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Social Security question - when to start collecting

Discussion in 'Non-Vegas Chat' started by makikiboy, May 31, 2017.

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  1. makikiboy

    makikiboy VIP Whale

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    I am planning to retire at the end of this year. I am 60. I am trying to determine when to start taking out my social security but wondered, because I won't be paying into ssa from age 60 will it make a difference whether I take out my social security at age 62 or 66 1/2? Although I can find calculators to help determine the amount I will be getting it assumes that you will still be paying into the system so not sure if I stop paying into the system whether it makes a difference. I know that normally your amount will be lower if you take it out "early" at age 62 but I am trying to find some way of calculating my social security if I stop paying into it at age 60.

    Financially I can wait to get social security till 66 1/2 but if I stop paying into the system at age 60 will my payouts be different if I wait until 66 1/2 versus 62?

    Thanks in advance for your info.
     
  2. BlacklabberMike

    BlacklabberMike VIP Whale

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    oddly, i've been looking into this also... I'm 63 and thinking of selling my business
    and collecting SS.... so far my best advice is to start planning to sell when I turn 65
    and then file for SS...

    pretty sure your payouts at 66 1/2 will be more than at 62 from what little i know.
     
  3. Breeze147

    Breeze147 Button Man

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    I started at 66.
     
  4. queuetee

    queuetee VIP Whale

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    There are SS offices all over. Find the nearest one, make an appointment ( don't show up cold!!!) and ask your questions
     
  5. The Rumor

    The Rumor VIP Whale

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    +1 to this. There are also consultants who can help you maximize the value of SS. It is an extremely complicated plan and this is worth it for some people - especially married couples.

    FYI - I am a pension actuary so I have a decent amount of experience here. I am not an SS expert nor a personal financial planner, so please consider that when reviewing my comments below.

    SS's benefit formula is your years of service accrued (max 35 years) times your average SS taxable pay, rolled forward with an interest adjustment, over your career (they take the 35 highest years) times a benefit factor (i.e. the amount of your pay that they replace for your lifetime.) If you stop working at 60 vs. 62, there are a couple of considerations here:

    - As long you have 35 years of service already, working more won't increase that piece. If you've been continuously employed since 25, you will have 35 years of service. You can look this up at the SS website.
    - Because they roll forward your historical pay with an inflation measure, there's going to be less change in your average pay than you would think from working two more years. It would likely have little impact overall.

    Given this is the formula, the adjustment for you working two more years is not going to be huge if you are already at the service cap. We're talking less than a 2% difference in all likelihood unless you weren't at the service cap. What really is going to matter for you is the stuff below. You should focus more on this.

    Consider the following:

    - Social Security applies an actuarial adjustment to your benefit to account for your age when you begin receiving payments. Your benefit is lower if you begin when younger because your life expectancy is higher

    See https://www.ssa.gov/oact/quickcalc/early_late.html for some detail here - this is going to be a much bigger factor for you.

    - SS is a lifetime pension benefit. Your personal health affects the value of what you will receive. If you are sick, waiting until 66.5 instead of taking it at 62 may be a terrible idea. Conversely, if your parents both lived to be 90, taking at age 62 may be a bad idea.

    - Again, SS is a lifetime pension, which means it exists for the remainder of one's lifetime. For some people who only have a 401(k), there may be value in delaying SS as a way to cheaply buy insurance against outliving one's 401(k) balance. I seem to recall you discussing being a government employee, so this may not be a major consideration for you.

    - If you retire and commence SS prior to your Normal Retirement Age (65-67 depending upon your year of birth), your SS can be reduced if you go back to work and make enough income.

    - As you are a government employee, it is possible that the Government Pension Offset may apply to you. They should be able to address this at the SS office based upon your individual characteristics.

    - In your post, you are only discussing you. A lot of the value in SS can come from spousal benefits. If you are married, you absolutely need to consider this side of the equation.

    Again, SS is about the most complicated plan on earth, and there are some other considerations that might come into play, but these are some high level factors that apply to the average person.
     
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  6. The Rumor

    The Rumor VIP Whale

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    One other consideration: I should have mentioned the Affordable Care Act - if you are purchasing health care on the individual market, there may be a lot of value in gimmicking your income down before age 65 to keep you eligible for large subsidies
     
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  7. The Rumor

    The Rumor VIP Whale

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    https://faq.ssa.gov/link/portal/34011/34019/article/3739/what-happens-if-i-work-and-get-social-security-retirement-benefits

    You need to account for this if you have a material amount of income
     
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  8. Joe

    Joe VIP Whale

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    No advice here, just what we did. I retired after 35 years of full time employment at 55. My wife, around 29 years. We both started collecting at 62, which was 2 +years ago. No regrets and between that, our pensions and investment income, we are both happy we did. With my lifestyle and family history, I'm certainly not worried about living until age 90 and running out of money. :beer:

    I know there are all sorts of ways to game the system. Lower earner collects first, and higher earner waits, etc, but we just said screw it and took the money. Now every third Wednesday of the month, we see two SS checks deposited. The first of the month, we have two meager pension checks deposited. We didn't wait to collect those either. Started at 62.

    I know the "experts" say wait as long as you can to collect, but wtf, live and enjoy it before you are drooling all over yourself sitting in the wheelchair in the nursing home, hospice, or in a grave. Yea I know, not an optimistic outlook, but reality in some cases.

    We were savers our entire lives and now want to enjoy it. YMMV.
     
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  9. vegasdev

    vegasdev VIP Whale

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    I am always curious to know what people are doing for healthcare coverage, if they retire before 65, when they are not yet old enough for medicare. are they remaining on their employer's plan, or something out of the (un)affordable health care act or what. or maybe they have a spouse that is still working. just curious.
     
  10. Chuck2009x

    Chuck2009x VIP Whale

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    Your benefits will definitely be higher at FRA than at 62 regardless of when you stop working. And the difference should be in the same proportion.

    But how much you'll actually collect at either age is a different question.

    If you go to the Soc Sec website and look up your history and your benefits projection, it gives you amounts you will be eligible to collect at 62, at Full Retirement Age (whatever that happens to be for you) and at 70.

    But it states
    upload_2017-5-31_16-22-42.png
    the blanked out amount is what you made last year. And does "retirement" mean FRA? It must.

    and

    upload_2017-5-31_16-23-50.png

    and

    upload_2017-5-31_16-24-17.png

    So then the question is, what if you:
    • Are making close to your highest lifetime salary now and
    • Retire before FRA and start putting up goose eggs until FRA?
    In that case, your estimates as they appear on the site now are probably higher than what you'll end up getting.
     
  11. nostresshere

    nostresshere Mr. Anti Debit Card

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    1 - As long as you have enough years of paying in, having more years with zero pay in will not change anything.

    2 - The longer you wait, the higher the amount will be. It is easy to figure that out online.

    3 - The longer you wait, the more chance you never get any of that money. My best friend died at 64 and never got one dollar of his SS.

    4 - If you wait, the monthly check will be higher, and often reccomended.
    BUT - you get it for less months. If you start at age 62 vs 65 means you will get 36 more checks. The breakeven point is around age 80. So, if you never get to age 80, starting sooner is smarter. If you live past 80, waiting will give you more money.

    *** BIG ISSUE - SS payments are income and taxable - partially. If you getting other money, even damn W2g's, it will count as normal income and cost you in medicare benefits or ACA - and your spouse. (even you never come out ahead in winnings)

    Again, the vast majority of 'advisors' say to wait because you will get more money. Tell that to people that died before age 80 and they will slap you up the side of the head from their grave.
     
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  12. nostresshere

    nostresshere Mr. Anti Debit Card

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    HEALTHCARE before 65? Insurance via ACA which is not cheap. Not other way around it. None - other than taking a really BIG gamble and hope you have no heart attack, cancer, or other serious stuff that can hit $100k in a few days.
     
  13. Bob Seaman

    Bob Seaman Tourist

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    I did it at 62 that makes the house payment
     
  14. The Rumor

    The Rumor VIP Whale

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    It's not "cheap" but managing your taxable income well has significant implications that can cap your costs. It takes a fair amount of work and tax structuring but this can be extremely beneficial - http://kff.org/health-reform/issue-brief/explaining-health-care-reform-questions-about-health/
     
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  15. The Rumor

    The Rumor VIP Whale

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    You're hitting the main options - there is no magic bullet
     
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  16. C0usineddie

    C0usineddie VIP Whale

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    I cant stand working so i am punching out of the workforce at 62 if not earlier. of course I will start collecting then as well.

    I have spent my entire life hating going to work. i am 56 now and dont see that work attitude turning around in the next few years so might as well just be done with it sooner then later.
     
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  17. nostresshere

    nostresshere Mr. Anti Debit Card

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    Yes - a bit complex. I have been trying to avoid playing over $5 slot machines to reduce the changes of getting W2g's. It is almost sad when I hit a jackpot these days. I will surely put most of it back in, but still show it as income which puts a dent in the ACA accounting. Going to really try hard.

    And, we avoided taking money out of IRA this year and did small mortgage instead. We can recoup the interest via lower premiums. Silly - but true. IRA withdrawels are regular income.
     
  18. The Rumor

    The Rumor VIP Whale

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    Counters to consider:

    - The average 65 year old will live to over age 85 https://www.ssa.gov/planners/lifeexpectancy.html

    This is likely higher than you would guess. Most life expectancy figures you see in the media are life expectancy from birth and include a probability that you die before you reach retirement age. That'ss not what matters when commencing SS, because you've already survived the first 62-70 years of your life

    - If you're dead, you don't need retirement income anymore

    - If you're the higher earning spouse, it's not just whether you live a long time. It's whether one of you or your spouse will live a long time since your spouse can take over your monthly payment amount. Hence a common strategy is for the lower income partner to commence early and the higher income partner to commence later

    - The average person can't go get a job when they are 85, running out of money then can be worse than having to work part time at age 64
     
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  19. The Rumor

    The Rumor VIP Whale

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    That is only true if you didn't use a Roth feature - Roth IRA and Roth 401(K) withdrawals are not taxable income and are not included in your income for ACA subsidy purposes.

    For some it makes sense to use the Roth amounts prior to age 65 for this reason

    There's other timing strategies that come into play here as well - hence my comment about this being really, really complex
     
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  20. Joe

    Joe VIP Whale

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    We bought coverage under the ACA for two years. Then my former company was acquired by another company. Now at my 1st company it was cheaper to buy insurance on the ACA, then what they offered. After the acquisition, I became eligible for their early retiree insurance. Not a bargain but $872 a month with a $5,000 deductible vs the $1,100 with a $10,000 deductible I was paying under ACA. BUT, with the ACA, they couldn't exclude me for a pre-existing condition and yearly exams were free. That also applied once I went under the retiree plan because ACA mandated it.

    It's not easy to retire early unless you planned well.
     
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