It's got me thinking, though.
Originally, social security was fairly straightforward. At age 62, you received a set amount based on the amount you "contributed" over your working life, and the number of years you worked.
But over the intervening decades, politicians have tinkered with it, generally Republicans and always with an eye to getting people to start the program later in life. They can read actuarial tables as well as anyone else.
So, as far as I can tell, here's the way it's set up now. I welcome corrections if anyone sees any. My sources are a series of letters and phone calls between me and the Social Security Administration, and two little books . Understanding the Benefits and Retirement Benefits, both published by the SSA, and available free from them.
The first factor to take into consideration is this. You are not grandfathered against changes until you are actually enrolled in the program. True, the SSA sets basic guidelines that may have exceptions for people past a certain age, but until you receive your first SSA check, they can at any time make changes that effect you. If you don't take your benefits at age 62, and they change the law two years later to make the earliest age you can receive your benefits age 75, you are screwed.
That being so, why would anyone wait?
Well, when the program first came into effect, you wouldn't have waited. It was straightforward.
But over the years, Congress has looted the social security funds. They take money out of social security, use it for other purposes, and essential put an "IOU" in the box. Of course, when the day comes that those IOU's have to be repaid, it will be interesting to see what happens. When the Social Security Administration says "we have X amount of money allocated for social security payments" they are counting these congressional IOU's, and maybe they shouldn't be.
In order to stave that day off, members of congress have changed the law to "encourage" people to start taking benefits later in life. Even the language in the documents has changed. Now age 66 is called "full retirement age" and any age earlier than that is considered "early retirement."
There are a lot of penalties attached to "early retirement."
Once upon a time, social security payments to an elderly person were not taxable. Now, if you take retirement at say, 62, your checks are taxed. Since this is money you earned and payed into the system, however involuntarily, you have already been taxed on it once. Now you are taxed on the same money again.
Once upon a time, if you wanted to work a little job and earn some extra money, that extra money was not taxed, within limits. Millionaires couldn't make zillions and not be taxed, but Joe the Ragman could work at a gas station and make a few hundred a month tax free. Now, if you take benefits before age 66, and you work a job, all the money you make is subject to regular taxation. So what's the point of working the small job?
Here's another kicker. You pay taxes on your money you earn if you are taking social security at 62-65. The money you earn also reduces your social security benefit. For every $2.00 you earn above the annual limit (now $15,000), (gross income), social security deducts $1.00 from your social security check. However, if you are good little senior citizen, and wait til 66 to apply, you can earn $40,000 a year and it will not be taxable income, nor will it reduce your social security benefits.
So you say, well, to hell with that. And you don't work. You're not over the hurdle.
- If you are single, receiving benefits before age 66, and file a single return that shows $25,000 a year gross income, from all sources including social security, your income is taxable, including social security. You can either make quarterly estimated payments or you can have taxes withheld from your other sources of income to cover it.
- If you are married, sitting on your rear at home, and doing nothing else, but your wife works, then "if you are married and file a joint return, with more than $32,000 gross income, then your income (social security) is taxable."
What's the big deal about age 62 vrs 66.
Well, if your social security benefit is $1,376 a month, and you get it at 62, then you will be getting payments 4 years earlier than at 66. That's 4 years X 12 months X $1,376 a month. Total amount:
Now , if you wait until you are 66, you would get "full" retirement, which would be $1,756.00.
So , $1,756 - $1,376 = $380.00
$66,048 / $380.00 = 173 months, or 14.41 years. That's how long you would have to keep getting your social security for it to be to your advantage to wait. If you figure you will make it to 80 years old, maybe it's worth it. But remember , you are going to be getting paid more money, later so it will be in dollars with decreased purchasing power.
In 1960, a candy bar cost ten cents. Today the same candy bar is $1.00 at Walmart.
A coke in a can at a gas station cost ten cents in 1960. Today it costs about a dollar.
Gasoline in 1969 was fifteen cents a gallon for regular. Gasoline yesterday was $3.44 a gallon.
There are other factors besides inflation which influence prices, but you see my point.
And overriding all of this is the fact that until you get that first check, the weasels in D.C. can change the law. I could wake up tomorrow and see the news article "Congress raises minimum age for social security benefits to 85."
I'm giving serious consideration to going ahead and applying. The big elephant in the room is that last point. It's about how far you trust the politicians. In my case, not at all. Not a groat, not one whit.