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A FEW MONTHS AGO, my wife and I were searching for an exciting diversion on a Saturday evening. It didn’t take long to agree on the perfect experience—logging onto SSA.gov to check out our estimated Social Security benefits.
What’s so thrilling about that? Like many people, Social Security will comprise a key component of our retirement income. Even now, those future funds exert a strong influence on our plans.
Background. I’ll turn age 62 this month and still work full-time. Sharon is 58½ and works a few hours a month. We have no debt, and don’t expect to incur any. The only expenses looming in the near term are college costs for our 18-year-old daughter, along with our current living expenses. College is covered, and we live a modest lifestyle supported by our present salaries, with money left over for savings.
Destination. Our clearest retirement-income goal lies eight years down the road—postponing my Social Security until age 70 to get the maximum monthly benefit. For us, that eight-year delay is an easy decision.
For starters, we’ve no pension awaiting us, apart from a minuscule sum I’m eligible to draw at age 65. Because of that, we’re counting on Social Security as the anchor that’ll provide steady income amid the financial markets’ ups and downs.
The value of a U.S. government-backed, lifetime income stream that won’t be eroded by inflation can’t be overstated. Even the immediate-fixed annuities we’re considering as a supplement to Social Security, while commendable, can’t compare. For this reason, we want our monthly Social Security check to be as large as possible until the last of us leaves this world. We think it’ll help us sleep more soundly until that final day.
On top of that, waiting to claim makes good financial sense. We think the case for delaying Social Security withdrawals until age 70 has been well-argued, both here and elsewhere. My wife and I are in good health and expect our genes to give us long lives, so we strongly believe we’ll be around to profit from our patience.
At present, our salaries supply virtually all the money we spend and save. If we pare away all spending except on essentials, we’re left with core costs that we think will be largely covered by our combined Social Security benefits when I reach age 70. Sharon expects to have already claimed her check when she’s first eligible, at 62. This is the best strategy for us according to OpenSocialSecurity.com.
The balance of our core retirement spending needs could be supplied by immediate income annuities. This option was off our radar a few years ago, but—to be honest—so was any serious thought of shifting from saving to spending. The more we study the topic, however, the more sensible it sounds.
Getting there. We know where we’re headed, but the exact route is an open question. We both agree that I should work full-time until I reach age 65. But at that juncture, our thoughts diverge on how to pay the bills until I start collecting Social Security at age 70. Which road do we take?
My wife would like me to fully retire at age 65. We’d have my tiny pension and her early Social Security, and draw the balance of our income from our investments. We could do it. While we’re not awash in money, socking away 35% to 40% of our income each year has allowed us to amass a modest pile of savings. We think trading some of those savings for a higher Social Security payout down the road is a sensible exchange.
Nevertheless, I know the decision to spend the precious treasure we’ve nurtured won’t be easy. We like the comfort of conservative investments. We already have more than enough money out of the market to carry us through the five years from my ages 65 to 70. But even with this backstop, I don’t think I could stomach pulling the retirement trigger in the face of a bear market.
What to do? I’m inclined to ease into retirement by shifting to part-time work, maybe clocking 25 hours per week. Those earnings, along with my pension and my wife’s Social Security, would easily fund our living expenses, with an ample amount left over for the fun my wife envisions.
The money from part-time work pays off in the future, as well. Each year we delay pulling money from savings means a year of spending still safely ensconced in our retirement accounts, hopefully ballooning ever larger. When added to my growing Social Security benefit, the potential returns from hanging on at the physical therapy clinic a little longer are compelling.
Cutting back without cutting loose also means I can stay flexible about when to call it quits. Most work carries a certain element of tedium, but that’s often true of life in general. I don’t lack for jobs to do or plans to pursue outside of work. But until those other activities overwhelm the sense of purpose that comes from my contribution at the clinic, I’m inclined to stay put. Both my boss and my patients seem to appreciate the service I provide. I’m not yet ready to fully forsake that feeling.
Like all life plans, ours has unique personal wrinkles that have yet to be ironed out. I suspect, though, that moving to part-time retirement in a few years will allow us to test the waters until we’re certain the time is right to take the plunge.
Ed Marsh is a physical therapist who lives and works in a small community near Atlanta. He likes to spend time with his church, with his family and in his garden thinking about retirement. His favorite question to ask a young person is, “Are you saving for retirement?” Check out Ed’s earlier articles.
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Ed, My first wife took her SS at 62 for a reduced amount for life as we understood. When I took SS at 65 she was to get 50% of my amount since her independent amount was small. What no one had ever told us was that her 50% was reduced by the % she had agreed to at 62. It turned out that it was folly to believe in the calculator programmed by the people who had to pay. I enjoy your
This article does a nice job of explaining the reduction to spousal benefits if your spouse first takes their own SS benefit prior to their full retirement age: https://www.aarp.org/retirement/social-security/questions-answers/switch-social-security-spousal.html
I’ve read the article twice, but I guess I’m missing the “nice job part of explaining”. I see they say “your benefits will be less than half”, but I don’t see a way to calculate what the benefit will be, nor how it changes based on what age my spouse claims SS, etc.
This appears like it will exactly affect us – our plan is for my wife to take her small SS at 62, but then I wait until 70 and she (theoretically) goes up to 50% of mine. But, I think you are saying this plan won’t work, and now I’m wondering if all of my plans are bad – she is currently working for me both to gain a 401K opportunity, but also to gain SS.
Thanks Kristine, I should have talked to you 30 years ago ;-).
Thanks for the thoughtful article.
I waited to collect SS until age 70 and then retired. It was a bit stunning to log on to SSA when I was 69 + 10 months and to realize that the monthly difference from taking SS at that age and waiting the month or so until age 70 was roughly $400/month in future payments. I’m happy I waited, as I’m in good health and don’t expect to die soon but who knows?
Thanks for the article. One thing that I didn’t know until recently was if your wife takes her social security benefit early, her spousal benefit at 70 would be reduced for the rest of her life. If her own benefit is more than half of yours then you are good to go with her taking early.
Your qualifier, for the rest of her life, could change. Her highest SS benefit can change when a spousal benefit becomes a survivor benefit after the death of her higher earner spouse.
A financial planner who writes and has many YouTube videos concerning social security is Devin Carroll. He has what I consider to be an excellent article on social security survivor benefits which I find informative.
https://www.socialsecurityintelligence.com/social-security-survivor-benefits-and-death/
My wife and I have similar stories and SS claiming plans. We retired about 6.5 years ago at 61 and 57 and I have been consulting part-time since. Works great and still time for other fulfilling activities, travel and fun. Good luck.
Great article. It was interesting that you made the point, “The value of a U.S. government-backed, lifetime income stream that won’t be eroded by inflation can’t be overstated.”
Inflation is my boogeyman. I’m never quite sure how to allow for it accurately and I also think about the fact that each person has their own “inflation rate.” I’ve been keeping detailed records for 40 years and when I look back at what we were spending on certain items “back in the day” it’s very striking.
Beyond inflation is the actual price increases that occur. Right now home and auto insurance premiums are increasing above the normal inflation rate. The only thing I’ve come up with is to have a very large “margin of safety” by accumulating liquid assets well, well beyond what we think we’ll need. Anything we don’t use will be donated to charities.
I appreciate all your thoughts on the ‘why’ of your decisions. Like you, we waited to take SS until age 70.
I’m curious how you have health insurance baked into each of your options. As Steve mentioned earlier, private health insurance (w/high deductibles) can cost $700+/month and up, or $8K+/year per person. For example, if you retire at age 65, would your wife purchase private health insurance until she reaches age 65 ($8K x 4 years)? If you work part-time, do you still get reasonable health insurance coverage for you and your wife?
I was surprised at how expensive Medicare and a Medicare supplement are. Medicare premiums are $174.90/month or $2100/year per person (the premiums are taken out of your SS check, if you are taking SS). Then you’ll need to add a Medicare supplement (Medicare Advantage/Medigap) and possibly co-pays, dental insurance, and vision insurance, depending on what kind of supplement you decide to take. And then there’s deductibles and out-of-pocket costs.
Part-time work would include family coverage. If I fully retire at 65, we’ll be starting to carry the total cost ourselves earlier, but it’s manageable.
There is no question that there is a lot of “security” in Social Security. That drip, drip, drip of money every month contributes to a good night’s sleep. However, the marquee number (what your entitlement is) is tempered by the fact that the government will deduct your Medicare obligation (and with a large IRMAA it could be a large deduction). And in addition, Social Security payments are subject to income taxes in a number of jurisdictions.
“The large print giveth, and the small print taketh away.” That inertia prevails throughout life, and it continues into retirement.
All you say is true. There are subtractions that lead to net income from SS, as with all income. But think how that net differs from income that requires performance and comes with risk. It’s a pretty good deal.
As I waited to age 70 to claim social security I found I worried a lot about the decision but I am happy I did wait to claim.
A good part of the worry was health insurance coverage related. My then current job of 28 years was ending as the owner of my employer was retiring and the firm ceased to exist. I was 68 at the time so I signed up for traditional medicare part B, a Medigap plan G and a part D prescription plan. My old employer group PEO medical family plan was a HDHP paired with a health savings account. When I sign up in my special enrollment period for Medicare part B past the age 65 normal window my part A Medicare was retroactive back to the later of age 65 or six months before the start date of your Medicare Part B coverage. That can impact your contributions to a H S A. Plan accordingly.
I was then covered but my four year younger wife was not yet eligible to sign up for Medicare. For our particular circumstances buying and paying the 102% of the full cost of COBRA coverage of my former employer plan. Fortunately, COBRA coverage cost was an eligible expense I could pay from my H S A savings.
Not having health insurance coverage for my my wife is not an option I would consider. An ACA plan did not work financially and administratively for us but does for many.
For ACA planning KFF has a free online calculator that allows you to estimate the cost.
https://www.kff.org/interactive/subsidy-calculator/
Yes, we have to cover the same stretch of years for Sharon’s health insurance. Thanks for the calculator.
Ed, I enjoyed this article. You and I share a couple of aspects to our retirement plan. I did wait till age 70 to claim my benefit and am thankful for that decision on the 2nd Wednesday of every month. I was the principal wage earner and so my wife enjoys a nice spousal benefit, and if I die first she’ll reap a larger survivor’s benefit.
Also, I was likewise able to “ease” into retirement. A couple of years before I completely bowed out, I started going in later and coming home earlier. I also tried to take off most Fridays and so have a 3-day weekend. One thing I learned from all this was that I was going to very much enjoy retirement—and that turned out to be true!
Thanks, Andrew. I hope for an easy transition—one step at a time.
Loved your first paragraph, Ed, because for years I would log into my SSA.gov account just to see what I’d be getting, and to watch the number grow as I added earnings. It made me happy every time.
I’d always assumed I’d wait until 70 to collect, but one day at age 65.7, I sat down with my accountant and a calculator and realized that if I waited out the extra 4+ years of zero payments, I wouldn’t break even until I was 84.
I don’t know if I’ll live that long. And I saw that my SocSec payment would cover my mortgage, property taxes, insurance and most other monthly household bills, so I pulled the trigger.
It’s great to live a stress-free autopay life, and even if I do live past 84 I doubt I will regret my decision.
Hello Mike, I took another approach than trying to break even.
I waited till I got the max pay out so that now, I have an excess of money and don’t even look at prices because my the bank accounts are full. Also, because I started with a bigger amount, the COLA is also bigger!
That’s a nice feeling.
I was rather shocked, in a good way, the first time I looked at what Social Security would pay my wife and me if we waited until age 70. I just pulled the numbers from the MySocialSecurity site and in two years, when I turn 70, my benefit and my wifes spousal benefit will total over $78,000 in 2024 dollars. That’s enough to live fairly well on in our LCOL area. Of course we also have a healthy nest egg in retirement and brokerage accounts. I did most of what you are projecting. I retired at 60, but took an off ramp of consulting a little, about one day a week. I did that for the first five years and it paid all our bills so we left our investments untouched. It even covered the $16,000 private health insurance premiums until Medicare took over. One note is that Medicare isn’t free, we still pay $8,000 a year for our various Medicare related premiums, much more than I expected. I’d always seen low numbers quoted of average SS benefits being in the $1500 to $2500 a month range, seeing we’d get $6,500 a month was a very pleasant surprise.
Reading through your comment, I agree with most of it. My wife and I pursued a similar course. I question the calculations on your $78K annual figure, and wonder if you’ve made an error that I had made for a while. I assumed that the Spousal benefit would equal one-half of the Maximum, 70-year-old amount. This turned out not to be the case. One of us gets the maximum possible wage-earner benefit, but the spousal benefit turned out to be one-half of the Full Retirement, 66-year-old amount. Off my head-top, I calculate our total benefit at closer to $72K. I’ll be curious to know your thoughts in comparison to our experience. Regardless, overall, a well-described scenario for retirement. May yours be happy and long.
Ed,
Great post!
I really think you nailed it when you wrote:
”… trading some of those savings for a higher Social Security payout down the road is a sensible exchange.”
That’s an important decision that many or perhaps even most pre-retirees have to make.
As far as I’m concerned there is no “rule of thumb” for this choice. Everyone needs to figure that out for their unique circumstances.
If some of those “savings” are a 401k/IRA accounts buying a higher Social Security payout you also decrease your RMDs
True. Thanks for commenting.
I agree with you Ed, and I think you’re a genius. I think all the other guys who agree with you are also geniuses.
We should start a club!
You’re planned path is the road that we have already traveled. I have no regrets about waiting until 70, my wife took her SS early, and will enjoy my larger benefit if I croak first. Where we are/were both fortunate is to have jobs that we like, that have the ability to cut back, and can be physically accomplished to the age of 70 (or beyond). This also allowed us to vacation frequently. You have a fine plan Ed.
Thanks for the affirmation.
Thanks, Ed, for sharing the details of your planning.
I don’t know anything about your work world. Does it involve committees, projects, meetings, and deadlines? If so, I’d hesitate before opting for part-time status. At age 60 I signed a three-year, part-time “phased retirement” contract. During that time I worked nearly full time for half pay. Full time workers don’t schedule meetings around part-timer calendars, nor are there many half projects! In retrospect, staying full-time would have be the wiser choice.
I chose to remain in a primarily clinical role at work. My duties outside of that lane are mostly handled through written communication or short meetings that fit my patient schedule. I do monitor work communication when I’m not there, and I anticipate an adjustment to reduced hours. I’m already preparing recruiting others to handle minor jobs. Thanks for the warning.
Ed, you are always one of my favorite writers because we seem to have similar thoughts, plans, interested, etc.. Thank you for your common sense (which isn’t that common) articles on investments, life, and retirement
Thank you for your kind words.
Ed, Thanks for sharing your thoughts and plan. It sounds solid. Two things you might want to consider. The first is to build a similar model with flexibility to start SS payments earlier, just in case life throws a curveball. The second is to add a healthy amount to the first year or two of partial retirement to allow you to do all those fun things you have always dreamed to do (travel, expand the garden, increase donations to charity, renovations, etc).
Hi Ed,
Over all a great plan.
As one PT couple to another. We are a few years older and both retired around the time of COVID. I chose the small (<1k monthly) pension vs lump sum with 100% survivorship as my wife’s family has had two centurions. We are waiting to claim SS at 70 as we have sufficient IRAs to fund “buying” larger SS payments. When we recently spoke with our CFP for a checkup his program showed greater sums for SS which he points out their software estimates inflation increases so keep that in mind.
As you did we used Open Social Security to assess different claiming strategies. We figure that at any time if necessary (such as a prolonged downturn in the markets) my wife who is the smaller wage earner can claim to preserve our retirement assets.
We used our retirement assets up to just short of 40k for our MAGI to qualify for “free” Affordable Care Act policies until we qualified for Medicare. We also are in good health so when working we able to utilize high deductible health plans and save a significant amount by putting the premium differences into our HSA for years. We the could utilize a bronze ACA policy knowing we had several years worth of HSA savings to cover the higher deductible and copays associated with the plan. We then used our taxable brokerage funds to cover the balance of our income needs. As a result we saved 48k over three years in premium costs.
Also if you are saving 35-40% of your income you can use your unsaved income amount as a target for 100% income replacement in retirement. You do not have to use your gross income as your target.
BTW when you are both retired those “exciting diversions” can occur during the day!
We find ourselves with many of the same problems to solve. Thankfully, we do have some tax planning flexibility if we need it.
Thanks for a well-written article Ed. Your plan makes a lot of sense. I was able to consult part-time the first few years after stopping work, and the money and interaction were great. I cut was back during Covid and missed both. We started my wife’s SS at 65, and I’m planning to wait to 70. I considered a 5-year period certain annuity to carry us from 65 to 70, but haven’t pulled the trigger. I checked Fidelitys Annuity Tool for a 5-yer guaranteed annuity starting on 4/1/2027, and it showed a $48,115 investment today from a qualified account would produce 60 months of $1,000 per month. I decided to do my own annuity with automated withdrawals from Vanguard. The idea of guaranteed income is definitely helpful.
Thanks, Rick. We’re staying flexible on that decision. Right now, part-time work is favored “bridge.”
When to start SS is always a fascinating discussion and I don’t think there’s any right answer, but I would not rely on what others or a website says is the best answer. There are always tradeoffs and risks.
You didn’t mention your SS FRA. I know it can’t be 65.
It seems to me considering all the financial components, the question is will a couple really need more income at 70 and beyond that’s worth giving up five years of benefits and taking money from savings?
If you retire at 65 and delay SS will your income and withdrawals allow the travel your wife would like?
At their ages their FRA age has to be 67
Yes to the travel. But remember, her thoughts may be a scaled-down version of the Quinn itinerary.
Regarding the financial trade off question, consider the linked research, and other Pfau research.
Thank you for the article, Ed! What are your thoughts for long term care?
Thanks for the question, I thought it might come up. We can’t convince our selves that LTC insurance is for us. If one of us became debilitated in the near future, our assets are sufficient to support us, and we each have the skills to provide care at home. Obviously, that would be a tough life. If we each have a normal lifespan, again the assets should be in place. In each scenario, an extreme fall back position would be selling real estate that I didn’t address in the article. We’re not planning a sale at this time, but dire situations call for appropriate measures. These thought are on the margin, though. In reality, we leave lots of cushion in our financial plans.
Thanks for the article, Ed. My wife is a little older than me. She will receive a spousal benefit based on my earnings as she has not earned enough credits based on her earnings. She worked a number of years for the federal government with no SS tax taken out. When I ran the Open Social Security calculation, it said I should start taking my benefit at 62.7 years old, and my wife should start a few months after that. I’m trying to wrap my mind around this….
Your wife will fall under the Windfall Elimination Provision (WEP) and you will fall under the Government Pension Offset (GPO). These rules punish pensioners who have held public service jobs–like teachers, fire fighters, police officers, etc.
Not true, for her. She doesn’t have a federal pension.
Ken,
Per your comment, “Not true, for her. She doesn’t have a federal pension.” …
I’m researching the public service and social security tax guidelines and find it difficult to know if I’m interpreting the tax code correctly. Could you expand on this topic? Did your wife not have a “pension” at all or did she possibly have a Defined Contribution Plan (DCP) and you are stating that she is not affected by WEP/GPO in this case. It seems a teacher could be entitled to receive their DCP lump sum (i.e., not really a “pension”), but then later be dinged on SS monthly payment amount (their own or 50% spouse) by WEP/GPO. This topic is a bit confusing when one attempts to read the tax rules on these public pension scenarios and SS implications.
Ken (or others), please weigh in on this topic. I haven’t seen much discussion on HD regarding this SS nuance. Thanks!
I’m no expert on the topic. My wife worked in defense over 30 years ago. She received a tax-free lump sum payout a few years after she stopped working for the federal government. I can’t remember if keeping her monthly pension (to be paid decades in the future) was even an option.
Thanks for the reply, Ken.
My family’s determinant was to keep in mind that, worst case, only one of us will ultimately rely on the largest of our two benefits. For us, this made it a [pardon the expression] no-brained to wait until 70 to claim SSI.
Many of us view Social Security as a Pension that we’ve paid into over countless years, and now feel entitled to claim. My own perspective is that Social Security, more than anything else, is a form of insurance: better not to need more, and get it, than to get a lesser amount, and need a greater amount later on.
I consider most of the “break-even” calculations thus to be effectively irrelevant: by the time we retired, activities such as (A) Tracking the Break-even Point for SSI between 62 and 70″ were not the kind of thing we care to think about, any more. Now in my 70s, I say that I have built up as secure a retirement situation as wife and I could manage, it’s now more than we reasonably ought to be able to accidentally go through. As we age, we understand: we can’t just go out and get a low-rent job, if necessity calls. We can no longer manage many of life’s requirements, and are kept busy in learning how to farm some things off to others. (Bookkeeping; lawn maintenance; etc.) If I must add managing earlypre-70-year-old SSI benefits to maximize a “spread” between (1) the early, reduced dollars and (2) the higher, later dollars, on top of other aspects of our life, I’d wish I’d done a better job of preparing for (3) Old Age and (4) Travel & Grand-kids, and (5) I think I’ve said more than enough about this, for one “Comment.”
Regards,
(($; -)}™
Gozo
Ken…if you are not completely satisfied with the answer you received further research will provide you with this. I sometimes don’t know what the correct answer is but I know what makes sense to me and it will click when you find it. I studied the brightest and the best advisors.
It seems our scenario is an outlier. The longer we wait past 62 and 8 months (my age), the worse the outcome is, according to the graph from the OSS calculator. When I fudge the numbers and put in an earned SS benefit equivalent to mine for my wife, the results are vastly different and waiting is the best strategy. My own analysis points toward taking SS about a year later than the calculator indicates.
Try Kotlikoff’s calculator. Compare and go with your best analysis.
Thanks Marjorie. I see that one is not free, but I bet it’s good. When we get closer to decision time, I’ll probably spring for it.
That’s interesting. Bears sharpening your pencil to better understand it.
Don’t underestimate the joy of cutting loose! My husband took SS at 62. I waited until I was 70. And I quit working, cold turkey, at 67. Our net worth took a hit over these past 3 years but it will settle out as the difference between our 70K in SS and spending needs is 4% of our remaining nest egg.
I could have “eased” into retirement with consulting but the pull of making every minute mine overpowered my desire to preserve my money. The last 3 years have been glorious.
live your life. Live your life.
That “pull” is not yet strong enough to snatch me away from work. Thanks for the comment.
Ed – having the option to “ease” into retirement part-time is a huge plus. While not often discussed on HD, the actual hard event of retiring is very stressful for many retirees, myself included. This is why it is good to do all the planning as outlined in your article – to ensure things are covered with a comfortable margin. The good news is that once into retirement, most retirees seem to enjoy it as all the uncertainties melt away.
You caught my desire for “a comfortable margin.” That’s the emotion, paired with a genuine liking for my work, that drives my planning.
Wouldn’t it be great if we could all find excitement in retirement planning as you have, Ed.
while the most fearful category in planning for retirement is the unknown unknown, I find your proactive, sensible approach exemplary.
Marjorie, thankfulness may be a better word than excitement. I’m glad I have choices.
Take it from my experience Ed, cut back for awhile before retiring full time. It eases the transition
Wise advice, I’m sure.
Great article! Logging onto SSA.gov for a fun activity? Your decision process and journey sounds similar to ours. I retired at 67, having saved enough to get by with moderate IRA and savings withdrawals, then started to draw SS at 70. I have no pension, but my wife retired with a pension from the local school system.
This comment: “I don’t lack for jobs to do or plans to pursue outside of work.” I encourage you to retire as soon as you can so you can tackle all those jobs and activities. Your older self will thank you later.
Jeff, it was already dark that Saturday evening. When it’s light I go outside to watch the garden grow!
Ed, nice article. It sounds like you have thought things out-it seems to make sense to me. In some cases it actually makes sense to take SS around FRA to optimize the growth of the savings portfolio. In other words the time to take SS needs to be considered along with all other financial factors. Your plan sounds right for you. Dont forget to look at health insurance at age 65 and beyond. The other large ‘cost’ in retirement is taxes, so start considering that. Nice work!
Yes, I didn’t mention our thinking on taxes in the article. It’s one of the details that we’re working to bring into sharper focus.
Easing into retirement with a shift to part-time work has many advantages, Ed. Your plan sounds great, best wishes for a smooth transition!
Thanks, David! I’m looking for a soft landing, at work as well as home.