Social Security

I started collecting SS last year when I turned 62.
There are several reasons to start as early as you
can and not wait till 66 or 70.

To make it easy to understand, lets say at age
62 you can collect $1000 a month, and at age
70 you could collect $1800 a month. If you waited
till age 70, you would have to live to age 77 just
to collect the money you would have collected
from age 62 to age 77. Its not till after age 77
that you get the full benefit of waiting to collect the
full amount. Thats a very big gamble to take, a lot
can happen in those 15 years.

An even bigger reason to collect at age 62 is
something a lot of people don't know about. If you
collect say $1000 a month between age 62 and 70,
thats $96,000. If you pay SS back that $96,000 at
age 70, you can start collecting your full amount. In
other words, they gave you an interest free loan
for 8 years. You can invest that money every month
or do whatever you like with it. The vast majority
of people can't afford to do this, so it never comes up.
For people that can afford it, why would you not do it.

Didn't know about that last bit, which is pretty cool if you're able to support yourself without using that money for 8 years, you can get a nice return by saving it in something like inflation protected bonds and then returning it.

I'm 32 and saving like SS won't be around and that will probably change by then even if it is, but you never know.

Quote: progrocker

Didn't know about that last bit, which is pretty cool if you're able to support yourself without using that money .

The trick is not letting yourself be taxed on
the SS money. You can make up to about
$14.5K a year and still not lose any of your
benefits. You need income from non taxable
sources, like retirement accounts and savings
to make up the rest. When you turn 66 and
have reached full retirement age, you can earn
as much as you like and not lose any of your
benefits.

There's FIT on SS benefits? What a crock of s#%&, SS deductions from normal payroll aren't subtracted from box 1 W2 wages, are they? Isn't that double taxation?

On this one, even the experts don't seem to agree.

Ric Edelman {btw he is another one with a show worth listening to on the computer} advocates collecting early like you do; or at least I have heard him advocate this on some show on radio or TV.

AARP believes you should wait, in most circumstances.

From looking at it myself, I think you need to have a reasonable expectation that you will live another 20 yrs. 20 yrs seems to really be the number. I think that, if you can and it makes sense about the 20 yrs, you should wait, but no longer than roughly the official full benefit date they give you, which for many of us is around age 66.

To illustrate how confusing it can be, after advising my wife this way, she one day announced she was going to collect at 62 because she had a hunch she was going to live a long time, "and I will make up the shortage that way". I had to explain to her she managed to get it backwards: if you think you are going to croak soon, collect ASAP; if living longer is your hunch, wait till later!

For those of you who arent yet getting to 'the age', believe me "when you get on Medicare" starts to loom just as large or larger.

The Social Security payback rule has been eliminated, so there goes that free lunch.

I think I posted some of this here before, but it seems relevant to this thread.

Long ago, I looked at my family history in an effort to get a rough guestimate of my life expectancy. One of my grandfathers lived to age 76, but the other died at age 50 from his third (I think) heart attack. My father died a couple of weeks after reaching 70. The two of those who lived to 70 had debilitating health issues in their later years.

Based on this, I made a guess that a terminal age of 70 was a reasonable basis for planning things like retirement and Social Security. I did not want to work right up to the point I was about to die -- I wanted to have some fun in my retirement. I took an early retirement from my job at the age of 58 years + 8 mo. and started drawing Social Security at 62. Whether I made a good financial decision is yet to be seen, but I am now 66 and have been having quite a bit of fun in my unemployed status.

Since retiring I picked up two more data points in my family history. My younger brother collapsed while jogging at the age of 52, and the folks at the hospital were amazed he survived. He had multiple bypass surgery a few days later. Then my older brother died of cancer at the age of 65. Those additional data items suggest that my original estimate of "only" living to 70 was not out of line, and it may have been optimistic.

I hope to live many more years, and I would like to see that solar eclipse that the Wizard talks about in 2017, but I think it would not have been reasonable for me to have made my financial/retirement plans based on living into my 80s. I have never regretted the path I chose on this matter.

Quote: calwatch

The Social Security payback rule has been eliminated, so there goes that free lunch.

Those bastards. Glad I found out now, think about
the people that have been planning on doing it for
the last 6 or 7 years and now they have the rug
pulled from under them.

Quote: progrocker

There's FIT on SS benefits? What a crock of s#%&,

Its not a tax but its amounts to the
same thing. If you make more than
the $14.6K ceiling, they deduct $1
from your benefits for every $2 you
made over $14.6K. Very soon all your
benefits are gone.

There's really no overall benefit for
waiting till 70 if you don't have a
crystal ball. Enjoy the money as
early as you can get it, how much
real enjoyment are you going to get
at anything after age 77, if you live
that long.

The best way to make money on SS is to wait to you are 66 to start collecting. Then you can work and collect SS. There aren't any income limitations after you meet the regular retirement age. Only bad thing is that your SS is taxed as income.

Quote: luckyjackg

The best way to make money on SS is to wait to you are 66 to start collecting. Then you can work and collect SS. There aren't any income limitations after you meet the regular retirement age. Only bad thing is that your SS is taxed as income.

You have to make over $25K before they start taxing it.

The story of Col. Harland Sanders is the most inspiring
Social Security story you'll ever hear. He retired in 1955
and at age 65, he took his first check and started cooking
his signature fried chicken in his home kitchen and selling it
by the piece to local restaurants. He made a few cents
with every piece sold, and he was relentless in maintaining
his delivery routes.

It was a big hit and with a lot of sweat and long hours,
he had developed KFC to such a point that 9
years later he sold it for $2mil, which was a lot of money
in the early 60's. He did all that after the age of 65, on
no education and no start up capital other than a $105
a month SS check. He lived to be 90, the epitome of the
American Dream come true.

Quote: luckyjackg

Only bad thing is that your SS is taxed as income.

This is generally not true. Only part of benefits are taxable, if your income is high enough. You might be referring to the earnings test, where your benefits are cut if you earn above a certain amount ($14,640 in 2012) before the full retirement age, but that isn't a "tax." If you're still working you should wait until the full retirement age anyway, which will be 66 for a while. It creeps up to 67 just before I get ready to retire -- naturally.

Depending on how much you make, you can
be taxed on up to 85% of your SS benefit.

I work for the railroad. Won't be collecting social security...

Quote: Triplell

I work for the railroad. Won't be collecting social security...

The RRs still have their own retirement system?

whats the annual % raise in $ in early retirement vs waiting till 70?

in my union, u can retire w/full benefits at age 62. u can take a 3% reduction per year for the 1st 2 years, then 6% for the next 3 years.

ie:
age 61- 97% of pension
age 60- 94%
age 59- 88%
age 58- 82%
age 57- 76%

it's a no brainer for me to retire at age 60. i can make more than 3% in the stock market (long term).

so whats the % penalties and bonuses at age 62 and 70 respectively?

I think for most people a lot of the analysis on this thread is not relevant. Most people will not take the money and invest it they will take it and blow the payment as disposable income. I can't argue with Doc's take, and his retirement planning with his family history, however, the average life expectancy of someone his age is more like 80.

My own decision on canadian CCP which was available at 60 is to wait until 70 and receive 66% more income. I am still working and will likely work until 70 because I still enjoy my working life. I am lucky in that I did an extensive amount of travelling earlier in my life and don't have that scratch to itch. My work is very flexiible and much of it can be done from home.

I am waiting because I don't require the income as long as I am working but it will become a significant source of income for me once I am actually retired so to max that amount seems right to me. I already have a couple of friends who took it at 60 are now having second thoughts about their decision.

Something that hasn't been mentioned yet and may be different in the US is survivor benefits. In Canada a substantial amount of the income will continue to be paid to a surviving spouse until they die making your own life expectancy not as important.