Making an early social security claim when you have other assets to spend down

[gamb00ler]

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[gamb00ler]

2 hours ago, mania said:

 

It is funny at times... The Pro wait till your 70 crowd talk about luck & yet they also need the luck ????

 

Actually many who use fear based scenarios to decide when to accept SS are the ones who need the treatment.

That they also like to label their fears financially sophisticated & those who do not agree with them as naive is the need for another type of treatment ????

"There is no such thing as luck. There is only adequate or inadequate preparation to cope with a statistical universe."

“Money problems can always be solved by a man not frightened by them. ” 

- R.H.

[mania]

48 minutes ago, gamb00ler said:

"There is no such thing as luck. There is only adequate or inadequate preparation to cope with a statistical universe."

“Money problems can always be solved by a man not frightened by them. ” 

- R.H.

Yeah yeah ???? Call it what you like

 

If a person waits till 70 for SS then dies at 72 that is bad luck in most folks mind

 

Perhaps you rather call it ironic? ????

 

 

[Rocking Robert]

On 7/19/2019 at 6:33 AM, partington said:

I'm english, living in the UK, and so have free healthcare, so this is not a consideration for me (and my main reason for deciding not to retire in the US!)

 

(I'm participating here because I worked in the US long enough to get a very handy $1200 per month SS payment which I started to claim the very first month I was eligible.

 

I agree this may not be wise for people in different situations.  I am lucky in that I have two other pensions starting in a few years time, plus enough savings to survive for about 30 more years in the absence of any pensions at all, plus no spouse, so I admit my situation is far from typical.)

If u worked long enough to get SS you also paid into Medicare. It’s not free you paid for it

[Uptooyoo]

12 hours ago, Jingthing said:

Currently it is not that.
You need a minimum number of work credits to be eligible for dollar one of an elder claim.
Your benefit goes up to a maximum based on your earnings and there is a cap on payments for high earners.
Some changes and or cuts may be made in future.
When and what are TBD.
Personally I don't believe there is much chance of benefit cuts for people already about age 50 when any changes might be made. That's how they do.

Sent from my Lenovo A7020a48 using Thailand Forum - Thaivisa mobile app
 

Not currently, but there's been talk in political circles of "means testing" for Social Security.

[Uptooyoo]

On 7/21/2019 at 1:30 AM, Jingthing said:

The obvious flaw with that point is that you will probably need to spend more to get personal care if you're disabled. It reminds me of health care costs in the U.S. Consider the high percentage spent on end of life phase. Sure if you're there you might want the help but there's all that money spent at the point of your life with the worst quality of life. In the long run, you can't win. 

If you don't have anything, you qualify for gov't assistance. If you have savings they'll take it all in just a few years anyway, then you'll be in the same boat as those who saved nothing. My grandpa paid a little over $5000/month living in an depressing assisted-care facility, sitting in a room with a wheelchair and computer, spending almost all of what he had saved before he died at 97. My ex-wifes grandmother, who had nothing except for her house, had to put it another's name to qualify for assistance when she was diagnosed with lung cancer and had to go into hospice. And you are right, no one wins in the end.....we eventually lose it all and disintegrate back into the cosmos.

[gamb00ler]

9 hours ago, mania said:

Yeah yeah ???? Call it what you like

 

If a person waits till 70 for SS then dies at 72 that is bad luck in most folks mind

 

Perhaps you rather call it ironic? ????

 

"There is no such thing as luck. There is only adequate or inadequate preparation to cope with a statistical universe."

“Money problems can always be solved by a man not frightened by them. ” 

- R.H.

 

My post was in no way meant to be a criticism of your contributions to this thread.

I just like those quotes from sci-fi books I read 40-50 years ago.

 

You're not a sci-fi fan?  R.H. is Robert Heinlein one of the best of an older generation of sci-fi writers.  I think you're a tad too young to be one of his fans.

[Jingthing]

4 hours ago, Uptooyoo said:

If you don't have anything, you qualify for gov't assistance. If you have savings they'll take it all in just a few years anyway, then you'll be in the same boat as those who saved nothing. My grandpa paid a little over $5000/month living in an depressing assisted-care facility, sitting in a room with a wheelchair and computer, spending almost all of what he had saved before he died at 97. My ex-wifes grandmother, who had nothing except for her house, had to put it another's name to qualify for assistance when she was diagnosed with lung cancer and had to go into hospice. And you are right, no one wins in the end.....we eventually lose it all and disintegrate back into the cosmos.

Yes that is more or less true that many people that had significant assets are eventually forced to spend it down so then they may qualify for government help. I don't know all the current details on that and I'm sure many people play games with that, but in such cases if you get to that point I'm not really sure it would make much difference when you started your S.S. claim.

[mania]

11 hours ago, gamb00ler said:

"There is no such thing as luck. There is only adequate or inadequate preparation to cope with a statistical universe."

“Money problems can always be solved by a man not frightened by them. ” 

- R.H.

 

My post was in no way meant to be a criticism of your contributions to this thread.

I just like those quotes from sci-fi books I read 40-50 years ago.

 

You're not a sci-fi fan?  R.H. is Robert Heinlein one of the best of an older generation of sci-fi writers.  I think you're a tad too young to be one of his fans.

 

Thanks & yes I know you were not criticizing that is why I had all the smileys in my post ????

 

I also agreed with the 2nd line & was basically saying the same......“Money problems can always be solved by a man not frightened by them. ” 

 

Will be 63 this year but must admit I am not a sci fi fan ....  Did like Outer limits & twilight zone as a kid though ????

[gk10002000]

12 hours ago, Jingthing said:

Yes that is more or less true that many people that had significant assets are eventually forced to spend it down so then they may qualify for government help. I don't know all the current details on that and I'm sure many people play games with that, but in such cases if you get to that point I'm not really sure it would make much difference when you started your S.S. claim.

Even Obamacare is literally free, while waiting for Medicare at age 65 (I am 62+) as long as you make around $30,000 in MAGI.  Basically, I am being induced to really retire this year.

[gk10002000]

23 hours ago, gamb00ler said:

"There is no such thing as luck. There is only adequate or inadequate preparation to cope with a statistical universe."

“Money problems can always be solved by a man not frightened by them. ” 

- R.H.

Loved RH.  The Methuselah stories about the long lives were great.

[partington]

On 7/21/2019 at 9:50 PM, Rocking Robert said:

If u worked long enough to get SS you also paid into Medicare. It’s not free you paid for it

? I'm not eligible for Medicare, as I do not live in the US and am neither a US citizen nor a Green card holder.

I don't get treated in the US, but in the UK, where I live, by the UK National Health service.

 

Medical care in the UK is available to all  long term residents of the UK irrespective of any taxes or contributions  an individual may or may not have made. In this sense it is "free".

 

However any Medicare contributions I might have made are now I suppose paying for US citizens, so, you're welcome.

[Gumballl]

4 hours ago, partington said:

? I'm not eligible for Medicare, as I do not live in the US and am neither a US citizen nor a Green card holder.

I don't get treated in the US, but in the UK, where I live, by the UK National Health service.

 

Medical care in the UK is available to all  long term residents of the UK irrespective of any taxes or contributions  an individual may or may not have made. In this sense it is "free".

 

However any Medicare contributions I might have made are now I suppose paying for US citizens, so, you're welcome.

Thank you for your contributions. You are correct, monies that are paid today towards SS and medicare are used as payouts to current recipients. Some day when I retire, current tax payers will be funding me. If god forbid I too have to continue paying taxes (due to high retirement income), then I will consider it as a reduction in benefits.

[tjo o tjim]

You can “afford” to delay taking SS if you have sufficient other savings.  If this is the case, then waiting is always the smarter decision, as it makes for an insurance policy.  I would say the savings should be more than 10x (ideally 13-20x) your annual budget personally.  If the savings has a positive return, all the better.

 

If that is not the case, it comes down to what you spend relative to your savings and relative to what your reduced SS payment would be.  If you can actually “save” some of your SS payments at the reduced level because of your low cost of living, materially building your savings then it isn’t a terrible thing.  

 

If you are spending all of your SS payments and your savings don’t grow, you are in for trouble later.

 

If you are spending all of your SS payments, plus spending some of your savings, you are in trouble now.  You need to undo the early retirement and find some income to slow things down.

 

But in the end, we can’t predict what will happen tomorrow.  You are just trying to work for the best chance of a positive outcome.

[Jingthing]

3 hours ago, tjo o tjim said:

You can “afford” to delay taking SS if you have sufficient other savings.  If this is the case, then waiting is always the smarter decision, as it makes for an insurance policy.  I would say the savings should be more than 10x (ideally 13-20x) your annual budget personally.  If the savings has a positive return, all the better.

 

If that is not the case, it comes down to what you spend relative to your savings and relative to what your reduced SS payment would be.  If you can actually “save” some of your SS payments at the reduced level because of your low cost of living, materially building your savings then it isn’t a terrible thing.  

 

If you are spending all of your SS payments and your savings don’t grow, you are in for trouble later.

 

If you are spending all of your SS payments, plus spending some of your savings, you are in trouble now.  You need to undo the early retirement and find some income to slow things down.

 

But in the end, we can’t predict what will happen tomorrow.  You are just trying to work for the best chance of a positive outcome.

That all sounds so oddly specific. Did you come up with these guidelines yourself or if not, what was your source.

 

Look, believe it or not, I get the concept. Taking savings and buying a virtual "annuity" by delaying a claim is a really, really good deal, because it's a high return and it's guaranteed. 

 

There would be no ambiguity to such decisions in the abstract, but in the real world in real lives there are reasons for people not to want to spend down their savings in exchange for that, such as thinking about life span and the benefits of holding on to that money.

 

Not sure you're correct that taking a conservative amount out of retirement savings, say 3 percent, is particularly risky even if you're spending all of your S.S. benefit. The idea for most people unless they're focused on leaving a big legacy is to not run out of money before they run out of life, rather than dying with a large pot of money that they worked and invested hard for, that they never get to spend.

[Skallywag]

23 hours ago, Jingthing said:

Taking savings and buying a virtual "annuity" by delaying a claim is a really, really good deal, because it's a high return and it's guaranteed. 

What is a virtual annuity and what percent is the "high return...guaranteed"?  

 

The way I look at is is SS will pay me approx. $1500 a month at age 62 (coming up in 8 months for me).

If I wait until 66 I will get a little over $2000.

So the break even point is a bit after age 76

My 401K is doing well - earning good interest, why should I dip into that? If I wait 4 more years to collect SS I will have to fairly significantly.

 

Trusting that the U.S. government/ Congress will not change things during those 4 years from age 62 to age 66 is another reason:  

• This school of though holds that a bird (or a benefit) in the hand is worth two in the bush. The theory goes that you should take every dollar as soon as you can because Social Security retirement benefits (at current levels) may not continue much longer. This concept is based on a fear that Congress will scale back benefits to shore up the system's funding.

[Jingthing]

Well the guaranteed return is the annual (actually calculated monthly I think) increase in benefit for however long you delay making a claim starting at the earliest possible claim date, 62.

 

Personally I think people over 50 and definitely 60 shouldn't worry about cuts.

Yeah the "break even" for longevity is usually calculated about age 78 but if you say 76 not much difference.

 

Obviously the issue is that lots of people make the mistake of greatly underestimating their longevity. So take the claim early and it's going to hurt if you make it to 90.

 

A fatalistic thought I have about that is that if you are underfunded, there is a greater chance your longevity is going to be reduced because of that.

 

As far as thinking you can beat it with investments, well, that's easier. Shorter term it may seem so, longer term historically you generally won't. 

 

But I totally relate to your desire to not eat up your nest egg too quickly while you are younger. That was powerful in my decision even though I realize the benefit of the high annual future return (if you live long enough to really benefit from it). 

 

 

[keemapoot]

6 minutes ago, Jingthing said:

Personally I think people over 50 and definitely 60 shouldn't worry about cuts.

What's your reasoning for thinking this group will be excluded from the possible (probable?) 25% cut to benefits that may happen? Are you thinking these age groups are high turnout voters and they will make their unhappiness felt at the voting booth or something else?

[Jingthing]

6 minutes ago, keemapoot said:

What's your reasoning for thinking this group will be excluded from the possible (probable?) 25% cut to benefits that may happen? Are you thinking these age groups are high turnout voters and they will make their unhappiness felt at the voting booth or something else?

Yes and also governments throughout the world including the U.S. tend to shield older people from major changes in retirement pension systems with the idea that younger people have more time to plan for the new harsh reality. 

I think it's very low risk of a major change for older people. Nothing is no risk but I think that fear is a poor reason to take an early claim. That's my opinion anyway. 

[keemapoot]

1 minute ago, Jingthing said:

Yes and also governments throughout the world including the U.S. tend to shield older people from major changes in retirement pension systems with the idea that younger people have more time to plan for the new harsh reality. 

I think it's very low risk of a major change for older people. Nothing is no risk but I think that fear is a poor reason to take an early claim. That's my opinion anyway. 

I agree that fear is the absolutely wrong reason to take an early claim. You should always wait until later if possible because once you go to a fixed income there is no going back, and should benefits get cut, a lot of people will be in big trouble who took it early and got reduced amounts. I would also be willing to bet that few of those who draw down early actually invest that money - I'll bet they use it for living expenses.

 

But...there is that risk that they will reduce benefits for those of all ages, or find some other tiered way of reducing benefits.

[TallGuyJohninBKK]

On 7/20/2019 at 9:12 AM, Jingthing said:

You can do anything you want with the money but that would be a bad reason to take it early, just to bank it.

Many people in recent years are doing something similar. They are talking it early without needing it and putting that money in the stock market. They feel they can beat the stock market compared to the built in increases by delaying starting the claim.

Well by recent stock market history they can, but longer term, they can't. 

 

If I remember right, the last time I read up on this topic, the financial benefit of delaying starting to take Social Security works out to about an 8% or so gain for each year of delay past one's Full Retirement Age up to one's maximum benefit age. And of course, at least under the current system, those increases are guaranteed by formula -- unlike the stock market.

 

Assuming I could afford to wait, I'd be happy to earn that kind of guaranteed annual gain on my Social Security investment. And for that portion of my financial portfolio, not having to worry about the ups and downs of stock market returns, and not having to worry about my principal being at risk.

 

Only have to worry about the prospect of dying unexpectedly before my time, and the prospect that the federal government in the future, facing today's ballooning federal deficits, might start monkeying around with the current Social Security benefits system for older people and even potentially then-current SS recipients. 

 

https://www.fidelity.com/viewpoints/retirement/social-security-at-62

 

Quote

 

If you start taking Social Security at age 62, rather than waiting until your full retirement age (FRA), you can expect up to a 30% reduction in monthly benefits with lesser reductions as you approach FRA. Remember, FRA is no longer age 65. It now ranges from 66 to 67, depending on your date of birth 

...........

For every year you delay past your FRA, you get an 8% increase in your benefit. That could be at least a 24% higher monthly benefit if you delay claiming until age 70. But, make sure to evaluate your decision based on how much you've saved for retirement, your other sources of income in retirement, and your expectations for longevity.

 

 

[TallGuyJohninBKK]

On 7/20/2019 at 7:22 PM, Uptooyoo said:

Yes, you'll have a bigger monthly check, but will you spend it if you're bound to a wheelchair?

 

Speaking as someone who's had elderly parents end up in wheelchairs and worse, you'll likely need the higher income even more as someone in that conditions, because of the expenses involved with caregivers and other support needs for those who can't fully care for themselves.

[TallGuyJohninBKK]

On 7/21/2019 at 2:19 AM, gamb00ler said:

 

IMPORTANT>> If you're still working, create a ROTH IRA right now to get the earliest possible creation date to start the important required 5 year aging as soon as possible.

 

That's also true because once you retire and presumably no longer have any EARNED income like salary (investment earnings are not considered EARNED income), you're no longer eligible to contribute new money to a Roth IRA. But you are eligible and can still convert money from balances in a regular IRA into an already existing Roth IRA.

 

[Jingthing]

I agree that the buying an annuity with an excellent guaranteed annual return is the very best analogy for the concept of spending down savings to delay beginning a S.S. claim.

Yet I continue to have a problem with the most purist mainstream financial advice that you should never consider life span (unless you know for a fact that you have a terminal disease). 

 

Here is another analogy that might illustrate my point.

 

Spending down your savings to buy real estate for cash. For people living abroad, if they do buy real estate (usually to live in with capital appreciation being a secondary consideration) it is mostly for cash.

 

So for that cash, like buying an annuity, they are locking in a housing cost and are receiving an annual return in not having to pay for rent. Over time in most markets more often than not the rents would eventually go up (but for expats exchange rates are another big X factor but let's forget that for now). 

 

Is not AGE a very important factor in such decisions?

 

I think it's massively important.

 

Say you move abroad at age 40 or 50 with intentions at least to live permanently in your new country.

 

Or perhaps age 62?

 

Or perhaps age 70?

 

Or perhaps age 80?

 

Consider the DIFFERENCE between those decisions based on age. Assuming you would legally be allowed to live in the housing (another X factor we can ignore for this exercise because in a country like Thailand you have no such assurances). 

 

In my opinion and I think arguably objectively for anyone, the OLDER you get, the LESS sense it makes to spend down a large amount of your saved CASH to buy housing. 

 

At age 40 or 50 almost a no brainer.

 

At age 80, are you insane?

At age 62, I think it's a GREY AREA. That's already getting up there. Do you really want to spend down a large amount of your savings for the benefits (return of not needing to pay rent and locking in presumably a lower housing cost going forward)?

 

I can see how this relates to the social security claim decision in cases where delaying it would mean spending down a significant amount of your saved cash. Where it turns out considering your AGE and life span actually are key factors.

 

Am I wrong about that? Is so, why? 

[mania]

On 7/25/2019 at 7:06 PM, Jingthing said:

At age 62, I think it's a GREY AREA. That's already getting up there. Do you really want to spend down a large amount of your savings for the benefits (return of not needing to pay rent and locking in presumably a lower housing cost going forward)?

 

I can see how this relates to the social security claim decision in cases where delaying it would mean spending down a significant amount of your saved cash. Where it turns out considering your AGE and life span actually are key factors.

 

Am I wrong about that? Is so, why? 

 

If you can I would spend to lock in the security of knowing that expense if fixed & I will never be forced out due to many factors....rent increase/landlord selling etc

 

Also even at 62 you may have 30+ years left & who is to say in 10 years you may again get itchy feet & if you rented that 10 years of rent is gone

If you bought you may not only get something back but profit from it too.

 

Also as LB mentioned earlier if you spend on housing it will not be counted against you should you later need govt assistance in various forms.

Otherwise those same programs look at your income/SS what ever BEFORE paying rent

 

But really no right or wrong answer do what feels right to your situation

[Dcheech]

 

You can debate this forever. You can also debate whether conservatives will finally close down Social Security and Medicare in the next decade.
 

I’m not going to dig it up, although I have saved it to my retirement folder. There is a paper/study floating around, written by a guy who used to work for Money Magazine, that recommends taking it at 62. Across the board.
 

Think of it this way. If you wait tell your 66 say to take you SS benefits and you die at 64, you have a problem. This paper statistically shows you that you are better taking it immediately. That has nothing to do with higher payouts, other investments, taxes, rentals,etc etc., that are always dragged out. No, it has to do with how long people live. Just that plain brutal fact.

 

I have two years before I am taking mine. My working life has been under the assumption that Republicans will destroy it, so I in no way expected it to be here, and I planned around that fact. As such I will earmark my SS for my beer and pizza fund. If I live that long that is. And I am hopeful. 

[mrwebb8825]

I've been looking at this also. If I claim at 62 it would take me until age 74 to hit the "break even" point in total amount collected vs waiting until age 66 and 10 months (latest info from SS office in Manila) If I created a foreign currency account and had all benefits paid directly into it and kept working until I was 65 that would be 3 yrs of benefits collected and not being used which would be quite a chunk of change. Also, in a foreign currency account the money market fluctuations would have no immediate effect.

I recently stopped drinking (only ever drank beer) but I still smoke and have for the last 50 yrs so I really don't think I'll live to see 80 even if I quit today so my concern is the amount of medical benefit I can claim from the US while living in Thailand. If it's zero then there's no reason not to claim early to stock up for the wife.

If the medical benefits all kick in when I claim then that's another argument for claiming early. If no medical benefits can be claimed while living abroad then that too is a reason to start stock piling cash early.

IF, by waiting, I can claim full medical benefits while living here then that's a strong argument to wait until FRA.

I have no assets in the states but will gain small amounts of inheritance as my parents pass but that will be lump sum payments and not enough to change my tax bracket. (probably around 1 million baht)

[Jingthing]

On ‎7‎/‎30‎/‎2019 at 5:16 PM, Dcheech said:

 

You can debate this forever. You can also debate whether conservatives will finally close down Social Security and Medicare in the next decade.
 

I’m not going to dig it up, although I have saved it to my retirement folder. There is a paper/study floating around, written by a guy who used to work for Money Magazine, that recommends taking it at 62. Across the board.
 

Think of it this way. If you wait tell your 66 say to take you SS benefits and you die at 64, you have a problem. This paper statistically shows you that you are better taking it immediately. That has nothing to do with higher payouts, other investments, taxes, rentals,etc etc., that are always dragged out. No, it has to do with how long people live. Just that plain brutal fact.

 

I have two years before I am taking mine. My working life has been under the assumption that Republicans will destroy it, so I in no way expected it to be here, and I planned around that fact. As such I will earmark my SS for my beer and pizza fund. If I live that long that is. And I am hopeful. 

I don't pay much attention to the doom and gloom forecasts on the future of social security if you're already over 50. But especially not if you're over 60. Changes that may come are much more likely to be designed in a way to hit younger people harder. Not saying that's fair, but it's politics. Also the rationale is they have more time to plan for the new reality.

But of course as always these decisions are personal!

[Jingthing]

5 hours ago, mrwebb8825 said:

I've been looking at this also. If I claim at 62 it would take me until age 74 to hit the "break even" point in total amount collected vs waiting until age 66 and 10 months (latest info from SS office in Manila) If I created a foreign currency account and had all benefits paid directly into it and kept working until I was 65 that would be 3 yrs of benefits collected and not being used which would be quite a chunk of change. Also, in a foreign currency account the money market fluctuations would have no immediate effect.

I recently stopped drinking (only ever drank beer) but I still smoke and have for the last 50 yrs so I really don't think I'll live to see 80 even if I quit today so my concern is the amount of medical benefit I can claim from the US while living in Thailand. If it's zero then there's no reason not to claim early to stock up for the wife.

If the medical benefits all kick in when I claim then that's another argument for claiming early. If no medical benefits can be claimed while living abroad then that too is a reason to start stock piling cash early.

IF, by waiting, I can claim full medical benefits while living here then that's a strong argument to wait until FRA.

I have no assets in the states but will gain small amounts of inheritance as my parents pass but that will be lump sum payments and not enough to change my tax bracket. (probably around 1 million baht)

I think the break even is actually about age 78. I looked at some charts on this. For people currently 62, at age 78 half will be dead. Do you feel lucky? What's the definition of lucky in this context? (Ha ha.)

[Jingthing]

I am now going to post this which I think is really worth reading. It makes a very strong argument to DELAY THE CLAIM. I have my own reasons for claiming early, but I can't really know at this point whether that's going to turn out to be a big mistake yet. But for others considering the options, by all means really think about it.

 

Note the advise specific to social security claim timing is later in the article. But a focus in the article on tactics for withdrawing retirement savings is also of course very important. 

 

https://www.cnbc.com/2018/01/23/stanford-center-on-longevity-calls-this-the-best-retirement-strategy.html

 

Quote

 

Stanford analyzed 292 retirement strategies—here’s what its experts determined is best

 

When you’re ready to retire, how can you be sure you’ll have enough money to last? And what’s the best way to withdraw your savings over the years?