What is the significance of SS full retirement age?

[John105]

If you were born 1960 or later, your FRA is 67.
You can start collecting SS at 62.
For every year you start before FRA you lose 8%.
That is permanent. You still get the COLA.
For every year you wait after FRA you get an extra 8%, up to 70.

If you start early, you will get more money until 80-81 yrs of age, after that you would get more by waiting until FRA or later.

I’m new to this as I only logged in this year to see what I “may” get.

It does seem that if you end up 84 and saying, darn I coulda gotten more if I had waited to 67, well, maybe that’s not really a problem. Or a good problem to have.

It’s almost this analogy…how do we know more about our cars, than the engineers who designed them. So what makes us think we can beat the actuaries? Seems the break even is on purpose where it is. And there is science to back the number up.

 

[Grumpyolman]

I’m new to this as I only logged in this year to see what I “may” get.

It does seem that if you end up 84 and saying, darn I coulda gotten more if I had waited to 67, well, maybe that’s not really a problem. Or a good problem to have.

It’s almost this analogy…how do we know more about our cars, than the engineers who designed them. So what makes us think we can beat the actuaries? Seems the break even is on purpose where it is. And there is science to back the number up.

You're assuming the actuaries are in charge of setting retirement age , THEY AREN"T!

 

[Grumpyolman]

Everything I read online says that if the surviving spouse is at or above their full retirement age when their spouse dies, the surviving spouse receives whatever benefit the deceased spouse was getting at the time of their death. I don't see anything that says the benefit is capped at the deceased spouses "full retirement age benefit". Can anyone provide a link where it says the benefit is capped?

Generally what ever the higher earning spouse was collecting at the time of their death , I believe the surviving spouse gets half that amount.

 

[4WD]

Don't do it. Always take the money as soon as you can.
Everyone I ever knew that tried to wait it out to get full benefits died before they hit the magic age.

Depends on how well set in retirement funds - many people face a steep drop in income post retirement …
(We call them Consultants )

 

[KJSmith]

It does seem that if you end up 84 and saying, darn I coulda gotten more if I had waited to 67, well, maybe that’s not really a problem. Or a good problem to have.

Everybody and his brother have a theory on when its best to start taking it.
If you tell me what day you are going to die, I can tell you what will give you the most money!!

Here is mine, can't remember where I read it.

If you have to have SS to live on, wait as long as possible to build your benefit.

If you don't have to have SS to live on, go ahead and take it.
Use that money to enjoy life while you still can.
Go to shows that you normally wouldn't.
Stay in nicer hotels. Take day trips.

In my case, I took SS and cut back on how much I draw from my IRA.

 

[ARCOgraphite]

Everything I read online says that if the surviving spouse is at or above their full retirement age when their spouse dies, the surviving spouse receives whatever benefit the deceased spouse was getting at the time of their death. I don't see anything that says the benefit is capped at the deceased spouses "full retirement age benefit". Can anyone provide a link where it says the benefit is capped?

I strongly recommend you go to SSA.gov and read up - It's a good, useful site.

If the Surviving spouse is collecting benefits and their benefit higher than the deceased - the survivor is entitled to nothing additional on or past their FRA. If the surviving spouse is not yet collecting and not at FRA, I do not know the calculation.

from a recent AARP article:

Social Security will not combine a late spouse's benefit and your own and pay you both. When you are eligible for two benefits, such as a survivor benefit and a retirement payment, Social Security doesn’t add them together but rather pays you the higher of the two amounts.
If that’s the retirement benefit, then the retirement benefit is all you’ll get. If the survivor benefit is higher, Social Security pays the retirement benefit first and tops it up to match the amount of the survivor benefit.


Full AARP article:

https://www.aarp.org/retirement/soc...n person at your local Social Security office.

 

[GON]

Great thread, lots of very helpful/ beneficial replies.

I have not been able to figure out when to take SS. My default course of action is to wait until I am age 70- which essentially equates to not making a decision. I plan to work full time until age 70. My Wife is 62, I am 60. My Wife likely has a very small SS entitlement. I suspect I may be at or near max SS entitlement.

 

[ARCOgraphite]

Everybody and his brother have a theory on when its best to start taking it.
If you tell me what day you are going to die, I can tell you what will give you the most money!!

Here is mine, can't remember where I read it.

If you have to have SS to live on, wait as long as possible to build your benefit.

If you don't have to have SS to live on, go ahead and take it.
Use that money to enjoy life while you still can.
Go to shows that you normally wouldn't.
Stay in nicer hotels. Take day trips.

In my case, I took SS and cut back on how much I draw from my IRA.

I waited just a scant year and a half past my FRA to collect and even at that, It will now take more than 10 years to make up the $63,000.00 I left on the table just to get an extra 470 dollars a month. I wouldnt collect at 62, but I would not wait till I am 68 either - unless your are working up to your FRA.

Remember also that you will be forced to withdrawal SIGNIFICANT amount of funds from your Traditional IRA or Rollover IRA
annually when you hit the Required Minimum Distribution age. My wife and I will be required to take out almost 60,000 a year and we would typically need only 20K of that. This can lead to massive taxes owed - Oh yes, you can owe substantial taxes in retirement if you are milking your IRA's to live on - and even if you are not once you are past ~ age 73.

A lot of stuff to consider - taxes can eat up all those % earnings you have working hard to achieve

- Arco

RMD Table (from SmartAsset)

How can you figure out how much you need to take out based on the above table? Here’s how to do the calculation:

1- Figure out the balance of your IRA account.

2- Find your age on the table and note the distribution period number.

3- Divide the total balance of your account by the distribution period. This is your required minimum distribution.

 

[ChrisMU]

This is an interesting subject that I’ve been thinking about a lot lately. I know laws and workplace policies can change a lot in 18-20 years (I’m almost 42), but the way things are now, my workplace will let me retire at 60 and I’ll get my retirement benefits (Texas Teacher Retirement Fund that I pay in to). I would still have my health insurance available to me at a higher cost but not COBRA prices. So I could retire at 60 and choose to take Social Security at 62, correct?

I’m thinking retiring early-ish would be better. My wife is six years older than me and makes significantly more. My dad passed away at 62, and my grandparents passed away at 71, 74, and 81 (x2). The ones who made it to 81 both had dementia/Alzheimer’s by around age 70. I’m not trying to live an unhealthy life, but I can’t ignore genetics. Keith Richards is still kickin’ and Jim Fixx didn’t even make it to 55. I don’t mean to hijack a thread… just curious.

 

[javacontour]

oilBabe retired from her school district this year, hitting the rule of 80 where she gets her pension.

She's in her mid 50s.

I'm in my last year of 50s.

I have longevity in my family history, so we took the pension option where I'm paid even if she passes before me. It wasn't a big cut to her pension because I'm an older male, so the tables say I'll die before she will.

Sadly, she faces more medical challenges than I do, so the odds are if it's natural causes, she will go before me. :sad:

Also, because her pension is a public service pension, there is an offset (can't recall the name) so any Social Security benefits she would get on my record get reduced because of this offset.

Because she didn't pay into Social Security most of her working years, benefits on her record will be small. Now, she may go work in a bank, or lawyer's office or boutique after taking a year off. Or not. She may just travel with her mom who is still alive in her 80s. (But her dad and younger brother have both passed, so her health outlook is mixed at best.)

Meanwhile, in my family, while my mother passed in her 70s, she was also a 50 year smoker. We have this nasty habit of dying in our 20s due to some accident or illness like Scarlet Fever or living to be 90+ years old.

I say that because my maternal grandmother soon turns 100.

I seem to be on that trajectory.

Therefore, my concerns are about outliving any money I've put away for retirement.

So, this is a long, windy, it depends. Other factors come into play, and I have just under 3 years before taking SS even becomes an option.

But I am considering the scenarios and how to address them as that date approaches.

Watching this space to see what others think and share.

 

[KJSmith]

t 60 and I’ll get my retirement benefits (Texas Teacher Retirement Fund that I pay in to). I would still have my health insurance available to me at a higher cost but not COBRA prices. So I could retire at 60 and choose to take Social Security at 62, correct?

Are you sure you qualify for SS?
Most TRS retirees I know do not get it.

I have a 7 year gap in my earnings history from when I was in TRS.

 

[TomYoung]

If any reader is making decisions based on this thread instead of talking to a professional, that's pretty bad. About 75% of the posts are wrong, and fall into the "BITOG is looking for my (completely uninformed) opinion on this topic.

 

[Tom NJ]

A couple of things to take into account when deciding when to collect SS.

Estimating your life expectancy is a factor to consider, and this changes with age. For example, while the mean life expectancy at birth for a white male in the USA is only 73.7, once age 62 is reached the mean life expectancy is 81, at age 66 it is 82.2, and at age 70 it is 83.6. The average person has a 50% chance of living longer than these life expectancies, so if you are healthy and have good genes you may want to assume a longer expectancy than these figures. Likewise if you are unhealthy or have bad genes you may want to assume less.

Also whether you need and will spend the SS benefit is a factor. In my case I am healthy and did not need my SS benefits to live, so I took my benefit at age 62 and invested the money as received. At the time 12 years ago I calculated that the extra four years of payments would give me a break even age of around low 80s if I spent it, but since those four years of benefits were invested the break even age moved closer to 90.

YMMV

 

[KJSmith]

Remember also that you will be forced to withdrawal SIGNIFICANT amount of funds from your Traditional IRA or Rollover IRA
annually when you hit the Required Minimum Distribution age. My wife and I will be required to take out almost 60,000 a year and we would typically need only 20K of that. This can lead to massive taxes owed - Oh yes, you can owe substantial taxes in retirement if you are milking your IRA's to live on - and even if you are not once you are past ~ age 73.

I have mixed feelings about RMD's.
From what I can tell, they are more than I currently take, but less than the recommended 4%.

Also, they can make me move it, they can tax it, but they can't make me spend it.
I have a few years to come up with a plan.

 

[John105]

You're assuming the actuaries are in charge of setting retirement age , THEY AREN"T!

No, I’m not. I believe they make calculations. In this case, on life expectancy. That isn’t the same as retirement age. If it were, we die and retire at the same time. The ones I know are pretty bright.

 

[zzyzzx]

But I have also read that before FRA, there is a limit to how much income you can make without losing some SS benefit. That to me is the real significance.

My understanding:
There is a limit to how much income you can make without losing some SS benefit from working, as in W-2 income. Things like dividends, interest, capital gains don't count towards this income calculation.

 

[Tom NJ]

Everything I read online says that if the surviving spouse is at or above their full retirement age when their spouse dies, the surviving spouse receives whatever benefit the deceased spouse was getting at the time of their death. I don't see anything that says the benefit is capped at the deceased spouses "full retirement age benefit". Can anyone provide a link where it says the benefit is capped?

To clarify my question above, my wife of nine years took her SS benefits five years ago at age 70 and I took mine 12 years ago at age 62. Although I earned more than her in our working years, her benefit is higher than mine because she waited until 70.

My question is that if she should pass away, will I receive her current benefit in place of mine, or will I receive the lower benefit she would have had if she took it at her "full retirement age" of 66 (assuming it is also higher than mine)? My online research suggests the former, but I have heard some people say it is the latter.

 

[CKN]

Are you sure you qualify for SS?
Most TRS retirees I know do not get it.

I have a 7 year gap in my earnings history from when I was in TRS.

Some plans what they call a "windfall" provision or something similar. That is-depending on the plan-Social Security benefits are greatly reduced. I guess they could be completed eliminated depending on how much you will receive, depending on what ever plan you were contributing under.
Anyway-My wife contributed to a pension plan in California (Educators) and fell under this. Her Social Security was reduced. Beyond that-I don't have any more details.

 

[csandste]

I took SS at my FRA of 66. At 79, retiring with a lot of 457 and rebated governmental retirement money I'm hit with lots of RMD, even though I'm trying to convert extra money from my regular IRA to my Roth. Would have been better for me to put everything off til I was seventy and live off of my regular IRA. Paying that extra money for Medicare isn't pleasant. I have more money in retirement than I thought I'd have. My state and federal income taxes have gone from about $9000 while working to $33000 today, although I was married then and single now. Guess it's better than being old and broke.

 

[pbm]

To clarify my question above, my wife of nine years took her SS benefits five years ago at age 70 and I took mine 12 years ago at age 62. Although I earned more than her in our working years, her benefit is higher than mine because she waited until 70.

My question is that if she should pass away, will I receive her current benefit in place of mine, or will I receive the lower benefit she would have had if she took it at her "full retirement age" of 66 (assuming it is also higher than mine)? My online research suggests the former, but I have heard some people say it is the latter.

I've also been told it's the latter by some people. It's sad that calling SSA couldn't get this question answered....the person on the other end of the line wasn't very helpful or bright.