8 Replies Latest reply on Nov 3, 2013 9:39 AM by Steve51

    Take Social Security early in the year you reach FRA?

    texasjimbob
      I reach full retirement age (FRA) in 9/2014 and plan to keep working as long as I can.  I read that there are special rules for working and drawing social security in the year that you reach your FRA.  I estimate that I would be quite a bit better off to start drawing a 95.6% early benefit in January rather than wait until I reach FRA in September.  Anyone else doing this? 
        • Re: Take Social Security early in the year you reach FRA?
          compiler
          Yes. I did this. I reached FRA in June, 2012. So, I started drawing SS in Jan (actually first check in Feb), 2012. Works fine. No restrictions on earnings.
          Mel
           
          • Re: Take Social Security early in the year you reach FRA?
            I am currently 67 years old and working full time. I do not plan to apply for SS benefits until I am at least 70. When do I apply?

              • Re: Take Social Security early in the year you reach FRA?
                BonnieA
                I understand that if you continue to work after you retire, SS will reevaluate your case and if you've been contributing to SS they will increase your benefits after you turn 70.  You might want to check with social security on this.
                • Re: Take Social Security early in the year you reach FRA?
                  howrub
                  roadbikedc said...
                  I am currently 67 years old and working full time. I do not plan to apply for SS benefits until I am at least 70. When do I apply?

                  There is a problem with your strategy.  You say you won't take your benefits until "at least 70".  Please re-think, there is NO continued growth in benefit beyond 70, so at 70 you should certainly begin to take it.
                  • Re: Take Social Security early in the year you reach FRA?
                    williaca
                    Just a thought...Consider doing some calculation about how long it will take you to "break even" on waiting until 70 to start Social Security.   Remember that, even though you gain another 8% income from S.S. for each year you wait, you also pass up the full S.S. income for an entire year.   I have heard that for every year you wait to take S.S., it take approximately 12 years to "break even" on waiting.   So if your retirement age is 66 and you wait one year to 67, it will take you to age 78 to break even on waiting.  Waiting until age 68 will take until approximately 90 to break even.   So is there a point in which it is better to start taking S.S. and simply "salt it away" if you don't need it.   For myself, I am thinking about waiting until just before 68 to start drawing S.S.  My "break even" point would be about 88.
                      • Re: Take Social Security early in the year you reach FRA?
                        Steve51
                        I think you need to rethink your math, and maybe look at this differently. Suppose that your monthly benefit is $2,100 per month. By delaying your date to take social security by one month, you will increase  your monthly benefit by $14. (8% x 2,100 = $168, divided by 12 for the monthly benefit increase.) In that month you are deciding to pay $2,100 for an annuity that pays you a lifetime benefit of $14 (the increase in your benefit by delaying). Ignoring present values, this means that it you would need to live 150 months, or 12 1/2 years, to recover the $2,100 benefit that you postponed. If you do the calculation and assume a 3% annualized interest rate--low historically, but probably not too far off from what you would get today--the period to get a return of your present value is 188 months. Your 20 or 22 year projections assume a discount rate of 5 to 6%--a bit high in today's world.  All that said, 68 may be a better age to take the benefit than 70 just because of our mortality.
                          • Re: Take Social Security early in the year you reach FRA?
                            williaca
                            Hi Steve,
                             
                            Thanks for your reply.  Evidently, I did not do a very good job with my explanation.  I fully agree with your computations, even though I derived the same conclusion that your reached.  I am not the individual that wanted to wait until 70 to start social security benefits.  I was proposing a similar option to what you are proposing.   Actually, I plan to start taking S.S. at approximately 67.5 years.  
                              • Re: Take Social Security early in the year you reach FRA?
                                Steve51
                                Thank you for your response. When you get to the same answer using two different and independent methods, as we have done, then we have more confidence in the answer.
                                I think that if people look at the deferral of receiving social security as the purchase of an annuity, it helps clarify the issue. For married couples, the monthly cost of the deferral is less if the higher earning spouse is able to draw benefits on the spouses's record until he or she reaches age 70. The monthly cost of the additional benefit is that much less.
                                 
                                Good luck and good health!