Is Delaying Social Security Still the Best Strategy?
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- เผยแพร่เมื่อ 2 มิ.ย. 2024
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I recently heard a parent say that they took SSA benefits at the earliest opportunity because they could pass their TSP/IRA balances onto their kids if any was left when they died, but not their SSA benefits that stop at death. They figured that if they could mostly live off their pension & SSA and let their investment accounts grow, it would benefit the kids/grandkids the most when they were gone. This may not be a relevant consideration for folks like me who don’t have kids, but maybe it’ll be a useful consideration for some parent out there.
That late 70’s breakeven calculation is what would happen if you take your SS early and put it under your mattress, meaning, it doesn’t take into account the potential ROI received if you invested your SS payments. If you invest those payments where you earn just 5% annually, the breakeven point moves into the early to mid 80’s.
So, in my case, when I turn 62 and my FERS supplement ends, I’ll need to replace that income. I can either pull it from SS or my TSP. What’s the better choice?
Well, when I die, my heirs can inherit my TSP, but they can’t inherit my SS, so why would I draw down my TSP first?
Also, no one ever talks about the taxes. If I pull from my traditional TSP, I’m taxed fully on every dollar. However, if I get the same amount from SS, I taxed at most on 85 cents of each dollar, meaning a 15% tax savings on pulling from SS first instead of my TSP!
You are smart
Tomorrow is not guaranteed. Take it at 62 and invest it if you don't need it.
Always take it as soon as you can get it
If my breakeven is the late 70s, just think of how much enjoyment you would have in those years of good health at 62. You'd get to enjoy retirement for eight more years. Most people I know at 70 are not able to get around like they could at 62.
Not only do you get more payments at an earlier age...each 1$ is actually more valuable the sooner you get it. Lots of variables for sure. No right answer for everyone...the correct answer is specific to your circumstances and the assumptions you make.
I'm a CSRS retiree and subject to the Windfall Elimination Act and even though I have well over 40 credits I lose roughly 40% of my SS. In my case, I waited until age 69 and to be honest I might have delayed it a couple of more years but I got tired of mailing the Medicare Quarterly payments.
Great video!
Thanks Dallen!
You bet!
I recently found you and it's been so helpful. Giving a common senerio makes really easy to understand. I want to know if i should roll over my other investment accounts to TSP for easy maintenance and low fee? Do you have a video for that? Other accounts include non-traditional IRA and non IRA.
Hello. Do some research on what the actual fees are. In the past couple of years, the TSP fees have increased.
Yes, we have many videos on that topic. Here is a great one:
th-cam.com/video/pdZ0v2ng_a8/w-d-xo.html&ab_channel=HawsFederalAdvisors
Spouse that get's 1/2 your amount is hard to calculate. That being said the 1/2 social security is based on the primary amount at 67 years old not your actual social security benefit. You have one year to change your mind on your date but would have to pay back all you receieved up to that point.
Exactly, very different for every person. Great points again thanks! 😊I would add with the FERS supplement until 62, would be hard to not continue those & wait until 70 etc. People who have spouses are lucky, should always take some early.
ah, the FERS supplement ends at 62?
@@marvinjenkins4901 Pretty sure it does yes
I wish he would do a video on age difference for social security my wife and I are 23 years apart..
Thanks for the feedback. We'll put that on the list.
What if the higher earner dies before age 70? If the survivor waits until the spouses 70 years in spite of the fact they passed at 66 will they get the higher rate of 70 years
Great question! The surviving spouse would have to wait until he/she turns 70 and then their could be a potential increase in the survivor benefits.
Can you do a video on how much FERS sucks for young people. I'm 32 and have to pay 4.4% into FERS. The older people I work with either get the same benefits and only pay 1% of their paycheck, or they have CSRA and get 2X the benefit with way less cost. It's way better to just quit and invest they money. If I quit today I'd get a lump sum payment of 20k. Invested at 9% (which is lowballing it) for 30 years until I'm 62, I'd have 265,000 in cash & could just withdraw 5% (13,000) a year and it'd likely never go down if I left it invested. VS. If i do not do this my option is I need to defer retire. When I'm 62 the government would pay me 12,000 a year and I'd have 0 dollars. So get paid less and not have $265,000... Young people aren't dumb, and there's going to be a gap when we all leave because the older generation thought they could count on us to be milked. I fully intend to withdraw my FERS contribution when I decide to get out and advise all the other young people do the same. Much like social security, the money I will be withdrawing is the money that is paying the older people who already retired. So this topic should really concern them more than me.
You're correct that your benefits may cost more. Your salary, position and cost of living adjustments will grow as well. It will be hard to beat a pension at 22% or more with cost of living adjustments and health insurance coverage at a investment rate of 4.4%. If you believe investing 20k and no additional money will cover your pension. Goal luck 😂
The pension is easily beatable. If I had the option to not spend 4.4% on FERS and just put that 4.4% into a 401k or TSP I'd be way better off. But I can't do that, my option is stay and be a lifer to get a bad FERS payout compared to what I put in, or quit and take my contributions with me to invest into a 401k, or do a deferred retirement. The best thing I can do with my FERS contributions is quit, take the lump sum, and move it into a 401k at my next job. FERS just isn't good when you are paying 4.4% of your pay into it.
@@bonez2450 It's your right. As an financial analyst for the Department of Justice for many years. I came across very few super saver like myself. Even the ones who average 10 - 15% of their salary not counting government contributions the middle of the road savers (retirement savings income failed below the pension) 5% and matching most TSP account balances didn't hit $200,000. Poor savings habits, market performance and borrowing. Lots of people used their account like a savings account. Reality is facts. Check fact your information and align it to yourself. My first five years I had six figures. By ten years I saved 3x as much of my co-worker with 15 years. My pension out peace my TSP. Recession 2008, convid 19, Global economy downturn. Government shutdowns. Over last five years I maxed contributions and did some catching up funds. But you young folks know it all.
There is another calculation concerning the spouse I can't grasp. Let's say your wifes own ss benefit is low like for example $500 at 64 can she take that amount at that time, and later at say 67 change it to 1/2 the husbands benefit whose ss at 67 is $3000 the wifes cut is $1500. I heard the low ss person can use their own benefit and later change to half higher spouse?
From the many videos I have watched, yes that is true. In that situation I have seen many advisors recommend the wife take their benefit at 62 then switch to their marital benefit at FRA.
Can only take the spousal benefit after the spouse starts theirs (unless you are divorced or widowed).
If you need the money, collecting at 62 makes sense. And if don't need the money, collecting at 62 makes sense because you can take the money and invest it-thus making more than you would have made if you would have waited until 70.
If you can invest that money that you could take at 62 - ALL OF IT - into an investment GUARANTEED to earn more than 8% annually, that's a good deal.
If you wait until 70, your benefit will INCREASE, guaranteed by 8% annually.
If you invest that SS money - ALL OF IT - and the market tanks, what then?
@@Royale_with_Cheeese And if the sky falls, then what?
Here's my scenario:
I don't *need* the SS now to live on. When I do apply, it will surely be "supplemental" income.
I looked at my lifetime of paying into SS. $113K
My feeling is that I will wait until 70 because I truly don't *need* it now.
My break even from if I took my SS at 62 will be 83. As long as I get back the $113K that I paid in, the rest is gravy and for the rest of my life.
Also, getting the maximum benefit at 70 and for the rest of my life will be more comfort zone against whatever inflation throws our way at that time.
If anybody truly needs their SS benefits to live comfortably, as compared with scratching by without it, by all means, take it.
You should consider, if you wait longer you get a higher pay out for Social Security, but inflation is going up over those years as well. Age 62-70 is an additional 8 years of inflation. You get 30% more payout at 70 but inflation will likely be around 30% as well and you will not have gotten paid for the past 8 years. The actual value of every dollar is worth more when you're 62 than when you're 70.
Age 83 OMG the average life expectancy is 77. I had Sunday dinner with few 85 year olds. Most wearing Pampers. All nearly able to walk. Those extra dollars don't mean nothing at that point. Your pension and social security has cost of living adjustments. Plan right with your TSP things will be fine. There no break even if you pass before 83. No real enjoyment after with those pennies.
So true!!!
@@b.coxemba6799
Please note that I said "My scenario."
I won't even *need* the money. It will be "supplemental" income for me.
I have a very healthy TSP, my modest annuity and have saved a decent amount of money all through my working life.
Also, for ME, I feel that as long as I get back the $113K that I paid in, I got my money that I paid into SS.
You also said that having the extra money at 83 isn't as good as having it at 62. If you *need* the money at 62, by all means, take it.
That extra money *starts* at 70, not 83.
Everybody's situation is different. My scenario looks good for me.
As well, average life expectancy is 77. That takes into account all the people who live long into their 90s and higher and the people who die way too young. I'm in very good health at 64. No meds, never smoke nor drink alcohol. I fully expect to live into my 80s.
A couple of counterpoints:
The "average" life expectancy is 77. That's not the same as everybody's expiration date is 77. Many people live healthy into their 90s and beyond.
Waiting until 70 to enjoy that higher benefit for life means you get that higher benefit at 70, when you can enjoy it all through your 70s and for the rest of your life. Your statement makes it sound like you won't have that high benefit until 83 and couldn't enjoy it at that time in your life.
The break-even is 83. You're still getting that good amount all through your 70s when you can enjoy it.
I stated that in MY scenario, this sounds good for me. I also said that if you really need the money to live on, compared to scratching by, then take it.
That is not the equation SS use to calculate spouse benefits if you have a higher income
Here is a great video that explains how Social Security is affected by higher income:
th-cam.com/video/xvBgNzChfJk/w-d-xo.html&ab_channel=HawsFederalAdvisors