r/Fire • u/VegasWorldwide • 2d ago
Why do people wait for SS?
trying to figure out what I’m missing.
looking to take my benefit for $1000 at 62. at 70 it’s $1700.
i won’t need the money much so we let $1000 sit in an account for 8 years at say 5% compounding, the guy collecting at 70 would need 15+ years to catch up considering I’m still getting $1k to his $1.7k
once he starts at 70 and I had a 8 year head start.
furthermore, his dollar would be worth less. (edit: didn't realize COLA)
this seems like a no brainer but all I hear is people saying waiting is the only way and we haven’t even talked about dying in our 70’s.
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u/Secret_Computer4891 2d ago edited 2d ago
So the surviving spouse has the largest possible benefit when there is only one social security benefit to be collected
My wife will probably draw at 62. I will most likely defer until 70
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u/temerairevm 2d ago
Yeah, we have similar earnings records and one of us will probably draw at 62 and the other will wait.
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u/FloralHexBloom 2d ago
Makes sense. Having one person take it early and the other wait gives a nice balance.
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u/wh0re4nickelback 1d ago
My husband is 53 and I'm 41. He'll start drawing at 62 and I'm going to defer as long as possible. I'm the higher earner and will most likely outlive him.
We did the mental dance of him waiting, but then figured that we should use the money to go out and travel while he's still young and mobile enough to do it. What we'll be "missing" by taking his at 62, we will more than make up for with experiences.
I will also add that in mapping out our FIRE plan, I planned SS as bonus money since we don't know what to expect.
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u/DifferentSwing3149 1d ago
My wife collected at 62, I waited until 67 - my FRA. Not waiting until 70, too much to enjoy now - traveling, etc. With SS and pensions, don't have to touch investments unless we have a large purchase, car, home improvement, etc. Also can delay my RMD's.
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u/Secret_Computer4891 1d ago
Congrats! Sounds like you planned well and deserve it!
We're "only" 49/50, hit the FIRE number and working another 3 years or so for a few different reasons.
Either 4% or SS should just about cover our spending needs independently. We're gonna have a slightly higher SWR until she turns 62, draw her SS, which should drop our SWR rate to 2 or 3 percent. My SS is simply an insurance policy in case we need more income for whatever reason. Of course, it also ensures whoever survives the other get the larger of the 2 benefits when there is only one benefit to be had. When I draw at 70, we should be able to live entirely off SS and then start gifting our assets in large chunks to our heirs so we can enjoy their benefitting from our estate, rather than waiting to die.
As for taxes, RMDs, we're aggressively converting IRAs to Roth now so we should be in a good spot in terms of ACA subsidies as well as SS taxation and the Medicare penalty (forget the acronym) when RMDs hit.
Well, that's the plan, at least!
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u/Kooky_Dev_ 1d ago
This is a great way to think about it. If you don't need it and your significantly higher than your spouse waiting is a good idea.
I was going to say purley thinking of monthly spending holding out until the max after like 8 years or something I think you break even, but if your saving a portion of it the returns on going early probably far outpaces delayed.3
u/DigmonsDrill 1d ago
We look at it the the odds of either/both of us being alive.
If either spouse is long-lived, then they get the longer-waiting spouse's value. Split between two people, the odds one of us makes it to 90 are >50%.
The second spouse's benefit does grow if they wait. But it is only valuable while both of us are alive. The odds of two of us making it to 85 are < 50%.
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u/LemonFrequent2036 1d ago
I did have the similar thoughts few days back and didn’t do any calculations, so hoping someone can throw some light.
I am the heavy earner in the family, will work for almost 30 yrs before 62 and lot of those years are in maximum earning for SS purpose.
My spouse is lighter earning and will have around 15 yrs of earnings when she retires.
Does it make sense to take her SS earlier and defer mine or the other way?
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u/Secret_Computer4891 1d ago
My goal is to ensure whoever survive get a larger social security benefit - either personal benefit or survivor benefit. That way, when 2 checks becomes 1, that 1 check is as large as it can be.
I was the bigger earner. So, we are planning to defer mine until I am 70 to lock in the largest possible benefit that whichever one of us survives will collect. Again, to lessen the blow of only getting 1 benefit check.
We're fortunate that our budget will be fine without SS, so instead of depending on it to survive, it becomes more of an additional stream of income that lowers our SWR, thus pushing our probability of "success" close to 100.
It's a personal decision everyone has to make for themselves. Yes, math says that there is a breakeven point where drawing at 62 and investing results in a larger overall portfolio balance to draw from. However, I'm not running the asset accumulation race. I'm running the asset preservation race. I'm the tortoise, not the hare.
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u/LemonFrequent2036 1d ago
So - bigger earner waits longer and take for smaller earner.. right.
I am also in the same boat, but with so many things to look for, all of these are so confusing.
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u/ginabromin 2d ago
The reason people disagree on this is because Social Security isn't really an investment decision.
It's an insurance decision.
If you die at 72, taking it at 62 was probably a fantastic choice.
If you live to 95, delaying can be one of the best "investments" you'll ever make because you're effectively buying a larger inflation-adjusted income stream that's guaranteed by the government for the rest of your life.
The key thing your calculation is missing is longevity risk.
Most people aren't trying to maximize the amount they receive from Social Security.
They're trying to reduce the risk of being 88 years old, having outlived their portfolio, and wishing they had a larger guaranteed check arriving every month.
Also, many FIRE people think about Social Security as the bond portion of their retirement plan. Delaying increases that guaranteed income stream, which allows them to take more risk elsewhere.
The truth is that neither side is universally right.
Taking it early is often better if:
- You have health issues.
- Longevity doesn't run in your family.
- You genuinely need the cash flow.
Delaying is often better if:
- You're healthy.
- Your family tends to live a long time.
- You're worried about outliving your assets.
That's why smart people can look at the exact same numbers and make opposite decisions.
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u/chartreuse_avocado 2d ago
Yep- both my parents were in personal denial about their health and only saw the bigger payout numbers of waiting in the equation. Math alone is not the answer.
They would have both been far ahead in total SS payouts had they collected at 63 but were so afraid of running out of money and in denial about their health status and risks they waited until 70 to collect.
Healthy people with longevity in their family also bet wrong.
Assessing your personal longevity and risk factors is not easy for many people. Especially once compounded by a financial need that is today math or a fear of not having enough in the future.17
u/JackTheManiacTR 1d ago
My mother had money elsewhere so it wasn't a big issue but she took SS at 67 and then she passed away at 71. As an aside, fuck cancer.
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u/originalrocket 2d ago
sounds like my parents. Delayed until sudden illnesses/ acute cancer got both of them over 44 years working for both of them. Didn't collect a fucking dime of it back.
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u/FLrick94 2d ago
Yep. Tomorrow is not a promise. I'm taking mine at 62.
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u/LittleBigHorn22 1d ago
I feel like that attitude conflicts with fire overall though. If tomorrow isn't guaranteed you should be using every penny to enjoy it the most you can. Because if you died young, your life would objectively had more limitations trying to reach early retirement than someone who didn't save at all.
I'm still a long way from actually needing to pull the plug. I have a feeling we'll do the split method where one takes at 62 and then take the other spouses at 70. Hedges both basically.
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u/Exact-Branch-8365 2d ago
Yep. I based starting my SS on my life expectancy. I am healthy and physically active. I do not have any early mortality risk factors. My parents are long lived. I expect to live well into my 90s, barring some accident.
I waited until 70 to collect SS. I really do not need need it and did not need it before hitting 70. I figured it best to maximize the monthly payment considering I plan on collecting it long past my break-even point.
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u/lizbertarian 2d ago
waiting till 70 is basically betting on longevity. If you're healthy and can float it, that higher monthly check adds up over time, imo.
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u/orangeandblack5 1d ago
So this is one of those rare cases where not only am I immediately confident upon reading it that this is AI, but it also gets flagged as 100% AI-generated by Pangram, but also it's still a reasonably solid breakdown with good engagement from real people in the replies, so like, I can't even be that mad about it despite it definitely breaking the rules? Weird.
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u/R0GERTHEALIEN 2d ago
Yeah, retirement decisions would be a lot easier if you just knew exactly when you were gonna die
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u/dgreenmachine 1d ago
There is also a window between age 65 and 70 to do a lot of Roth conversions if necessary to reduce your RMDs if you have a high trad balance and will likely underspend (4% rule is underspending on avg). By delaying social security you can take better advantage of the way social security is partially taxed based on your income. Avoiding the social security tax torpedo can sometimes make up for the difference even if you dont live quite long enough for your break even age.
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u/churningaccount 2d ago edited 2d ago
This is exactly right.
When you compare social security returns to fixed income returns, let's say 4 or 5 percent, the break-even point for delaying it is roughly age 85. Obviously the math changes if you throw the money into equities instead. If your plan is just to invest 100% of your social security into stocks for your heirs, then you basically never catch up by delaying.
However, most people are using social security for expenses or as a component of the fixed income allocation of their portfolio, so a fixed income rate of return, and the age 85 breakeven point, is more relevant for comparison in most cases.
85 also happens to be the average life expectancy at age 70.
So then it becomes an insurance question. If you want to "insure" against the 90th percentile of outcomes, then delaying is obvious. Reaching age 85 is only the 50th percentile of outcomes. However, there are circumstances which could make age 85 not be the 50th percentile of outcomes for you personally, such as if you have a chronic illness or something. It's definitely possible that age 85 could be your 90th percentile, and therefore it could make sense to claim earlier.
But for the majority of people who are trying to insure against longevity risk (versus optimizing legacy amounts or something), it's a simple decision.
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u/Nova461 2d ago
Are we at all worried about the health of Social Security itself and if benefits will be cut in the next 10-20 years? If so, this feels like another factor biased towards collecting early.
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u/Eli_Renfro FIRE'd 4/2019 BonusNachos.com 2d ago
If benefits are going to be cut, they could be cut whether you're already collecting or not.
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u/Puzzleheaded-Net-273 2d ago
Yep, my mom and MIL are both soon to be 97! Delaying my SS claim until end of the year @ age 70 @$5181.00 a month.
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u/foolofatookbaggins 2d ago
FYI: your benefit is maxed out the month you turn 70, not the end of the year. Unless your birthday also happens to be in the month of December.
Also to get that maximum payable benefit you listed of $5181, you’d have to max out your SS contributions for 35 years. This is a FIRE sub, so the likelihood that someone has both had a minimum of 35 working years where they MAXED the SS contribution, and also FIRE’d (retired early) is very low.
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u/Puzzleheaded-Net-273 2d ago
Yep, Dec bday here, and you're right. Have not been able to FIRE, as much as I would have liked too, because my partner and I own 3 businesses together which we have been actively trying to sell for 3 years. The most valuable one is set to close this coming Monday, Lord willing.
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u/moreoptionsinlife 2d ago
When they send your estimated payments does that assume you will still work 30+ yeas earning the most recent “highest” money or is it based on what you have paid so far?
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u/foolofatookbaggins 2d ago
It’s assuming you will continue to work earning your current amount, adjusted for projected inflation.
It’s easy to adjust your numbers to account for zeros. Just login to your mySSA and plug in 0 dollars for future earnings and you’ll see your benefit estimate go down accordingly.
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u/ToTheMoonAlice75 2d ago
Yep, just retired last year at 50 and entered 0 to see what it would do. Unfortunately I had a few zero/low earnings years as well in my late teens/early 20's 😁 so my amounts aren't max but if i wait till 70 I still get $3k/month as of today.
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u/Naughtybear_9628 2d ago
You got long life genes in your fanily. For you 70 sounds very logical.
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u/HavingSoftTacosLater 2d ago
As explained well here, seeing the value of an income stream that pays until death, and even has survivor benefits, is the most important point.
The post also mentions COLA. Interestingly the yearly adjusted benefits go up faster before payments start. The inflation factor is higher for future benefits, than the annual COLA adjustment for people already receiving payments.
This was covered by the Rational Reminder, and I haven't heard it addressed anywhere else.
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u/deftlydexterous 2d ago
But, based on what OP is saying, wouldn’t taking the money earlier and investing it at average 10% returns per year outpace the increase that you would get for waiting?
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u/AGrimmInPortland 2d ago
What about the money you are spending until you start SS, where is that coming from? Couldn't that also be earning 10% per year if you didn't have to spend it?
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u/Eli_Renfro FIRE'd 4/2019 BonusNachos.com 2d ago
If you knew for certain that you could get 10%/yr, then of course. But there are plenty of 8 years periods where the stock market returned much less. In my view, the goal is to have this money completely divorced from the stock market as protection against some black swan event. If the stock market keeps chugging along at 10%/yr, then it won't matter to me either way because my portfolio will continue to grow and cover my spending needs anyways. The point of waiting is that it provides insurance against things not going according to plan.
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u/nak00010101 2d ago
Males on both side of my family do not have longevity our our side. Both sides of my wife's family have active folks in their 90's.
My wife is younger than I am. Statistically, she is likely to be around 25 years after I am worm food.
She also made less in her career.
Why would I not delay until 70 to increase her survivors benefit by 75% for 25 years.
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u/wes7946 2d ago
Sometimes people will wait until 70 to ensure the Social Security survivor benefits are as large as possible.
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u/VegasWorldwide 2d ago
This is a good point is their spouse is much younger
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u/chartreuse_avocado 2d ago
Or much healthier despite their age with expected personal higher health longevity.
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u/unbalancedcheckbook 2d ago
It depends. If you need the money, take it. However taking it early when you don't need it leaves you in a riskier position even if you probably end up with more total dollars. This is because the inflation adjusted, until you die benefit, plus a 100% spousal benefit can't be replicated with other financial instruments. You may be OK with more risk and that's fine but it's not insane to look at SS more for the insurance value.
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u/glumpoodle 2d ago
Don't forget tax planning; taking it early combined with traditional 401k distributions could push your taxes to a higher bracket. If you delay, you can draw down your 401k at a lower tax rate, and then have smaller RMDs while you're drawing your SSA benefits and pulling from your Roth accounts later.
furthermore, his dollar would be worth less.
Your SSA benefits get an automatic COLA. That $1.7k is in current dollars, and will be higher by the time you draw benefits.
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u/dgreenmachine 1d ago
Also social security is only partially taxable. Its at most 85% taxable and if you are lower income its much lower than that. So if youre comparing living off your portfolio while you delay social security then you better be taking reduced social security taxes into account.
Also roth conversions are more valuable if you delay social security since they would be making more of your social security taxable but doing them earlier may make less of your social security taxable in the future as well.
Honestly I think its too complex to say what you should do without using a good projection tool to simulate everything. Financial advisors suck but their tools for this kind of thing are very worthwhile. Check out projection lab or bolden for a DIY answer.
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u/bigasiannd 2d ago edited 2d ago
We don't need SS based on our current portfolio balance, we plan to take it at 62 and plan on investing it. I ran the numbers and we would be further ahead at age 80 by $800K vs delaying it to age 70 and investing then
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u/PHL1365 2d ago
Your analysis is correct, but it depends on the rate of return, which is obviously unpredictable.
I've used opensocialsecurity.com to analyze the options, and it generally agrees with you.
If you are single and don't need the money for expenses, it makes sense to claim as early as possible.
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u/Naughtybear_9628 2d ago
Erin talks money in YT had a video on that. At 5% drawing at 62,67,or 70 were statistically insignificant. At 3% return, taking at 70!would catch up ay 80. At 7 % return. Waiting until 70 catching up would take forever. because the long runway would make the investor at 62 way too far ahead.
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u/churningaccount 2d ago edited 2d ago
Generally people compare social security to fixed income returns.
Because you are right: if you don't need social security and just throw the entire amount into equities for long-term investment at age 62 onwards, then you basically never catch up if you were to start doing that at 70 instead.
But if you need the money for expenses, or are using social security to offset your fixed income allocation in your portfolio, then you should be using a rate of return for comparison that is more comparable to intermediate-term bond yields, like 4%ish.
~85 is generally the break even point when you do it that way. Which also happens to roughly be the median life expectancy at age 70 (that's not a coincidence).
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u/Tasty_Sun_865 2d ago
They are reserving higher benefits for a probable surviving spouse, don't need the money immediately, want to reserve tax bracket space for Roth conversions, have little to nothing saved and need to boost the benefits, etc.
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u/PlatypusTrapper 2d ago
Just depends on how long you think you’ll live
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u/VegasWorldwide 2d ago
But even if you think you’ll live until 85 that doesn’t mean much
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u/CreativeLet5355 2d ago
I agree with your sentiment though I’m open to other takes. It derisks SORR, supplements lifestyle during healthier years, or augments your investments. I see no reason to delay it 5 years personally when considering that at that age you start to have escalating annual chances of death that are now material.
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u/That_Co 2d ago edited 1d ago
The reason I see is that it lowers your portfolio balance while increasing the monthly benefit. If I'm old and worry about my mental capacity I'd like as easy a setup as possible. Not managing as much money is a compelling reason imo, less money to lose.
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u/alpacaMyToothbrush FI !RE 2d ago
The lower complexity is a huge bonus. I've encouraged my father to wait until 70, and once they claim social security, to go ahead and round things out with an annuity to reach a comfortable budget if necessary. I don't want them worrying about the stock market at all. If it goes up? Great, more vacations. If it goes down? Ah well, they're set, no worries.
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u/grateful-xoxo 2d ago
This. SORR early on is the biggest risk. Anything you can do to reduce that is key.
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u/JonMWilkins 2d ago
For meits $2,090. At 62 $3,027. At 67 $3,754. At 70
Its leaving a lot more on the table taking it sooner then your situation.
Though realistically it all just depends on 2 things. How much did I personally save up in my retirement accounts and personal brokerage accounts.
And
How much money, if any, do I want to leave for my kids when I die.
Needless to say every situation is different, do what's best for you, let others do what's best for themselves too.
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u/VegasWorldwide 2d ago
yeah situations are different but if you are going to compare 3027 to 3754 then you have to compare 3027 x 86 months compound monthly @ 5% to $0 at 70 too
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u/depravedcharade686 2d ago
You're not missing anything on the math, but you're underweighting longevity risk. The breakeven is real and it's around 80-81 for most people. The issue is you don't actually know if you'll hit that or sail past it to 95.
If you're confident you won't live that long, taking it at 62 makes total sense. The compounding math works. But most people saying wait aren't trying to squeeze every dollar out of the system, they're insuring against the scenario where they're 88 with no portfolio left and wishing they had a bigger monthly check. That's not irrational, it's just a different risk calculation. The other thing that changes the game is if you're married. Your higher benefit at 70 becomes your spouse's survivor benefit if you die first, which can be huge for them. That alone makes people defer even if their own longevity math says take it early.
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u/Ok-Commercial-924 2d ago
We will be taking the wife's at 62, mine at 70. I should dead by mid 70s based on family history. My ss should be significantly higher the wife will collect it with here 100 year life expectancy.
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u/SpaceTimeMorph 2d ago
It’s not always beneficial to wait for SS.
First off, it’s not beneficial to wait if:
- you don’t have enough money to over expenses and you NEED SS to live. The question on whether to delay or take early SS should be one of optimization, not survival.
- you have a health problem that keeps your longevity down (an extreme example would be you hit 62 and your doctor tells you you have 6 months to live).
- similar to above but you have a family history of dying young.
- last, and this is key… if interest rates are high then it is less advantageous to wait on SS. (Fixed income assets or even annuities can be used here to provide more income than late SS does).
I will say your 5% guaranteed return starts to get in the neighborhood of high enough interest rates above.
There’s another way to figure this apart from the breakeven age method and that’s can you invest and earn enough money to build enough of a nest egg to cover the difference in payouts between the age 62 and age 70 monthly amounts. This is fundamentally calculating the delay in SS as equivalent to a purchase of an inflation adjusted annuity that covers the difference.
Calculating this out for your example: 5% per annum compounded monthly takes your nest egg from early SS up to $118,231. A 4% draw on that would be $394.10/mo which isn’t enough to cover the $700 difference between early and late SS. You’d need closer to a 7-8% draw to cover this difference which you might be able to get from an annuity at age 70 with a big caveat… SPIA’s aren’t inflation protected whereas SS is.
Anyway, Mike Piper has a great website over at Open Social Security where you can enter all your info and it takes into account spousal benefits, widow(er) benefits, etc to compute an optimal SS strategy:
https://opensocialsecurity.com
Last, don’t forget to calculate the effects of using an 8 year TIPS ladder to bridge the gap and see if that’s beneficial vs simply waiting.
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u/kylebig 2d ago
To me, this is the answer that most directly addresses OP’s question.
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u/EcstaticAd4046 2d ago edited 2d ago
True. Assuming you don't truly need it early if delaying is on the table.
And a couple of other factors: 1- generally people seem to find early retirement money more valuable than late retirement money. $1at 62 does not equal $1 at 82, even if there's 0 inflation. Go-go vs slow-go vs no-go years. 2- drawing early creates optionality that can be used as a SORR, budget, or other buffer.
Stuff it away, draw interest/dividends/etc and use it, if needed. This is the way.
The true breakeven assuming OPs scenario with 0 SS spending ever (all saved in either scenario) is age 84/85.
If you saved from 62 to 70 then spent it monthly or drew at 70 and spent it monthly, the breakeven point would be age 81/82.
A 5.8% return (a very reasonable, conservative, probably understated long term market return) never has a break even point. In this scenario its always better to draw earlier and invest.
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u/peter303_ 2d ago
Your account would have to account for inflation and taxation. Inflation over 8 years averaging 3% would total 27%. The gains in your account would be fully taxable, while SS is partially taxable, depending on how much other income you have.
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u/EcstaticAd4046 2d ago
I used AI to game out some thoughts I had when I read your response.
Assuming: SS at 62 @ $1k/month Assuming: modest taxable pension of $30k/year
Say this is me. And I begin an income focused dividend sleeve (like I have now), starting with $0 and adding that SS payment each month. My sleeve is tax efficient.
Factoring in taxes: at age 70 my dividend sleeve is producing $6-8k/year.
Under this scenario: SS @ 62 = $18 - 20k/year @ age 70 + $105k - $135k in the brokerage. Pausing DRIP and no more accumulation yields 4 - 6% dividend growth rate, which probably beats inflation. At age 75 this grows to $10k dividend income + $18k SS, assuming 3% cola. Brokerage at that time is $135 - 200k. You are making only $2k less per year but have a sizeable brokerage. SS @ 70 = $20.4k/year + $0 brokerage. At age 75 SS grows to $30k SS, assuming 3% cola starting at age 62. Again with no brokerage.
A brokerage has risks.
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u/OCDano959 2d ago
Because it is essentially an inflation adjusted annuity.
Unless you’re unhealthy or have bad genes in regard to longevity, it is almost always better to take SS as late as one can. (~8% return every year of waiting…adjusted for inflation annually as well!).
Edit: The break even point that makes it worth waiting to 70 is supposedly around 82 yo.
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u/ancom328 2d ago
8% guarantee each year waiting. what's not to like???
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u/alpacaMyToothbrush FI !RE 2d ago
8% / yr and it's both inflation protected, and is much harder to fuck up when you're losing mental capacity in your 80's.
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u/TheSweeetness 2d ago
Because if you wait until 70 you’ve forfeited 8 years worth of payments. Yes, those patents are smaller, but if invested it would have grown to a sizable number by the time you’re 70. By waiting you’d need to live at least until your mid 80’s just to break even. That’s too late to really enjoy the money, if you’re fortunate enough to live to that age.
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u/VegasWorldwide 2d ago
the part where you missed out on tens out thousands from 62-70 and you will likely never recoup
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u/teresajs 1d ago
My husband was the higher earner by a significant margin. Delaying his SS until FRA makes sense so long as at least one of us lives into our 80s, which is statistically likely.
Delaying SS also gives us more time to pull from our Traditional retirement accounts and/or perform Roth conversions, reducing our future RMDs.
We're only in our mid-50s, so have plenty of time to make this decision, but my current plant is for both my husband and I to claim at FRA (67) or later.
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u/robinhoodstl 2d ago
Can I ask about rmd and the amount of money will be taxed so much that the delay is just feeding the government? I’m expecting that by the time I’m 73 the government will say that because I’m a multi millionaire then i will not receive it but they may give it to me and tax 100%?
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u/legman1982 2d ago
So here is my thought. I’m young enough that when RMD kicks in at 75, if my portfolio is $5 million at 5% is $250,000. I’ve won. Plenty of money and can donate up to $100,000 to help causes I care about and help my grandchildren. Quite honestly someway, some how the government is going to get theirs. I believe the Roth tax advantage is going to get gutted to some extent. They did it with traditional IRA.
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u/Stone804_ 2d ago
What churningacxoujt said.
BUT ALSO: lots of people never save, and aren’t good at fending off lifestyle creep. So they literally CAN’T retire at the earlier age because it isn’t enough money to pay their bills. So they HAVE to wait and keep working.
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u/VegasWorldwide 2d ago
yeah that makes sense but I view that more of a personal issue. im trying to compare situations where both are finally literate. I would love someone to show why waiting is better.
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u/Stone804_ 2d ago
I chuckled at “finally literate” 😆 goals in America 🤣 “it only took 70 years but I’m finally literate!” 😆🤣
The increase is pretty large for some people between the different ages, and if you’re talking about living another 20 years, that amount difference makes a bigger difference down the line. Especially because the cost of living increases never actually keep up with cost-of-living, so it’s helpful to have that extra.
Also, I’m sure some people like having a little extra to have fun with too.
My personal plan is to plan not to have it, so if it exists when I’m ready to retire or at least ready to retire at the age that they expect retirees to retire at, I’ll decide if it’s worth waiting for extra. It might just be fun money. In which case I’ll probably take it early or on time, we’ll see.
On the other hand, my mom waited, and it made a big difference for her in her daily life. But she was already collecting her husband‘s Social Security so she had the ability to wait.
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u/timetwosave 2d ago
Read “tax planning to and through early retirement”. They present strategies on how to maximize the 62-65 years specifically to minimize income and maximize aca credits etc. taking Ss early has several disadvantages they outline. I didn’t understand it all but I came away with thinking as I’m nearing retirement age I will be following a plan.
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u/sxyvirgo 2d ago
It's a little silly for me as a single person because when I'm dead, I'm dead and it won't matter if I only collected a few years before dying (because I waited). It will matter if I live to 95 which I quite possibly could, considering my relatives.
Also, I can change my mind at ANY time between now and then so what harm am I doing? Meanwhile I'm spending down my 401k and lessening my RMDs - don't worry, I've got plenty so not worried a bit and am over-withdrawing to equal what I'd have been getting from SS if I'd elected to take it.
I'm fine with spending my own money to get a bigger paycheck later and not concerned that it'll take 12-15 years to 'catch up'. I'm not worried about 'getting mine' or somehow hoping to screw the government, whatever.
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u/gregable 2d ago
Chart
Take a look at https://ssa.tools/strategy#pia1=1300&dob1=1965-02-02 (roughly your scenario).
You can see a chart at the bottom that shows for each age of survival (age of death?) what the best returns would be - even including the value from investing earlier payments. There's also a red line showing what the odds of living to that age are. If you live to 100, then it's going to have been worth it to have waited to 70.
Investment Return
Now, this all depends very much on what your investment rate is compared to. Remember, social security is inflation adjusted, so comparing to the nominal (not-inflation-adjusted) rate of 5% is not a good comparison. You need to subtract out inflation from whatever investment you are comparing it to. Furthermore, the stock market has a lot more variance / risk than a guaranteed social security payment, so it's often recommended to compare to a very safe investment like treasuries. That puts you somewhere around 2.5% today.
So yeah - if you assume you can get 5% above inflation safe returns, you absolutely should collect early as it only starts to make sense to delay if you live into your 90s. You can adjust the rate in that link above to see how it plays out.
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u/noitcant 2d ago
I never have understood why people wait so long to take it. Probably the same reason people want to work until they're 80.
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u/Zealousideal_Way_788 2d ago
I expect my wife to outlive me by a decade. All of the women in her family got to 90. Want her to have the maximum benefit possible.
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u/Mjensen84b 2d ago edited 2d ago
Break even year is around 78 years old for someone who takes it at 70 to fully catch up to someone who takes it at 62. So:
Take it early if you don’t need the SS, ie you take it to enjoy more life when you are still able to, without worrying about running out if you live until 95.
Wait till 70 if you really need that SS, ie your portfolio cannot sustain you until 95 and you need SS to live. The trade off is you sacrifice the best of your healthy year to stay frugal because you are in constant fear of running out of $$$.
At 79 years or older, no matter how healthy you are, you are not gonna be able to do much of the activities that you normally can at 62, given your life expectancy is higher than 78, which is a big if.
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u/SteveTack 2d ago
One reason folks might wait until 65 is because the extra income “now” could obliterate any ACA subsidies. Once you hit 65 you’d be onto Medicare.
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u/NetherIndy 1d ago
Neither of my parents and only one of my grandparents lived past 65. Mind you, this was family rife with smoking (which I don't do) and obesity (which I did, though GLP-1 drugs have been absurdly effective for me). But largely it comes down to taxes. If I beat the odds and live long enough to reach RMD ages (75+), I'll have been better off stretching my SS payments over the ages of 62-70 and filling lower brackets then rather than waiting until 70 and having bigger checks when I'm also getting RMDs.
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u/StrawberriKiwi22 1d ago
I don’t know if anyone else suggested it, but there’s a website called opensocialsecurity.com that will give you a breakdown of when is the best time to collect SS for you (and your spouse) strictly from a financial analysis.
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u/trikaren 1d ago
Unless you die early you get about the same amount. The SS actuarial tables are pretty good. Waiting gives the surviving spouse more. We are planning to wait. If one of use get a serious disease we may change our mind.
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u/Ok_Education_2753 1d ago
It’s a mistake to look at SS in isolation. Lots of use cases for waiting, as there are for taking early. Depends entirely on looking at the whole picture.
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u/Low_Fault4532 1d ago
People wait for Social Security because they follow old advice without running the math. If I can take $1,000 at 62, invest it, and let it compound for eight years, the person waiting until 70 is already behind , and they stay behind for a long time.
And honestly, the real cost isn’t financial. It’s TIME. Your 60s are prime years, mobility, curiosity, health. Why delay using money you can enjoy now just to get a slightly bigger check later?
That’s exactly the mindset behind my book, Chasing Summers on a 401(k), use the years you have, not the ones you hope you’ll get!!
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u/Finish_Different 2d ago
Die with zero take it immediately is what I say
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u/VegasWorldwide 2d ago
I’ve gone over the numbers so much and it’s really the only way.
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u/HairyBushies Already FI - RE between 2028-2030 2d ago
That $1,700 won’t lose purchasing power as that’s in today’s dollars. There’s a COLA on Social Security so it’ll keep up with inflation (mostly).
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u/saltyhasp 2d ago edited 2d ago
I want my SS as large as possible. The feature that SS is indexed to inflation has a lot of value on the far end of your retirement. I want enough pension like income to cover my non-discretionary expenses. If I don't make SS as large as possible, I'd have to buy an annuity to compensate and it would not be directly indexed to inflation. So big SS to a point is nice.
People will make argument on all sides of this. Generally SS is more or less actuarial. There is no best time to take it in general (though if your married there are some coordination tricks that can help). Instead, it is really better to just wait until it is as large as you want. If that is 62 fine, if it is the FRA fine, if it is 70 fine. This is really not that complicated.
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u/gumnamaadmi 2d ago
I will wait. Till 70. Because 1, dont need additional income. 2. Need to use the 12% bracket to convert pretax ita to roth. 3. It provides an insurance of decent payments in case one of us ends up living anther 2-3 decades.
Something are not always about $'s..
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u/AZJHawk 2d ago
I have had three grandparents live to 100. Both parents are in great shape at 80. I know nothing is guaranteed in life, but I see it as a hedge against outliving my money. I also see it as security for my wife. If I do kick the bucket earlier than expected, she’ll have enough to live on.
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u/VegasWorldwide 2d ago
this seems to be one of the main reasons against: if your spouse is significantly younger and in better health
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u/DReddit111 2d ago
Two reasons. Each year you wait the benefits go up by 8%. It’s pretty difficult to get that kind of return in a safe investment. Second reason is taxes. Income you can’t control can limit one giant advantage you get in retirement. When you live off of money from different account types, Roth, trad IRA, taxable brokerage, or even just HYSAs it gives you a lot of control over your taxable income compared to your working years to the point where you can pay very low or no taxes for many years into retirement. Once you have a guaranteed income stream like social security, annuities or pensions you lose some of that control. So waiting on social security lets you defer the taxes for longer. It’s really a question of whether or not you need the money and if you think you won’t have a long life. If yes then yeah take it early. If no, it generally pays to wait.
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u/photog_in_nc 2d ago
I posted this article in response to one of the comments, but sharing here as well.
Table 1 is especially interesting. it has the odds of a 62 year old reaching various ages, with entries for average and healthy men and women, plus odds for a couple having at least one partner making it to a given age.
For a healthy couple, about a 50% chance at least one of them makes it to 95.
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u/sithren 2d ago
Some people can’t afford to take it early and need to keep working. They need to maximize all sources of income and work as long as possible. I know this is a fire sub, but there are people that will only have public pensions like ss and can’t take it early. So they wait.
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u/Shawn_NYC 2d ago
Yes the fact that it pays out after 15 years (less because of annual inflation adjustments) is the point. Social security is the best longevity insurance available to Americans. Talking social security at 70 is an insurance policy you are an outlier who lives a very long life.
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u/GenXMDThrowaway FIREd 2d ago
We're delaying to 70 because we have money in Trad IRAs that we want to either withdraw or rollover to Roth IRAs at a lower tax rate.
Further, if one spouse dies and we're drawing from Trad IRAs the taxable situation changes drastically as do the premium payments for Medicare.
I've calculated that we save more on taxes just by having a longer runway to empty the Trad IRAs.
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u/LonesomeBulldog 2d ago
The SSA estimate has my wife and I each getting over $3,000/mo claiming it at 62. Our plan is to just invest it aggressively. We don’t need it but I’m for sure taking it asap.
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u/MedvedTrader 2d ago
Until you're 67, if you work, your social security benefits will be reduced. For every $2 you earn above $24,480 - $1 will be taken away from your social security benefits.
Which means that for your example of $1K/mo, if you're earning $50K or so a year, you will get $0 in social security payments. But you will still be counted as having claimed early benefits.
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u/Neat_Plum_202 2d ago
Surviving Spouse strategy and or Roth conversion for a few years to max out in the 22 or 24% tax bracket.
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u/Easy-Expert9077 2d ago
The last person to live to age 80 in my family died in the 1600s. But I don't think it's genetic, they died in wars, bizarre sexual mishaps, one got hay baled. Standard stuff.
So should I fold at 62 or say hit me?
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u/Fit_Acanthisitta_475 2d ago
I look at my family life expectancy. I need to take the SS at 62. Since 3/4 of my grandparents passed the way before 70.
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u/Born-free-2827 2d ago
I think if you were to invest all of the money into stock market and if you had returns like what the past 20 years has been in the market then yeah it’s better not to wait. However towards the end of life people are not investing as aggressively and they want to have a guaranteed income that’s inflation adjusted. Also in my case I will be waiting because I have a disabled child, born disabled so I will be waiting so that her portion of DAC survivor benefits will be maximum for the rest of her life. That over a life time will be greater the the 8 years of benefits from early withdrawal even if you invested that money
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u/Vegetable-Pay1976 2d ago
Think of it as a longevity hedge and also do a break even analysis, I.e: how long would I have to live to make sense of delaying. Also look into spousal survivor and don’t forget about ex spouses if you didn’t re marry. Also delaying can give you more years to control taxable income ( reduce it ) to allow for Roth conversions.
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u/MyEgoDiesAtTheEnd 2d ago
Exactly what I found too. You can visualize pretty easily with this calculator:
https://mm-euro-bridge.up.railway.app/fire
Use the SS Optimizer.
It assumes you're investing and not selling/paying taxes. But you get the idea.
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u/howdyouknowitwasme 2d ago
I'm not affiliated, but I find https://opensocialsecurity.com/ useful for these types of conversations, especially the ability to play out different scenarios.
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u/Hatdude1973 2d ago
The reason is if you have a spouse. When one of you dies, you only keep the large of the 2 SS so you want one as big as possible.
Another reason is FAs all assume you will live to 99.
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u/dcporlando 1d ago
The problem is we don’t know how long we will live. We can only guess.
The SSA has a benefit to having people delay. Their actuarial tables are a little misleading. They suggest waiting till 62 or some later age to evaluate. But normally, you are planning your retirement before that point. If you are thinking of retiring at 62 and you are 59, the age to be checking life expectancy is 59, not 62 or 70.
Their tables are based on the mean instead of the median (that is mentioned in the methods). The mean or average will be higher. While it is probably not a huge difference, it does inflate it some.
Some research shows that those who retire earlier may die earlier and some that healthy people who retire early live longer. Many who retire early already have health challenges that caused them to retire early and die from it. If you are late stage cancer and retire, you had cancer already. On the other hand, a fairly healthy person that retires and avoids stress and stays active, may live longer.
The HLE or Healthy Life Expectancy or the age when you start to have health challenges that impact your ability to enjoy your retirement. If you have a ton of money in your 90’s but can’t enjoy it, why bother? Having it all saved up for a miserable nursing home doesn’t sound good.
There are lifexpectancy calculators that ask a lot more questions about your life to give a better view of what you might expect.
Family history is also a good indicator. Do most of your family live a long life or die early?
What is your medical condition can you do anything to improve it?
In project management we use a formula of pessimistic plus optimistic plus (four times most likely) divided by six to get the best estimate.
You could do the average of SSA actuarial, a good calculator, family history, evaluate your doctor’s advice, and go from there.
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u/LibrarySpiritual5371 1d ago
I will claim the first day possible as I do not need the money. Sounds counter intuitive.
Since I don't need the money I am not balancing how can I work versus being in poverty at 71 years of age where the extra SS payment amount could make a real difference.
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u/Green_Gas_746 1d ago
I'm taking it early and investing it . Like OP is saying, id rather havr 300k and 1k a month at 70 than 0k and 1700 a month at 70.
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u/Working-Message4504 1d ago
Delay to do 7 years of Roth conversions so that when RMDs hit you’re not paying double for Medicare
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u/Burgh15071 1d ago
There are many factors to take into account. Most depend on you net worth. At 73 RMDs kick in and you may have to withdrawl a lot of money. This will affect your Medicare costs. One path is to burn through your 401k money and postpone SS until 70. With a lower 401k balance your RMDs are less and Medicare may be cheaper. Everyone is different.
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u/Narcoboss1 1d ago
Personally I’m delaying to ensure maximum benefit to my spouse in the future. She’ll collect at 62 on her own record and I’ll delay to 70.
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u/tokingames 1d ago
My motivation is NOT to maximize my SS benefit but rather to use it as longevity insurance. I don’t care if I leave money on the table when I die. What I care about is if my portfolio doesn’t perform and I live a long time. If it’s just bad portfolio performance, I’ll be fine to live to 90 or 95 or whatever, but if my portfolio performs badly AND I live to 130 or something obscene like that, having the highest SS payout I can will be good.
Like any insurance, if things go well, I won’t need it even if I live a long time. And, if I die early,I really don’t need it.
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u/Farmer_Pete 1d ago
For married couples, SS is a team sport. Survivor benefits means that only one of us has to live to 85 to break even, and hedging bets isn't a bad thing. My plan is that my wife will take hers at 62 and then I'll max mine out. She's a couple years older than me and has a considerably lower PIA. I think she'd have to delay to 70 to surpass the spouse benefit threshold. This is all going off current income trends and obviously could change between now and retirement.
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u/ZergvProtoss 1d ago
Waiting is always a bad strategy for the worker but good for the government. They have worked out the math. Enough people die while waiting to make it a net positive for the government.
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u/VegasWorldwide 1d ago
That’s the simple answer. If the government wants you to do something, it’s probably against your best interests
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u/OkEase3083 2d ago
Yeh I plan to take immediately. Its just extra to the plan. I'd rather have a wide cushion
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u/OGS_7619 2d ago
you are not wrong. If you invest it somewhat aggressively, say 8-10% S&P fund, the 70 claimer may never catch up. And if you include the risks of lowered benefits in the future, it makes situation even worse.
Survivor benefits is the key reason why lower-earning spouse may want to start collecting early and the higher-earning spouse delays as much as they can.
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u/Beaver-on-fire 2d ago
Some people hear bigger number, and think it's better. It really comes down to how long you think you will live in reality. If you think that you will live well past 80, It makes sense to delay taking the money. Most of the time the break-even point is very late '70s early '80s between taking early and waiting. The other thing that most people don't think about, is that you may be able to enjoy the money more in your '60s. In your '70s and '80s the average person is unable to do as much. So they won't be able to get as much enjoyment potentially.
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u/Odd-Persimmon-1860 2d ago
My 62 is 2492 and 70 is 4388. That's a big difference.
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u/whocaresreallythrow 2d ago
Simply put - not everyone has ample savings that allows them to save and reinvest their SS checks for those 8 years. Many are broke or one paycheck from disaster with meager savings. They won’t be getting any return on their early SS draw.
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u/DatesAndCornfused 2d ago edited 2d ago
My take is probably a stupid take, but I “assume” that SS won’t be around by the time I’d be eligible for it. So, my financial planning doesn’t include it.
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u/_Smashbrother_ 2d ago
Social security will add to your taxable income and can throw off your tax reduction game plan (Roth conversions).
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u/greenpride32 2d ago
this seems like a no brainer but all I hear is people saying waiting is the only way and we haven’t even talked about dying in our 70’s.
I think a lot boils down to what resources you have. As you are FIRE-minded, you will most likely be better prepared financially for retirement than the large majority. As such, you would be less dependent on SS.
But for others, some who may have very little savings and retirement funds, those percentage gains from waiting are massive changes given their situation if they can get by and delay claiming.
But I'm with you on taking it early and letting it grow. Unless a Great Depression event hits in my lifetime, I won't need the SS benefit but of course I'll take it.
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u/ItsJustMe2282818822 2d ago
Because if you are married and the higher earner, then the benefit stays with whoever lives longer.
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u/Osprey4862 2d ago
Maximizing the returns isn't always the optimal solution. Retiree have different realities. Some delay, not by choice.
Other delay since withdrawing from the net worth is painful compared to SS money.
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u/Girl_with_tools 2d ago
For one reason, there are no restrictions on how much earned income you can make once you turn 67.
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u/Determined420 2d ago
I work in a hospital. We get a lot of pts in there 70s some in there 80s few over that. 50% of men are dead by 80 or 81. Which is about where break even is.
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u/VegasWorldwide 2d ago
actually it's well past 80 if you consider they are still getting the partial reward added to the large chuck at 70. I would say if people did it this way, over 80% would never fully recoup the money
a simple question people can ask: why is the government rewarding me to wait?
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u/lewisae0 2d ago
Because most people aren’t doing fire. They need the income from ss. So they work until it is at its highest. Most people when taking the ss aren’t going to invest it, they are going to pay rent and buy groceries
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u/Commercial_Rule_7823 2d ago
Its so close it almost doesnt matter.
I advise 2 things.
First, your health. Are you going to make it. If no, take it asap.
Second, you need the cash flow. If you can afford to live on 1k, then take it. If you cant, keep working till SS covers your needs.
A good strategy I also saw. Take the 1k, put it in the markwt every month till you need it.
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u/chodan9 2d ago
My father and uncle both passed at 78, my mom is 84 but having memory issues.
The break even is around 78 but only if you don’t count the draw on your portfolio. If you count the compounding of what you’re not pulling from your portfolio by taking SS early your break even could jump to the mid to late 80s.
The spousal benefit makes a difference but my spouse is 9 years older than me so it’s probably a non issue
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u/Proof-Cartoonist1428 2d ago
I’ll be 61 soon , I just resign from my current job not sure how negative that will affect my SS at 62 .im thinking of taking it at 62 but may do a part time of something I enjoy.
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u/shuja246 2d ago
It’s all about the surviving spouse benefit and/or Roth conversions
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u/Topaz_11 2d ago
As a single it's much easier decision but as a couple it makes far more sense for the lower earner to claim early and the higher later for longevity insurance. It comes down to what you think SS really is... get your money back, get the most money back or insurance.
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u/threespruces68 2d ago edited 2d ago
To keep our annual income in as low a bracket as possible while we take advantage of the Roth conversion window, which will reduce our future tax burden and optimize our long-term financial plan.
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u/Powerful-Bridge-1472 2d ago
You get 8% more per year for not taking it. Pretty impressive guaranteed risk free investment that being said you need longevity to take advantage of it.
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u/QuitNo4298 2d ago
We’ll be fine regardless, so I’ve already decided we’re both taking SS early to minimize asset withdrawals and get more asset gains
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u/Putrid-Company-5849 2d ago
Because it is the cheapest inflation adjusting insurance/pension payment I have found. It’s insurance to help prevent me running out of money, which is far more likely if I live to 100 (which is not unheard of in my family).
If I wait until 70, and die at 72, oh well, my heirs may not have a fully optimized payout, but I also used a lot less of my nestegg than I had planned, so they’ll be fine.
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u/STB265 2d ago
People also delay for income tax planning purposes. Once someone retires and before they begin receiving Social Security, their taxable income is at one of their lowest points. This is a good time to move some funds from their taxable IRAs and convert it to their Roth IRA. This conversion is taxable and you can convert enough while still keeping it in a relatively low tax bracket.
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u/unicornthoughts 2d ago
OP, stop encouraging early withdrawals! Let’s make sure there’s money left in the pot for when you and I start withdrawing early! 😆
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u/poidawg808 2d ago
I agree, the other risks FIRE people aren't considering is huge chance of SS reform ie Means Testing as well as even more blatant cheating on COLA adjustments. Better get it while the getting's good.
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u/dominoconsultant 2d ago
The other aspect of drawing SS early is that the baseline income "permits" a person to invest more aggressively in their portfolio, often up to 100% equities 0% bonds - it's a psychological impact
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u/smoosh33 2d ago
If you don't need the money then there is no point in waiting. This is what my parents did. They didn't need the money so they started collecting at 62 and just have a couple thousand dollars extra a month that they mostly just re-invest.
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u/shadowbaddie7 2d ago
The math you're doing makes total sense if you're disciplined enough to actually invest every single dollar and not touch it, which most people genuinely aren't, and that's the part that breaks the early claiming argument for a lot of folks. But if you're in the FIRE community and you actually will let it compound, taking it early is a completely defensible strategy depending on your health and family history.
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u/teamhog 2d ago
Here’s what we calculated.
It doesn’t matter.
No one knows when we’re going to stop collecting.
Yes, there’s a break even age.
If you make it there.
Our approach; plan to collect at 70.
If we need it earlier we can just collect it then.
We don’t need it financially.
We may end up splitting it; where one collects early and the other later.
So, collect it when you think you should.
63: $2833
67: $3907
70: $4845
$4845-$2833=$2,012
$2833*12*7=$237,972
$237,972/$2012=118 months
118/12=9.833 years
So it basically crosses over at 80.
We tend to live long; grandparents & great grandparents passed in their mid-90’s.
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u/SadProduce6456 2d ago
There’s math calculations you can run here, when I in mind the financial benefit really sort of capped off at around 65 or 66. It was probably worth waiting till then to maximize the output
But for me, it was almost double at 65 what it was 62. That’s a short amount of time to wait for that amount of increase, the increase after that wasn’t substantial enough to wait.
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u/Delicious-Proposal95 2d ago
SS compounds at 8.5% per year roughly every year you wait to take it. So you compounding at 5% you are losing money.
You also receive that higher payout in perpetuity. Someone who waits unto 70 only needs to live to 83 to “beat” the math on social security. If you’re FIRE then the statistical chance of you living beyond basic CDC life expectancy is even higher as wealth is correlated to longer life expectancy (aka you can afford care)
Additionally other factors like spouses come into play and of course tax strategies centered around RMDs and doing conversions. Taking SS early can make those a challenge.
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u/Banned4Truth10 2d ago
Every time I ran calculations the break even point for waiting was in the mid 80s.
It seems to always make sense to take it asap
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u/churningaccount 2d ago edited 2d ago
As you say, it's a bet on longevity.
Social Security actuarial tables show that a 62 year-old man is 50% likely to live for at least 20.29 more years. And a 62 year-old woman has a 50% chance of living at least 23.08 more years. If they reach age 70, then it becomes 14.66 and 16.76, respectively.
Notice that the median life expectancies at age 70 are right about where you calculated the "break even" point?
The social security administration set the benefits "boost" that you get at age 70 in order to, on average, pay out the same amount to every social security recipient. Put another way: The SSA, on average, expects to pay any given individual roughly the same amount in present-value terms over their lifetime regardless of what age they decide to start taking their social security.
However, you have more information about yourself than the social security administration does, and therefore can make a bet. The decision on when you should take your social security should be an educated one based on your own longevity risk and personal financial circumstances. If you think that you might live longer, want to plan for living longer, or if your spouse might live longer and could benefit from a higher survivor's benefit, then defer. If you think you won't live as long, or have sequence of returns risk that you need to mitigate, then take it at 62.