I joined so I could respond to this post. Someone please prove to me that I am an idiot.
Based on my personal estimate I received from SSA, I think waiting until 70 is wise advice to those that live paycheck to paycheck. I agree with the "experts" that if you just look at benefits received and spend every dime as soon as you get it, and you look at tables from age 62 to 90, then waiting until 70 is ideal if you can afford it.
Based on my personal estimate I received from SSA, I think it is poor advice to wait until 70 for those that have self-restraint and seem to align their lifestyle with Mr. Money Mustache on several points. I believe it is wiser to start collecting at 62.
My assumptions are: people on this site will not need the money to live on (as original poster Workinghard noted). I also assume that in the time period between 62 and 70, the people like Mr. Money Mustache will not be working and will be living off other funds until age 70, but you will spend every dime of SS received after age 70 no matter at which age you choose to start collecting. You cannot predict when you will die. I did a projection from age 62 to 90. Maybe someone can share, but I doubt most Americans are predicted to make it to 90. So all things being equal, you are just looking to find out what plan gives you the most money in your pocket between 62 and 90.
In my way of figuring, collecting at age 67 may be the best financially.
In my way of figuring, collecting at age 62 may be the wisest as you cannot predict your death. Take the money and run!
This is my plan. Tell me why this will never work.
When I looked it up in 2012, SSA said I will get $1,035.00 at 62, $1,602.00 at 67, and $2,032.00 at 70.
Lets start with age 70. I plan to spend every penny collected from age 70 on no matter what age I start collecting. I plug it into a compound interest calculator and determine with COLA’s, my total benefits collected from age 70 to 90 is $686,606.40.
I then plug the same data into a compound interest calculator and start collecting at age 62. With COLA’s, I find my total benefits collected from 62 to 90 is $546,978.84. All the experts say I would be giving up $139,627.56 if I live to 90 and start collecting benefits at 62 rather than waiting to 70. What an idiot the paycheck to paycheck people are thinking.
But if I do not need the money to live on (and I am not alone if Workinghard is any proof), and I believe I can manage my money better than have someone else manage my money….
Why not collect at 62 and save every penny in a savings account. I plug the numbers into a compound interest calculator and find that if I start at 62, by the time I am 70 I will have $139,930.45 in my account. I restrain myself and I do not spend the money, rather I treat the $139,930.45 as principle and only add the interest earned on the principle to my SS benefit. So now my yearly benefit is what I get from SS and the interest off benefits received up to this point. I take advantage of the magic of compounding interest. That simple fact that everyone knows exists, yet the young ignore and the old regret and those that do take advantage of are classified as “odd” or “lucky”.
I now take every dime of benefits from age 70 to 90 and spend it all. If I start at 62, then that amount from 70 to 90 is a lousy $437,199.96. Don’t forget to add all of that beautiful interest. That adds up to $613,512.33 from 70 to 90. So the total in my pocket is $1,050,712.29. Oops, don’t forget about the principle that was generating the interest - $139,930.45, for a grand total of $1,190,642.74.
Again, prove me wrong, but I see myself as being $504,036.34 ahead by taking at 62 rather than waiting until age 70. 67 is the ideal, but without knowing your year of death it is risky.
http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.phpIn 2014 I am 62. In 2042 I am 90. Base amount is 0. Interest rate of 6%. Calculation period of 29, then 24, then 21. I estimated a SS COLA (inflation) of 2.83%. Payments are made monthly (SSA said I will get $1,035.00 at 62, $1,602.00 at 67, and $2,032.00 at 70) and the compound interval is monthly.