Social Security: How Secure and When to Take It

Cat eating

Cat food.  It’s what’s for dinner.

Back in the early 1980s I remember railing against Social Security to my mother who was on it. She’d grown up with the specter of little old ladies living on cat food. That was a real possibility when she was a girl and the elderly were the poorest group in America. I explained to her that if I and my two sisters were let off the SS hook we could not only give mom more than her monthly check, we’d have extra left to feather our own nests. She wasn’t buying it.

And I wasn’t buying it, either. I never figured Social Security would be there for me. All my financial planning has been based on the idea that if it wasn’t, no problem. If it was, that would be a pleasant surprise.  Well, Surprise! Now I’m just a few short years from collecting and a surprisingly hefty amount at that.  Considering what we’ve paid in and assuming we live long enough, it turns out to be a pretty sweet deal. I hadn’t counted on the power of the AARP: The most formidable lobby in history.

retired couple 

No cat food for these folks.

Us geezers are now the wealthiest group in America.

A little bit of history.

Social Security was born in 1935 during the depths of the Great Depression. Those hard times devastated everybody, but none more perhaps than the elderly who were no longer able to work even in the unlikely event work might be found. Many were literally living on cat food, if that could be had.

Back in those days, life expectancies were considerably less. Now figuring this can be tricky as the biggest reducer of average life expectancy is deaths in childhood. But if we look at the life expectancies of people who have survived to the age of 20, we get a more useful number. In 1935, for men the average was around 65, for women about 68. Since then, life expectancy in the USA has continued to expand. Here’s a cool tool for looking at this: Expanding Life Expectancies

From those numbers it’s easy to see that setting the age to collect Social Security at 65 was a pretty good bet for the system. All workers would pay in, relatively few would live long enough to collect and then only for a few years. This worked so well, in fact, (with some fairly minor adjustments along the way) that it was only around 2011 that the money flowing in stopped being more than the money being paid out. So well the total surplus is currently around 2.7 trillion dollars. (Update: As of September 2018 it is now 2.9 trillion) (Drifted down to 2.83 trillion as of 2022)

The times they are a changin’.

But now the wheel has turned. The huge baby boom generation that has been paying in these surpluses has begun to retire. In addition, they are living a whole lot longer. Going forward, if nothing changes, the system will be paying out a whole lot more than it takes in. It looks like this:

1935-2011:  Annual surpluses build and end up totaling about 2.7 trillion.

2012-2021: Annual payroll taxes fall short of the annual payouts.  But the ~4.4% interest on the 2.7T will cover the gap.

2021-2033:  The interest payments will no longer be enough to make up the payout difference and we’ll start drawing down on the 2.7T.

2033:  The 2.7T is gone.

After 2033:  The payroll taxes then collected will only be enough to cover 75% of the benefits then scheduled to be paid out.

Where exactly is this 2.7T?  

The 2.7 trillion dollar surplus is commonly referred to as the Trust Fund and it is held in US Treasury Bonds. This, by the way, is about 16% of the roughly 16 trillion-dollar (Now ~22 trillion as of 2018, five years later) US debt. In a real sense we owe it to ourselves. In fact, about 29% (4.63T) of our 16T debt is owed to ourselves in this fashion: Social Security, Medicare and the balance in Military and Civil Service Retirement programs. Only 1.1T/8.2% is owed to China, the creditor we hear most about. We owe Japan about the same. If you’re curious, here’s a breakout:

Does this 2.7T really even exist?

You’ve probably heard scary talk that this Trust Fund doesn’t really exist. That the government has already spent the money. Well, yes and no.

There is no “lock box” somewhere stuffed with these:

$1000 bill

$1000 bill

Or these:


$5000 bill

Or these:


$10,000 bill

Or even these:


$100,000 bill

It is in a whole bunch of these:


US Treasury Bond

*For bonus points, can you name the guys on those bills? Without consulting your Uncle Internet?

To answer the question, “Is the money really there?” you need to understand a bit about what bonds are and how they work.

Anytime any entity sells a bond it is to raise money it intends to spend. The bond and its interest are then paid back with future revenues. This is how bonds work. As it happens US Treasury Bonds, what the Trust Fund holds, are considered the safest investments in the world. Backed, as the saying goes, by “the full faith and credit of the United States Government.” Of course, that’s us, the US taxpayers and the same folks owed most of the 2.7T.

So the US Treasury Bonds held by the Trust Fund are real things with real value. Just like the US Treasury Bonds held by the Chinese, the Japanese, numerous bond and money market funds and countless numbers of individual investors.

Yeah, well I’d still feel better if they hadn’t spent the money I contributed and if it really was cold hard cash in a lock box I could draw on.

Well, OK, but cash is a really lousy way to hold money long-term. Little by little it gets destroyed by inflation.

It is important to understand that any time you invest money, that money gets spent. If you hold a savings account at your local bank, your money isn’t just sitting in a vault. The bank has lent it out and is earning interest on it. A portion of that is the interest they pay you. Federal law does require that banks hold a portion of deposits as cash “in reserve” to be able to pay depositors upon demand. If that demand exceeds the reserve, what is commonly called “a run on the bank” occurs. Because most of it has been lent out and is not instantly available.

If that is an unacceptable risk, your alternative is to stuff your cash in your mattress or (much better) a safe deposit box. Had the government done that, the Trust Fund would now be overflowing with currency. That is, pieces of paper money backed by, you guessed it, “the full faith and credit of the United States Government.”

At least the Treasury Bonds pay interest.

When should I begin taking the money?

Once you reach age 62, you can begin receiving Social Security. The catch is, the sooner you start, the smaller your checks. The longer you delay (up until age 70), the bigger the check. Of course, the longer you delay the fewer the years you’ll be collecting.

Countless articles have been written about strategies attempting to answer the question as to when to begin receiving benefits. All kinds of fancy, sometimes complex strategies, are described. I’ve read a bunch and my view is in the end it’s really pretty simple: Since the government actuarial tables are as good as they get, the payments are pretty much spot on with the odds. Here’s what, in order, you have to ask yourself:

1.  When do I need the money? If you genuinely need the money right now, nothing else matters. But if you can delay you might find some advantages.

2.  Do you think Social Security will collapse and stop paying? If you believe this, clearly you’ll want to collect while the collecting is good. For what it’s worth, I happen to think you’re wrong and I’ll explain why further on.

3.  How long are you going to live? The longer you live, the more advantageous delaying is. The break even point between age 62 and 66 is around age 82-85. If you think you’ll die before then, you might want to take the money sooner.

4.  Unless you are married and you were the higher earning spouse. Then you also want to consider how long your spouse will live. If your spouse is likely to outlive you, upon your passing he/she will be able to trade in their lower SS payments for your bigger checks.

For example, my wife and I are both in good health. But looking at family histories, and because women outlive men, my best guess is that she’ll survive me. Maybe by as much as two decades. I figure I’m good to maybe 80-85. Were I alone, I’d start drawing ASAP. But she could easily see 95 or 100. When I die she’ll have the option of switching from her benefit to mine. Since mine will be larger, that’s what she’ll do. To maximize that check for her, I’ll delay taking my benefit until I’m 70. She’ll start hers at 66.*

*(2023 update: My wife and I are now drawing SS and have done exactly this. It has worked out well so far)

Another thing worth considering: As we reach advanced age our mental acuity diminishes. Managing our investments becomes harder. We become more reliant on others. At that point, a monthly government check has more value than just the dollars.

Of course there’s no way to know what the future really holds. The best we can do is play the odds.

The odds look to me like Social Security is doomed. I’m taking mine ASAP.

Eggs with scared expressions

There are those who choose to take their benefits the moment they turn 62, even though the amount is reduced. Some simply need the money right now and have no choice. But others are acting out of fear. They believe Social Security will collapse in their lifetime and they want to get what they can while they can. I’m not worried. If you are 55 or older you’ll collect every dime. Here’s why:

1. Social Security is backed by the most powerful lobby in history: AARP.
2. Geezers are an increasing proportion of the population.
3. Geezers vote.
4. Politicians rarely try to take anything away from a large population that votes.
5. This is why all the possible solutions being suggested will affect only those age 55 and under.

Well that’s all well and good, but I’m under age 55! What about me?

For anyone 55 and over, Social Security has turned out to be a pretty great deal. But mine and the generations older than I are likely the last that will enjoy such lofty benefits. The system is in trouble and clearly changes will have to be made. For those under 55 today the deal is likely to be a lot less sweet. You can expect:

  1. To get 100% of any promised benefits, but the promises will be smaller.
  2. It will cost you more. Income caps (the amount of your income subject to SS tax) will continue to be raised. In 2003 the cap was $87,000. For 2013 it is $113,700. (As of 2020: $137,700) That’s a trend that will continue.*
  3. The “full retirement age” will continue to rise. It used to be 65. For me it’s 66. For anybody born in 1960 or later it is 67. Those ages will continue to rise.
  4. Benefits may become “means tested.” That is, based on your need rather than what you paid in.*
  5.  Your benefit will be subject to income tax, if your income is over a certain amount. In 2020 for Singles this begins over $25,000. For Married Filing Jointly: over $34,000. 
  6. Congress will continue to tinker and in the end Social Security will still be there.

*2023 updates:

2. The discussion now is tilting to removing the caps altogether and subjecting all income to the SS tax. 

4. If you and young and follow the advice on this blog and become very wealthy, there is a growing chance your benefit will be means tested away entirely.

Both #2 & #4 represent a fundamental shift in the nature of Social Security, changing it from a forced retirement program where your checks are based on your contributions to a social welfare program where your checks are based on your need. How you feel about this will depend on your political persuasion but either way, in my view, this philosophical shift should have a more prominent role in the debate.

So, is Social Security a good deal?

Well, it kinda depends. For the fiscally responsible types who read this blog, probably not. If you took that 6.2% of your income you are compelled to contribute, along with the 6.2% your employer is compelled to kick in, and invested it over the decades using the strategies presented here, you’d likely be far, far ahead. Plus your money would be in your hands and not subject to the whims of the government. But that’s just the few of us.


I’m realistic enough to know most people are goofs with their money. Without Social Security many would be back to living on cat food. Not only would the rest of us have to read about their sad plight, something much more draconian than Social Security might well be implemented to remedy the situation. So, yes, for most people it will turn out to be a good deal. And probably for society as a whole. But not for you. Or me.



Plan your financial future assuming Social Security will NOT be there for you. Live below your means, invest the surplus, avoid debt and accumulate F-You Money. Be independent, financially and otherwise. If/when Social Security comes through, enjoy.


Want to know where you personally stand with Social Security right now?

What’s your Social Security break-even age?


Addendum 1:

In our comments conversation here, Stocks Part VIII: Withdrawal Rates, Reader jcw provided two very useful additional links for married couples: A calculator for figuring when and how best to take benefits and an article on how to Maximize Joint Benefits. 

Addendum 2:

Here’s a great post from Go Curry Cracker debunking the Social Security Torpedo.


*As for those guys on the currency:

$1000: Grover Cleveland

$5000: James Madison

$10,000: Salmon P. Chase**

$100,000: Woodrow Wilson

Oh, and that’s Teddy Roosevelt on the $1,000,000 Treasury Bond.

**Chase is one of three guys on US currency who was not President.  He was a Senator, OH State Governor, US Treasury Secretary for Abraham Lincoln (probably tough years to have that job) and Chief Justice of the US Supreme Court.  But never President.  The slacker.


Subscribe to JL’s Newsletter

Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. Monica Lewis says

    I always thought I would wait until my full retirement age –67– to begin drawing SS… Until I had a financial plan done by Vanguard. They recommended my taking SS at age 62. When I asked the planner why would I take it early and accept a reduced benefit, she explained that this allows more of my investment dollars to continue to grow from my age 62 to 67. I rarely, if ever, read about this strategy. Of course, it’s based on your investments growing during those years, which I believe they will.

    • jlcollinsnh says

      Hi Monica….

      Once you step beyond looking just at SS other possibilities open up. The strategy suggested to you is a sound one and if recommended by a Vanguard advisor with intimate knowledge of your circumstances, I believe you can feel comfortable with it.

      The risk, of course, is that in any 5 year period your investments can go down as well as up. But overall and over five years you should be fine.

      The alternative, spending some of your investments until 67 and then drawing the bigger check, is the flip side of that same coin.

      • jlcollinsnh says

        Perhaps the most important deciding factor, Monica, is largely still how long you’ll live.
        The further past your mid-eighties you see yourself, the more valuable the delayed and larger checks become.

        Another thing worth considering: As we reach advanced age our mental acuity diminishes. Managing our investments becomes harder. We become more reliant on others. At that point, a monthly government check has more value than just the dollars.

    • Mary L says

      Incomplete approach. SS is taxed in an obscure fashion at rates up to 80%, depending on the character of your other income streams. It’s a pretty awesome annuity, but more like a longevity insurance policy that is inflation indexed. Third it’s not an investment, it’s a straight up income transfer program. Fourth, it might actually be solvent if it weren’t for all the (mainly women) collecting without working or paying in. It’s possible for a lazy housewife to collect more than someone who dragged their ass to work for 35 years, standing in pouring rain at the bus stop with latchkey kids and a body wrecked by work. Pretty sweet deal for a big fraction of the population.

      • Nathan says

        Hi Mary,

        Social Security is never taxed at an 80% tax rate. If your taxable income is above a certain level, then up to 85% of your Social Security benefits can be taxable, but it is subject to your marginal tax rate. The highest taxable amount on SS in 2015 was 33.66%, which is the 85% maximum that it taxable multiplied by the 39.6% highest marginal tax rate. In 2019, the highest taxable amount is 31.45%, which is the 85% highest taxable amount multiplied by the 37% highest marginal tax rate.

    • Lynn Keller says

      Interesting. My Vanguard Advisor advised me not to take SS until I am 70. (I retired at 62 and I am now 63 – no debt.) His rationale is for me to spend down my investments so that when I am 72, my RMDs won’t be as high and risk tossing me into a higher tax bracket. I am not a multimillionaire, by far. All my investments, sadly, are in tax-deferred accounts. So now I am questioning his strategy. Hum….

      • Lynn says

        I was planning on collecting my government pension and SS at age 66 or later but now that I’m thinking about it, maybe I’ll withdraw those sooner. I’m 61 and I quit my job last year and I’m living off withdrawals from my 457b, and savings. The plan was, I will be drawing down the 457b, then collect my SS and government pension later to get larger amounts on them, but the thing about 457b is that my children can inherit it. They can’t inherit my pension or social security.

  2. Monica Lewis says

    P.S. Also involved in my situation is retirement before age 60 so some income other than a salary is required. I will have only SS or investments to choose from, and she recommended SS.

  3. Prob8 says

    Being one of the biggest programs we have, I can’t imagine SS going away. I agree that the benefits will be eroded over the years and the ages will go up. I’ve heard of the means testing ideas and, for me, that’s the biggest cause for alarm. I would hate to be denied a benefit because I was smart enough to invest like Uncle JLC. It’s also because I’m self-employed and pay both the employee and employer share of the SS tax – annoying.

    Anyway, another great post! I haven’t heard the word “draconian” since law school. Nice work.

    • jlcollinsnh says

      Thanks Prob8…

      …always trying to dust off good old words around here.

      You make a great point about means testing and I thought about addressing it in the post.

      The prospect troubles me as it will fundamentally change the character of SS. As originally conceived, and so far, it is a retirement system that pays benefits based on your level of contributions. This is why my checks will be larger than my wife’s: I’ve paid more into the system.

      Once it becomes means tested it becomes fundamentally a wealth transfer welfare program.

  4. SavvyFinancialLatina (@SavvyFinLatina) says

    I’m 22 and I doubt I will see social security by the time I retire. I wish I could have the 12% given to me. There are two kinds of people that I now in retirement: the first, social security is a bonus, the second, social security is the only cash flowing in. There are no in between people. I don’t understand why I have to spend the next 40-50 years paying for someone else’s retirement.

    • jlcollinsnh says

      Ha! You sound like me in my 20s.

      I’m sure you’d do better investing the 12.4% on your own. But in the end you’d be surrounded by people who didn’t coveting what you have.

      If it’s any consolation one of the retirements you’ll be paying for, hopefully for the next 40-50 years is mine. Does that help?

      Didn’t think so. 🙂

  5. Ruth says

    Thanks JL. I love your blog and find it very helpful. One question: in this discussion I always read about the Boomers being such a big group compared to Gen X. But the Millennials, the generation after X (b. 1981-2000 I think), is bigger even than the Boomers. If that’s true, won’t their earnings stabilize things, at least for a while?

    • jlcollinsnh says

      Hi Ruth….

      You are absolutely correct and that fact is something the doomsday prophets fail to see or choose to overlook.

      Not only will their earnings help, but their investing for their own futures will likely drive the market much higher over the next couple of decades.

  6. DFW says

    Great site. I’ve learned a lot from it and am rethinking my whole investment strategy. One question: could you give us your thoughts on life insurance as an investment vehicle to safe for retirement?

    • Prob8 says

      Sounds like another post idea for JLC! In the meantime, I’ll share with you my thoughts on life insurance. Although financial planners may give a different opinion (and have to me over the years), I think you should use life insurance as a specific tool for a specific job. For example, young parents might own term life insurance during the childhood years to provide money for payment of debts and expenses in the unlikely event of an early death of one or both parents. I don’t think life insurance should be used as a tool for retirement savings. As this blog illustrates, there are other far more effective tools for meeting your retirement objectives.

      • jlcollinsnh says

        Hi DFW….

        Thanks and glad you’ve found value here.

        Prob8 nailed it exactly and, if anything, I’d put it in stronger terms:

        Life Insurance is a terrible investment. So terrible the only people who seriously call it an investment with a straight face are the people who sell it.

        Life insurance has the characteristics of the worst possible investment: Lousy performance laden with exorbitant commissions and fees. Great for the sales person and the insurance company. Dreadful for you.

        The fact that they peddle such crap solely to line their own pockets is one of the many reasons I distain investment advisors, especially insurance sales people pretending to be investment advisors.

        As Prob8 says, the only life insurance worthy of any consideration is Term Insurance. That is insurance designed and bought solely for the insurance itself. Insurance not trying to be an investment.

        Even here, I’d suggest you’d be better served leaning out your life and creating a savings rate of 50, 60, 70% of your income. If you are living on 30% of your income, and with the ever growing savings/investments the other 70% is building, in the unlikely event of catastrophe you’ll be even better positioned than with insurance.

        Life insurance, even the “good” term kind, is aimed at people spending every dime they make. That’s just not what we believe in around here.

        Buy term if you must. Dump it as soon as you are able. And never let anybody sucker you into lining their pockets by selling you insurance as an “investment.”

        • DFW says

          Thanks for the prompt reply. Unfortunately I’ve already been suckered into buying 2 whole life insurance policies (one for me and one for my wife) and now I’m wondering if I should just cut my losses and get my cash back or sit it out for the long term. It’s too bad that I didn’t find your site earlier.

          • David W says

            Cut your losses, a bad investment doesn’t become a better investment the longer you hold it. I’m actually working on a blog post right now comparing cash value insurance with investing and in almost every situation you are better off with term + investing in mutual funds. Check my blog in a week or so and you should find it (sorry Jim, hope you don’t mind the shameless promotion).

          • jlcollinsnh says

            Don’t feel too bad, DFW. These things are enormously profitable for the insurance companies and they spend a ton of money suckering people into (marketing) them. I’ve met insurance sales people who honestly seem not to understand how bad these things are. Maybe they’re the first suckers. Or maybe I just want to believe that rather than believe so many people would willing sell such crap.

            Anyway as to what to do now, follow David W’s advice.

          • jlcollinsnh says

            Thanks for weighing in David, that’s good advice.

            No problem, at least around here, mentioning your upcoming post. In fact, when it goes up please comment again with the link.

          • Prob8 says

            I agree with the cut your loses theory. Consider it a lesson learned. IF you decide to buy term insurance, consider buying only the amount you acutally need and dumping it when the need is done as JLC mentioned. I have married friends who brag about owning over $1 million in term insurance on each other. To me that’s insane. If you think you need that much, it might be time for a lifestyle makeover. Anyway, good luck DFW.

          • David W says

            I speak from experience. I signed up for a whole life policy a few years ago but something seemed fishy so I started doing the math and comparing what I was told to what I was getting. I cancelled the policy after a few months and considered it an expensive lesson. Since then I refuse to touch any financial products that I don’t fully understand.

          • DFW says

            Thanks for all the advice. I checked out your site David and it’s also great stuff. The hard part will be cancelling all the insurances. Those guys are very hard to argue with. That’s how they can convince you in the first place that you need their crap.

          • jlcollinsnh says

            Very true. They will make it as hard as possible. They don’t want to lose the income stream.

            Here’s the key: Don’t argue. Demand. It’s your money. If they don’t cooperate threaten to go to your state insurance commission and file a complaint. If that doesn’t help, do it.

            Good luck! and let us know how it goes.

          • David W says

            I didn’t even bother talking to the agent, I just called up the billing dept and told them to stop the automatic payments. I got a few calls from the agent which I ignored. I learned not to talk to them in person or via phone, instead I only email. That way there’s a record and they behave themselves. I also found it futile to try explaining my reasons, I just told them what I was going to do and when they ask why I say it’s my decision and I’m not going into the reasons.

  7. vinoexpressions says

    “Live below your means, invest the surplus, avoid debt and accumulate F-You Money.” I love that advice…though I have a hard time avoiding buying some decent bottles of wine! Nevertheless, living in a relatively dry Asian country has helped curb that itch. Appreciate the insight – simplifies the issue.

    I believe my grandfather had a 10,000 dollar bill. He was a wealthy man when young, though not so in his older years. Your advice should help me keep on a steady path.

    • jlcollinsnh says

      Glad to hear it, VE…

      …although reading your blog it seems you figured out the good life without my help!

      Whatever happened to the $10,000 bill? I’ve only seen them in pictures. It is hard to imagine folks carrying around that kind of scratch. And when those were in circulation 10 grand was real money! 🙂

  8. chenzhaowei says

    I think Social Security would have been a great idea if AARP wasn’t such a powerful lobby group. The actuaries could see that lives were being extended, the Baby Boomers were going to eventually retire, and that population growth rates can’t keep exponentially growing to keep a ratio of maybe 3-4 workers for every 1 retiree.

    At the very least, I am grateful for Social Security’s less-discussed but potentially fraud-ridden disability program. I don’t know if I would expect with high probability that a regular insurance company to be able to give payments for maybe 60+ years to a person who was disabled. Or in any case, it is a good back up because the price of long-term disability insurance would be pretty high if it would not be supplemented with Social Security.

    • Tobi says

      Do you have any evidence whatsoever that Social Security’s disability program is “potentially fraud ridden”? SSI pays $780 per month. How many people are willing to fake a disability to live in the splendor that less than $800 per month buys in 2020?

      Try having a little compassion along with your investment skills. Disabled people shouldn’t have to be beggars.

  9. Sean says

    Side note: It’s sadly appropriate that good old Woody Wilson is on the $100,000 bill:

    “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.”
    –Woodrow Wilson, after signing the Federal Reserve into existence

  10. Chris says

    Since 1950, there’s actually been at least 5 non-presidents on US Currency:

    Salmon P Chase ($10,000 bill), Ben Franklin (half dollar coin and $100 bill), Susan B Anthony $1 coin, Sacajawea $1 coin, and Alexandar Hamilton ($10 bill)

  11. Shilpan says

    our beloved Fed can print money, so no worries on the credit worthiness of our borrower. 🙂 The only way to avoid Trust fund depletion after 2033 is to add more young workers to pay for the retirees. Unless we start bringing high skilled young immigrants, the picture depicts a rather sad story going forward for the future SS recipients who are in their 30’s and 40’s now.

    • jlcollinsnh says

      Hi Shilpan!

      As Ruth points out in her comment below: “But the Millennials, the generation after X (b. 1981-2000 I think), is bigger even than the Boomers.”

      That, along with an influx of young and talented immigrants, as you point out, are what make me optimistic. Of course, we might have to work a lot harder to attract those immigrants. With the world economies improving, staying in their home countries is ever more appealing for them. And those countries are working harder to keep them.

  12. chronicrants says

    Actually, private disability insurance policies do not pay out indefinitely. My current one only covers up to 7 years – and that’s if you can get them to pay you. They try to use every loophole to avoid it. SSDI will pay out for longer, but first you must qualify by having paid enough into the system, then your benefit is based on how much you paid in. It also does not account for cost of living. So for example, I am in my 30s and have paid into the system, but my benefit would not be enough to cover rent (even in a cheap place), food, utilities, and medical expenses. Forget about extras like a cell phone, trips to visit family, or a meal out with friends. It’s a great safety net for sure, but unfortunately it’s not the panacea that many would believe it to be.

  13. chronicrants says

    I’m having trouble understanding the purpose of a $100,000 bill, or even a $5000 bill. Why would those exist? People don’t carry them around, do they? It’s just so unfathomable to me.

    Thanks for the SS post Jim! I’ve been excited to read it ever since it appeared in my Reader 🙂 Your advice aligns with my own thinking – to plan as if SS won’t be there (I’m late Gen X) but I’m still nervous about it. I spend below my means, sure, but what if I can’t save enough? I think the main problem is that the timeline is so huge. I won’t reach standard SS age (whatever that may be by then) for another 35 years or so, and then I expect to live at least another 25-30 years beyond that (lots of longevity in my family) so it’s a bit daunting. But I know I’m ahead of things. My thinking is “wow, how will I manage to save enough by then?” whereas a lot of people my age are saying “that’s so far away, I don’t need to worry about it yet.” I worry for them, because SS really may not be enough and I don’t want to see anyone eating cat food. I may have to pass this post around and hope that it gets through to at least one or two people. Thanks for writing it 🙂

    • jlcollinsnh says

      Hi CC….

      While no one can predict the future, my guess is you’ll be just fine. You are all ready thinking about these things, and planning. It really is simple:

      Live on less than you earn.
      Invest the difference.
      Avoid debt.

      Learn to be flexible. Live your life and learn new things. You’ll be able to handle what comes.

      I tell my daughter: Plan your life, work and dream it. But spend not a moment worrying about it. Worry does only harm and whatever we worry about is seldom the problem we actually face.

      • chronicrants says

        Thanks! My big concern is saving “enough,” since working into my 60s (or probably even into my 50s) won’t be an option due to health problems. But you’re right, I need to just do what I can and not worry. I come from a long line of worriers, though, so it’ll take some practice to learn not to. 🙂 But I appreciate your last lines – very wise!

    • John says

      I think those big bills were for banks keeping money, not for the common person. That was before the days of having money simply because the computer says you do.

      Much easier for a bank to keep $10,000,000 in cash reserves using 100 $100,000 bills rather than 100,000 $100 bills. (Or god forbid pallets of gold since those were gold certificates).

      I doubt there was much use for them outside of banks though…you don’t necessarily go buy a bottle of water and a pack of gum for $1.50 and ask for $99,998.50 in change. Hah.

  14. DFW says

    I did it! I got my money out of all the life insurances. Of course the agents tried to convince me that it was a huge mistake. They showed me many calculations based on current or projected returns, which made life insurance seem like the best thing ever. However, my response was always that I would only base my decision on guaranteed returns, which are much less favorable. Anyways… now I’ll invest in Vanguard index funds and recoup my losses as quickly as possible.

  15. Simon Kenton says

    I took social security as soon as the monthly payment hit a predetermined amount, based on N/3 = X mod(0). (Three kids.)(Recondite joke.)

    I have used the money to pay down principle on their home loans, and to pay down their student loans.

    — I don’t want to enslave others to support me, via a Ponzi scheme.

    — this returns the money to those from whom it is being extorted.

    — this increases their net worth without the temptation to waste it, such as a cash return might evoke.

    — they will have some tangible result from the money extracted from them, which would assuredly not be true if I had spent “my” SS money and died. Unlike an IRA, your (fake) social security account is not heritable. Using SS like this creates an inheritance for them.

    Yes. It would be possible to collect this money and invest it at a growth rate higher than the increase in benefits based on delaying retirement. Doing so could, in theory, become an inheritance for them. My experience determines on the side of money now rather than more money later; kids benefit from the practice, and geezers who inherit substantial money when both old and unpracticed tend to be poor stewards.

    • jlcollinsnh says

      Hi Simon….

      and welcome!

      I very much enjoyed your comment and your unique approach. Sounds like we have similar attitudes toward all this. I’ve even been thinking about a post on how SS is effectively shafting the young to enrich the elderly, who are now the wealthiest group in the country.

      I especially like your concept of sifting your wealth to your kids slowly so they both enjoy it earlier and learn how to handle it.

      My only concern with your idea is, as I said in the blog, “As we reach advanced age our mental acuity diminishes. Managing our investments becomes harder. We become more reliant on others. At that point, a monthly government check has more value than just the dollars.”

      Maybe an alternative would be to delay SS for the bigger check in your seriously old age and use your current assets to shift money to the kids.

      Either way, I like the idea of funneling the money back to them. I’m sure they do, too! 🙂

  16. Robert says

    You could (and probably should) spend an entire post just on the topic of how to optimize SS benefits when you are married. There are strategies around optimizing the timing of individual benefits vs. spousal benefits. For example, if the wife had a relatively low income compared to the husband (often the situation, though becoming less so) such that the wife’s individual benefit is less than the 50% spousal benefit, the wife can take her own SS benefit at Age 62, the husband can delay his individual benefit until 65 or more to maximize the benefit, then the wife can switch to the 50% spousal benefit (which is higher).

  17. John Veit says

    Excellent article.

    I have heard that if the income limit on SS taxes was removed, the cash in/cash out future problem with the SS trust fund would go away.

    Of course the “richer folks” would get socked with a big tax increase that they have not had to bear for years and years and years, as the “poorer” folks have been doing since the “poorer” have been paying the SS tax on all of their earnings in most cases.

    Another plus for the SS fund would be that since there are fewer “richer folks”, there won’t be a rich-baby-boom bubble to deal with.

    Two other points, SS is also a disability insurance program, and pays survivor benefits to children and widows if the worker dies. So, it is more than just a retirement fund. It’s a mixed bag with heavy social overtones.

    And it still is a financial floor on which one can build on with their own savings plan.

    Secondly, as to early retirement, another reason to take the money and run, is that you may still be “young” enough to want to do and enjoy many things that down the road ten years or so, you won’t care so much about doing. Or your physical situation will have gone down hill as is the case with older folks (two heart attacks + for me), and as such, doing some things will be out of the question. For example, it’s hard to paint or do needlepoint with shaking hands. And doing most things requires the ability to be able to walk, and walk a lot, and go up and down stairs or pathways. So, if you can’t walk much, or you get dizzy, etc., plan to stay home a lot.

    Lastly, SS is an insurance system by which workers save for their future via the SS tax on their earnings, so that if or when they die, get disabled, or get old, society won’t have to pick up the tab for their or their family’s full support.

    I used to work for SS many years ago, and have no work connection with SS anymore. My views and opinions are mine alone.

    • jlcollinsnh says

      Thanks John…

      Glad you liked it, especially as someone who used to work there. I appreciate you adding your perspective. Great points!

      Since SS payments are at least somewhat tied to contributions made, I wonder how that would be handled if the income limit were removed. If the payouts were still capped at the current levels, SS would become more of a simple income redistribution scheme.

      Depending on one’s viewpoint, that may or may not be a good thing. But I think it should be part of the discussion.

      As for SS and early retirees, check out:

      I think you and my other readers will find it interesting and useful.

  18. Shane says

    Hi Everyone,

    Recently I’ve been running the numbers trying to decide when my wife and I should begin collecting our Social Security Benefits, and I’m curious what others’ thoughts on our situation will be. My wife is 57, I’m 48, and we have a beautiful 5 year old daughter. We have always lived comfortably, well below our modest means, and saved and invested the rest. Right now, I’m working full time, and my wife is staying at home with our daughter. We’re considering possibly selling our home and becoming location independent for a while, probably relocating to somewhere nice with a lower cost of living, possibly within the next few years.

    In 5 years, when my wife turns 62, she’ll be eligible for ~$800/month in SS benefits. If she waits until her full retirement age of 66, she’ll get ~$1100/month. If she waits until age 70, she’ll get ~$1400/month. All the articles I’ve read and SS benefits calculators I’ve looked at say that its best to wait until you’re at least full-retirement age or, better yet, until 70 years old to begin taking benefits. While this may be good advice for most people, I’m wondering if it’s the best thing for those of us who are planning on being financially independent, not counting SS, when we retire?

    Right now, we’re living fine with only one income, so we could easily elect to delay taking my wife’s benefits until she’s 66 or 70 years old, but I’m thinking it might be better for my wife to take the reduced benefit of $800/month at age 62 and invest all of it in VTSAX. Assuming an estimated 7% yearly return, her $800/month deposits would grow to ~$110,000 between the ages of 62 and 70. Assuming a 4% SWR, that money could provide us with ~$400/month in additional income by the time my wife turns 70. Alternatively, the money could be used to fund our daughter’s college education, which will be starting right around that time. Although this would be less than the ~$1400/month that she’d get from SS if she waited until age 70 to begin receiving benefits, my thinking is that taking control of the money ourselves, as soon as possible, might be safer than waiting and hoping that my wife lives long enough for the increased benefits rate at age 70 to pay off for us. I realize, though, that this is counter to what seems to be the prevailing wisdom, so I’m curious if anyone else has done this or is planning to do it. Also, it would be good to hear from others who think that this idea is a dumb one and to listen to their reasons why.

    My wife is healthy, and I always joke with her that even though she’s older, she’ll probably outlive me, just because I think she’s genetically predisposed to that. It’s hard to know, though.

    Recent life experiences involving seemingly healthy family members and friends who everyone expected would live at least in to their 90′s but who died unexpectedly in their 60′s and 70′s have colored my perception of the risks associated with whether or not to delay taking SS benefits in hopes of getting a bigger check later in life. For some people that later in life never comes, and they end up with nothing. Since the Social Security Administration’s actuaries apparently do a pretty good job of figuring out how to set the amounts that people receive each month so that no matter what age you start taking your benefits, on average, you end up getting the same amount, especially for those of us who don’t necessarily need the monthly check to live on, wouldn’t it be safer to start taking “reduced” benefits at 62, invest that money so that it grows in the meantime, and then in the event that you die earlier than expected, at least your family has the money in the bank?

    I’m wondering what others who have pondered these same questions think about my idea of taking a “reduced” benefit from SS and depositing 100% of it into our Vanguard account to grow during the 8 years between when my wife is 62 and 70. Is it better to have a $1400/month check beginning at age 70, or would you rather get an $800/month check and have $110,000 in the bank at age 70?

    Thanks in advance for your ideas and comments,


    • Tobi says

      This reply is many years too late, but when my husband starting taking Social Security benefits at age 62 we found out 2 things:

      1. Our 16 year old son is entitled to 50% of his benefit, on top of what my husband receives, until he turns 18.

      2. The real surprise: my son’s portion is 50% of my husband’s full retirement benefit (what he would have received each month if he had waited until age 66), not what my husband is actually collecting at age 62.

      Since my husband was a stay at home dad and I’m still working, it was a no-brainer for us to start him collecting at age 62.

      It also works the same way in waiting to take Social Security for spousal (and disabled adult child) benefits. They get 50% of Social Security at full retirement age so waiting until age 70 doesn’t increase the spousal (or SSDI) benefit.

      The nice folks at SSA were tremendously helpful, once I waited on hold for eons to talk with then.

  19. jlcollinsnh says

    Shane and I have been discussing his idea over on and I suggested he post it here as well. My hope is enough readers are still tracking the comments here to add to the discussion.

    I think his idea is very intriguing and I’ve actually thought about doing something similair. However, as I said in the post, my current plan is different. To save you the effort of searching thru the post again to find it, here you go:

    “For example, my wife and I are both in good health. But looking at family histories, and because women outlive men, my best guess is that she’ll survive me. Maybe by as much as two decades. I figure I’m good to maybe 80-85. Were I alone, I’d start drawing ASAP. But she could easily see 95 or 100. When I die she’ll have the option of switching from her benefit to mine. Since mine will be larger, that’s what she’ll do. To maximize that check for her, I’ll delay taking my benefit until I’m 70. She’ll start hers at 66.

    “Another thing worth considering: As we reach advanced age our mental acuity diminishes. Managing our investments becomes harder. We become more reliant on others. At that point, a monthly government check has more value than just the dollars.”

    These decisions are tricky and have lots of moving parts. There is no easy “do this and be done” sort of answer. I hope some of you will offer your thoughts on these two ideas and/or share your own strategies.

    • Mike says

      Having young children during retirement years is a very unusual situation to have to consider.
      I’m in the same boat. My research has turned up that your wife must fuke for SS at age 62 so your child can claim for their social security also at the same time. Your child will receive approximately 8 years of social security checks and that blows away your wife trying to delay to get more.

  20. Sara says

    I finally understand how the social security program works, thanks for the great explanation. Wish I could just keep that 12%, but its nice to know there’s a backup in place.

  21. Simon Kenton says

    My wife and I were hammered in the Colorado floods, and even after the flood insurance parsimoniously paid we ended up with a spare mortgage for recovery that we had not planned on for our geezery. Once Ms Kenton reached full retirement age, she became eligible to file for the spousal benefit, even though she continues to work and will do so until at least 70. This benefit turns out to be somewhat greater than half the monthly amount I receive and divert to my children. We are aiming this extra monthly amount at principle on our higher-interest loan. With this amount and some supplementation we should be able to clear off that loan in 4 years, which will produce a substantial monthly surplus either for living or for clearing the surprise mortgage. If I succumb to serious neurosis about these mortgages, I can at any time cut off the kids and divert my benefit, as well as the spousal, to curtailing principle.

    Mr Collins, I take your point about becoming less able to manage investments in late geezery, at which point the government check becomes welcome. You are quite correct; both Mrs Kenton’s mother and my father became pretty much incapable of investment management sometime after 90. Here is my plan: when I get demented, I intend to forget that I have been writing monthly checks to the kids for their loans and mortgages based on my SS. That will allow the government checks to pile up in the bank, because my ancillary plan is to forget to spend them on myself, too.

      • Simon Kenton says

        Perhaps you give me too much credit. It is not hard to conceive of harnessing millions of randomly firing amyloidal-plaque challenged neurons, once you have grasped the idea of putting millions of industrious little dollar bills to work. I have been motivating mine with traditional management tools: praise and reward. When some of them managed a 40% increase (counting reinvested dividends) in 11 months, I made them line up and told them, “Folks, you’ve done WAY BETTER than I ever anticipated. Any employer would be proud to have a set of dollars like you who achieved what you have. I want you to take the rest of the year off. Spend some time with your nickels and pennies. Cruise the vaults, and if you find any others with your ambition and your know-how that you think might be as much of a credit to this team as you are, invite them over. Guys, show up here at the first of the year, relaxed, refreshed, ready to get back to it.”

  22. Kris says

    My husband is 43 and thinking of retiring (after a job loss last month). One concern I have is his social security. While it might not be very big, if he stops work now I can only think SS would be super small if at all by the time he’s in his 60’s. My SS is pretty much zilch after staying home with my kids since I was 30 followed by VERY low paying jobs.

  23. Mike says

    Hey Jim, First things first, Thank you for the wealth of knowledge. I learn so much everytime I read the blog. I have bought 3 copies of The Simple Path to Wealth book. One for me, my son and my nephew who has a interest in retiring early.

    I have read your post about the RMD’s, but what I just read was if a married couple are in the 15% tax bracket (Roth ladder) counted as non SS income then the tax can be
    27.75 %. Can you explain this and the best way around this ?

    Thanks Mike

    • jlcollinsnh says

      Thanks Mike…

      Glad it helped and I appreciate you buying the books!

      But I’m afraid I don’t quite understand the situation you are describing in your question.

      RMDs are taxed at your tax bracket rate and, if they are large enough, they can push you into a higher bracket. Does that help?

  24. kindoflost says

    What would happen if we put those 2.7T in VTSAX? When would money run out? (Would it?). If that money is getting 4.7% and we usually assume retirement accounts grow at around 7% I bet it would last longer.
    Great article, but I am not so sure we should trust the lobbying power of the AARP, mostly because I think the idiocity of the electorate is underestimated. And on this matter of SS there are already too many (defeating and self fultilling) jokes about how it will end bankrupted and this only creates room for our leaders to kill it or let it die because it is not performing as greatly as it performed in the past.
    I loved that you said you would take is at 62 if you were single (loved it because it’s what I plan to do).
    But back to the VTSAX idea and the actuarial tables. Aren’t the tables built on the assumtion of the 4.7% return? If so, then if I take the money and invest it on my own (in VTSAX) (as they did in the linked article to make the apples-to-apples comparison) then wouldn’t I get a better performance than what the actuaries predicted or assumed? The only problem is that the 7% is more likely in longer time horizons and if I do this at 62 I will have to make it to 92 for a 30 year run.
    Regarding the break even ages, I take “when to claim” as a hedging bet. Claiming at 62, I bet that I will die before 82. If I make it to 82, I will start losing money, but I will be alive! I’d like to lose that bet.

  25. Bill W says

    It doesn’t take someone with a Ph.D to figure out that FDR’s long-ago program is still a very good worker retirement program. While there is no doubt that workers’ FICA withholdings could be better managed than they are now, there is also no doubt that the concept of mandatory saving for retirement is essential …… otherwise there would be a lot of penniless seniors amongst us. While we live in a free country, sometimes people have to be forced to do the right thing. I waited until I was 70 before drawing my SS income, which equates to about $44,000 a year. Certainly doesn’t seem like a princely sum, but if one doesn’t have any long-term debts then it really is a lot of money. And based on my calculations, I’ll use up my and my employers’ FICA accumulated withholdings in 10 years, which makes SS a pretty darn good annuity.

  26. K says

    Thank you for sharing all of your knowledge.

    Yet another kick in the gut for the financially responsible. Hopefully they will just remove the income cap. There is no cap for Federal withholding or Medicare tax so they should remove the cap for Social Security as well. Let’s face it, most of the “rich” people aren’t making all of their money through wages and are already paying lower tax rates on capital gains.

    I know I should look at this with a grateful heart that the government considers that I have “enough” and don’t need to benefit from the decades I have paid into the system but I already pay extra on my phone bill, my electric bill, my internet bill for those who can’t pay and since 2018 haven’t been able to deduct all of the State and Local taxes I am paying so I am paying even more in Federal taxes. I have paid over $100k in school taxes while I have no children. Yes, I know, education of children benefits society. I think over $100k is enough to pay for one person with a low to middle income salary. As a single person I pay all the costs and get a single standard deduction (of course no child tax credit for me, either). I live simply and frugally to be able to pay and still save for retirement (even when the IRA limit was $2k). The government just seems to be taking more and more away and it’s deflating. Being in the middle class feels like you are fighting the tide.

Leave a Reply

Your email address will not be published. Required fields are marked *