Another one of the decisions that will have to be made in retirement is just exactly when you want to start drawing your Social Security. Everyone's situation is different and is influenced by many variables. There are two schools of thought on this process. The first is "get your hands on the money before it is gone or the program is changed." The other process is to look at your own situation and figure out what is best for you and your spouse as far as total benefits, survivors benefits, tax situation, etc. You get a 7% bump for every year you wait to draw beyond your normal retirement age.
When I retired at age 65 I took the first approach; "give me the money before it is gone." By drawing at age 65 I received a $156 lower payment than if I had waited until full retirment age of 66. I would have to draw for 14 years and 3 months to break even if I had waited to draw at age 66. However, in hindsight, I may have been better off waiting until age 66. As a FedEx retiree I received a lump sum payment for unused vacation and a lump sum payment for nonqualified pension funds. Both of these were taxed. I could have used that money to replace the first or second year of Social Security payments and paid less in Federal Taxes. It would have reduced my MAGI for last year and this year which is used to compute your Medicare costs. Also, my wife's survivor benefit and any future COLA's would have been based on the higher amount at age 66 or 67.
There is a lot to consider for anyone reaching this milestone. Just some food for thought. Do your own research and figure out what is best for you.

 

How long are you going to live?

The Ponzi known as SS is a small addition to a real retirement fund, it isn't even going to cover your taxes. Debates about when to start it are therefore somewhat moot, at some point it is going to run into even more severe funding problems and any benefit may be denied to those who actually planned their future.

The assumption that it is always going to be there is perhaps the biggest mistake many of us can make.

156$ a month is just enough to keep most people in cat food, beer and bait at best.

You can easily make more money by retiring to a state which does not tax your retirement payments.

 

"How long am I going to live" is the unknown in this whole planning equation. You can look at actuarial tables, plot your family history, get a complete physical workup and then get hit by a truck coming home from the doctor's office. I agree that Social Security is a Ponzi scheme and is doomed to failure. Also, think about this. You pay into the fund with after tax dollars, but 85% of your witdrawals are taxed as ordinary income!!
We live in a very tax friendly state (Mississppi). None of my pensions are taxed, no IRA or 401(K) funds are taxed and when you turn 65 they lower your property tax about 20%. The only state tax I am liable for is on dividends, interest, etc. and, with a very generous standard deduction or all of your federal deductions, plus a very generous exemption, those taxes are zero.
Just trying to generate a little talk about planning and dealing with this whole retirement thing.

 

FWIW, my financial advisor agreed with you: "We anticipate changes in the Social Security payment formula. The details of these changes are still unknown, but they will not be to your advantage. We suggest that you begin collecting benefits as soon as possible."

 

Sounds like you have a good handle on everything, tax avoidance is key for long term benefits to you and your estate.

Good point Tom, I think any advisor worth his salt would give the same advice.
Given the long term trend, the future is not going to be to our advantage, but the real irony is that it is going to hurt those who can least afford it the most.

 

I wouldn't waste one moment Flyinhigh worrying about what you "coulda, shoulda" done in hindsight with SS. Many aspects of personal finance are, "Measure with a micrometer, mark with a crayon, cut with an axe." You don't know when you're going to die. You don't know what taxes are going to be in the future. You don't know what SS will pay in the future. All you can do is make educated guesses.

Jungle, maybe you mistyped but SS is more than just a "small addition" to people's retirement funds. When he was talking about $156 month, that's not what he was collecting. That was the change in monthly benefit because he didn't wait until FRA to start collecting. For a professional pilot for example, he/she may be collecting over $2,000/month in inflation adjusted dollars. Further, the spouse will be collecting (in most cases) 1/2 of that benefit at a minimum or their own accumulated benefit, whichever is better (with some exceptions). So for a married couple, you could easily be looking at over 3 grand/month, adjusted for inflation annually, and perhaps over 4 grand/month if both had decent jobs. For the vast majority of retired Americans, that's likely a good chunk of their retirement income.

 

Understood, the fact is what sounds like a lot of money really would not cover Federal taxes on retirement income in this case.
The money just vanished because of other income.
Neat trick.

We all know if a private firm tried to sell a plan based on the SS model they would all land in jail.

 

WW

 

Start collecting the day you can...