We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
To be honest, I am tired of reading articles about what age to start your Social Security benefit, especially in the context of maximizing lifetime income. Maximizing lifetime income is meaningless. What matters is receiving the income when you need it most.
That may be at age 62 or you may see the need for more income in your later years and start benefits at age 70. Of course, it could be anywhere in between.
If you have not planned otherwise- like a survivor annuity or life insurance or investment income – maximizing the SS survivor benefit may be a factor.
Don’t worry about the break even point, you can’t control that anyway. It’s the cash here and now that matters. It’s all a matter of getting more for fewer years or less each month for more years- assuming you are actuarially average.
The misleading part about collecting SS is we believe the benefit is increased if we wait. Think of it more as a reduction for each month benefits are started before age 70.
Following are excerpts from an article on the Motley Fool website. There is much more to the article you will find interesting.
The average Social Security retired worker benefit at age 70 is much higher than the average benefit at age 62.
KEY POINTS
Roughly half of retired workers claim Social Security before age 66, but statistics show that strategy very rarely maximizes lifetime income.
The average monthly Social Security benefit for retired workers is about $1,298 at age 62 and $2,038 at age 70.
Workers born in 1960 or later can increase their retirement benefit 77% by claiming Social Security at age 70 rather than age 62.
Because it was an income necessity?
In recent years, about one-quarter of new retirees claimed Social Security at age 62, meaning they started as soon as possible. And another one-quarter claimed Social Security between ages 63 and 65. That means about half of new retirees started benefits before age 66.
Statistically speaking, the vast majority of those people are leaving money on the table. A recent study published by the National Bureau of Economic Research concluded that fewer than 1% of retirees maximize their lifetime income by claiming Social Security before age 66.
Every one has different needs, easy decision to take the money at 62 if the person person claiming can no longer work and needs the money to live on. For me Social Security is an inflation adjusted income I can’t out live (Income Insurance), so I would defer to age 70.
Of course the average person provably thinks IRMAA is a sitcom–what the average person is looking at is money they need and for many folks how long they might live–like yesterday’s Medicare and Medicaid information (very good by the way) all of these programs are broken in some fashion, basically running out of money.
In this case one basic flaw that is disheartening and might be a cause of taking money at age 62 or before the normal retirement age, is you might not live to get your benefit. If you make it to 62 and you are single, death ends your benefit.
If this was a rational retirement benefit one would receive their contribution and the employer contribution, which is really our money, regardless of the age of death. If you have begun taking your benefit and your benefit exceeds contributions then your heirs get nothing. Being single should not be a penalty–if I predecease my wife she will get my benefit if she wants it and she will as it is greater than hers.
If that were the case it would have been out of cash a long time ago. It really isn’t our money. We pay taxes that have nothing to do with our benefits. It’s insurance; some winners, some losers.
Sitcom as you know is like I Love Lucy–Honeymooners–ask a few folks on the street and they have not a clue about IRMAA from Benefit Jack this morning. Most folks know little about the system.
I would think SS taxes have consequence as far as our benefits.
Ms. Smith cleans houses for 35 years and is not a big time wage earner–Mr. Jones is an engineer at Boeing and makes good money for 35 years and for numerous years has received a nice bonus.
Time and wages I assume have something to do with income from SS upon retirement. We know on a proportional basis Ms. Smith does better than Mr. Jones–he might have contributed 10 x as many dollars to the system but does not not get, as an example, 10 x her benefit. But Jones gets more dollars each month than Ms. Smith because he contributed more. Same work history other than money.
I could be wrong, but that is how I assume the system operates.
Nope, nothing to do with taxes paid, but earnings up to the limit. The law determines the benefit formula independent of revenue to SS (taxes). Which is why the program is in the shape it is. Then the benefit formula favors lower earnings so higher paid receive lower percentage of average earnings.
Very good article! This is only of interest to “knowledgable” readers such as found here. Most people look forward to receiving their S.S money pretty soon after retirement or disability irrespective of their real need. After all, it feels good getting “free” money from the government. P.S.: It’s been conditioned in us!
Actually, best practice involves timing and ordering your assets set aside for retirement income so that they produce the greatest income, after taxes. That is, it isn’t what you get that counts, but what you get to keep, after taxes.
So lifetime value received after taxes (IRMAA, etc.) is only inconsequential if you have a surplus of assets such that maximization only affects the residual or legacy.
Those whose lifestyle is a function of their income should have maximizing value, after taxes, as a top financial priority in retirement.
QUINNSCOMMENTARY 
Every one has different needs, easy decision to take the money at 62 if the person person claiming can no longer work and needs the money to live on. For me Social Security is an inflation adjusted income I can’t out live (Income Insurance), so I would defer to age 70.
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Of course the average person provably thinks IRMAA is a sitcom–what the average person is looking at is money they need and for many folks how long they might live–like yesterday’s Medicare and Medicaid information (very good by the way) all of these programs are broken in some fashion, basically running out of money.
In this case one basic flaw that is disheartening and might be a cause of taking money at age 62 or before the normal retirement age, is you might not live to get your benefit. If you make it to 62 and you are single, death ends your benefit.
If this was a rational retirement benefit one would receive their contribution and the employer contribution, which is really our money, regardless of the age of death. If you have begun taking your benefit and your benefit exceeds contributions then your heirs get nothing. Being single should not be a penalty–if I predecease my wife she will get my benefit if she wants it and she will as it is greater than hers.
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If that were the case it would have been out of cash a long time ago. It really isn’t our money. We pay taxes that have nothing to do with our benefits. It’s insurance; some winners, some losers.
Not sure what you mean about IRMAA.
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Sitcom as you know is like I Love Lucy–Honeymooners–ask a few folks on the street and they have not a clue about IRMAA from Benefit Jack this morning. Most folks know little about the system.
I would think SS taxes have consequence as far as our benefits.
Ms. Smith cleans houses for 35 years and is not a big time wage earner–Mr. Jones is an engineer at Boeing and makes good money for 35 years and for numerous years has received a nice bonus.
Time and wages I assume have something to do with income from SS upon retirement. We know on a proportional basis Ms. Smith does better than Mr. Jones–he might have contributed 10 x as many dollars to the system but does not not get, as an example, 10 x her benefit. But Jones gets more dollars each month than Ms. Smith because he contributed more. Same work history other than money.
I could be wrong, but that is how I assume the system operates.
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Nope, nothing to do with taxes paid, but earnings up to the limit. The law determines the benefit formula independent of revenue to SS (taxes). Which is why the program is in the shape it is. Then the benefit formula favors lower earnings so higher paid receive lower percentage of average earnings.
LikeLike
Very good article! This is only of interest to “knowledgable” readers such as found here. Most people look forward to receiving their S.S money pretty soon after retirement or disability irrespective of their real need. After all, it feels good getting “free” money from the government. P.S.: It’s been conditioned in us!
LikeLike
Actually, best practice involves timing and ordering your assets set aside for retirement income so that they produce the greatest income, after taxes. That is, it isn’t what you get that counts, but what you get to keep, after taxes.
So lifetime value received after taxes (IRMAA, etc.) is only inconsequential if you have a surplus of assets such that maximization only affects the residual or legacy.
Those whose lifestyle is a function of their income should have maximizing value, after taxes, as a top financial priority in retirement.
LikeLike