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Discuss Latest WCI Blog Post: 10 Reasons NOT to Take Social Security Early

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  • Discuss Latest WCI Blog Post: 10 Reasons NOT to Take Social Security Early

    Some people claim that taking Social Security early is the right move. Here's why that's absolutely the wrong move for your retirement.

    The post 10 Reasons NOT to Take Social Security Early appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.



    Click here to view the article!
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

  • #2
    I'll offer a contrary view. The crossover point at which waiting till age 70 recovers SS payments not received after normal retirement age approaches 10-12 years. If you don't need the money and can instead invest the post tax proceeds, this pushes out the crossover point even further. So, one must both live and collect the promised benefits at least until your mid-80s for the "wait till 70" strategy to work.
    Jim makes the following statement near the end of the article:

    Unlike Medicare, Social Security's problems are pretty easily fixed. You simply do one or more of the following:
    • Increase the wage limit on the tax
    • Increase the tax percentage
    • Decrease the inflation adjustment
    • Delay the age at which you can take Social Security
    All of these changes are possible, and all change the equations for the crossover time-and not in a good way. SS is already taxed at 85% for most of us, so who cannot believe it won't become 100% taxable. Medicare B became means tested (I pay over three times the lowest category of premiums) a few years ago, so who cannot believe that SS benefits won't become means tested in some way (of course they are means tested already as benefits as a percentage of lifetime income is so much lower for high income taxpayers).

    Comment


    • #3
      Originally posted by Steven Podnos MD CFP View Post
      I'll offer a contrary view. The crossover point at which waiting till age 70 recovers SS payments not received after normal retirement age approaches 10-12 years. If you don't need the money and can instead invest the post tax proceeds, this pushes out the crossover point even further. So, one must both live and collect the promised benefits at least until your mid-80s for the "wait till 70" strategy to work.
      Jim makes the following statement near the end of the article:

      Unlike Medicare, Social Security's problems are pretty easily fixed. You simply do one or more of the following:
      • Increase the wage limit on the tax
      • Increase the tax percentage
      • Decrease the inflation adjustment
      • Delay the age at which you can take Social Security
      All of these changes are possible, and all change the equations for the crossover time-and not in a good way. SS is already taxed at 85% for most of us, so who cannot believe it won't become 100% taxable. Medicare B became means tested (I pay over three times the lowest category of premiums) a few years ago, so who cannot believe that SS benefits won't become means tested in some way (of course they are means tested already as benefits as a percentage of lifetime income is so much lower for high income taxpayers).
      At what age did you start taking SS? What do you recommend for your clients? I’m 3 years older than my spouse. We have similar SS earnings history and both are past the second bend point. She is statistically much likelier to live longer than me. How would you advise us?

      Comment


      • #4
        I had my (ex physician) wife take her benefits at age 65, when she had earnings that were below an amount that would provoke an earnings penalty. I plan to take my benefits at normal retirement age of 66 and 8 months since I still have earnings that would cause a penalty. I cannot give you advice on timing without knowing your entire financial situation.

        Comment


        • #5
          I could file for it today if I thought it was wise. I do not. The article by Jim is very good. Basically unless you have a diagnosis that will kill you prior to 80 I would strongly suggest waiting to 70 to start. If married I would run Mike Pipers software to see if one should start earlier. My oldest brother took it at 62 and regrets it. He also thought he could invest the money. My other brother took it at FRA. I will wait to 70. I do not plan to buy LTCI so a higher SS payment will help with these costs if they happen. I also bought a QLAC after talking to Jim Lange at WCIcon22. QLAC plus age 70 SS will be nice if I need LTC.

          Comment


          • #6
            Originally posted by Steven Podnos MD CFP View Post
            I'll offer a contrary view. The crossover point at which waiting till age 70 recovers SS payments not received after normal retirement age approaches 10-12 years. If you don't need the money and can instead invest the post tax proceeds, this pushes out the crossover point even further. So, one must both live and collect the promised benefits at least until your mid-80s for the "wait till 70" strategy to work.
            Jim makes the following statement near the end of the article:

            Unlike Medicare, Social Security's problems are pretty easily fixed. You simply do one or more of the following:
            • Increase the wage limit on the tax
            • Increase the tax percentage
            • Decrease the inflation adjustment
            • Delay the age at which you can take Social Security
            All of these changes are possible, and all change the equations for the crossover time-and not in a good way. SS is already taxed at 85% for most of us, so who cannot believe it won't become 100% taxable. Medicare B became means tested (I pay over three times the lowest category of premiums) a few years ago, so who cannot believe that SS benefits won't become means tested in some way (of course they are means tested already as benefits as a percentage of lifetime income is so much lower for high income taxpayers).
            I"m not sure you're considering everything.

            If you don't need the money it pushes nothing out. Money is fungible. If you don't spend the SS you're spending something else in its place. As the article says, and given current inflation rates of about 9%, by NOT delaying you're assuming you can get a risk free return of 10.8%-12% on your investments. Good luck with that. The higher inflation gets, the better delaying becomes.

            It's also not just about getting the most money. The longevity insurance aspect also matters. The person who dies at age 70 would obviously have collected more money by not delaying to 70. But that person is also unlikely to have run out of money. That's not the situation worth worrying about when making this decision. The situation worth worrying about is living to 101.

            While you're almost surely right to take one spouse's earlier than the other's, and honestly you like most of us are rich enough that it really doesn't matter all that much, it's extremely unlikely that you not delaying to 70 is the right move.
            Helping those who wear the white coat get a fair shake on Wall Street since 2011

            Comment


            • #7
              Jim, your comments are predicated on things remaining as they are. And in my case (and others), receiving SS early is indeed "extra" money that can be invested. We'll just have to disagree on this strategy, but I think it is worth everyone considering their options.

              Comment


              • #8
                Originally posted by Steven Podnos MD CFP View Post
                Jim, your comments are predicated on things remaining as they are. And in my case (and others), receiving SS early is indeed "extra" money that can be invested. We'll just have to disagree on this strategy, but I think it is worth everyone considering their options.
                The only reasons to take SS early is if you actually need it or have a pretty strong case for “death” before 80 (70+10).
                I don’t buy the assumption that predicted risk adjusted rate of return of investment is better than the rate of increase in SS.

                Regarding the assumptions remaining the same, the same risks apply to investments as well. Neither is fact based.
                Perfectly correct, there is a payback period.
                That is what the spreadsheet says. If you are going to “invest”, you don’t need it.

                They took away the “file and suspend” and “restricted claiming” options.
                Last edited by Tim; 04-19-2022, 08:03 AM.

                Comment


                • #9
                  I plan on taking my widower benefit (if i never remarry) when I turn 60, but delay my own benefit until I turn 70. I believe this is still allowed and wasnt taken away when "file and suspend" lapsed. Best of both worlds? Its also allowing me to mentally accept lowering my bond allocation in my retirement savings.

                  Comment


                  • #10
                    Originally posted by Steven Podnos MD CFP View Post
                    Jim, your comments are predicated on things remaining as they are.
                    Guilty as charged. If I could predict the future, I would definitely take it into account when making comments, giving advice etc.

                    But until then, I know no better way to do financial planning than to use current law.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

                    Comment


                    • #11
                      Originally posted by billy View Post
                      I plan on taking my widower benefit (if i never remarry) when I turn 60, but delay my own benefit until I turn 70. I believe this is still allowed and wasnt taken away when "file and suspend" lapsed. Best of both worlds? Its also allowing me to mentally accept lowering my bond allocation in my retirement savings.
                      Yes both allowed and sensible. https://www.prudential.com/corporate...vivor-benefits

                      Comment


                      • #12
                        Originally posted by billy View Post
                        I plan on taking my widower benefit (if i never remarry) when I turn 60, but delay my own benefit until I turn 70. I believe this is still allowed and wasnt taken away when "file and suspend" lapsed. Best of both worlds? Its also allowing me to mentally accept lowering my bond allocation in my retirement savings.
                        You paid a heavy price, no doubt about. It is not the best, however I admire your plan.

                        Comment


                        • #13
                          Originally posted by The White Coat Investor View Post

                          I"m not sure you're considering everything.

                          If you don't need the money it pushes nothing out. Money is fungible. If you don't spend the SS you're spending something else in its place. As the article says, and given current inflation rates of about 9%, by NOT delaying you're assuming you can get a risk free return of 10.8%-12% on your investments. Good luck with that. The higher inflation gets, the better delaying becomes.

                          It's also not just about getting the most money. The longevity insurance aspect also matters. The person who dies at age 70 would obviously have collected more money by not delaying to 70. But that person is also unlikely to have run out of money. That's not the situation worth worrying about when making this decision. The situation worth worrying about is living to 101.

                          While you're almost surely right to take one spouse's earlier than the other's, and honestly you like most of us are rich enough that it really doesn't matter all that much, it's extremely unlikely that you not delaying to 70 is the right move.
                          I definitely agree with you however isn't it also true that most of the docs on this forum are ALSO not going to run out of money, whether they die at 70 or 100? And that's probably true of their spouse, as well. So how much does longevity insurance really matter to this cohort?

                          Basically I want to maximize our after tax (net) proceeds from SS, in real terms, over our two lifetimes. Assuming better than average health (which tends to be true for folks with high SES), delaying seems to be the right answer, with or without the benefits of longevity insurance.

                          Comment


                          • #14
                            Originally posted by Tim View Post
                            You paid a heavy price, no doubt about. It is not the best, however I admire your plan.
                            Yes poor choice of words on my part, and if I can change it all I would obviously rather my wife survived and was healthy even if it meant us being poor. But with the hand I was dealt, I'm trying to plan on how to make the best of the SS aspect of my future.

                            Comment


                            • #15
                              Originally posted by FIREshrink View Post

                              I definitely agree with you however isn't it also true that most of the docs on this forum are ALSO not going to run out of money, whether they die at 70 or 100? And that's probably true of their spouse, as well. So how much does longevity insurance really matter to this cohort?

                              Basically I want to maximize our after tax (net) proceeds from SS, in real terms, over our two lifetimes. Assuming better than average health (which tends to be true for folks with high SES), delaying seems to be the right answer, with or without the benefits of longevity insurance.
                              That's a pretty good argument. But I'd still say the SS decision should be about maximizing the income available to you IF you live a long time, not just on average.
                              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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