Social Security's place in retirement income stream

[rosarugosa]

Most of the seniors I know personally seem to have started collecting their SS benefits right at 62 years old. I realize some people don't really have a choice in the matter, but it seems like it would be preferable to start SS benefits later if possible to lock in a higher benefit. I was recently talking to someone in her seventies who said she hasn't touched her 401k money, but had started collecting SS at 62 because she needed the money to live on. This seemed backwards to me, but maybe I'm looking at it backwards. What do you all think?

[Lainey]

I started collecting SS last year at age 62 1/2. A big factor was my guesstimate of my own life span given my family history. I'm healthy, but our family typically makes it to about age mid to late 70s and then it's lights out.
If I thought I'd be living into my 80s or 90s I would have considered taking cash out of my 401(k) to live on and start collecting SS later.

[Yppej]

If the amount in the 401K is small I could see keeping it as an emergency fund in case one's car dies or something.

[dado potato]

For details on the reductions in benefits if the recipient begins to receive benefits before "full retirement age" there is a page at

http://www.ssa.gov/planners/retire/retirechart.html

The primary advantage in starting to receive benefits before full retirement age is to receive social security benefits for a longer period of time, or, stated differently, to break-even on your lifetime of social security taxes at a younger age.

[iris lilies]

It is all a crapshoot. While theoretically I believe in taking all of the gubmnt money it throws at me, we have the practical consideration of the ACA which will not give us big subsidies or ANY subsidies if we draw Social Security. So, we are not drawing it yet and we are both 63 years old.

I dont expect to live a real long time, I expect DH to live a long time so he may wait u til he is 70 to draw it. That will not be a problem if I am still alive, my income is ok and I plan to draw SS at age 65 (Medicare age.) He needs every penny of his SS because it won't be all that much.

By the way, that rule where you could,only work X number of hours in a year before your SS is affected was deleted a few years ago.

[catherine]

DH just started drawing on SS. He is SO financially clueless that he was amazed at this "free" money coming his way. I've been bugging him since he turned 62 to draw on it now because he has no other income, and it would take the load off me a little, but one day he whined, well, what's the use. It's only $300. I've gotten those annual statements from SS every year, so I know it was more than that, but he has zero interest in any financial stuff, so he never read them. I told him to call the SS Administration.

The next day he was grinning from ear to ear. You'd have thought he won the Powerball.

My plan is to wait until 70, and I'll try to live off that, because my 401k will not be huge, although I'll be working on growing it over the next 4-5 years.

[Teacher Terry]

I plan to wait until my FRA because due to WEP mine will be tiny and they take some $ away after you earn a certain amount and I am still working p.t. and make more then what they allow before they start keeping some of your $.

[pinkytoe]

We took at 62 last year as that along with my pension was more than enough to support us in retirement. Especially with paid off house and no car payment. Neither one of us wished to continue slogging away at work for four more years so that we could have a few hundred more each month. I wanted to be able to do things like travel or garden while I still could - who knows as one ages how health will turn out. I also don't have great faith in the future of "entitlement" programs so figured we better get what we can while we can. I do however continue to save in various accounts and our small 401K will sit until we have to withdraw.

[iris lilies]

I plan to wait until my FRA because due to WEP mine will be tiny and they take some $ away after you earn a certain amount and I am still working p.t. and make more then what they allow before they start keeping some of your $.

wait, what? I “heard” that “they” took away those rules that reduced incme if someone worked.

I dont know the acronyms you use anyway. Speaka da Engleesh, please! Haha.

[iris lilies]

...The next day he was grinning from ear to ear. You'd have thought he won the Powerball.
.

My man! Tell him Welcome to the gubmnt teat, the taxpayer’s dime, the welfare state! He is rollin’in it!

[ApatheticNoMore]

yes you might be looking at it backwards, it probably is a wash if you live to the average age (if everyone in your family tends to be long lived though you may want to wait). See reason #2:

https://www.fool.com/retirement/2018/01/14/3-reasons-its-smart-to-take-social-security-benefi.aspx

Now I would suspect A LOT of people might wish to work until 65 because they want to collect that employer provided medical insurance until they can finally get Medicare, but the affordability of healthcare options is a separate issue.

[frugal-one]

We took at 62 last year as that along with my pension was more than enough to support us in retirement. Especially with paid off house and no car payment. Neither one of us wished to continue slogging away at work for four more years so that we could have a few hundred more each month. I wanted to be able to do things like travel or garden while I still could - who knows as one ages how health will turn out. I also don't have great faith in the future of "entitlement" programs so figured we better get what we can while we can. I do however continue to save in various accounts and our small 401K will sit until we have to withdraw.

+1

[dmc]

I’ll probably start mine at 62. We don’t need the money, so I’ll either invest or blow it. The break even point due the extra payments if invested moves it out to 80 something I believe. And who knows what changes may be in the future. If it turns out I live past the break even point I won’t be complaining.

[sweetana3]

We have done the same thing as DMC. We planned on a retirement based on our own efforts. SS was a total fall back and not to be a significant portion of our plans. Life is a gamble and with our tax situation, it is always likely that more will be clawed back in taxes.

[Tybee]

We are both still working, and make more than the 16920 I think you can earn without it affecting benefits. IL--that rule about how much you earn is still there. Not sure what rule you are talking about--hours?

"For the year 2017, this limit on earned income is $16,920 ($1,410 per month). The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit."

If and when we stop working, or are making less than 17k, we will stop. DH plans to work til 70 if he can stand it, both to get more money and to build up 401k. His dad lived to be 93 and he looks just like him, so probably he is in for a long haul.
My dad is 89 and my mom is 91. But the grandparent whose body I seem to have inherited died at 78, so I have always thought I would not make it as long, so maybe I will take earlier.

It's a really good question. right now, it is our safety net if we get fired, I guess.

[LDAHL]

There seem to be two camps on the SS claiming decision. The breakeven strategy aims at collecting the maximum amount prior to dying. The longevity insurance strategy looks for the highest payout for the contingency of living a long time. I've seen the debate get surprisingly acrimonious at some sites.

I'm planning on a delayed claim. My wife is younger than I am and has a significantly lower earnings record, so I need to look to maximizing her survivor's benefit. She also has little interest in investment management and a generous nature that makes me think it a good idea to emphasize streams of regular income over a larger investment portfolio. I've made additional contributions to my pension plan for the same reason. The idea is to live off the paycheck-like income and let the rest alone to cover major emergencies, end-of-life care, bequests, etc.

[iris lilies]

We are both still working, and make more than the 16920 I think you can earn without it affecting benefits. IL--that rule about how much you earn is still there. Not sure what rule you are talking about--hours?

"For the year 2017, this limit on earned income is $16,920 ($1,410 per month). The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit."

If and when we stop working, or are making less than 17k, we will stop. DH plans to work til 70 if he can stand it, both to get more money and to build up 401k. His dad lived to be 93 and he looks just like him, so probably he is in for a long haul.
My dad is 89 and my mom is 91. But the grandparent whose body I seem to have inherited died at 78, so I have always thought I would not make it as long, so maybe I will take earlier.

It's a really good question. right now, it is our safety net if we get fired, I guess.


Hunh, now I have to research the thing about limits on earned income. I wonder what it was that my friend told me?
It isnt important for me since I do not plan to work nor does DH, but it is bugging me. Thanks for the info, clealy I wm erong in my understanding of what My friend told me.

[pinkytoe]

I am waiting to see how our income tax works out this year, but might consider part-time work after that. I know there is an earning threshold to be wary of plus I don't want any extra income to kick us into another bracket as happened last year.

[bae]

I have always planned our retirement as if SS would be extinct by the time we could draw on it.

Now that assumption seems wrong, as in < 10 years I will be able to begin taking SS payments. I suspect, unless it hoses my taxes and medical insurance, I will simply draw on it as soon as I can, and invest/donate/spend-on-wine-women-and-song whatever they decide to send me.

[Teacher Terry]

IL: WEP is a special rule if you retire from a place that does not pay into SS they can take up to 60% of your SS unless you have 30 years of what they consider substantial earnings under SS and they specify each year what that amount was. If you have 30 years employment in a system that does not pay into SS then you make out. I however only have 15 years in the system so am losing out on my SS big time.

[iris lilies]

We are both still working, and make more than the 16920 I think you can earn without it affecting benefits. IL--that rule about how much you earn is still there. Not sure what rule you are talking about--hours?

"For the year 2017, this limit on earned income is $16,920 ($1,410 per month). The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit."

If and when we stop working, or are making less than 17k, we will stop. DH plans to work til 70 if he can stand it, both to get more money and to build up 401k. His dad lived to be 93 and he looks just like him, so probably he is in for a long haul.
My dad is 89 and my mom is 91. But the grandparent whose body I seem to have inherited died at 78, so I have always thought I would not make it as long, so maybe I will take earlier.

It's a really good question. right now, it is our safety net if we get fired, I guess.

Here is the change (below) I THiNK my friend and I were discussing some weeks ago.It doesnt apply to us in the age range of 62-65 ish, the age prior to Full Retirement Age, so what Teacher Terry said for her own situation is true. Of course,this is a random website which could be bogus info, but it was the first place I saw an actual date for this change in Social Security rule.


Joseph Alfonso

(https://www.nerdwallet.com/ask/advisor/joseph-alfonso-1296)CFP®, RICP, ChFC, EA


As others have said the earnings test that limits how much earned income you can have before Social Security benefits are withheld (temporarily) no longer applies upon reaching full retirement age. The law was changed in 2000 to eliminate the earnings test after FRA.


https://www.nerdwallet.com/ask/question/income-limit-social-security-over-seventy-9609

[jp1]

Among the older people I know there seems to be a very mixed thought process on this. One friend retired at 62, 6 years ago, and immediately started taking SS. He hated his job and the damage the stress of it was doing to his health. At the time he was nervous about not having any income other than investments. He had over $1M in financial assets plus a paid off house at the time, and now he has significantly more income than he spends so money will not likely be a problem for him ever. My sister, on the other hand, retired about a year ago at age 53. She has a bigger next egg than my friend, and an older wife who started collecting SS at 62. Sister intends to wait until her max retirement age before starting to collect since she is likely to outlive her wife and they don't need the money currently. Her thought process is that she'd rather have the max benefit just in case.

I'm still over a decade away from being able to collect SS early so I will probably wait, crunch the numbers based on my situation at the time, and then make a decision. If all goes as planned and I work another decade, dutifully putting away $24,000 per year plus employer match in my 401k and the max in my roth IRA, and my investments keep growing, the decision will be a non issue because there will be more than enough money either way. But a lot can happen in 10 years so I'll figure it out when the time is right. The likelihood, though, is that I've made it to 50 without significant health issues and most in my family, (including my dad, who smoked 2 packs a day for 67 years and still lived to be 86) have lived into their 80's or 90's, so a gambling man would tell me to make my decision assuming I'll live to be an old old man. But ask me again in 2030 when I'm approaching early SS age and I'll tell you what the plan is...

[Rogar]

One way to look at it is if the addition income could make a difference in your quality of life or ambitions. It might come at a time when you are a little younger and more active for travel or outdoor adventure. Or maybe improve your living conditions or move to a more expensive location. It's probably reasonable to ask what you will do with the money once you start taking it or what things would be unpleasant without it.

[KayLR]

I'm 63. Hate my job. I would love to retire, work my p/t job and collect SS. BUT everyone in my family lives 90+ years.

[Teacher Terry]

3 of my friends died between 59-67 yet their parents were still alive and healthy. I am not basing my plans on others longevity.

[goldensmom]

I started receiving SS at 62 after doing the math of amount of SS at 62 vs. 65 and estimated longevity. Other calculations revealed that for the first 15 years I will get back what I (and my employer) paid in over my working career before receiving any government monies. Additionally I pay $300 federal taxes on my SS (returning my own money again) so it is possible I will just keep receiving money that I paid in and am currently paying in depending on how long I live. Kind of like drawing out of my own savings account except that I don’t get the interest back.

[Bullie76]

3 of my friends died between 59-67 yet their parents were still alive and healthy. I am not basing my plans on others longevity.

My brother died at 56 but my mom lived until 95. Pretty much a mixed bag in my family. I usually base my decisions on the averages and based on that it really doesn't matter when you take SS. If one does live well beyond the average age of death then it certainly would be better to wait. I began SS at 62.5.

[herbgeek]

I dont know the acronyms you use anyway.

FRA = full retirement age. ie used to be 65, now its 66 and mine (at 57) will be 67.
WEP= windfall elimination program- indicates someone has a government pension and that reduces future social security benefit: https://www.ssa.gov/planners/retire/wep-chart.html