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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: What age to take SS payments? Date: 12/9/2013 9:34 PM
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I am not that confident that I will be able to earn 4, 5 or 6% returns in this economic environment over the next ten years.
There's a not uncommon viewpoint that the economy is one thing and SS is another thing and they have nothing in common. In fact the money that goes to SS recipients comes (albeit indirectly) from the economy. Over the long haul, if the economy does poorly, then SS payouts will have to be cut because there's no money coming in to pay out.

The stock market, and specifically the S&P500 or VTI (total market index) essentially track the US economy as a whole. Over a 20 or 30 or 40 year period, if the economy crashes then we'll all be happy to have Alpo on the table. SS recipients will be in the same boat -- see Detroit as an example of what happens when there's no money, regardless of "guarantees" that retirees will get paid.

You guys appear to have more confidence in your investing skills than I.
Maybe. But as in anything, you have to go with the base rate and look at the statistics. And the base rate for the S&P500 in the long term is about 10.5% per year. The median (half are worse, half are better) return for all 15-year periods 1950 thru 2013 is 10.7%.
The 5'th percentile (5% are worse, 95% are better) for all 15 year periods is 5.3%

So, yeah, it's easy to have confidence that you can get an acceptable return. Easy to do, too, no superman investing skills required. Simply buy & hold the S&P500.

Ah, you said 10 years. Fair enough. Median return for all 10 year periods is 10.8% 5'th percentile is 1.9%.
Worst 10 yr period was -3.9%. Worst 15 year period was +3.5%.

Assuming $1,000,000 saved, and total income of $5479.50 plus SS of $2959, you get $8438.50 which may or may not pay their nursing home bills at age 80.
But don't forget that they've got that $1,000,000 to draw from. We factored this into our SHTF scenario. At a rough SWAG, at 80 you are unlikely to live more than 15 years. You can take $67,000 out each year before it runs out.

Since many people are not frugal, they may not have much if anything at all saved at 62.
Yes, and those are just the people who cannot afford to forego 8 years of SS. For them, the discussion is moot -- they absolutely need to start collecting SS the minute they retire.
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