You don’t have to earn 8% to justify taking SS early. Your benefit increases 8% annually (between age 62 and age 70), but that’s not the same as earning 8% on money received. I have played with the numbers, and if you can earn 5% on your money, you end up with more money if you start your benefits early - but I did a simple calculation that did not consider taxes.
At age 63/64 our current plan is for wife to start at age 66, then when I turn 66 a few months later I file a restricted application and collect a spouse benefit on her SS. Then, when I reach age 70 I file for my own maximized benefit. My father died at age 49, but I plan to live to 120. Once you reach age 62 it is tempting to file even if you don’t need the money. Sometimes I find myself calculating the checks we have foregone already.
Our state does not tax SS. Our financial planner says it makes sense for us to take SS early because it means we will withdraw that much less from our retirement portfolio annually which will continue to grow. We plan to take SS when we each turn 63 (we’re 59/60 right now).
I’m 63 and still working, so I’d just forfeit whatever I could take because my earnings are too high. Here’s an article from Forbes with the quick & easy answer:
So absent a change in circumstances I’ll probably wait until full retirement age (66) or maybe even until age 70. My mom died young but other women in my family have lived until their early 90’s – and I have no chronic health problems. My work situation is that I work from home, set my own hours, and 90% of what I do involves writing or doing stuff related to the internet… and when I am not working, I get bored to distraction. I enjoy what I do and can’t really envision myself as being “retired.”
It had originally been my plan to claim on my ex-husband’s SS# when I reached age 66, and wait until age 70 to collect my own – but my ability to double-dip that way was shut down last year – so really, between age 66-70 is something I will decide based on factors at the time. If my health is good and I’m still working, I think I’m better off to maximize my benefit-- but I’d probably want to take SS# before drawing down retirement funds.
You should check but I think they did away with that spousal filing benefit thing (file and suspend?) and that the last set of people who could take it were born in mid 1951. I had planned to do that as well, but I think that avenue is gone now. If you were thinking of something else, please let me know. As of now, my plan is to wait until at least full retirement age of 66 and 10 months and then reconsider if I want it then or if I want to wait.
I’m 99% sure that that the birth year cut off for file-and-suspend was 1953. (I was born in 1954) (The 1% of uncertainty is whether there were any unusual circumstances that added some sort of wrinkle).
We are currently doing ok living on H’s pension and RMD from his work retirement account. I will defer as long as possible, as the pension goes down to 55% benefit if H dies before I do and the SS will be handy to pay my Medicare B premiums and help with the shortfall (I’m much younger than H). I believe if I die first, his benefit may increase.
My personal wages are low but taxes would take a bite out of whatever we get. Hmmmm, I’m too young now anyway and gave no idea what SS will be like in a few years when I’m nearer any age to collect.
I think I’ve read that, actuarily speaking, it is supposed to come out the same. If only you knew when you would die, it would make the decision so much easier, lol.
There’s also the thought that you are spending down SS before you touch your own assets, which can continue to grow. I don’t know what we will do yet - husband is only 60 and I will file based on his benefits when my time comes. But we are paying attention to the thoughts out there.
Question–I know there’s an income threshold over which your SS is taxed. Does that include spouse’s income too? So if i retire at 62, and keep my income below 15k, but H is still earning till 65 on account of getting us both to Medicare (he’s a year younger than me), would my SS be taxed at his income’s rate? Anyone know this?
Edit: And they have it set up so that you are taxed as a household, so there is no way to avoid being considered that way (even by filing separately). Except to divorce.
Currently, only 85% of benefits is subject to taxation at the upper bound. You still get 15% of your benefit untaxed, no matter what your income. My understanding is that the idea behind this is that, on average, that represents the return of the $ that you contributed, and therefor ought not to be taxed.
I wouldn’t necessarily take the advice of a person handling a portfolio saying to take Social Security early so as not to draw down on your assets. I think they are rewarded by their companies for how much in assets they are managing so they have a personal financial incentive to have you not draw down on the accounts they manage.
I like the concept of not drawing until 70 as insurance against catastrophe. So if the market crashes, assuming the government doesn’t change the benefits, I’ll have SS as back up.
And given that I have no chronic conditions and long lived genetics, I may live into my 90’s like my mom and dad.
Also, pensions and other things (like retirement accounts) don’t count–only YOUR current. I looked it up. Of course, things are subject to change and are being examined as we type.
OTOH, my actuarials aren’t great, so I am inclined to take SS at 62. DH disagrees. Am somewhat inclined to throw it at a non-deductible IRA. At least I’d be tax-deferred on the gains. No 401(k) at my employer, do not qualify for Roth. Not wealthy enough not to worry about having enough.
So rental income and income from drawing out IRA does not reduce SS benefits. However, it could put a person in a higher income bracket so that SS benefits would be subject to taxes. Do I have that right?
Igloo I agree because for sure you are alive today…tomorrow is unknown…I take a conservative approach in life. I may come out behind but I know where I stand.
This thread is becoming confusing because it’s mixing two different things without being specific.
If you draw social security benefits before your full retirement age (FRA), [which is for most people on this board age 66] and if you are working still, then your benefit is reduced until the time that you reach FRA. After that, your benefit is adjusted to the full amount that you would have been entitled to based on your start date for collecting, PLUS an additional amount to pay you back for the amount that they held back from you while you were working and collecting. So the amount that your benefits are reduced because you are working is a temporary hold back which you get back later on after you are old enough (FRA), or earlier if you stop working .
Social security benefits can be taxed if you earn above certain thresholds. EIther zero, 50%, or 85% of your benefit gets taxed at your normal rate, depending on your family income.
These two factors operate independently, and both can be happening at the same time. If you take benefits at age 62, and continue working, and have a modestly high income, you’ll experience the temporary benefit reduction described in 1, AND you’ll be taxed on 85% of the benefits that you do receive.
After age 66 (FRA) you can work and item 1 doesn’t apply to you no matter how much you earn. But #2, the taxability of up to 85% of what you’re getting continues to apply. It all depends on your income each year, calculated as a family/household.