What age to take Social Secuirty?

[CowboyAndIndian]

] God it's depressing to think about getting old.  Aging sucks.

If you think about it, it beats the alternative.

So true ....

[Shane]

Assuming you don't need the money, another good reason to not take SS benefits early is because they are indexed to inflation. If early 1970s style hyper inflation were ever to rear its ugly head again in the US, and, say, prices of things you needed to buy like food, fuel, medicine, etc, started going up by 10 or 20%/year, your SS benefits would also go up by an equal amount. Based on history, though, your investments would be more likely to tank at the very time you needed extra money. Most failures of the 4% rule happened, not as a result of stock market volatility, as many people assume, but because of a combination of weak stock market returns and high inflation during the period between the mid 1960s and the mid 1970s.

 I think you addressed the question I had while reading this thread.
Say my SS statement says I will  collect $1,600 at 66yrs old and $2,200 at 70yrs old.
Can I assume if inflation is 3% a year from 66 yrs old to 70 yrs , does my $2,200 increase
with inflation to $2,900, even though I'm not collecting.
ie. Will the number on my SS statement at 70 yrs old increase each year with inflation?

@BTDretire , Yes, you are correct. The projected benefits shown on your SS statements are in current dollars. Each year the SS Administration increases everyone's benefits by the inflation rate determined by the Consumer Price Index, so the amount you are projected to receive will continue increasing each year, assuming there was inflation. After you start collecting benefits, they will continue to increase every year based on the CPI's estimate of inflation.

[BTDretire]

Assuming you don't need the money, another good reason to not take SS benefits early is because they are indexed to inflation. If early 1970s style hyper inflation were ever to rear its ugly head again in the US, and, say, prices of things you needed to buy like food, fuel, medicine, etc, started going up by 10 or 20%/year, your SS benefits would also go up by an equal amount. Based on history, though, your investments would be more likely to tank at the very time you needed extra money. Most failures of the 4% rule happened, not as a result of stock market volatility, as many people assume, but because of a combination of weak stock market returns and high inflation during the period between the mid 1960s and the mid 1970s.

 
 I think you addressed the question I had while reading this thread.
Say my SS statement says I will  collect $1,600 at 66yrs old and $2,200 at 70yrs old.
Can I assume if inflation is 3% a year from 66 yrs old to 70 yrs , does my $2,200 increase
with inflation to $2,900, even though I'm not collecting.
ie. Will the number on my SS statement at 70 yrs old increase each year with inflation?

I found the answer to my own question, and now I think duh! of course.

"If you do receive a statement next month, it is important to know how to interpret the benefit projections. They are likely somewhat smaller than the dollar amount you will receive when you actually claim benefits, because they are expressed in today’s dollars - before adjustment for inflation."

 “Take someone who is 54 years old today - and her statement says she can expect a $1,500 monthly benefit 13 years from now when she is at her full retirement age of 67,” says William Reichenstein, Meyer’s partner and a professor of investment management at Baylor University.“If inflation runs 2 percent every year between now and then, that’s a cumulative inflation of 30 percent, so her benefit will be $1,950 - but prices will be 30 percent higher, too. "

https://www.reuters.com/article/us-column-miller/how-to-interpret-your-social-security-benefit-statement-idUSKBN0GL14N20140821

[seattlecyclone]

I'm on team "take it as late as you can afford to." Since the monthly amount goes up each year until you turn 70, this seems like great insurance against outliving your savings. I don't think maximizing the expected value is really the right strategy here. Instead you want to minimize the chance that you have to make drastic spending cuts later on in retirement. The two concepts are related, but not entirely equivalent.

[DreamFIRE]

The only good reason I have heard to not take SS early is to provide a larger check for your spouse if you should die.

There are some other reasons which I think are even better in this thread.   I don't have a spouse, so I'm not worried about that

Assuming you don't need the money, another good reason to not take SS benefits early is because they are indexed to inflation.

Just wanted to note that the benefit is indexed to inflation whether or not you take benefits early.  By taking the benefit early, you aren't going to give up inflation based increases each year, but the benefit will be smaller, so I still think it's better to delay if possible,  and to 65 at the least if MAGI would be affected enough to cause a significant increase in out of pocket expenses related to ACA and healthcare prior to reaching Medicare age.

[Bateaux]

I plan to take it somewhere between 62 and 65.  I'll see what my health is at the time.

[Roadrunner53]

In 2034 the Social Security reserves are expected to be exhausted. With no reserves available, the only money available to pay benefits is what comes in from current worker and employer contributions into the program. Sadly, that won’t be enough; starting in 2034 there will only be enough coming in to pay 77% of scheduled benefits. 16 years from now.

I took mine at age 62. Breakeven point is around 82 years old. However, if they don't fix SS by then they will cut the check by 23%. What is wrong with our congress people. They don't want to DEAL with it so they put their heads in the sand as the clock is ticking closer to 2034.

[Sojourner]

In the end, my mom's survivor benefits are based on his FRA amount, not when he started taking, so it didn't really matter in the long run (other than extra cash up front).  I didn't previously realize that about survivor benefits.

I had never heard this before. Does anyone know if this is documented somewhere on the SSA website or somewhere else?

This is not documented because it is not correct.  The mom's survivor benefit in this scenario would not be based on the husband's benefit amount at FRA because he opted to receive his benefit before FRA.

Maybe I should have stated PIA instead of FRA.  82.5% of his PIA was greater than what he was receiving by taking at 62, so what he took early didn't really matter.  Maybe I'm wrong.  Shitty thing to argue about either way.

https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p89.html

Under the amendments of 1972, the widow's benefit is limited to the greater of the amount the deceased worker would be receiving if alive or 82.5 percent of the PIA.

Not being "shitty" or arguing...just answering the question posted by 'rab' regarding documentation.

The PIA amount is equivalent to the FRA amount, so the change in terms would not have made a difference.

Documentation how the SSA would calculate such cases (example at bottom of page helps):
https://secure.ssa.gov/poms.nsf/lnx/0300615320

A delayed filing by NH would eventually result in surviving spouse receiving greater than 82.5% of PIA, so the statement that the survivor benefit did not depend on when NH started taking the benefit is not accurate.  That's all I was pointing out.

WIB = Widow's/Widower's Insurance Benefit
RIB  = Retirement
LIM  = Limitation
DNH = Deceased Number Holder (Number Holder is the wage earner)

[TomTX]

In 2034 the Social Security reserves are expected to be exhausted. With no reserves available, the only money available to pay benefits is what comes in from current worker and employer contributions into the program. Sadly, that won’t be enough; starting in 2034 there will only be enough coming in to pay 77% of scheduled benefits. 16 years from now.

I took mine at age 62. Breakeven point is around 82 years old. However, if they don't fix SS by then they will cut the check by 23%. What is wrong with our congress people. They don't want to DEAL with it so they put their heads in the sand as the clock is ticking closer to 2034.

Removing the income cap on contributions solves the problem.

[seattlecyclone]

In 2034 the Social Security reserves are expected to be exhausted. With no reserves available, the only money available to pay benefits is what comes in from current worker and employer contributions into the program. Sadly, that won’t be enough; starting in 2034 there will only be enough coming in to pay 77% of scheduled benefits. 16 years from now.

I took mine at age 62. Breakeven point is around 82 years old. However, if they don't fix SS by then they will cut the check by 23%. What is wrong with our congress people. They don't want to DEAL with it so they put their heads in the sand as the clock is ticking closer to 2034.

I find the notion that Congress will simply allow the 2034 date to pass without any changes to be rather far-fetched. In 2033 the Treasury will somehow find a way to pay full benefits, so it should be almost as easy to do in 2034. Meanwhile the odds that senior citizens will sit back and allow their representatives to stay in office while allowing an immediate 23% cut in benefits to happen is roughly nil.

I have no idea what solutions they will come up with. Maybe they'll get rid of the cap on payroll taxes for high earners. Maybe they'll institute a means test for some portion of the benefits. Maybe they'll dispense entirely with this fiction that Social Security is a standalone program that has nothing to do with the rest of government spending from a fiscal perspective. I don't know. But I'd peg the odds of 16 more years of inaction at roughly nil.

[Shane]

Assuming you don't need the money, another good reason to not take SS benefits early is because they are indexed to inflation.

Just wanted to note that the benefit is indexed to inflation whether or not you take benefits early.  By taking the benefit early, you aren't going to give up inflation based increases each year, but the benefit will be smaller, so I still think it's better to delay if possible,  and to 65 at the least if MAGI would be affected enough to cause a significant increase in out of pocket expenses related to ACA and healthcare prior to reaching Medicare age.

@DreamFIRE You're right. SS Benefits are indexed to inflation regardless of when one starts taking them. What I should've said was, I think it's better to delay taking SS benefits as long as possible, even if that means spending down investments in stocks and bonds a little more than a retiree would normally be comfortable with. Because SS benefits are indexed to inflation and because they are uncorrelated to the stock and bond markets, a larger SS benefit is worth more, to me, than an equivalent amount of income from investments in my stash. SS just seems like a good insurance policy, and the idea that Congress might someday cut the benefits of people who are already of retirement age seems really unlikely.

[Roadrunner53]

Why does Congress always wait till the 12th hour to do anything? The budget is always done at the last minute and typically they have to extend out the time line. The Dreamers decision timeline came and went and is sitting in limbo. This Social Security money issue has been known for years and yet they put their hands over their ears and don't want to hear it or fix it. Paul Ryan would like to see it do a death spiral along with Medicare and Medicaid. Seems they have all run out of ideas on everything. So now the answer is just do away with it all.

[robartsd]

I have no idea what solutions they will come up with. Maybe they'll get rid of the cap on payroll taxes for high earners. Maybe they'll institute a means test for some portion of the benefits. Maybe they'll dispense entirely with this fiction that Social Security is a standalone program that has nothing to do with the rest of government spending from a fiscal perspective. I don't know. But I'd peg the odds of 16 more years of inaction at roughly nil.

There have been plenty of proposed changes to the system (usually proposing that the changes only affect those under age 55); but the options for how to fix it narrow the closer we get to the fund running out. I think the most likely fix will significantly change the income cap. Increasing (or removing) the income cap is probably not very favorable with most political donors and fixing Social Security is not at the forefront of most voter's minds. I think the odds of 10 more years of inaction are fairly high - most likely the fix won't come until the fund is projected to be depleted within an election cycle or two.

[rosarugosa]

Why does Congress always wait till the 12th hour to do anything? The budget is always done at the last minute and typically they have to extend out the time line. The Dreamers decision timeline came and went and is sitting in limbo. This Social Security money issue has been known for years and yet they put their hands over their ears and don't want to hear it or fix it. Paul Ryan would like to see it do a death spiral along with Medicare and Medicaid. Seems they have all run out of ideas on everything. So now the answer is just do away with it all.

If they worked for us, we would fire them (the bad kind).  Oh wait . . .

[DreamFIRE]

I didn't see anyone mention it, but taxes can can figure into this in ways that you might not be aware of.

A higher SS benefit can increase your marginal tax rate, and the formula for determining how much of your SS benefits are taxed is NOT indexed to inflation, so that threshold has not increased since it was first introduced in 1983.  For a single person, if your income combined with half your SS benefits exceeds $25,000, you have to pay income tax on up to 50% of your SS benefits.  If it exceeds $34,000, you have to pay income tax on up to 85% of your SS benefits.  Since your retirement distributions and SS benefits will be adjusted with inflation, but NOT the $25,000/$34,000 thresholds, a greater percentage of your SS benefits will become taxable as years pass (for married filing jointly, the thresholds are $32,000/$44,000.)  It's a built-in tax increase.  The greater your combined income and SS/2, the more you will be affected by this up to a max of 85% of your benefits being taxed.

https://www.fool.com/retirement/general/2016/05/08/this-33-year-old-social-security-rule-is-wreaking.aspx
http://www.foxnews.com/story/2007/03/25/double-whammy-taxation-social-security-benefits.html
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html

There can be a significant increase in the marginal tax rate as SS benefit taxes are phased in at the thresholds stated:

https://www.kitces.com/blog/the-taxation-of-social-security-benefits-as-a-marginal-tax-rate-increase/
https://www.bogleheads.org/wiki/Taxation_of_Social_Security_benefits

CNBC actually mentioned this in a new column - and surprisingly, they didn't just mention the percentage of SS that may be taxable but also that the income thresholds that determine those taxes have not been increased for inflation since being implemented in 1983:

https://www.cnbc.com/2018/08/03/you-may-be-overlooking-this-reason-to-delay-social-security-benefits.html

[wenchsenior]

I'm a long way off from retiring so I haven't looked into SS much (for myself at least, have researched for my mom), but when I run Cfirism, the success % is better for the age 62 SS scenario than 67 or 70.

One potential answer is: Delay taking SS until the market tanks, use the SS to minimize how much of your stash you draw in a down market.

That is a really good idea. 

Apart from that scenario, I'm thinking we will delay as long as is feasible b/c I'm going to try to convert a bunch of our 401K/IRA money to Roth IRA money, and we already will have a pension increasing our income, which leaves us less 'room' in our tax bracket to convert.  Nice problem to have, I know.

[TomTX]

I'm a long way off from retiring so I haven't looked into SS much (for myself at least, have researched for my mom), but when I run Cfirism, the success % is better for the age 62 SS scenario than 67 or 70.

One potential answer is: Delay taking SS until the market tanks, use the SS to minimize how much of your stash you draw in a down market.

That is a really good idea. 

Apart from that scenario, I'm thinking we will delay as long as is feasible b/c I'm going to try to convert a bunch of our 401K/IRA money to Roth IRA money, and we already will have a pension increasing our income, which leaves us less 'room' in our tax bracket to convert.  Nice problem to have, I know.

Glad you like it :)

I also hope to be in the same scenario with Roth conversions and a pension.