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social security Concept of global communication network.Getty
Mark Hubert's recent Market Watch column, It might be better to take Social Security at age 66, here's why, suggests that taking social security at age 70 could be a big mistake. The reason? Social Security is bankrupt and Uncle Sam can reduce benefits. He points out that in 2034, when the system trust fund will run out of money, the benefits will have to be reduced by 23% in the absence of increased charges social or other sources of additional social security funding.
Mark is right. Social security is broke, indeed, she is dead. His red ink totals $ 34 trillion, double the official debt announced by the Congressional Budget Office.
Hubert concludes that taking early profits, for example at age 66, makes more sense. I think this is bad advice for current and short-term retirees. Here's why.
First, social security remains the third pillar of politics, and any politician advocating direct benefit reduction is likely to commit political suicide. Democrats probably controlling and retaining Parliament for the next decade, the prospect of a direct reduction of benefits is far off. I would expect Democrats to raise taxes on social security benefits, directly or indirectly, without reducing benefits.
Second, it is extremely unlikely that benefit reductions will be perceived for those who are already receiving benefits or who are about to start receiving, say, over the next decade. About one-fifth of the elderly live on social security and are the main source of financial support for about half.
Third, the calculations based on my business MaximizeMySocialSecurity.com The software suggests that even those who face a 23% reduction starting in 2034 could lose tens of thousands of dollars by depositing before the age of 70, assuming that the 70-year collection would maximize their profits for life.
I led the case of a single man, Dana, 58 years old. Dana started working at age 22 and earned $ 30,000. Over the years, Dana's revenues have increased by 3% per year. Today, he earns nearly $ 85,000, which he hopes to continue to earn thanks to his planned retirement at age 65.
If Dana retires at age 62, her lifetime benefits, measured in current value (as of today), will be $ 818,747. They will total $ 849,678 if he waits for retirement age, ten months after his 66th birthday. And if Dana waits until age 70, her lifetime benefits will be $ 950,698. It's $ 131,951 more than receiving benefits at age 62 and $ 101,020 more than receiving benefits at 66 and 10 months (full retirement age). Clearly, patience pays.
But what happens if profits are reduced by 23% from 2034, including for Dana and other people who are already collecting? In this case, waiting gains up to age 70 are less important, but nonetheless significant. The current values of the 62, FRA, and 70-year life benefits are now $ 678,124, $ 700,084, and $ 764,084, respectively. As a result, the waiting gain of 62 to 70 years is $ 85,960. The waiting gain of 66 to 70 years is $ 63,300. So, if Dana exceeds Mark's advice and is 62, he loses $ 85,960. If he follows Mark's advice, he will leave $ 63,300 on the table.
Mark sets a different numerical example and comes to a very different conclusion. I'm not sure what he's doing under the hood. But I trust our tool, which has been repeatedly ranked the best social security tool on the Web. It incorporates all benefit provisions, allows you to specify future benefit reductions and see how this affects your lifetime benefits, which maximizes recovery decisions.
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social security Concept of global communication network.Getty
Mark Hubert's recent Market Watch column, It might be better to take Social Security at age 66, here's why, suggests that taking social security at age 70 could be a big mistake. The reason? Social Security is bankrupt and Uncle Sam can reduce benefits. He points out that in 2034, when the system trust fund will run out of money, the benefits will have to be reduced by 23% in the absence of increased charges social or other sources of additional social security funding.
Mark is right. Social security is broke, indeed, she is dead. His red ink totals $ 34 trillion, double the official debt announced by the Congressional Budget Office.
Hubert concludes that taking early profits, for example at age 66, makes more sense. I think this is bad advice for current and short-term retirees. Here's why.
First, social security remains the third pillar of politics, and any politician advocating direct benefit reduction is likely to commit political suicide. Democrats probably controlling and retaining Parliament for the next decade, the prospect of a direct reduction of benefits is far off. I would expect Democrats to raise taxes on social security benefits, directly or indirectly, without reducing benefits.
Second, it is extremely unlikely that benefit reductions will be perceived for those who are already receiving benefits or who are about to start receiving, say, over the next decade. About one-fifth of the elderly live on social security and are the main source of financial support for about half.
Third, the calculations based on my business MaximizeMySocialSecurity.com The software suggests that even those who face a 23% reduction starting in 2034 could lose tens of thousands of dollars by depositing before the age of 70, assuming that the 70-year collection would maximize their profits for life.
I led the case of a single man, Dana, 58 years old. Dana started working at age 22 and earned $ 30,000. Over the years, Dana's revenues have increased by 3% per year. Today, he earns nearly $ 85,000, which he hopes to continue to earn thanks to his planned retirement at age 65.
If Dana retires at age 62, her lifetime benefits, measured in current value (as of today), will be $ 818,747. They will total $ 849,678 if he waits for retirement age, ten months after his 66th birthday. And if Dana waits until age 70, her lifetime benefits will be $ 950,698. It's $ 131,951 more than receiving benefits at age 62 and $ 101,020 more than receiving benefits at 66 and 10 months (full retirement age). Clearly, patience pays.
But what happens if profits are reduced by 23% from 2034, including for Dana and other people who are already collecting? In this case, waiting gains up to age 70 are less important, but nonetheless significant. The current values of the 62, FRA, and 70-year life benefits are now $ 678,124, $ 700,084, and $ 764,084, respectively. As a result, the waiting gain of 62 to 70 years is $ 85,960. The waiting gain of 66 to 70 years is $ 63,300. So, if Dana exceeds Mark's advice and is 62, he loses $ 85,960. If he follows Mark's advice, he will leave $ 63,300 on the table.
Mark sets a different numerical example and comes to a very different conclusion. I'm not sure what he's doing under the hood. But I trust our tool, which has been repeatedly ranked the best social security tool on the Web. It incorporates all benefit provisions, allows you to specify future benefit reductions and see how this affects your lifetime benefits, which maximizes recovery decisions.
