Optimizing Social Security Benefit withdrawal

I am in complete agreement with "most pro's", in that I reccomend and have been using, "as soon as possible".

When I approached 62, I determined that I will have to live BEYOND age 82, to show a loss in benefits when compared to waiting until 65.

IF I had been in a position to "set aside" the monies received from age

I elected to start receiving benefits at 62, and am currently 78, and doing fine............. Cal Lester CLU

Thanks Cal. That's exactly the stuff I am looking for.

Scott Burns, the financial writer for the Dallas Morning News, addressed this topic a few months ago. He says that women and single men should begin taking Social Security at age 62, but that married men should wait even beyond full retirement age. Check out his article and his responses to many comments and questions on his website:

and to complicate it even more, consider that the SS system may change in the future for political purposes (not likely for sound financial reasons), including means testing. If you wait, and then get nothing when means testing kicks in, well . . .

On Feb 9, 2:09 pm, "Gil Faver"

"kastnna" wrote in news: snipped-for-privacy@s48g2000cws.googlegroups.com:

However, if you simplify to the point of no confounding variables and average everything the right answer is................. it doesn't matter you will get exactly the same.

Scott Burns did an analysis. It should be on his web site:

My current plan (still a few years off) is to wait until 70 (which I think is the last age the benefits increase). I'm from long lived stock. My main retirement concern is running out of money before running out of breath. Social Security is a big defense against that because it is an annuity that is inflation indexed.

-- Doug

I am 72 and started taking benefits at 62. No one can tell you or predict in advance what is the best age to take benefits. There are too many variables. If one person decides to wait until age 67 and then dies just before receiving benefits, he or she has missed out on

Agree that there are too many variables to have a "rule" about this. Up until about a decade ago my response to this issue was that because of the potential for change in SS benefits and the unknown life expectancy aspect, we should take SS as soon as possible.

However, my answer has changed as my appreciation grew for the SS COLA and its inflation fighting benefit over ever-increasing life spans. As a big fan of regular monthly checks as we get older, my focus is this: Over our increasing life spans do we want the COLA to apply to a bigger number, or a smaller number?

So my most frequent - not always - answer is this: If the person needs the additional income and there are no complications from the earned income limitation, start SS as soon as possible and move on. But providing there is sufficient other income and the person is in good health, I'd wait for the bigger number.

-HW "Skip" Weldon Columbia, SC

Cal, is this essentially the same age ratio to benefits for everyone - or most of us?

I will be taking my SS benefits when I turn 62 later this year. I figure that's money not coming out of my IRA, which is invested conservatively, but currently earning more than the above 6%. I may live long enough to show a loss in total benefits (beyond 100), but . . . .

Elizabeth Richardson

I noticed that his premise is that this hypothetical married man is approximately 3 years older than his wife, and, therefore, his wife will probably outlive him. Also, the assumption is that the man has a significantly higher SS benefit than the woman, and that this is part of the calculation that it is better for the married man to defer taking is SS benefit.

What kind of recommendation is likely if the wife is several years older than the husband, so that life expectancy tables indicate their deaths are likely to occur with a year of each other; and if the difference in their benefits is negligible (less than $150 )? It seems to me that both taking the benefit early is the better alternative. Maybe not?

Elizabeth Richardson

Elizabeth, I did the calculations about 16 years ago.. I did not include the inflation factor either. I agree that you will in all possibility , especialy if you are in a position to set aside and invest the SS income that you will find that it is benefial. Cal

When figuring this out, don't forget to consider your taxable income and the affect it has on the portion (if any) of your SS benefits that may be taxed at age 62-65 and also beyond age 65. If you are in a high tax bracket now you could be giving a good chunk of your 'early' SS money back to the government because a large portion of it could be subject to income tax.

The same thing goes for your SS payments after 70 1/2 when you have to start taking required minimum distributions (RMD) from your IRA. If your IRA is large, the RMD's could also bump you into a high tax bracket having the same effect on your SS taxes.

Before I made the decision to receive SS early at 62 I worked all of these numbers on a spread sheet. I am a believer in the old saying that a bird in the hand is worth two in the bush and my spread sheet told me that I wouldn't break even for many years if I waited till 65, so I elected to take SS early, but the break even point was nowhere near age

It's a moving number because interest rates change, SS COLA increases, other income and estimated tax rates are all unknowns.

The article is here;

Well, ALL of my IRA money would be taxed, so if only a portion of part of my income (SS) is subject to tax, isn't this a good thing? Also, we have never been in a high tax bracket - we have enjoyed life rather than working our fingers to the bone 60+ hours a week.

My Traditional IRA is money I expect to run out before age 70-1/2. Both of us have Roths, so RMDs do not come into this.

Elizabeth Richardson

If I read the article right, he puts the break even point at 14 years which is right about where I figured it. Of course to gain any benefit from deferring, one must live that long. In theory he is correct in the long term, but when I made my decision I figured having the extra money now from SS and not having to touch my IRA would allow me to spend the extra money while I am still young enough to enjoy it rather than have more money later when I would be too old to enjoy it, if I should live that long. (All assuming that SS will still exist as we know it 14 years from now).

My feelings exactly. AND I am doing it NOW.... Cal Lester CLU

I don't believe there is a "one size fits all" answer.

I did some calculations for myself (wife is six years younger) -- and I don't recall all the details now, but if I lived into my 80's I'd get more SS money over my lifetime by deferring. My dad died in his late 80's and mom is going strong at 87

However, in order to defer I'd have to be withdrawing money from my IRA's. I have both Roth and conventional. Once I took my target earnings for those funds into account, it made much more financial sense to take the money early. So I started at 62.

For others, it may not make as much sense, depending on the source of alternate funds (if needed), and their health status, expected longevity, etc.

--ron

"Cal" wrote Ernie wrote

Makes sense to me. I see E. Richardson's posts here comments similarly about not working so hard and saving so much for one's much older years, when one, for health reasons probably, is less likely to be able to enjoy spending the money. Helps me justify my big bucks spending for dental services, simultaneous to weekly ski outings, too, lately. Ya only live once. :-)

Though gosh knows what will happen to Social Security by the time I am eligible for withdrawals. (I being 40-something.)