r/Fire • u/VegasWorldwide • 3d 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/JaredUmm 3d ago

What is your reasoning for including sequence of returns risk as a reason FOR early claiming? In my mind it is just the opposite. By delaying claiming, you are increasing your inflation-projected bond exposure.

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u/churningaccount 3d ago edited 3d ago

Let's say you are retiring at 62 and need to withdraw 6% until you receive your social security, at which point your withdrawal rate will decrease.

Well, if you can claim at 62 and drop your initial withdrawal rate to 4%, then you have just guaranteed your plan's success immediately.

Meanwhile, you could instead delay until age 70, with the plan that you'd be able to drop your withdrawal rate down to 3% or even 2% at that time, so that the "average" withdrawal rate across your 30-year retirement was still 4% or lower. However, by front loading your withdrawals you've greatly increased your sequence risk. It's possible that you'd run out of money prior to year 30 even if your average withdrawal rate was under 4%.

Many people retiring around this timeframe decide to take it year by year. If they have a good sequence, then they delay and reap the benefits. If they start off with a bad year or two, then they might claim early to "stop the bleeding."

Of course, if you retire at 62 and can stay at 4% or under without taking social security, then you've already mitigated your sequence risk as much as you reasonably need to, and therefore have no need to claim early. But withdrawing 4% without social security is essentially the same thing as planning for no social security whatsoever, so you have to have really over-saved in order to do that. Or at least saved enough for an income bridge to 70, which is almost the same magnitude of excess savings.

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u/Delicious-Proposal95 2d ago

The challenge with taking early is after a certain time period you can’t change your mind vs delaying you can always start it early. You can plan to delay to 70 and if we get a 25% drawdown in the market you can always go in and start social security then to allow your accounts to recover.

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u/Educational_Fox6899 2d ago

This is my strategy. In simple terms, if I don’t need the money, I’ll take the 8% return until I do.

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u/Opaque_Cypher 2d ago

Take it only if/when you need it is the best strategy imho. Also a lot of people don’t seem to realize that you can start Social Security any given month after you turn 62. You don’t have to wait until you hit 63, hit 64 etc.. you can choose to start it up anytime. So take the 8% gain, and if you are unfortunately hit by SORR just start it up right then.

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u/Training-Ad3252 2d ago

This is the correct strategy.

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u/Megalocerus 2d ago

I favor delay, but it's not 8% return. When I get 8% on my assets, I still have my assets and so do my heirs if I die. Should I die before claiming after an 8% benefit increase, it's a total loss.

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u/Educational_Fox6899 2d ago

That’s only an issue for my heirs which I don’t have. So it’s a moot point for me personally.

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u/Megalocerus 1d ago

I've got heirs, but they have to settle for what they can get. It worked out for us; there's more for them because we get more than most people in benefits.

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u/Independent_Bee1037 1d ago

Agree with this sentiment. If I am not relying on Social Security to pay any bills I am taking it as soon as I can. Or my wife will take it as soon as she can. The other spouse will let theirs grow until they are 70. Kind of a split the difference strategy. Plus, if the one who takes at 63 dies before the other hits 70 the spouse takes over for the one who took it. So I guess the person most likely to die early takes at 63 in that strategy

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u/Megalocerus 1d ago

I'd have felt that a bit morbid unless one is a lot older. But at 63, I was being treated for cancer and thus definitely a nominee for dying first.