This is great video if all you care about in life is getting the most out of your social security income. What about getting the most out of your life? Did you notice you don't break even until around age 82? Well guess what? You probably won't NEED a lot of money after age 82. Unless you're a health machine, it's about time to die, or you'll be physically limited in what you can do. LIFE planning is what's important. If you have a plan to live with the benefits and saving you have, it's stupid to keep working when you could be enjoying retirement - when you can still get around and enjoy yourself. My parents are in their mid 80s and live very cheaply - not because they want to or have to, but because they physically can barely get to the grocery store and won't be able to do that soon. They both have multiple health conditions now that limit their abilities and mobility. The good news is they both retired in their 50s back when pensions and retirement healthcare still existed and had decades to enjoy their retirement together - before health issues slowed them down. They would tell you they've had a wonderful life and enjoy their more limited life now - knowing they took their chance to enjoy life when they could. My advice debunking this video - Retire as soon as you have the financial means to have a retirement lifestyle that works for you. Or work until you die as suggested. It's your life.
I totally agree, why work in your 60s and miss out on more active part of your later years just so you can have more money in your 80s (if you make it there) when you don't spend much except on health care.
@@onlywenilaugh6589 im afraid you are confusing not working with taking social security....you can retire at fifty if you can afford it...the problem isnt that you cant afford to quit..its how you will live with only social security to live on after you;ve spent everytrhing else...
Tbh the people who died at 68 probably won't feel great being told they took the statistically sensible option by delaying taking their benefits lmao I definitely still think taking benefits early is the best idea. Since SS only grows at a rate comparable to the rate the market grows i see no point delaying. If you take the money it means you don't have to take that money out of your 401k Only caveat here is if someone is kinda poor and desperately needs to earn more money then sure, keep working until 70 to maximize everything. But most people weighing the option are actually doing well enough that they're not desperate at all. They're just anxious.
"You don't need more money, you need a better plan." You know, it's likely true, for most people, that they need both a better plan,*and* more money. I mean, I'm pretty sure that's true for me, at least. Anyway, another great explainer video, thanks!
Don't forget to that folks who file early usually get to stop working 3-5 years eerier than those who wait. Waiting means you will be a lot less active and miss one of the best part of your later years between 62 and 67-70. Might be a good trade off to gain those years not sitting in the crap old office.
I retired at 61. I am 64 and I’m waiting until 70 for my Social Security. My wife and I have been on cruises and road trips and we’re going on a through hike of the Appalachian Trail next year. Just gotta plan for retirement. Make the investments while you’re working and you will be fine.
People think that SS rules are simple. But in reality, the decisions concerning it are as complex as tax planning! Thank you for talking about those myths!
Yes very complicated, especially if you are a married couple. I checked out a helpful book that had case studies. Your birth date, your spouse's birth date and each of your expected benefit amounts all play into it. I ended up taking my full benefit at 66, spouse filed to get a dependent benefit from me until he filed for his delayed SS at 70, a year later.
Very helpful, thanks. I also add in a quality of life factor. At 62 I would expect to use more funds for travel and life quality enhancements than the break even age of 83 where my biggest concern might be finding the remote. Again thanks for sharing
You failed to include the present value of money and the obesity factor in the US. If you are obese and run the risk of passing away earlier, the I doubt you will see much of your eighties. Also there is a cap for what a married couple can get from social security. It doesn't make much sense for both people to wait until 70. If you can pay your debt earlier by receiving earlier, then your calculations are off as well. I would be cautious about discussing delaying social security benefits. How long your parents lived will play a major factor in how long you live no matter how healthy you think you are. The stress you reduce by retiring earlier may also benefit the individual.
Great information. I do need my coffee to watch this again, or I'm too much of a simple man. This a subject that really requires a one on one appointment. Maybe a cursor or some sort of highlighting on the graphs, while explaining, would be helpful. But, that's a lot of work and attention to detail the man put up to share this valuable information. Going to watch couple of times, cause my mindset is of 62
What's absent in this analysis is that at a given age 80/85/90, seniors income needs drop significantly. Outside healthcare, older seniors become less active and spend less. In effect, some delay SS to maximize a benefit they do not use
An investor can simply take the excess income and add to their investments at this point if they are spending less. The math will not adjust substantially.
Very helpful vid. In a few minutes you confirmed several points that had taken me several months to sort out info and determine valid calculations to test. In addition to 401K and IRA assets we have some money sitting in a savings account at nearly 0% interest. Some was the ready cash reserved for emergencies during working years and some was from sale of a small airplane. After 59 1/2 there's no penalty for accessing 401K assets so a cash emergency fund isn't as essential as during working years. Delaying SS is now creating some payoff for the savings account. By spending down the "0%" savings account for two years our SS benefits will be growing at 8% per year. As stated in the vid, SS benefits also get inflation adjustment therefore we'll have 16% larger SS benefits getting COLA bumps. I did look at taking SS at 62 and moving the savings account assets to some investment. But, with fees, taxes, and market volatility I couldn't see reliably beating the 8%+ of spending down cash reserve to delay SS.
SS benefits grow at 8% per year from FRA to age 70, but less at 5-6.66% per year from age 62 to FRA (formula is 5/12% of 1 percent per month first 2 years and 5/9% of 1 percent per month after 2 years to FRA...)
@@Bill-vk7fh You are correct on the %s. In my posting 7 months ago I did incorrectly state 8% for the period I was waiting. However, pulling out my old calculation notes I do see that I used to the correct %s for my pre-FRA years. So, I remain confident that delaying SS while spending down non or underperforming assests is more reliable than attempting to make short term (2-4 years) investments that would have a high risk of being in a down market but only a small chance of providing superior performance in an up market. Apologies for my misstatement in prior posting and thank you for a direct and factual response.
@@MrGoodaches thank you both for clearing it up. I didn't realize that the %change was different pre and post FRA. So many details to study and learn. I'm glad we're all out here trying to help each other.
This is the most overstressed decision in American culture. Just do your research and make the best decision for you. Then live your life.... There really is no "wrong" answer. And you don't need to be perfect.... ( Full disclosure. I am 72 and took mine at FRA. All is good)
What is the risk that Congress will change the rules and reduce or completely destroy SS? It would be good to get as much as you can before something like that happens.
My thought as well, especially since I have almost 20 years to go and it is a given that SS will be reduced if not outright eliminated by then. And even people who think tgat won’t happen, it’s still possible they’ll reduce your benefits if you were responsible and have other sources of retirement income because “it’s not fair to those in need,” never mind I’ve been paying into it my entire life.
Sheesh, so complicated. My husband took it this year at 66.4. I’m 61 and was going to take it at 62 but think I’ll wait to full retirement age. Hard to spend your savings though, but it was reduce our required minimum distributions is what we figure.
Video much appreciated. Wife has family history that makes her statistically less likely to outlive me. We have pensions and investments that will cover our expenses throughout retirement. I have been studying the SS benefit and timing for a while now. I do believe for me it will be age 68 and for her it will be age 62. My benefit will be much higher and I am 4 years older. My grand strategy involves leaving legacy wealth to my children for their retirement years. Your video was very helpful in helping me confirm my beliefs on what to do.
The big benefit of delaying until 70 is if it is your only income, it is tax-free. $4,000 tax fee will be better than $7,000 which is taxable when rates go way up in 2026.
Not so, depending on your benefits. The 50% taxation threshold is only $24k and is not indexed to inflation. If your benefit exceeds $48k, and given current inflation levels that won’t be long at all if you’re anywhere near, you’ll pay tax on your SS benefits even if you have $0 of other income.
The only way you get 7000 from SS is if two people are collecting, although inflation may push it up there. Max at 70 now is about 4550. But after the 15% discount, you'd be paying tax on 71400, around 8600 at most, or 62800, which is more than 48000. The point is more money, not less taxes. (tax estimates here quite crude, but 2026 rates are not super high on $71400.) I get if people don't want to wait, but it will cost them.
SS is taxable depending upon your overall annual income. I know already my military pension and SS will cause my SS to be taxed at the 85% taxable rate. While my military pension is completely taxable. We have ROTH accounts that are fortunately going to be tax free income.
Because the tax thresholds aren't inflation indexed but benefit levels are, SS benefits will eventually be taxed without other income being required. Higher earners should start seeing this soon, especially if single.
Not too variable at all, Greg. In your investment portfolio mix of stocks, bonds, and cash, just treat your soc sec and pension payments as bonds for a consistent risk / reward calc. And, keep in mind that the SSA "bond" yield is inflation-adjusted as well -- a very big deal in the overall calc.
If collecting later was the smart choice, the government wouldn't pay you a bonus for waiting or have the first retirement reform actions be increasing the retirement age.
Excellent point! The dangling carrot is actually opposite of what is taught in this video. Clearly the government's dangling carrot is for us to wait til age 70, probably because they know the statistics that death is going to come sooner that most anticipate.
I just hit my FRA, still working and making 6 figures. I plan to work until 70. I am undecided about drawing SS now and investing it, or waiting until I retire. This video helped me realize the risks. We don't need any of our savings to live on for retirement, as my SS and my military retirement will easily cover our expenses.
Excellent video. I think of Social Security as addressing Longevity Risk in my planning or as "Old Age & Survivors Insurance"...oh...what a coincidence. Especially like your addressing the SS taxation as well. I need to look at the formula for that to understand it more...some homework.
If taking social security lets me retire before 60, which it will, then I make a plan for taking it at 62. If I haven't depleted too much or any of my cash bridge by 62 then I will take it at a later date. So I have a well planned strategy for collecting ss at 62 and additional plans for collecting at 63 thru 70. Having tons of money when I am too old to enjoy it, or being the wealthiest corpse in the graveyard aren't important to me. No spouse or children so don't have that to worry about.
If the Congress eliminates the SS tax cap, they also need to lift the SS benefits cap! Why should we pay so more much but get so much less in our golden years?!
There is not much connection between what you paid in and benefits received anyway. Just look up "bend points." That said, eliminating the cap doesn't go very far toward resolving the problem, especially long term. Growth of benefits can't exceed growth of revenues forever.
Delaying helps because the annual increase to keep the age which you claim revenue neutral, everybody dies at 84. But nobody does a PV/FV financial analysis the SS payments that always lose ground to inflation. The other point all RUclips advisors miss is the risk of a market downturn. My team of CFA&CFP did a Monty Carlo simulation that showed the probability of NOT RUNNING out of money went from 98% down to 95%, if I took SS at 70 vs FRA. Why, because my portfolio was exposed to additional years of volitivity where I would have to take more money from my declining asset which I could maybe never make back. Sequence of returns risk. I retired at 60 in 2017 and have experienced 3 market downturns. 3rd and 4thQ of 2018. Covid19 in 2020. Currently in 2022, Putin's war. So, I will take my SS at FRA to preserve our portfolio and provide my healthy wife a good monthly check.
That’s funny when you say if the Politicians want to keep their job they will fix Social Security ! Actually if they don’t want to get mobbed to death they would fix it , keeping their job becomes moot .
A little off topic. Are the taxes paid on SS benefits credited back to the SS trust fund? For example, say I earn $40k in SS, 85% of which is taxable because of other income, and I'm in the 22% tax bracket, does the $40k * 85% * 22% = $7,480 get credited back to the fund? It is effectively a reduction in benefits. I'm really only getting $32,520 net benefits after taxes. I know since Johnson combined the trust with the general fund it does not change the deficit, but it is an effective reduction in benefits, SS is not paying out net as much as it appears.
My FRB is age 66.6 (not 67). I am going to take my retirement at age 65, this is about 89% of my full retirement. 62 would've been too early for me, I think 65 is perfect.
Your math doesn't work. You posted this 11 months ago... My FRB age is 66.6 and I just hit it this month. You should have already been 65 when you posted this, or you have your FRB age wrong. Either way, best of luck.
Why dont you tell people that the department of defense and others agencies borrow money from social security and those agents do not pay back. Taxes to social security is double taxed under certain circumstances.
What about a high powered income annuity where you're taking your SS at 62 in depositing it in the annuity then turning on income with the roll-up at 72. Does that eliminate sequence of returns or is the growth not enough to make up for the COLA?
All good points. But - my wife and I have virtually the same benefit amount (so no gain if she switched to my benefit if I died first.) If I claimed at 67 (vs 70), my breakeven point is age 80. Not sure if I will reach that age.
I have zero issues with a split strategy (delay one, take one early). Just recommended the other day a barbell strategy where one spouse files at 70 and the other at 62. Unique situation but I think a split strategy does a nice job of providing some diversified benefits.
@@SafeguardWealthManagement No argument here. But let me clarify: My wife is older - she took SS at 67. I was going to wait until 70. Then I looked at cumulative payouts starting at 67 and 70. I would get a LOT of money before turning 70. And we each have pensions and annuities (all joint life) providing more then we need to live on. My point was - (if I do not make it until 80) but started SS at 67 - we will have accumulated a tidy sum of money that will have had a chance to grow. My wife gets about the same SS benefit so she could keep hers instead of switching to mine. I realize that not everyone has the same set of circumstances.
How does the strategy change if your personal philosophy is you want the most money in your go-to years and do not care to leave an estate, let the last check bounce.
Great question. Of course it depends on your savings level. But if you have reasonable assets, we've seen income often maximized by using your savings in the go-go years as a bridge to a higher Social Security benefit. Once on Social Security, many couples will find their need beyond SS is very small. The idea that filing at 62 allows one to take more income in the go go years is only a reality for those will smaller savings. For retirees with savings, the filing strategy should have very little impact on the go go years income.
@@SafeguardWealthManagement agreed my FI had me file at 63, we have a nice nest egg and could have used traditional IRA funds since we are rolling funds to ROTH anyway. We got killed in taxes in our SS. We could suspend but seems like a lot of trouble.
Ugh, sorry to hear about the tax situation. It depends on how big your SS benefits are. If they are eliminating a sizable conversion room and you will be continuing to convert, it might be worth suspending. Can be a hassle though for sure. All depends on your current ages and amount left to convert.
What happens for a couple that is married, (HIM the larger earner/HER the lower earner), she doesn't delay takes SS early, but he delays his SS and dies before age 72. (before filing for the delayed SS benefit) - Will she still get the spousal death benefits even though he delayed or will she not receive it because his SS wasn't filed when he was alive? Note: Their entire nest egg portfolio outside of SS consist of ROTH assets, and no pension or other taxable assets they would sell.
@@_-Karl-_ thanks ok, I’m trying to explain why my dad should delay since he is still working. My mother is older than my dad by 1 year, she is 67 and hit FRA and is already collecting SS. But also if he died before 70 she would collect his benefit which is larger than hers by 2x at FRA next year for him, so delaying guarantees a larger benefit for her even after he goes.
Are the $32,000 (50% SS income taxed) and $44,000 (85% SS income taxed) income limits cliffs? Meaning if a married couple has provisional income $1 above those amounts the SS income are all fully taxable? Are these then taxed at their federal income for the total AGI levels? I tried to deconstruct the tax illustrations at 6:44 but could not come up with the formula of taxation ( I presume plus state taxes, not illustrated)
38 states don't tax social security at all. It would be based on income after deductions. The number used to test the limits is your AGI other income plus half your social security; yes it is a cliff, but the tax rates are not.
In the example with the couple, Todd…what if he dies at age 67, and had planned to wait until the age of 70 to claim SS. Would his wife still get the spousal widow benefit, even though he hadn’t filed? Or is the fact that he’s past 62 good enough to secure the wife’s widow benefits, the higher of the two?
If he died at FRA or before, the survivor benefit would be his benefit at FRA. If he died at 68, the survivor benefit is his benefit if he had filed the month he died. She'd have to file for it.
Great video, but I have a tweak to Your Myth 4. What if Sarah was a school teacher and subject to GPO that would result in no spousal or survivor benefit from Todd’s SSA? Should they take Todd’s early and let Sarah’s benefit continue to grow until 70? And what if Sarah was also subject to WEP reduction that would result in 50% cut to her PIA? Would that change anything? Thanks!
Let me just add to your commentary. Why wouldn't you work from 62 till fra if you are able to thus gaining all of your full retirement at age 67 assumably. Gainful employment offers you most likely a higher income than full retirement age social security would give you in the first place. This information is based on the fact that full retirement is only meant to cover 40% of your regular wages. I better reason to wait is that higher payouts when you need it the most will be helpful in fighting inflation long-term care costs Health costs which will all expand and grow in your later years and yet you'll still be stuck at less than full retirement income by seeking it early.
His income+other income+ half your social security is tested against the limits; I assume you would hit the 85% taxable. So you pay taxes on his income plus 85% of your social security less your deductions, at whatever rates that puts you.
Social security employee told me that the surviving spouse only receives what the deceased spouse would receive at full retirement age or what the amount is if the deceased filed early. What is the truth?
My understanding is the surviving spouse gets the full SS plus any additional credits. It is when the higher earner claims SS, if the spouse is collecting 50%, then they only get 50% of the amount of the higher spouse's SS at full retirement age (unless they are under full retirement age themselves then they get a lessor pro-rated amount.
It depends on when the person passes away, for simplicity, let's say that both spouses have filed for Social Security. Spouse 1 filed at 62, spouse 2 filed at 70. They are both in their 70s and spouse 2 passes away... Spouse 1 will lose their benefit and receive the full benefit of spouse 2 plus all additional credits.
Be careful as there are two different terms...one is a spousal benefit...and the other is a survivor benefit. Spousal benefits are maxed out at 50% of FRA (full retirement age). If the spouse takes SSA earlier than FRA, then the spousal benefit is maxed out at 50% of that benefit. Now, for the question you asked regarding survivor benefit, the amount would be 100% of the deceased spouses benefit including additional credits past FRA. So, if the deceased spouse began SS at age 70, that full amount would be considered the survivor benefit. A "spousal" benefit does NOT include an additional credits pass FRA.
Take it at 62. They will tax the increased amount away from you. Inflation is a bitch and they will increase your personal taxes to pay the increase everyone is getting.
small quibble, please say 'high income earning spouse' not 'husband' say 'high income, statistically shorter life span spouse' it is 2022 some apples are actually pears
By taking social security early (I'm 61.5), I can let my Roth, which is 100% stock, continue to grow. I paid a 12.4% average tax rate on my conversions and I'll avoid a 41.9% tax rate (including IRMAA & NIIT), when I make Roth withdrawals. Plus, I'm single, thus upon my death, my beneficiaries will receive $0 from my Social Security benefit. With those stats, it seems taking social security as early as possible, is the only viable alternative? If I delay taking social security five years (67 - 62 = 5), then I'm going to do damage to my 'gain from doing Roth conversions'. Einstein called compound growth as the 'eighth wonder of the world'. What would Einstein have called compound growth in a Roth IRA in an era of high tax rates, including IRMAA & NIIT? He'd probably say, 'keep your Roth withdrawals as small as possible, and taking social security at age 62 is a perfect solution'?
@@_-Karl-_ Delaying Social Security to age 63 or 64 provides a 5% increase; to age 65, 66 or 67 provides a 6.67% increase; to age 68, 69 or 70 provides an 8% increase. My Roth has well exceeded inflation, over the long term (I'm 100% stock). I retired at 48 and I won't be working during retirement. You're forgetting about IRMAA & NIIT assessments. And today's lower tax rates are set to expire on 12/31/25, unless Congress extends them. I don't have Roth withdrawals planned until after 12/31/25, when rates will probably be higher, along with California state taxes, IRMAA & NIIT (a 41.9% tax rate for me). Plus, I'm protecting myself against any future tax rate hikes. I performed my Roth conversion while in Texas (no state income tax), but I'll be in California when I withdraw from my Roth, thus I'm mostly avoiding their high rates.
Do you have any worries about investing 100% in stock at your age? Isn't it usual to invest in safer bonds the older you get in case the stock market suddenly drops 40 points right when you want to retire?
Is assuming better returns on the stock than would be offset by the 8% per year increase in the inflation protected Social Security benefit. Might be a risky bet. Best solution might be to work a couple more years or even take on a job after retiring for a few years in order to delay Social Security without hitting on the Roth early. Might even be able to make some more contributions to the Roth.
I did Roth conversions too but left a substantial amount in my traditional Ira. Now I am taking distributions from my traditional Ira and delaying Social Security until age 70. My Roth continues to grow in the background (100% stock as well) and when I reach 70 I should be able to amortize the remainder of the traditional without incurring any taxes. The Roth will be available for any emergencies with no tax liability.
@@davidpowell3347 Yeah, the 8%/yr guaranteed social security increase from full retirement age to age 70, is certainly appealing. It is further appealing with the inflation protection. Assuming a 2% annual inflation rate, this totals to a 10% rate, which is close to the historical rate of return on stocks. If I halt social security at age 67, and restart it at age 70, I'd have to withdraw a higher amount from my Roth. 85% of my social security would be federally taxed (& 0% state taxed), while 0% of my Roth withdrawals are federally & state taxed. My planned for rate of stock returns is 10.4%. If it weren't for the tax difference, I'd probably plan to halt social security at 67 & restart at age 70. But, when I include the tax impact, it makes continuing to draw social security from age 67 to 70, the better option. Also, by having a monthly social security check coming in, I'm able to invest for aggressively (100% stock). If I halted my social security check, I'd have to invest in some bonds, which would increase my opportunity cost (as bonds usually generate a lower return). If I were to live to a very advanced age, then halting social security would have been the better option. But, chances of living to a very advanced age are quite low (generally). Bottom line: it's a close call, but I still think Einstein would advise me that my top priority should be to protect my Roth IRA investment (let it grow), since compound growth from stock returns are hugely valuable, and the state/federal tax free feature is unbeatable. My gain from my Roth conversions is HUGE, because my average tax rate on the conversions was 12.4% (over 11 years), and my avoided tax rate on Roth withdrawals is 41.9%. If I make Roth withdrawals earlier, due to halting social security, then I'd miss out on some of my HUGE 'Roth conversion gains'.
Here’s my plan, if I love my job at that point I’ll keep working and take it later; if I hate my job or have health issues then I’m taking it early.
Medicare is another consideration--it starts at 65. If you have health issues, bills could be pretty high without work insurance.
This is great video if all you care about in life is getting the most out of your social security income. What about getting the most out of your life? Did you notice you don't break even until around age 82? Well guess what? You probably won't NEED a lot of money after age 82. Unless you're a health machine, it's about time to die, or you'll be physically limited in what you can do.
LIFE planning is what's important. If you have a plan to live with the benefits and saving you have, it's stupid to keep working when you could be enjoying retirement - when you can still get around and enjoy yourself.
My parents are in their mid 80s and live very cheaply - not because they want to or have to, but because they physically can barely get to the grocery store and won't be able to do that soon. They both have multiple health conditions now that limit their abilities and mobility.
The good news is they both retired in their 50s back when pensions and retirement healthcare still existed and had decades to enjoy their retirement together - before health issues slowed them down. They would tell you they've had a wonderful life and enjoy their more limited life now - knowing they took their chance to enjoy life when they could.
My advice debunking this video - Retire as soon as you have the financial means to have a retirement lifestyle that works for you. Or work until you die as suggested. It's your life.
I totally agree, why work in your 60s and miss out on more active part of your later years just so you can have more money in your 80s (if you make it there) when you don't spend much except on health care.
@@onlywenilaugh6589 im afraid you are confusing not working with taking social security....you can retire at fifty if you can afford it...the problem isnt that you cant afford to quit..its how you will live with only social security to live on after you;ve spent everytrhing else...
Agree 100%.
When to take SS is a very complex problem with several unknowns. I think I will split the difference between 62 and 70 and take at 66. 😅
Yep, probably that's the best of both worlds. I am doing that too, except I'm doing 65 (my FRB is is 66.6).
Tbh the people who died at 68 probably won't feel great being told they took the statistically sensible option by delaying taking their benefits lmao
I definitely still think taking benefits early is the best idea.
Since SS only grows at a rate comparable to the rate the market grows i see no point delaying. If you take the money it means you don't have to take that money out of your 401k
Only caveat here is if someone is kinda poor and desperately needs to earn more money then sure, keep working until 70 to maximize everything. But most people weighing the option are actually doing well enough that they're not desperate at all. They're just anxious.
"You don't need more money, you need a better plan." You know, it's likely true, for most people, that they need both a better plan,*and* more money. I mean, I'm pretty sure that's true for me, at least. Anyway, another great explainer video, thanks!
Don't forget to that folks who file early usually get to stop working 3-5 years eerier than those who wait. Waiting means you will be a lot less active and miss one of the best part of your later years between 62 and 67-70. Might be a good trade off to gain those years not sitting in the crap old office.
I retired at 61. I am 64 and I’m waiting until 70 for my Social Security. My wife and I have been on cruises and road trips and we’re going on a through hike of the Appalachian Trail next year. Just gotta plan for retirement. Make the investments while you’re working and you will be fine.
@@johnscott2746 That's mighty impressive, John. Good for you!
People think that SS rules are simple. But in reality, the decisions concerning it are as complex as tax planning!
Thank you for talking about those myths!
Yes very complicated, especially if you are a married couple. I checked out a helpful book that had case studies. Your birth date, your spouse's birth date and each of your expected benefit amounts all play into it. I ended up taking my full benefit at 66, spouse filed to get a dependent benefit from me until he filed for his delayed SS at 70, a year later.
Very good summaries on those myths. If nothing else, it will help newbies to the Social Security benefit discussion. Great job.
Thank you Jim!
Very helpful, thanks. I also add in a quality of life factor. At 62 I would expect to use more funds for travel and life quality enhancements than the break even age of 83 where my biggest concern might be finding the remote. Again thanks for sharing
You failed to include the present value of money and the obesity factor in the US. If you are obese and run the risk of passing away earlier, the I doubt you will see much of your eighties. Also there is a cap for what a married couple can get from social security. It doesn't make much sense for both people to wait until 70. If you can pay your debt earlier by receiving earlier, then your calculations are off as well. I would be cautious about discussing delaying social security benefits. How long your parents lived will play a major factor in how long you live no matter how healthy you think you are. The stress you reduce by retiring earlier may also benefit the individual.
Then again, you can get hit by a bus tomorrow... it's all an educated guess anyway.
Great information. I do need my coffee to watch this again, or I'm too much of a simple man. This a subject that really requires a one on one appointment. Maybe a cursor or some sort of highlighting on the graphs, while explaining, would be helpful. But, that's a lot of work and attention to detail the man put up to share this valuable information. Going to watch couple of times, cause my mindset is of 62
What's absent in this analysis is that at a given age 80/85/90, seniors income needs drop significantly. Outside healthcare, older seniors become less active and spend less. In effect, some delay SS to maximize a benefit they do not use
An investor can simply take the excess income and add to their investments at this point if they are spending less. The math will not adjust substantially.
Outstanding details. Love it. 70 for me
Thank you Joe! You put out great content as well!
Very helpful vid. In a few minutes you confirmed several points that had taken me several months to sort out info and determine valid calculations to test.
In addition to 401K and IRA assets we have some money sitting in a savings account at nearly 0% interest. Some was the ready cash reserved for emergencies during working years and some was from sale of a small airplane. After 59 1/2 there's no penalty for accessing 401K assets so a cash emergency fund isn't as essential as during working years. Delaying SS is now creating some payoff for the savings account. By spending down the "0%" savings account for two years our SS benefits will be growing at 8% per year. As stated in the vid, SS benefits also get inflation adjustment therefore we'll have 16% larger SS benefits getting COLA bumps.
I did look at taking SS at 62 and moving the savings account assets to some investment. But, with fees, taxes, and market volatility I couldn't see reliably beating the 8%+ of spending down cash reserve to delay SS.
SS benefits grow at 8% per year from FRA to age 70, but less at 5-6.66% per year from age 62 to FRA (formula is 5/12% of 1 percent per month first 2 years and 5/9% of 1 percent per month after 2 years to FRA...)
@@Bill-vk7fh You are correct on the %s. In my posting 7 months ago I did incorrectly state 8% for the period I was waiting. However, pulling out my old calculation notes I do see that I used to the correct %s for my pre-FRA years. So, I remain confident that delaying SS while spending down non or underperforming assests is more reliable than attempting to make short term (2-4 years) investments that would have a high risk of being in a down market but only a small chance of providing superior performance in an up market.
Apologies for my misstatement in prior posting and thank you for a direct and factual response.
@@MrGoodaches thank you both for clearing it up. I didn't realize that the %change was different pre and post FRA. So many details to study and learn. I'm glad we're all out here trying to help each other.
This is the most overstressed decision in American culture. Just do your research and make the best decision for you. Then live your life.... There really is no "wrong" answer. And you don't need to be perfect.... ( Full disclosure. I am 72 and took mine at FRA. All is good)
What is the risk that Congress will change the rules and reduce or completely destroy SS? It would be good to get as much as you can before something like that happens.
My thought as well, especially since I have almost 20 years to go and it is a given that SS will be reduced if not outright eliminated by then.
And even people who think tgat won’t happen, it’s still possible they’ll reduce your benefits if you were responsible and have other sources of retirement income because “it’s not fair to those in need,” never mind I’ve been paying into it my entire life.
Sheesh, so complicated. My husband took it this year at 66.4. I’m 61 and was going to take it at 62 but think I’ll wait to full retirement age. Hard to spend your savings though, but it was reduce our required minimum distributions is what we figure.
Video much appreciated. Wife has family history that makes her statistically less likely to outlive me. We have pensions and investments that will cover our expenses throughout retirement. I have been studying the SS benefit and timing for a while now. I do believe for me it will be age 68 and for her it will be age 62. My benefit will be much higher and I am 4 years older. My grand strategy involves leaving legacy wealth to my children for their retirement years. Your video was very helpful in helping me confirm my beliefs on what to do.
Glad we can be of service! Thanks for the comment.
The big benefit of delaying until 70 is if it is your only income, it is tax-free.
$4,000 tax fee will be better than $7,000 which is taxable when rates go way up in 2026.
Not so, depending on your benefits. The 50% taxation threshold is only $24k and is not indexed to inflation. If your benefit exceeds $48k, and given current inflation levels that won’t be long at all if you’re anywhere near, you’ll pay tax on your SS benefits even if you have $0 of other income.
The only way you get 7000 from SS is if two people are collecting, although inflation may push it up there. Max at 70 now is about 4550. But after the 15% discount, you'd be paying tax on 71400, around 8600 at most, or 62800, which is more than 48000. The point is more money, not less taxes. (tax estimates here quite crude, but 2026 rates are not super high on $71400.) I get if people don't want to wait, but it will cost them.
SS is taxable depending upon your overall annual income. I know already my military pension and SS will cause my SS to be taxed at the 85% taxable rate. While my military pension is completely taxable. We have ROTH accounts that are fortunately going to be tax free income.
@@headlibrarian1996nope. Under current limits on Social Security benefits there is no way that you can pay income tax if SS is your only income.
Because the tax thresholds aren't inflation indexed but benefit levels are, SS benefits will eventually be taxed without other income being required. Higher earners should start seeing this soon, especially if single.
Which thresholds?
@@LuisVelazquezLV3 The SS benefits taxation thresholds.
Can you comment on how having a guaranteed income stream from a pension affects the calculus? Or is that too variable for this topic?
Not too variable at all, Greg. In your investment portfolio mix of stocks, bonds, and cash, just treat your soc sec and pension payments as bonds for a consistent risk / reward calc. And, keep in mind that the SSA "bond" yield is inflation-adjusted as well -- a very big deal in the overall calc.
If collecting later was the smart choice, the government wouldn't pay you a bonus for waiting or have the first retirement reform actions be increasing the retirement age.
Excellent point! The dangling carrot is actually opposite of what is taught in this video. Clearly the government's dangling carrot is for us to wait til age 70, probably because they know the statistics that death is going to come sooner that most anticipate.
I just hit my FRA, still working and making 6 figures. I plan to work until 70. I am undecided about drawing SS now and investing it, or waiting until I retire. This video helped me realize the risks. We don't need any of our savings to live on for retirement, as my SS and my military retirement will easily cover our expenses.
I'm guessing you love your work since there is no reason to delay retirement given your financial situation.
Excellent video. I think of Social Security as addressing Longevity Risk in my planning or as "Old Age & Survivors Insurance"...oh...what a coincidence. Especially like your addressing the SS taxation as well. I need to look at the formula for that to understand it more...some homework.
If taking social security lets me retire before 60, which it will, then I make a plan for taking it at 62. If I haven't depleted too much or any of my cash bridge by 62 then I will take it at a later date. So I have a well planned strategy for collecting ss at 62 and additional plans for collecting at 63 thru 70. Having tons of money when I am too old to enjoy it, or being the wealthiest corpse in the graveyard aren't important to me. No spouse or children so don't have that to worry about.
If the Congress eliminates the SS tax cap, they also need to lift the SS benefits cap! Why should we pay so more much but get so much less in our golden years?!
Those who are worried about the tax cap being lifted have no worries about needing their SS payment to meet their needs.
There is not much connection between what you paid in and benefits received anyway. Just look up "bend points." That said, eliminating the cap doesn't go very far toward resolving the problem, especially long term. Growth of benefits can't exceed growth of revenues forever.
Will lifting the cap negatively affect your quality of life?
Great presentation - as always!
Two of my friends’ husbands both died right after receiving their 1st SS checks.
If you need the money, take it.
Delaying helps because the annual increase to keep the age which you claim revenue neutral, everybody dies at 84. But nobody does a PV/FV financial analysis the SS payments that always lose ground to inflation. The other point all RUclips advisors miss is the risk of a market downturn. My team of CFA&CFP did a Monty Carlo simulation that showed the probability of NOT RUNNING out of money went from 98% down to 95%, if I took SS at 70 vs FRA. Why, because my portfolio was exposed to additional years of volitivity where I would have to take more money from my declining asset which I could maybe never make back. Sequence of returns risk. I retired at 60 in 2017 and have experienced 3 market downturns. 3rd and 4thQ of 2018. Covid19 in 2020. Currently in 2022, Putin's war. So, I will take my SS at FRA to preserve our portfolio and provide my healthy wife a good monthly check.
I am all for elimination of the cap.
That’s funny when you say if the Politicians want to keep their job they will fix Social Security ! Actually if they don’t want to get mobbed to death they would fix it , keeping their job becomes moot .
A little off topic. Are the taxes paid on SS benefits credited back to the SS trust fund? For example, say I earn $40k in SS, 85% of which is taxable because of other income, and I'm in the 22% tax bracket, does the $40k * 85% * 22% = $7,480 get credited back to the fund? It is effectively a reduction in benefits. I'm really only getting $32,520 net benefits after taxes. I know since Johnson combined the trust with the general fund it does not change the deficit, but it is an effective reduction in benefits, SS is not paying out net as much as it appears.
LBJ did no such thing. The money goes back to the fund.
My FRB is age 66.6 (not 67). I am going to take my retirement at age 65, this is about 89% of my full retirement. 62 would've been too early for me, I think 65 is perfect.
you'll be eligible for Medicare; it matters.
Your math doesn't work. You posted this 11 months ago... My FRB age is 66.6 and I just hit it this month. You should have already been 65 when you posted this, or you have your FRB age wrong. Either way, best of luck.
Why dont you tell people that the department of defense and others agencies borrow money from social security and those agents do not pay back.
Taxes to social security is double taxed under certain circumstances.
Because they pay interest on the borrowing and have started paying back now that the payroll taxes are not enough to fund all benefits.
Very helpful. Thank you.
You're very welcome
What about a high powered income annuity where you're taking your SS at 62 in depositing it in the annuity then turning on income with the roll-up at 72. Does that eliminate sequence of returns or is the growth not enough to make up for the COLA?
All good points. But - my wife and I have virtually the same benefit amount (so no gain if she switched to my benefit if I died first.) If I claimed at 67 (vs 70), my breakeven point is age 80. Not sure if I will reach that age.
I have zero issues with a split strategy (delay one, take one early). Just recommended the other day a barbell strategy where one spouse files at 70 and the other at 62. Unique situation but I think a split strategy does a nice job of providing some diversified benefits.
@@SafeguardWealthManagement No argument here. But let me clarify: My wife is older - she took SS at 67. I was going to wait until 70. Then I looked at cumulative payouts starting at 67 and 70. I would get a LOT of money before turning 70. And we each have pensions and annuities (all joint life) providing more then we need to live on. My point was - (if I do not make it until 80) but started SS at 67 - we will have accumulated a tidy sum of money that will have had a chance to grow. My wife gets about the same SS benefit so she could keep hers instead of switching to mine. I realize that not everyone has the same set of circumstances.
How does the strategy change if your personal philosophy is you want the most money in your go-to years and do not care to leave an estate, let the last check bounce.
Great question. Of course it depends on your savings level. But if you have reasonable assets, we've seen income often maximized by using your savings in the go-go years as a bridge to a higher Social Security benefit. Once on Social Security, many couples will find their need beyond SS is very small.
The idea that filing at 62 allows one to take more income in the go go years is only a reality for those will smaller savings. For retirees with savings, the filing strategy should have very little impact on the go go years income.
@@SafeguardWealthManagement agreed my FI had me file at 63, we have a nice nest egg and could have used traditional IRA funds since we are rolling funds to ROTH anyway. We got killed in taxes in our SS. We could suspend but seems like a lot of trouble.
FI means Financial Advisor.
Ugh, sorry to hear about the tax situation. It depends on how big your SS benefits are. If they are eliminating a sizable conversion room and you will be continuing to convert, it might be worth suspending. Can be a hassle though for sure. All depends on your current ages and amount left to convert.
What happens for a couple that is married, (HIM the larger earner/HER the lower earner), she doesn't delay takes SS early, but he delays his SS and dies before age 72. (before filing for the delayed SS benefit)
- Will she still get the spousal death benefits even though he delayed or will she not receive it because his SS wasn't filed when he was alive?
Note: Their entire nest egg portfolio outside of SS consist of ROTH assets, and no pension or other taxable assets they would sell.
@@_-Karl-_ thanks ok, I’m trying to explain why my dad should delay since he is still working. My mother is older than my dad by 1 year, she is 67 and hit FRA and is already collecting SS. But also if he died before 70 she would collect his benefit which is larger than hers by 2x at FRA next year for him, so delaying guarantees a larger benefit for her even after he goes.
Are the $32,000 (50% SS income taxed) and $44,000 (85% SS income taxed) income limits cliffs? Meaning if a married couple has provisional income $1 above those amounts the SS income are all fully taxable? Are these then taxed at their federal income for the total AGI levels? I tried to deconstruct the tax illustrations at 6:44 but could not come up with the formula of taxation ( I presume plus state taxes, not illustrated)
38 states don't tax social security at all. It would be based on income after deductions. The number used to test the limits is your AGI other income plus half your social security; yes it is a cliff, but the tax rates are not.
AGI is before deductions plus tax free interest.
The amount taxable gets a little weird--85% is the worse case. There are two other calculations--you get the best of three.
In the example with the couple, Todd…what if he dies at age 67, and had planned to wait until the age of 70 to claim SS. Would his wife still get the spousal widow benefit, even though he hadn’t filed? Or is the fact that he’s past 62 good enough to secure the wife’s widow benefits, the higher of the two?
Wow! that's an epiphany like question. Definetly going to research this with all mighty google.
If he died at FRA or before, the survivor benefit would be his benefit at FRA. If he died at 68, the survivor benefit is his benefit if he had filed the month he died. She'd have to file for it.
Great video, but I have a tweak to Your Myth 4. What if Sarah was a school teacher and subject to GPO that would result in no spousal or survivor benefit from Todd’s SSA? Should they take Todd’s early and let Sarah’s benefit continue to grow until 70? And what if Sarah was also subject to WEP reduction that would result in 50% cut to her PIA? Would that change anything? Thanks!
Let me just add to your commentary. Why wouldn't you work from 62 till fra if you are able to thus gaining all of your full retirement at age 67 assumably. Gainful employment offers you most likely a higher income than full retirement age social security would give you in the first place. This information is based on the fact that full retirement is only meant to cover 40% of your regular wages. I better reason to wait is that higher payouts when you need it the most will be helpful in fighting inflation long-term care costs Health costs which will all expand and grow in your later years and yet you'll still be stuck at less than full retirement income by seeking it early.
How does ss tax work if my husband is not collecting social security just me and our income is from his current job?
His income+other income+ half your social security is tested against the limits; I assume you would hit the 85% taxable. So you pay taxes on his income plus 85% of your social security less your deductions, at whatever rates that puts you.
But......you spend less and need less every year in retirement according to BLS
Social security employee told me that the surviving spouse only receives what the deceased spouse would receive at full retirement age or what the amount is if the deceased filed early. What is the truth?
My understanding is the surviving spouse gets the full SS plus any additional credits. It is when the higher earner claims SS, if the spouse is collecting 50%, then they only get 50% of the amount of the higher spouse's SS at full retirement age (unless they are under full retirement age themselves then they get a lessor pro-rated amount.
Louis, thank you for explaining spousal benefits, but it’s clear as mud.
It depends on when the person passes away, for simplicity, let's say that both spouses have filed for Social Security. Spouse 1 filed at 62, spouse 2 filed at 70. They are both in their 70s and spouse 2 passes away... Spouse 1 will lose their benefit and receive the full benefit of spouse 2 plus all additional credits.
What SS employee told you were correct.
Be careful as there are two different terms...one is a spousal benefit...and the other is a survivor benefit. Spousal benefits are maxed out at 50% of FRA (full retirement age). If the spouse takes SSA earlier than FRA, then the spousal benefit is maxed out at 50% of that benefit. Now, for the question you asked regarding survivor benefit, the amount would be 100% of the deceased spouses benefit including additional credits past FRA. So, if the deceased spouse began SS at age 70, that full amount would be considered the survivor benefit. A "spousal" benefit does NOT include an additional credits pass FRA.
Take it at 62. They will tax the increased amount away from you. Inflation is a bitch and they will increase your personal taxes to pay the increase everyone is getting.
small quibble, please say 'high income earning spouse' not 'husband' say 'high income, statistically shorter life span spouse' it is 2022 some apples are actually pears
Sorry, I was referencing the specific example we gave in the video rather than implying this was always the case
Lmao
By taking social security early (I'm 61.5), I can let my Roth, which is 100% stock, continue to grow. I paid a 12.4% average tax rate on my conversions and I'll avoid a 41.9% tax rate (including IRMAA & NIIT), when I make Roth withdrawals. Plus, I'm single, thus upon my death, my beneficiaries will receive $0 from my Social Security benefit. With those stats, it seems taking social security as early as possible, is the only viable alternative? If I delay taking social security five years (67 - 62 = 5), then I'm going to do damage to my 'gain from doing Roth conversions'. Einstein called compound growth as the 'eighth wonder of the world'. What would Einstein have called compound growth in a Roth IRA in an era of high tax rates, including IRMAA & NIIT? He'd probably say, 'keep your Roth withdrawals as small as possible, and taking social security at age 62 is a perfect solution'?
@@_-Karl-_ Delaying Social Security to age 63 or 64 provides a 5% increase; to age 65, 66 or 67 provides a 6.67% increase; to age 68, 69 or 70 provides an 8% increase. My Roth has well exceeded inflation, over the long term (I'm 100% stock). I retired at 48 and I won't be working during retirement. You're forgetting about IRMAA & NIIT assessments. And today's lower tax rates are set to expire on 12/31/25, unless Congress extends them. I don't have Roth withdrawals planned until after 12/31/25, when rates will probably be higher, along with California state taxes, IRMAA & NIIT (a 41.9% tax rate for me). Plus, I'm protecting myself against any future tax rate hikes. I performed my Roth conversion while in Texas (no state income tax), but I'll be in California when I withdraw from my Roth, thus I'm mostly avoiding their high rates.
Do you have any worries about investing 100% in stock at your age? Isn't it usual to invest in safer bonds the older you get in case the stock market suddenly drops 40 points right when you want to retire?
Is assuming better returns on the stock than would be offset by the 8% per year increase in the inflation protected Social Security benefit. Might be a risky bet.
Best solution might be to work a couple more years or even take on a job after retiring for a few years in order to delay Social Security without hitting on the Roth early. Might even be able to make some more contributions to the Roth.
I did Roth conversions too but left a substantial amount in my traditional Ira. Now I am taking distributions from my traditional Ira and delaying Social Security until age 70. My Roth continues to grow in the background (100% stock as well) and when I reach 70 I should be able to amortize the remainder of the traditional without incurring any taxes. The Roth will be available for any emergencies with no tax liability.
@@davidpowell3347 Yeah, the 8%/yr guaranteed social security increase from full retirement age to age 70, is certainly appealing. It is further appealing with the inflation protection. Assuming a 2% annual inflation rate, this totals to a 10% rate, which is close to the historical rate of return on stocks. If I halt social security at age 67, and restart it at age 70, I'd have to withdraw a higher amount from my Roth. 85% of my social security would be federally taxed (& 0% state taxed), while 0% of my Roth withdrawals are federally & state taxed. My planned for rate of stock returns is 10.4%. If it weren't for the tax difference, I'd probably plan to halt social security at 67 & restart at age 70. But, when I include the tax impact, it makes continuing to draw social security from age 67 to 70, the better option. Also, by having a monthly social security check coming in, I'm able to invest for aggressively (100% stock). If I halted my social security check, I'd have to invest in some bonds, which would increase my opportunity cost (as bonds usually generate a lower return). If I were to live to a very advanced age, then halting social security would have been the better option. But, chances of living to a very advanced age are quite low (generally). Bottom line: it's a close call, but I still think Einstein would advise me that my top priority should be to protect my Roth IRA investment (let it grow), since compound growth from stock returns are hugely valuable, and the state/federal tax free feature is unbeatable. My gain from my Roth conversions is HUGE, because my average tax rate on the conversions was 12.4% (over 11 years), and my avoided tax rate on Roth withdrawals is 41.9%. If I make Roth withdrawals earlier, due to halting social security, then I'd miss out on some of my HUGE 'Roth conversion gains'.
Thank you
You're welcome Pat!
Some people need their money. Must be nice being you
Yes, many (most?) people don't have the luxury of doing this analysis. They need the money now.