When to take social security given the current situation.

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ctillotson's picture
ctillotson
Status: Member (Offline)
Joined: Sep 27 2011
Posts: 6
When to take social security given the current situation.

I am 60 years old.  My spouse (57) and I both will qualify for SS.  I have far out-earned my spouse so my SS payment will be higher.  My spouse is younger, of a very healthy lifestyle and has great genetics for longevity.  The conventional wisdom is for me to defer SS until I am 70 since when I die, my spouse will assume my level of payment.  Given the current sorry state of financial affairs in the USA as chronicled by Peak Prosperity, are we better off with me taking SS at 62 in the hope that we will at least get something? As an aside,  I have been somewhat successful so that if SS becomes means-tested, I would probably not fare well. Thank you.

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 864
SS Payout

ctillotson,

It all boils down to 3 general issues. First off, how long do you think you will live? Second, how long do you think SS will remain solvent? Third, since there are reductions in payouts the earlier you begin taking SS, will those expected amounts be sufficient for your lifestyle?

I wanted to have a rational basis for making the decision of when to begin taking SS. Although I wish it never were instituted in the first place, I was forced to contribute to it for my 42 years of gainful employment. It won't remain solvent if I decline payments; therefore, it isn't a moral issue for me to take it.

I wrote a simple spreadsheet with expected payouts VS age to see what was the most advantageous for my situation. Each year you delay taking SS, the payout increases; however, you collect for that many fewer years. This spreadsheet assumes no inflation and that you'd receive full benefits of $1,000 per year at age 66. (You can multiply the amounts by your specific benefit.) There are reductions for each year you retire earlier than age 66 and increases for each year you delay payments. The right half of the spreadsheet shows cumulative benefits. The green box shows the largest total payout for current age based on the year you began taking benefits. Since you are 60, if you and SS survive another 25 years, it would be best to wait until 70 to retire. If either you or SS terminate within the next 15 years, you'd be better off taking it as soon as you can.

Of course, there are many complicating factors in your situation. Can you work longer (emotionally, mentally, and physically?) Do you have better things to do? How much do you wish to leave for your wife should you die early? What if they change the rules of the game midstream? Only you can decide how to play it. I sincerely hope this helps in your decision making process.

Grover

ctillotson's picture
ctillotson
Status: Member (Offline)
Joined: Sep 27 2011
Posts: 6
Same

Many thanks Grover for your attention. Very helpful!  One thing I read recently was that even if SS is fazed out, it would be likely that those already on it or close to qualifying would be exempt.  

 

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 864
T4T

You are definitely welcome! Although the SS recipients may be exempt from cuts for a while, the whole federal debt issue is so large that it will eventually collapse the whole system. That's mathematics talking. When will it happen? I really don't know. Look at charts of projected outlays for SS and Medicare. Within a decade, those 2 entitlement programs will consume all the revenue currently being collected by the US government. Will we have enough "growth" or hidden inflation to keep kicking the can?

Politicians will do everything in their power to keep themselves in power. I suspect that SS and Medicare will turn into welfare programs. If you made the mistake of planning for retirement, you won't need (and won't get) government assistance. That will kick the can a bit further down the road. Eventually, that won't save their bacon.

So, ask yourself what happens after that? What will your world look like? What will you be able to do? Right now, there is still time to change your location so the future won't be so bleak when the inevitable arrives.

To me, the key is the basics. If there are limits on any of the basic necessities, there will be conflict. If you're in a small community that has enough water and food being grown in the local area to feed the local populace, there is a chance for cooperation. If either is in short supply, expect brutal competition until the population drops at least enough for the situation to be sustainable. The bigger the city and the poorer the natural resources surrounding that city, the worse it will be.

I'm a big fan of the Fourth Turning by Strauss and Howe. History shows that repititions occur about every 80-100 years. This one won't repeat exactly, but the underlying fundamentals will lead to similar outcomes. The self-centered Boomers will destroy the system. Then, they'll shift their outlook 180°. Instead of bragging about their homes, their cars, their vacations, etc. they'll start bragging about how little they need to survive. (Once the system is broken, there really won't be any other alternative.) Self-centered Boomers will continue to brag - just about other things. Other generations won't be able to understand our obsession, but it won't really matter to us. We won't do it for Gen-X. We'll do it for the Millennials - the generation that has been coddled throughout their lives and actually looks for guidance from elders.

That being said, your decision to take SS as soon as possible or to delay gratification a bit longer won't save the system. The inevitable will happen either way. Look at your finances, look at your prospects, decide what is important, make a decision, and let the chips fall where they may. That's what I did ... and I'm happy I did.

Grover

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