At 62, I can start drawing Social Security. Or I could wait and draw more. Each year I think adds 8% to the monthly total.
The question is: Do I wait and gamble that I will live long enough to make up for the amount I’m losing by waiting? Should I take the money now, eventhough I don’t need it, and gift it to my kids who really could use it until they start earning more? I could draw it out and save it but it’s not likely I’ll get 8% return. My parents are in their 90’s but that’s no guarantee for me.
Are there other considerations that I haven’t outlined?
Other considerations: whether you’re married, divorced, or widowed (in any of these situations, you’d be eligible for some benefits based on your spouse or former spouse); whether you plan to keep working while receiving SS. I know there are additional factors. I’m sure others will chime in with them.
Here’s a link to a helpful book: https://www.amazon.com/Get-Whats-Yours-Secrets-Security/dp/1511321075
Since my SS benefit is only enough to cover my Medicare bill (I’m a retired teacher in a state where teachers don’t contribute to SS…and there is an offset provision)…I collected at 62. I figured I would enjoy that puddly S,all amount (it was $140 a month when I started collecting) for,the three years…because after that, it,was all going to Medicare anyway.
If you don’t need the money now, then it seriously depends on your life expectancy. If your parents are both alive in their 90s, it bodes well for you. In that case, the general rule of thumb is to postpone taking SS as long as possible. Yes, you get an increase of 8% every year so – when there is a cost of living adjustment later – that paltry amount of, say, 2% will be on the much larger benefit you’d already be receiving.
If you don’t need the money and you have a long life expectancy, then it’s a bad idea for you to take the benefit now.
Also…if you do plan to work between 62 and 65, you can’t earn more than $15,000 for the year without penalty. In 2015, I earned a lot more than that, and had to pay back my entire years benefit…which was $2020. Yep that’s it.
I will be 66 this year, and I think that earnings amount bumps up to $45,000 a year. After 70, there is no penalty.
But if you plan to work, you do have to think of the amount you earn until,age 70.
My full retirement age is 66 so I started collecting at 66. My mother lived to 84 but the last 12 years of her life were lost to dementia. I’m still working part time. My husband is younger so isn’t collecting yet. I don’t gift it to the kids but I do throw money their way occasionally.
I didn’t have a choice when my wife took ill. I drew my soc sec at age 62, and found a part-time job subbing in schools. After my wife passed away, I met with a soc sec rep in Syracuse. Because she was 62 but hadn’t yet started drawing it, I received a slight increase. So now I’m receiving almost the same amount as I would have had I waited. My situation is unique. I enjoy working a few days a week and having the rest of the week off.
My H’s dad died literally 3 weeks before he was eligible to collect SS. H is terrified that will happen to him and wants to start collecting at 62 so he will at least get something. I am the larger earner but I am three years younger so he can’t collect on my record. I would rather he wait because, as long as we are both working, we don’t need the money and would lose a large portion to taxes. The only way I would do it would be if he permitted me to use it to subsidize myself so that I could max out my 401 (k) - that way we would wind up with about the same income level but more put away for retirement. We are discussing this.
Other considerations - I have a pension I could take now but it’s growing at 8% per annum until I reach 65. Like SS, I have no reason to take it now. I will say that my former employer tried really hard to get me to take a lump sum payout a couple of years ago but I would have lost a huge amount to taxes. I will have another pension from my current job that will stop growing at 65.
I used maximizemyss software. The biggest factor was life expectancy. Everything else was noise. Once you pick a date to die, the difference was only one or two thousand dollars. Spread out over 20 years. I decided to go ahead and get SS to be done with the paperwork. I am happy to get it over with. Now I don’t have to think about it and the money will come to my bank account until I die.
I need to figure this out too. My H is retired, I am not, but we are the same age. We have been told to have him file and start receiving at 62 and to have me wait as long as possible and I’m happy working for at least 5 more years or more so could easily barring health issues get me to the latest date…but I need to do the research. For us, if he does take it we would sell one of our rentals that throws off some of “his” spending money which we would dump into our retirement mix. I just did my last FAFSA so now we are ready to start crunching numbers and looking at different scenarios from a cash flow and tax perspective. Ugh. Hate being at this point in life.
I just read a column in today’s paper by Laurence Kotlikoff, who I think is the maximize my SS guy. Very interesting. As I’m only 55, but planning on retiring in the next 2 years, the collecting time frame enters into the money discussion.
I’m 63. I’m going to start taking SS at 66, if I live that long. No way I am going to wait until 70 to get more $. I learned a long time ago that free time is more important than money to me. The only reason I do not collect now is because I have a job that allows me a lot of free time and my H is younger than me.
It all kind of depends on your expected longevity, and your personal economic wherewithal.
If you are worried about eventually running out of money from your savings, (but have enough to support yourself until age 70 without drawing your assets down too far) you should wait and collect the max monthly amount at age 70. Some people regard this choice as “insurance” against outliving your assets, since it maximizes your monthly check (at the expense of not receiving it until you reach 70). The difference between age 66 and age 70 is material.
If you are flush with savings and have no worries about spending all your money in your old age, you could go for an earlier commencement. That lowers every monthly check, but you get several years more checks overall.
Also, if you have some reason to believe you won’t live a very long life, the early collection choice maximizes your lifetime collection. If you expect to live a very long life and can afford to support yourself while you wait to age 70…then you wait.
Yes, @dadx summarized it nicely. It’s interesting when you have a health condition that COULD cause an earlier death but also longevity running in your family. I guess you have to decide which way makes the most sense. To me, I don’t have confidence I could earn anything like 8% returns on my investments, so am happy for SS to do so.