Posted on 07/14/2008 9:19:24 AM PDT by InvisibleChurch
For decades, a fairly consistent share of workers -- about 60 percent of women and about 52 percent of men -- have claimed a Social Security check at 62, the earliest age at which most people qualify for benefits. However, collecting Social Security before "full retirement age," which is climbing gradually to age 67, results in a permanent reduction in a person's monthly payout, says the Wall Street Journal.
In a study published in June by the Center for Retirement Research at Boston College, researchers found:
Some 48 percent of women and 43 percent of men who turned 62 in 2006 claimed Social Security benefits as soon as they became available. That's down from 60 percent of women and 51 percent of men who turned 62 in 2000. This decline is consistent with data that show labor-force participation rates among older adults increasing, say researchers. About 23 percent of people age 65 to 74 were in the labor force in 2006, up from 19.6 percent in 2000, according to the Census Bureau.
Financial advisers increasingly are urging people to push back their "start date" for Social Security, says the Journal. Delaying Social Security is a way of increasing your overall income in retirement and standard of living.
A number of factors argue for postponing, and trying to maximize, that first check -- including the demise of traditional pensions, increased life expectancy, retirement accounts that fall victim to bear markets, and Social Security's own rules (which tend to favor survivors whose spouses claim benefits at a later date).
Source: Glenn Ruffenach, "The Benefits of Holding Off On Social Security," Wall Street Journal, July 6, 2008.
For text:
http://online.wsj.com/article/SB121529931995230377.html?mod=2_1581_middlebox
For study text:
http://crr.bc.edu/images/stories/ib_8-7.pdf
For more on Economic Issues:
http://www.ncpa.org/sub/dpd/index.php?Article_Category=17
$700 a month at age 62; $1000 a month at age 67
Suppose you can’t live on $700 a month. Wouldn’t it be wise to wait for that $1000 per month?
LOL! Yeah, those millions in royalties are really messing up my widow's benefits. : )
Instead of joining the chorus of eulogies for Social Security, let me propose a practical process for restoring it to its original intent, which was a good one.
SS was created to provide a full retirement for minimum wage employees who had no other retirement. Only they would pay into it, and only they would receive a *full* retirement from it. As such, it was a viable and reasoned system.
But this system was destroyed and its future doomed by two things: incorporating people who should never have been brought into the system; and stealing of the funds within the system for use in other government spending.
The first mistake was in the socialist hope of making all retirements in the US under the control of the government. The second was raw greed, stealing from SS to pay for greater pork spending.
That is, the Democrat party created it, and the Democrat party destroyed it.
So what can the Republicans do to fix it?
The guiding principle should be not to truly cheat anyone who has paid into the system and expects benefits. This means different approaches to different groups, to ensure fairness.
To start with, those already receiving benefits, or who are shortly to get new benefits, should have a new choice. By this I mean they should be able to choose between continuing to receive the paltry sum if they opt to, *or* to receive a higher amount as a tax deduction.
This solves the “means test” problem, because those without means will continue to receive their checks, and those with other taxable retirement money or income get more as a deduction than the money they would have been paid. So nobody gets screwed.
The next group, those people who have been paying into the system for years, are still employed, and have other retirement available to them, should be given a substantial tax deduction for years, to get back the money they paid into the system, and discontinue paying into the system. This will give both a big boost to their paycheck today, as well as a big tax deduction, with that money going into IRAs. So they don’t get screwed either.
The next group are those who have only been in the system for a few years, but are salary employed with prospects for an alternative retirement in their career. They stop paying into the system and are given cash rebates for the money paid in already. They are paid their FICA withholding for as many years as they paid into it, and for each years’ amount. So they don’t get screwed either.
The last group are the “originally intended” SS recipients. The system is really for them, and once all the other participants have been eliminated from the system, they can look to a full retirement, of perhaps $25-35,000 a year, adjusted for inflation. This is an honorable full retirement, and a fair return for their investment. They are the ones who most benefit, because they are the ones that *should* have benefited.
The end result is that most of the SS system is gone, and those who remain in it have a decent retirement, not a pittance. The money should have always been in a “lock box”, and there it should remain, building up for the eventual day when these people retire.
“My plan, arrived at after much crunching of numbers, is to take it at sixty-two and invest every dime since I won’t need it to pay the bills.”
Exactly.
I understand that many (including myself) can’t or won’t retire until later. I’m talking about people who have a reason to consider retirement at 62. I was surprised that, rather than advising them to stick it out until full retirement age, Orman suggested that they take the money now. If I were a black man, I’d take the money at 62 since statistically, most black men don’t live long enough to collect SS at 65. There are many other reasons to take the money as early as you can.
Did you read the post though? Even if you didn't feel you could live on $700 per month, you would have received $42,000 dollars in those five years and if you waited for that additional $300 per month, it would take you until the age of 79 to make up that $42K.
Interesting topic. My dad just went through this in 2003-2006; Due to his circumstances, collecting at 62 was never an option. He was still working at age 65 when he started "thinking about" retiring.
A couple of events made him think long and hard about longevity vs benefit amounts. Two of his co-workers, while planning retirement to the nth degree (lots and lots of plans) died (unexpectedly) while on the job. One at age 70, and the other at age 68. I assume their widows are doing quite well.
He decided at that point he did not wish to join that club.
Due to a records mixup, his birthdate was "wrong" on his official SS records by a month and two days. As a result of this, he was required to provide a birth certificate, the "official record" of which had been destroyed around the start of WW1.
The delay in getting an "official" copy from a foreign country took two years at which point he was eligible to collect, at age 67 and one month.
Don't know what he expected to collect at age 65 and one month, but he always assumed "around $1200 a month". When the checks began, it was actually around $1900 a month, which was a pleasant surprise. He finally retired in late 2006.
We have no idea how long he will live, but his current check is around $2100, which together with a modest 401(k) account will allow him to live comfortably (if not extravagantly for about 10-15 years depending on what the market does. He feels comfortable with that.
The Census Bureau has current and historical tables that are interesting.
I have a spreadsheet on my computer that shows every dollar my wife and I have paid into FICA and Medicare plus every dollar my employers have paid on my behalf. The numbers are not inflation adjusted, just the actual dollars they seized. It's a nice little sum of money - almost a quarter of a million dollars. If the government were to pay me back that money they had better get started PDQ.
I’ve tried to do the math on that, and I’m not sure it works out as great as they claim.
I’m not sure why though. Maybe different base assumptions.
It still looks to me like I only come out ahead doing that if I live another 12 years.
You have to be careful about mortality statistics. The mortality age of people who actually LIVE to age 62 is much older than the mortality age of the average person.
Pingie Dingie....
Importantly, this model looks only at SS. Other models, such as Medicare, are very different, and their solutions would be as well.
And given the choice between the two, I would be more inclined to think that Medicare will go the way, because it has no base legitimacy.
That is, there is no particular reason for Medicare but Medicare. No underlying group of people that it is specifically for, and provides more advantages to, apart from other systems.
So much money might be freed up by its elimination, that the costs of health care would drop precipitously.
Until tax year 1991, there was no separate distinction made on W2’s for Medicare. Prior to that, it was all shown as FICA. I have almost every W2 from when I first started working and paying taxes in 1967.
As far as forgoing future SS payments in return for tax credits or a lump-sum today, I would sign such agreement for just half the money I and my employers have paid in.
DITTO!
You mean ...both husband and wife get separate SS checks??? What if the wife never worked?
Thanks for the heads’ up.
My wife plans to live past 90 and this may be of interest to her-—
She has already cooked up something to claim her benefits until she is eligible for mine.
This is a no brainer, retire at 62.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.