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3 out of 4 retirees receiving reduced Social Security benefits

http://www.marketwatch.com/story/3-out-of-4-retirees-receiving-reduced-social-security-benefits-2015-05-05

"Of course, the best way to maximize Social Security is to delay claiming benefits until “full retirement age,” which is climbing gradually to 67, or beyond. A person due to receive a benefit of $1,000 at a full retirement age of 66 would receive only $750 at age 62 (the earliest age at which most people can claim benefits) – and $1,320 at age 70."

Note that underlined part. People will still need to take it earlier but (I'm guessing) when they do take it earlier and the full amount is 67 or later they will receive even less at 62.

This adds to my "give up hope of retiring early" thread.

From what I not see about my finances (having been retired for 9 years, starting at 51) I am feeling less flush. A the major change in that feeling is Obamacare. I was paying $3,000/year before OC. I will be paying $7,200 under OC. If, OC was the law before my retiring I may have had second thoughts.
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Comments

  • I wonder if the impact of 0-Care on people is forcing them in taking SS early?

    Another thought is that by taking SS early, one does not have to use their tax deferred retirement savings, in the hope they will experience gains. In my calculations, if I take SS at FRA ,my break even age is 70 figuring the total amount received if I took it at 62.
  • I wonder if the impact of 0-Care on people is forcing them in taking SS early?

    Another thought is that by taking SS early, one does not have to use their tax deferred retirement savings, in the hope they will experience gains. In my calculations, if I take SS at FRA ,my break even age is 70 figuring the total amount received if I took it at 62.

    Did you include COLA in your calculation? Remember, you will often receive COLA increases most years and they are cumulative. Also, this lower income may qualify you for programs that are income dependent.

    The hardest nut seems to be covering healthcare costs yourself during these early retirement years prior to qualifying for Medicare at age 65.
  • edited May 2015
    Dex, everyone here enjoys your retirement articles including your personal journey. Did I miss it or have you written why you retired at such a young age? I took early SS at 62 (4/09) and have not regretted it in the least. That was money I didn't have to take from my trading accounts. I was *lucky* the markets were so vigorous after that time.

    Edit: Wait till you get to 65 and Medicare. In my opinion the greatest thing since sliced bread. But you have to get the supplemental policy that covers 100% of what Medicare doesn't pay.
  • Junkster said:

    Dex, everyone here enjoys your retirement articles including your personal journey. Did I miss it or have you written why you retired at such a young age? I took early SS at 62 (4/09) and have not regretted it in the least. That was money I didn't have to take from my trading accounts. I was *lucky* the markets were so vigorous after that time.

    I did not write about it. I had a very easy office job, watched TV and read the internet, people worked for me and made good money. I worked since I was 15 and it just felt like the right time. I have a travel trailer and like to travel. Right now I'm at home getting dental work, check ups and soon a colonoscopy. I'm 60 now and might like to find some work during the winter months Nov - Jan. Other then that life is good.

  • I didn't add in the COLAs.

    I retired at 52. I also started work at age 15. For a lot of people, 35-40 years of work is enough. If you have saved all your life it is time to enjoy the fruits of your labor.
  • Junkster said:



    Edit: Wait till you get to 65 and Medicare. In my opinion the greatest thing since sliced bread. But you have to get the supplemental policy that covers 100% of what Medicare doesn't pay.

    How much does medicare cost for a single person and the supplementals? At this point I'm just growing my health ins costs for budgeting.

    Blue Cross/ blue shield just notified me that the non OC plan I have will end in Dec. So, the only option is OC plans. My state does not supplement OC - I agree with that - OC costs will bankrupt states in the future. So from this year to next year I'm guessing on a $3,000 health insurance increase or 12,000+ until I'm 65.
  • edited May 2015
    Dex and John Chisum, couldn't agree more. In older age, live life pursuing your dreams and passions while you still have your health! Or any age for that matter.
  • deleted
  • edited May 2015
    Dex said:

    Junkster said:



    Edit: Wait till you get to 65 and Medicare. In my opinion the greatest thing since sliced bread. But you have to get the supplemental policy that covers 100% of what Medicare doesn't pay.

    How much does medicare cost for a single person and the supplementals? At this point I'm just growing my health ins costs for budgeting.

    Blue Cross/ blue shield just notified me that the non OC plan I have will end in Dec. So, the only option is OC plans. My state does not supplement OC - I agree with that - OC costs will bankrupt states in the future. So from this year to next year I'm guessing on a $3,000 health insurance increase or 12,000+ until I'm 65.
    Dex, $104.90 is deducted from my SS check each month for Medicare (Part B) Part A is free. My supplemental through Anthem which covers 100% of the 20% that Medicare doesn't cover for doctor visits, surgeries, and the like is $2400 annually. My Medicare drug coverage is under $200 annually through Humana. It's not the most comprehensive but I take no medications.

    Edit: I am paying then around $3600 annually for health insurance. But that is still far cheaper than the close to $7000 I was paying before Medicare kicked in. And that private policy had a $2500 deductible.
  • Neither the best written nor the best read article. The underlined phrase is just part of the sentence. Notice that it is set off by commas. I'll emphasize the effect of that punctuation by replacing the commas with parentheses:
    Of course, the best way to maximize Social Security is to delay claiming benefits until full retirement age (which is climbing gradually to 67) or beyond.
    That is, the "or beyond" applies to "the best way to maximize SS" is to wait until FRA or beyond. The parenthetical remark simply clarifies what FRA is - it does not assert that FRA is rising beyond age 67.

    The title is misleading, because actuarially speaking, benefits (on a constant dollar basis) are the same regardless of when you start taking them. They are not reduced if you start them at age 62. Of course, if you take them earlier, you're spreading them over more years, so the rate at which you receive your benefits is reduced. (There are ancillary benefits, like spousal payments that are indeed reduced if you claim before FRA.)

    @Junkster - New medicare supplemental policies starting in 2020 will not cover 100% of what Medicare doesn't pay. (You're grandfathered in, but Dex is not.) Specifically, "Under the doc-fix law, Medigap plans will no longer cover the annual Part B deductible for new enrollees ($147 this year). That will mean changes for Medigap "C" and "F" plans, the two most popular plan choices and the only ones that cover Part B deductibles. Starting in 2020, seniors would have to pay it themselves. "

    That's from M*: What the Medicare 'Doc Fix' Means for Your Pocketbook

    It's actually rather debatable whether Medicare supplemental insurance is even worth it (given that part A is 100% covered without it). Here's a column suggesting that these policies are cash cows for insurers. He overstates his case, but the numbers seem sound. IMHO, the main virtue of these policies is for catastrophic insurance (i.e. they cap out-of-pocket expenses).

  • Many thanks msf. I read and then bookmarked that on supplemental insurance. I may have to rethink and will do more research. I had my first surgery as an adult as soon as I tuned 65 and thought (may have to review that closer) that the supplemental saved me over $10,000 of out of pocket.
  • Junkster said:


    Edit: I am paying then around $3600 annually for health insurance. But that is still far cheaper than the close to $7000 I was paying before Medicare kicked in. And that private policy had a $2500 deductible.

    Thanks, I currently have $8,500 budgeted for Health Insurance in 5 years when I'm 65. I might be able to reduce that some - maybe down to 6,000. But, I have to update my budget for years 61 - 64.

  • >> If OC was the law before my retiring I may have had second thoughts.

    Dex, when you were running the numbers at 51 for healthcare costs until Medicare, what did you plug in and what did you base them on? Was your nonjob private insurance inexpensive somehow?

    Lots of impressive early retirees here! Way to go. I am delaying taking SS until 70, two years off, chiefly on principle, but have shaky confidence of living to wherever the lines cross, like 82 or whatever. Hope so. The best way to think of reduced vs max benefits is to look at the lines, as msf implies; see here, halfway down the page:

    http://www.schwab.com/public/schwab/nn/articles/When-Should-You-Take-Social-Security

    I have had a lot of arthritis surgeries under Medicare with supplement, also an umbrella managed Medicare plan w rx (forget what this is called, Preferred maybe), so it seems (seemed) like a wise idea to me, though I have not run the numbers. I am now cash at the dentist, though. Maybe I should look into going without supp.
  • Hi Guys,

    I’m somewhat amazed at how many MFOers retired at so early an age. Contrary to earlier periods, nowadays older folks are and are planning to work longer.

    You guys who opted for early retirement are swimming against the prevailing, but ever changing, tide. It’s great that you had the wherewithal to assemble the requisite financial resources to implement your preferences. Congratulations to all retirees of all ages!

    The early retirement goal is an illustration of an eroding characteristic that contributed to our Nation’s original success story. I’m speaking of our famed hard work ethic. Mostly we came to America, not to extract riches from the soil and leave, but to toil the soil and build. We worked harder and longer than most others around the globe.

    What was true in the past still remains true today, although to a lesser degree. Here’s a Link to a worldwide survey that lists annual hours worked by nation:

    https://stats.oecd.org/Index.aspx?DataSetCode=ANHRS

    Among developed nations, the US still works longer hours; compared to underdeveloped nations, that is not so. Note that our annual work hours have decreased slightly since 2000. But that’s not the trendline with our older population segment.

    Today, approximately 80% of baby boomers anticipate that they will work beyond the normative retirement age. That’s likely to change because of our pernicious system of laws and rules. Remember that most laws are commands; they are prohibitive or compulsive by design with limiting options and opportunities. All this makes a retirement decision still more complex.

    There are many personal reasons why the current trend is against early retirement. Work
    tasks have become less physically and more mentally demanding that allows for a longer
    work life. A worker may need the job to protect family financial security, or to keep healthy, or because he finds the job enjoyable and stimulating. This last reason seems especially attractive given today’s job market.

    From a national perspective, a delayed retirement should also benefit the Nation’s prosperity and strength. Presumably, the retiree is incrementally adding more value in doing his assigned tasks than he is being paid. That’s a net increase in our GDP. Also, since he is presumably experienced at his job, his efficiency and effectiveness should be at a high profitable level. If it were not, an employee would choose a younger less talented individual who would command a lower salary.

    It’s not altogether a bad thing that our aging population is migrating back to the workforce. Like most complex happenings, there are both pluses and minuses. But the current trend is clear: Our older folks are freely electing to rejoin that workforce for a variety of excellent reasons. Those of you who have chosen the “other path” have similarly made free choices to satisfy your own personal situations and preferences. More power to all our aging population.

    By the way, the when to initiate SS benefits issue has no simple answer from my perspective. It depends on too many uncertain variables like how long you will actually live. The statistics can give you a rough number, but the actuality is something else entirely. As you might anticipate, I did Monte Carlo analyses on this matter without much final help. The uncertainties dominated any worthwhile insights. Make your best speculative guess and just do it.

    I’ve enjoyed each and everyone’s story on this exchange. Each has its own logic and its own quirks. We’re all the same, yet we’re all so different. Thank you all for sharing.

    Best Regards.
  • If you want to gain a smidgeon of flexibility on cash flow re. unexpected bigger ticket items ($1000-2000) for dental/vision/hearing/dermatology care, I was offered a CC when my mother needed a hearing aide in December that does the trick for many things. CareCredit (www.carecredit.com). The min. monthly depends on the size of the charge, but there is no interest if the bill is paid in-full within one year. [I have no idea how the company makes money with this arrangement.] You'd have to use it responsibly, but it keeps you from having to bang a big payment out of your reserves, when doing so might leave you with an uncomfortably reduced margin for "error" with respect to something else coming along you wouldn't expect to happen (and that's when it often does).
  • Dex
    edited May 2015

    >> If OC was the law before my retiring I may have had second thoughts.

    Dex, when you were running the numbers at 51 for healthcare costs until Medicare, what did you plug in and what did you base them on? Was your nonjob private insurance inexpensive somehow?

    In 2008, I paid $205.83/month from BC/BS I was able to keep it in the 240 range until OC. Then it went to 335 same BC/BS policy but OC adds increased it. Next year they are canceling the policy so I have to go full OC. Which will be close to $600/mo the last time l looked.

    I'm still very OK financially. Part of this is because I'll get Medicaid in 5 years and Georgia does not tax retires' dividends/interest/SS/Pensions after 62(?). However, I am feeling less flush due to OC. I won't be changing my spending habits.

    However, if I knew about the OC costs, I may have not stopped working or delayed it for a couple of years. It is just too much of an unknown for 14 years. Spending $2,400 Vs $7,200 and an unknown future is disconcerting.

    This is just another reason why I don't think many will be able to do what I did in the future.
  • Retiring on June 1 at age 59....getting COBRA for about $1K a month and will figure out what the ACA has in store for me at the end of the year since I am not insurable otherwise.

    The week after I retire, I'm headed to Italy for 3 weeks.

    There are perks for living below your means during your working career.
  • "They are not reduced if you start them at age 62. Of course, if you take them earlier, you're spreading them over more years, so the rate at which you receive your benefits is reduced."

    The cynical side of me begins to wonder if all these media spots that tell you to wait on SS is being run by the govt in hopes that there will be less payout? I cannot be the only one that has noticed we are inundated with this idea.

  • So, it looks like I may be wrong about next year's OC cost.

    I may be able to get plans at $240/month with the subsidy.

    this is because my income is 345% of the poverty line, over 400% and you don't get one.

    you are eligible for an estimated subsidy of:

    $2,737.2annually
    $228.1 monthly
  • >>>>There are perks for living below your means during your working career.<<<<

    MFO Hall of Fame quote from PressmUP. And after your working career too.
  • "They are not reduced if you start them at age 62. Of course, if you take them earlier, you're spreading them over more years, so the rate at which you receive your benefits is reduced."

    The cynical side of me begins to wonder if all these media spots that tell you to wait on SS is being run by the govt in hopes that there will be less payout? I cannot be the only one that has noticed we are inundated with this idea.

    The calculation I'm familiar with views SS as an annuity. Suppose you start SS at age 62. The question asked is: If you bought a private annuity with the checks you receive from age 62 to age 70, would that annuity be able to make up the difference between the checks you're getting and the checks you would have gotten by deferring until age 70? If not, then deferring benefits gives you "extra value".

    For example, if you'd get $900/mo at age 62, and $1600/mo starting at age 70, would you be able to replace that extra $700 with a private annuity for the cost of the $900 checks that you received for eight years? The answer is no.

    But as this FA Magazine page points out, "the reason that SS annuities are a better deal than those in the private markets is that SS can offer a product that is actuarially fair - the y are based on the life expectancy of the average person ... and SS does not have to worry about marketing costs or profits." Sort of like Vanguard, except Vanguard pays marketing costs.

    Another reason aside from profits that private annuities cost more is adverse selection. People who buy annuities tend to have longer life expectancies, so the insurers have to charge more simply to cover that cost.

    With SS, those people should be deferring benefits. But with 3/4 of people not only not deferring, but actually taking benefits before FRA, it's clear that many people are making the "wrong" decision - lots of people with personally long life expectancies are going for the earlier checks. (They often have other reasons, such as cash flow, for taking early benefits.)

    Thus rather than costing SSA money, its seems that so many people starting benefits early actually saves the government money, statistically speaking. Thank you very much.
  • msf
    edited May 2015
    @Dex - thanks for being diligent and forthright with the numbers. ACA often does cost some people more money (though not as much as they may think, because health care/insurance rates were rising so fast anyway that part of the increase was inevitable).

    The winners, or at least the non-losers tend to be those who qualify for subsidies (and of course those who would not have qualified for reasonable rates or any insurance based on preexisting conditions).
  • This is going to sound contrived but it's true as true could be. A hiking friend of mine always use to ride me for taking early benefits. He was a meticulous planner and had some longevity genes from his parents. He was fit as fit could be, no real history of any health issues, etc. etc. and had more than enough to enjoy a comfortable retirement. But he was bound and determined to milk SS for all it's worth and take his maximum benefits at 70 and live happily ever after. His motto financially was the more the better. You know where this is going. He passed away at age 67 - stroke related. While he was still slaving away in a consultancy business, his friends and I were hiking our lives away in the Great Outdoors. While frugality should be a lifelong pursuit, at some point you have to stop and smell the roses before it is too late.
  • @msf and @Junkster, Thanks to both of you for those clear and informative answers. The statistics show we are living longer but as with any statistical study, there is a mean average. So 50% don't make it to that certain age and 50% go beyond it. On which side am I or anyone else here? Well, that is the million dollar question. Family history and physical shape are good determinating factors but they are not 100%. In my case, my family has a history of long life well into the 80's and beyond. Then again, there is also a family history of cardiovascular disease, diabetes, and cancer. I already have the diabetes. So for me, taking it while the taking is good seems to be the prudent choice.
  • Junkster, thanks for sharing that story. I'm spending my SS before I'm 6 feet under!
  • Junkster said:

    While frugality should be a lifelong pursuit, at some point you have to stop and smell the roses before it is too late.

    We always need that reminder.
  • Dex
    edited May 2015
    msf said:

    @Dex - thanks for being diligent and forthright with the numbers. ACA often does cost some people more money (though not as much as they may think, because health care/insurance rates were rising so fast anyway that part of the increase was inevitable).

    The subsidy could influence me on when I take SS. For years 61 and 62, I may be able to get the subsidy. If, I took SS on the earliest date June of my 62nd year I probably would lose the subsidy for years 62, 63, 64. So in year 62 it might make some sense to delay taking SS so that I still get a subsidy. Based upon what I know now the subsidy is in the area of $3,000 per year of non taxable money. My income would need to be less then 4X of the poverty base for the year.


    Now, considering my net worth - my getting a subsidy doesn't make much sense.


    Also, after seeing how his subsidy thing works, I don't think OC will be repealed. Too many people are getting something out of it.

  • beebee
    edited May 2015
    Dex said:

    msf said:

    @Dex -
    Now, considering my net worth - my getting a subsidy doesn't make much sense.

    Wonder if Warren Buffet qualifies for the subsidy (high net worth...very little taxable income), but his secretary (very little net worth...higher taxable income) doesn't?

    Means testing anyone?
  • >> all these media spots that tell you to wait on SS is being run by the govt in hopes that there will be less payout? I cannot be the only one that has noticed we are inundated with this idea.

    If there is any plan, it is to get people more money and not have them and their spouse regret their decision in their 80s and 90s, I would think.
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