I dont normally follow Ramseys advice but in this case he makes sense.
How much money can you earn by working if you are collecting social security?
As much as you want. But, if you take your S/S before your full retirement age ‘fra’ (65-67, depending on your birth year), S/S will withhold $1 from your benefit for every $2 earned over $22,320/year until your fra. That amount is adjusted annually, and is only wages (probably w2 and 1099 earnings) and does not include investment income, pensions, annuities and other non-wage income.
My wife and retired at 52, and had no intention of working again, so we knew what had been contributed to S/S by us and our employers long before age 62. Before 62, I did a fairly detailed analysis of the present value of the s/s payment streams starting at each age from 62 to 70 and ending at our standard expected life from s/s mortality tables (at age 62, the predicted life span is to 83-84). The present value of each of those streams were surprisingly similar and generally indicated that if you die prior to your expected life, it is financially better to have started early and if you live past that date, it is better to have taken s/s later. We both started at age 62.
My husband started collecting SS at full retirement age and I planned to do the same. Then it occurred to me that if I took SS earlier they wouldn’t be deducting Medicare premiums for a few years and if I invested that SS income instead of spending it the investment income would help to offset the penalty for taking it early. In addition if I outlived my husband, which I did, I would not be getting that lower payment for the rest of my life because as a widow I would have the choice of receiving SS benefits based on either my record or what my deceased husband had been receiving.
Every situation is different but this decision worked out well for us.
Im not sure I agree with this…
I believe each year you don’t take SS you get around an 8% increase in payments. This is a risk-adjusted 8% gain in income, like a dividend increase from a stock portfolio. Even if you invest your SS in the market, most experts are predicting lower returns than we have had the previous decade.
Where is the other Jim2 from CH to run an analysis when we need him?
We won’t need our SS income at all for retirement, so we plan to take it t 67 and just pass it along via annual gifts to our kids. Of course, we still have 15 more years before we even get there…
I think everyone’s situation is different and thus will require a different logic and result in a different decision.
Depending on how much money one has saved, whether the individual can work, how enjoyable continuing to work would be, level of savings/investments, life expectancy (including familial factors), and a spouse’s income situation are all major factors influencing a decision here.
When I get there, I’ll make my best educated guess at 62 and not look back. I’m not planning on relying on S/S to live anyhow, so it won’t be worth stressing over or gnat’s-assing/second-guessing the fine details.
Lot of factors involved in making the decision - do you need the money, will you continue to work, how much S/S will be subject to income taxes (if your other income is over $25K single or $34K married, 85% of S/S is taxable), what’s your saving and investment philosophy, etc. It’s also not 8% a year.
At age 62 (if FRA is 67), you get 70% of the calculated FRA benefit. At age 63 75%, age 64 80%, age 65 86.7%, age 66 93.3%, age 67 100%, age 68 108%, age 69 116%, age 70 124%.
Men in my family don’t have a good record of longevity. It would suck to hold off to get a bigger check, only to die a couple of years later. As it is, I’ve have enjoyed 5 wonderful years and will enjoy every future year. And to reach the “break even” point, I’d be well into my 80’s.
Thats what nobody talks about. A strong argument for taking SS at 62 is tomorrow isnt guaranteed. Another argument is that $2000 a month at 62 could be worth more than $3000 at 70. At 62 youre healthy and traveling, for many folks age 70 is rocming chair time.
Hey @jimtoo dont you get the COLA on top of those numbers as well ? So if you wait an extra year, then the COLA increases the FRA amount and you get a higher percentage of that ?
There is an annual COLA that raises amounts paid out to recipients and, I think, future payment amounts even if one has not started but is 62 or older. I presumed it did when I did my analysis because I was concerned with the present value of the total amount to be paid out over time by the various alternatives, and not with the monthly amount.
I’m generally a very positive, optimistic person but for some reason when I turned 62 I decided to collect SS. I could see myself walking into the Social Security office on my 70th birthday to start collecting only to die as I opened the door!