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There are good reasons to start Social Security at 62 or at age 70 or anywhere in between. One is that the money is needed as income. Another is to assure the maximum possible monthly income later in life, including survivor income. Both are valid based on individual needs. Less than 10% of America will wait until age 70 – generally out of necessity.
But when I read on Open Social Security:
“Recommended Strategy:
The strategy that maximizes the total dollars you can be expected to receive over your lifetime is as follows:”
I cringe.
Can anyone explain why being concerned with maximizing the total lifetime benefits received from Social Security matters in the slightest way?
How does anything other than maximizing your income when you feel you need it most matter?
I wonder how many people follow the Open Social Security advice without understanding what objective it is based on?
Pretty sure I stated this months ago on this topic:
Nobody, “A PRIORI”, can make a right or wrong decision, unless a) they have a crystal ball which tells them in advance how long they are going to live, or b) they have a known terminal illness at the first decision point, which is at age 62.
FWIW; For all of you chest thumpers who are so proud that you waited, or will wait until age 70 to claim, how would you feel, in retrospect, from the great beyond, if you kicked the bucket at age 72 ?
Mark, I believe age 70 was the best choice for me because I wanted to be certain my wife would have the highest possible survivor benefit should I croak first. My waiting until 70 also made it possible for my wife to retire and begin her SS at 64.
If I should outlive Chrissy, I guess I’ll be stuck with my maximum benefit for the rest of my life.
If we both get run over by the same bus tomorrow, I would have no regrets.
Having said all that, my waiting until 70 did not require me to burn through any assets. If it had, my choice may have been different.
For me, even without the benefit of a crystal ball, I made the right decision.
I’m absolutely fine with my decisions. Not only with my SS decisions but with my delayed retirement. I did cut it a bit close. I was given at best a 15% chance of survival in 2023, yet here I am. I say “decisions” because I decided to work longer, save more and travel more.
I decided that it would only be a “wrong” decision if I or my spouse were to run out of funds while in retirement. Being imperfect I expected to leave money on the table. I’m fine with that because I’ve done just about everything I wanted to do in life. I realized a few years ago that I’ll never make it to Mars.
Of course, there is always more to do and things to see, if I’m inclined to do so. There have been benefits. My spouse is on the other side of the country visiting her ailing parent, attending a school reunion, and getting some medical care. I’m glad we have the funds so she can do these things.
No regrets at all. Goal was to get best COLA benefit for my wife and I. My benefit is substantially larger than hers, so if I kick the bucket at 72, she will live on with my larger benefit. Generally the odds are good that one person in a marriage will live into 90s if alive at FRA with good health. If we both die in our 70s- well I guess we won’t be around to fret over it…
Wouldn’t bother me at all. My objective was the largest base for future COLAs, not the largest pay out. At 78 I suppose I have yet to reach that theoretical break even point, but if I drop dead tomorrow that’s fine. I’m happy with my decision.
I don’t understand why anyone who has an investment portfolio which gets them to 70 would not want to maximize lifetime benefits from Social Security.
What difference does it make? There is no value to the person other than the monthly income.
Maximize the income as fits a situation certainly, but how are the aggregate benefits received over 10-20 years (maybe) relevant?
I fail to see why income over the 3 years between my FRA and 70 matters more than income over the rest of my life.
I’m not sure we are on the same page.
Let’s say your FRA benefit is $1500 a month. Your age 70 benefit is 24% higher at 1,860. That may be important to you as income – an extra $360 a month plus possibly higher survivor income. That’s a personal decision, but it’s all about monthly income.
What is not important nor can it be controlled by anyone is whether you collect the monthly benefit for two years or twenty years. So, what difference does the total amount collected over a lifetime matter?
The more I collect, the more I can spend or give away.
But in any case you can only collect it on a monthly basis and only as long as you live. So, use whatever strategy you like to maximize that monthly income so you can spend more, but the accumulated lifetime total is still meaningless.
If a software program tells you what collecting strategy to use based on maximizing lifetime benefits using actuarial life expectancy, then I think that is wrong. That’s the only point here.
As I posted before we both took our Social Security as soon as we could.
We figured that our kids can inherit all of our investments.
But they can’t inherit any of our Social Security.
Financial need played no part in our decisions. Thankfully.
Obviously … YMMV
One of our reasons for waiting until 70 to claim was to help ensure that we wouldn’t need financial help from our children no matter how long we live.
While it is obviously true that SS isn’t inheritable, the higher income we have from waiting until 70 to claim means that less of our investment portfolio is needed to fund our retirement, so I don’t think it is a given that claiming at 62 would have allowed us to leave more money to our children.
This is a good point, Winston hadn’t thought of it. Chris
You said, “Less than 10% of America will wait until age 70 – generally out of necessity.”
I think it’s almost exactly the opposite reason. The 10% of Americans waiting until 70 are probably the least likely to need the money. They just want the most they can get and because they don’t need the SS, they can wait and get a guaranteed 8% return.
It was the 90% who need the money and not waiting to age 70.
I assume you are familiar with the famous “marshmallow test” conducted by Stanford psychologist Walter Mischel in 1972. While many people clearly do have good reasons for claiming before 70, it may also be the case that many of those who claim early are similar to the children in the test who were unable to delay gratification in order to receive a larger reward.
I’m not familiar with that, but in this case it’s pretty good bet they need the income, but also sadly, some say they take it because they think it will be gone if they delay.
I find it interesting that you have frequently criticized people for their failure to adequately save for retirement, which clearly requires delaying gratification, yet you assume that it’s a pretty good bet that those who claim early need the income. Although, I suppose it does make some sense that those who failed to save enough for retirement would be more likely to need SS income at a younger age.
It’s not just an assumption it is based on research/surveys of people taking it before FRA or later before age 70.
It is pointless to claim that something is based on research without a citation. A poorly designed research study is worse than useless because it can cause people to draw the wrong conclusions.
Having written on and studied the claiming strategies there are many shades of gray and a few obvious easy answers. But what I think is much more important is what do we think our “fearless leaders” in Washington D.C. will do when they can only pay us 80%ish of our promised benefits. I guess they just print more money to keep us from rioting. Or do something similar to IRMAA and tax benefits higher if they are deemed unnecessary. I’m still planning to wait to 70 to maximize my inflation adjusted benefits.
I agree this is a more important question than optimal claiming strategies. Many have offered reasonable, multi prong fixes to the problem based on logic and fairness, including Dick Quinn.
My prediction is that Congress will wait as long as they can, and the solution they come up with will not involve the same approach but rather be the one which they estimate will cost them the least number of votes.
The law does not permit funding from general revenue
Laws can be changed.
In this case that’s the last thing you want- social security being part of federal budgets, spending rules and such. It was designed intentionally to avoid that.
I thought we had already beaten this equine not just dead but underground. As I have posted multiple times, I waited until 70 because I wanted the largest base for future COLAs. If I had needed the money to live on I would have had to choose differently. I will not be worrying about my claiming strategy on my death bed.
It’s not the choice that is the issue as was stated, but rather is it right to make suggestions through a program that is basing the advice on maximizing the accrued lifetime benefits collected which may not be the goal❓
I think we talk about SS a lot b/c it is a big deal to so many of us. And we also have a lot of new people that are coming to the Forum since Jonathan’s passing. I think it is ok to talk about it. Chris
To begin drawing SSA when you “need it most” seems sensible. The problem was, while I knew how much I needed or desired that income at 65 when I retired, I did not know whether I would have a lesser or greater need for it when one or both of us turn 90. I my opinion, delaying until 70 provides a sort of longevity insurance, but not everyone can afford it. And for those with diminished life expectancy or those who experienced involuntary early retirement, drawing early may be necessary. Therefore the optimal age to begin drawing varies from one person or couple to the next.
Yes, Spouse’s brother who died earlier this year from ALS had to take it at 60. Chris
You have my sympathy. Of all the people I diagnosed and cared for in my career, that was one of the worst.
Thank you, Jack, I really appreciate your comment. It was so hard on everyone in the family, especially his wife and son. We miss him. C
I agree with you, RDQ, that maximizing lifetime benefit shouldn’t be the goal. Another possible benefit to delaying until age 70, for some, is tax efficiency, for example, the possibility of doing Roth conversions. For me, it will mean offsetting SS income with qualified charitable distributions from an inherited account, which can’t begin until 70.5 years of age.
Open SS has been around a long time. I have used it through the years as one part of our planning. It was very interesting that for many years it said to wait until 70 for the higher earner, but as we got to SS age, the algorithm changed to take it earlier. I am not sure why? Everyone’s situation is different, I guess. Chris
That has happened with our calculations also, so I agree that waiting to 70 so my COLA’s are acting on a larger number works better for my wife’s future income.
One answer might be that the people looking to consciously absolutely mathematically maximise are are 2 ends of the economic spectrum.
1 Those without any alternate provision or savings (and perhaps carrying debt) who are prepared to work longer until they can extract the maximum lifetime benefit from SS because it will pay for a better lifestyle and they need every cent.
2 Those who absolutely do not need SS so might as well try to game it to extract the maximum return on their investment.
I’d guess the idea is popular because many people intuitively fall into the maximum return thinking because they need something “objective” to help them with what might be a confusing and “difficult” decision. So for them knowing that it is an “endorsed” decision might provide a peace of mind dividend.
It’s just maths -but human behaviour plays a part.
Right, it’s math and actuarial assumptions, but unless a person is very clear their goal is maximizing the accrued lifetime benefit, the advice when to start benefits may not actually meet their more practical income goals.
That is of course true. But the problem with writing general guides is you obviously aren’t addressing the specific circumstances of every individual reader. Doesn’t make the original work invalid.
While you frame it as “advice” I read it as caveated by the objective. I would guess if it is a professional article there is enough equivocation in the preamble around how people might have many different and perhaps competing objectives.
Dick, my strategy is to maximize the inflation adjusted like annuity benefit that SS provides at age 70. This increased benefit will cover both my life and my wife’s life(she gets my benefit should I pre decease). For our situation it’s a no brainer with my PIA nearly 3 times that of my wife. If I was single I would probably claim at FRA. Don’t take this the wrong way, but I believe you are still trying to justify claiming at age 62.
I think you may have confused the fact that RDQ has argued many times for not claiming later than FRA.
I stand corrected. I thought previously he made the point to claim as early as 62, which he did. In any event, I think this topic has been rehashed by RDQ to a point I don’t really understand.
Not at all. I would never suggest at age 62 unless there was a dire financial need or suggest later than FRA for that matter
Here’s my 2 cents worth, let’s exaggerate for hyperbolic effect. An “optimal retirement age calculator” that maximized lifetime earnings would tell everyone to work until they drop dead, which reveals how meaningless pure mathematical optimization is without considering why you’re doing any of this.
Social Security claiming strategy is the same thing. The goal isn’t to “win” at Social Security by extracting maximum dollars. The goal is to live the retirement life you want with financial security. Maximizing lifetime benefits might align with your goals, or it might not. That’s a personal decision, not a math problem.
Agreed. What makes this decision such a vexing conundrum is the fact that we have imperfect information to work with. We don’t know how long we’ll live, what our needs may be later in retirement, and we all have different financial circumstances, so it comes down to a personal decision. I sometimes feel that people who don’t wait until 70 are sometimes looked down upon as financial amateurs. My recommendation is to decide as best you can and don’t ever look back.
I agree, but why would it be a persons goal – especially when it may not even align with ongoing income needs?
Seems like the math problem has overridden common sense.
For most people, I would tend to agree with you. To extend the maths metaphor, There’s always going to be a subset who’s values and goals align with SS optimization.
Let me just say, no offense intended, that most “people are dumb”. They don’t plan, research, consider all alternatives and make informed decisions. They let family, friends or the SS website give advice as to what’s good for THEM!
Yes, take it when you need it but please try to wait until Full Retirement Age (FRA) at least.
There is very little that is magical about the FRA which makes me wonder why so many people make such a big deal about it. Spousal benefits are capped at 50% at FRA and those who are still working who have claimed no longer receive lower benefits once they reach their FRA. Otherwise, it seems that one’s FRA is simply one possible claiming age between 62 and 70.
The FRA was sort of a big deal for us. We did plan on continue working, so taking before our benefits weren’t reduced was not going to happen. But I will admit that when to start SS was never a big issue for us. We never consulted any calculators — or actually thought about it at all. We didn’t save and invest the SS dollars. We used the money to rent an apartment near our granddaughter and her family. It was an excellent choice made with no agonizing. I know many HD readers may be appalled, but it worked for us.
Wow, thanks for sharing! On average, people are of average intelligence. You seem to be confusing a lack of time/resources with a lack of brains. Social Security is complex, and getting advice from a friend or the SSA website is exactly what ‘average’ people—who are also busy working, raising families, and living—are supposed to do. The best advice is to clarify the path, not insult the travelers.