Anonymous
Anonymous asked in Education & ReferenceOther - Education · 6 months ago

Does it really make a huge difference at which age I take my social security?

Many people choose to collect social security benefits at full retirement age, which is 67 for most people.

You can also take early benefits at 62 which is a lower monthly payment, or wait until age 70 or 75 and get more per month.

But let's say I retire at 62. And to be clear, social security will NOT be my only source of retirement income. I have a pension and a 401K.

The way I see it, if I take early benefits at 62, I'll get a lower monthly check than if I take them at 67 but I'll get more checks in my lifetime.

If I wait until 70 or 75 then I'll get a higher monthly check but fewer of them in my lifetime.

Unless I live to a significantly older age than the average person, would my lifetime social security earnings really change that much based on the age I choose to collect benefits?

If choosing an age besides 67 means either more smaller checks or less bigger checks, would I do just as well over the course of my retirement years to start collecting at 62?

11 Answers

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  • B
    Lv 7
    6 months ago

    the 8% a year which is the increase in your social security may well be worth it, unless you can earn that on getting reduced payments at age 62. So, if you don't need the social security and take the lower payment, you are cheating yourself if you don't invest the lower payment at least getting 8%. I doubt you could invest in any thing which pays 8% a year guaranteed, so I'd wait on taking the social security until after age 67 and get 8% a year.

  • Anonymous
    6 months ago

    How long will you live?

    How much do you need the money?

  • Dan B
    Lv 7
    6 months ago

    If you delay taking SS, the SS is betting you'll die before you break even. I took my SS at 62 because none of my family lived to SS age except for my dad. You'll have to do your own math. Pick an age at with you might die. Then run the numbers from 62 to that age, 67 to that age and 72 to that age.

  • 6 months ago

    Statistically, it all washes out the same way.

    The actuaries at Social Security have based their monthly payment scheme on the number of years they expect people of your age to live.

    For instance (and this is highly simplified), suppose they assume that the average death age is 80.

    If you receive your first benefits at 62, they will assume that you will get benefits for 18 years. If you receive your first benefits at 67, they will assume that you will get benefits for 13 years. In the later case (again simplified), a person who starts benefits at 67 will get 18/13 times as high a monthly benefit as the person who starts at 62.

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  • 6 months ago

    The earlier you take it, the less you get of the total amount you'd be entitled to at age 70.

  • Anonymous
    6 months ago

    For me, pro to taking SS early is that I don't need the money and can therefore invest/grow it. If I do that, the money is mine to spend or leave to heirs/donate upon my death even if I croak off early. And hey, 62 to 70 is 8 years so that's no small thing when you consider the time-value of investing.

    Con to taking SS early is that it increases taxable income and therefore also increases medicare premiums. Fortunately for me I recognized early on that pre-tax retirement accounts are STOOPID tax-wise (not for everyone, but certainly for people who will have a higher income in retirement than when they were working) and therefore I've made good use of the Roth accounts. This means that my taxable income in retirement will be pretty low with the wildcard being what I have been told I will inherit from my parents when the time comes.

    So in a nutshell, while Judith crunched the basic numbers, she didn't touch on other factors that might go into one's decision making process.

  • 6 months ago

    You need to do the math. If you know what the monthly payments will be at 62, 67 and 70, you can figure this out.

    Simply take the amount of money you will pass up by waiting until the later age. Then take the payment for the later age and subtract the payment at 62, see how much you 'lose' every month. Then divide that number into the money you passed up by waiting. That will give you the number of months beyond 62 that you must live to break even. Then, you're rolling the dice, how long you think you might live.

    I don't have the exact numbers anymore, but my wife began collecting the month she turned 62. Family history is against her, her father passed at 65 (8 days after turning 65 and would not have gotten his first SS check - but he took it at 62), her mother at 72 and she recently lost a brother at 61. We calculated that if she waited to 66 and 4 months, her full retirement age, she had to make it to 76 just to get back the payments she passed up for 4 years 4 months. And if she waited to 70, she would have to live to 82.

    If you have an excellent family health history, don't need the money now, and think you will live into your 80s, then you should at least hold off until your full retirement age, and recalculate things then, on whether you should wait until 70.

    I have never read anywhere that you will get any additional benefit by waiting beyond age 70, and for most people it would not make financial sense.

    • NA
      Lv 7
      6 months agoReport

      If they waiting until 70 and lived to be 90, the extra is roughly 27% more than age 62, and 10% more than age 67.

      Dying earlier than you expected messes this all up.

  • 6 months ago

    Benefits max out at age 70, so there's no reason to wait past that age.

    You are right that if you live to right around your actuarially-determined life expectancy, you'll break even no matter when you start to collect benefits. The system is set up to pay you about the same over your lifetime whether you collect at 62, 67, 70 or anywhere in between.

    If you collect at 62 and die before your life-expectancy date, you will have received more than if you had waited and not collected anything. If you collect at any age and live longer than your life-expectancy date you will have received more than Social Security planned for. So, the odds of you collecting the greatest amount are to start as early as possible (you game the system both if you die early and if you die late).

    The downside to that strategy is if you are counting on the Social Security check to make basic ends meet. If so, you should wait until the check is the biggest it's going to be. But, in your case, where you're not relying on the amount of the check to get by, an early start makes most sense.

  • Judith
    Lv 7
    6 months ago

    Full retirement age won't be age 67 for quite a few years. Right now it is age 66 and two months. If you are age 60 it will be age 66 and four months.

    Of course it makes a huge difference when start your benefits. Someone who decides to take it at age 62 will get about 32% less each month than someone who decides to wait until full retirement age. When full retirement age is age 67 then the benefit at age 62 will be about 40% less. Not only that but some people wait untiil age 70 to collect so that they get what is called delayed retirement credits which amounts to an increase of 8% in the monthly benefit for each year beginning with the year they are of full retirement age up to age 70.

    If someone wants to know how long it would take them to reach the "break even" point they need to get an estimate of the monthly benefit amount at age 62 (or whatever early age they like) and an estimate of the monthly benefit amount at whatever their full retirement age is. Subtract the early benefit amount from the unreduced benefit amount to get the $ difference. Multiply the early benefit by the # of months benefits would be received by full retirement age then divide that by the $ difference in benefits - the result is the # of months a person would be financially ahead if they take it early - that is the "break even" point..

    What many people don't take into account when they decide to wait until full retirement age is how much money they are giving up. If they aren't working or they are working and earning under the yearly allowable amount and they wait until full retirement age to start collecting it will take them at least 8 years to make up for the loss and only then will they be financially ahead.

    There is absolutely no point in starting to collect after age 70 because the benefit won't get higher since delayed retirement credits end at age 70. Anyone who would wait until age 75 to collect will NEVER EVER make up for the lost benefits which would have been paid between age 70 and 75.

    I think anyone who isn't working or who isn't earning more than the yearly allowable amount is foolish not to take it at age 62. If they don't need the money they can always invest it.

    You can find your full retirement age by googling it or by checking out the ssa.gov website.

    Source(s): I was a SS claims rep for 32 yrs.
  • rmm
    Lv 7
    6 months ago

    make a graph of the money vs time. Time could be in years, and money the yearly amount of SS you would get.

    Draw a "62" line showing each year worth of money.

    Draw a "67" (and maybe 70 or 75) line and see where they would intersect.

    It will take a few years to catch up, so the 62/67 intersection may not occur until 75 or so. Then you'll just have to guess how long you will live and decide if you need the money before what age.

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