AllyParticipantStatus: AccountantPosts: 3Joined: 01/12/2016
I’ve been trying to research this for my parents and I think I got it. But would feel better if I got confirmation from this crowd:
- Retiring at age 62 (and will have no wage income once retired)
- Options – start SS at age 62, waiting till full retirement age of 66, or waiting till 70
- Only have 15 working years
- Working till 66 is not an option
- Assume long life expectancy
- Have other sources of income, if waiting till 66 or 70
The main question is: Does the SS benefit increase if wait to claim benefits until age 66 (and not working at all between 62 and 66)?
I think it does, roughly 8% a year. In which case, given the circumstances above, it makes sense to wait till at least 66 to lock in a ~25% increase in benefits.
If not, then it doesn’t make sense at all to wait and start claiming at 62.
Appreciate the feedback!February 11, 2019 at 8:47 am MST #189845ZaphodParticipantStatus: Physician, Small Business OwnerPosts: 5221Joined: 01/12/2016
Its basically as you describe, the increase is substantial for waiting so if they can they should do it. I’d check Mike Pipers site to be sure as things might have changed but was the thrust of his talk, though I dont pay too much attention to SS since its way off for me.JBMEParticipantStatus: SpousePosts: 255Joined: 03/26/2018
I think you’re thinking about this the wrong way. You get 100% of your promised benefit if you retire at full retirement age, which today is 66 years and 2 months. If you take the benefit later you’ll have a permanent increase in benefits, roughly 8% each year you delay up until age 70. On the other hand, if you take it at 62, you’ll be heavily penalized for taking it early. It’s not that you are rewarded for taking the benefit at age 66 vs age 62. It’s that you are penalized if you take it at age 62. Sounds like they have the means and unless there’s a family history of illness or dying relatively early in low or mid 70s they should delay until age 70PedsParticipantStatus: PhysicianPosts: 2651Joined: 01/08/2016Assume long life expectancyClick to expand…
then you come out ahead waiting till 70.spiritriderParticipantStatus: Small Business OwnerPosts: 1406Joined: 02/01/2016
Before FRA your benefit is reduced 5/9 percent/month up to 36 months and then 5/12 percent/month. Your benefit is increased 8/12 percent/month after FRA.
It is generally a good idea to try to get your average indexed monthly earnings (AIME) from your 35 highest indexed years at least to the second bend point (2019 = $5583). Are those 15 years your only income years or just your high income attending years?
You need to have >= ~$17.5 years of only SS maximum wage base (MWB) years to reach the second bend point. However, in your case if you have a total of all years prior to attending >= ~$2.5 years of the MWB and 15 years >= the MWB, that is equivalent.February 11, 2019 at 10:00 am MST #189867TimParticipantStatus: AccountantPosts: 1081Joined: 09/18/2018
The social security has an individual signup site.
Each parent can setup their own login. Based on their own earnings history and age, the numbers for each are available at the different ages.
1) Assuming normal life expectancy, delaying every month possible until the month turning 70 will benefit.
The increases exceed the foregone payment.
2) With two parents, things like spousal benefits and survivor benefits come into play. That gets complicated based on FRA and whether the other spouse has already filed.February 11, 2019 at 10:50 am MST #189876AnneParticipantStatus: PhysicianPosts: 699Joined: 11/07/2017
Also, you said parents (plural) so if there are two of them they need to consider the spousal benefit. Unlike the primary recipient, there is no increase in the spousal benefit for delaying past full retirement age (there is a penalty for taking it earlier). If both parents are eligible for SSI the spousal benefit only makes up the difference between the lower paid spouse’s benefit and 50% of the higher paid spouse’s benefit.
I think this is confusing but don’t know how to write this more clearly. My personal experience with this is that my parents don’t like taking advice from me because they like to think there’s no way I could know more than they do about these topics–I think it’s what Dave Ramey calls the powdered butt syndrome. They did get good guidance from the rep at the social security office who walked them through all their options and they decided to do exactly what I thought they should do. This may be office location dependent, but the employee at theirs really took the time to explain everything well to them–they didn’t advise them what to do, just explained the facts, which is all they needed to make a good decision.TimParticipantStatus: AccountantPosts: 1081Joined: 09/18/2018
The drawback is the spouse has to file as well. Thus forfeits the increases being earned.
So for 1/2 of the partner, both take less than desired.February 11, 2019 at 11:00 am MST #189881Faithful StewardParticipantStatus: Financial Advisor, Small Business OwnerPosts: 188Joined: 06/12/2017The main question is: Does the SS benefit increase if wait to claim benefits until age 66 (and not working at all between 62 and 66)? I think it does, roughly 8% a year. In which case, given the circumstances above, it makes sense to wait till at least 66 to lock in a ~25% increase in benefits. If not, then it doesn’t make sense at all to wait and start claiming at 62.Click to expand…
Between 62 and 66 (assuming age 66 is your Social Security full retirement age) does not get you the 8% per year increase for delaying the start of benefits. That only kicks in between your Social Security full retirement age and age 70.
However, delaying until age 66 (again, assuming age 66 is your Social Security full retirement age) allows you to avoid the reduction in benefits for filing before your full retirement age. At age 62, the reduction of your benefits at age could be as much as 25%.
Michael Peterson, CFP® | Faithful Steward Wealth Advisors
http://www.fswealthadvisors.com | (717) 496-0900February 11, 2019 at 11:28 am MST #189891GParticipantStatus: Physician, Small Business OwnerPosts: 1244Joined: 01/08/2016
1) I forget that retiring “early” means significantly different things to different people.
2) As others have suggested, Mike Piper has a great calculator.
3) If long life expectancy, delaying is going to offer the most financial benefit.IntensiveCareBearParticipantStatus: PhysicianPosts: 27Joined: 12/22/2018
Try the calculator… and guess how long you plan to live. It is like the most macabre carnival game ever! Bwahahaha.
The other side of the coin is how good you are at investing. Remember, the calculator assumes no growth on the money. Six years of payments with compounded interest really adds up fast for the early taker versus the delayed taker getting six years of nothing but higher annual payments later. You guys know how this stuff works. Besides, we are not talking about a 25 year old versus a 29 year old here, neither of whom is going to have a MI or CVA or broken hip. lol. If you can get even 5% compounded on the SS money (plust 3% inflation), it makes better sense to take SS payments asap based on that reason alone than to shudder at the 8% bonus/penalty for early/late takers.
Personally, despite being at my ideal weight with no risk factors and great family health and longevity, I’m taking social security payments ASAP and investing it… or just enjoying it if I have plenty of passive investment income already. I have no crystal ball saying how many good years I have, and I can say with relative certainty, based on what I do every day and from watching my elderly family members, that QOL, mobility, and expenses will decrease exponentially after around age 70-85 (depending on how someone takes care of themself). Even if I can travel until 90, walk well until 95, and live until 99, I, or my heirs, will most likely come out ahead taking payments early.
…. If long life expectancy, delaying is going to offer the most financial benefit…Click to expand…
Um, yes. I would think that would be obvious carrot on the stick they are aiming for.