a spouse under her ex's SS claim/payout. Once she hit FRA, and her ex was drawing SS, she applied for spousal benefits - this was before rules changes went into effect WRT applying and suspending benefits to maximize SS payment while pulling out spousal benefits, so I don't know how that would impact this situation if you were to start collecting today or in the future. She is currently drawing spouse benefits, but has not applied for SS benefits under her earnings history - she plans to do that at 70, in 3 more years.
So I take it her ex never married again? (Because it would seem impossible that an ex wife and current wife could both get benefits.......) ?
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