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Thread: When to Draw Social Security Retirement

  1. #1
    See, the Thing is... Cow Poke's Avatar
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    When to Draw Social Security Retirement

    OK - I'm there this month - the magic 66 years old, which, for me, is FTA - Full Retirement Age.

    At 66, of course, you can draw your full amount, but waiting another year increases that amount by 8%.
    Each additional year you wait, another 8%, up to a total of 32% growth at 70.
    It's crazy, because if you wait till 70, your monthly payment is higher for the rest of your life, but you've given up 4 years of payments at "full" amount.
    It's a numbers game, of course, depending on how long you will live, whether it makes more sense to start at 66 or 70 or somewhere in between.

    I google "when to start drawing Social Security", and I get varying advice.

    WAIT if at all possible, if you don't really need the money now.
    Or start drawing it, but invest it without using it - the "take and invest" strategy.

    Anybody been there? Thought this through?
    Every problem is the result of a previous solution.

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    Professor and Chaplain Littlejoe's Avatar
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    Are you stepping down as Pastor of your church? I"m thought there was a max you can earn before it impacts your benefits...isn't there?
    "What has the Church gained if it is popular, but there is no conviction, no repentance, no power?" - A.W. Tozer

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    tWebber Teallaura's Avatar
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    Quote Originally Posted by Littlejoe View Post
    Are you stepping down as Pastor of your church? I"m thought there was a max you can earn before it impacts your benefits...isn't there?
    At full retirement age there is no limit on earnings.

    Source

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    See, the Thing is... Cow Poke's Avatar
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    Quote Originally Posted by Littlejoe View Post
    Are you stepping down as Pastor of your church? I"m thought there was a max you can earn before it impacts your benefits...isn't there?
    As far as the SSA, there is no limit. IRS can tax your earnings (not more than 85% of your SS income in any case) depending on your tax bracket.

    I plan to continue at my current church at least to age 70, if they'll allow me. So far, we're on a pretty good run, growing, and getting along.

    My plan was -- IF I start receiving at 66 -- to invest HALF that money in my current 403(b) and the other half as "principle only" payments on my house.

    Here's the challenge...

    The money "grows" at 8% per year for 4 years, as long as you don't touch it.
    If you start receiving it at FRA, you are locked into the lower amount, but you'll have 48 months of that received before age 70.
    So it's not just "find something else that pays you 8% or better" - it's find a way to invest that money while you're collecting it that, in addition to the 48 months you receive, offsets the gain for waiting.

    Example:
    If your FRA amount is 1000/month (round figure), and you start taking it at age 66, you'll have received 48,000 by age 70, then 1,000 / month for life.
    If you WAIT to start taking it at age 70, you'd start receiving 1,320 a month, but you've missed out on the previous 48,000.

    I'm still trying to decide. The biggest factor is -- none of us knows how long we will live.
    Every problem is the result of a previous solution.

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    tWebber
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    Quote Originally Posted by Cow Poke View Post
    As far as the SSA, there is no limit. IRS can tax your earnings (not more than 85% of your SS income in any case) depending on your tax bracket.

    I plan to continue at my current church at least to age 70, if they'll allow me. So far, we're on a pretty good run, growing, and getting along.

    My plan was -- IF I start receiving at 66 -- to invest HALF that money in my current 403(b) and the other half as "principle only" payments on my house.

    Here's the challenge...

    The money "grows" at 8% per year for 4 years, as long as you don't touch it.
    If you start receiving it at FRA, you are locked into the lower amount, but you'll have 48 months of that received before age 70.
    So it's not just "find something else that pays you 8% or better" - it's find a way to invest that money while you're collecting it that, in addition to the 48 months you receive, offsets the gain for waiting.

    Example:
    If your FRA amount is 1000/month (round figure), and you start taking it at age 66, you'll have received 48,000 by age 70, then 1,000 / month for life.
    If you WAIT to start taking it at age 70, you'd start receiving 1,320 a month, but you've missed out on the previous 48,000.

    I'm still trying to decide. The biggest factor is -- none of us knows how long we will live.
    Well, this is gonna sound morbid, but I'd say statistically your best bet is to assume that you'll live the average amount of time. The life expectancy for a male in the US I think is around 78 (you may want to fact check me). I'd run the numbers to see how long the extra 32% takes to make up for 4 years of no payments. I'm guessing somewhat more than 8 years. Which basically would mean you're only better off waiting till 70 to draw if you live longer than 78. (check me on that, you'll want to me absolutely sure)

    So...that means practical situations unique to you may matter more. If you think that once you fully retire, the payment at age 66 benefits would allow you to maintain your standard of living, then that means you'd have enough money in retirement...so why wait for the higher payment? Of course, if you're got plenty of income now and you just don't need the money at all (doubtful -- I know how pastors get paid, brother) then I'm not really sure it matters...and I'd probably just wait until 70 to draw benefits as a backstop against the unlikely chance I run out of other retirement funds around age 90-110.

    I dunno, am I making sense here at all? My parents are near your age. They're going for a meeting with SSA this coming week it is. My mom just lost her job (company closed down her branch) and she's only a few years from 66. So she's trying to decide if she should take early SSA at reduced benefits and work part time, or find some other job for a few years and retire at full benefits. Part of that depends....because apparently it's a thing to take early benefits, then switch and draw a spousal benefit calculated at 50% of your spouse's benefit calculated at full retirement age. So they've been playing with numbers to see what works best.
    "We see unmistakably the sort of universe in which we have all along been living, and must come to terms with it. If we had foolish un-Christian hopes about human culture, they are now shattered. If we thought we were building up a heaven on earth, if we looked for something that would turn the present world from a place of pilgrimage into a permanent city satisfying the soul of man, we are disillusioned, and not a moment too soon." - C.S. Lewis, The Weight of Glory

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    Quote Originally Posted by myth View Post
    Well, this is gonna sound morbid, but I'd say statistically your best bet is to assume that you'll live the average amount of time. The life expectancy for a male in the US I think is around 78 (you may want to fact check me). I'd run the numbers to see how long the extra 32% takes to make up for 4 years of no payments. I'm guessing somewhat more than 8 years. Which basically would mean you're only better off waiting till 70 to draw if you live longer than 78. (check me on that, you'll want to me absolutely sure)

    So...that means practical situations unique to you may matter more. If you think that once you fully retire, the payment at age 66 benefits would allow you to maintain your standard of living, then that means you'd have enough money in retirement...so why wait for the higher payment? Of course, if you're got plenty of income now and you just don't need the money at all (doubtful -- I know how pastors get paid, brother) then I'm not really sure it matters...and I'd probably just wait until 70 to draw benefits as a backstop against the unlikely chance I run out of other retirement funds around age 90-110.

    I dunno, am I making sense here at all? My parents are near your age. They're going for a meeting with SSA this coming week it is. My mom just lost her job (company closed down her branch) and she's only a few years from 66. So she's trying to decide if she should take early SSA at reduced benefits and work part time, or find some other job for a few years and retire at full benefits. Part of that depends....because apparently it's a thing to take early benefits, then switch and draw a spousal benefit calculated at 50% of your spouse's benefit calculated at full retirement age. So they've been playing with numbers to see what works best.
    You make a lot of sense, and you echo some of the things I've already considered, and identified some of the important factors that need addressed.

    I was actually concerned that, even though I make a decent salary as a pastor, I had long ago (foolishly) chosen the conscientious objection option - which means NONE of my income from religious service is taxable for social security purposes. (IRS can still tax the dickens out of me) A consequence of that is the fact that, unless I worked a secular job, I would have ZERO social security benefits available.

    Fortunately, the 10 years I spent with a gas compression company provided not only a very decent 401(k) (matching 100% up to 6% of what I invested), but also gave me the opportunity to shore up (and qualify for) social security benefits. I maxed out both the 401(k) and SS amounts every chance I got, which, in later years, allow extended "catch up" amounts.

    One of the factors I just found out was that your benefit is figured on an AVERAGE of your best 35 years of paying in. My concern was that, for the last 7 years (and for the foreseeable future) I am contributing ZERO, and each zero year would bring down the average. I was assured that was not true - that my minimum benefit has already been established, and cannot "slide back". That takes away some urgency, and I no longer feel pressured that I have to decide this NOW.

    It looks like it comes down to two factors them.
    A) Do I really need the income right now? Answer is no - Church pays a livable wage, and I have plenty in savings from my time with the gas compression company.
    2) Do I expect to live longer than the average? If my Dad is any indicator, he lived to be 98 and was in pretty good health for an old guy, except for being stone deaf from the war.

    I HAD been 50/50 on what to do - but now I'm leaning toward holding off to 70 unless there's some compelling reason to start taking SS retirement money sooner.

    Thanks for your thoughts!
    Every problem is the result of a previous solution.

  8. Amen Teallaura amen'd this post.
  9. #7
    tWebber
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    Quote Originally Posted by Cow Poke View Post
    You make a lot of sense, and you echo some of the things I've already considered, and identified some of the important factors that need addressed.

    I was actually concerned that, even though I make a decent salary as a pastor, I had long ago (foolishly) chosen the conscientious objection option - which means NONE of my income from religious service is taxable for social security purposes. (IRS can still tax the dickens out of me) A consequence of that is the fact that, unless I worked a secular job, I would have ZERO social security benefits available.

    Fortunately, the 10 years I spent with a gas compression company provided not only a very decent 401(k) (matching 100% up to 6% of what I invested), but also gave me the opportunity to shore up (and qualify for) social security benefits. I maxed out both the 401(k) and SS amounts every chance I got, which, in later years, allow extended "catch up" amounts.

    One of the factors I just found out was that your benefit is figured on an AVERAGE of your best 35 years of paying in. My concern was that, for the last 7 years (and for the foreseeable future) I am contributing ZERO, and each zero year would bring down the average. I was assured that was not true - that my minimum benefit has already been established, and cannot "slide back". That takes away some urgency, and I no longer feel pressured that I have to decide this NOW.

    It looks like it comes down to two factors them.
    A) Do I really need the income right now? Answer is no - Church pays a livable wage, and I have plenty in savings from my time with the gas compression company.
    2) Do I expect to live longer than the average? If my Dad is any indicator, he lived to be 98 and was in pretty good health for an old guy, except for being stone deaf from the war.

    I HAD been 50/50 on what to do - but now I'm leaning toward holding off to 70 unless there's some compelling reason to start taking SS retirement money sooner.

    Thanks for your thoughts!
    Dunno if you've seen this on the SSA website.

    If I picked your birth year correctly, here's how they calculate your benefit:
    https://www.ssa.gov/pubs/EN-05-10070-1953.pdf

    If I got that wrong, here's the main page:
    https://www.ssa.gov/pubs/?topic=Retirement
    "We see unmistakably the sort of universe in which we have all along been living, and must come to terms with it. If we had foolish un-Christian hopes about human culture, they are now shattered. If we thought we were building up a heaven on earth, if we looked for something that would turn the present world from a place of pilgrimage into a permanent city satisfying the soul of man, we are disillusioned, and not a moment too soon." - C.S. Lewis, The Weight of Glory

  10. Amen Teallaura, Cow Poke amen'd this post.
  11. #8
    Troll Magnet Sparko's Avatar
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    Quote Originally Posted by Cow Poke View Post
    OK - I'm there this month - the magic 66 years old, which, for me, is FTA - Full Retirement Age.

    At 66, of course, you can draw your full amount, but waiting another year increases that amount by 8%.
    Each additional year you wait, another 8%, up to a total of 32% growth at 70.
    It's crazy, because if you wait till 70, your monthly payment is higher for the rest of your life, but you've given up 4 years of payments at "full" amount.
    It's a numbers game, of course, depending on how long you will live, whether it makes more sense to start at 66 or 70 or somewhere in between.

    I google "when to start drawing Social Security", and I get varying advice.

    WAIT if at all possible, if you don't really need the money now.
    Or start drawing it, but invest it without using it - the "take and invest" strategy.

    Anybody been there? Thought this through?

    I am 58 right now. I have been thinking about it. I didn't really have much 401K saved up until my current job which I have been at for only 12 years. So my main worry is how much I will have saved in my 401K by the time I am 67.
    I am going to have to work at least until then in order for my social security check to even pretend to pay my monthly bills.

    I would love to retire at 65, but at that age, I won't have enough SS to even pay my minimum monthly bills. That is all at my current salary, so since SS is based on the average of your highest 35 years salaries, I am hoping I will get enough raises over the years to maybe be afford the minimum monthly expenses on my SS, and use my 401K as my buffer for various other expenses that come up, or for discretionary spending.

    I don't think the take it now and invest it would work for me. A couple of years of lower SS payments wouldn't add up to much, even invested, and then the rest of your life you are getting those smaller payments.

    The biggest problem of course is you don't know how long you will live. If I only live to 77 (10 years of retirement) then I have plenty. If I live to 90, not so much. Of course I could just drop dead before retirement and then all those years of savings are wasted.

  12. Amen Teallaura amen'd this post.
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    See, the Thing is... Cow Poke's Avatar
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    Quote Originally Posted by Sparko View Post
    I am 58 right now. I have been thinking about it. I didn't really have much 401K saved up until my current job which I have been at for only 12 years. So my main worry is how much I will have saved in my 401K by the time I am 67.
    Does your company match any amount dollar for dollar? This is what I often could not get the young kids I hired to understand --- it's FREE MONEY. Our company matched 100% of what I put in, up to 6% of my salary, so I always maxed it out.

    I am going to have to work at least until then in order for my social security check to even pretend to pay my monthly bills.
    But you like your job, yes?

    I would love to retire at 65, but at that age, I won't have enough SS to even pay my minimum monthly bills. That is all at my current salary, so since SS is based on the average of your highest 35 years salaries, I am hoping I will get enough raises over the years to maybe be afford the minimum monthly expenses on my SS, and use my 401K as my buffer for various other expenses that come up, or for discretionary spending.

    I don't think the take it now and invest it would work for me. A couple of years of lower SS payments wouldn't add up to much, even invested, and then the rest of your life you are getting those smaller payments.

    The biggest problem of course is you don't know how long you will live. If I only live to 77 (10 years of retirement) then I have plenty. If I live to 90, not so much. Of course I could just drop dead before retirement and then all those years of savings are wasted.
    There are ways to shift or transfer your 401(k) to annuitize it for guaranteed minimum income for life, and in the case of my 403(b), that entire amount gets distributed even if I die -- to my wife, and in case she dies, to my grandkids, etc...
    Every problem is the result of a previous solution.

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    Troll Magnet Sparko's Avatar
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    Quote Originally Posted by Cow Poke View Post
    Does your company match any amount dollar for dollar? This is what I often could not get the young kids I hired to understand --- it's FREE MONEY. Our company matched 100% of what I put in, up to 6% of my salary, so I always maxed it out.
    up to 4% matching, but currently I am putting away 15% (I would do more if I could afford it)



    But you like your job, yes?
    For the most part. But I would like to be retired and not locked into a single location or 9 to 5 job. Then I could spend time traveling. Maybe go around the world staying with twebbers along the way. Got a couch handy for me?


    There are ways to shift or transfer your 401(k) to annuitize it for guaranteed minimum income for life, and in the case of my 403(b), that entire amount gets distributed even if I die -- to my wife, and in case she dies, to my grandkids, etc...
    Well if I die early, my brothers are gonna have some party money coming their way.

  15. Amen Teallaura amen'd this post.

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