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question about when to collect Social Security
#1
I was just wondering what the general feeling is regarding when to start collecting ss. I will be 62 in 6 months and want to start collect and perhaps work part time. I know my ss check will be cut if I make over approx 16k (which will not be hard to exceed). so I was wondering if I should just delay ss and work part time and spend some of my savings/investments.  We have approx 1.2M in savings/investments but also have a disabled adult son that is eligible to collect 1/2 of my ss (this is my understanding) per month if I retire. I am not sure exactly how my working part time would effect his benefits. Any help/comments would be appreciated
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#2
The vast majority of people start collecting at age 62, mostly because they need the steady income.
 
As you probably know, there is an actuarial calculation they do knowing the average lifespan, and they calculate so that you will collect the exact same $ in total no matter when you retire, IF you die at the average age. If you expect to live to 90, you will collect more money if you wait until full retirement age to collect.
 
If you have a health problem and – looking in the mirror – recognize that your lifespan will probably be on the shorter side, it can be in your advantage to start collecting as early as possible.
 
Consider, if you can start collecting at 62 but decide to wait and then die before your full retirement age, you will have foregone many years of income that was due to you. But you will still collect more if you start at 62 rather than wait until full retirement age, if you die younger than the average lifespan.
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#3
How is your health?  What is your family history-how long did your Mom and Dad live?  Generally, the longer you delay, the greater the benefit.  If your family history is long-lived and you are in good health, wait until at least your full retirement age to begin your benefits.  Every year you delay, your benefit increases 8%, guaranteed.  It is difficult to do that with your investments.  If you don't need it at your full retirement age, think about letting it grow until you turn 70.  The 8% still applies.  Without caveats, that is a simple answer to your question.  I took mine at almost 63 upon a physicians advice based upon discovery of an adverse, life ending diagnosis. Otherwise, my plan was to allow the benefit to grow until 70.  Also, don't forget your wife's benefit if she also worked and paid into social security.  Let the larger of the two grow or both, if you don't need the income.  My wifes social security benefit is larger that mine, we don't need the income, so hers is still growing.
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#4
If you need the money, take it early. If not, then it is an optimization question.
 
The best free online optimizer I have found is here: http://www.bedrockcapital.com/ssanalyze/
 
It will find the optimum based on Present Value before tax.   However, note that if your tax rate varies over time, the answer might be different. Also, the social security benefits can impact other things (medicare premiums).
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#5
I say take it early. The actuarial calculation is the same at any age. My logic, taking it at 63, was that was $20K I could leave in the IRA to grow. Over 10 years I figured that would have a net benefit of about $50K.
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#6
The "when to collect SS" is one of the most widely discussed topic on this forum. You can search for posts that captures perspective from different people. One such thread is below:

Everyone says wait until 70 1/2 to start Social Security,but what if they run out of money?

Reading through the diverse viewpoints from various forum members, my takeaway is that, risk-averse investors who wants to minimize the possibility of outliving investment (if I'm fortunate to live longer than expected, will I have enough money to support myself), prefer delaying collection until 70. Profit-maximizing investors who has less dependency on SS (why leave money on the table if I live sooner than expected) prefer collecting early. I decided to delay with the rationale that if I die early, I won't be around to regret the uncollected money but if I live longer, the fatter checks will come handy. But this rationale is right for my personal situation and mindset only, and probably not applicable for most others.
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#7
However if while you're waiting for age 70, Congress allows a cut of payouts by 79%, that is something you might well have to regret while you're living. That figure isn't arbitrary; the trust fund is running out of money and the cut is automatic unless Congress can figure out other ways to keep the system funded.

What Happens If the Social Security Trust Fund Runs Out in 2034?
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#8
(11-30-2018, 08:29 AM)DoubleDown Wrote: However if while you're waiting for age 70, Congress allows a cut of payouts by 79%, that is something you might well have to regret while you're living. That figure isn't arbitrary; the trust fund is running out of money and the cut is automatic unless Congress can figure out other ways to keep the system funded.

What Happens If the Social Security Trust Fund Runs Out in 2034?

Thanks DoubleDown.  Yes the cut is always a risk. It's hard to make a decision based on uncertainties. Should such a situation happen, there will likely be other rippling/related effects across the board affecting investments / expenses as a whole that I can neither anticipate nor take into account. For now, I'm hoping for the best outcome and simultaneous staying prepared to handle the worst just in case.
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#9
(11-30-2018, 08:29 AM)DoubleDown Wrote: However if while you're waiting for age 70, Congress allows a cut of payouts by 79%, that is something you might well have to regret while you're living. That figure isn't arbitrary; the trust fund is running out of money and the cut is automatic unless Congress can figure out other ways to keep the system funded.

What Happens If the Social Security Trust Fund Runs Out in 2034?

First of all, it is likely that any changes will be grand-fathered. Second, if cuts are made across the board, someone who takes at 62 will be cut the same percent as someone who takes at 70 so the effect is not so great and still depends on life expectancy, opportunity cost(risk free rate), CPI, tax rates etc. For someone who is now 62, the effect of future cuts in 2034 is probably not a big issue to worry too much about when deciding to take early or not.
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#10
The SSA predicts the surplus is expected run out around 2035. If nothing is done then benefits are expected to drop by 25%.
 
Example:
  • If you expect to receive $1,000 at FRA but take it at 62, you  will receive $750. In the same vein if you take it at 70, you  will receive $750

  • When the surplus is gone the recipient getting $750 will drop to $562.50 and the $1320 recipient will drop to $1320
 
Depending on a person's expectations for longevity, I am planning longer then shorter like me IRA projection, it may come as a catastrophe if someone's income based falls any amount while in retirement.
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