When To Take Social Security Benefits
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- čas přidán 6. 08. 2024
- Timing your Social Security retirement benefits can depend on several factors. Here’s a quick primer on when to take Social Security.
Click here to find out your Full Retirement Age (FRA):
www.ssa.gov/benefits/retireme...
Click here for the Social Security Retirement Benefits Estimator:
www.ssa.gov/benefits/retireme...
Click here for the Social Security Benefits Calculator:
www.ssa.gov/benefits/calculat...
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-- About Patrick King CFP® --
Patrick King is a fee-only financial advisor in Atlanta and the Founder of Prana Wealth. Over his career, Patrick has helped CEOs, all-star athletes, Grammy-winning artists, and many others build their wealth, retire sooner, and create a legacy. Patrick enjoys yoga, mountain biking, golf, travel photography, and Clemson football.
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Everybody's story is different. Here's mine, I retired 7 years ago at age 62 and went on Social Security at that time and here's why. I first calculated my break even points. By that I mean when would my 62 year old, my 66 year old and my 70 year old money come even. For me it was 79 years and 8 months. So the question I had to ask myself was: Would I rather have 4 more years of retirement (based on age 66. or 8 more years at age 70) or more money when I was almost 80. The answer was simple, I took the time because time is the one thing money can't buy. I turned 69 yesterday. There is no doubt I made the right decision. I am in a place where I know I won't outlive my money. The other lesson I've learned thru this process is that it's not about the money. It's never about the money. It's about something that is more valuable than money, it's the time. Time is the most precious thing in you life.
Took mine at 62 as it was the best option. I needed the money,plus I have a child who is a minor. The plus was the additional benefit for my child.
My Aunt retired early and lived way below her means. She was able to wait until 70 YO to max out on SS benefits at $3500 per month. She owns a house debt free and has a reasonable savings. I think the best practice was using her husband's SS benefits and possibly his pension and not using her social security benefits until age 70.
Tymeesa -- that's awesome! Your aunt really knew how to maximize things. I'm glad to hear that she's thriving in retirement! Waiting until 70 to take benefits is hard!
Only problem with these BE analysis, is that the BE points are not TRUE BE points because those future dollars are deflated. Which means a TRUE BE point is actually longer. Also, by waiting till 70, your getting a higher check at an age when statistically you spend less in virtually every category except healthcare. And you're getting a bump in cash-flow at an age when you are much less likely to be able to enjoy it, even if you're still healthy (for a person that age).
If you die before your BE point, you lose. Government keeps everything you didn't collect and your heirs have less because you were likely eating up your own assets to gamble against the house. Also, even if you surpass your BE point, you'll never collect enough extra to even equal what you wagered up front (all the payments you didn't get). Ignoring the obvious health and life risk, would you make a bet in Vegas where you have no chance of even getting even money?
If you have to wait to collect because you haven't saved for retirement and can't live on what you would get at an earlier point, you'll have to do what you'll have to do. But if you don't need to rely on SS as your sole means, it is foolish to eat away at your assets to retire and an older age when you'll be less physically able to enjoy it, just to ensure the government will have more. Do yourself and your heirs a favor, retire and collect as early as you can.
Tom, I'm in agreement - any BE analysis would need to factor in inflation. I know Social Security does have a cost-of-living adjustment each year, but there is some controversy over whether it follows true inflation. Each person is different, so the decision on when to take Social Security should be in the context of a full financial plan. Thanks for the great comment!
@@PranaWealth - Most people I've talked to who have been collecting SS for years often state that the COLA bump essentially only covers the rising cost of the Medicare. So they don't experience a bump in what they end up with after Medicare deductions.
Tom, I'm sure there's something to that. I know that healthcare costs are rising faster than inflation, for sure.
I appreciate the need to keep the analysis simple for this short video; however, 2 important factors were omitted that weigh heavily in favor of taking Social Security at the earliest possible age:
First, there is the time value of money. If you can afford to delay taking benefits until your FRA or later, then you can also afford to take benefits early and invest all of them. Assuming even modest a modest return on investment, I am showing that this would push my break-even age from early 80’s to early 90’s.
Second, there is the inevitable future insolvency of Social Security. Benefits will have to be either reduced or taxed at increasingly higher rates, likely within the lifetimes of those currently considering retirement. Clearly, it is better to start taking benefits before this happens.
Larry, you bring up a couple of really good points here. The inflation issue for Social Security is somewhat offset by the annual cost-of-living adjustments. However, there is some controversy over whether these actually reflect true inflation.
As far as the solvency of the Social Security system, we'll have to wait and see. Politicians have zero incentive to fix the system until it's completely broken. For my younger clients, I've projected 70% - 80% of their Social Security benefits for retirement, just in case everyone's benefit gets a haircut in the future.
Great comment! 🙏
A co worker of mine lost her husband at age 54. My own father passed at age 74. One never knows how long life will be.
I initially was planning to live off of savings and wait until age 70. But the extra SS income means I can afford better travel experiences now. My plan now is to retire early age 64. I missed my age 62 early in. My FRA age 66+8mos. I only start to lose money at age 74. And by then who knows? Great video.
Thanks, Jay. And you're absolutely right -- none of us is promised tomorrow. We can plan for the future, but we also need to enjoy the present.
Hey Patrick, I like this video, along with a few others I have watched, I have subscribed and am looking forward to hearing more information about Ss. thanks again for your help
I also subscribed!
Thank you, William! I appreciate the support and the kind words! 🙏
I think retiring at your FRA is the best plan. Waiting till 70 is a bridge to far.
P.C. -- it all depends. I've had clients still engaged and going strong in their jobs past 70. And since your benefits increase, waiting can be a better option. Each person is different. That being said, most people tend to claim before FRA.
@@PranaWealth if I retire at 62 I get a double hit on my SS because of a pension windfall elimination and then the hit for early SS. So I’ll wait till I’m FRA at least.
Sounds like a good plan!
I’m sorry. Spell check please. The misspellings were a distraction. However thank you so much for the information!
Thank you for this…in plain easy english!
You're welcome, MGunnz! Thank you for the kind words!
ASAP!
Doing a quick analysis of taking SS @ FRA (about $3k) vs waiting until 70 (+$1k), I get a break even at 81. However the opportunity cost (@ 6% / yr) of using my retirement funds to fill that gap pushes my break even until at least 83.5,.which is right around the average male life expectancy. My point is that while everyone's situation is different, the cost to delay SS is not that straight forward and could impact future gains in your portfolio by having to replace that SS income in the interim.
Dennis, you're absolutely right. There are a lot of "what ifs" that come into play on this decision. When it comes down to it, everyone needs a financial plan to ensure they're making the best decisions with the information we have. Thanks for the great comment! 🙏
I'm retiring at my FRA at 66 1/2, a year and a half come this March, just want to do the things I want to do. All set and ready to go financially.
That's awesome, Max! Congrats on being prepared and ready to go! I'm sure it will feel good in March!!!
Great explanation, but maybe spell check your slides (dealying?).
Ha! I knew I was going to do that eventually! Dang-it. There's a huge lag when typing those headlines into my video editor. I'll add a spellchecking step to my video creation checklist... Progress, not perfection, right?
Thank you for the kind words, Earl! I'm thrilled that folks are finding these videos helpful!
I may have to pick early due to lack of work. Despite the low unemployment I can't seem to get hired due to agism.
Julie -- it's a problem these days. I wonder if that'll change with the labor force shrinking like it has... Good luck and thanks for the great comment! 🙏
So, retiring at 62 (1416.00/month) and dying at 82 (20 years) brings $339840.00.
And retiring at 70 (2506.00/month) and dying at 82 (12 years) brings $360864.00.
Is that right? Waiting until 70 only adds $21024.00?
yes, but it brings in a lot more if you live to 92. It will bring in free money every month until you die, no matter how long that takes.
Are you a gambler? Do you want to bet that you die at or before 82?
You did not mention an important factor in this decision that applies to married couples, where one person earned significantly more than their spouse. If the high income earner passes first, their spouse is able to take over that higher earner's SS benefit, versus continuing with their own (lower) SS benefit based on their own earnings. So delaying SS benefits of the high income earner can be a good strategy for a married couple, especially if the higher income earner has greater health issues or is expected to not live as long as their spouse. Do you agree?
Dennis, this is a great point! I believe you're referring to the "file and suspend" strategy that works just as you've detailed. For couples that are in the situation you've described, it can move the needle on their financial plan. Sounds like the topic of a future video!
As you said, SocSec is "an unnecessarily complicated govt program." As such you cannot cover all the details in a 7-minute vid. Another detail complicating things is how much of your SocSec gets taxed. If you delay and get higher payments, you may find that a greater portion of your SocSec is taxed, and possibly at a higher rate. This situation would make the breakeven point a little bit younger, maybe not that much, but it is a factor.
Another consideration, one that happened to me -- You might want to delay taking SocSec to keep your income lower while dealing with other financial matters. In my case, I had some cash savings along with a little income from a few investments, enough to live on for 2-3 years. I had Two financial matters. (1) I have an IRA and near my FRA finally realized it would be wise to convert that to a Roth. The money from the IRA counts as income and if I also took SocSec my income would be subject to the higher tax rate (22% I think). But without SocSec my tax rate was the historically low 2nd tier tax rate of 12% (thanks to Trump tax change). If possible, I try not to let the govt take more money from me than they already have. (2) Another reason to limit income is that my spouse had Obamacare and as soon as you hit a threshold of around $65K income, you suddenly lose any subsidy and end up paying many $1000s more for health care. So not taking SocSec kept us below that threshold. Now I'm 2 years past FRA and will soon apply to draw SocSec, at 116% of the FRA amount. I think for me it was worth waiting.
UPDATE: The average increase for SSI recipients is reported to be $92.00/month, the reported Medicare Part B premium will be $158.50/month for 2022. So $158.50 minus $92.00 equals negative $66.50, now how does everyone feel about that 5.9% increase in SSI. If you can possibly take your SSI at 62, take it, because it really doesn't get any better with the passage of time. Hopefully everyone has several other income streams they can rely on to support their retirement.
Because of the many changes to CPI-U over the years, many people don't believe that it is a true reflection of inflation.
Delayed? LOL
JP, while I think there are fewer and fewer people delaying, there are still a few people who do.