Retirement Talk - Deciding When to Claim Your Monthly Social Security Benefits

[uscfanhawaii]

Thanks TommyIV for your ‘like’. You moved me up to 4,000 reputation points!!

[evilanne]

I just started getting the FERS supplement...it was more than I expected. It is more than 5 years away until I have think about it but I still believe I will wait until FRA or 70 to draw SS...I'm optimistic that waiting will pay off over the long term and if I kick the bucket sooner, there will be more left for the rest of you.

[nasa1974]

I just started getting the FERS supplement...it was more than I expected. It is more than 5 years away until I have think about it but I still believe I will wait until FRA or 70 to draw SS...I'm optimistic that waiting will pay off over the long term and if I kick the bucket sooner, there will be more left for the rest of you.

Evilanne,

For social security you want to do the math. The difference between FRA and 70 to collect or even when you become eligible say at 62/63. Here is an example, but it doesn't include Medicare Part B payments;
Monthly check at FRA = $1200
Monthly check at 70 = $1600
If you start collecting SS at FRA (I'm using 65) that's $14,400/year or $72,000 for 5 years. The difference between FRA and 70.
If you started collecting SS at 70 that would be $19,200/year. That is a nice difference compared to FRA.
Now the question is by not collecting SS at FRA how long would it take you to see that lost income you could have had previous to age 70? About 15 years, $72,000 divided by $4,800/year. Of course at age 85 you would be making more money.
Think of collecting SS at FRA as an investment opportunity and how much more you might have at age 70 to offset that $400 difference per month.

Something else to think about. If you decide to collect SS before FRA and you are still working your monthly SS check will be smaller because there is a penalty involved.

For those that are CSRS (and are eligible to collect SS) don't forget you will get a smaller SS check because of WEP, unless Congress changes the law.
For me that was about a 42% reduction.

Good luck.

[uscfanhawaii]

Evilanne,

For social security you want to do the math. The difference between FRA and 70 to collect or even when you become eligible say at 62/63. Here is an example, but it doesn't include Medicare Part B payments;
Monthly check at FRA = $1200
Monthly check at 70 = $1600
If you start collecting SS at FRA (I'm using 65) that's $14,400/year or $72,000 for 5 years. The difference between FRA and 70.
If you started collecting SS at 70 that would be $19,200/year. That is a nice difference compared to FRA.
Now the question is by not collecting SS at FRA how long would it take you to see that lost income you could have had previous to age 70? About 15 years, $72,000 divided by $4,800/year. Of course at age 85 you would be making more money.
Think of collecting SS at FRA as an investment opportunity and how much more you might have at age 70 to offset that $400 difference per month.

Something else to think about. If you decide to collect SS before FRA and you are still working your monthly SS check will be smaller because there is a penalty involved.

For those that are CSRS (and are eligible to collect SS) don't forget you will get a smaller SS check because of WEP, unless Congress changes the law.
For me that was about a 42% reduction.

Good luck.

Yeah, what he said!
Plus, that math does not take into account that the SS $$ in hand will grow, if you don’t need it right away and can invest it!
Nor does it take into account that SS is in a death spiral. Unless something is done soon, payments will HAVE to reduce, not increase.
I am still in the corner of taking SS as soon as you retire.

This is the way!

[nasa1974]

Yeah, what he said!
Plus, that math does not take into account that the SS $$ in hand will grow, if you don’t need it right away and can invest it!
Nor does it take into account that SS is in a death spiral. Unless something is done soon, payments will HAVE to reduce, not increase.
I am still in the corner of taking SS as soon as you retire.

This is the way!

You do get a yearly cost of living increase with SS, but if you invest some of the money you can definitely do better than the COL.

Like your tag line. Love the Mandalorian.

[Scottydog007]

I have to respectfully disagree with Tony on this one. While I agree that many of us can assume to live into the 80s, he doesn't mention what can be done with the funds at 62...etc. I still have a ways until that age but I did create an account with "My Social Security" (I think that is what it is - through the SSA). It's pretty interesting stuff like all the social security earnings from all the jobs you've had since you were born. It also lays out the amounts you would receive at various ages - 62, 67 and 70. I'm a budget analyst by profession so I wanted to calculate the breakeven points between the 3 ages and payout amounts. Keep in mind - I didn't factor in any COLAs...etc. It was just what the monthly payouts would be and when they would "break even" - 62 vs 67 and 62 vs 70. What I found out was that if you take the payouts at eligibility (62), it doesn't breakeven with taking the payouts at 67 until I'm 78 years and 3 months old. If I'm comparing 62 vs 70, the breakeven point would be 79 years and 11 months old.

Now based strictly on that, one might assume that you wait because you'll get more paid out the longer you live past 80 (basically) but it doesn't factor in what you've done with that money since collecting at 62. It could be extra leisure, charity donations, spoiling your grandkids, investing it...etc. There are quantifiable reasons as well as qualitative (better enjoyment in retirement) factors that were not part of the article and that is a shame. I hear many financial advisors recommend to delay until 70 because the checks are larger. Regardless of how long you live, even if you lived to the age of 90 or 95....by getting payouts for 8 years before the age of 70, I have a handful of options of what I can do with that money vs waiting for a larger check. Of course all of these options/decisions are one's own but if people are worried about getting bigger checks and needing bigger checks, then maybe they should work longer and have more savings/investments built up.

I for one, will start at 62 - regardless of health, financial....etc. because I want to be able to choose what I do with that money and know that I'll have it for whatever I decide. I don't really factor in SS income into my retirement calculations anyhow so the monthly checks will be icing on the cake.

[FAAM]

S-dog007: Thx for sharing your thoughts & assessment on this question/subject!
I came up with about similar/same conclusion(s) when I analyzed this for myself a couple years ago... nothing has changed. I recall I did it both-- factoring "none-" & again with a very-modest COLA and very-modest investment gain for SS received by claiming sooner than later, which made the "break-even" point a little later in age than what you came up with -- in favor of claiming SS at 62-63. Another factor in my thoughts to claim SS earlier... the good chance at this point (unless or even IF congress changes SS computations/ payouts at account for it) is the fund failing to fully cover the payouts annually... that, at present state, could well happen somewhere between 2026-ish to 2035-ish if I recall (a moving estimate). Since I'm nearing that early-claim age now, I figure taking the funds soon is better -- since waiting could meant getting perhaps 10% to 25% LESS than estimated prior to cuts when I hit age 70 or so (get as much of current "full value" for more years before a cut is possible).
Then, good reasons for early claiming are the other ones you mentioned; mostly for me, being able with SS income to do more than I might on a tighter budget while I'm still healthier & alive (knocking on wood).

[NatInPW]

I've always heard, and the SS website seems to confirm it, that the estimates they provide for ages 62, FRA and 70 all assume that you continue working, at your current salary, until you reach those ages. I don't think they provide an estimate for delaying your payment past 62 when you are not still working.

I've had several friends say they delayed SS for a few years after retirement, living off their pensions/IRA, and when they actually started claiming SS, the difference was only a few dollars a month than it would have been if they started claiming at 62.

The SS website says this about their estimates: "You have earned enough credits to qualify for benefits. At your current earnings rate, if you continue working until..."

How do you calculate the effects of the SS decision if you plan on retiring and delaying SS when the estimates assume you'll continue working (?)

[ALRetiree]

I've had several friends say they delayed SS for a few years after retirement, living off their pensions/IRA, and when they actually started claiming SS, the difference was only a few dollars a month than it would have been if they started claiming at 62.

The SS website says this about their estimates: "You have earned enough credits to qualify for benefits. At your current earnings rate, if you continue working until..."

How do you calculate the effects of the SS decision if you plan on retiring and delaying SS when the estimates assume you'll continue working (?)

you can go on the ss site if you are registered and do a what if scenario by working to a given age and taking it at the later ages. It will factor in the difference and tell you what it is. When I did mine retiring at 56 and claiming at other ages it roughly takes off about $200.

[nasa1974]

Again you have to remember that if you collect Social Security before your FRA and you are still working there is a penalty that will reduce your SS payments according to how much you are earning.

[gibsonman]

SSA takes the highest 35 years and only 35 years, its a marginal amount you get if you continue to work, the question is how much do you value your time? A work year is 2087 hours, what could you do with that time if you weren't working? I will make 2K MORE monthly net income after all deductions including taxes then I make right now with my pension + SSA + VA + tsp ( this will last 43 years at 1% if I take 18K per year) ( I have 620K in ), not including the wife's pension, SSA and TSP( will save that for the kids)...I'm a topped out GS15 with 39 years will retire april 2022, al though right now I would make more then I bring home now.

[NatInPW]

Looks like you're very prepared for retirement gibsonman, congrats!