Why Starting Social Security At Age 62 Could Cost You Over $500,000!

by | Jan 8, 2019 | Retirement, YouTube

Key Takeaways

In today’s blog post and video, we’re talking about why starting Social Security at age 62… could cost you over $500,000!

In today’s blog post and video, you’ll learn:

  • Why starting Social Security at age 62 could cost you over $500,000.
  • How long you will have to live in order to make the strategy work. There are a lot of myths around Social Security… and they simply are not true!
  • How to fill the gap until Social Security kicks in.
  • How to make a smart and informed decision about your social security. There is too much on the line and too much to give up if you don’t fully understand your Social Security decision.

Click here to watch the full video or read the full video transcript, below.


Transcript

Today I’m talking about:

Why starting Social Security at age 62 could cost you over $500,000!

Last week I was working with a husband and wife couple who are going to retire next spring. Yea, they’re retiring! And one of the things that we looked closely at, was their Social Security decision. So they’re retiring in their early 60’s and, actually, they’re going to retire before they’re going to be eligible to take Social Security.

So what they’ve assumed all along is that they’re just going to take Social Security as early as possible. But when we ran the numbers, it actually would be a huge mistake for them to do that.

When I ran the numbers for them, if they lived to their life expectancy and took Social Security at age 62, versus waiting until age 70, there was almost a $600,000 difference in lifetime benefit that they would receive.

If they waited until their full retirement age, which is about 67 for both of them, it’s a $400,000 difference in lifetime income that they would get additionally if they waited.

So this is no joke, this is not something to take lightly. You really want to look closely at what your Social Security benefit is going to be and how that’s going to impact your lifetime income.

When I showed this to the client, when I showed them the actual numbers of taking Social Security at age 62 versus taking it at 67 or even 70, their mind was absolutely blown! They had no idea that they would be sacrificing that much income over their lifetime if they took it early at age 62.

And the same is true almost regardless of the situation. So the difference is even more dramatic if your income is higher. So the higher your income is, the larger the difference is between the lifetime income of taking it at 62 versus waiting until you’re a little bit older. And that’s because Social Security benefits increase a little bit every year the longer that you wait.

How long do I have to live… in order to make this strategy work?

I think there’s a lot of myths around Social Security and when you take it. So, for example, if you wait until you’re 70, a lot of people say “Well, I don’t want to do that because then I have to live until my 80’s in order to have that strategy make sense.” Actually that’s not true. Most of the time when I do a Social Security analysis for a client, the break even age – this is the age that you have to live to in order for strategy B to make sense over strategy A which might be taking it early; it’s typically in the mid-70’s. So for this client, in particular, if they waited until 70, they only have to live until ages 74 and 76, respectively, (husband/wife) in order to have the ‘taking it at age 70 strategy’ make sense financially in the long run.

So pretty powerful stuff when you look at “How long do I have to live in order to make this strategy work?” And that should go into the equation as well. Considering that most people today who are close to retirement are going to live until your 80’s. And there’s almost a 50/50 shot that if you’re married, one of you is going to live to age 90.

With health care continuing to advance, we’re living longer and longer and longer and so it makes even more sense unless you’re already in poor health to wait as long as possible to take Social Security. Because even if you live until your mid-70’s, it still makes sense most of the time to wait as long as possible.

How to fill the gap until social security kicks in?

Let’s say you retire at age 64, but you wait until age 67, 68, 69, maybe age 70 to take your Social Security benefit. But you need that income that Social Security is going to provide. Here’s how you plug that gap. If I run the numbers for a lot of clients, it actually makes sense for them, if they’re going to retire before they start Social Security, to take higher withdrawals from their investment portfolio in that gap of time while they’re waiting to start Social Security.

And then a lot of times what they’ll do is when Social Security starts and they have that income stream, then they’ll reduce what they’re withdrawing from their portfolio. This works really, really well and it can help to ensure that you are maximizing your lifetime benefit, not leaving $500,000 or more on the table because you took Social Security early. And using your portfolio withdrawals instead to kind of plug that gap between when you retire and when you take Social Security.

Make a smart and informed decision about your social security

Here’s what I want you to do, take the time to fully understand your Social Security decision and make a smart decision. There is too much on the line, too much that you could give up if you make a decision that is not fully informed. So understand what the difference is between taking it at 62 or 66, 67 or 70. Run the numbers for yourself and that will help you make the smartest decision possible about your Social Security.

If you would like to run the numbers for Social Security analysis for your particular situation, I have a special treat for you. If you email me what your monthly benefit amount is at your full retirement age, I can run the numbers for you. We usually charge $1,000 to do this analysis if you’re not a client of True North; but for those of you who are watching this video, it’s free.

Email me your monthly benefit amount and full retirement age to: ashleym@truenorthra.com. I will run the analysis for you and show you exactly what it will look like to take Social Security at various ages to help you make a smart and informed decision about your Social Security.

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ABOUT THE AUTHOR

ASHLEY M. MICCICHE, QPFC®, CRPC®, CEXP®

Ashley helps business owners exit their business and retire with financial security. As a Certified Exit Planner she specializes in helping business owners navigate the maze of decisions that need to happen from full-time running their business to retirement.

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