When to claim Social Security Benefits

[dmclennan]

Hi everyone,

My wife and I are both 62, born in Oct 1957. We are both retired and have about the same Social Security benefits (around $2,000 if we claim now, $3,000 at FRA, and $3,900 at 70).

We have suitable savings to live comfortably without Social Security, 50/50 split between savings and retirement accounts, no debt. My mom and dad died young (not healthy lifestyle); my wife's mom is a young 85!. I have no doubts that we both will live well into our 90's or beyond.

For budgeting purposes, I estimate living to 100; I believe savings and lifestyle will last through then.  Are there any advantages to our both taking benefits now, FRA or 70? Or, one claim now or FRA and the other spouse waits to FRA or 70?

Cash and cash flow don't seem to be our problem. I'm more worried about the politics of Social Security and whether it will be available in 8 years vs. claiming now, etc. I'm concerned that after 70, we have large RMDs from our 401K's. Taxes seem to be a bigger issue that I expected.

We are very fortunate that we are in this situation. It almost seems that it doesn't much matter when we claim Social Security benefits. Any suggestions or other considerations to consider?

Thanks

[StephenB538127]

if you don't need the money then i suggest you wait until you turn 70.....i turn 70 in june 2020 and it has been terrific to see my account grow at 8% since i turned 66.......you can't beat the 8% as it's the best guaranteed investment you'll ever get!

[fffred]

I agree wholeheartedly. I am following the same plan (I am now 68).

If one can get by on personal savings, etc, after retiring and wait until age 70 to begin drawing SS benefits that can be well worthwhile. Of course, some people (perhaps quite a few) won't have the resources to be able to wait and that is okay, it is what it is.

(and on that note, it's interesting to point out that those who don't have the additional resources are probably mostly those who made lower incomes in their working years. They will have SS benefits that will actually make up a higher proportion of their earnings from their working years so it may not be much of a penalty for them not to be able to wait. Due to the way the SS benefit is structured with the "bend points" it really is true that the program is designed to provide an advantage to the lower earners. Nice!)

For me, the bigger advantage of waiting to collect SS is so that my wife, assuming that she becomes my widow (rather than me dying first), will then collect a larger survivor's benefit than if I drew benefits at a younger age.

And this will apply regardless if (1) she draws her spousal benefit early at age 62, as we plan to do so at this time, and (2) even if SS benefits are reduced across the board in the future due to possible shortfall in SS revenue (and that may become more likely depending on how jobs and the economy turn out when this pandemic event is over) (on the other hand, Congress can always change the law so that any benefit due my widow as a result of my delaying benefits will be lost. It's possible in a dire condition.)

For me, the potential benefits to my spouse-survivor outweigh all other considerations. If I was on my own then I would probably view this a lot differently and it might change my decision.

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@StephenB538127 wrote:

if you don't need the money then i suggest you wait until you turn 70.....i turn 70 in june 2020 and it has been terrific to see my account grow at 8% since i turned 66.......you can't beat the 8% as it's the best guaranteed investment you'll ever get!

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[GailL1]

@dmclennan 

It appears that you both have planned well but as you mentioned there may be other dilemmas that come up.  Some to consider off the top of my head would be:

• the amount your SS benefit might be reduced if you continue to work after beginning early retirement
• income taxes- consideration whenever you decide to take your SS benefit
• the tax you will pay on your SS benefit depending on your income, not just earned income
• once you reach 65 and go on Medicare - the income based surcharges on Medicare Part B and Part D.

One other thing that may make a difference to you is the new law which President Trump signed on 12/20/2019 - The Secure Act.  The part that would be applicable to you is the change in age for Required Minimum Distributions (RMD) from tax deferred retirement account.  Instead of being 70.5 years of age - you can now wait until 72 to begin those RMDs.

If Congress fails to enact some increase revenues to the SS Trust Fund by around 2035, the law states that once the Trust Fund reaches a certain point of depletion, benefits will be automatically cut a certain % - right now that looks to be about 20%.  At that point the Trust fund would be declared insolvent because incoming tax revenues would be sufficient to to pay only about 80% of the scheduled benefits.

We still have 14 - 15 years but the sooner changes are made to bring in more revenues or cut benefits or a combination of both, the easier the changes will be for those who will be affected.

This explains it fairly well:

Congressional Research Service- Report to Congress - 06/12/2019 - Social Security: What Would Happen... 

You can keep up with the most recent Trust fund figures and outlook each year when the Social Security Trustees issue their annual report - usually about June.

Social Security Trustee Report Summary 2019 

There are tons of different (and similar)  proposed legislations out there - 

Social Security.gov - Office of the Chief Actuary's Estimates of Proposals to Change Social Security...Some of them fix the problem - others, not so much.

Personally, I like the "Social Security 2100 Act" introduced on January 30, 2019 by Congressional Chairman John Larson, Se...  

Even if you and/or your wife waited until 70 to file for benefits, that is only 8 years away and I don't think any of this would be affecting you so close to retirement - so just plan as you would normally do.  We may have to pay more in taxes on our SS benefit but that is gonna happen regardless.

There is just no way I can advise you because the details, the circumstances, the situation all make a big difference in your situation (and your wife's) - maybe find yourself a (real) Fidicuary - Investopedia - What is a Fiduciary who can help guide you in your decision.

[dmclennan]

Thank you for your reply -- your comments are very helpful!