Social Security - 62, 66 or 70?

[fishheadbob]

Minor points:
It wasn't Carter or LBJ who came up with taxing SS benefits; the honor goes to Ronald Regan.
65 as the original retirement age predates Franklin Roosevelt by 50 years, it was the brainchild of Prussian Chancellor Otto Von Bismarck who instituted the first modern retirement system. 100 years later the age for full retirement has soared to age 66.
The first person to get a U.S. SS check was a sweet little old lady in Vermont( Ida Fuller). She worked and paid into SS from 1937 to 1940 when she turned 65 and retired. She agreed to have her picture plastered on most newspapers and newsreels of the day. Who knew that she was going to live and collect until she was 101. Now you know how to beat the system.

 

[riptides]

They do only the most simplistic calculations, with no respect for the either the time value of money, or of "opportunity cost". Show me a table of year-by-year contributions, both employee and the employer match and compare that with the value of those same contributions invested in an index fund tracking the S&P 500. The S&P 500 investments will do much, much better than SS any day.

Unless there is a market meltdown right before you want to draw.

But I will agree that SS and the Market should both be in your planning portfolio from the day you start working.

Insurance and Cash too.

 

[JDgreen227]

Unless there is a market meltdown right before you want to draw.

But I will agree that SS and the Market should both be in your planning portfolio from the day you start working.

Insurance and Cash too.

Sad thing is, for the majority of the middle class today there is precious little chance of having either insurance or cash. I was able to retire at age 51 with only modest investments because I had a near 100% pension backed up, and could be reasonably assured that I would get my contributions back from SS at age 62 on and then some. fishheadbob mentions "beating the system" well my query to him is WHAT is the system and HOW do you beat it...?

 

[Travelover]

I generally don't defend government programs but SS includes an insurance component for disability or survivors. As a result it isn't fair to compare it to an investment fund.

Right, plus your wife can collect 50% of your full SS benefit even if she never paid a dime into FICA in her life. And if you have kids under 18 (or so) when you are collecting SS, they collect, too, regardless of your financial situation. Plus, those that contribute minimally from low wage jobs get a much higher percentage of their contributions back than higher paid workers. Even your ex-wife can collect a spousal benefit equal to 1/2 your benefit if she didn't remarry. It is a social program not a retirement plan.

 

[fishheadbob]

fishheadbob mentions "beating the system" well my query to him is WHAT is the system and HOW do you beat it...?[/QUOTE]

Live to be 100.

 

[JDgreen227]

fishheadbob mentions "beating the system" well my query to him is WHAT is the system and HOW do you beat it...?

Live to be 100.[/QUOTE]

What a howler....why bother to live to be 100 when you cannot do a d**n thing for yourself after age 80? My step-mom's mother died last year at age 99....she had been in an advanced care facility for TWENTY FIVE YEARS suffering from advanced dementia for most of that time. Where is the quality of life? I would rather be dead than be a vegetable kept alive by advanced care. PERIOD !!!!!!

 

[fishheadbob]

Right, plus your wife can collect 50% of your full SS benefit even if she never paid a dime into FICA in her life. And if you have kids under 18 (or so) when you are collecting SS, they collect, too, regardless of your financial situation. Plus, those that contribute minimally from low wage jobs get a much higher percentage of their contributions back than higher paid workers. Even your ex-wife can collect a spousal benefit equal to 1/2 your benefit if she didn't remarry. It is a social program not a retirement plan.

probably why it's called SOCIAL Security. Don't forget little kids whose parent died, or the truly disabled, not the fakers. Expanding benefits has always been a great way to stay elected. Cutting benefits is a great way to the political unemployment line.
We have a problem of being a compassionate country. Most people feel SS has gotten out of hand, costs too much. Where do you want to start cutting ? How about with your mother? Maybe she
never paid a dime in but collects as a widow. Dead wood. And those orphans have got to go. Uncle Ralph started to collect at 62, he's pushing 86 now. Great deal for him. Aunt Tootsie lives in Florida and has her check sent to one of her bank accounts down there. Has a boyfriend but still collects as a widow. Bloodsucker.

Unless you're prepared to have Ma move back in with you in her old age,(Heck no. Send her to the poor farm) and are willing to cough up a few grand per month to take care of your orphaned grandkids, or pay the exorbitant amounts to hospitals and doctors that Medicare currently pays, not to mention wisely investing 10 or 15 % of your earnings every year from day one on to provide for your own old age I'm dieing to hear a good solution. About now some stockbroker, excuse me financial consultant, rises to say that the only way to handle this mess is to invest every nickel with him. Don't know about you but my investments aren't exactly setting the world on fire.
The punchline to the old stockbroker joke goes "...But where are the customers yachts?"

 

[KennyG]

Live to be 100.

What a howler....why bother to live to be 100 when you cannot do a d**n thing for yourself after age 80? /QUOTE]

Lots of different potential outcomes, but, as I said earlier, I'm an optimist. My parents lived to almost 90 and only needed care in the last 6 months to a year of life. I know many people who live active and independent lives into their 90s. That's where I'm headed. Modern medicine is doing wonderful things. The odds may not be so good if you are an obese alcoholic smoker, but that's not the path I'm taking.

 

[Threepoint]

[snip] Show me a table of year-by-year contributions, both employee and the employer match and compare that with the value of those same contributions invested in an index fund tracking the S&P 500. The S&P 500 investments will do much, much better than SS any day.

Dave, but realistically, who would take their SS payment each month and use it to buy that indexed fund? Sure, money is fungible, and if taking the early, reduced SS payments avoids the need to sell performing investments, then I agree that is an important factor in the analysis. For most, though, I suspect waiting is a form of self-imposed "forced savings," with the savings accruing at 8 percent simple interest.

I also think about the folks who had some of their retirement savings in market in 2008, saw the bottom drop out, got scared and sold, then stayed in cash in their local bank savings accounts, too afraid to get back in to catch the run up. But that's a different issue, as is the fact that SS is much more from a societal point of view than simply an alternate investment vehicle for those of us in a position to manage our investments privately.

 

[RedNeckGeek]

Dave, but realistically, who would take their SS payment each month and use it to buy that indexed fund? Sure, money is fungible, and if taking the early, reduced SS payments avoids the need to sell performing investments, then I agree that is an important factor in the analysis. For most, though, I suspect waiting is a form of self-imposed "forced savings," with the savings accruing at 8 percent simple interest.

I've been very fortunate to have had corporate jobs with good 401K plans and employer matches, as well as company subsidized disability insurance. I contributed as much as it took to get the maximum company match, way more than the SS payments. And if I'd have been given the choice, I'd have taken those SS payments and put them in an IRA. Most of my life I didn't pay any attention to the performance of the 401K, just had it pretty much evenly split between bond and stock funds. I realize now that bonds had no place in that portfolio until I reached my 40s, but the so called "advisors" of the time saw it differently. I'm not saying I was your typical American worker, but I don't think it's fair to force those with better alternatives to contribute to Social Security. But I also understand that without the contributions of those in the upper income brackets, SS would have been bankrupt long, long ago. And when I say "contributions" that's exactly what I mean. I'd have to live past 140 years old to get back even what I've contributed, let alone what could have been made if the funds were conservatively invested in a low overhead S&P 500 index fund.

Threepoint, you make a very good point about bailing after the losses of 2008. That crash wiped out 10 years of earnings in the S&P 500, but it took "only" 5 years to make it back.

It may not be politically correct to say so, but if more people were allowed to suffer the consequences of their poor decisions, maybe they'd learn to make better ones. It seems that the current system penalizes those that keep their nose clean and to the grind stone so as to blunt the consequences for those that do not.

 

[riptides]

... Modern medicine is doing wonderful things.....

Yah, but I'd rather blow some of my money living each day than save it for the nursing home choice of - male erection drugs, soup of the day, or whatever.

There are things like travel and physical labor that I don't think being in my 80's or 90's will offer the same level of pure discovery or muscle ache as they do NOW. ****, who is to say your memories will still be as fresh?

It is a difficult and risky choice, enjoy each day NOW, or..... money is just a tool in the shed.

 

[ultrarunner]

I guess a man could really beat the system by having children very late in life...

My friends that were high school sweethearts never could have kids and then at age 50 she gave birth to triplets... kids are now 3 and thriving... she says every day is a blessing... her husband is not quite on the same page...

Also... most of my friends are 80+. Just helped my long time widow neighbor move at age 101 to a retirement home... except for me... age in the neighborhood is all folks 80 to 104... guess that's California living at it's best... no ice to slip and fall or snow to shovel and get a heart attack.

The 104 was still traveling to Hawaii alone to her condo until she was a 100...

 

[rekees4300]

What experience can you guys lend to the thought process?

62... Bird in the hand is worth two in the bush.

 

[jeff9366]

FROM THE WALL STREET JOURNAL, TODAY:

MISGUIDED MONEY IDEAS I KEEP HEARING

You are better off claiming Social Security at age 62.

Many folks are adamant this is the right strategy. Rather than delay Social Security until as late as age 70, thus ensuring a larger monthly benefit for themselves and potentially a larger survivor benefit for their spouse, they are convinced they should claim at 62, the earliest possible age.

To back up their argument, readers send me spreadsheets showing that they would come out ahead if they claim benefits early, then invest the proceeds in stocks that only go up or in bonds with yields available only from dicey issuers.

Yes, if you assume a high enough return, you can come out ahead by taking Social Security early. Yes, if you (and, if married, both you and your spouse) fully intend to die early in retirement, claiming at 62 makes sense.

But for those who reside in a world where investment returns and longevity are uncertain, delaying benefits makes sense. Sure, there is a chance that you will die early in retirement, having received little or nothing in return for your many years of paying Social Security payroll taxes.

But this is rather like buying homeowner's insurance, then despairing because your house did not burn down. The big financial risk in retirement isn't dying young. At that point, all your money problems are over.

Rather, the big risk is living longer than expected and running through your savings. Want insurance against that risk? Go for the fatter Social Security check.

 

[jeff9366]

FROM THE WALL STREET JOURNAL, TODAY:

MISGUIDED MONEY IDEAS I KEEP HEARING

You are better off claiming Social Security at age 62.

Many folks are adamant this is the right strategy. Rather than delay Social Security until as late as age 70, thus ensuring a larger monthly benefit for themselves and potentially a larger survivor benefit for their spouse, they are convinced they should claim at 62, the earliest possible age.

To back up their argument, readers send me spreadsheets showing that they would come out ahead if they claim benefits early, then invest the proceeds in stocks that only go up or in bonds with yields available only from dicey issuers.

Yes, if you assume a high enough return, you can come out ahead by taking Social Security early. Yes, if you (and, if married, both you and your spouse) fully intend to die early in retirement, claiming at 62 makes sense.

But for those who reside in a world where investment returns and longevity are uncertain, delaying benefits makes sense. Sure, there is a chance that you will die early in retirement, having received little or nothing in return for your many years of paying Social Security payroll taxes.

But this is rather like buying homeowner's insurance, then despairing because your house did not burn down. The big financial risk in retirement isn't dying young. At that point, all your money problems are over.

Rather, the big risk is living longer than expected and running through your savings. Want insurance against that risk?
Go for the fatter Social Security check.

 

[riptides]

Ok,

Maybe a person will not draw at 62. What does that mean, current job continues until 70? Find work between 62 and 70? Doing what? At what quality?

Working almost kills me now, I imagine after 62, working will kill me quicker.

 

[Tractor Seabee]

"Beat the System" is somewhat a misnomer. A Gov system is only "Beat" by the dishonest scammers and criminals. Us honest middle class are just receiving the dividends from that hard earned money we and our employers sent to the "System". We elected the folks that screwed around with the investment part of the "Social System" by making a large part of it into a welfare program and a poorly policed bonanza for the criminal element (scammers are criminals).

One way to "beat the system": you have to be in that six figure earnings class that stops paying on their earned income early in the fiscal year. Social programs are "progressive taxing" programs and that earning cap does not belong there until we do away with "progressive taxing of all types. The good ole' US progressive way is to tax all to the max but means test benefits to the rich so the poor have a piece of the social pie. The reverse example is: I am means tested on what I have to pay for Medicare so why not the same principal on SS and very little of my current income is "Earned".

Solution: Flat income tax, delete all other taxes on the individual, and a planned elimination of SS benefits till those grandfathered are gone. Swim or Sink except the "PROVEN" poor and helpless. Drones and scammers beware.

The purpose of this dialog is to NOT start a political slant and steer the thread off course here; but, state what I perceive to be important elements of the "Program". So far we have done well to keep politics from dominating the dialog as so often happens.

Ron

 

[dave1949]

The current system of progressive tax with loopholes is working quite well for those who can afford a politician. What makes you think they would support an inescapable flat tax? Can you out-spend them for contributions? I can't.

 

[Threepoint]

Ok,

Maybe a person will not draw at 62. What does that mean, current job continues until 70? Find work between 62 and 70? Doing what? At what quality?

Working almost kills me now, I imagine after 62, working will kill me quicker.

As I understand it, you would not have to continue working beyond 62 in order to benefit from waiting to start your payments. If you preferred to stop working at 62, but deferred commencement of payments until 66 or 70, your monthly payments when they began would be only slightly smaller than if you continued to work up to that time. Smaller because you did not continue paying into the system, but still much bigger than at 62 because you waited. Stopping work completely at 62 would mean, though, that you would not be earning income (and paying taxes on it) thereafter. So there's that. You'd need to have some other source of cash flow. And you might get real bored.

 

[Tractor Seabee]

The current system of progressive tax with loopholes is working quite well for those who can afford a politician. What makes you think they would support an inescapable flat tax? Can you out-spend them for contributions? I can't.

Dave,

Yes I was facetious, you hit it on the head as to the real problem, so we continue live on our little share of the country's largess. Actually because of a lot of due diligence and good I did not come out too bad. The stock market has bailed me out, after the slump I did nothing, 5 years later I was back ahead of the game and still climbing.

Ron