“Should I take Social Security at 62 or wait?” ~Newspaper Headline
What is a headline like this doing in a blog about Cuenca?
Because it affects many people who are trying to figure out when to retire, where to live for the rest of their lives, etc. That question posed by the newspaper applied to Joanna and me.
I was only 61 years old, and my physical health and mental health were getting worse due to an absolutely miserable job. My boss was a witch and the business I was in was going down the toilet.
But at 61 years of age, what is one to do? I tried getting another job in northwestern North Carolina, but age discrimination reared its ugly head. Even agreeing to a 60 percent pay cut and being extremely qualified did not get one phone call from the state university where I sent five job applications.
Crunching numbers for our planned retirement home in a small mountain town in Ashe County, North Carolina did not work out despite it being only 80 percent of the national average for the cost of living.
Social Security and Cuenca was the answer. The mountain town and $1,935 monthly for ACA (Affordable Care Act) insurance was not the answer so we opted for early retirement at three degrees south.
As you know, your benefits get slashed if you take the money and run at the age of 62. The exact amount varies with each person due to a variety of reasons (such as the year you were born and how much you earned in your lifetime).
When I went to Social Security’s website (https://www.ssa.gov/), it told me I would get 91 percent of what I would get if I waited for 4 years and 8 months longer… 56 months. Of course, the Social Security Administration is pushing retiring at 70 years of age. They have seen the life expectancy data that shows a drop to 77.28 years for Americans (Canada is 81.75 years).
A 2021 Gallup U.S. Poll indicates many take the exit ramp before qualifying for 100 percent of Social Security payments. The poll found the average retirement age was 62 (Just like me!).
On December 27, 2022, the New York Times ran the headline, “Retirees Are One Reason the Fed Has Given Up on a Big Worker Rebound.” It confirms what the 2021 poll stated: Unlike older Americans who, in the decade after the Great Recession, delayed their retirements to earn more money and have their 401(k) accounts recover from the Dow Jones Industrial Average falling 1,874 points or 18.1 percent in October 2008, many today are leaving the job market.
On November 30, 2022, Federal Reserve Chair Jerome Powell spoke at the Hutchins Center on Fiscal and Monetary Policy on the outlook for the economy, inflation, and the changing labor market. He told the audience that about 3.5 million people are missing from the U.S. labor force. Powell compared with what one might have expected based on pre-pandemic trends.
Powell told the audience, “Despite very high wages and an incredibly tight labor market, we don’t see participation moving up, which is contrary to what we thought. Part of it is just accelerated retirements.”
People 62 and over do not work for a variety of reasons. Some want to enjoy their retirements. Many of them are looking at Cuenca to do just that. They want to enjoy life before it is too late… which leads us back to that poll.
Health issues rank high on the list of concerns cited by those in the 2021 Gallup U.S. Poll. Many respondents were concerned they could face being disabled, needing an unexpected surgery, or face a terminal diagnosis.
Joanna and I factored that into our decision making to claiming Social Security as soon as possible. A personal story was part of what made us to retire early. A friend of Joanna’s sister waited until she could get 100 percent of Social Security. Nine months later, that friend had died.
It is important to remember that if you retire early, Medicare benefits don’t kick in until you reach 65. ACA insurance may be your only option if you stay in the United States. For Joanna and me, that is moot. We have Ecuadorian national healthcare that is supplemented with private self-insured coverage.
According to the U.S. Federal Reserve, of those between 55 and 64, they had an average debt load of $97,290. A lot of that debt is unsecured (i.e., credit cards). According to LendingTree, the average credit card interest rate in America today is 22.91 percent. However, that is likely going to go up as the Federal Reserve tries to control inflation with higher interest rates.
With high interest rates on your credit cards, it’s a real budget killer. Top that off with inflation running around eight percent in the United States and those credit balances could be getting worse the longer one stays in the country.
Why continue, then, to rack up runaway interest charges if you have an option? For many Americans, Cuenca is their financial solution. I have heard the term, “Financial Refugee,” bandied about for Americans who moved to Cuenca for financial reasons. These refugees have debt and/or little saved for retirement. Cuenca is their savior as the cost of living here is a lot less than where they moved from.
Inflation is another factor. For 2022, inflation in Ecuador was less than half of the United States. Monthly Social Security payments went up 8.7 percent starting in January 2023. This is the annual cost-of-living adjustment (COLA) required by law.
Projections for inflation for Ecuador for 2023 are lower than the four percent in 2022. The annual inflation rate in Ecuador eased for the third month to 3.64% in November 2022, from 4.02 percent in the prior month. It was the lowest reading since May, mainly due to slowing prices of transportation.
Meanwhile, prices in Ecuador increased faster for food and non-alcoholic beverages, and housing and utilities. On a monthly basis, consumer prices were almost flat, after increasing by 0.12% in October 2022.
The way I see it, I am already making up that nine percent reduction in my monthly Social Security payments by living in a country that has a lower inflation rate than the United States.
Top that off with affordable prices, one can most likely retire early in Cuenca. That includes that huge and delicious gourmet hamburger from Calvo & Co. (Los Cipreses 1-133 y Ave. Ordóñez Lasso) in my photo above, which will set you back less than nine dollars. For comparison, the average price of a hamburger at Red Robin is $14.
Oh! Calvo & Co. has been honored twice in the last three years with “The Best Hamburgers” in Cuenca. This is according to the readers of Gringo Post.
Then there are the intangibles with taking Social Security at 62. Freedom from office constraints is a huge reason for many of the expats in Cuenca. You won’t have to report to a horrible boss, and you do not have an alarm clock waking you up an ungodly hour (2:30 a.m. for me).
Living in Cuenca at the age of 62 means you can use your time your way. That includes walking at night on a lit pedestrian bridge over El Río Yanuncay. That bridge is yours five years earlier than expected!
Another intangible that financial experts do not talk about is retiring earlier than planned is the time to pursue your passions. For my wife, it means artwork. We dedicated one of our rooms to her passions. Joanna has made numerous beautifully decorated bottles. One style has been découpage, which is the art of decorating an object by gluing colored paper cutouts onto it in combination with special paint effects, small objects, etc.
For me, I have finally been able to pursue my love of photography. I hung up the television camera in 2020 and I had sorely missed expressing myself through photography. No longer working 9+ hours per day without any breaks (including lunch), I have the time to capture the beauty of Cuenca with my camera.
It can be the simplest thing such as a bicycle in the terrace of Bistro Yaku. The subject matters in my hometown are truly limitless. And what you can do with your free time is up to your imagination and desires.
If you’ve been waiting for the chance to help in your community or volunteer at a non-profit organization, early retirement presents the opportunity to get started in Cuenca.
A great example are Des Dizney and Bill O’Brien, who moved to Cuenca from the Dallas-Fort Worth, Texas area in 2018. In no time, they were involved with the Cuenca Soup Kitchen. And in January 2019, Des, Bill, and another man took the helm of the non-profit organization.
Her leadership has helped expand the Cuenca Soup Kitchen way beyond what a stereotypical soup kitchen does. It starts with the screening of the needy. Once accepted, there is a process to get food to the most in need. Cuenca Soup Kitchen works with a nutritionist for balanced meals. And a couple of dozen of expats help with the distribution of the food.
Another great example is Canadian Garry Vatcher, the Director of Hogar de Esperanza. Garry left Lewisporte, Newfoundland and runs this fantastic organization. Their mission is to “provide support to people who are in a situation of vulnerability or poverty due to an illness.” Hogar de Esperanza provides programs and services that “empower and inspire hope in those facing these challenges.”
One of their volunteers is Saralee Squires, who moved from Denver, Colorado. Writing for the English speaking online newspaper, CuencaHighLife, Saralee said, “I realized after retirement I missed a daily sense of purpose that comes with work. Volunteering at Hogar de Esperanza is so satisfying as I work with our team to help as many people as possible by sorting and distributing food donations from our generous sponsors.”
One’s health in retirement has been mentioned before in this blog and certainly in my book, “Una Nueva Vida – A New Life: A Rejuvenated Enthusiasm in Cuenca, Ecuador.” Exercise and eating healthy often take a backseat during working years. I cannot count the times I saw my co-workers getting fast food on the run or eating some of the unhealthiest food I have ever seen. Many gained a lot of weight. I remember a former television news photographer who must had a 50 percent weight gain due to what he ate at work.
Due to the high quality and fresh food coupled with walking everywhere in Cuenca, it took little time for me to lose 25 pounds of my American weight. Joanna lost weight, too, due to our diets and exercising. Early retirement allowed us to focus on our quality of life and much higher activity levels.
Getting out in fresh air more can be advantageous to your health. I get in at least 35 miles / 56 kilometers on foot every week. Walking around the city has allowed us to discover great places to eat.
We avoid the grease and high calories of the fast-food joints (which is rather easy as there are so few of them in Cuenca). Our walks have led us to the highly rated La Guarida and Sofy Glocal Cuisine. We had an excellent neighborhood restaurant run by Javier Patiño. Sadly, for us, Javier is headed to the United States to pursue new opportunities.
Americans who wait until they reach the full retirement age for Social Security may have the best financial scenario IF they plan to live in the United States. But for folks looking to live outside of the U.S., especially in Cuenca, that may not be true.
Numbeo is the world’s largest cost of living database. It is a very reliable resource for your planning to live in another country. According to Numbeo, consumer prices (not including rent) in United States are 105.7 percent higher than in Ecuador. Rent in U.S. is 385.7 percent higher than in Ecuador.
Everyone needs food. Numbeo says groceries prices in the U.S. are 122.2 percent higher than in Ecuador. Want to eat out? Restaurant prices in the United States are 165.6 percent higher than in Ecuador.
So, is 62 the magic number?
I think it is if you are wanting to live in Cuenca. Those figures I just threw at you are very enlightening. Fidelity Investments claims, “If you claim Social Security at age 62, rather than wait until your full retirement age, you can expect a 30 percent reduction in monthly benefits.”
Being a lover of numbers, I see that 30 percent reduction meaning you are saving 75 percent for consumer goods, 355 percent for rent, 92 percent for groceries, and 135 percent for eating out if you are living in Cuenca at the age of 62.
Please note I am not a financial advisor. Before making any major decisions, a financial advisor can help you determine what’s best for you. My Fidelity Investments advisor was blown away when I told her what my monthly budget is in Cuenca. Yours may be, too.
A lot more information on life in Cuenca can be found in my book, “Una Nueva Vida – A New Life.” Some say it is the most thorough book out there concerning moving to and living in this beautiful city.
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Salud, mi amigos.