Why We're Taking Social Security at Age 62

Credit: Eric Chan via Flickr.

As a married couple approaching traditional retirement age, we recently made the decision to take Social Security at age 62. We know there are as many ways to consider this decision as there are days in a year. And many experts advise against taking Social Security "early" so that you get a bigger check at full retirement age. It's hard to argue against that.

However, we have always lived an unconventional lifestyle. We retired in 1991 at the age of 38 and have lived and traveled all around the world since then. Therefore the fact that so many experts agree on waiting for payment gives us pause for thought. Here is our logic.

First, the S&P 500 index has averaged returns of more than 8% per year, plus dividends, since we retired in 1991. If we take Social Security early and invest it, we won't be losing the extra 8% in benefits we could get for every year we delayed receiving them. Granted, the benefits of delaying Social Security are guaranteed, while stock market returns are not. The markets could go up, down, or sideways -- no one knows.

But we have lived off of our investments for the last 24 years, through good times and bad, and we could easily make it another four if necessary, so investing the monthly check is definitely an option. More likely, we will allow our cash to grow while we look for opportunities to deploy it in the market. Plus we would have control of the money, adding to our net worth.

Next let's look at some numbers
For easy math, say at 62 you are set to receive $1,000 per month in benefits. If you wait until you are 66, your payment will be $1,360. Sounds great, right? However, you would have missed receiving $48,000 dollars in payments from the previous 48 months. How long is it before you make that money back? Using this example, it would take 133 months, or a little over 11 years, meaning we wouldn't break even until age 77. In that time frame, the Social Security we began receiving at age 62, plus our investments, should grow enough to easily surpass the additional money received by waiting.

For some people, deferring until their full retirement age -- or even later -- could make sense, especially if they do not have the assets to support themselves, have difficulty handling money, or are still working. However, this is not our situation, and therefore we have decided to take the money and run.

It's really a question of who you think can handle your money better -- you or Uncle Sam?

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Comments from our Foolish Readers

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  • Report this Comment On August 06, 2014, at 7:22 AM, Mathman6577 wrote:

    Another aspect for deciding to take it early is that most people are healthier and can enjoy the money (travel, activities, etc.) at a younger age.

  • Report this Comment On August 06, 2014, at 12:55 PM, fearandgreed2005 wrote:

    And another aspect is that the future of social security is not the "sure thing" that this couple thinks it is. I fully expect social security to remain solvent but the easiest way to do this is to reduce or eliminate benefits for those that "don't need it". This means if you have saved for your retirement you can expect less from social security. I think that in the future social security will become taxable for those beyond a certain income level and that income level will include investment returns as well as withdrawals from retirement accounts.

  • Report this Comment On August 06, 2014, at 1:22 PM, KombatKarl wrote:

    The market isn't guaranteed, but neither is you living that long. I'm taking it the second I am allowed simply because I may not even live to full retirement age.

  • Report this Comment On August 06, 2014, at 2:06 PM, raven939 wrote:

    Another thing to consider it whether you will still be working. If you are still working and take your social security benefits at 62, in addition to the reduced amount for taking it early, your benefits are reduced $1 for every $2 you earn over the exemption amount ($15,480 in 2014). If you make $40,000 a year, your benefits would be reduced by $12,260. The year you reach full retirement age, it changes to $1 for every $3 over a higher amount ($41,400 for 2014) until the month you reach full retirement age. No reduction for earnings after you reach full retirement age.

  • Report this Comment On August 06, 2014, at 2:20 PM, raven939 wrote:

    Social security benefits are taxable if your other income is above certain amounts. If you are single and your other income is over $34,000, 85% of your SS benefits are taxable. If you are married filing jointly and your other income is over $44,000, 85% of your SS benefits are taxable. Your other income includes investment income and taxable retirement account withdrawals. This has been in effect for a long time. Since the 1980's, I think.

  • Report this Comment On August 06, 2014, at 2:26 PM, IslandTime59 wrote:

    After my wife had a triple bypass 12 years ago, it made this choice easy. We are retired @ 62 and live modestly and without debt. Waiting until we're 66 to draw SS no longer made sense and we live every day like it may be our last one.

  • Report this Comment On August 07, 2014, at 1:16 AM, GETRICHSLOW2 wrote:

    Get every penny you can get as soon as you can get it!

  • Report this Comment On August 07, 2014, at 3:41 AM, nahag wrote:

    IslandTime59, we are with you. Live modestly, I know it is weird in our times but that is the best option. Living large is the worst trap, a person can get into because they will always think they are poor because tech always comes out that makes your tech worthless. How many people are waiting for I phone 6, which will cost $600usd plus the $100 a month for internet. Now I can see why people are NOT smiling.

  • Report this Comment On August 07, 2014, at 10:57 AM, u622683 wrote:

    It really depends on ones personal situation. If you need it now, you can grow it better than Uncle Sam or you simply don't think you will not live long enough to enjoy the benefits of the increased payment, go for it girlfriend! Take your Social Security payments early.

  • Report this Comment On August 07, 2014, at 2:18 PM, datasave51 wrote:

    To Fearandgreed2005:

    You might not be aware that this IS NOT "free money". This is money that is taken out of your check each payday. Then, when you do become eligible to receive SS, It is "taxed" as income at the end of the year. And lastly, you work for this benefit and contribute for this benefit, therefor again.... It's not free money!

  • Report this Comment On August 07, 2014, at 2:39 PM, FallenLeaf wrote:

    The appropriate time to take your social security is highly situational and therefore a broad article should not be written about it.

  • Report this Comment On August 07, 2014, at 6:54 PM, born2win wrote:

    To fearandgreed2005:

    I don't understand your way of thinking. If I have saved for retirement, I should not get SS. Yet they are taking my monies out of every paycheck for SS. This is not an entitlement to me. This is something that I have paid into expecting to get it back.I will get my money as soon as I can. The way I see it the government is legally pimping us and they are trying or planning to keep our money in the future. I want what is rightfully mine as soon as I can get my hands on it.

  • Report this Comment On August 07, 2014, at 8:45 PM, twelve1 wrote:

    The government is already cutting the payment by not paying healthy seniors the first week of the month Since the 90's only the disabled get the check at the first of the month. There are less days in the month to invest or get deals when the check comes in the middle of the month. Get out at 62 promises will be broken.

  • Report this Comment On August 07, 2014, at 9:13 PM, colonelken wrote:

    It all depends! In a perfect world if you knew when you'd die you could maximize SS to the max.

    In a non perfect world you should evaluate your health, look at mortality rates for your age, your current financial situation and your family beneficiaries. I almost always advised clients to wait and collect the bonus 8% until they reached age 70 but then one unhealthy friend with young children (under 18) was eligible and I told him to cash out before he croaked. He's 75 now and still hasn't croaked but his kids are better off collecting for at least 5 years each. WP economics writer Sloan recently decide to call his shot at mortality and decided to take SS at about age 67-68 looking for a new term.....mortality equilibrium. Good luck with that.

  • Report this Comment On August 07, 2014, at 10:09 PM, JohnHeenehan wrote:

    Intriguing food for thought, except for the lame closing.

    Since the federal government created Social Security nearly 80 years ago, it has been a tremendous success -- it regularly polls as enormously popular. Despite claims of its imminent demise, modest and relatively painless solutions are available to ensure proper payouts well into the distant future.

    I welcome different perspective on investing here but please leave the tired and tiresome kneejerk government bashing to hack TV pundits and other ignoramuses.

    Your question is really one of risk, of whether to roll the dice or not. Your investment returns are unknowns -- the government's SSA payouts are knowns.

  • Report this Comment On August 08, 2014, at 12:38 AM, RxPro wrote:

    I took the simple math a little further, to show why taking it as early as possible is almost always the right choice.

    $1,000 x 48 mo = $48,000 invested at 8% return = $3840 per year.

    Difference between $1,000 per month at 62 and $1,360 at 66 is $4320 per year.

    That's a difference of $40 per month for waiting.


    If you invested the 1,000 monthly you'd be at $58,400 after 4 years, again assuming a return of 8% nets you $4,672 per year plus your $1,000 per month or about $29 more per month versus waiting 4 years.

    The obvious variable here is the 8% returns. Those are solid returns, but not even near where the market has been averaging lately or even historically. And since the only logical argument for waiting for SS is if you don't need it yet, then it would make even more sense to take it and invest it fairly aggressively, right?

    Anyways, think about it. I plan on enjoying my retired life, no time for waiting!

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