Should my husband draw Social Security now at age 66 1/2?
My husband and I got married a year ago. I am 58 years old and he is 66. When we married, we both agreed to work until I retired, which is good because neither one of us is wealthy. In the meantime, his parents in Texas recently passed away. We inherited some money and a few low valued rental properties there. He is in Texas, where he hasn't worked for two years now, still trying to get rid of those properties and I am back in Illinois (where we will live) working full-time. The Texas properties are really bad and he is putting in a lot of labor to fix them up. I think he should take Social Security now instead of digging into the money we inherited to live off of each month. My salary pays for my commute, living expenses, insurance, and a small bit for savings if we're lucky. I'm also covering a long-term care insurance policy for us and dental for both of us as well as my health insurance. When he gets back to Illinois, we wanted to buy a house, but instead of even getting a part-time job to supplement our income (which would not decrease his Social Security at this point) as he promised, he is living off of the inherited money and refusing to draw Social Security until age 70. Soon, we won't have enough money to get a house or for any retirement security. At this point in our lives, I don't see how waiting 4 years to get an increase of $200 a month makes any sense. We are losing $15,000 a year to maybe make $2,400 more a year four years from now. I think he should get a part-time job AND take the Social Security. Who knows if either one of us will make it to 70 or be unable to work soon, and we'll both have to live to over 80 to break even with what he's NOT taking. Letting the Social Security sit there with our fingers crossed for a very small increase while we could have income, and maybe even some savings on top of that, and instead spending saved money for our house, seems insane. We are just getting further and further behind. I would like your opinion because this is really starting to get contentious between us. I realize in a normal situation that if you don't need the money, you shouldn't take it until 70 years old, but we DO need the money. I can't possibly cover for the both of us. Besides that, if something happens to his or my health, and neither one can work, we're really in a worse mess. What should I do?
I understand your angst and that is sometimes the problem when people read the generic news and feel bad if they can't follow it. I am not in favor of depleting the assets now with the expectation of slightly better cash flow in the future. It would be an easier answer if we had all of the numbers but obviously you feel that your assets are not large enough to provide a comfortable retirement and you do not wish to deplete them now, thinking that it would take over a decade to recoup. Delaying social security works the best for those who are in great health and have a large nest egg.
Having said that, you may wish to sit down with someone who can look at your assets and benefits and confirm the decision or show you how you could comfortably wait, If you are adventurous you could also look at some of the tools to help you understand the implications. Here is one http://crr.bc.edu/special-projects/interactive-tools/target-your-retirement/
Whew! You have a lot of moving parts to think about here. And also at least one incorrect assumption in addition to a lot of missing information. Right up front it's apparent you need to visit with a holistic, fiduciary planner who can do projections for you based on your current assumptions, and, put together the missing pieces for you.
The "incorrect assumption" is your Social Security calculation. If your husband's annual benefit at 66 is $15,000 then it would be no less than 32% higher at his age 70: $19,800. The delayed credits between 66 & 70 are simple (as opposed to compouned) 8% for a total of 32%. That's $4800/yr, twice the $2400 number you're using. With cost of living increases- which apply even if you're not taking benefits -that increase would be even more. In general, your husband is correct in his plan to spend down savings in exchange for much higher lifetime income. In addition, if his benefit is higher than yours will be at his age then he is also doing you a big favor. Because upon his death, his full benefit will replace yours.
However, having said that, here are some of the missing pieces any planner would need:
- Your budgets. Yes, that's plural. A Survival budget is essential. This is the amount of monthly income it would take to be sure you are housed, fed, healthcared, dressed and transported for work. Then a Living budget, the amount you need to live life the way you would like.
- Both your Social Security benefits at age 66. Most planners can work forward and backward from there.
- Your longevity. Meticulous planners will have you complete a Longevity Calculator. You can do this yourself in advance with a quick Google search. If your result is less than about 85 then you may indeed want to file for Social Security early. But your biggest retirement risk is living longer than you expect. Social Security is a great hedge against that risk.
- All your asset values and income amounts.
AARP has a pretty good calculator at http://www.aarp.org/work/social-security/social-security-benefits-calculator.html if you would like to start there. But there is no substitute for an experienced planner who can pull everything together for you and visually illustrate the effects of different choices.
When to begin taking Social Security can be a very subjective matter, but it really is objective if you really need the income stream (in your case this seems to make sense). One of the key phrases in your story is "this is starting to get contentious between us", and I would HIGHLY recommend you seek out a finanical planner to help settle this matter as a third party. In addition, it seems the inheritance money is a tremendous finanical windfall for the both of you, and that money also needs to be earmarked for your long term needs/expenses. You did not mention you have any additional retirement savings, so without knowing your full story I will assume there is very little to none, which makes the inheritance money that much more important. Also, based on your story, I don't think buying a home is in your best interest when you consider the repairs, maintenance, and the loan you will have to repay on the property. Ultimately, you need to focus on cash flow now, preserving the inheritance, and saving as much money as you can. I would also suggest having a professional review your long term care policies to determine whether there may be a way to save money on the premiums you are paying.
To summarize, based on what you have said, your thinking is correct. However, unless you meet with a financial planner to help the two of you settle this dispute nothing will be resolved. A financial planner can help provide the two of you a roadmap to succes in retirement and for the long run. They can help both of you find the pitfalls in the plan, make corrections where necessary, and be the intermediary between you and your husband. I don't think if you show your husband this response he will care much unless he speaks with someone on a personal level. Sometimes the planning has more to do with the emotions, and a planner can help the both of you see clearly down the road where you are headed. I would suggest a fee only planner for you.
I hope this helps,
The information provided would appear to be a lot of facts and assuming what you laid out is reasonably accurate, it seems to me to be a no-brainer to begin to take the Social Security now. Regardless of what you do from a financial perspective, I would go so far as to recommend that the two of you sit down with a marriage counselor or psychologist because this seemed to go way beyond financial considerations. Hope this helps and good luck
Thank you for sharing the details of your financial situation. I wanted to applaud you for covering the long term care insurance, dental insurance and health insurance. I empathize with you as I understand how stressful the situation has become. It is true that by delaying Social Security your husband would increase his benefit. I don't know the details of your household income. When I advise clients, we we delay the larger of the two Social Security benefit to ensure continuity of retirement. I agree that putting too many resources in an illiquid asset like real estate can compromise your ability to save for retirement and maintain financial stability. I think working with an unbiased objective Certified Financial Planner to help you see the impact one area has on another area of your financial life can be eye opening. Working with a third party with no emotional attachment to the situation can change the dynamic in this situation.
Good luck to you.