Social Security Withdrawal Questions

[My English Castle]

Hi Folks:
Yesterday in a chat with some old friends, two of them mentioned they're either already drawing Social Security or plan to well before their full retirement age. Both report their financial advisors think they should. With one, I understand it; although they're very well off, they have serious health concerns. But the other doesn't need the money to cover expenses, yet her advisor pretty much insisted on it.

I've always been taught that it's better to wait if possible. Have these guidelines changed? I was planning on waiting. My family has a good longevity record, and while the extra disposable income would be nice, we won't really "need" it.

Eager to hear your thoughts.

[kork13]

If you are in good health, have reasonable expectation for a lengthy retirement (family all lives into 90s+), and don't require the SS money to live off of, it makes the most sense to delay taking SS to maximize the long term payout. If the opposite is true (poor health, short life expectancy, or need the money to survive), then taking it early makes sense. The difference between taking SS early vs. FRA vs. delayed can be calculated, and assuming the money is invested decently, there can be a benefit to taking it early as well, at least until a break-even around age 75-80 (don't remember exactly) where the early draw + investment returns would provide you with more money overall compared to an on-time or delayed draw.

Alternatively, some people just have a visceral hatred for all things government controlled, and they simply want to get everything possible into their own control as quickly as possible. This becomes an emotional decision vs. a rational one... But a choice that is often made nonetheless.

[My English Castle]

Thanks Kork. Can you point me to one of these calculators.? I never like waiting, but my gut tells me to wait, at least for a while.

[Jluke]

Financial advisor most likely wants them to deposit the SS checks in the account they manage so they can charge them more money to manage their money (AUM of 1% usually)

[james.hendrickson]

Financial advisor most likely wants them to deposit the SS checks in the account they manage so they can charge them more money to manage their money (AUM of 1% usually)

Naturally.

[disneysteve]

Financial advisor most likely wants them to deposit the SS checks in the account they manage so they can charge them more money to manage their money (AUM of 1% usually)

Bingo!

[kork13]

Financial advisor most likely wants them to deposit the SS checks in the account they manage so they can charge them more money to manage their money (AUM of 1% usually)

Ah yes, how did I overlook the most obvious & scummy reason.... This is most certainly a distinct possibility as well.

[My English Castle]

That makes perfect sense! This same advisor also sold her an annuity which I have some qualms about. Thanks!

[Fishindude77]

If you expect long life, holding out on social security is money in the bank.
From time you are first eligible until it's maxed out at 70, it increases approx. 7% annually.

However if you are in poor health, have family history of short life, or just plain need the money, take it.

[Like2Plan]

Hi Folks:
Yesterday in a chat with some old friends, two of them mentioned they're either already drawing Social Security or plan to well before their full retirement age. Both report their financial advisors think they should. With one, I understand it; although they're very well off, they have serious health concerns. But the other doesn't need the money to cover expenses, yet her advisor pretty much insisted on it.

I've always been taught that it's better to wait if possible. Have these guidelines changed? I was planning on waiting. My family has a good longevity record, and while the extra disposable income would be nice, we won't really "need" it.

Eager to hear your thoughts.

There are a lot things to consider when claiming social security. Without an in depth analysis, it is hard to know for sure. You did mention that one friend was in poor health and the other one was female. Is she married? Does she have dependent children? If married, was she (is she) the high earner? Would she be claiming a survivor benefit or claiming on her own record? Was she divorced? It may not be a straight line decision.

There is software called "open social security" (it was written by Mike Piper: https://opensocialsecurity.com/about ) that you could do some modeling. If you go to the link, at the top of the page there is a box you can check that opens additional input options for more complex type situations ("Certain situations require additional input. Click here to select situation(s) that may apply to you (and/or your spouse, if filing jointly).")

https://opensocialsecurity.com/

The open social security calculator does require that you know the Primary Insurance Amount (PIA)--this would be what would be expected at your full retirement age.
If you want to know what all goes in to determining your PIA, you can go here: https://www.ssa.gov/oact/cola/piaformula.html

Or, you can go here for a benefit calculator

https://www.ssa.gov/benefits/retirement/estimator.html

[Petunia 100]

There are a lot things to consider when claiming social security. Without an in depth analysis, it is hard to know for sure. You did mention that one friend was in poor health and the other one was female. Is she married? Does she have dependent children? If married, was she (is she) the high earner? Would she be claiming a survivor benefit or claiming on her own record? Was she divorced? It may not be a straight line decision.

There is software called "open social security" (it was written by Mike Piper: https://opensocialsecurity.com/about ) that you could do some modeling. If you go to the link, at the top of the page there is a box you can check that opens additional input options for more complex type situations ("Certain situations require additional input. Click here to select situation(s) that may apply to you (and/or your spouse, if filing jointly).")

https://opensocialsecurity.com/

The open social security calculator does require that you know the Primary Insurance Amount (PIA)--this would be what would be expected at your full retirement age.
If you want to know what all goes in to determining your PIA, you can go here: https://www.ssa.gov/oact/cola/piaformula.html

Or, you can go here for a benefit calculator

https://www.ssa.gov/benefits/retirement/estimator.html

Mike Piper of White Coat Investor? Cool beans. Thank you for the link.

[Like2Plan]

Mike Piper of White Coat Investor? Cool beans. Thank you for the link.

I think he is actually the oblivious investor: " He is the author of nine financial books, as well as the popular blog "Oblivious Investor." "

[My English Castle]

The two friends are both women;one married, one divorced for a long time but with a partner. Neither have children. On advice in the blogs, I went to the Oblivious Investor. I can see the case on the married one in poor health. She and her husband have no children and both were pretty equally high earners. The divorced friend, I'm not so sure about--she's the one with the annuity,no kids. She's in excellent health.
The Oblivious Investor seems to indicate that it may've been a short-sighted decision for her. But I try to stay out of my friends' financial lives. We manage our money pretty differently.

[Like2Plan]

The two friends are both women;one married, one divorced for a long time but with a partner. Neither have children. On advice in the blogs, I went to the Oblivious Investor. I can see the case on the married one in poor health. She and her husband have no children and both were pretty equally high earners. The divorced friend, I'm not so sure about--she's the one with the annuity,no kids. She's in excellent health.
The Oblivious Investor seems to indicate that it may've been a short-sighted decision for her. But I try to stay out of my friends' financial lives. We manage our money pretty differently.

You most likely already know this, but for the folks who are looking over your shoulder ... In the case of a marriage (or divorce or in the case of a survivor), you also have to consider how the other partner's (or partners) earnings record(s) will impact the claiming strategy. Obviously, there are lots of intricate rules to navigate. So, let's say you are a widow (or widower), maybe it makes sense to claim a survivor benefit earlier in order to delay taking your own benefit until age 70.

For a married couple, it may make sense for the lower earning spouse to claim earlier on their own record while the higher earning spouse waits until 70 to claim preserving the higher benefit--again, no one size fits all.

https://www.ssa.gov/sf/FactSheets/WomenandSSrev1.pdf

https://www.ssa.gov/policy/docs/ssb/v72n1/v72n1p11.html

https://www.ssa.gov/benefits/retirement/planner/applying7.html

[Petunia 100]

I think he is actually the oblivious investor: " He is the author of nine financial books, as well as the popular blog "Oblivious Investor." "

Oh, OK. I read that, too.