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Why the Age at Which You Claim Social Security Benefits Might Not Matter

Scorpio

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#1
Why the Age at Which You Claim Social Security Benefits Might Not Matter
File for your federal retirement benefits at 62, 67, 70, or anywhere in between -- the Social Security formula is designed to even things out for the average person.



Katie Brockman
(TMFKatieBrockman)

Nov 18, 2019 at 7:47AM


There are a lot of opinions about what the best age is at which to claim Social Security benefits. Some experts advise waiting until age 70 so you can receive bigger checks each month, while others say it's best to claim early at 62 so you can start collecting and enjoying your benefits as soon as possible.
However, the age at which you begin taking Social Security benefits may not have as big of an impact on your retirement as you may think. In fact, it may not matter at all.

How much does age really matter?
The amount you'll receive from the Social Security program each month depends largely on two things: The average amount of money you made during the highest-earning 35 years of your working life, and the age you are when you file for benefits. To receive what the government defines as your "full" benefit, you'll need to wait to claim until your full retirement age (FRA). Your FRA depends on the year you were born: For those born in 1960 or later, it's 67; for those born prior to 1960, it's either 66 or 66 plus some number of months.
You can apply for benefits as early as age 62, but the earlier the claim, the smaller the size of the checks you'll receive. If you wait until after your FRA to file, you'll receive larger amounts each month. Based on that, it might seem at first glance as if waiting longer to start collecting benefits would naturally result in you getting more money out of the program in retirement, but that's not always the case.
The Social Security program's benefits formula was designed such that if you live to an average age, you'll end up collecting roughly the same in total benefits during your retirement regardless of when you start taking them. If you claim early, your checks will each be smaller, but you'll receive more of them. If you wait, your checks may be bigger, but you'll receive fewer of them.

To see how this plays out in practice, let's consider a hypothetical example. Say your FRA is 67, and based on your income over your career, you'd receive $1,500 per month in benefits if you file for them at that age. If you claim at 62, your checks will be reduced by 30%, leaving you with $1,050 per month. If you wait until you're 70, you'd receive 24% more per month or $1,860.
The average life expectancy in the U.S. today is 78.6 years old, according to the Centers for Disease Control and Prevention. So if you live until, say, age 80, here's what your total lifetime benefits would look like depending on what age you began claiming them:
Lifespan Total Lifetime Benefits When Claiming at 62 Total Lifetime Benefits When Claiming at 67 Total Lifetime Benefits When Claiming at 70 80 years $226,800 $234,000 $223,200
Source: Author's calculations
In this example, you might come out slightly ahead by waiting until 67 to claim. But you'll still only receive roughly $7,000 more over a lifetime than if you filed for benefits at 62, and that small difference may not be worth the wait. Then consider the $10,800 less you'd receive by waiting until 70 to file.

When it pays to aim for a certain age
So, if your lifespan is something close to average, it may not matter much when you file for Social Security. However, if you have reason to expect you'll live significantly longer or shorter than that average, you might benefit by timing your claim accordingly.
Although nobody can predict their exact lifespan, it's worth trying to estimate it as best you can. Take an honest look at your health situation, and weigh your family's medical history as well. If you're in shape and eating right, and your relatives have a habit of living into their 90s, it's probably safe to bet you'll have a longer-than-average lifespan. In that case, it might be a good idea to delay benefits past your FRA to earn those bigger checks. In the example above, living just 30 months longer would put you at the breakeven point relative to claiming at FRA, after which each larger check puts you ahead of the game.
On the other hand, if you're battling health issues or have other reasons to think its less likely you'll reach 79, it could be wise to file early, giving yourself more time to enjoy your retirement, and your money.
Keep in mind, though, that when picking an age at which to file, there are other important considerations beyond simply maximizing the total amount of cash you extract from Social Security.

For example, if you've built a health enough nest egg to do so, you might choose to claim early and get a head start on retirement. In addition, if you're married, there are strategies you and your spouse may want to take advantage of under which one of you claims early and the other does so later.
Choosing when to start taking your Social Security benefits is a big decision, but it's not quite as important as it sometimes gets made out to be. It may not make much of a difference at all in regards to how much you receive over the course of your retirement. But the more you know, the better a decision you'll be able to make.


The Motley Fool has a disclosure policy.


https://www.fool.com/retirement/2019/11/18/why-the-age-at-which-you-claim-social-security-ben.aspx
 

Uglytruth

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#2
 

ErrosionOfAccord

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#3
Interesting. It would be nice if you could start at 62 and not be penalized for continuing to work.

At 51, I really should be looking at this stuff closer. What is the penalty for continuing to work?
 

Scorpio

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#4
Your Guide to Working While Collecting Social Security
If you don't know the rules, working while receiving Social Security can result in less Social Security income and a bigger tax bill.



Todd Campbell
(TMFEBCapital)

Updated: Oct 26, 2017 at 11:11AM

Published: Apr 24, 2017 at 11:41AM

This article was updated on Oct. 20, 2017, and originally published on April 24, 2017.
If you're considering working even part-time while collecting Social Security in retirement, there are some important rules to follow. Why? Because if you earn too much money from work, Social Security could reduce your income and you could end up paying more in taxes on your Social Security benefits.
You could end up receiving less in benefits
A retired worker can only receive 100% of their Social Security benefit if they claim at their full retirement age. The full retirement age varies, and it depends on a person's birth year, but for people turning 62 in 2018, the full retirement age is 66 and four months.

If you claim benefits early (and many, many people do), then you receive less in Social Security income per month than if you had waited until your full retirement age to claim. Your monthly benefit is reduced by a fixed percentage for every month you claim prior to full retirement age and, overall, claiming early can result in monthly Social Security income that's up to 30% less than you'd receive at full retirement age.
If you do claim early and you decide to continue working, then the amount of your monthly Social Security benefit can be reduced even further.
In 2017, Social Security recipients who earn more than $16,920 will have $1 withheld for every $2 earned above that limit. Recipients who turn their full retirement age this year can earn up to $44,880, but their benefit is reduced by $1 for every $3 earned above this higher limit.
In 2018, the limits increase slightly. You can earn up to $17,040 without having your Social Security cut and if you turn full retirement age this year, you can earn up to $45,360 without a reduction.
If you're subject to a benefit reduction because of earnings, you should know that Social Security doesn't spread the reduction out over the course of the year. Instead, it doesn't send any monthly benefit payments until the reduction amount is covered.
For instance, let's say your monthly benefit is $600, or $7,200 per year, and you plan to earn $22,000, or $5,080 more than the limit in 2017. Social Security will withhold half that amount, or $2,540, so it won't send you any monthly checks until that amount is held back.
Because Social Security doesn't issue prorated checks, you wouldn't receive any Social Security income from January through May (five months multiplied by $600 per month = $3,000). The rest of your $600 checks would arrive every month as planned for the remainder of the year, and the extra $460 ($3,000-$2,540) withheld would be paid back to you next year.
It's also important to know that the money withheld by Social Security isn't being forfeited. Instead, any money held back by Social Security is added back into your benefit calculation, so it will increase your Social Security benefit when you reach full retirement age.
Remember, Social Security's income limit from work only applies if you're younger than your full retirement age. If you've already reached your full retirement age, then you can earn as much as you want without it reducing your benefit.
Also, the limit only applies to earnings from work, not income from other sources, such as investment earnings, pensions, or annuities. If you're self-employed, Social Security bases your income on your net earnings.
You could pay more in taxes
Working while receiving Social Security can also result in a bigger bill at tax time.
Many people won't pay any taxes on their Social Security income. However, about one-third of recipients do pay taxes on at least some of their Social Security, and if your earnings are high enough, taxes can be applied to up to 85% of your Social Security income.
The IRS determines how much of your Social Security to tax based on your adjusted income. One way to quickly see if you might be taxed on your Social Security income is to add one-half of your expected Social Security income to all of your other expected income, including tax-exempt interest.
If that amount totals more than $25,000 for an individual or $32,000 for a married couple in 2017, then at least some of your Social Security will be taxable. If it totals more than $34,000 for an individual or $44,000 for a married couple in 2017, then up to 85% of your Social Security may be taxable.

Tying it together
There are plenty of reasons to work in retirement, and not all of them are financial. But if you claim Social Security benefits early or you keep working while receiving benefits after reaching your full retirement age, then you ought to consider the impact earnings from work may have on your Social Security. At a minimum, doing so can help you plan a better budget.

The Motley Fool has a disclosure policy.


https://www.fool.com/investing/2017/04/24/your-guide-to-working-while-collecting-social-secu.aspx
 

TAEZZAR

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#5
I did the math for my benefits & it was better to take it at 62, as the break even point for me was, as I recall, 81 or 2, or about 20 years. Now that I am 77 & in pretty good health except for knees & hips, which really aren't life threatening, I think I will beat them at their game.
Isn't it just wonderful that gov. employees retire at an earlier age & much higher benefits than "We The People" that they work for, OR DO THEY ??? :don't    know2: :rage 1:rage 1:rage 1
 

TAEZZAR

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#6
Interesting. It would be nice if you could start at 62 and not be penalized for continuing to work.

At 51, I really should be looking at this stuff closer. What is the penalty for continuing to work?
EOA, if you owned your own biz. & were married, just get off the company payroll & pay your wife, problem solved & she will get some benefits. Now how did I know to do that ???????????
 

ErrosionOfAccord

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EOA, if you owned your own biz. & were married, just get off the company payroll & pay your wife, problem solved & she will get some benefits. Now how did I know to do that ???????????
Not a biz owner and divorced the 401kate nearly five years ago.
 

GOLDBRIX

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Interesting. It would be nice if you could start at 62 and not be penalized for continuing to work.
You can work, BUT once you hit a certain amount the SSA claws back $1.00 for every $2.00 over the number until you are 65-67. At which ever age you are required to reach the limit come off.
I do a little job as a school crossing / traffic control officer morning and quitin' time. I get enough money to pay for gasoline and running around a bit.
Two months ago I got a three dollar bump up in my SS Check for the added money to my SSA record for still working ( a little). Jus' Sayin'
 

tigerwillow1

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#10
The OP author strikes me as not too bright. First she says
In fact, it may not matter at all.
The explains at the end of the article why it matters if you're not "the average person", whoever the heck that is. She probably means somebody who expects an average lifespan.
 

TAEZZAR

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#11
Not a biz owner and divorced the 401kate nearly five years ago.
YUP, I recall that & I am sorry that it happened. I was there 30 years ago. Life does go on. :2 thumbs up:
 

Fatrat

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#12
Fun subject.
 

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#15
I don't understand these 'retire at 62 — it won't make any difference' statements. Why work at all if you despise working so much?

If you retire at 62 and start collecting SS, and your SS income is $1,050 a month, why can't you keep working instead and just live on $1,050 a month and buy silver with whats left of your salary for eight more years? Can't save money?

When you retire at 70 you'll have a pile of silver and a higher SS income; $1,860, almost double.

When your wife retires she will be able to draw on your higher SS income instead of the reduced one. And actuarials suggest the female human lives longer than the male.

BF
 
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DodgebyDave

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#16
I'm claiming as soon as I can
 

the_shootist

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Usury

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#19
I just read an article that suggests to fix the projected SS shortfalls that they’ll likely raise the retirement age, including the early age from 62 to 66.
 

keef

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#20
Thanks for reminding me! Uncle is sending me some of that fresh fiat tomorrow and I will be MIGGER RICH ONCE AGAIN!

Long live the Roman Empire!

I'm gonna blow it at the Chick-Fil-A at the MOA. I should be able to do an in/out with all the security guards they have posted down there.

Then I will tell you how good that new Fil-a samwich is for all you Caucasians who dread leaving ur 'safe spot'

Still won't venture into a Pop-Eyes. Hellll no. I want to live to see my next SS check.

Actually, I should blow it at some 'gentrified' steak house like "Murrays", same establishment since 1946, but I still like the thrill of a hunt before dining.

1574193866048.png


Thanks again, Scorp. Stay safe my good ole pal.

(Maybe I will fedx ya a take out at 'the silo' when y'all get tired of that MRE beef-a-roni)
 

Scorpio

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#22
Long live the Roman Empire!
my only goal in life remains to insure all you old f@#$@ are comfortable and happy

go get yourself a juicy lucy
 

keef

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#24
After seeing all these people on disability or immigrants who never paid in a dime collect; most of us just want to break even.

Fair enough. I once visited the SS office in Minneapolis. I was the only old white guy there who qualified for retirement.

The waiting room was FILLED WITH MUSLIM SOMALIS! The only other 'white' guys in the room were the pictures of Trump/Pence on the walls.

Fuggin Surreal. I don't want to piss ya off, but I feel like an asshat for working hard and paying in all those years expecting we would still have a country bro.

Oh, and I also noticed the local Masonic Lodge has a 'gold room'. those guys dont worry much about the SS problem.

Just had to see this shit for myself. Bout had enough.
 

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Scorpio

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Fuggin Surreal. I don't want to piss ya off, but I feel like an asshat for working hard and paying in all those years expecting we would still have a country bro.
that is exactly what frosts me about this 'system', and why I have been on the rampage about it,

it has went so far off the deepend ................ grrrrr you can shut up now scorp

standin' in line at a fleet farm, 'ole gal starts talking to me, don't know why, she just does

says she was standing in another line one day, and this gal in front of her was a bitchin' and carrying up a storm about how she wasn't able to buy certain stuff with her ebt. She told this gal that her taxes don't pay for her stuff, that ebt's are free from .gov. Never coming to grips where the dough comes from.

Although she did actually have a point. Anyway, this gal is a givin' me the story, and I am just a noddin' and hopin' this slave in front of me would get it figured out. Let's say I am not good in confined environments.
 

tigerwillow1

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#26
I just read an article that suggests to fix the projected SS shortfalls that they’ll likely raise the retirement age, including the early age from 62 to 66.
That's a responsible thing to do, so we'll never see it. Congress knows only how to concoct fiscally irresposible schemes that lift the urgency for a few years in trade for an even bigger mess after they're out of office.
 

GOLDBRIX

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I just read an article that suggests to fix the projected SS shortfalls that they’ll likely raise the retirement age, including the early age from 62 to 66.
Ponzi schemes must always be tweaked.
And then you got politicians that could not leave the money where it belong so they'd spend it and leave an I.O.U.
 

keef

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that is exactly what frosts me about this 'system', and why I have been on the rampage about it,

it has went so far off the deepend ................ grrrrr you can shut up now scorp

standin' in line at a fleet farm, 'ole gal starts talking to me, don't know why, she just does

says she was standing in another line one day, and this gal in front of her was a bitchin' and carrying up a storm about how she wasn't able to buy certain stuff with her ebt. She told this gal that her taxes don't pay for her stuff, that ebt's are free from .gov. Never coming to grips where the dough comes from.

Although she did actually have a point. Anyway, this gal is a givin' me the story, and I am just a noddin' and hopin' this slave in front of me would get it figured out. Let's say I am not good in confined environments.
I'm glad you are not here. I have become so jaded I could walk through a Fleet Farm today and hold the door for the EBT customer knowing she is about to be booted out of the DNA heard and hope she enjoys her candy canes or whatever tripe they throw to her while she is going down the tubes.

I see shit here they don't put on the Internet. But I am like George Carlin after he became jaded, "I'm just a spectator now."

Here, you will either learn tolerance or end up shooting up a walmart. Most of the 'men' are pathetic whimps.

Or they are rich guys in suits that prance around like royality

"Patience of a saint" hahahahahah. But I also have witnessed revivalist rednecks blow through town and don't want any part of them either.



But how many times have niggers threatened to knock me out or kill me right on the street? (all bullshit - if you have any backbone they back down) The dumbasses you often see on the Internet are all easy prey and these predators know that. You can't 'fake it' here.

But now I'm ready, I have had my boot camp, for the next decade when things really go to shit. Won't be here to see it.

2020-2030
 

sandblaster

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#29
I just went down to file a couple of hours ago. Went in, got my number and waited over an hour to be called. Got to the desk and gave her my ID and SS card, she punched in some things and said someone will contact you with an appointment time to come back and file. This has been an expensive day and nothing accomplished.
 

EO 11110

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#30
Not that simple. If the SS recipient has current income, a traditional IRA, or factors in spouse benefits, taking SS early can lead to the losses being large and near.
i was talking apples to apples. of course you can introduce oranges and pineapples to make the outcomes better/worse for each choice

and you are incorrect -- there are no losses near for the 62, large or small. those large near losses are all for the wait-ers

62 wins for MANY years before wait can catch up - and not unlikely it will never catch up
 
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Scorpio

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#31
she punched in some things and said someone will contact you with an appointment time to come back and file. This has been an expensive day and nothing accomplished.
this is so a unqualified dunce with a low iq can 'instruct' you on the various options open to you

they are leeches on the system, so maybe they can give you some pointers on how to join them
 

EO 11110

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#32
few know this about working and 'earning too much' when taking ss early. it increases your later checks

https://www.fidelity.com/viewpoints/retirement/social-security-and-working

Once you reach your FRA, the Social Security Administration (SSA) will look at the number of months of Social Security benefits that you were reduced due to the earnings test. They add that number of months to the age when you started Social Security, resulting in a later (older) retirement age for their records, and a resulting higher benefit going forward.

For example, if you retired at 62 and your FRA was 66, and the earnings test reduced your Social Security during those 4 years by 50%, then at FRA the SSA would add 50% of those 4 years to your original retirement age, resulting in a new retirement age for their records of 64, and a corresponding higher benefit going forward.
 

keef

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#33
this is so a unqualified dunce with a low iq can 'instruct' you on the various options open to you

they are leeches on the system, so maybe they can give you some pointers on how to join them
Come to MN. You don't even have to speak ENGLISH. Make sure you are wearing ur Habib and act like you own the place.

They might even pay ya for cab fare. Just don't sit by the pictures of Trump/Pence even though that is the only seat you will find unoccupied.
 

sandblaster

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#34
this is so a unqualified dunce with a low iq can 'instruct' you on the various options open to you

they are leeches on the system, so maybe they can give you some pointers on how to join them
It's more like a jobs program someone came with to waste money. Should be a ten minute ordeal, start to finish.
 

ErrosionOfAccord

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#35
few know this about working and 'earning too much' when taking ss early. it increases your later checks

https://www.fidelity.com/viewpoints/retirement/social-security-and-working

Once you reach your FRA, the Social Security Administration (SSA) will look at the number of months of Social Security benefits that you were reduced due to the earnings test. They add that number of months to the age when you started Social Security, resulting in a later (older) retirement age for their records, and a resulting higher benefit going forward.

For example, if you retired at 62 and your FRA was 66, and the earnings test reduced your Social Security during those 4 years by 50%, then at FRA the SSA would add 50% of those 4 years to your original retirement age, resulting in a new retirement age for their records of 64, and a corresponding higher benefit going forward.
My father is seven figures well off. Just a blue collar guy who, with my mom, managed to scrimp n save. Much to my chagrin, in adolescence, you never saw my brother or I wearing the under armor of the 70’s and 80’s. They paid the house off in their 40’s. As with many, they had bigger lives after the kids were gone but it wasn’t until the last decade that the I badgered them into going to the islands. They loved it, btw.

Dad had a financial guy from his 40’s on. Marc is the son of a guy who dad worked with. Marc did them right imho. I’ll have to get the specifics but despite the old man making better than $30 an hour Marc had him take the SS early. Dad kept working and I kept asking him why. I knew he didn’t need to. He said, if I quit working I’ll sit in that “computer chair” and rot.

He finally retired at 70. At the time he was ground maintenance at the now defunct gaseous diffusion plant. Out cutting trees, weedeating mowing grass and tending fences. It was government contract work but it kept him busy. You know pre-break, break, post-break kind of mentality. It hadn’t always been that way though, most of his career was millwrighting and then water management. I think he told me they could pump 100,000 gallon a minute if some atoms decided to go critical.

He enjoyed retirement for about three years before the stroke and he did indeed sit in that “computer chair and rot”. Today he has pneumonia. The other day he fell and broke his arm. I’ve asked a couple of times if he was satisfied that he survived and he always says yes but I think he is lying when he says it.

I suppose I was a little pissed that he kept working. I thought he ought to enjoy what he had earned. In the end it might have killed him to retire. I’ll talk to them this weekend to see what’s up. Hopefully I’ll remember to ask them how this SS thin went down.
 

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#36
My father is seven figures well off. Just a blue collar guy who, with my mom, managed to scrimp n save. Much to my chagrin, in adolescence, you never saw my brother or I wearing the under armor of the 70’s and 80’s. They paid the house off in their 40’s. As with many, they had bigger lives after the kids were gone but it wasn’t until the last decade that the I badgered them into going to the islands. They loved it, btw.

Dad had a financial guy from his 40’s on. Marc is the son of a guy who dad worked with. Marc did them right imho. I’ll have to get the specifics but despite the old man making better than $30 an hour Marc had him take the SS early. Dad kept working and I kept asking him why. I knew he didn’t need to. He said, if I quit working I’ll sit in that “computer chair” and rot.

He finally retired at 70. At the time he was ground maintenance at the now defunct gaseous diffusion plant. Out cutting trees, weedeating mowing grass and tending fences. It was government contract work but it kept him busy. You know pre-break, break, post-break kind of mentality. It hadn’t always been that way though, most of his career was millwrighting and then water management. I think he told me they could pump 100,000 gallon a minute if some atoms decided to go critical.

He enjoyed retirement for about three years before the stroke and he did indeed sit in that “computer chair and rot”. Today he has pneumonia. The other day he fell and broke his arm. I’ve asked a couple of times if he was satisfied that he survived and he always says yes but I think he is lying when he says it.

I suppose I was a little pissed that he kept working. I thought he ought to enjoy what he had earned. In the end it might have killed him to retire. I’ll talk to them this weekend to see what’s up. Hopefully I’ll remember to ask them how this SS thin went down.
Sorry to hear about your dad's health. He did what he thought was right whether it was or not.
 

ErrosionOfAccord

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#37
Thanks but, I was telling the story for educational purposes. It is what it is. We all have or had parents to lose. It’s the nature of the game.

I’m often accused of being too much like Spock. I try to avoid telling stories like the one above or visiting threads with such stories. It’s not that I don’t care so much as it is that there ain’t a damned thing I can do about it.
 

hammerhead

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#38
Thanks but, I was telling the story for educational purposes. It is what it is. We all have or had parents to lose. It’s the nature of the game.

I’m often accused of being too much like Spock. I try to avoid telling stories like the one above or visiting threads with such stories. It’s not that I don’t care so much as it is that there ain’t a damned thing I can do about it.
my kids feel the same way about me. They try to set me straight and I love them for it but I ams what I ams. So there. Thhhhpppp.
 

tigerwillow1

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#39
there are no losses near for the 62, large or small. those large near losses are all for the wait-ers

62 wins for MANY years before wait can catch up - and not unlikely it will never catch up
Let me throw a pineapple on the wall and see if it sticks.
Married couple, income of $20k, age 66 FRA benefit $32k, benefit of $24k started at age 62 $24k. None of the SS is income taxed.
Throw in a 20k traditional IRA withdrawal, and 85% of the SS income is taxed. In 10% bracket, $2,040 is lost, that wouldn't have been by delaying SS.
This is a short term loss. Yes, there's still a breakeven point to wait for, it's just sooner when the tax traps are avoided. If this couple waited for age 70 to claim, the monthly benefit would be $42,240, with up to $16,320 saved in past taxes if they are able to drain the IRA before claiming SS.

And throwing an orange on the wall:
The wage earner's spouse can collect the amount of the deceased wage earner's benefit. Say the wage earner lives to age 72. A big loss for him if he waited to age 70 to take the benefit. But what if the surviving spouse lives to 90? The benefit would be $42k per year, vs. $24k if the wage earner started collecting at age 62. With a couple you need to calculate the breakeven point using joint life expectancy data, which makes the odds of waiting look a lot better.
 

Scorpio

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#40
which makes the odds of waiting look a lot better.
Of course it is,

actuarials are quite busy gaming the system against the slave,

their job is to get you to collect as little as possible prior to going 10 toes up, or in a doggy bag
their job is to minimize liability, as that is dough that can be spent making sure pedo's run wild, or 8 yr olds get properly trained to be future transvestites

the law of averages is in their favor, the dealers favor, unless you skew it by living too damn long,
which of course, when that becomes a problem, they either extract from you another way or exterminate you

after all, its only numbers