16 Replies Latest reply on Feb 26, 2016 5:39 AM by Frugal12

    Delaying Social Security Until 70

    Chanliendo

      I "filed and suspended" my social security benefits when I turned 66 with the hopes of delaying starting my benefits until I turn 70, thereby getting social security benefits that will be more than 32% greater than if I started at age 66. I continue to work 1/2 time in a "phased retirement" program where I receive 1/2 of my paycheck. My wife and I are able to live comfortably on this paycheck. After I fully retired this coming June and I plan to start taking out systematic withdrawals from my TIAA-CREF 403(B) retirement plan for the next 17 months until I turn 70. I am in fairly good health, and both my wife and I have parents that lived into their 80s and late 90s.

       

      Has anyone else successfully done this strategy and do you have any regrets about not taking your social security benefits earlier?

        • Re: Delaying Social Security Until 70
          Susanna144

          I am planning to defer my Social Security until 70 also, but for me there is going to be a longer time to wait, perhaps 15 or 16 years between retirement and collecting Social Security.  I think waiting until 70 is a good decision, when your primary goal is to avoid out-living your savings and income.  It requires that you have significant savings, and could result in a smaller estate.  Some of my family members have elected to take Social Security much earlier, but they have essentially no risk of out-living their assets.  There is also the personal matter of how much you value wealth, of itself.  For me, money has value to the extent that I need it, and not so much when I don't.  That makes me a relatively conservative planner and investor.  Your strategy is safer than mine, because the law is unlikely to change before you collect benefits.  I might collect earlier if my health gets drastically worse or if benefits formulas are about to be resolved downward significantly.   I can afford to be a little less careful with my benefit because my husband could support me, if necessary.

          • Re: Delaying Social Security Until 70
            oldGatorgrad

            I did the same thing.  I received advice and an analysis from Social Security Solutions for $20.  It was a detailed plan and recommendation that I implemented.  I am currently still working full time at my position and am trying to get to 69 before pulling SS.  I also have substantial assets in TIAA-CREF that I will start pulling at the end of this year.  The SS solution to delay benefits until later really benefits my wife who will get substantially higher SS benefits when I die.  Yes, I will get more when I start receiving it, but more importantly, she will get my full SS benefit when I die instead of 1/2 of mine, which she receives now.

             

            I highly recommend this option.  You know it has to be an extremely favorable option to retirees when Obama has now removed it as a SS option in the future.  When I did it two years ago, there were only 100,000 retirees that had chosen to "file and suspend" benefits.  With the opportunity to choose it now ending, I am sure alot more are selecting it if they are still eligible.

              • Re: Delaying Social Security Until 70
                Chanliendo

                Thanks for your reply as it reinforces everything I have read about delaying. I am curious about why you are deciding to start social security at 69. Why not wait until age 70 and collect another 8% + any COLA  between 69 and 70? Was this something that Social Security Solutions recommended?

                  • Re: Delaying Social Security Until 70
                    oldGatorgrad

                    No, the solution was to wait until 70 to maximize the SS benefit. Right now I just can't maintain my full time job for that additional year.  It is just too challenging and difficult.  And I don't want to burn through savings to capture the additional SS benefit. 

                      • Re: Delaying Social Security Until 70
                        Chanliendo

                        I have read several research studies that recommend actually using funds from a 403(b)/401(k) first as "bridge monies" so that you can delay starting social security until age 70. Check out this article, especially p. 11:

                        https://www.nasi.org/sites/default/files/research/BRIEF_When_Should_Take_Social_Security.pdf

                         

                        Here is another article that also recommends the same strategy, although this article is a bit older and certainly does not reflect recent changes congress has made in the rules for maximizing social security:

                        Tap an IRA Early, Delay Social Security-Kiplinger

                         

                        I especially recommend that you read this recent article on the financial advantages delaying social security by Kitces:

                        How Delaying Social Security Can Trump Long-Term Portfolio Returns Or Lifetime Annuity | Kitces.com

                         

                        Finally, there are a number of tax advantages to this strategy and this strategy will likely reduce taxes associated for some with required minimum distributions when they are due the year after we turn 70.5.

                          • Re: Delaying Social Security Until 70
                            Frugal12

                            Charliendo-  I am new here and saw your mention of Kitces, someone whose posts I try to read regularly. If I'm remembering his article correctly, one point he made is how delaying Social Security allows  it to act as longevity insurance, something which may become more vital as people live longer -at least  if predictions by retirement researchers and those who keep track of longevity statistics are on target.

                             

                            We are trying to delay Social Security to age 70 as well.

                             

                            But here's the variable that concerns  me when it comes to delaying Social Security. It seems that very few people, something like 1 or 2 percent, actually get to 70 without taking Social Security. I wonder why.

                             

                            Do you or anyone else here have insights about that? Do they lose their jobs? Does health become an issue? Are they concerned they won't live long enough to reach the "break even" point- and does that make them feel like they are throwing away money? Or can they simply not afford to wait?

                              • Re: Delaying Social Security Until 70
                                sherylbug

                                Of the people I know:

                                1. My father had some severe health problems and the job was killing him.  He figured out that between his pension and his SS he'd be making about as much as he did working at that point.  He didn't have any savings to speak of.  After he retired and recovered, he was able to work for 15 years at a job that didn't pay much but was much more fun for him.  He's now in his late 80s and not able to work anymore.
                                2. My mother had been out on disability and returned to work just in time for the plant to close down and move to Mexico.  She was chosen to help close down the plant and that took her to the age/number of years combination to receive her pension.  She had to work at a part time job after her unemployment ran out until she was old enough to take SS.  She was sick of working and wanted to do what she wanted to do.  It's difficult to say whether she could have worked at an office job after that.  She only had skills for something like retail or work that would have been more physical.  People in office jobs often can go to 70 but factory workers and others in physical jobs wear out long before that.  If it hadn't been for some class action settlements against her former employer for shenanigans with the pension funds, my parents would have been in pretty dire straits and I probably would have been helping support them for at least a decade.
                                3. One of my friends got her 30 years in and took her pension, moved to another state.  She doesn't have kids, doesn't have a very extravagant lifestyle and wants to paint and travel.
                                4. Another friend who spent a lot of time in school and is in her 50s planned to retire next year because she and her husband want to spend time together.  He's a few years older and already retired.  Unfortunately, she developed cancer and had to stop working to go through treatments.
                                5. Another woman took care of her father, who was in a wheelchair and had dementia, for the last several years of his life.  She paid herself a salary from his estate and then had what was left over from the estate.  She lived in a rent-controlled apartment for $500/month and paid about that for an HMO for health care.  She was extremely frugal and really valued her time so she decided to retire even though she really didn't have much.  I think the leftover money from her dad was under $100k, and when she started taking care of him she had been training for a career in computer graphics but by the time he died the field had moved on too much to catch up.  She worked part-time occasionally.  I don't know how that worked out.  I moved away, saw her a couple of times but then lost touch.

                                Nobody I know has been so "flush" financially that they could retire at an early age without any concern about money.  I think most of them just get sick or get sick of working and hope for the best.  I plan to go to 70 because my parents and grandparents were very long-lived (both parents still alive) and I have to try to keep the money coming in until my 90s.  I don't have kids to fall back on.  But there's always the chance that I'll get laid off and not find another job, or that I'll become unable to work due to a health challenge.

                                  • Re: Delaying Social Security Until 70
                                    Frugal12

                                    Sherylbig- if longevity runs in your family  think you are wise to wait until 70. Of course -as you note- you may get laid off or become ill- Vut at least you'll have that 8% increase in benefits for every year you wait.

                                     

                                    I know plenty of people who are too ill or have too little money to wait. Good luck in making it to 70 and getting as much as you can. We're going to try and do the same even though my husband d is having some health issues but minor ones so far.

                        • Re: Delaying Social Security Until 70
                          taconner

                          I read an article several weeks ago that only 2% of the population waits until 70 to draw SS. There was an article on the internet last week that said the average retirement age is 63, so I'm guessing lots of individuals start SS then. Since Medicare doesn't start until you are 65, retiring at 63 seems risky unless your spouse has medical at her job or your company plan is available after retirement or you're independently wealthy.

                          My plan was to wait until 70 but at 67 my job of the previous 14 years disappeared so opted to start social security. My wife retired at 66 & started her SS. I stayed retired for five months & then took a full time job at a university about 1/2 mile from my home. While the job pays only about 1/3 of my previous income, the added income is welcome. I tried several part-time jobs but they pay very low wages & weren't worth the effort. It was an eye opener to see how difficult it must be for those stuck in low paying jobs.

                          • Re: Delaying Social Security Until 70
                            Frugal12

                            Ww used Maximize My Social Security to figure out when each of us should file. By following the suggestions,we'll  end up, with over 50k more ryan we would otherwise.mThere are many options- retire at full age, retire early , wait till 70, etc and it can be mind boggling.. Few make it to 70 before filing but we're hoping at least one of us can.

                            • Re: Delaying Social Security Until 70
                              Julianne Vander Meulen

                              No way am I waiting! I'm turning 62 this year and I'm cashing in. Even my tax guy says it's a good move. Who knows what tomorrow may bring, and I deserve my SS now. I'll still be working, so continue to add to the pot.

                                • Re: Delaying Social Security Until 70
                                  JerryD

                                  The big push is to wait, wait, wait. But there are other reasons to take it earlier. Ours was  due to cash flow so that we could let our retirement funds ride longer.  GOOD LUCK!!!    :-)))

                                  • Re: Delaying Social Security Until 70
                                    Chanliendo

                                    JerryD,

                                    You mention that you are still working and that you plan to continue working after you begin collecting social security when you turn 62. Since you have not reached your full retirement age yet, are you (and your "tax guy") aware that if your earnings are over $15,720 for 2016, that Social Security will reduce your benefit by $1 for every $3 you earn above that limit? Not only will your social security benefit be reduced if you continue working and earn more than the above limit, your benefit will also be reduced by 1/3 the rest of your life if you were to start receiving social security at age 62 instead of your full retirement age. Finally, if you are married and your wife has less earnings that you, should you pass first her spousal benefits will be permanently reduced as well.

                                     

                                    I suggest that you read this link at the social security website that answers the question "What happens if I work and get Social Security retirement benefits?"

                                    https://faq.ssa.gov/link/portal/34011/34019/Article/3739/What-happens-if-I-work-and-get-Social-Security-retirement-benefits

                                      • Re: Delaying Social Security Until 70
                                        JerryD

                                        I think that your advice is addressed to Julianne, but I agree with your caution about "lost" SS. I suggest that she talk to the local SS office before making assumptions about SS benefits. Major Government benefits like SS and Medicare are very complex and "Gotchas" seem to pop up if you don't understand the rules.

                                      • Re: Delaying Social Security Until 70
                                        Frugal12

                                        Julianne-

                                        Do, you mean that you plan to,work after claiming Social Security at age 62? Do you plan to,earn more than $15,720? If you earn more than that, you lose $1 in benefits for every $2 you earn.And Social Security is also taxed.

                                         

                                        But if you wait until the month you reach full retirement age, you can get all your benefits  and also,have no limit on your earnings. If you don't plan to earn more than $15.720 a year at age 62  that might not matter to you.But if you do earn more than that you will lose a significant amount of Social Security benefits.

                                         

                                        The information above is for 2016 and I used  the Social Security Administration pages as my reference.  I would suggest you also read the complete details at SSA because you can earn significantly more in the months just before you  reach your full retirement age...but there is still a limit. However,the current limit for working just before full retirement is much higher limit than retiring at age 62- about $41 000.

                                         

                                        I have a friend who tutors  students for $40 an hour and he is about to be 62 years old.  .He quit his full-time job and uses a small part of of his savings for income. The rest comes from tutoring and he is very frugal..  Even as a part- time job - between 10-  20 hours a week - he could  easily make way more than the $15, 720 a year.. So if he claims benefits at age 62,  he'd have to cut his hours or lose part of his benefits. He is definitely not claiming early unless he gets sick or has a large financial emergency...

                                         

                                         

                                         

                                        .

                                      • Re: Delaying Social Security Until 70
                                        Frugal12

                                        I read a brand new post by Michael Kitces which focuses on the sequence of returns before retirement- in those crucial 5-10 years before retirement and before a regular draw from equities, cash, bonds, and other assets is needed. I think he makes some good points.

                                         

                                        Financial advisors have traditionally focused on returns or  interest ratess  after retirement, usually in the first 10 years of retirement. If interest rates on equities or other assets don't keep pace with inflation but retirees need a certain draw rate for basic expenses -not discretionary expenses - they will invade their principal and it is very possible, even likely, that money will run out in their lifetime.

                                         

                                        Delaying Social can help reduce expenses and what else has a guaranteed 8% return for every year one waits? Of course if one is in a financial bind or in ill health that is another story. Waiting may be impossible.


                                        But for those who can wait it might make sense to delay Social Security. First of all,  no  one can predict returns. There have been many periods of flat or low interest returns and if one is unlucky enough to retire at that point, they are essentially invading their principal....to a point that may be difficult to ever replace, eespecially if the years before retirement - or the first years after retirement have terrible returns.

                                         

                                        Another reason to wait? Social Security be a kind of  longevity insurance...especially for couples. Statistically, it is likely that one spouse will die by 80.  But the odds are high that the surviving spouse will live well past 80. It's just the way it works and I can provide links tof research studies that bear out what I'm saying, Having the highest Social Security possible could make a huge difference.