US. income tax after retirement.

[sirineou]

I should have started thinking about this earlier in life, but here I am. 

I will be turning 62 next month and was thinking about retiring in the next few months and applying to receive Social Security (SS)  benefits. (I know there are is a three month waiting period).

I started reading about SS   and if I understood what I read correctly , when receiving SS income , anything up to 32k usd you pay  0% tax (married ,filing jointly) . From 32k-  44k  50% !!!!!, so if I understand this correctly after 32k on the next 12k I will pay 50% or 6k in taxes?  and then on anything over 44k I will pay 85% tax?

I must have misunderstood, this can't be right.

I  will have income other than SS (Union Pension, Annuity, rental income, wife makes pretty good money) 

If I applied for SS I will be receiving a litle less than $1,500 per month at age 62. Is it even worth applying for SS if it will put me in a 50-85% tax bracket, for 18,000 per year?  

I can't be understanding this right. If any of you who are collecting SS could enlighten me I would appreciate it, 

Thank you all in advance.

[timendres]

You are absolutely correct: https://www.ssa.gov/planners/taxes.html

 

So, it makes sense to delay taking your SS benefits, which only means they will be worth more later, if and when you really require them.

[ubonjoe]

Not correct according to that webpage.

"You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an "individual" and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
• file a joint return, and you and your spouse have a combined income* that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits may be taxable."

[TGIR]

There is not specific tax on your Social Security income.  The figures refer to the amount of benefit you received that will be subject to tax on your 1040.  If you have other income and don't need to take Social Security now it is probably wise to wait.  There will be a significant increase in the amount you receive by waiting.....approximately six percent a year.  

 

A more important thing to pay attention to is your Medicare Part B and Drugs, part D.  If you don't take them when your are 65 there will be significant penalties that last the rest of your life when and if you do take them.  I learned that lesson having to retire from health problems when I was 63.  I didn't take Medicare Part B or Part D because I was living in Thailand and never planned to return to the U.S.  As it happened I moved back for three years and needed to sign up for Medicare Part B and the drug part D.  The penalties for taking them late were severe.......and will never go away.  

 

 

[gamb00ler]

Months ago, I spent a couple of days using TurboTax Home&Business version to do some tax planning.

One of the things I wanted to learn is the level of income where US federal income tax begins to accrue.

 

After adjusting the various types of income and observing the resultant tax owed, I arrived at the following scenario:

- senior married couple filing jointly

- approx. $300/mo taxable interest income

- approx. $200/mo capital gains

- approx. $100/mo dividend income ( 50% qualified)

- approx. $1,500/mo withdrawal from IRA/401(k)

- approx. $1,900/mo SS income

 

Total adjusted gross income (none of SS taxable) for this scenario was $29,200 with $0 tax owed (using 2018 tax law).  I can't remember if I used inflation adjusted values for standard deductions, etc.

 

I found TurboTax to be an incredibly useful tool for tax planning.  I ended up making a tax plan for the next 15 years.  Of course it can all fly out the window after the next federal election.   But it only took a few hours once I got the hang of changing the various incomes and looking at the tax owed for each scenario.

 

Edited May 19, 2019 by gamb00ler

[GinBoy2]

30 minutes ago, ubonjoe said:

Not correct according to that webpage.

"You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an "individual" and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
• file a joint return, and you and your spouse have a combined income* that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits may be taxable."

I think that is the crux, the OP is misunderstanding the amount that is taxable, versus the tax rate

Edited May 19, 2019 by GinBoy2

[sirineou]

7 minutes ago, ubonjoe said:

Not correct according to that webpage.

"You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an "individual" and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
• file a joint return, and you and your spouse have a combined income* that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits may be taxable."

Ok, So I think I now understand.

 for up to 32k I pay no tax

for over 32k and up to 44k 50% of my SS income is taxed at the appropriate tax bracket which is about 12% 

 

Then for over 44k combined income 85% of my SS income would be taxed at my tax rate and since my combined income will not be over 77k it should remain at 12%

After the 12% of tax on SS income I will also have to pay tax on the additional amount in my combined income.

If I understood this correctly , then it is not so bad, I should calm down and put the Pitchfork away LOL

 

[sirineou]

27 minutes ago, GinBoy2 said:

I think that is the crux, the OP is misunderstanding the amount that is taxable, versus the tax rate

Yes indeed

I thought  SS would be taxed at 50% (embarrassed) 

I now understand that it is 50% of the SS income that would be taxed at my particular tax rate which seems to be 12%

so  18000x50%= 9,000x12%=1,080 about, there might be other variables that could make it a litle more ot a litle less. 

 

 

Edited May 19, 2019 by sirineou

[GinBoy2]

10 minutes ago, sirineou said:

Yes indeed

I thought  SS would be taxed at 50% (embarrassed) 

I now understand that it is 50% of the SS income that would be taxed at my particular tax rate which seems to be 12%

so  18000x50%= 9,000x12%=1,080 about, there might be other variables that could make it a litle more ot a litle less. 

 

 

It happens to the best of us, so don't feel bad.

[gk10002000]

7 hours ago, sirineou said:

Ok, So I think I now understand.

 for up to 32k I pay no tax

for over 32k and up to 44k 50% of my SS income is taxed at the appropriate tax bracket which is about 12% 

 

Then for over 44k combined income 85% of my SS income would be taxed at my tax rate and since my combined income will not be over 77k it should remain at 12%

After the 12% of tax on SS income I will also have to pay tax on the additional amount in my combined income.

If I understood this correctly , then it is not so bad, I should calm down and put the Pitchfork away LOL

 

yes, getting SS benefits does not put you in the 85 per cent overall tax bracket as you first asked about.  Depending on your overall Adjusted Gross Income AGI, actually MAGI which adds in even tax free income such as from municipal bonds, more of your social security tax may be subject to taxation at whatever tax bracket you are in.  Note that MAGI thing.  Which is a reason to have a ROTH or maybe convert some of your 401 k or traditional IRA monies to a ROTH before you start taking social security.  It becomes all about juggling income and overall tax bracket rate

[gk10002000]

9 hours ago, timendres said:

You are absolutely correct: https://www.ssa.gov/planners/taxes.html

 J

So, it makes sense to delay taking your SS benefits, which only means they will be worth more later, if and when you really require them.

The SS benefits increase about 8 per cent every year you wait past 62.  So depending on your income and needs, it may be beneficial to delay taking SS.  I just turned 62 myself but am still working and even when I stop working after this year, I will still delay taking SS for a few years.  My main reasons are as follows.

1:  The SS benefit increases about 8 % each year. That's a pretty decent return.

2.  I don't need the income at this time as I have other passive income coming in

3.  I want a few years where I am in a lower tax bracket then when I was working because I am going to convert my traditional IRA monies that I dodged taxes on while I was making 150 k a year and convert those while I am showing about 50 k a year.  And all those years I dodged paying high fed taxes on my 401k  monies I also dodged paying state income taxes.  The nice thing about retirement is I don't need to try and save much money, so that is not in the budget and I can easily live on 50 k a year or about 4000 USD.  Plenty of cash flow to enjoy 6 months a year in Thailand and Florida and Southern California.  Then in a few years start the SS benefit.  My starting benefit is coincidentally right now at 2000 a  month which is just about what is needed for the Retirement extensions in Thailand.

Edited May 19, 2019 by gk10002000
change

[sirineou]

16 minutes ago, gk10002000 said:

The SS benefits increase about 8 per cent every year you wait past 62.  So depending on your income and needs, it may be beneficial to delay taking SS.  I just turned 62 myself but am still working and even when I stop working after this year, I will still delay taking SS for a few years.  My main reasons are as follows.

1:  The SS benefit increases about 8 % each year. That's a pretty decent return.

2.  I don't need the income at this time as I have other passive income coming in

3.  I want a few years where I am in a lower tax bracket then when I was working because I am going to convert my traditional IRA monies that I dodged taxes on while I was making 150 k a year and convert those while I am showing about 50 k a year.  And all those years I dodged paying high fed taxes on my 401k  monies I also dodged paying state income taxes.  The nice thing about retirement is I don't need to try and save much money, so that is not in the budget and I can easily live on 50 k a month or about 4000 USD.  Plenty of cash flow to enjoy 6 months a year in Thailand and Florida and Southern California.  Then in a few years start the SS benefit.  My starting benefit is coincidentally right now at 2000 a  month which is just about what is needed for the Retirement extensions in Thailand.

Thank you for that advice ,

I certainly will think about all this.

Since I asked this question I have used this day researching the Issue, though I am not yet certain of what is the best way to go, and certainly need to study the issue more, some advisers have a different take on the issue than you.

They say that regardless of when you start SS on the average everyone will get the same amount in the end.

Less at 62 but three year longer

more at 65 but three years less,

A point that was made is that though my SS will die with me, 

My retirement account will not, So it might be best to live on income that will die with me if I can afford it, such my SS and pension, and leave my annuity along  for my wife after I die. 

Another option that was presented to me was that I take a reduced amount  of my work pension and my wife keeps it for life, but I don't trust this option because unions are under attack in the US and I don't know how long my union pension fund will be fully funded,, It is insured but only at 60% so I think it is better to get it now while the getting is good.

Anyway a lot to think about.

Thanks again.

[Number 6]

The future of social security does not bode well. Unless you've a specific reason to put off the benefit, I'd take it. Even then it's dicey. I don't see how it can survive without a drop or hold in benefits as well as helicopter money + inflation. From what I've read those that postpone benefits don't end up with all that much more if any money. Then you have the issue of death before you take your benefit. I had a very wealthy aunt who must have paid a Kings ransom into SSI. Took her benefit at 70. At 71 diagnosed with terminal cervical cancer. Another aunt took benefit at 62. Died at 73 from lung cancer. Jus sayin.

[GinBoy2]

5 hours ago, Number 6 said:

The future of social security does not bode well. Unless you've a specific reason to put off the benefit, I'd take it. Even then it's dicey. I don't see how it can survive without a drop or hold in benefits as well as helicopter money + inflation. From what I've read those that postpone benefits don't end up with all that much more if any money. Then you have the issue of death before you take your benefit. I had a very wealthy aunt who must have paid a Kings ransom into SSI. Took her benefit at 70. At 71 diagnosed with terminal cervical cancer. Another aunt took benefit at 62. Died at 73 from lung cancer. Jus sayin.

I've had a similar discussion with myself about this. 

 

My Dad lived to 89, yet my Mom was dead at 66 after a botched hip replacement, it's really roll the dice time

 

I'm thinking 64 is a good compromise age. I worked it out at 64 I'd get $150 less a month than if I waited to 66.

I can live with that

Edited May 20, 2019 by GinBoy2

[Number 6]

Just my 2 satang, the hip replacement doctors love $$$. Old folks just never quite recover - from the surgery. Two relatives also died after hip replacements.

 

I think I'd read recently 10,000 Americans retire each day - boomers. They're going to have to inflate the money supply. Especially if Dems grab control of Congress.

 

All bits of paper.

 

 

[gk10002000]

10 hours ago, GinBoy2 said:

I've had a similar discussion with myself about this. 

 

My Dad lived to 89, yet my Mom was dead at 66 after a botched hip replacement, it's really roll the dice time

 

I'm thinking 64 is a good compromise age. I worked it out at 64 I'd get $150 less a month than if I waited to 66.

I can live with that

Yes.  There is no perfect answer as much depends on things not in our control.  The key to me, in my particular situation being single, and no attachments is the tax bracket, IRA conversions, my own passive income, etc.  Between the two extremes of taking it right at 62, or waiting until your full retirement age, well, neither is probably optimal, but the difference is not ginormous for most people.  So anything in the middle, depending on your individual situation is probably the best route.   The total payout comes out about the same unless one lives well past 80.  The social security guys and their actuarial analysts have that all laid out.  Now if one is married, has other retirement plans, or has to worry about transferring benefits on death, has joint social security from the spouse, etc. things can get more complicated. 

Edited May 20, 2019 by gk10002000
add

[cmarshall]

 

On 5/19/2019 at 10:00 PM, Number 6 said:

The future of social security does not bode well. Unless you've a specific reason to put off the benefit, I'd take it. Even then it's dicey. I don't see how it can survive without a drop or hold in benefits as well as helicopter money + inflation. From what I've read those that postpone benefits don't end up with all that much more if any money. Then you have the issue of death before you take your benefit. I had a very wealthy aunt who must have paid a Kings ransom into SSI. Took her benefit at 70. At 71 diagnosed with terminal cervical cancer. Another aunt took benefit at 62. Died at 73 from lung cancer. Jus sayin.

Wrong on every single point.  

 

SS has made every payment for the past 80+ years.  Under some scenarios of GDP growth (but not under other scenarios) the SS Trust Fund, which was setup to pay us baby boomers and for which the plan was always to spend it down completely, may be exhausted earlier than planned.  If there is a Democrat Congress and a Democrat president, they will just remove the cap on the payroll tax, which is currently $132,900/yr and that problem will be solved completely.  Other fixes are also possible.

 

Inflation in the US and around the world has been declining for forty years.  That could change at some point, but there is no sign of it.  Astute readers may have observed that the $1+ trillion of "helicopter" money that the Fed created out of thin air following 2008 never produced any increased inflation.  Maybe inflation is not always and everywhere a monetary phenomenon after all.  

 

SS is not an investment; it is an insurance program.  Our goal should not be to game the govt by guessing our date of death to maximize the payout.  For one thing, we don't generally know the date of death.  For another, if we guess wrong we end up old, probably sick, and broke, the very problem that the SS insurance program was set up to solve.  By delaying receiving benefits, we are effectively buying more of the best annuity on earth which means we and our surviving spouse will enjoy a higher income for the rest of our lives.  Being dead is dirt cheap.  At that point we won't need money anymore.  

 

I will soon be 70 and will be receiving my first SS payment.  I feel (and am) more secure knowing that my monthly benefit will be 132% of the benefit I would have received at age 62.  And I will not outlive my SS benefits.  If I were to die tomorrow, I wouldn't regret having the decision to delay, because the goal was to assure financial security and I have been financially secure since before age 62.

 

If you can't afford to fund your lifestyle otherwise, then you may have to take SS early.  If you can afford to wait, it is the best financial deal available to Americans.

[cmarshall]

10 hours ago, gk10002000 said:

The social security guys and their actuarial analysts have that all laid out.  Now if one is married, has other retirement plans, or has to worry about transferring benefits on death, has joint social security from the spouse, etc. things can get more complicated. 

Actually if you are married and your spouse is eligible to receive SS benefits on your earnings record, things get much simpler, not more complicated.  The difference between early, full retirement, and delayed retirement benefits is actuarially neutral only for unmarried recipients.  Since wives usually survive husbands and young wives still more frequently do, then there is a huge actuarial benefit to delaying: the wife's increased survivor benefit is essentially free.  

[Number 6]

17 hours ago, cmarshall said:

 

Wrong on every single point.  

 

SS has made every payment for the past 80+ years.  Under some scenarios of GDP growth (but not under other scenarios) the SS Trust Fund, which was setup to pay us baby boomers and for which the plan was always to spend it down completely, may be exhausted earlier than planned.  If there is a Democrat Congress and a Democrat president, they will just remove the cap on the payroll tax, which is currently $132,900/yr and that problem will be solved completely.  Other fixes are also possible.

 

Inflation in the US and around the world has been declining for forty years.  That could change at some point, but there is no sign of it.  Astute readers may have observed that the $1+ trillion of "helicopter" money that the Fed created out of thin air following 2008 never produced any increased inflation.  Maybe inflation is not always and everywhere a monetary phenomenon after all.  

 

SS is not an investment; it is an insurance program.  Our goal should not be to game the govt by guessing our date of death to maximize the payout.  For one thing, we don't generally know the date of death.  For another, if we guess wrong we end up old, probably sick, and broke, the very problem that the SS insurance program was set up to solve.  By delaying receiving benefits, we are effectively buying more of the best annuity on earth which means we and our surviving spouse will enjoy a higher income for the rest of our lives.  Being dead is dirt cheap.  At that point we won't need money anymore.  

 

I will soon be 70 and will be receiving my first SS payment.  I feel (and am) more secure knowing that my monthly benefit will be 132% of the benefit I would have received at age 62.  And I will not outlive my SS benefits.  If I were to die tomorrow, I wouldn't regret having the decision to delay, because the goal was to assure financial security and I have been financially secure since before age 62.

 

If you can't afford to fund your lifestyle otherwise, then you may have to take SS early.  If you can afford to wait, it is the best financial deal available to Americans.

 

Wrong on every point except all of them. Much of your wishful thinking is just that.

 

Just because something had occured in the past does not mean it will continue. It's the basis of every disclaimer of every portfolio tool in existence.

 

Remove the cap on a tax Congress will pay themselves and receive no benefit. Remove the cap on their constituents and the only people left paying taxes in the country. But the biggest chuckle, your dream of Dem House, Senate and Presidency.

 

There's a ton of inflation out there, the manner in which it's calculated publicly is not accurate. This is true for unemployment stats as well. Inflation is rife here as well. I vividly recall months ago a small loaf of bread b18 just yesterday at 711 it was b22.

 

Releasing trillions into the economy, fractional reserve, zero interest loans must debase a nation's currency. The dollar hasn't been weaker in years.

 

The economy, jobs, real incomes and wages for your SSI is based on. This is not "insurance" it's pay-go and a ponzi scheme. It has nothing to do with what you pay in but rather what others are paying in when you are being paid out. And, like so many underfunded private pensioners rely on, it's broke. How will they fix it? In my opinion more helicopter money.

 

For me, it's the question isn't funding lifestyle it's getting out what I paid in before the entire system collapses.

 

The entire world is absolutely crushed by debt. That debt must be paid. Wealthy people don't need and may even lose part or all of their SSI. They accumulate assets, only the plebs worry about SSI golden ticket. It will rain money, especially when what's going on in France crosses the pond.

 

Roubini, Rickards, Farber - Austrian economists.

[mania]

23 hours ago, cmarshall said:

If you can afford to wait, it is the best financial deal available to Americans.

 

This is what most folks say/think but is it?

 

Lets do a simple what if situation

(these are actual SS graduation amounts given the $823 start amount)

Lets say  recipient

A - Start collecting at age 62 = $823 a month

B - Start collecting at age 66 = $1117 a month

C - Start collecting at age 70 = $1444 a month

 

So if recipients lived till 75 years of age .....

A - collected $128,388

B - collected $120,636

C - collected $86,640

 

If recipients lived till 83 years of age....

A - collected $207,396

B - collected $227,868

C - collected $225,264

 

 

So all said & done recipient C who played the long wait game got what advantage over recipient A in actual $$$ ?

Looks like $225,264 - $207,396 = $17,868 yes?

 

But.... since recipient A  actually pulled in $79,008 before recipient C ever started collecting

$823 x 96 months

Can we ignore that $$ could have been used to invest/earn  all those years?

 

So I cannot say it is just a matter of can you afford to wait...Folks need to look at actual "what if" scenario

for themselves & decide if the risk/reward of waiting is valid.

 

 

Edited May 22, 2019 by mania

[cmarshall]

I am going to feel like shoveling sand into the wind explaining yet again.

 

Mr. Mania is doing a kind of break-even analysis, which is used to evaluate investments.  As I said earlier, SS is not an investment, but a special kind of insurance policy.  So, what is the difference?  In an investment we normally seek the highest return taking into account the risk involved.  Also, with an investment the return does not depend on the investor's being alive.  If he isn't alive, his heirs get the return, so it doesn't matter whether he is alive or not for purposes of analysis.  Let me explain why a break-even analysis is exactly the wrong tool to apply to SS.

 

Insurance is an entirely different kind of financial instrument with a different purpose.  In the case of insurance we are not trying to maximize return.  Instead we are facing a financial risk of loss that is too great for us to bear.  We therefore pay to transfer that risk to an insurance company.  So, for instance if we own a home, we insure it against loss from fire, not because it is particularly common for houses to burn down, but because if it were to burn down we would not be able to pay out of pocket to rebuild it or pay off the mortgage which we would still owe.  This is the crucial point.  We don't even try to estimate how likely a devastating fire would be; we only consider whether we could cover the resulting financial loss ourselves or not.

 

In doing our financial planning for old age we face another financial risk that is too large for us to bear ourselves: the cost of living longer than expected.  (A long life may be a wonderful thing in itself, but we are talking strictly about the increased cost of a long life which would be a considerable financial burden.)  The risk we cannot bear is that we run out of money.  If our life expectancy at birth is 78 years, perhaps we plan to draw down our investment portfolio by age 88, just to provide a margin of error, but then we wake up one day age 92.  Now we have hit the trifecta from hell: old, probably sick, and broke.  This is the worst possible outcome.  At that age we will not be able to recover on our own, because to do so would require assets which we don't have.

 

So, just as we pay a casualty insurance company to accept the risk to repay us the value of our house should it burn down, because the SS has to keep paying us even if we outlive all our peers.  So then, if we aren't flush at least we never go broke.  An annuity, of which SS is the very best type available, is the only financial asset that we cannot outlive.  No matter how shrewd an investor you imagine yourself to be, you can certainly run through your portfolio and still be above ground.

 

While SS is the best annuity available to Americans, bar none, you normally can't buy more of it even if you would like more.  The only way to do so is to earn Delayed Retirement Credits by delaying the start of your benefits anytime from age 62 until no later than age 70.  The cost to do so is steep.  You have to fund your lifestyle without any SS benefit until you decide to start.  Most people cannot afford to do that so they have to take benefits when they need to.  This discussion only applies to those who can afford to decide to wait.

 

There are at least two ways in which the break-even analysis fails when evaluating the decision to delay SS.  The most important is that we just don't know how long we will live.  The misguided break-even analysts step around this problem by making a simplifying assumption that they do know how long they will live.  They pick what sounds like a reasonable age to shuffle off this mortal coil and do an analysis as though they know how long they will live.  They thereby simplify the problem beyond recognition by eliminating the most crucial aspect of the problem.  Sure, if we knew the answer to that we could optimize with ease. But we don't.  I notice also that they always, like our friend Mr. Mania above, make assumptions that support their case.  So, Mr. Mania apparently considers survival until age 83 the practical outer limit of longevity.  However, if we consult the mortality tables that the SSA actually uses we see that at age 62, when the break-even types are so eager to start collecting SS early, the life expectancy is 82+ years.  That means that half of those who make it to 62 will make it 82+.  So, Mr. Mania has jiggered his numbers.  He hasn't fooled me, but he has apparently fooled himself.

 

If he ran his scenarios until age 102 or 104, the benefits of delaying SS would become still more apparent.  But the point is that picking any number is foolish when you can just transfer more of the risk to the SSA by buying more annuity, i.e. delaying.  But once again, this is only a decision for those who can afford to make it, not everyone.

 

The other way in which a break-even analysis fails when applied to an insurance problem is that we aren't looking for a return; we are looking to avoid a catastrophe.  So, when we buy fire insurance for the house and pay the premiums without ever collecting a nickel, because the house never caught on fire, we don't kick ourselves for having wasted all those premiums over the years.  We don' complain "If only I had had one small kitchen fire, I could have recouped all those premiums."  We paid for peace of mind not to lose the house and we didn't lose it. 

 

So, I will start collecting my SS at age 70 next month.  My monthly benefit will be $3185.  Had I started collection at age 62, it would have been $1809.  So my benefit has increased 76% by waiting.  Is that a lot?  Well, it's the difference between qualifying for a retirement visa on income or not, for one thing.

 

Even if I were single increasing my monthly income by 76% for as long as I live is a tremendous advantage.  The only way to get an income that I cannot outlive is from SS and the only way to buy more is to delay.  

 

If understanding the difference between insurance and investment is hopelessly above your pay grade and you are happy to insist that with break-even as your hammer every financial question is just another nail, then I can only wish you the best of luck.  The difference may not matter, but if it does, it may matter a lot.

Edited May 22, 2019 by cmarshall

[gamb00ler]

One more advantage of delaying SS is the improvement in life expectancy in the coming years.

Here's a quote from a reliable source:

"Life expectancy around the world has increased steadily for nearly 200 years.

During the nineteenth and early twentieth centuries, an increase in life expectancy was driven mainly by improvements in sanitation, housing, and education, causing a steady decline in early and mid-life mortality, which was chiefly due to infections. This trend continued with the development of vaccines and then antibiotics. By the latter half of the twentieth century, there was little room for further reduction in early and mid-life mortality. The continuing increase is due almost entirely to a new phenomenon: the decline in late-life mortality." © 2008 American Association for the Advancement of Science

[mania]

9 hours ago, cmarshall said:

I notice also that they always, like our friend Mr. Mania above, make assumptions that support their case.  So, Mr. Mania apparently considers survival until age 83 the practical outer limit of longevity.  However, if we consult the mortality tables that the SSA actually uses we see that at age 62, when the break-even types are so eager to start collecting SS early, the life expectancy is 82+ years.  That means that half of those who make it to 62 will make it 82+.  So, Mr. Mania has jiggered his numbers.  He hasn't fooled me, but he has apparently fooled himself.

 

If he ran his scenarios until age 102 or 104, the benefits of delaying SS would become still more apparent. 

 

555 ????

 

First off let me make clear I am not jiggering any numbers nor do I assume 83 the max age you can stretch the age out to any number results will hold about the same .

If recipients lived till age 102

A- collected $395,040.

B- collected $482,544

C-collected $554,496.

 

But I am not advocating anything ...all I am saying is each person needs to look at it & decide for themselves whether to wait as you did or take the money & use it even to invest as many who reach 62 have no bills left and home etc is paid off.

 

What I showed was a simple "what if" & recommend folks to do it for themselves.

Let me add one more what if.......

 

You said if you started at age 62 to collect your SS it would have been $1809. but you waited till 70 & now it is $3185

Congrats that is very good & as you say a large % increase

 

I see that & also ask what if you had taken that $1809 at 62?

Well I see that at age 70 it is a total of $173,664 that you did not take

 

Now your 70 & going to get $3185 ....again great congrats

But to be fair I would say $173,664 / $3185 = 54.5 months

 

So in my mind you are not making/collecting a SS dime till your 74.5 years old

But again this is a "what if" & how some look at it.

 

Again I am not swaying you or anyone but instead just saying folks look at things differently & depending on their personal

financial situation & financial skills will handle it differently. I also realize some look at it as a straight insurance policy & others do not.

 

Good luck to you & I hope you live a very long life

Edited May 22, 2019 by mania

[utalkin2me]

You guys are overthinking this. It is a scam so the govt can have money to loan and make more money for themselves. 

 

The govt does not care about anyone. That is the most obvious  thing in earth. There is data out there on the most effective healthcare systems. A single congressional hearing and some appropriations could solve all the problems and put the country on a trajectory to catch up. But, they do not care. You expect me to believe they actually care when they collect SS?! It is all about them, just like everything else is. 

[cmarshall]

6 hours ago, mania said:

 

First off let me make clear I am not jiggering any numbers nor do I assume 83 the max age you can stretch the age out to any number results will hold about the same .

If recipients lived till age 102

A- collected $395,040.

B- collected $482,544

C-collected $554,496.

 

But I am not advocating anything ...all I am saying is each person needs to look at it & decide for themselves whether to wait as you did or take the money & use it even to invest as many who reach 62 have no bills left and home etc is paid off.

 

What I showed was a simple "what if" & recommend folks to do it for themselves.

Let me add one more what if.......

 

You said if you started at age 62 to collect your SS it would have been $1809. but you waited till 70 & now it is $3185

Congrats that is very good & as you say a large % increase

 

I see that & also ask what if you had taken that $1809 at 62?

Well I see that at age 70 it is a total of $173,664 that you did not take

 

Now your 70 & going to get $3185 ....again great congrats

But to be fair I would say $173,664 / $3185 = 54.5 months

 

So in my mind you are not making/collecting a SS dime till your 74.5 years old

But again this is a "what if" & how some look at it.

 

Again I am not swaying you or anyone but instead just saying folks look at things differently & depending on their personal

financial situation & financial skills will handle it differently. I also realize some look at it as a straight insurance policy & others do not.

 

Good luck to you & I hope you live a very long life

 

Try to take the break-even analysis away from the financially unsophisticated is like trying to get a bone away from your dog.

 

You continue to jigger the numbers, to your own detriment.  And evidently grasping the difference between insurance and investment is indeed outside of your compass.

 

You jigger the numbers, as I pointed out in my previous post, by excluding the half of the retiree population aged 62 who will live beyond age 82.  Since you only consider the scenarios where the recipient will die before "breaking even" while excluding the half who would have come out ahead in your "break even" analysis.  So, plainly jiggered and in the direction of encouraging taking benefits earlier rather than later, however much you claim to be neutral.

 

But the break-even analysis even when it favors delaying is the wrong analysis, because it focuses people like you on trying win a bet with the government by guessing when you will die.  That's the "investment" perspective.  I am not interested in playing that game since I am unwilling to assume what I don't know.  The problem I want to solve is how not to outlive my assets so that I end up old and broke.  Here's the example that is conspicuously missing from your jiggered scenarios.  What about the guy who is 92 and has no other assets left?  What do you say to him if his monthly benefit is $1809?  Do you think he will regret then taking SS early?  Probably, since the difference between living on $1809/month and $3185/month, to use my numbers as an example, is huge.  

 

Perhaps you have never met a retiree who regretted taking SS early, but I have.

 

On the other hand, like the rest of the break-even crowd, you exhibit characteristic over-confidence in your investing ability.  When you suggest factoring in the gains from investing available by taking SS early, you, like the others, never seem to consider the possibility of investment losses.  Perhaps you didn't notice the 57% drop in the S&P 500 in 2008 or how the stock market failed to provide a positive return adjusted for inflation for about 15 years beginning in 1966.  Those periods were particularly crushing for retirees who don't have time to recover even if the market does.  

 

SS, by contrast, has about as good a guarantee, including adjustment for inflation, as can be found anywhere in the world.  

 

When I made my decision to delay I wasn't trying to outguess the government on my life span, I was trying to create the largest income stream possible that I cannot outlive so that I will not go broke.  If I were to die tomorrow it wouldn't matter since being dead is cheap and my wife will inherit my increased SS benefits for as long as she lives.  

 

People are certainly entitled to make any decision they wish even one based on misconception.  

[mania]

38 minutes ago, cmarshall said:

On the other hand, like the rest of the break-even crowd, you exhibit characteristic over-confidence in your investing ability. 

Hardly as I retired at 52 but that is not the point........

 

Look as I said before I have no numbers to jiggle

I have said these are "what if's" but the numbers are factual

 

I was not even fully "break even" comparing with you because if I was even at 74.5 your not even

as Mr 1809 a month was still getting another $97,686 during your 4.5 years of trying to "break even"

 

Break even? Bird in hand bird in bush??

Call it what you like it was never a preaching as you are doing here

Quote

People are certainly entitled to make any decision they wish even one based on misconception.  

 

It was a simple "what if" comparison

 

I have said before & will say again

One size does not fit all

 

Yes there are folks like your example of

" the guy who is 92 and has no other assets left?  "

Yes sorry for him I guess but again one size does not fit all

 

Some folks are completely debt free including owning properties to live on

at 62 with lifetime health care  taken care of ...they are not your guy at 92 are they?

Perhaps they too knew a thing or two??

 

Again Good luck to you & I hope you live a very long life

I think we're done here ????

Edited May 23, 2019 by mania

[cmarshall]

1 hour ago, mania said:

Hardly as I retired at 52 but that is not the point........

 

Look as I said before I have no numbers to jiggle

I have said these are "what if's" but the numbers are factual

 

I was not even fully "break even" comparing with you because if I was even at 74.5 your not even

as Mr 1809 a month was still getting another $97,686 during your 4.5 years of trying to "break even"

 

Break even? Bird in hand bird in bush??

Call it what you like it was never a preaching as you are doing here

 

It was a simple "what if" comparison

 

I have said before & will say again

One size does not fit all

 

Yes there are folks like your example of

" the guy who is 92 and has no other assets left?  "

Yes sorry for him I guess but again one size does not fit all

 

Some folks are completely debt free including owning properties to live on

at 62 with lifetime health care  taken care of ...they are not your guy at 92 are they?

Perhaps they too knew a thing or two??

 

Again Good luck to you & I hope you live a very long life

I think we're done here ????

Well, we're nearly done.

 

I identified one of the two groups for whom this discussion is not intended: those who cannot afford to delay.  I should also have been explicit that the other group for whom the discussion is not relevant: those rich enough that their SS benefits just don't matter for their future financial security.  I know people in the latter group, but I am not one of them.  

 

If you count yourself among the rich who just don't need their future SS benefits and can afford to make a casual bet with the government about how long you will live without putting your future security at risk if you lose, then you ought to have pointed this out rather than giving ill-conceived advice, disclaimers notwithstanding, to those for whom SS counts.  

 

Now, we're done.

 

 

 

Edited May 23, 2019 by cmarshall

[Berkshire]

On 5/19/2019 at 5:35 PM, timendres said:

You are absolutely correct: https://www.ssa.gov/planners/taxes.html

 

So, it makes sense to delay taking your SS benefits, which only means they will be worth more later, if and when you really require them.

Something else to consider....particularly for expats in Thailand.  My understanding is you can claim your children and receive extra SS funds.  So if a 62 year old manages to have young children, he/she can receive extra money for these kids up to the age of 18.  This would be one case where it's significantly more advantageous to claim at 62.   

[Thaidream]

19 hours ago, cmarshall said:

If understanding the difference between insurance and investment is hopelessly above your pay grade and you are happy to insist that with break-even as your hammer every financial question is just another nail, then I can only wish you the best of luck.  The difference may not matter, but if it does, it may matter a lot.

Thanks for providing a very professional explanation.

 

Social Security is complicated- one thing most people do not know is one can keep working -draw Social Security benefits- and each year have a recalculation of benefits which raises the monthly amount.

 

I first took reduced Social Security benefits at age 62 and was paid approximately $1200 per month. I continued to work. However, there is a limit each year of earnings one can work up until the first year of full SS. In my case age 66.  After a year of drawing SS- I was sent a letter indicating I was overpaid.  I  had already drawn almost $17,000 of benefits so SS stopped paying me and each month  subtracted $1200 until $17,000 was reached. I didn't pay them- they just did not pay me until the debt was paid.

 

I figured I was  in bad shape but since I was working I was able to live and save based on my salary. Also,Since I was working- SS was being deducted from my salary and sent to the system. I continued to work until almost 70.

 

What I came to realize is that:

 

-The $17,000 was an interest free loan

-Since I continued working- when I finally retired my SS  income had grown to $2100 per month and gets adjusted for  raises each year. 

-The downside was that I ended up paying extra taxes which I had not planned for. The IRS and I battled for years over proper withholding- very stressful.

 

Though I thought I did plan but I did not understand the real effect of  taking early SS- working- and taxes.  The thing that worked out well was that the years I was working past normal retirement were my highest income years.  It ended up OK but not because I had the right plan but pure luck.

 

The bottom line is that each person really needs to study their own situation; study  how taxes affect your situation ; study what monies you get at what age and if you don't understand- get a hold of someone who does and make an informed decision.

 

SS is very complex and the US tax law consists of about 75,000 pages of regulations and situations. The Internet does have websites that use a calculator to figure out if one has any tax liability on their SS.  In addition- the IRS 1040 instructions have a page in which one can figure out the same .  Best wishes tp all.

 

 

 

 

 

 

[sirineou]

A lot of different perspectives on the subject, many things I had not considered.

  I guess the crux of the problem is finding a good balance between guaranteeing enough funds to last you all your retirement life, and  retiring at a young enough age to enjoy retirement before you are too old to do anything.