Author Topic: Are Americans Retiring too early?  (Read 9802 times)

I'm a red panda

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Are Americans Retiring too early?
« on: March 05, 2015, 10:15:25 AM »
http://www.nbcnews.com/business/retirement/are-you-ready-retire-depends-n317891
According to the article the average retirement age is 62 for women and 64 for men.

Quote
An individual who delays claiming Social Security from age 62 to age 70 receives a monthly benefit that is 76 percent higher,"

Okay, just one more year is one thing- but just 8 more?  You've got to be kidding me.



The comments on their facebook thread are great fun too- most people insist they can never retire, how can anyone save anything? The comments on the article aren't very good though.

RexualChocolate

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Re: Are Americans Retiring too early?
« Reply #1 on: March 05, 2015, 10:30:45 AM »
http://www.nbcnews.com/business/retirement/are-you-ready-retire-depends-n317891
According to the article the average retirement age is 62 for women and 64 for men.

Quote
An individual who delays claiming Social Security from age 62 to age 70 receives a monthly benefit that is 76 percent higher,"

Okay, just one more year is one thing- but just 8 more?  You've got to be kidding me.



The comments on their facebook thread are great fun too- most people insist they can never retire, how can anyone save anything? The comments on the article aren't very good though.

It's worse than that.

So you forgo the benefit for 8 years to receive 76% higher payouts. With discount factor of 0, thats over 9 years to break even at 79.

Delaying not exactly the cut and dry 'obvious choice' people make it out to be.

pdxbator

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Re: Are Americans Retiring too early?
« Reply #2 on: March 05, 2015, 10:48:18 AM »
Working in health care I see many patients of all age ranges. Though we are living longer I don't see how there is this expectation that everyone work to 70. Sure it may be possible for white collar people who can sit at a desk and use their brain to make money. However all the rest of the people who are making a living doing work that is tough on the body I just don't see it possible to continue to work to 70.

Numbers Man

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Re: Are Americans Retiring too early?
« Reply #3 on: March 05, 2015, 10:53:07 AM »
Working in health care I see many patients of all age ranges. Though we are living longer I don't see how there is this expectation that everyone work to 70. Sure it may be possible for white collar people who can sit at a desk and use their brain to make money. However all the rest of the people who are making a living doing work that is tough on the body I just don't see it possible to continue to work to 70.

I agree. Guess who makes all the rule changes? White collar workers (Congress, etc) that get free healthcare and sweet pensions while retiring early.

MoneyCat

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Re: Are Americans Retiring too early?
« Reply #4 on: March 05, 2015, 10:57:36 AM »
Working in health care I see many patients of all age ranges. Though we are living longer I don't see how there is this expectation that everyone work to 70. Sure it may be possible for white collar people who can sit at a desk and use their brain to make money. However all the rest of the people who are making a living doing work that is tough on the body I just don't see it possible to continue to work to 70.

Very good point.  The body breaks down with physical work and just because people are getting a few more years at the end of their lives that doesn't mean that their bodies are going to be able to work for a longer period of time.

DrF

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Re: Are Americans Retiring too early?
« Reply #5 on: March 05, 2015, 11:18:27 AM »
I think the idea here is to live off your other retirement accounts until you hit 70, it guarantees you that extra gain in payout.

It's half a dozen of one or 6 of another though, because if you got SS benefits at 62, then you could just let your investments increase over the next 8 years. I guess the idea is that if you leave the SS there it is guaranteed to pay more.

rockstache

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Re: Are Americans Retiring too early?
« Reply #6 on: March 05, 2015, 01:13:11 PM »
I'm incredibly far from having to make this decision, but just out of curiosity, what do most folks here intend to do? If you RE and don't factor SS in as a part of being FIRE, then once you get to that age range, do you take it asap just because you can?

mm1970

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Re: Are Americans Retiring too early?
« Reply #7 on: March 05, 2015, 01:24:26 PM »
http://www.nbcnews.com/business/retirement/are-you-ready-retire-depends-n317891
According to the article the average retirement age is 62 for women and 64 for men.

Quote
An individual who delays claiming Social Security from age 62 to age 70 receives a monthly benefit that is 76 percent higher,"

Okay, just one more year is one thing- but just 8 more?  You've got to be kidding me.



The comments on their facebook thread are great fun too- most people insist they can never retire, how can anyone save anything? The comments on the article aren't very good though.

It's worse than that.

So you forgo the benefit for 8 years to receive 76% higher payouts. With discount factor of 0, thats over 9 years to break even at 79.

Delaying not exactly the cut and dry 'obvious choice' people make it out to be.
Yeah. My mom died at 67. 

GuitarStv

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Re: Are Americans Retiring too early?
« Reply #8 on: March 05, 2015, 01:25:41 PM »
I plan to kill myself at a particular age, so most of these concerns are moot.

Cassie

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Re: Are Americans Retiring too early?
« Reply #9 on: March 05, 2015, 01:58:35 PM »
I watch the Suze Orman show but it drives me crazy when she tells people who have enough $ to work until 70.  She always says they will need more $ in retirement then they are currently spending.  Many of these people are doing well & want to retire between 60-65. Some people die before 70-my MIL did.

Guesl982374

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Re: Are Americans Retiring too early?
« Reply #10 on: March 05, 2015, 02:00:28 PM »
I'm incredibly far from having to make this decision, but just out of curiosity, what do most folks here intend to do? If you RE and don't factor SS in as a part of being FIRE, then once you get to that age range, do you take it asap just because you can?

When I am 61.5 I will do the math (net expected value) of if I take the early payout and invest (since I probably won't need the money) vs. have SS "invest" it for me and give me a high payout at 70. I am 95% sure that I will take it early based on the (very) early math I have done.

RexualChocolate

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Re: Are Americans Retiring too early?
« Reply #11 on: March 05, 2015, 02:04:05 PM »
Yeah. My mom died at 67.

Yep, as well as what Liberty Stache said. Not withstanding the Time value of money is much greater than 0 over 9 years so the actual break even time is more like 12-14 years, meaning 80+. Makes no sense to delay to 70. If you die, your heirs get nothing, spouse gets 50% benefit I believe. No one should be waiting to 70.

You're also susceptible to the risk of them changing the rules on you and/or reducing benefits. For SS, you can make the case for a few year delay, but for people with robust retirement savings it makes the most sense to take them at 62 and reinvest them.

PEIslander

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Re: Are Americans Retiring too early?
« Reply #12 on: March 05, 2015, 02:25:59 PM »
I think the idea here is to live off your other retirement accounts until you hit 70, it guarantees you that extra gain in payout.

It's half a dozen of one or 6 of another though, because if you got SS benefits at 62, then you could just let your investments increase over the next 8 years. I guess the idea is that if you leave the SS there it is guaranteed to pay more.

This is the first time I've heard that argument. I like it. It does seem to make sense that it doesn't really matter if you take it early or wait for a bigger payout later. For many getting it early might make sense because the potential investment returns on your retirement accounts might be better than the effective return on delaying the SS.

Unique User

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Re: Are Americans Retiring too early?
« Reply #13 on: March 05, 2015, 03:03:52 PM »
I'm incredibly far from having to make this decision, but just out of curiosity, what do most folks here intend to do? If you RE and don't factor SS in as a part of being FIRE, then once you get to that age range, do you take it asap just because you can?

When I am 61.5 I will do the math (net expected value) of if I take the early payout and invest (since I probably won't need the money) vs. have SS "invest" it for me and give me a high payout at 70. I am 95% sure that I will take it early based on the (very) early math I have done. 


My spouse is 52 and that is our plan.  The other thing to think about is if you plan to earn over $15k, SS will deduct $1 from your benefits for each $2 you earn above $15,720.  It'll all depend upon whether he is still thinking he wants to do some contract work or not. 

Cassie

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Re: Are Americans Retiring too early?
« Reply #14 on: March 05, 2015, 03:10:46 PM »
Once you reach your full retirement age then you can collect while working without them taking any $. For me that is age 66. It is different for everyone depending on what year you were born.

The_Dude

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Re: Are Americans Retiring too early?
« Reply #15 on: March 05, 2015, 05:53:49 PM »
http://www.nbcnews.com/business/retirement/are-you-ready-retire-depends-n317891
According to the article the average retirement age is 62 for women and 64 for men.

Quote
An individual who delays claiming Social Security from age 62 to age 70 receives a monthly benefit that is 76 percent higher,"

Okay, just one more year is one thing- but just 8 more?  You've got to be kidding me.



The comments on their facebook thread are great fun too- most people insist they can never retire, how can anyone save anything? The comments on the article aren't very good though.

It's worse than that.

So you forgo the benefit for 8 years to receive 76% higher payouts. With discount factor of 0, thats over 9 years to break even at 79.

Delaying not exactly the cut and dry 'obvious choice' people make it out to be.

The total amount of SS payments made to someone who claims at 62 years old versus waiting until 70 is statistically the same.  Which is why you came up with age 79 to break even.  That is close to the average life expectancy. 

However, when you consider it on an individual level, big surprise, it depends on a lot of factors.  As someone else mentioned if you defer SS then you just take more out of your portfolio earlier and less out later.  The biggest argument to deferring SS is to increase the amount of CPI adjusted lifetime payments you can count on, where as your own portfolio is variable and subject to potentially big swings in value.  The closer to the end of your life the more impactful those swings can be.  Hence deferring SS when you can.

If you die prematurely and deferred SS but had adequate retirement assets you are going to have money left over no matter what.  The only ones who lose are your heirs since you will have drawn down more of your portfolio than if you claimed early.

Sid Hoffman

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Re: Are Americans Retiring too early?
« Reply #16 on: March 05, 2015, 08:49:45 PM »
So you forgo the benefit for 8 years to receive 76% higher payouts. With discount factor of 0, thats over 9 years to break even at 79.

Delaying not exactly the cut and dry 'obvious choice' people make it out to be.

I agree it's ideal if people can retire before that, but for those who never earn high wages and either made poor investment choices throughout life or no investments, Social Security is all there is to fall back on.  Statistically, although the average age of death overall is 77-78, for people who do reach age 65, the average age of death is around 84.  So on average, people who do make it to age 65 are likely to be able to make it about 5 years beyond age 79.  To get from age 70 to 84 is 14 years of retirement, which probably sounds pretty relaxing to somebody who was working poor from, say, age 16 to 70.

RexualChocolate

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Re: Are Americans Retiring too early?
« Reply #17 on: March 06, 2015, 07:48:24 AM »
Both of your points have some merit, but I still don't see any dispute of the breakeven math.

From a purely financial standpoint, it's never optimal to delay SS to 70. The 9 year breakeven assumes a TVM of 0. Even at just inflation, the breakeven starts stretching to 12 years. If you factor in what you should expect your fungible money not taken out of retirement accounts due to SS payments to return, you're talking 16+ years.

It never makes sense to delay.

RexualChocolate

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Re: Are Americans Retiring too early?
« Reply #18 on: March 06, 2015, 07:50:59 AM »
As usual, never is too strong of a word.

Given normal life expectancy, for most people, it doesn't make sense to delay.

If everyone in your family lives past 86, absolutely delay all the way to 70. You'd make out like a bandit if you lived to 100.

Mississippi Mudstache

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Re: Are Americans Retiring too early?
« Reply #19 on: March 06, 2015, 07:55:21 AM »
If SS still exists in its present format by the time I'm 62, I'm taking the money ASAP. I have progenitors who have lived to be 98, and others who died at 49. No way in hell I would put off the payout for 8 years, hoping that I'll make it another 15-20 years to realize the benefits.

Rural

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Re: Are Americans Retiring too early?
« Reply #20 on: March 06, 2015, 08:52:26 AM »
Assuming I don't develop any alarming health problems, I'll probably postpone to get the full benefit. A few women in my family have died at 90 in the last two centuries, but they were the young ones. There are no guarantees, but if I lose that bet, I won't care.

Sid Hoffman

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Re: Are Americans Retiring too early?
« Reply #21 on: March 06, 2015, 10:31:40 AM »
Both of your points have some merit, but I still don't see any dispute of the breakeven math.

From a purely financial standpoint, it's never optimal to delay SS to 70. The 9 year breakeven assumes a TVM of 0. Even at just inflation, the breakeven starts stretching to 12 years. If you factor in what you should expect your fungible money not taken out of retirement accounts due to SS payments to return, you're talking 16+ years.

It never makes sense to delay.

For the record, I plan to take SS at age 62, based on current rules.  However, my reasoning is that taxes play a bigger role.  Let's just look at age 62-70.  I'm going to end up going into age 62 with far, far more money in my traditional IRA than my Roth IRA because I won't be retiring until something like age 50 and the overwhelming majority of my retirement funds are in my current 401k as well as a rollover traditional IRA from a previous 401k plan.  My understanding of the tax code is that you can generally take Social Security tax-free as long as your income is below a certain threshold.

If I wait until age 70, then my SS income is way higher and with RMDs it is going to cost me way more in taxes.  However at age 62, I'm getting a lower SS payment, making it easier to take SS as well as have plenty of room to convert traditional to Roth while that SS income remains entirely tax-free.  Again, that's assuming no changes to current tax code, which are certainly possible.  Still, the current tax code basically seems to encourage people with large 401k/T-IRAs to take SS earlier, and keep converting as much T-IRA to Roth as practical in those years from 62-70 before you have to start taking RMDs from the T-IRA.

The point I was trying to make was that if somebody who's been working poor all their lives is still healthy enough to keep working beyond age 65 anyway, they are probably healthy enough to go several more years, and maybe all the way to 70.  This working poor worker likely has no other retirement savings, so they don't have to worry about tax implications or RMDs or any of that.  If they're healthy enough to work right up to 70, they are probably one of those people who may live to 95, and that higher SS payment would help out for sure.  It's going to be different choices for different workers and their unique situations.

MrsPete

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Re: Are Americans Retiring too early?
« Reply #22 on: March 07, 2015, 07:49:42 PM »
If SS still exists in its present format by the time I'm 62, I'm taking the money ASAP.
A few women in my family have died at 90 in the last two centuries, but they were the young ones.
These two thoughts wrap up my thoughts: 

On the one hand, it seems smart to begin collecting ASAP.  If they change the rules, people who are already in the system would be better off than those who weren't yet collecting. 

Yet I also come from a long-lived family, and I could easily live to be 100.  So chances are good that I'd be better of waiting to begin collecting. 

These two thoughts are in conflict with one another.

clarkfan1979

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Re: Are Americans Retiring too early?
« Reply #23 on: March 08, 2015, 01:16:50 PM »
Could we argue that most people on this forum has a college degree, above median income and will most likely out-live the typical life expectancy? I would like the idea of delaying SS to 70 to bet on myself. If I took it early, I would feel like I am betting against myself.

capital

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Re: Are Americans Retiring too early?
« Reply #24 on: March 08, 2015, 11:05:34 PM »
The real benefit in delaying claiming Social Security is gaining longevity insurance. Social Security is essentially an annuity backed by the US Government, and one of the most secure investments available. The real tradeoff is between living on your investments until 70 and then a higher guaranteed higher payout for the rest of your life, however long it may be (and statistically probably pretty long if you bike everywhere and mostly eat healthy home-cooked meals and avoid stress related to work and money for the vast majority of your life), or claiming SS earlier and getting a larger proportion of your income from more-volatile investments.

Obviously, we're all planning on having portfolios we can draw on forever, but still at only a 95% or 99% or 99.9% chance based on past sequences of returns.

Purple Economist

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Re: Are Americans Retiring too early?
« Reply #25 on: March 09, 2015, 10:25:53 PM »


My spouse is 52 and that is our plan.  The other thing to think about is if you plan to earn over $15k, SS will deduct $1 from your benefits for each $2 you earn above $15,720.  It'll all depend upon whether he is still thinking he wants to do some contract work or not.

If you take Social Security before full retirement age and have your monthly benefits reduced because you earn over $15,720, then your benefits will increase the next year.  You don't actually "lose" the benefit, it just gets treated as if you waited to claim.

forummm

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Re: Are Americans Retiring too early?
« Reply #26 on: March 10, 2015, 08:06:21 AM »
I will most likely have many millions of dollars by the time I get to eligibility for withdrawal because the <4% withdrawal rate tends to end up being a dramatic underspending the vast majority of the time and I have about 30 years to go. So for me it likely won't matter much. But if I don't take it right away, I could always file if the market should crash to avoid selling cheap stocks. My goal is to leave money to charity. At the <4% SWR, I'm not planning on needing the SS$.

But if I do need the money, I'll do what I always do--make some spreadsheets and figure it out from there. One of us is a bit younger than the other, so it could make sense to file and suspend and let the other take a spousal benefit. We'll see what the rules are in 30ish years.