Barron's had two articles about retirement, one about Social Security and one saying that most workers don't want to work past 62. The sentiment of that second one, there are articles all the time that say different things about the desire to versus the need to work and so on. The better framing of this IMO is to have a Plan A of what you intend to do and then some sort of backup in case your hand is forced somehow (layoff or health) or you get to some age and decide you've got to do something different.
If you want to retire at 60, great, do the planning and the work but be adaptable if something doesn't work out. Plan to work until 72? Ok what is your backup if you can't. The important thing is knowing what you actually care about and then figuring out how to plan toward that outcome. My own pitch is that these things become much easier when you have a workable Plan B.
The first article gave an update about when and by how much the looming cuts in SS payouts will be but it had different figures than what I saw earlier this week, sorry no link. The first thing I read said the cuts had been pushed back to 2035 and that now it was pointing to only a 17% cut realizing the precise details change every year.
The article didn't talk about how unlikely it is that a cut will be implemented all or nothing with everyone taking an x% cut on day one. Current retirees should not expect a cut (the article did say that) and there is some birth year that cuts, if they really happen, would be imposed like everyone born after a certain year, maybe 1975 or something? Of course cuts actually happening is very unlikely. At some point, fearing for their jobs, it is a good bet that Congress would intercede. Planning around the idea of them failing is prudent but total failure is a low probability outcome.
I will again interject the idea of means testing though, I think that is more plausible for higher income people or those with more assets. Got a million bucks (in today's dollars) and not quite 50 years old? Yeah, you might get means tested.
There were two thoughts on claiming strategies, one I liked and one I thought was cringe. Don't make changes to what you have in mind for when to take it over concerns about a cut. That makes sense, and there is plenty of time to Plan B in case that turns out to be wrong. Someone born in 1975 or later to stick with my made up example could face a cut regardless of when they take. Born in 1980 and it does end up cutting reduced, it would be reduced whether the person born in 1980 takes it at 62 or 70. The advice I thought was cringe was implying that everyone should wait as long as possible to take it. "there's a clear payoff to delaying as long as possible."
There are endless different scenarios to dictate when an individual should start Social Security. The idea that everyone should take the same action doesn't make sense to me. I think everyone should understand how it works in terms of the size of the monthly check going up the longer you wait, knowing that is important but holding out to some older age isn't the answer for everyone. There's no wrong answer assuming someone is making an informed decision.
The comments are always worth reading on these articles and more of them favor taking it early than waiting. Back to making sure you're informed, taking it before your full retirement age while still working is not a great mix for tax reasons. Go learn about that before taking it early.
There were two interesting ideas in the comments I want to touch on. One is to offset SS pay cuts by lowering or even eliminating the tax owed on IRA distributions. In the early years of taking an RMD it would be a nice offset but it wouldn't equal out in too many instances but later in retirement it would become more meaningful as the RMD percentage increases. Those are different pots of money by the way. Cutting that tax doesn't take from the SS program. Yes, it's accounting but that's how it works.
The other idea was to take it at 62, put that money right into the stock market and presumably live off savings, passive income or have earned income below $22,320. There seems to be a lot variables here but lets just keep it simple for now and assume someone's age 62 payout it $2000/mo. They'd be able to put in all $2000 in for three years before Medicare starts.
I backtested May, 2015 to May 2018 which included one pretty good year, one average year and portions of two years that were flat. If that number seems too big, it isn't. For 36 months, this person put in $2000 per and then got some growth. Then at age 65 in May, 2018 this person would start having Medicare deducted, let's assume $200 which is a little high leaving $1800 to keep buying VFINX every month for, let's say the next five years until age 70.
So now they have $313,000 in this account in May, 2023 at age 70 from SS going into VFINX, actually more because starting in 2018, the $1800 would have been a higher number due to COLA. If they had waited until age 70 to take SS instead, they would be getting $4400, less $200 (still too high) for Medicare, so $4200 versus $1800 plus 4% of $313,445 which is $1044; $2844 versus $4200.
If the $1800 monthly SS check starting at age 65 is adjusted up by 3% per year from age 62 then he would have been putting $1966 per month for five years (that actually pads it a little), bringing the total up to $327,165 so still not as much as waiting but please let me know if there is an error in my process.
There are other reasons to take it early and they either resonate enough for you to take it early or not. I continue to plan on waiting until 70 not for any numerical reason but to leave my wife the largest survivor benefit possible if I die young-ish. But I would suggest she take it early (for her) at 64 and two months, the same time that I turn 70.
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