When is the best time to retire?
Tom Hess: In the past, our agency would try to make some economic decisions with our clients, and so when I look back over my career with Social Security, over the last 30 years, I’ve been doing comparisons for the people that I’ve talked to, and I would compare… well, you know if your benefits are available at age 62 and you’re only working for $10,000 a month, then this is your option: You may want to take your benefit, still work a little bit, but it’s not over the retirement limit, and take your benefit early at your lower amount.
Now, in comparison, you’re money-ahead to start with, but what happens if you outlive your retirement? You know, when you take it early and many times the breakeven point is only like 14 years into the future. Well, we were kind of comfortable with that comparison until, looking back, we realized that people are living longer. So what happens on the end of the comparison where somebody gets to be 80 and it would have been a better decision for them to have left their money in the program and not taken it out as early and their benefit would be higher for the rest of their life.
Well, what kind of economic comparison can you make between being money-ahead or outliving your retirement so that you are going into poverty levels, in some cases, by starting your retirement too early? So we’re really kind of pulling back and saying, “It’s up to the client. Let the client make their decision”. If they feel they want to take their benefit at age 64 because their brother took it at 64 and he seems to be doing okay with that decision. If a client wants to take it at 62 and they think they have thought ahead enough, we’re not going to try to give them a lot of comparisons as to, well, what’s your breakeven point.
There is no breakeven point in life, you know, and in your finances. If a stock broker would have told me what my breakeven point was a few years ago, I would have put my money in a sock under my mattress. So, you can’t always just look at the economics, sometimes you have to realize that there is no set answer into the future and we’re not really going to give people comparisons, because we’re comparing apples to oranges, and that’s not correct.
So we’re going to pretty much leave it with the client. And we have a sheet that talks a little bit about what the client should be looking at: longevity (how long they expect they live), finances (what other money they have), how they are planning on making ends meet into the future. That review, that factsheet is called “when to start receiving retirement benefits”, and the best way to get that sheet is to go to our website www.socialsecurity.gov and in the search feature just type in “when to start receiving benefits” and it will refer you to our fact sheet, and you can print it right off your computer. Of give us a call 1-800-722-1213 and we’ll send one to you.
Interviewer: Lot of unknowns there, there’s always an element of chance.
Hess: Well, and you’re one of the best people to talk to because you’ve got a lot of background in finance, in taxes and you don’t know until the dust has settled how things are going to turn out, and you can’t always be looking at the rosiest outcome because the rosiest outcome is to put your feet up, settle back in your hammock and hope that everything turns out and that you’ll have a lot of good years in retirement by taking retirement early.
But, you get to be 80 and you’ve outlived your income and bills have kept rising, your income is not staying at that same level. You have to cut back on driving, you have to cut back on living in your own home, you have to cut back on medical insurance. Well, there are a lot of things that are hard to cut back. Like this winter, cut back on heating your house just because you’ve outlived how much you needed to survive on? That’s a tough one.
So, I don’t want to be the person to advice people to take benefits early just because they’ll have more time on their hands and they’ll have money to start with when, you know, at the end they might not be living as they could be had they waited and taken retirement later.
Interview: One person said “I’ve got enough money for the rest of my life: if I die at 4 o’clock tomorrow afternoon.”
Hess: I don’t want to see people really come away from a comparison saying, “Well, I’ve got enough money to live until 79″. Well, that’s not a good decision to make because people are living longer than that. And that’s not a good decision to make. Try to maximize your income until your late 70s, because a lot of people live much longer than that.
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