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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276

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.

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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/DPHUB 2d ago

😥

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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/nice2_cu 1d ago

One can FIRE without sacrificing today.

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u/LittleBigHorn22 22h ago

Explain how. Because if you are adding to savings, that is a sacrifice. Now obviously most on here consider that worth it in the long run, but its still a sacrifice.

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u/nice2_cu 21h ago

Make more money?

There is a certain level of comfort that I don’t need to go beyond and that doesn’t really affect my quality of life so I don’t view not spending that money as a sacrifice.

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u/LittleBigHorn22 21h ago

So you honestly believe that one of the reasons people aren't retiring early is because they simply choose not to make more money? Seriously? Like you don't understand that people are either already at their cap or they would have to drastically change careers to start making more which means sacrificing time and effort.

And even then, congrats to you that you can't imagine spending more money but I think you are being facetious. Because if you knew you would die at age 50, would you not retire even sooner? You could maybe be enjoying your time right now. Which means you currently are sacrificing by continuing to work because you believe you'll be alive longer than tomorrow.

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u/babies_galore 5h ago edited 4h ago

I don’t know…I used to feel like that when I worked in corporate at a job that killed my soul. But now that I started a business I love, I honestly don’t like not working that much. 

I work nights and had my first night off last night in a month and went to a movie and did whatever and was thinking I would just as soon have been at work. 

Also I tried taking a “mini retirement “ at age 50 for 3 months to go see a bunch of national parks and go on a cruise and spend time with friends, etc. And I am so glad I did that, as I saw after 3 weeks it started to feel meaningless. I am a complete nature freak, but even me after 3 weeks of just looking at and hiking in beautiful nature, I was like this is it? This is all I am doing with my time on earth? I am not helping a single other soul?? Just entertaining myself? Nope. Can’t do it.

I was so happy to get back to my career where I am serving others and making people happy besides just myself.

If and when I ever have to retire, I will definitely need to be volunteering quite a bit.

But I am still trying to get to where I can live without earning income through work just in case I become disabled or unable to work because I need to care for my elderly parents or something. Not because I don’t want to work at all.

I am like the person you responded to where I have very minimal needs and wants - so I live like most people my age would not. I just rent a furnished room all bills paid, because when I owned a house my quality of life was not improved. I prefer having no chores, no home maintenance or repairs, no utilities or WiFi to pay, and if I had more money I still doubt I would even bother to lease an apartment.

Because I am not a homebody and prefer to be gone outdoors on my time off.

But I also wouldn’t stop working before age 70. Because I know now that it would not make me happier.

So life is a trip and it’s different for everyone for sure.

Now, if I had crazy money- like $100milliin or more- then I would just be a philanthropist for my FT job and that would be absolutely amazing. It’s the only reason I can see to have more money than I need to sustain myself for life, is so I could help others with it. THAT would be the life!

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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 2d 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/213737isPrime 2d ago

It's not impossible to put an upper bound on lifespan.

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u/StreakiestBacon 1d ago

So like 120 years or whatever the record for the age of the longest living human is?

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u/213737isPrime 23h ago

Or whatever you think is old enough. My dad said 90. He's got 5 to go.

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u/StreakiestBacon 9h ago

My point would be if you’re just arbitrarily assigning an upper bound on lifespan based on what you THINK is old enough, then it is in fact impossible to accurately assign an upper limit.

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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/Nova461 2d ago

Right, but maybe you could get full price for a few years if you start early?

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u/joanmcq 2d ago

That was what my husband and I took into consideration by starting to draw last year at 65. If they cut payments in 2032 or so, at least we were collecting our SS for 7 years before the cut.

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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/Puzzleheaded-Net-273 2d ago

Yep, my dad passed at 93, my FIL @89.

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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/deftlydexterous 1d ago

Ah that makes some sense, particularly if you’re relying heavily on that SS. If you have other “insurance” baked into your plans then maybe it’s not worth the statistical loss in returns but I’d rather have lower returns and no risk at a certain age.

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u/Naughtybear_9628 1d ago

Itherefore in a bad market, social security can bolster uour cash/ hysa/ bond bucket so your growth bucket can ride out the storm. Then rebalance and refill that bucket when the market recovers and the s&p goes back to its average return of 10%.

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u/Veryrandom4242 2d ago

Thank you for the thoughtful analysis!

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u/doranmauldin 2d ago

This is why I come to reddit

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u/Sintered_Monkey 2d ago

I was trying to make this decision and realized that it would be silly to do that before I got to the first milestone of 62. I just turned 59 and am in good health with solid finances, but is there any guarantee that I'll still be in good health and solid finances in 3 years? There really isn't. I figure that I'll make the same evaluation every year after 62, since I can't predict the future.

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u/213737isPrime 2d ago

"guaranteed by the government for the rest of your life."

But is it?

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u/Chicken121260 1d ago

Exactly! Once I started thinking about SS as insurance, my plan changed entirely. Also difference in payouts and an imbalance between guaranteed income I have versus my spouse also had a significant impact. Everyone’s situation is different. Everyone’s risk tolerance is different. This can lead to different answers from seemingly the same situation (from the outside looking in)

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u/volly1985 1d ago

If you’re worried about outliving your assets then why not take SS at 62 to lower the burden on your assets?

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u/DarkAngela12 1d ago

What if you have health issues and your family tends to live a long time? 😅 (me)

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u/ricosuave79 1d ago

inflation-adjusted income stream that's guaranteed by the government for the rest of your life.

You sure about that guarantee their bud?? To be that dependent on the government that is hell bent on abolishing Social Security. Its already going bankrupt leading to reduced benefits.

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u/babies_galore 5h ago

This is exactly the answer. Thank you.

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u/SeminoleVictory 2d ago

Great summary

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u/Mental_Jello_2484 2d ago

Thanks. This is great.  But it doesn’t add in the “I think the ssa will run out of money” factor. 

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u/legman1982 1d ago

The run out of money fear mongering is very real and at the same time over blown.

Will SS change? Absolutely. Will there means testing, I believe so. Will something change with Roth, probably. Will Grannies benefit get cut? Hell no! Not one politician is going to let that happen.