IN MY FIRST ARTICLE for HumbleDollar nearly four years ago, I said I’d claim Social Security benefits at my full retirement age of 66 and two months. By claiming mid-way between 62 and 70, I intended to hedge my bets, because I couldn’t know such relevant variables as my lifespan or future tax rates, inflation rates and investment returns.
And I did indeed claim Social Security recently, though—full disclosure—it was nine months after my full retirement age. Here are the 10 factors that influenced my decision:
I may have challenged genes. Not a single family member on my mother’s side has made it to age 80. I hope my daily exercise, moderate weight, lack of smoking and more balanced diet may help offset my family’s clear lack of longevity.
The added Social Security income means we won’t need to take taxable IRA distributions or realize capital gains from selling investments over the next five years.
By claiming earlier than age 70, my Social Security payment is somewhat reduced. This will marginally help our tax situation beginning at age 72. That’s when required minimum distributions are scheduled to kick in—and when our tax rate is likely to rise.
Today’s low federal income tax rates are slated to sunset at year-end 2025, so the tax on my Social Security payments should be somewhat lower for the next three-plus years.
We live in one of the 37 states that doesn’t tax Social Security income, so I won’t incur added state taxes from claiming earlier.
To solve the future Social Security funding shortfall, many of the suggested fixes include reducing benefits for those with moderate to higher incomes. A recent bipartisan poll indicates that more than 80% of Americans support some sort of benefit reduction for the financially well-off. If that happens, claiming earlier may prove to be a wise move.
The Social Security Administration can forevermore administer my Medicare premiums by deducting them from my Social Security payments.
I would be extremely frustrated if I delayed Social Security until age 70 and then subsequently suffered some major physical deterioration so I was unable to enjoy the extra money, even if I did live beyond the age 80 or so financial breakeven point.
I no longer need to evaluate the tradeoff of when to claim. I can move on from this debate, which—frankly—just feels good.
Claiming Social Security near my full retirement age, versus claiming at either age 62 or 70, guarantees that I’ll be at least half-right.
The $25,000 and $32,000 thresholds for taxation set in 1983 have not been raised since set into law. Meanwhile the medium household income in 1983 was just under $25,000 as compared to 2021 which is just under $71,000. The way I see it our Social Security benefits have been reduced every year since President Reagan signed the law in 1983 via means testing from the IRS. It’s well past due to adjust the thresholds upwards.
What do you know?! It’s already time for my wife to claim….and answering that question seems to be what everyone else’s comments are about, too. I better find that next article “how to file for social security!”
My wife’s family is longer lived, so she likely will outlast me by a decade or more. She also worked, so she initiated SS a bit past FRA based on her own past income. Her life-expectancy did not factor in the decision, but she more than me felt comfort by initiating the annuity type cash flows so she can more easily manage monthly expenses versus cash needs.
The $25,000 and $32,000 thresholds for taxation set in 1983 have not been raised since set into law. Meanwhile the medium household income in 1983 was just under $25,000 as compared to 2021 which is just under $71,000. The way I see it our Social Security benefits have been reduced every year since President Reagan signed the law in 1983 via means testing from the IRS. It’s well past due to adjust the thresholds upwards.
What do you know?! It’s already time for my wife to claim….and answering that question seems to be what everyone else’s comments are about, too. I better find that next article “how to file for social security!”
John: You didn’t mention your wife’e life expectancy. Did that factor in to your decision?
My wife’s family is longer lived, so she likely will outlast me by a decade or more. She also worked, so she initiated SS a bit past FRA based on her own past income. Her life-expectancy did not factor in the decision, but she more than me felt comfort by initiating the annuity type cash flows so she can more easily manage monthly expenses versus cash needs.