Social Security - 62, 66 or 70?

[fishheadbob]

Minor points:
It wasn't Carter or LBJ who came up with taxing SS benefits; the honor goes to Ronald Regan.
65 as the original retirement age predates Franklin Roosevelt by 50 years, it was the brainchild of Prussian Chancellor Otto Von Bismarck who instituted the first modern retirement system. 100 years later the age for full retirement has soared to age 66.
The first person to get a U.S. SS check was a sweet little old lady in Vermont( Ida Fuller). She worked and paid into SS from 1937 to 1940 when she turned 65 and retired. She agreed to have her picture plastered on most newspapers and newsreels of the day. Who knew that she was going to live and collect until she was 101. Now you know how to beat the system.

 

[riptides]

They do only the most simplistic calculations, with no respect for the either the time value of money, or of "opportunity cost". Show me a table of year-by-year contributions, both employee and the employer match and compare that with the value of those same contributions invested in an index fund tracking the S&P 500. The S&P 500 investments will do much, much better than SS any day.

Unless there is a market meltdown right before you want to draw.

But I will agree that SS and the Market should both be in your planning portfolio from the day you start working.

Insurance and Cash too.

 

[JDgreen227]

Unless there is a market meltdown right before you want to draw.

But I will agree that SS and the Market should both be in your planning portfolio from the day you start working.

Insurance and Cash too.

Sad thing is, for the majority of the middle class today there is precious little chance of having either insurance or cash. I was able to retire at age 51 with only modest investments because I had a near 100% pension backed up, and could be reasonably assured that I would get my contributions back from SS at age 62 on and then some. fishheadbob mentions "beating the system" well my query to him is WHAT is the system and HOW do you beat it...?

 

[Travelover]

I generally don't defend government programs but SS includes an insurance component for disability or survivors. As a result it isn't fair to compare it to an investment fund.

Right, plus your wife can collect 50% of your full SS benefit even if she never paid a dime into FICA in her life. And if you have kids under 18 (or so) when you are collecting SS, they collect, too, regardless of your financial situation. Plus, those that contribute minimally from low wage jobs get a much higher percentage of their contributions back than higher paid workers. Even your ex-wife can collect a spousal benefit equal to 1/2 your benefit if she didn't remarry. It is a social program not a retirement plan.

 

[fishheadbob]

fishheadbob mentions "beating the system" well my query to him is WHAT is the system and HOW do you beat it...?[/QUOTE]

Live to be 100.

 

[JDgreen227]

fishheadbob mentions "beating the system" well my query to him is WHAT is the system and HOW do you beat it...?

Live to be 100.[/QUOTE]

What a howler....why bother to live to be 100 when you cannot do a d**n thing for yourself after age 80? My step-mom's mother died last year at age 99....she had been in an advanced care facility for TWENTY FIVE YEARS suffering from advanced dementia for most of that time. Where is the quality of life? I would rather be dead than be a vegetable kept alive by advanced care. PERIOD !!!!!!

 

[fishheadbob]

Right, plus your wife can collect 50% of your full SS benefit even if she never paid a dime into FICA in her life. And if you have kids under 18 (or so) when you are collecting SS, they collect, too, regardless of your financial situation. Plus, those that contribute minimally from low wage jobs get a much higher percentage of their contributions back than higher paid workers. Even your ex-wife can collect a spousal benefit equal to 1/2 your benefit if she didn't remarry. It is a social program not a retirement plan.

probably why it's called SOCIAL Security. Don't forget little kids whose parent died, or the truly disabled, not the fakers. Expanding benefits has always been a great way to stay elected. Cutting benefits is a great way to the political unemployment line.
We have a problem of being a compassionate country. Most people feel SS has gotten out of hand, costs too much. Where do you want to start cutting ? How about with your mother? Maybe she
never paid a dime in but collects as a widow. Dead wood. And those orphans have got to go. Uncle Ralph started to collect at 62, he's pushing 86 now. Great deal for him. Aunt Tootsie lives in Florida and has her check sent to one of her bank accounts down there. Has a boyfriend but still collects as a widow. Bloodsucker.

Unless you're prepared to have Ma move back in with you in her old age,(Heck no. Send her to the poor farm) and are willing to cough up a few grand per month to take care of your orphaned grandkids, or pay the exorbitant amounts to hospitals and doctors that Medicare currently pays, not to mention wisely investing 10 or 15 % of your earnings every year from day one on to provide for your own old age I'm dieing to hear a good solution. About now some stockbroker, excuse me financial consultant, rises to say that the only way to handle this mess is to invest every nickel with him. Don't know about you but my investments aren't exactly setting the world on fire.
The punchline to the old stockbroker joke goes "...But where are the customers yachts?"

 

[KennyG]

Live to be 100.

What a howler....why bother to live to be 100 when you cannot do a d**n thing for yourself after age 80? /QUOTE]

Lots of different potential outcomes, but, as I said earlier, I'm an optimist. My parents lived to almost 90 and only needed care in the last 6 months to a year of life. I know many people who live active and independent lives into their 90s. That's where I'm headed. Modern medicine is doing wonderful things. The odds may not be so good if you are an obese alcoholic smoker, but that's not the path I'm taking.

 

[Threepoint]

[snip] Show me a table of year-by-year contributions, both employee and the employer match and compare that with the value of those same contributions invested in an index fund tracking the S&P 500. The S&P 500 investments will do much, much better than SS any day.

Dave, but realistically, who would take their SS payment each month and use it to buy that indexed fund? Sure, money is fungible, and if taking the early, reduced SS payments avoids the need to sell performing investments, then I agree that is an important factor in the analysis. For most, though, I suspect waiting is a form of self-imposed "forced savings," with the savings accruing at 8 percent simple interest.

I also think about the folks who had some of their retirement savings in market in 2008, saw the bottom drop out, got scared and sold, then stayed in cash in their local bank savings accounts, too afraid to get back in to catch the run up. But that's a different issue, as is the fact that SS is much more from a societal point of view than simply an alternate investment vehicle for those of us in a position to manage our investments privately.

 

[RedNeckGeek]

Dave, but realistically, who would take their SS payment each month and use it to buy that indexed fund? Sure, money is fungible, and if taking the early, reduced SS payments avoids the need to sell performing investments, then I agree that is an important factor in the analysis. For most, though, I suspect waiting is a form of self-imposed "forced savings," with the savings accruing at 8 percent simple interest.

I've been very fortunate to have had corporate jobs with good 401K plans and employer matches, as well as company subsidized disability insurance. I contributed as much as it took to get the maximum company match, way more than the SS payments. And if I'd have been given the choice, I'd have taken those SS payments and put them in an IRA. Most of my life I didn't pay any attention to the performance of the 401K, just had it pretty much evenly split between bond and stock funds. I realize now that bonds had no place in that portfolio until I reached my 40s, but the so called "advisors" of the time saw it differently. I'm not saying I was your typical American worker, but I don't think it's fair to force those with better alternatives to contribute to Social Security. But I also understand that without the contributions of those in the upper income brackets, SS would have been bankrupt long, long ago. And when I say "contributions" that's exactly what I mean. I'd have to live past 140 years old to get back even what I've contributed, let alone what could have been made if the funds were conservatively invested in a low overhead S&P 500 index fund.

Threepoint, you make a very good point about bailing after the losses of 2008. That crash wiped out 10 years of earnings in the S&P 500, but it took "only" 5 years to make it back.

It may not be politically correct to say so, but if more people were allowed to suffer the consequences of their poor decisions, maybe they'd learn to make better ones. It seems that the current system penalizes those that keep their nose clean and to the grind stone so as to blunt the consequences for those that do not.