I was very young when I started working. I loved getting paid, but didn’t quite understand what the deductions from my pay were. I was told that one of the deductions was for something called “Social Security” and when I got older there’d be a pile of money waiting for me. I still didn’t understand it, and the fact that it would take me over 50 years to get to that pile of money made it seem like a fantasy, but I was told that it was the law and I had no choice.

When I got to be 22 and graduated from college, I started working full time. Of course my pay went up (not by much, it was a family business, and the father’s thought they were overpaying us to begin with) but so did the deductions. I still wasn’t too happy about the deductions, and knowing that I wouldn’t find that pile of money for another 43 years still made social security feel like something that was so far away that maybe I’d never get there.

By the time I got to be about 40 I started to think that maybe this social security thing isn’t so bad. After all, I’ve only got another 25 years until I can retire, so it could be possible. But at about that same time the government threw me a curve ball. Now, the thanks for being smart enough to save my money and invest it in order to have some income in later life was that 80% of my social security would be taxed at my tax rate. I didn’t think it was fair, and they never told me that when they started taking the deductions from my pay, but, the government needed the money, and this was one way they could get it.

40 became 50 and now social security was only 15 years away. Even though 80% would be eligible to be taxed, at least I’d get some of the money that they took from my pay all those years ago. With only 15 years to go I started to think that maybe, just maybe, I’d actually see some of my money.

50 became 60 and now social security seemed real. With only 5 years to go, it felt so close that I could almost touch it. But the government threw me another curve ball. Now the retirement age for social security became 66. I thought I only had 5 years to wait, but now I had six. I started to feel like that cartoon character who has the carrot dangled in front of him and can never catch it. Still, we were told that the system was in danger of collapsing, and the only way to save it was to raise the retirement age by a year.

60 became 65 and now I could taste it. After all of this, only one year to go. But I’m going to be 66 in a few days and now the government changed again. You can still get your social security at 66 but if you wait your annual amount goes up by 8% for every year you wait (until 70). I’m still working and don’t expect to stop working for a number of years so I don’t need the social security money (80% would be taxed anyway) so I’m probably going to wait a few years to start to collect. I hope there’s still a social security fund by then.

Looking back, it’s been so many years since that first payroll deduction, more than I ever expected it to be. I wonder if I’ll ever see a social security check. I wonder if I’ll ever see that pile of money I was promised when I was a kid.

 

If you are really worried about it, it's simple - retire early. That is what I did. And took SS ASAP. Never looked back on my decision. People place way too much importance on the MONEY WORRY when it comes to retirement. I can tell you this much and I don't have any health issues at all. The difference between what I could do between 60 and 70 was a real eye opener in just general terms as the OLD BODY starts to tell you you're on the downslope. And, the years blew by. I'm now 75 but if I could go back to being 60 again I wouldn't change a thing except to try harder at getting my wife to retire earlier. Thanks for keeping the SS system funded; we are enjoying it.

 

IBTM!!

 

I, somewhat like Dave, took my SS early (only by one year). To keep waiting so that I could get 8% more per year was not going to work for me. I had worked long enough! It was time to enjoy the fruits of my labor. We are comfortable in terms of money and only occasionally do I miss work (really I miss my friends more than the work).

I tell everyone that if you can retire, retire!! Enjoy life.

 

Let's not forget SS was originally instituted at a time when the average life expectancy of an American adult was younger than the age at which you could collect SS benefits. It really was insurance in that it was covering the "chance" that you would still be alive when you could no longer work. Here is a web site with an interesting chart showing the average life expectance of an personal age 16 in the US. Take a look at the change over the years since 1920.

http://life-span.healthgrove.com/l/17/16

Consider that the program started 1935, a time when most people were working full time from age 16 or 17 on. According to the charts, the average 16 year old person was expected to be dead 10 years or more before they could collect.

Today, the average person is expected to be alive by the time they are eligible to collect. Here is another web site where you can see the average life expectancy as of today, based on gender, age and country:

YOUR LIFE EXPECTANCY BY AGE

Today a 20 year old in the US is expected to live until 80. That is about 15 years of expected benefits for the average person who is 20 years old today, versus zero years for the average person in 1935!!! Those who have made it to 65 as of today can expect to collect 18 years of benefits.

Since the money we pay towards social security goes into the general fund, and since the country operates at a deficit, we simply don't have the money to pay these social security benefits without continued borrowing or drastic spending cuts. The other option is to change the program to reflect the change in life expectancy. As Rob mentions, the government did that few years ago, but there is MUCH more room to move the eligibility age.

I have to assume that we will see at least two of the above changes. My prediction is that the government will increase the SS tax by increasing the rate as well as the ceiling. So you may have to pay 10% of your income for SS tax, or maybe you will have to pay the current 6.2% on all of your income regardless of how much you earn, or some combination of the two. I think you will also see another increase in the eligibility age, phased by your age in the same fashion as the current system. So today's 40 year old may have to wait until he or she is 70 to collect full benefits, instead of the current 67. The government may also institute needs testing to determine if you even need the benefits before you receive them, but a change like that would convert SS from a government required insurance system to a welfare tax.

As you can probably tell, I have given this a lot of thought. I'll be eligible to collect next year when I hit 62. My plan is to retire a bit early, maybe age 63, but not start my SS benefits right away. When will I start to collect? Hard to say. You are betting on how long you are going to live. If I wait to take benefits until 66, I would have to live to the age of 76 just to break even as compared to taking the benefits at 62. See this web page for a simple chart that shows the break even points.

What Is Social Security's Full Retirement Age?

I'll be monitoring government thinking on this issue and will pull the trigger sooner if I see a change is likely. I will not wait longer than my age of full benefits. I don't think it is a good gamble to wait until you are 70 to start collecting unless you are very confident that you are going to live well into your 80s AND that you are going to need that money when you reach that age. My expenses will be a lot less if I am lucky enough to reach that age. I think my age of big expenses will be between 63 and 75.

 

As I was told by my financial adviser, TTMAR. Take the Money and Run! You only have so many years left, they call the 60's the go - go years, the 70's, the slow - go years, and the 80's, the no - go years. The earlier your retire, the better.

 

That was great advice Glen.
Levi

 

I retired at 62 and couldn't sign up for SS fast enough! I am a true believer in TTMAR!

 

Since the money we (pay) paid into social security was taxed, I don't think it's right that we should be subjected to tax on 80% of it when received. I propose that when you start collecting social security that you receive 100% of it tax free, until you have recovered every dollar you paid in. After that, you become subject to tax on 100% of it, with your actual tax based on your total income (as it is today).
edit: I would also include in the amount to receive tax free, the amount your employer matched your contribution, because that could have been part of your income if there was no match requirement. Yes, I realize tax was not paid on that portion.

 

Wise man, sage advise.