Tau837
Footballguy
Another example of the inconsistent thinking I regularly see on this topic. People are willing to give up the guaranteed 8% increase every year because they assume they can invest and the market will deliver more than that. The average real return of the market is below that. And historically the real return of a 100% S&P 500 portfolio is negative over a 10 year period 11% of the time. And most people in their 60s aren’t 100% equities, so their actual returns are even lower. So this feeling that 7-8% real returns of a retirement portfolio over 10 years is virtually guaranteed, which is what I typically hear form the “I’ll take SS early and invest it” crowd, isn’t without significant risk.And what if you lost money on your invested early SS money?I don’t agree with this at all in terms of “probably a mistake.” If I didn’t have a lot of traditional 401k/IRA money that I want to transfer into Roths during low or no income years (either before 62 or 62+ because I have a good amount in taxable accounts to live off that), I would take it at 62 and invest it. I’m still too far away to know how many low or no income years I’ll have to transfer to Roths, but I’ve done a few advanced calls including investment returns from 62 to 70 and as long as you can get 6-7% returns on the money you get from 62-70, you would never catch up starting at 70. That means that the monthly investment income plus your year 62 SS monthly amount would be higher than your 70 SS monthly amount. Add in the fact that you “own” the nut that’s producing the monthly investment income (all the money you got from 62-70) and that nut is yours/your heirs if you pass early. You don’t own the money that’s producing the age 70 SS income above the 62 SS income.Obviously it's unique to everyone's situation, but generally speaking, it's probably a mistake to claim before full retirement age. There are really only a few specific instances where it makes sense to take it early.
My situation could be much different in that I expect my wife and I to both be getting close to the max SS so no worrying about spousal benefits. If SS was a much bigger nut in my retirement income I would also consider working longer and waiting for SS, but most people who start at 62 do so because they have to not because they want to invest. That said, most people in here don’t appear to fall in that bucket.
*The only reason I don’t want SS and transfer to Roths in the same year is because you can lose up to 50% of your SS benefits pre-67 if you have too much income and the transfer would be considered income.
And again, these tend to be the same people that are worried that a 4% SWR is too aggressive.
ETA: this is also based on people 100% investing that early SS money, even net of taxes on it. Who actually does that?
For me, it isn't at all about believing I can invest it and earn 8%+ by investing. It is more about not having confidence that I will live long enough to come out ahead by waiting... and to a lesser degree not having confidence that the payouts will always be there throughout my life. The latter concern is what started this tangent of discussion.