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https://www.wsj.com/personal-finance/retirement/delay-social-security-retirement-cc6e1bbc?st=MZWHJR
Gift link to an article by Derek Tharp in the WSJ from a few days ago. He was (? still is) one of the contributors to Kitces et al.
It’s refreshing to see an article written that suggests the opposite of the “dogma” of delaying SS, which I personally have never agreed with.
I find this whole discussion (again) funny and a bit bizarre. While I’m sympathetic to the wait until 70 side, obviously the other side won this argument a long time ago and it’s not even close.
The article says 90% of SS recipients don’t wait until 70! That ends the discussion. If I had 90% of the public agreeing with my position I would just shut up. I wouldn’t bother arguing with the wait till 70 folks who are obviously wrong. Why the need to rub it in their faces? You won, let it go.
And yet in the HD guide there is a Social Security section that starts –
THERE’S A TREND TOWARD claiming Social Security retirement benefits later. Still, many continue to start benefits at 62, the youngest possible age. If these 62-year-olds are in poor health, claiming benefits right away might be the right choice. But many likely made a mistake.
I am happy to have waited to age 70 to claim my social security benefit. I think each person needs to make an informed social security claiming decision based on their personal circumstances.
I took SS about a year before FRA because I had just bought a house, my SS benefit precisely matched my monthly payment (mortgage/insurance/property taxes/utilities), and I expected my work income to fall off a cliff as my business model became obsolete.
Had I known the clients would keep coming and I wouldn’t need the benefit, I’d have waited until 70.
But no regrets. I have slept well with my decision.
A major reason I took SS at FRA was because I felt that SS would eventually implement some sort of needs basis which could reduce higher earners SS income. I am now 81 and it has not happened yet, and I hope it does not.
The reality is that politicians have some hard choices to make and they are running out of time to keep kicking the can down the road.
You should know there is talk and proposals floating around as part of fixing SS to go to a chained CPI for COLAs and to limit future COLAs based on income. So, keep an eye on all this if your strategy counts on the future value of the COLA.
If you’re in a position of deciding rather than having no choice in order to survive then the problem is probably lower order.
There is no single right answer for anyone unless you , unfortunately, have a strong predictor of when you are going to die. Actuarial maths should make the decision largely a wash.
People have different needs and emotions based on their own circumstances – hence the “take early so I have more portfolio to leave to heirs” vs “take late so I have maximised the most secure inflation proofed part of my “portfolio” in the event of a long life”.
It’s a popular topic it seems because there is loads of maths to be cranked to try to prove out positions but ultimately I would say it’s an emotional decision. And one that no-one should have regrets over.
I retired from full time work at 53, with a pension with no COLA. I retired from part time work three and a half years later.
I took (ex) spousal SS at FRA.
I took my own SS at 70. (You can read the details of this progression here.)
My reasoning was simple: I wanted the largest possible base for future cost of living increases. I have zero interest in discussing break even points. I will not lie on my death bed calculating whether I would have made more money by claiming early, and in any case, I have a good chance of living to my late 80s if not 90s.
I am single, so no spousal considerations. I have no biological children, so I am more concerned with not running out of money than with leaving a legacy. Money needed to “bridge” came out of my money market fund, which was earning derisory amounts of interest.
Talk about discount rates is above my pay grade. Again: largest possible base for future COLAs.
Amen to your reasoning Kathy. I also wanted Chris to have the largest possible survivor benefit when I expire. Waiting until 70 is helping us live our best retirement.
Still, I get it that filing early makes sense for some.
Now that makes sense.
Thank you! I am aware that other people will have other primary considerations.
I would love to have the opportunity to increase my guaranteed income so handsomely. As an outsider looking in, it would seem to me if you can afford to do without Social Security, it’s unwise to take it early.
Basically, assuming 3% inflation, your portfolio needs to earn an 11% return every year to match the benefits of delaying. The question becomes this: Can my portfolio provide a guaranteed, risk-free, inflation-adjusted 8% increase that lasts until I die, provides a maximized survivor benefit, and cannot be touched by a market crash? If the truthful answer is “no”, and you can fund your retirement from portfolio withdrawals, it seems logical to delay… I’m just jealous.
It really depends. I’m in the camp that delaying taking social security unless you are either actively working and earning income or you didn’t do a great job saving for retirement and need a bigger check to survive on is not for me. The reason; we have more than enough money saved in my retirement accounts to live on till aged 99 and leave some money behind. Eith that particular scenario waiting to collect social security and drawing down my accounts make no sense. Even accounting for the larger checks. Firstly you miss the annual payments year one -seven which in itself is a tidy sum, then I need to drawdown my retirement accounts until then. Finally the social security income in my younger years is worth far more to me than when I’m 70. Assuming my investments grow at the average, my portfolio will be well above a few million dollars, the larger SS check as a proportion of my net worth doesn’t mean much. I’ll take the funds early, spend it to reduce my portfolio drag in the early years amd call that a day. This doesn’t work if your retirement income outlook is poor and you need the money to eat.
I get it, Mike. I had an easy job, one that I enjoyed. That enabled me to delay to age 70, without having to spend my savings. Had I needed distributions in order to make it to 70, I’d probably started SS earlier.
People who try to say the best outcome is to always claim late are just wrong. It is a lot more nuanced and they must look at the entire picture. Like I said in my earlier post, a bigger check at aged 70 or 75 won’t matter one iota to Tamara and I. So.we will claim earlier in between Roth conversions and when we don’t have much income. For others, it makes all the sense in the world to claim later to increase the retirement security. It’s the same way I feel about an annuity… doesn’t fit for us, but for others it makes sense (maybe). Then , there is actual missed dollars for the delayed filers…like how do you reconcile that and say its always wrong to claim early? It’s not that straightforward.
Right on Mark. I also consider that 11% is a pretty aggressive target to hit when your time horizon is only 8 years.
Before envy overwhelms, there is a chance, perhaps very small, that benefits will be reduced somewhat when Social Security’s trust fund runs dry in ~2034. Other changes to the program are likely to happen before something that drastic, but it is a non-zero risk. Jonathan was fond of saying: politicians like to be re-elected, and voters receiving Social Security benefits vote at a higher rate than younger ones.
I was more inclined to put my faith in that sentiment before bond rates rose and the federal government’s annual budget deficit grew to match GDP.
I agree with Dick and others who note there is no single right answer for everyone. There are some really unfortunate options, like starting at age 62, but sometimes life deals people a really hard hand.
I guess for you US folks, it’s a nuanced and very critical debate. You’re the equivalent of the big kids in the candy store, $50 in your pockets, debating how many chocolate bars you can afford and still have money for the diner later. I’m the poor schmuck with a dollar in my pocket and a brown bag for later, wondering if my UK social security will even cover the bus fare at 67. 😂
Your system is unbelievably generous, and I think that sometimes gets lost in translation. In most of the world, portfolios have to do all the heavy lifting right through to the end. Paradoxically, yours is an extremely serious but wonderful problem to have
.
Most seniors don’t think our Social Security system is generous, quite the opposite in fact and it’s now getting close to insolvency because of inaction by politicians for tens of years.
Also, Mark, posts you read on HD do not reflect typical older Americans or retirees. For many here SS is an add on to retirement income, necessary, but not critical. Whereas average retirees depend on it for a substantial part of income.
In addition, you don’t have nearly the same burden for health care expenses in retirement as we do. You have the $50 in your pocket in that case.
I have to concede the health care point. Not having to account or worry about this potentially massive expense is very reassuring.
And what if you delay and the market dives between your age 67 and 70 but you need to use the money to live on or you don’t make it past age 70?
We have hashed this subject several times, there is no single right answer, but my view is a bird in the hand is worth two in the bush.
I didn’t need the SS benefit but I started it at my normal retirement age and invested it in tax free bonds for several years and have reinvested all the interest for the last 17 years. We now have a hefty six figure investment balance and if we need it, we can stop reinvesting and generate monthly tax free income equal to my before income tax SS benefit. And the value of the account will go to our children.
It is my understanding that according to the SS actuaries, if one lives to the projected lifespans, the total income is the same no matter when one takes social security. The real differences occur if one dies younger or older than the projections. The tables indicate that a male aged 60 has a life expectancy of +21.08 years (age 81) while a female aged 60 has an expectancy +24.12 years (age 84). If one lives longer than that, they’ll achieve a greater total income. At my age the tables indicate I may live another 9 years. That’s unlikely considering my health issues. What the tables cannot tell us is the difference taking SS will make in our lives. That’s a very personal decision with differing outcomes. I took it before reaching age 70 and invested the funds in a very robust stock market. All things considered it was a decision with a wonderful outcome.
You should measure from age 67, not 60
I used 60 because that’s an age at which one should be finalizing their retirement plans (I would hope). There is a 92% chance a 60 year old male will live to 70. Obviously, some won’t. My point is about “the difference taking social security in our lives” at various ages. If one dies at 70, there will be a spousal benefit, but those funds left on the table could have paid for some lovely vacations in retirement. There is no one size fits all. For example, my spouse has a pension and a SS work record, too. A lot of people make it entirely on their own with no spouse. The SS tables are readily available here:
https://www.ssa.gov/oact/STATS/table4c6.html
But life expectancy from age 60 and 67 is different.
Calculations should be made based on individual circumstances. When I turned 60 I had maybe a year to live, and I crunched the numbers for my wife based on that. My unexpected survival and the ever-improving odds that the cancer won’t be back and I could live out a normal lifespan (now 69) have required an ongoing rejiggering of the numbers. Actuarial tables are only guidelines, and loose ones at that.
My wife and I enjoyed our jobs and didn’t retire until 70 and 71, so it was easy for both of us to wait until 70 to claim. Our combined SS benefits are 101k this year and that amount will continue compounding each time there is an increase in benefits for as long as we live. The additional pyschological sense of security was also an important factor for us and allows us to sleep better when the market is in turmoil.
Jonathan recommended waiting until 70 for most people and Bill Bernstein continues to do so, which is all of the advice I need to know that there are experts who agree with us.
Long Odds by Jonathan Clements
But what if you’re a 65-year-old who is in good current health, has lived a healthy lifestyle and didn’t have a job that was physically demanding? The odds of making it to 90 rise to 30% for men and 42% for women, with the chances that one member of a couple lives that long at 60%.
https://humbledollar.com/2024/05/long-odds/
I strongly agree with you parkslope. It made the most sense for my wife and I. Too say this topic has been discussed thoroughly on this site is an understatement. It may or may not be the best strategy for others, for a myriad of reasons. I defer to Jonathan and Bill Bernstein on this topic. They both wrote lucidly, so I seriously doubt one cannot understand their logic. Of course, how one deals with future uncertainty is valid, so do what makes the most sense to you. Its your money.
Only 8-10 % delay to age 70, most because they need the income. For the life of me I can’t see the advantage of delaying to age 70 even now with the potential of a 24% higher benefit for a few years … maybe. That is true in my opinion if a person is drawing from assets or has a pension. There is a risk that offsets the gain IMO and as was said by Winston, kids can’t inherit SS.
Hmm. Our kids would not inherit an annuity either, if we purchased one. That is why we preferred to keep our portfolio and create cash flow to supplement our SSA benefits by taking 3% a year, and rebalancing as needed.
There are tradeoffs no matter which age you begin to draw benefits. To me, longevity risk is important, and should my wife make it to 100, and she could, she will have a lifetime, inflation-protected income stream from SSA worth much more since I waited until 70 to begin drawing. I received a spousal benefit of 50% of her amount she had begun drawing at age 66 between the ages of 66-70, a provision eliminated for those born the year after we were. Otherwise, we would have both waited til 70. The probability that our portfolio will be depleted if she makes it to 100, the future real return from stocks and bonds over the next 28 years, and the sequence of those returns are unknown. So we use conservative variables based on historical market performance and do what makes the most sense to us.
Just like everyone has their own “sleeping point” in terms of how much to hold in stocks, I suspect they also have their own comfort level making decisions based on unknown variables. This is why even two couples or individuals with the same financial and health status may opt for different strategies. Who is right and who is wrong? If they each chose the option which made the most sense to them, then they were both right, in my opinion.
No one-size-fits-all advice on claiming strategies for SSA is possible, in my opinion. Each person or married couple must weigh the tradeoffs between drawing at various ages for themselves, perhaps with the guidance of an expert. Period.
Thanks for the gift link. The WSJ article of a much longer article on Kitces.Com.
HOLY COW! When I posited this I got beat up more than once. I still say taking at FRA and preserving assets is the least risky strategy -even if a person does not need the SS benefit at that point to pay basic expenses.
Mark, when you post a url did you know you can make it a direct link here?
No. How please ?
I copied and then pasted the wsj url 🤷♂️🤷♂️
Look at the bottom of the box when you post and you will see a symbol that looks like a chain. Highlight what you post and then click on the chain symbol.
I use to do the same thing. Jonathan gently explained in a comment to me how to make the link an active link. I think he was tired of changing my paste & copy to a active link. He described the chain symbol as a double helix.
Be advised that when you post an active link on Humble Dollar your post may go through moderation, appropriately, before being available as a HD post.
Embedded links are a nice feature which improve readability. But note: Unlike HD’s founder, who had the time to work on the site all day, every day (until his illness), Bogdan also has a more-than-full-time job, so approving pieces with embedded links may take longer than before.
SS claiming is highly personal. I know a lot of people here delay, but they may have more assets that they can live on in the meantime. Not everyone has that, and what a blessing it is if you do. Some people like their jobs and want to keep working, like my mom did. It is easy to delay then, I think. Spouse’s brother had to take SS disability at 60 since he had ALS. Some people take at FRA, some when they are eligible for Medicare, some take as soon as they can. If you take before FRA, there is a limit to what you can earn if you still want to work part time. Sometimes there is a larger Spousal benefit to think about. It is a LOT to think about. Sometimes the math wins out, sometimes your life circumstance does. Chris
We took our Social Security benefits as soon as we could.
That was because our kids can inherit our investments, but NOT our SocSec benefits.