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In 1991 Billy and Akaisha Kaderli retired at the age
of 38. Now, into their 4th decade of this
financially independent lifestyle, they invite you
to take advantage of their wisdom and experience. |
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Why We Took Social Security at
Age 62
Billy and Akaisha Kaderli
Billy
and Akaisha in Thailand
We decided 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 is hard to argue against that.
We have always lived an
unconventional lifestyle and 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 over 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 8% per year the
experts claim is the annual increase of waiting - although one is guaranteed and
the other is not. Maybe the markets will trend sideways or go down or even up,
no one knows. For the last 33 years we have lived off of our investments through
up and down markets, so
investing the monthly check is definitely an option. More likely, we will just
not spend our stash and look for opportunities in the markets as our cash
positions grow. Plus we have control of the money at this point, adding to our
net worth.
Next let’s look at
some numbers.
For easy math, say at 62
you are going to receive $1000.00 per month in benefits, but if you wait until you
are 66, your payment will be $1360 ($1000 x 8% for the four years you have
waited). 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 ($48,000 divided by $360) and that would put us at 77 years of age, just
to break even. In that time frame, the Social Security we are receiving plus our investments should grow far outpacing
the extra money received by waiting.
For some people
deferring until their full retirement age could make sense, especially if they
do not have the assets to support themselves, are poor at handling money or if
they are still working. However this is not our situation and therefore we
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?
Update: Below is the
return of the S&P 500 Index since we took Social Security at 62.
Retire
Early Lifestyle appeals to a different
kind of person – the person who prizes their
independence, values their time, and who doesn’t
want to mindlessly follow the crowd.
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