Recently I learned that the Social Security Administration considers 78.5 or 78 ½ years old as the life expectancy for the average American male in 2023. For women it’s a couple years more.
If I should be so fortunate to live that long, that means I now have a little over 16 1/2 years remaining on this planet.
That doesn't seem like a long time, but certainly more than my parents had.
My dad died at age 63, my mom at 64. After I hit my sixties, I feel like every day I’m here is a blessing.
Anyway, it's gotten me to thinking again about when to take social security. I'm currently eligible to apply in 3 months. Should I wait? Financial dinosaurs like Suzie Orman or Dave Ramsey will tell you the amount you receive will increase by 7-8% every year so you should try to hold off until FRA (full retirement age) or better yet, age 70.
Not so fast, says the Social Security Administration. You’re not penalized for taking it early or rewarded for taking it late. We just try to average it out so you get the same amount in the end.
(Unless you make it to your mid-80s, that is. That’s when you beat the odds and waiting to collect pays off.)
Well, thanks to the Social Security website, I can see at a glance what that monthly amount will be depending on the age I start.
Forsaking cost of living increases and such, and going with the current 2023 estimates above, if I know I'm going to be departing at age 78.5, does it pay to wait?
If I take Social Security at 62... that's $1581.00 a month.
1581 x (12 months x 16.5 years or 198 months) = $313,038.00 total paid to me by the time I croak at 78 1/2 years old.
If I wait and take Social Security at 64... that's $1796.00 a month.
1796 x (12 months x 14.5 years or 174 months) = $312,504.00 total paid to me by the age of 78 1/2, hardly any difference at all.
If I wait and take Social Security at 67... that's $2246.00 a month.
2246 x (12 months x 11.5 years or 138 months) = $309,948.00 total paid to me by the age of 78.5.
If I take Social Security at 70... that's $2785.00 a month.
2785 x (12 months x 08.5 years or 102 months) = $284,070.00 total paid to me by the age of 78.5.
Whoops, I shouldn’t have waited to age 70 to collect. But what if I live to age 80?
From age 62 to age 80 = 1581 x 216 months = $341,496.00
From age 64 to age 80 = 1796 x 192 months = $344,832.00
From age 67 to age 80 = 2246 x 156 months = $350,376.00
From age 70 to age 80 = 2785 x 120 months = $334,200.00
Hmm… it STILL doesn’t make that big a difference. But what if I live to age 85?
From age 62 to age 85 = 1581 x 276 months = $436,356.00
From age 64 to age 85 = 1796 x 252 months = $452,292.00
From age 67 to age 85 = 2246 x 216 months = $485,136.00
From age 70 to age 85 = 2785 x 180 months = $501,300.00
So if you live to 85 or more…. it DOES pay to wait to start. Well, as long as you don’t need to spend down your assets so Medicaid will kick in and cover your long-term care because you neglected to buy LTC insurance 20 years earlier.
Am I missing something? Unless you’re still working, or are pretty certain you’re living into your mid-eighties and beyond, it makes little difference to wait. So why do these so-called experts encourage you to delay?
If you’re on Social Security, did you wait to collect yours? I have yet to meet an early retiree who regretted taking it at 62.
I suppose I’m fortunate I don’t need the money yet. Still, when it’s sitting there on a table, waiting for you to claim it… it’s tempting!
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If I were you, I"d go ahead and wait until 67. That's what I did, and I am very happy with the amount I receive every month. It sure makes a difference!
ReplyDeleteThank you DJan, but I don't see myself waiting that long--you are clearly one of those 'beat the odds' people I mentioned and I don't see myself lasting as long as you. You're doing 8 mile hikes twice weekly and I can barely do 1 mile on a treadmill! :^)
DeleteIf you don't need it now, but took it and invested the lower amount for the next 5 years, would your investments yield more over time than the higher amounts paid later? I've never been able to figure that out, but my gut tells me if you don't need it but use it for investments, you'd wind up with more in the end. Unfortunately, I'm not enough of a math whiz to know for sure.
ReplyDeleteBobi, good question and I honestly wonder that too. Also, you wouldn't have to spend years 'catching up' to make back all the checks you passed up on! I am looking more into this option, thank you. :^)
DeleteHi Doug! Well, my husband and I both had planned to wait until we were 70, to take advantage of the 8% yearly increase in benefit. Unfortunately, my husband developed dementia. When I realized his life would be cut short from this cruel disease, I helped him apply when he was 64. He died at the age of 70, so I'm glad I saw this coming and was able to help him receive some of his benefit before he passed.
ReplyDeleteOn the other hand, I was/am in pretty good health, and deferred payment until I was 70 (last year). I'm grateful for the larger benefit. Will I live until I'm in my mid-80's? I have no idea.
That's really what it's all about, right? Trying to assess our own health, and figure out if it's worth the wait, versus taking it now while it's a sure thing. I don't think there is necessarily a right strategy that works for everyone. Good luck! And let us know what you decide.
Carole
Carole, thank you so much for sharing. I'm so sorry about your husband's dementia... but reading this provides a great example of the different things we need to consider. Like you said, I'm glad he was able to collect some of what was owed him, at least. You're right, there is no 'one strategy fits all'.
DeleteI've seen such a charting of "what ifs" before. I'm waiting until 70 to get the larger amount. I've not seen anything that says the amount increases after you're 70. They only give the little Cost Of Living Increases sometimes. You can get Medicare at 65 and should. You're penalized permanently if you wait. Medicare and a SUPPLEMENT plan are the best ways to get access to the docs, clinics and hospitals you want, with next to zero costs out of pocket. Then you can choose your own Drug Part D plan based on your meds. For some of us getting only SS for retirement, waiting til 70 gives us the most money, no matter how long we live. Linda in Kansas
ReplyDeleteThanks Linda--oh I'm all ready for Medicare, and you're right--your social security payout stops increasing at age 70. But I can't see myself passing up 8 years of checks to get there! But good for you, that's planning ahead :^)
DeleteDug, I took my SS early and DH took his at 66. We both took Medicare at 65 and carry a supplement and a Medicare Rx plan. It works for us. And I think you should look into taking it either early or at full retirement and investing it. That makes sense to me, but I'm no financial expert. Interesting that the average life span is 78.5 for males and a few more for women in 2023. DH and I both turn 78 this month... (not going to tell him he only has another 6 months).
ReplyDeleteThanks Rian, I appreciate your feedback (and sorry about the 78 factoid from the SSA!) I think the Medicare stuff is going to raise some even bigger questions in a couple years. I like the idea of a supplement, but what about those Advantage plans? A lot to consider...
DeleteMedicare Advantage plans are for profit, profit for the people who offer them. They're free to the consumer for a reason. Give that decision a lot of thought.
Deletehttps://medicareadvocacy.org/ma-plans-deny-care-even-as-they-claw-for-overpayments/
I am on my late husband's SS but have changed my mind about waiting until 70. I want more money now while I can use it. I figured that with the difference between what I get at 67 and at 70 that it will take me 4 1/2 years to break even. But who knows if I'll make it to 75 anyway?
ReplyDeleteMargaret, thanks for sharing and good for you. "More money now while you can use it." Exactly and that should be a top reason.
DeleteI’m 52 and have been thinking about this very thing recently. I will have to reevaluate as I get closer in age, but I’m heavily leaning towards taking it at 62. If I’m still working for my current employer (already been with them for 16 years) then I may wait until 65. There’s no way I will wait any longer than that though! Deep down I just know that I won’t be living into my 80’s, regardless of wanting to LIVE LONG & PROSPER!!
ReplyDelete-Jase
Hi Jase! I was going to say I didn't realize you were only 52, but trust me those sixties come fast! Well, it's an unwritten rule that all Trekkers get a 5 year bonus on living (because they're awesome, period) so keep boldly going, my friend!
DeleteGood analysis Doug - I love it when I see people "doing the math". Besides the concerns of an early than wished for demise, my thought is that having the funds earlier rather than later, allows one to use those funds when one is still relatively healthy. Unless the goal is to leave as much money behind for the beneficiaries, of course. However, assuming one lives into their late 80's and their children are in their late 50's, early 60's, they'll be looking at the same decision in a few years. So really, take it and enjoy it!
ReplyDeleteThank you Maebeme, I appreciate your input and the kind words--well, I never married and have no descendants, so my funds are earmarked for a couple charities and family members; but they're not really counting on anything from me. I want to live a little, but leave a little too. :^)
DeleteI've done a lot of living "in the moment," so I took my very tiny SS payment when I turned 62. I retired from teaching with a lovely pension at 58, and because Ronald Reagan didn't want teachers, or other government workers, to "double-dip" on pensions, my social security is very small.
ReplyDeleteI get a SS payment because I worked for over 20 years in private industry before becoming a teacher. It pays for Medicare, my monthly hair appointment, and groceries. Not as many groceries as before inflation took over, but that's the way the world works. At 70, I'm hoping for almost another 20 years. Life is very good in retirement.
Thanks for sharing dkzody, this was interesting and I hope you make it another 20 years. How awful about Reagan, it's because of him that social security is taxable too. He sure was on an agenda to wreck the middle class, it seems. Anyway, I'm glad you/re doing well.
DeleteI took mine at 66. My Mom died at 74 of COPD and related things. Long time smoker and life long asthmatic. I'm not a smoker but have had serious asthma since child hood. Now I'm 81 and have a heart problem and COPD but I am still putting around in a wobbly fashion. have most of my marbles and am living on my own. So that early worrying came to nothing. You just never know. The dollar reward for waiting didn't seem significant. Sometimes I think it's just a crap shoot, hugs.
ReplyDeleteCelia, thank you for sharing what you did here--I'm so sorry about your mom, but you making it to 81 (and being independent like you are) gives me real hope. And yes, crap shoot is exactly right!
DeleteI’m glad I’m not American, I’d only have about 9 months left to live. Fortunately, Australians’ life spans are several years longer than Americans’.
ReplyDeleteOn my family front, I’ve beaten my mum (72), yet to reach my sister (81) or my father (83). At least I’m still on track.
Good for you, Peter--and I'm sure it helps that you Aussies don't have to worry about 10,000 guns hitting the streets everyday. I hope we wise up soon.
DeleteI'm a little confused about your Social Security, is it the same as our Australian Age pension given by the government? Years ago people coupld apply for it at age 60, then it was 65 and now it is age 67. But the amount a person gets is the same as everyone else, unless the person has other financial assets thenthe amount is lessened and I'm not quite sure how that works. it depends on how much the assets are worth. We have something called Superannuation, which is what we can pay a certain amount of our wages into, towards our retirement and those who knew about this early enough (not me, my parents taught me nothing about money) could stash away a significant amount and never need to apply for the age pension. Those like me who only learned about it a few years before retiring, stashed away a much lesser amount and when applying for the age pension, the amount in "super" is taken into consideration and the pension amount is lessened according tp how much a person draws down fron his/her "super". I opted to draw only the minimum amount and got a part pension for several years. Now that I am 70 I get the full age pension amount I think as well as that minimum "super" payment and we get paid fortnightly, which I think is better than monthly, as I know a few people who could blow through an entire monthly amount in a week and be hungry for the next three weeks.
ReplyDeleteWhew, thanks for sharing River--I'm a little familiar with Canada's Pension Plan, but that's it. Our social security does sound the same as your own Age pension, we pay into it (automatcally deducted from our paychecks) and the SSA keeps a complete record of our earnings history. The earliest we can access it is 62, but our "official" retirrement age is 67.
DeleteIf you pay into it from your own paychecks, then it is the same as our Superannuation scheme. The age pension is different and given by the government to everyone with assets under a certain amount, once they reach the applicable age. Currently 65 but soon to be 67.
DeleteRiver, sounds like Australia takes care of their aged better than we do.
DeleteI've waited until 70 (and will be 70 in September). My father lived to 87 and my mother is 91 and still going strong. A better way to look at your "life expectancy" is to use the Social Security "Actuarial Life Table"
ReplyDeletehttps://www.ssa.gov/oact/STATS/table4c6.html
According to this table, a male currently at age 61 can expect to live another 20 years. As you get older each year your life expectancy increases. Makes sense, if you've made it this far the odds are in your favor to make it longer, etc.
Thanks for sharing Don (that table too, I'm anxious to check it out). First, that’s wonderful you still have your parents. That alone would make me rethink my own strategy. Second, wow you waited till 70! I very much hope that pays off for you, of course I don't know how much you're getting but I'm sure it's going to be a nice amount. I definitely need to think more on this..🙂
DeleteDoug, I find money posts so interesting! I am probably one of a few people that can say I have never officially made an income. For years I worked ‘under the table” being a nanny. Once I got into my thirties that stopped and I was a SAHW. I will receive OAS (old age security) I believe at 65. Chuck has/will have multiple pensions. Right now he is receiving his military pension and a disability pension. IF he retires next summer he will defer this work pension until he is 65 which would be a year and a half roughly. He talks about clawbacks of one pension but you make it up on another. My opinion on your situation, take the money. My Mum was a nurse, worked for thirty years in long term care. When she was able, because her years working and her age added up to a certain number, she took retirement. She is going to be 90 shortly. She now has collected her work pension for longer than she worked. Doug, you sound like you have a very healthy cash situation so you do what you feel is best.
ReplyDeleteTake care.❤️
Hi Robin! Thanks for finding my blah ssn income post interesting, I needed to hear that, haha--second, very interesting how your own income history has been under the radar. I'm glad Canadians have OAS, I'm not sure we have that here and I need to look that up. Well, it sounds like Chuck is all set and that was wonderful to read about your mom! And yes I'm pretty healthy right now too (financial wise at least). Just felt the need to put this stuff out there. :^)
DeleteThanks for this financial analysis. My SIL waited until age 70 to collect SS and received $3,000 per month. Unfortunately, she died in a car accident at age 73. So, she collected SS for only 3 years! Very foolish of her to wait. David and I decided to collect early and have no regrets.
ReplyDeleteOmigosh. Gigi, thanks very much for sharing--this is such a good example of what I was trying to convey in my blog (the risk of waiting). I am very sorry for the loss of your SIL, and only 3 years collecting. I'm glad you & David didn't wait, this makes a good case for applying early.
DeleteWow, you really did your homework! When it is time for Medicare, try to get a Medigap insurance rather than a supplement. That way you will keep original medicare, which can be valuable if you ever need treatments not covered by some supplemental companies. Joyce
ReplyDeleteThanks Joyce! And you bring up a very good point, something I've been giving a lot of thought to, medicare gap vs supplement or advantage. I know the medigap is expensive, but more & more professionals say the same thing you do.
DeleteI waited until I was 70 to collect social security. I have no idea how long I will live, but my father lived until he was 88 and my mother was 93. If I do live a long life I may need that additional income.
ReplyDeleteThere are a lot of things to consider.
Do you have some health problem that makes it likely that you will die early? Will you be struggling to pay your bills without it? There isn't the same answer for all of us. But if you do live a long life I think you will appreciate the extra income.
Thank you Donna, and based on your parents long lives it sounds like you made the right choice. You're right, there are a lot of factors to consider. I've got a lot to think about.
DeleteGiven that you do not need SSA retirement income, you could consider taking it at 65 and investing it. Your ability to invest probably makes up for any increase in SSA benefits by taking it later.
ReplyDeleteThank you very much Susan, I'm leaning in this direction. It makes good sense!
DeleteDug, thanks so much for this very relevant blog post. I was wondering if you have any thoughts on collwcting at 62 and keep working full time?
ReplyDeleteThanks for the comment & question, Anon--I wouldn't do that, unless the job was low paying or part-time. Social Security would reduce your benefit by a dollar for every 2 dollars you earn over 21 thousand. You can only work and receive full SS benefits if you're 67 or older.
DeleteAll this sounds spooky to me since Art will turn 80 next year. The years fly by.
ReplyDeleteHe certainly doesn't look it, Kay--there's always exceptions to the rule :^)
DeleteI think you would need to figure out the little bit of difference the annual increase would make on your figures. It probably wouldn't make more than a couple of % but I'm not Excel savvy enough to do the math.
DeleteHey Ken, nice to hear from you! 🙂
DeleteHi Doug. I took my SS at 62 becasue I have MS and figured I could use the funds now to help pay for my long term care insurance and fun stuff once in awhile while I'm on earth. I don't expect to reach age 83 or 95 like my parents, who took very little medicine and were healthier than I am now at 65. I don't regret it...yet anyway. Husband took his at 62 also. Kim in PA
ReplyDeleteHi Kim! I had no idea, I'm very sorry about your MS Kim. But it sure sounds like you did the right thing. Thanks for saying that about yourself and your husband too.🙂❤️
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