Will You Light $180,000 on Fire by Taking Social Security at Age 62?
By Dennis Miller
On the television series Dragnet, Sgt. Joe Friday was known for his calm demeanor while questioning witnesses. When they began to ramble, he would corral them with comments like, “Just the facts, ma’am.” Sound advice for the witness stand, but when it comes to retirement planning, Sgt. Friday was giving the wrong instructions. Instead of asking for “just the facts” we should ask for “all the facts.”
A recent article for Bankrate featured a frightening graphic quoting Social Security Solutions founder William Meyer: “Two-thirds of Americans take Social Security at age 62, giving up $180,000 if single, $323,000 if married.”
With those statistics in mind, holding off until age 70 can seem like a no-brainer. Let’s take a closer look, though, with “all the facts” in plain sight.
The Social Security Administration’s website offers a handy tool for estimating benefits. We used it to run through a few hypotheticals for a man I’ll call Joe Friday.
Let’s assume Joe was born on January 1, 1953. This would make him 62 on January 1, 2015, and he plans to retire immediately before this birthday. Joe would rather sail around the world than work. To keep it simple, let’s say he’s unmarried—or married to his boat, so to speak.
Joe’s current annual salary is $200,000, which puts him above the Social Security maximum ($114,000 in 2014). According to the calculator, if Joe starts receiving Social Security benefits beginning at age 62, his monthly check will be $2,000. If he waits until age 70, he’ll receive an estimated $3,562 per month (all amounts are in 2014 dollars), or $1,562 more. In other words, if he waits eight years, his monthly benefits will increase by approximately 78%.
And there you have “just the facts.” Wait eight years longer… receive 78% more each month. Now, let’s explore “all the facts.”
If Joe takes Social Security at age 62, he will have collected $192,000 by age 70. At this point, he is well ahead of the game.
About 10 years and 3 months later, or just after Joe’s 80th birthday, though, he will have received the same total amount in benefits whether he began taking them at age 62 or age 70. Taking the benefits at age 62, however, won’t put him $180,000 behind, as Meyer said, until he reaches 89 years, 10 months of age.
With that in mind, Joe should consider a few details before waiting to take Social Security:
- If he lives past 80 years, 3 months of age, he’ll receive more money. If not, waiting is a bum deal.
- These estimates are just that: estimates. They do not take into account potential changes to the Social Security system. The government could reduce benefits, tax a larger portion, or scrap the program entirely. With so many uncertainties, there’s something to be said for having some money in hand, even if it’s in exchange for more (but not guaranteed) money later.
- These calculations ignore the value of money. They assume Joe will spend, not invest his Social Security, from age 62 until age 70.
So, what is the right decision? If Joe asked me, I’d recommend he consider:
- His realistic life expectancy based on his health, lifestyle, and family history;
- Whether he needs the money now; and
- Whether he’s confident the Social Security system will remain intact throughout his lifetime.
If Joe were married, he’d also want to consider his spouse’s income and expected longevity.
When you make these decisions for yourself, keep in mind that taking Social Security at 62 or 70 are not the only choices. You can start receiving benefits any point after age 62; the amount will go up with each passing month.
I have a high school classmate who, at age 70, told me about his quadruple bypass and how he’d outlived every male in his family… by 20 years! He died shortly thereafter. My own grandmother passed away two months shy of her 100th birthday, and my mother’s twin sister just celebrated her 99th birthday. Although a man who reaches age 65 today can expect to live, on average, until age 84.3, you know many more details about yourself. Although it’s uncomfortable to think about, you can make a more personalized estimate than “84.3.”
Because you can’t know for sure if you’ve made the right decision until after the fact, the best decision is one that weighs all of your personal facts. Headlines and sound bites might make it seem like a no-brainer, but it’s not. I’m sure most of the two-thirds of Americans who take Social Security at age 62 have good reasons for doing so. Many who wait and enjoy increased benefits can likely say the same.
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The changes coming in Social Security in order to keep it solvents means that you have to wait until you’ve been dead for two years in order to draw benefits .
For those of you who aren’t retired and haven’t done the Social Security math, read this article. It’s excellent. And give Admin a hat tip.
bullshit!
if i take social security at age 62, which i will, and am able to invest the money until age 70 at 5%, i will have a $200k nest egg. at 5% again, i will match the payout i would get by waiting until 70 AND continue to maintain my $200k nest egg which i can leave to my children. and by taking it early i reduce the risk of being subject to legislative changes in social security, be they dissolution, means-testing, possible SS tax increases, whatever the progressive loonies dream up.
I agree, I thought the article was very informative and thought provoking. Seven more years to 62……..will the SS of today still be there then? Doubt it.
“If he waits until age 70, he’ll receive an estimated $3,562 per month (all amounts are in 2014 dollars), or $1,562 more. In other words, if he waits eight years, his monthly benefits will increase by approximately 78%.”
Before age 66 – SS will take away $1 of benefits for every $3 earned. So people who take SS at 62 either have a ton of dividen income, or have a low income. I would think it’s the latter – low income. At age 66 you can earn as much as you want, but most of the SS will be taxed. Now that sucks, since you paid tax on your SS contributions.
I know quite a few people who are hanging on the edge at 60 – 65. They have no choice.
@ tim re your “bullshit” comment
Hope your scenario of taking SS at age 62 works for you. The article does not condemn those who do this and in fact recognizes some of the reasons for doing so.
It just covers a broad spectrum of the different mathematical outcomes from taking SS at various ages. I think it did an excellent job of doing this without being judgmental.
Here’s some good advice:
@SSS
the article’s headline certainly suggests condemnation. and it does not cover a broad spectrum, as you suggest.
If you are healthy and have a good job, I beleive it is prudent to take S.S. later. My case is I quit working for a salary at 48 Y.O., so when I took S.S. at 62Y.O. I still had a son under 18Y.O. by 54 months. They gave me 1100. month S.S.(taxable) and 787. mo. for 54 months for my son that was not taxable. I thought that was a better deal, and I have a great deal of investment income and a wife who is a pharmacist who is still working.
I live in California and have three retired tenants, two with spouses and one that is windowed. The single tenant make 42,000 yr. and struggles, and the ones with spouses around 53,000 year and they have a comfortable life sytles, but not high on the hog. They spend 26 to 33 percent of their retirement income on housing. Retirement is bleak if you only have S.S., but own your own home. If you have to pay rent with only S.S benefits, you should start to develop a taste for dog food.
Tim – what will you live on until age 70 if not the SS you are putting into a nest egg? Do you already have a nestegg? Working for cash? Etc.
Without knowing that, I cannot call bullshit on your numbers or not. It depends on how you will fund your existence for those 8 years.
For instance, if you work for those 8 years, and make $50k per year, you will have a nestegg of perhaps half a million at age 70. So you would be way in front if you wait for SS until then under that scenario.
So what will you live on for those 8 years?
it does not matter. the premise of the article involves waiting until age 70. if you can do that, you can clearly live without social security for 8 years. under my suggestion, i will have at least $200k, the earnings from which i can supplement my age 62 level payout, making it roughly equal to my age 70 payment. EXCEPT that i will also have $200,000!
of course, if you are still employed or make more than the taxability limits on SS after 62, manage accordingly.
I got an idea .Why don’t you lazy ass holes work until you die like the vast majority of people have doneand continue to do in other parts of the world. All you guys are telling me is that at the age of 62 or 65 or 70 you will become part of the loafing class.Loafing is not an ENTITLEMENT. Playing golf is not an ENTITLEMENT. Besides , this house of cards is going to collapse. Haven’t you got the MEMO
@bb
you talk like you know somebody here personally. you don’t know if we work at the golf course, babysit our grandkids, maintain rental properties, are disabled, or escort older women – and it’s none of your business. my ENTITLEMENT of $1,659/month at age 62 cost me roughly $1,000,000 in employee/employer contributions and lost opportunity cost that i EARNED and paid in for 40 years, pissant!
funny, all the toe -jam pickers on TBP yammering on about the “end is nigh” prefer to wait 8 years to get entitlement money that is now printed on demand..ha….my advice is take the cash while it is offered , suckers….an have a back-up plan, too.
No male in my family has survived past age 74. I am taking ss asap.
tim says:
“bullshit!
if i take social security at age 62, which i will, and am able to invest the money until age 70 at 5%, i will have a $200k nest egg. at 5% again, i will match the payout i would get by waiting until 70 AND continue to maintain my $200k nest egg which i can leave to my children. and by taking it early i reduce the risk of being subject to legislative changes in social security, be they dissolution, means-testing, possible SS tax increases, whatever the progressive loonies dream up.”
LOL! I don’t think SSS did that math.
I’m 47. Given the financial position of the US, the proclivity of the US to renege on promises and the fact that I don’t want or plan to live past 70, I’ll take mine at 62.
Besides, I doubt that SS will be there when I turn 62.
I am 61 years old.
I can’t believe how many of my friends from my 20’s and college contemporaries are no longer alive, they never made it this far. By the time you’re 60 people really start dropping off noticeably.
Hell yes I’m filing at 62. If I make it that far.
I’m no expert on actuarial tables, but unless I am mistaken that’s what most insurance companies use to determine rates and payouts. I’m guessing Uncle Botox has a couple on retainer as well.
The average life expectancy for a male in the US is 76 years. If you opt for the 2K@62 then your return from SSI is 288K. If you wait until you’re 70 your payout is 256.5K. If you go by life expectancy you’re going to take a 80K hit if you wait for the big bucks.
I’m the tail end of the boomers and I have zero expectation of SSI as it is promised today, even less so if I were to wait until I am in my 70’s. They’ll probably be offering free tickets to National Parks in lieu of payments or something equally demeaning, like WalMart scrip.
“Loafing is not an ENTITLEMENT. Playing golf is not an ENTITLEMENT.”
—-bb
You are correct, of course. They are privileges you earn.
I do both ….. “loaf” (mainly by reading) and play golf. One costs me lots of money, the other doesn’t. I wasn’t entitled to these pleasures. I worked for them, many times in very dangerous environments. I and my wife saved a lot, mainly after raising two children. I don’t owe anyone, except the ever-present property and income tax man, a fucking penny for anything I have. And I don’t need my SS check. If it goes away, pffft. Don’t care.
I did not CHOOSE to work until I die, as you suggest of us “assholes” who have retired. My choice because I could make that choice.
Eight more years to 62.
ss – The premise re taking SS at 70 would be that they work until 70. No one can survive 8 years without an income or a nest egg.
Therefore your comment about being able to save $200k nest egg is bullshit. You cannot save that which you need to exist. And if you already had the $200k to exist, you would STILL be better off in the long run by working – the $200 would have grown to $400k or whatever at $5%.
I know math is difficult, but keep trying. Start with these exercises:
2+2 =
2+3 =
2+4 =
etc.
If those are too difficult, start with the oneseys.
Hardscrabble – so sorry, but your entire premise you laid out in the following is wrong:
“The average life expectancy for a male in the US is 76 years. If you opt for the 2K@62 then your return from SSI is 288K. If you wait until you’re 70 your payout is 256.5K. If you go by life expectancy you’re going to take a 80K hit if you wait for the big bucks.”
The life expectancy at birth may indeed be 76 or whatever. You are confusing life expectancy at birth with life expectancy at different ages.
The life expectancy of a man or woman of age 62 is FAR greater than that. For instance, a 65 year old man has a life expectancy of 84+ years, and a high percentage of 65 year old men will live beyond 90.
@ ilpoh
hey Einstein. if you look at the second paragraph just below the pretty graph up there, you’ll see that the premise is based on retiring “immediately” at 62. if you do not need the money to live on til 70, you can delay or collect. that is the decision we are discussing. i will begin collecting at 62 and amass $200k by age 70. in this case, you would OBVIOUSLY have other means of sustenance. examples of these are pensions, investments, annuities, tenant rents, cash, part-time work, a rich girlfriend, etc. got it now?
Yep, I got it. If you can save the 200k, then you already have the 200k, or whatever, or you would starve during the 8 years.
Having run the numbers, the break point is going to be living to approx. 82. If you live longer than that, you are better waiting until age 70 to take the money, if you can, and assuming your expenditures do not exceed the $24,000 per year (ie you do not over-erode whatever nest-egg you begin with)..
In other words, if you start with a nest egg of $200k, and use it up at $24k a year, and continue to spend only $24 k a year, and take SS at 70, at around age 82 you will be better off than the scenario where you start with $200k and live off $24k and take SS from age 62.
This works for whatever nest egg you start out with – 200k, 500k, 1000k, so long as expenditures are the same under both scenarios.
SS is not stupid – they set these things up to actuarial tables.
On average, waiting to take SS is going to be ever so marginally better off for folks who live to the average age. There will be losers – those who die before age 83 or 84 – and winners those who live to 103.
Human nature being what it is, most folks will take the bird in the hand. People with more money will probably be more likely to wait.
once again. the $200k nest egg is the accumulation and earnings from social security collected from age 62 to 70. the earnings from that accumulation at 70 makes up the difference between the age 62 level payment, bringing it to the same level as if i had waited til 70. and i have an extra $200k. i’m not starving during these 8 years because i have other means. breakeven dates don’t matter when my total income equals the 70 year age payout and i have $200k. if i die early, guess how much ahead my kids are? (answer contained herein)
tim – it is this simple. Under ANY scenario:
If you die before 82, approx, you are better off having started SS early.
If you live longer than 82, you are better off to have waited.
The 200k advantage is eroded by year 82. Simple as that. At the end of 22 years, tax issues excluded, you will have $395k, while under the take it at 70 scenario you will have $404k. That is based on 5% return. At 7% the break point is around year 84. The lower the rate of return, the better it is to wait.
SSS , just trying to get a rise out of the….Tim…I thought was from Dallas. I guess I got the wrong Tim.Carry on playing golf and enjoying your retirement. bb
Anonymous above is bbs smart phone showing it’s ass again. Damn thing
Lloph, you threw in some hazy stats yourself, according to something I read, you have a 90% chance of living ten more years if you are currently 62, at around 75 you have a 25% chance of making it to 85. While you life expectancy increases as you age, the odds decrease. as your cohort dies out.
I went through this exercise some time ago and came up with the same conclusion as HF, the bundle of cash you stand to collect it divvied up by the plan so that you can collect a little for a long time or a lot for a short time. If you outfox the longevity tables, you made out.
Our old company offered us a $1400 payout between the ages of 55 and 67 when you could collect the same amount from SS, my old boss said he did not plan to live that long, (he is my age but physically he is spun out due to the alcohol and foodie factors) so he said he’d go for the deal. I opted to take a measly amount but it’s a guaranteed annuity (I know) for life and my wife has survivor rights.
The best way to get the most money is like bb said, keep working. The best way to get the most ‘free money’ is to do like Tim says: apply for it at 62. I already discussed how SS contributions are actually taxes so don’t tell me it is ‘your’ money, it’s not. The same goes for that trick journalist use to inflame you when they claim the government spent “your tax dollars” foolishly; they aren’t yours, go ahead, write to the IRS to give you your tax dollars back. It isn’t yours.
EC – hazy my ass. At 75, your life expectancy is a bit over 85 – and that means roughly half will make it over 85, and half will not. You can yahoo this shit up yourself: “life expectancy by age”. All sorts of calculators and charts pop up pop up.
http://www.worldlifeexpectancy.com/your-life-expectancy-by-age
Well OK, the one I saw gave a 25% chance, I didn’t say your wrong, I meant you could cite some figures from those calcs. You did a good job otherwise.
How many people think they will live to 62? And then after that? Buy An RV trailer and an old truck. Buy a boat to live on. It’s not that hard to do. And like many, I wonder if it will still be there.
The article barely touches on the really big gorilla in the room and that is:
“Whether he’s confident the Social Security system will remain intact throughout his lifetime.”
The article makes that one statement then goes on to assume that SS will continue on in its present form and meet all its “commitments”, and doesn’t factor in that risk in any way.
Yea I did the math but I also factored in the likelihood that this Ponzi scheme makes it to that breakeven point and my decision was to “get it while it’s still there”. If I live beyond that point and SS is still paying out, I’ll still consider myself fortunate.
My grandfather worked for a small industrial firm for forty years, five days a week, fifty-two weeks a year. He got time off if he was sick, but I don’t believe he was paid for that time (this was before the government started dictating what businesses had to compensate, how much time off they had to give, etc.) He also worked on the weekends at a bakery. 7 days a week for forty years. He did have a pension plan.
About six months after he retired the company went under and he never saw another dollar of his pension.
So much for contributions, promises and what you’ve paid in.
HSF, if you happen to know, how did that change him?
I don’t even want to think what I’d be like if that happened to me. I think I’d be damned hard to get along with for some time.
I took SS at 62. The thinking was that with that I could have more years to let my retirement funds grow. That actually worked out well. But, what I did not expect was ZIRP. I was expecting to make a safe 4%. So much for that idea. However, I still have no regrets about starting at 62. When we talk about waiting until 70, we also have to factor in the value of retirement and your current savings.
I read too many obits of people 50-65.
Unless you’re just a cockeyed optimist, a crystal ball would be helpful.
My hubby is almost 10 yrs. older than me. If I wait until I’m 70 to collect, husband will be 80.
The odds of collecting my paltry amount for very long could be slim.
Assuming dh is still with me, God willing, when I turn 62, I’m signing up!
Sorry Dennis.
” In other words, if he waits eight years, his monthly benefits will increase by approximately 78%.”
Unfortunately. Joe was hit by a bus 3 days after he turned 62, and didn’t get a fucking nickel out of SS.
“A bird in hand…..”
Maddie’s Mom says: I read too many obits of people 50-65.
Indeed, and younger than that even. We are survivors. It took me a while to grasp that when LLPOH says half will make it to the next level, that half is one quarter of the previous level.
Urging people to wait until 70 to collect leaves certain calculations out, like, there will be less people collecting. BWAHAHAHAHA applies here.
EC – Not so fast grasshopper. All the calcs are based on actuarial stats for people based on their life expectancy at age 62.
On average, those folks will make it to age 83 or thereabouts. And it just so happens that some will die before then (too bad for them) and others will live longer.
But the government will pay out more, on average, to those that wait than to those that do not. On average, they will pay each recipient to age 83. Some of these they will begin paying at age 62 or whatever, and some they will begin paying at age 70. But overall, they will continue paying those folks until an average age of 83. Those that die early are simply offsets to those that die later.
Maybe if I explained it using your fingers and toes you would get a handle on it.
The odds of a man dying between age 65 – 74 is one in forty two, per year. Only 1 in 65 women will die per year between the ages of 65 and 74! So about 1/4 of men will not make it from 65 to 74, and about 1/6th of women will not make it.
So there is a 75% chance a 65 year old man will make it to 74, and an 80+% chance a woman will.
Once again, humans tend toward instant gratification. Only about 1 in 3 humans will choose more later versus less now. Gotta have it now is the human way.
Those instant gratification folks are a boon to SS funds.
Perhaps a smart thing would to be to have a thorough health exam done at 61. If you are a walking heart attack, go for the quick bucks. If you are the picture of health, wait for the money.
A health exam is only good for a year or two, things can go down the tubes real fast. You know, when we left the old company, we got those thorough health exams, anticipating losing coverage. All I managed to do was transfer the last bit of money from the company insurance to the doctors. I was in good shape then. Now the doc asks if I’ve been drinking, my liver looks bad. I don’t drink, my only vice is TBP. TBP is more fun, I’d hate to drink alone.
My mom was the picture of health all her life until one morning, at 59, she couldn’t get out of bed.
She was diagnosed with terminal cancer and lived 2 1/2 yrs. One day she was up on scaffolding painting and the next morning she could not get up. Her life turned just that quickly.
Her grandmothers lived to 98 and 101. Her mother to 85. We were always certain she would live a very long life.
I make no assumptions.
Daughter’s auntie-in-law decided to retire early to take care of her octogenarian parents, life had other plans, she developed cancer almost immediately and was gone just like that at 62
My father-in-law father in law noticed some pain and difficulty while defecating so he went to his doc and was dead two weeks later from cancer. He would have considered that a blessing so that made it a bit easier. We flew home for Europe in time to say goodbye but only made it by hours. When we got back to his home all of his tools were still out as he had been prepping the house for winter when he left for his first “routine” appointment. He never even made it back home. I buttoned the work up and we flew back to England.
flew home ‘from’