Author Topic: Retire at 62 vs. 67 Social Security Numbers  (Read 8380 times)

Rollin

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Retire at 62 vs. 67 Social Security Numbers
« on: September 30, 2014, 12:59:30 PM »
Please send me to other post(s) that have already answered this question if you know of any.

So, what I understand is that if you are to start claiming SS benefits at 62 (noticed I didn't write "retire" at 62 :)) vs. 67 years old, your monthly check is reduced by 25%.  Many say that's an issue (I just read a Motley Fool article that throws a lot of caution at that, but thankfully also says you might be able to retire even earlier - http://www.fool.com/retirement/general/2014/08/24/retire-at-62-5-simple-reasons-why-you-shouldnt.aspx ).

However, I did a quick calculation, with a 2% COL increase for each year, when you reach the age of 85 things start to equal out.  That doesn't include the fact that you could invest some of the money you receive for the 60 months prior to 67, or use it first and keep your retirement stash working for yoy.  Am I missing something?  Seems like it might be nice to have that extra $$ for four years between 62 and 67, as opposed to getting 25% more from 67 on.  You only benefit after age 85, and by then I may not be here, but if I am I still plan on having other income to hold me over.

Edit:  to change the age from 66 to 67 for my situation.
« Last Edit: September 30, 2014, 01:12:14 PM by Rollin »

dandarc

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Re: Retire at 62 vs. 66 Social Security Numbers
« Reply #1 on: September 30, 2014, 01:11:41 PM »
You must not be applying the 2% on both the 62 and 66 areas - if you haven't caught up by 66, and both sides get a 2% COLA, the monthly payment for 62 is permanently less than the the payment at 66 - things would not even out at 80, from a monthly payment perspective.  Or I'm misunderstanding what you mean by that.

Waiting a year to take SS usually results in something like a 7% increase in payments.  You correctly point out that the payment is not the only issue - if you invest all of it from 62-66, the results look different.  I believe it is designed in such a way that it is supposed to be close to a wash for an average lifespan.  YMMV - live to be 110, and you maybe will be wishing you had waited until you were 70 to start collecting, only make it to 61, and the decision is moot any way.

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #2 on: September 30, 2014, 01:28:32 PM »
Depending on the math used, the break even point tends to be somewhere in the late 70's.  If you have enough money to secure your retirement without SS or with only minimal reliance, feel free to do whatever you think is best, based on your health.  If you do not have enough to secure your retirement, or have only marginal assets, you need to delay as long as possible, not only to increase your monthly benefit, but to also build your 'stache as much as possible. 

Due to the numbers of boomers retiring over the next decade, articles on "gaming" SS have proliferated across the web and finance magazines.  Everyone wants to be told what the "best" SS withdrawal strategy is.  The fact is, the age you decide to draw is a tradeoff, plain and simple.   More money now when you are healthier, or more money later when you are less likely to be able to "enjoy" it, and also more likely to be dead. For folks that are prepared for retirement, I say take it at 62.     

MDM

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #3 on: September 30, 2014, 01:39:18 PM »
Please send me to other post(s) that have already answered this question if you know of any.
The one true answer starts with "It depends...."

See these two threads, plus links therein, for a few drops in the sea of information/opinion on this topic:
http://forum.mrmoneymustache.com/ask-a-mustachian/wealth-building-for-those-over-sixty
http://forum.mrmoneymustache.com/ask-a-mustachian/what-age-do-you-plan-on-taking-your-ssi


hybrid

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #4 on: September 30, 2014, 01:47:37 PM »
I will counter by saying that if you are ready for retirement without taking SS and have a family history of long health, defer until 70. This is the situation the DW will soon be in. When she retires at 62 in two years she will be eligible for SS but we shouldn't need it. Given her family history the DW should live into her 90s, knock on wood.

No one has a crystal ball, so I am on the cautious side that says don't lock in a smaller check if you don't need it and have a good health history, especially in these uncertain times where equities are the only simple investments making real money and are on the verge of becoming bubbly.

We crunched the numbers assuming we would invest every dime of SS and it still made more sense to defer. 

Rollin

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #5 on: September 30, 2014, 01:47:54 PM »
Due to the numbers of boomers retiring over the next decade, articles on "gaming" SS have proliferated across the web and finance magazines.  Everyone wants to be told what the "best" SS withdrawal strategy is.  The fact is, the age you decide to draw is a tradeoff, plain and simple.   More money now when you are healthier, or more money later when you are less likely to be able to "enjoy" it, and also more likely to be dead. For folks that are prepared for retirement, I say take it at 62.     

That's kinda what I was thinking.  Also, since I posted this I found a very good article that helps with the "that depends" statement:

http://www.nysscpa.org/cpajournal/2006/606/essentials/p42.HTM

Professor Ecks

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #6 on: September 30, 2014, 01:49:58 PM »
The "early retirement" age reduction you mention would not be your only concern when deciding to take benefits at 62, especially if you don't actually plan to stop working. There is also an earnings limitation that applies to benefits prior to full retirement age (FRA). For 2014, that limit is $15,480.00. 50% of any earnings in excess of that limit will be withheld from benefits. For example, if you earned $25,480.00 in 2014, you would have $10,000 in excess earnings, so $5,000.00 (50% of the excess) will be withheld from benefits paid in 2014. That coupled with the age reduction can really limit benefits payable. Keep in mind, however, that any month you do not receive a full benefit due to work withholding will be credited once you reach FRA.

However, that only applies to earnings through work or self employment. Income from other sources (retirement accounts, investment returns, pension payments, etc) safe from consideration. So, if you have retired early, the earnings limit may not have an impact on you.

Rollin

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #7 on: September 30, 2014, 01:56:53 PM »
The "early retirement" age reduction you mention would not be your only concern when deciding to take benefits at 62, especially if you don't actually plan to stop working. There is also an earnings limitation that applies to benefits prior to full retirement age (FRA). For 2014, that limit is $15,480.00. 50% of any earnings in excess of that limit will be withheld from benefits. For example, if you earned $25,480.00 in 2014, you would have $10,000 in excess earnings, so $5,000.00 (50% of the excess) will be withheld from benefits paid in 2014. That coupled with the age reduction can really limit benefits payable. Keep in mind, however, that any month you do not receive a full benefit due to work withholding will be credited once you reach FRA.

However, that only applies to earnings through work or self employment. Income from other sources (retirement accounts, investment returns, pension payments, etc) safe from consideration. So, if you have retired early, the earnings limit may not have an impact on you.

Thanks for that clarification (i.e., the income that would and would not apply to that scenario).

mak

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #8 on: September 30, 2014, 02:40:50 PM »
I've heard another strategy which may be considered.  If one has longevity in his family, and plans to wait to get a larger benefit, when filing that benefit in the future the maximum time he is allowed to claim back-benefits is 6 months.  For example at age 65, or 68 he gets ill and decides he made the wrong decision in waiting so goes rushing in and says look I should have filed...they will let him file back 6 months and give a lump sum payment for the benefits missed during those 6 months, calculated at the amount he would have gotten had he filed 6 months before. 

At age 62, he could however go in and "file and suspend" his benefit, establishing the filing date, but turning off all payments and allowing the amounts to continue to grow.  In the future he can go in at any time and say I wish to file now at the current amount going forward.  OR, because he filed & suspended long before, he has an option to say I now want to un-suspend retroactive to the date I filed, which could have been age 62.  This doesn't give him more money but gives an option.  Suppose age 68, happily planning to wait to 70, he becomes terminally ill.  He can go in and say I want to unsuspend retro to age 62.  He (or his heirs if he doesn't live long enough for the payment) would get a retro lump sum all the way back to age 62, based on the lower amount he would have gotten at age 62.

There are all kinds of aggressive claiming strategies, most useful for married couples.  Such as one with a higher benefit and one with a lower benefit deciding that the low benefit one will file, and the high benefit one will file a restricted application (claiming a spousal 50% benefit based on the lower earner's work record), while leaving the high benefit unclaimed to continue to grow.  At age 70, the high benefit one goes in and switches his benefit on, increasing his check.  The lower earner then has the choice of either keeping the check she has already been receiving or switching to a 50% spousal benefit based on the higher earner's work record, whichever is greater.  Best of all then, when one dies, the survivor's check steps up to the higher of the two benefits which could be the one who waited to age 70 to claim.

Listening to all this stuff has made me realize there is much to be considered, and I plan to study the rules in force at the time when I approach 62 very carefully to see if any of these things apply to me.  Many options are available for those who "do not need the money".  The annuity (increased SS checks) you are purchasing (by foregoing some/all benefits at an earlier age) is supposedly better than any you could buy privately, and comes with a 2% COLA built in courtesy of the government.

hdatontodo

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #9 on: September 30, 2014, 03:00:35 PM »
...
At age 62, he could however go in and "file and suspend" his benefit, establishing the filing date, but turning off all payments and allowing the amounts to continue to grow.
 ...

---
http://www.ssa.gov/retire2/suspend.htm says
If you have reached full retirement age, but are not yet age 70, you can ask us to suspend retirement benefit payments.
---

You can file and collect pre-FRA benefits at 62 and then file and suspend at FRA (66 or 67) and increase until 70.

CPA CB

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #10 on: September 30, 2014, 03:26:19 PM »
Ultimately this decision is based on two predominant factors

1) The discount rate you use (or rate of investment) and,
2) Lifespan

With regards to lifespan, the average person in their 60's lives to between about 80.5 (Men) and 84.5 (Women) as per various mortality statistics. Keeping in mind these are averages across the general population, you would want to adjust these figures up or down based on your circumstances (i.e. family medical history, smoking, etc.)

By accepting Social Security five years early, you secure about 3 years of total retirement pension (after adjusting for the 25% discount and the discount rate above). This means that it will take over 12 years (closer to 14 to 15) before accepting at 67 'breaks even' with 62. In other words, you'll be in or near your 80's by the time this happens.

The short answer is - by taking early it protects you from 'losing' up to about age 81 or 82. If you live beyond this (easily possible based on today's statistics) you end up losing in the long run (when you very well may need the money most).

Good luck in the decision!


giggles

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #11 on: September 30, 2014, 06:55:13 PM »
The six month retro is only effective after FRA, And cannot be retroactive to a time before FRA.  Example:  you file at age 66 and two month, you only get two months retro, not 6.

aj_yooper

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #12 on: September 30, 2014, 07:45:11 PM »
I like this quote from the article:

"Note that the average life expectancy for men who reach 62 years of age is around 80, while for women it is around 83 Qs . In this example, therefore, a strict adherent to statistical probabilities might advise a man to collect early Social Security benefits, and a woman to wait until age 70 to begin collecting benefits. It is more likely, however, that many individuals will optimistically estimate their own life expectancy as somewhat greater than the statistical averages."


Rollin

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #13 on: October 01, 2014, 09:06:39 AM »
By accepting Social Security five years early, you secure about 3 years of total retirement pension (after adjusting for the 25% discount and the discount rate above). This means that it will take over 12 years (closer to 14 to 15) before accepting at 67 'breaks even' with 62. In other words, you'll be in or near your 80's by the time this happens.

Without factoring in investments, other earned income, etc. this is what I came up with.

To the others responding thank you - great information to consider.  I'll be considering a SS class offered by my accountant in the near future.

I may just go for the 62 years old collection option because it'll be nice to have that money available now, as opposed to later.  I have a long life expectancy based on my family history and my great health now, but I also ride bicycles, motorcycles, dive/snorkel (shark infested waters!), spend a lot of time as a pedestrian, and do a lot of boating and hiking in remote locations - so I might just "kick-it", as my Mom says, at any time.  OTOH, these are the things that help me live longer!

TreeTired

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #14 on: October 01, 2014, 09:24:31 AM »
The "breakeven" analysis between starting SS at 62 and waiting until age 66  works out to be somewhere around age 80. (I have done this but can't remember the exact breakeven age).    Personally,  my biggest fear (risk) is running out of money at a very old age, so my plan is to wait until age 70 to collect SS which will maximize my cost of living forever annuity.

The tricky part of this analysis (as the op has actually noticed: 
Quote
That doesn't include the fact that you could invest some of the money you receive for the 60 months prior to 67
)  when you assume an interest rate and some kind of investment return on the amounts received by filing at age 62,  the breakeven age gets pushed farther and farther to the point where if you could earn 6% on funds received by starting benefits at age 62 you would never catch up if you waited until age 66.   

I still plan to wait until age 70,  but the decision is not a simple or obvious one.

CPA CB

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #15 on: October 01, 2014, 09:36:23 AM »
The "breakeven" analysis between starting SS at 62 and waiting until age 66  works out to be somewhere around age 80. (I have done this but can't remember the exact breakeven age).    Personally,  my biggest fear (risk) is running out of money at a very old age, so my plan is to wait until age 70 to collect SS which will maximize my cost of living forever annuity.

The tricky part of this analysis (as the op has actually noticed: 
Quote
That doesn't include the fact that you could invest some of the money you receive for the 60 months prior to 67
)  when you assume an interest rate and some kind of investment return on the amounts received by filing at age 62,  the breakeven age gets pushed farther and farther to the point where if you could earn 6% on funds received by starting benefits at age 62 you would never catch up if you waited until age 66.   

I still plan to wait until age 70,  but the decision is not a simple or obvious one.

This is very true - and something to factor into the analysis. However, the most important part is to use something called an Actuarial Present Value (APV) in doing this calculation, as investment rates of return aren't sufficient to derive which opportunity is better. The APV takes mortality statistics into account in your specific circumstance (i.e. date of birth, valuation date, and expected rate of return on funds) and discounts the annuity accordingly.

These types of calculations are frequently used in income and pension loss tort litigation proceedings as it provides a more accurate reflection of probability versus a standard present value calculation..

Rollin

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #16 on: October 01, 2014, 01:41:59 PM »
The "breakeven" analysis between starting SS at 62 and waiting until age 66  works out to be somewhere around age 80. (I have done this but can't remember the exact breakeven age).    Personally,  my biggest fear (risk) is running out of money at a very old age, so my plan is to wait until age 70 to collect SS which will maximize my cost of living forever annuity.

The tricky part of this analysis (as the op has actually noticed: 
Quote
That doesn't include the fact that you could invest some of the money you receive for the 60 months prior to 67
)  when you assume an interest rate and some kind of investment return on the amounts received by filing at age 62,  the breakeven age gets pushed farther and farther to the point where if you could earn 6% on funds received by starting benefits at age 62 you would never catch up if you waited until age 66.   

I still plan to wait until age 70,  but the decision is not a simple or obvious one.

This is very true - and something to factor into the analysis. However, the most important part is to use something called an Actuarial Present Value (APV) in doing this calculation, as investment rates of return aren't sufficient to derive which opportunity is better. The APV takes mortality statistics into account in your specific circumstance (i.e. date of birth, valuation date, and expected rate of return on funds) and discounts the annuity accordingly.

These types of calculations are frequently used in income and pension loss tort litigation proceedings as it provides a more accurate reflection of probability versus a standard present value calculation..

Sounds a little more accurate than flipping a coin for sure!

hdatontodo

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #17 on: October 01, 2014, 02:49:43 PM »
Today I downloaded the Social Security Detailed Calculator http://www.ssa.gov/OACT/anypia/anypia.html

It lets you manually enter your 30-40 years of wages and even project forward if you're planning to work beyond the last year you entered. That is a nice feature since I was able to put in that if I work until 62 I'll get about $1,820 per month, and if I work until 56 and file at 62 that I'll get $1,724 per month. I was wondering what would happen to the benefit if I got laid off in my mid-50's.

For comparison, the Social Security website said that I'll get $1,813 if I retire at 62. I may have ended up with the $1,820 due to how I filled out the data for the calculator.

I got an error when I tried to put in my spouse and child, so maybe I'll have another go at that.     

Edit 1:
It looks like if I file at 62, I can get child benefits ($1,200+) until my kid gets out of high school just before I turn 66. (45 mo x $1,200 = $54,000.) After that, I'm back down to $1700-1800 range. At 67, I could suspend for 3 years (losing 1750 * 36 = $63,000) but increasing my 1750 to 2170 at age 70. Hmm. That would seem to mean I'm ahead at age 82 roughly, so maybe don't suspend at 67? (I'm not considering being able to earn money/dividends with the early payments in the above.)

Edit 2:
Still running some rough numbers, it looks like
1> Getting benefits with the kid and then losing them when he gets out of high school leaves me at 82 with benefits of about $481,000.
2> Getting more per month by waiting until 67 (with no kid benefits) leaves me with benefits of about $475,000.
Now both of these were calculated by saying I wouldn't be getting a salary (e.g. layoff) after next year when I'm 55.

Edit 3:
If I adjust the above scenario to say I'll work until 60 (instead of 55), filing at 62 with the kid benefit is $494,000 and at 67 is $491,000 at age 82.


« Last Edit: October 01, 2014, 06:48:29 PM by hdatontodo »

MKinVA

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #18 on: October 01, 2014, 03:04:19 PM »
Is there any benefit to waiting until 63, 64, or 65? I always see that you get a 8 percent increase for each year after full retirement age, but what about the years between 62 and full retirement age? In my case, I plan to be retired already by 62 so I won't be increasing my benefit simply by replacing lower income years with higher income years.

CPA CB

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #19 on: October 01, 2014, 03:43:26 PM »
Remember that in addition to receiving the benefit at an earlier age, you also gain a benefit by not contributing.

For instance, by waiting for 5 years, and assuming a contribution rate of approximately $4,500 - you would save around $19,000 once your PV the payments.

If anyone is interested, provide your birth year, and expected benefits at an early age vs. normal age, and include your contributions per year. I can let you know what the options are on an APV basis (based on Canadian figures for mortality - not different significantly from US) and what your expected expected mortality is (albeit - it's a bit morbid).


Professor Ecks

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #20 on: October 01, 2014, 03:58:12 PM »
Quote
Is there any benefit to waiting until 63, 64, or 65? I always see that you get a 8 percent increase for each year after full retirement age, but what about the years between 62 and full retirement age? In my case, I plan to be retired already by 62 so I won't be increasing my benefit simply by replacing lower income years with higher income years.

It's important to note that the age reductions applied to Social Security benefits are done on a monthly basis, not a yearly basis. Current Full Retirement Age is 66, so if you take the benefit at age 62, you are incurring the highest possible number of reduction months, 48 (although though most people won't actually qualify until age 62 plus one month, so they would only have 47 reduction months). Each month that you delay taking the benefit will reduce the reductions by one, resuting in a higher monthly benefit amount. Some may consider that a benefit. Of course, you will still have to weigh the benefit of delaying payment to receive a higher monthly benefit check vs getting more payments at a lower rate.

MKinVA

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #21 on: October 01, 2014, 05:39:21 PM »
Thank you, professor. I get that. So it's not so much increasing your benefit as it is reducing the reductions between 62 and, in my case, 67.

Professor Ecks

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #22 on: October 02, 2014, 10:11:51 AM »
Quote
Thank you, professor. I get that. So it's not so much increasing your benefit as it is reducing the reductions between 62 and, in my case, 67.

Correct. Before full retirement age, you are reducing reductions. After FRA, you are earning a credit.
 
Thanks for leading me to a much more succinct way of putting it. I am used to explaining it to people who aren't nearly as well-versed on the subject as those found here in the forum.

Heywood57

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #23 on: October 02, 2014, 11:53:20 AM »
Here are some simple SS payout guesstimates

When the total at starting age x is less than total at starting
age x+1, the total at age x no longer prints.


                   M o n t h l y   A m o u n t
     1000    1080    1166    1259    1360    1469    1586    1713    1850
Age    62      63      64      65      66      67      68      69      70
62   12000
63   24000   12960
64   36000   25920   13992
65   48000   38880   27984   15108
66   60000   51840   41976   30216   16320
67   72000   64800   55968   45324   32640   17628
68   84000   77760   69960   60432   48960   35256   19032
69   96000   90720   83952   75540   65280   52884   38064   20556
70  108000  103680   97944   90648   81600   70512   57096   41112   22200
71  120000  116640  111936  105756   97920   88140   76128   61668   44400
72  132000  129600  125928  120864  114240  105768   95160   82224   66600
73  144000  142560  139920  135972  130560  123396  114192  102780   88800
74  156000  155520  153912  151080  146880  141024  133224  123336  111000
75          168480  167904  166188  163200  158652  152256  143892  133200
76                  181896  181296  179520  176280  171288  164448  155400
77                          196404  195840  193908  190320  185004  177600
78                                  212160  211536  209352  205560  199800
79                                          229164  228384  226116  222000
80                                                  247416  246672  244200
81                                                          267228  266400
82                                                                  288600
83                                                                  310800
84                                                                  333000
85                                                                  355200
86                                                                  377400
87                                                                  399600
88                                                                  421800
89                                                                  444000



      1844    1991    2150    2322    2508    2698    2913    3146    3357
        62      63      64      65      66      67      68      69      70
 62   22128
 63   44256   23892
 64   66384   47784   25800
 65   88512   71676   51600   27864
 66  110640   95568   77400   55728   30096
 67  132768  119460  103200   83592   60192   32376
 68  154896  143352  129000  111456   90288   64752   34956
 69  177024  167244  154800  139320  120384   97128   69912   37752
 70  199152  191136  180600  167184  150480  129504  104868   75504   40284
 71  221280  215028  206400  195048  180576  161880  139824  113256   80568
 72  243408  238920  232200  222912  210672  194256  174780  151008  120852
 73  265536  262812  258000  250776  240768  226632  209736  188760  161136
 74  287664  286704  283800  278640  270864  259008  244692  226512  201420
 75          310596  309600  306504  300960  291384  279648  264264  241704
 76                  335400  334368  331056  323760  314604  302016  281988
 77                          362232  361152  356136  349560  339768  322272
 78                                  391248  388512  384516  377520  362556
 79                                  421344  420888  419472  415272  402840
 80                                                  454428  453024  443124
 81                                                          490776  483408
 82                                                          528528  523692
 83                                                          566280  563976
 84                                                                  604260
 85                                                                  644544
 86                                                                  684828
 87                                                                  725112
 88                                                                  765396
 89                                                                  805680

hybrid

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #24 on: October 02, 2014, 12:21:37 PM »
Here are some simple SS payout guesstimates

When the total at starting age x is less than total at starting
age x+1, the total at age x no longer prints.


                   M o n t h l y   A m o u n t
     1000    1080    1166    1259    1360    1469    1586    1713    1850
Age    62      63      64      65      66      67      68      69      70
62   12000
63   24000   12960
64   36000   25920   13992
65   48000   38880   27984   15108
66   60000   51840   41976   30216   16320
67   72000   64800   55968   45324   32640   17628
68   84000   77760   69960   60432   48960   35256   19032
69   96000   90720   83952   75540   65280   52884   38064   20556
70  108000  103680   97944   90648   81600   70512   57096   41112   22200
71  120000  116640  111936  105756   97920   88140   76128   61668   44400
72  132000  129600  125928  120864  114240  105768   95160   82224   66600
73  144000  142560  139920  135972  130560  123396  114192  102780   88800
74  156000  155520  153912  151080  146880  141024  133224  123336  111000


This is where it gets tricky for the MMM crowd. Assuming one does not actually need the $1000 a month SS provides in this scenario, and every dime of it is invested and it earns 5% over time, the $156K at age 74 is closer to $196K, or a whopping 74K head start on the deferral at age 70 bracket also invested at 5% (122K).

This assumes both a steady 5% (could be higher or lower) but more importantly that the money never gets tapped and stays invested. Invested to what end, one might fairly ask? What is the point of the principal in the golden years if it is not supporting the golden years.

For these reasons the conservative part of me says defer if it is not required, 1850 is a LOT larger than 1000 every month. As another poster put it so well, the time you may need it the most is latest in life. I have family members on both sides of this equation, taking early was a patently poor decision for the one who took early. The money was never invested like it should have been and she has lived past the "break even" point. Now her options are severely limited.

CPA CB

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Re: Retire at 62 vs. 67 Social Security Numbers
« Reply #25 on: October 02, 2014, 12:44:18 PM »
Alright Folks - So here's where I land with calculations.

This is assuming a 5% discount rate, for someone born October 1st, 1952, i.e. their time to decide to start withdrawing at 62 was yesterday.

The total APV is as follows, assuming the chart posted is correct... Remember this accounts for mortality rates, based on Canadian rates (I know I know) for mortality survey in the years 2009 to 2011 (which is as recent as it comes north of the border).

62 Years Old ($1,000 per month)

Male: $148,200 - Life Expectancy is 83.19
Female: $ 161,400 - Life Expectancy is 86.29

At $1,844 per month:

Male: $273,281
Female: $297,622

67 Years Old ($1,469 per month)

Male: $141,523
Female: $160,239

At $2,698 per month

Male: $259,979
Female: $294,298

In addition - you save the contributions to the plan over the period, so the APV of 67 is lower than the stated rates above by a factor of:

Male: 4.32 * yearly contribution
Female: 4.36 * yearly contribution

Conclusion

In either case (based on the posted tables) it is better to trigger benefits at 62 versus 67, especially in the case of men who have a shorter life span. This indicates a break even age beyond 86 years based on mortality statistics, which exceeds even what I had thought initially.

(Edited for formatting after the fact)


« Last Edit: October 02, 2014, 01:03:24 PM by CPA CB »