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Should You Take Social Security at 62, 66, or 70?
The Motley Fool ^ | updated on January 11, 2018, and originally published on March 25, 2017 | Todd Campbell (TMFEBCapital)

Posted on 08/02/2018 9:22:46 AM PDT by Red Badger

Social Security benefits can be claimed at any point after a recipient turns age 62, and most Americans take their Social Security as soon as they can. Claiming benefits early can be smart, but it can pay off to wait. If you're deciding when to start receiving Social Security, here's what to consider. Estimate your expenses

Retirement usually means a big drop in income, and if you don't have a solid grasp on what your spending is going to look like in retirement, then you won't be able to make the best decision on when to claim.

Depending on who you talk to, experts usually recommend budgeting for 70% to 80% of your pre-retirement income to cover expenses in retirement. However, the exact amount you'll need depends on your specific situation.

According to the Bureau of Labor Statistics (BLS), retirees spend the most money on home mortgages and auto loans, so if those loans won't be paid off when you retire, you'll need to budget accordingly. Overall, the BLS reports that the average 65-plus household spends about $45,221 per year, and housing and transportation account for $15,711 and $6,830 per year, respectively.

Healthcare is another big expense in retirement, and it's usually smart to over-budget when it comes to planning for those expenses. If you're healthy, your costs might not increase significantly at first, but you'll likely require more healthcare as you get older, and that healthcare won't be cheap. Healthcare spending in over-65 households totals $5,877 per year, according to the BLS, including $4,029 for health insurance and another $694 for medicine. Fidelity Investments estimates that a couple retiring at 65 this year will fork out over $275,000 in healthcare expenses during their retirement, and ultimately, the tally could be tens of thousands of dollars higher than that if you need long-term care at some point, too. Social Security options

If you've paid into Social Security over a career lasting at least 10 years, there's a good chance you'll qualify for benefits.

You can claim your benefits when you turn 62, but you'll receive a reduced payment. If you go the claim-early route, apply three months before you turn 62, so that you can receive your first check in the month after you turn 62.

If you want to receive 100% of the benefit you're eligible for, you'll need to wait until you reach your full retirement age to claim. Your full retirement age depends on the year in which you were born, but for people turning 62 in 2018, it is 66 years and 4 months.

Your third option is to wait until after your full retirement age to claim so that you can receive delayed retirement credits. These credits increase your payment for every month beyond your full retirement age that you delay. Overall, delaying increases your benefit by 8% for every year you hold off, until age 70.

The following chart shows how much a Social Security recipient would receive if their full retirement age is 66, their benefit is $1,000, and they chose to claim benefits between age 62 and age 70.

Data source: Author's calculations.

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While this example shows how benefits change depending on when you claim, the exact amount you'll receive in benefits is determined by a complex calculation based on your highest 35 years of earnings.

You can create a login here to view your actual Social Security benefit, but the average monthly Social Security check is $1,404 in 2018, and the average check paid to recipients age 62, age 66, or age 70 last year was $1,112.30, $1,382.78, and $1,510.49, respectively.

Once you know your expected Social Security income at age 62, age 66, and age 70 add to it any other sources of retirement income you'll receive, such as pensions and investment income. If you've thoroughly calculated your projected retirement expenses, then you should be able to use these numbers to determine the age at which you can reasonably expect to afford to retire. Important considerations

If you have ample income in retirement from other sources, it might make the most sense to embrace a claim-early and-invest strategy. As you can see in the following chart, waiting to claim benefits doesn't break even with taking benefits early until you reach your late 70s or early 80s, depending on when you claim. But if you claim benefits early and then invest that income, you could conceivably push that breakeven point back even further, depending on your annual returns.

Data source: Author's calculations.

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It's also important to consider the impact of claiming decisions on your spouse's financial security after your death. If your widow and widower is full retirement age, they can receive 100% of your benefit amount after you pass away, but only up to what you would otherwise be receiving if you were still alive. Therefore, if you claim early and receive a smaller monthly benefit, it may not be enough money for your surviving spouse to maintain his or her lifestyle.

If you're working in a high-paying job (relative to what you earned early on in your career), you might want to delay claiming your benefit anyway. If you've already accumulated a 35-year work history, additional high-earning years will replace lower-earning years in your benefit calculation, thereby giving your full retirement age benefit a boost.

Furthermore, if you plan on working into your early 60s, then you should know that if your income exceeds limits, the IRS will tax some of your Social Security until you reach your full retirement age. In those cases, delaying when you claim so that you lower your income taxes might be a smart choice.

Overall, when to claim your Social Security benefits is one of the most complex, and important, choices you'll face leading up to retirement, so make sure you understand the various retirement strategies available to you.


TOPICS: Business/Economy; Education; Health/Medicine; Society
KEYWORDS: 401k; ira; retirement; seniors; socialsecurity; ssa
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To: Starstruck

You mean after I die?


121 posted on 08/02/2018 11:18:08 AM PDT by cuban leaf (The US will not survive the obama presidency. The world may not either.)
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To: HotHunt

I was 62 so perhaps that is why I did not need to sign up until no longer covered by my wife a few years later


122 posted on 08/02/2018 11:20:59 AM PDT by CIB-173RDABN (I am not an expert in anything, and my opinion is just that, an opinion. I may be wrong.)
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To: Red Badger

Bkmk


123 posted on 08/02/2018 11:21:10 AM PDT by AllAmericanGirl44
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To: cuban leaf

No. She would be entitled to your full amount if you go first. My wife only worked enough to get a few hundred dollar of SS but by using my earnings she gets a thousand a month which is half of what I get.


124 posted on 08/02/2018 11:24:00 AM PDT by Starstruck (I'm usually sarcastic. Deal with it.)
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To: lee martell

There is no gain without risk. Find a Mutual Fund with a good track record. Dipping below Principal is not a bad thing so long as you don’t sell it. It always eventually comes back.
When the market is down, you are just buying stocks cheaper.


125 posted on 08/02/2018 11:27:25 AM PDT by AppyPappy (Don't mistake your dorm political discussions with the desires of the nation)
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To: Starstruck

I need to look into that. Half of mine is about $1300, but she only gets 900. She’s 64, though.


126 posted on 08/02/2018 11:28:23 AM PDT by cuban leaf (The US will not survive the obama presidency. The world may not either.)
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To: BobL

thanks...sorry. I see it. I know better. No way did i mean to imply taxed at an 85% rate. I even gave a link to it.
thanks


127 posted on 08/02/2018 11:30:56 AM PDT by stylin19a (Best.Election.Of.All-Times.Ever.In.The.History.Of.Ever)
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To: Red Badger
But if you start collecting at 62 by the time you are 70 how much have you collected? Approximately 72000 dollars.

Now if you start collecting at 70 and only live another 5 years, how much did you collect? Approximately 78000 dollars...its pretty close.

And no guarantee when you will die.
I work out 6 days, regular check ups, watch my diet but tend to over eat at times. I don't drink.

I was born in 62(cannot brag about that anymore LOL) and when I was growing up, I saved for retirement as if SS did not exist. I do not have to rely on SS to have a great retirement. I will never be a burden to society.

128 posted on 08/02/2018 11:34:04 AM PDT by Uversabound (Might does not make right, but it does enforce the commonly recognized rights of each succeeding gen)
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To: Red Badger

He’s not dead. Amazingly. ;)

Yes, I know. I’m just going to wait and see which pays me more and go that route. Mine alone will be adequate for my needs, but I’m not going to turn down more money! :)


129 posted on 08/02/2018 11:35:07 AM PDT by Diana in Wisconsin (I don't have 'Hobbies.' I'm developing a robust Post-Apocalyptic skill set.)
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To: stylin19a

No prob...I figured. Just that radio infomercial sends me off!


130 posted on 08/02/2018 11:35:08 AM PDT by BobL (I drive a pick up truck because it makes me feel like a man)
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To: cuban leaf

That is probably the problem. I had my wife wait until 66 to take SS. It may not be convenient but you can pay the money back and wait a year or two to get a better return. Also she probably wouldn’t get your full amount if you go first.


131 posted on 08/02/2018 11:35:26 AM PDT by Starstruck (I'm usually sarcastic. Deal with it.)
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To: Starstruck

I just checked. My wife is currently receiving her own benefits (started at age 64). At age 66, when I start receiving benefits, hers will increase to 42% of mine. It will be a bump, but only $150 a month. Better than nothing.

At least, that is how I interpret it...


132 posted on 08/02/2018 11:39:40 AM PDT by cuban leaf (The US will not survive the obama presidency. The world may not either.)
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To: Starstruck

When we read this stuff, we were absolutely amazed at just how convoluted this whole thing actually is.

I’m fine with just seeing it bumped up a bit when we both turn 66. We’re only six days apart, btw.

I did a lot of calculations regarding early vs late benefits. I still think it was the right thing to do to take hers when we did. The benefit it brings us today is huge, for reasons I’ll avoid getting into. Much bigger than the benefit of waiting.


133 posted on 08/02/2018 11:51:21 AM PDT by cuban leaf (The US will not survive the obama presidency. The world may not either.)
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To: Responsibility2nd
How long will you live? If you plan on living a long time - wait.

Which reminds me of this: Do you want to make God laugh? Tell Him your plans.

134 posted on 08/02/2018 11:59:39 AM PDT by mc5cents (Pray for a new Pope)
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To: cuban leaf

Age 64 is only a 13% reduction. It would take approximately 12 years to hit the point where you start losing money by taking it early.


135 posted on 08/02/2018 12:00:29 PM PDT by Starstruck (I'm usually sarcastic. Deal with it.)
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To: Starstruck

Yep. That’s why we did what we did. :)

And the timing advantage was actually huge, Without getting into details, it’s along the lines of “$1,000 in hand today is worth more than $5,000 in a year.”

13% was a small hit. And its impact is really not that great.


136 posted on 08/02/2018 12:10:56 PM PDT by cuban leaf (The US will not survive the obama presidency. The world may not either.)
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To: Red Badger
If the cause of death is the same then that gives a pretty good stake in the sand to make a decision.

SS is designed not to pay out as much as you pay in.

If you collect at 62 with a life expectancy of 15 years at 75% then you can weigh that against collecting at 66 with a life expectancy of 11 years at 100%.

Personally my dad died younger than the American average and that drove my decision. I hope you live long past you aunts and uncles and enjoy your SS to the max.

137 posted on 08/02/2018 12:34:30 PM PDT by pfflier
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To: cuban leaf

I semi-retired at age 64. I quit my job and was hired back as a contractor. I worked less than 20 hours a week and could choose when I wanted to work. I had to flip my 401k to an IRA and probably lost out on about 200k in company stock growth over the next 2 years. I don’t regret it at all.


138 posted on 08/02/2018 12:35:39 PM PDT by Starstruck (I'm usually sarcastic. Deal with it.)
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To: ridesthemiles

As I understand it, the penalty is 10% for each year you delay your part B. I don’t think you are penalized if you never enroll. That said, Medicare part B (and a supplemental plan F) was a much better deal than the health coverage I received at work—better coverage at about 2/3rds the cost.


139 posted on 08/02/2018 12:36:04 PM PDT by hanamizu
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To: Red Badger

I’m taking it at 62. Wait at your own risk. I’ve known too many people who’s only benefits were the $ 255 burial benefit


140 posted on 08/02/2018 12:36:11 PM PDT by Figment
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