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I have noticed while playing around with FIRECalc (http://www.firecalc.com) that if I enter my social security payments as additional income in the appropriate future years, then calculate (using Investigate) my spending level for 100% success rate over 40 years, I end up with a higher number taking SS at age 62 instead of waiting for age 70.

I am seeing this for leaving my portfolio at the default Total Market setting, or playing around with it under the mixed portfolio setting, but I certainly haven't tried everything. My guess is if I make the portfolio really conservative then I'll get a different result.

This indicates to me that it's a better idea to take SS payments earlier rather than later. Usually I've been hearing the opposite advice,and waiting for a higher payment is my natural inclination. Anybody have any informed observations on this subject? Anybody seeing anything different using this or other data-based simulators?

-IGU-
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This indicates to me that it's a better idea to take SS payments earlier rather than later. Usually I've been hearing the opposite advice,and waiting for a higher payment is my natural inclination. Anybody have any informed observations on this subject? Anybody seeing anything different using this or other data-based simulators?

</snip>


I'm still several years away from SS, but I think waiting until age 70 makes compelling investment sense given the guaranteed 8% annual return for waiting. (Assuming your health is good and you're likely to live until the break-even age.)

The worst thing you could do is take it early at age 62, and then decide to buy an annuity at age 70 to make up the difference in monthly benefits.

http://retireearlyhomepage.com/bad_annuity.html

intercst
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I'm still several years away from SS, but I think waiting until age 70 makes compelling investment sense given the guaranteed 8% annual return for waiting. (Assuming your health is good and you're likely to live until the break-even age.)

I'm in a similar place, and am debating between taking SS at full retirement age or at 70, but am not planning on taking it earlier at 62 at all. As you point out, the annual return is good, but I was also thinking that we would start taking IRA distributions when we retire, and use those years before collecting SS to reduce the holdings in our IRA so that we can also reduce our RMDs and spread out the tax hit from those.

We will have a choice between taxable accounts, IRAs and Roth IRAs, which have very little money in them due to only being able to contribute a handful of years, and my thinking has been that we start with IRAs to reduce what's in there for our future RMDs and use some of our taxable money with our Roths being left for later.

I haven't quite cranked out all the numbers yet to see how it works in our situation because it's a couple of years away, but that's my current thinking.
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62. Next question?

I created a spreadsheet a few years ago, to figure it out. Link:
https://docs.google.com/spreadsheet/ccc?key=0AlyWRtMroxvgdDI...


You'll find all sorts of different answers and reasoning on the web. Most of them are garbage, because they assume that a dollar today is worth the same as a dollar 8 years from today. This is sheer financial innumeracy.

SSA itself says that any age between 62 and 70 is the same, and are actuarially equivalent in what you'll collect over your lifetime. More money for fewer years, less money for more years.

This also explains why there is continual debate on the issue. There is no clear-cut answer, because *any* age between 62 and 70 is actuarially equivalent. The only difference is the shape of the income curve; the NPV's are all the same.

62 vs. 70, the naive (0% interest) break-even point is age 77. If you can make 6% on your money, the breakeven age is 94. If you can make 7%, the age is 132.
Note that the life expectancy of a 70 year old male is age 84, so any BE point past 84 is essentially infinity.

When I plug in reasonable assumptions for earnings rate, COLA, etc. into my spreadsheet, it always shows a breakeven age of around 87.
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You'll find lots of advice to delay until 70 but I think that's over simplified. It's a decision you have to base on your personal situation.

I took mine at 62 because I had retired early and was living off my investments for 8 years. My choice was either continue to deplete my investments or cover 40% of my expenses with SS. I've been happy I did that way and my investments have weathered 2008 and rebounded.

Among the things to consider are your health (can you reasonabley expect to live long enough after 70 to make up for the years you didn't take SS?), your situation regarding spousal benefits, do you want to continue working until you're 70, are your investments sufficient to support you until you are 70?

As you can see, there are lots of questions to be answered and everyone's situation is likely to be a little different. If you don't feel comfortable making the decision alone, this is one those times it might be wise to consult a CPA. Just stay away from financial advisers who might benefit from steering you one way or the other.
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Start with the idea that if you defer taking benefits at age 62 to age 70, you must collect for x years past age 70 just to get back the cash you did not take earlier. I suspect the break even age might be as high as age 85. And that does not count inflation. Nor does it count the effects of mandatory distributions from your IRA or 401k, which may put you into a higher tax bracket in those years.

It's a very complex issue which can be figured many ways. I'd go mostly with your health and your life expectancy. If in doubt take the money earlier (assuming you are not still working etc). Otherwise it's a toss up and a gamble. Too many assumptions necessary to win the bet. May as well flip a coin.

If you win the bet, you can always brag about it later (assuming you live long enough).
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Rayvt you have a very pretty spreadsheet that in my view is very misleading. You have some rather odd assumptions -

#1 You assume 3% on a savings account - where do you get that? When was the last time any bank paid 3% on a savings account?
#2 You assume a COLA of 2.8% --- on what basis?
#3 You do not appear to have applied to COLA to the benefit you would start collecting at age 70. Applying your 2.8% over the 8 years would increase the initial monthly benefit from $1,320 to $1,646 by my calculator.

While deciding on a future COLA is guess work and one could project 2.8% assuming inflation happens as in the past - it is grossly wrong to apply COLA for 8 years to the age 62 withdraws, but not increase the withdraw beginning at age 70.

And with regard to inflation/COLAs - just keep in mind Japan had a nice economy with normal inflation from the 1950s until roughly 1990. They have had at first significant deflation and than no inflation. Oddly that results with darn near zero returns on bank accounts, bonds, etc. I am not saying that will happen, but there was pretty good agreement such a mess could not happen to Japan up until the early 1990s.
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Rayvt writes:
I created a spreadsheet a few years ago, to figure it out.

Thanks, Ray, for an excellent answer based on actual calculations. I notice that intercst's web page provides further reason to go with early distribution (you might die, and they might mess with the rules) so it becomes even more of a good decision.

It still seems a bit counterintuitive to me (waiting patiently and getting a bigger monthly payout just seems like it must be better), but I'm happy to go with the way the calculations go. Your spreadsheet makes clear to me why FIRECalc's results are the way they are. I won't have to make up my mind for several years so it's not like there's any rush, but it's good to have a plan.

-IGU-
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Both I and my husband took ours at 62. While we are in pretty good health, neither of us comes from particularly long-lived families.

We have never regretted that decision.

AM
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We have never regretted that decision.

That is good because the "Do Over" option has been generally removed.
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You have some rather odd assumptions -
#1 You assume 3% on a savings account - where do you get that? When was the last time any bank paid 3% on a savings account?
#2 You assume a COLA of 2.8% --- on what basis?
#3 You do not appear to have applied to COLA to the benefit you would start collecting at age 70. Applying your 2.8% over the 8 years would increase the initial monthly benefit from $1,320 to $1,646 by my calculator.
#4 While deciding on a future COLA is guess work and one could project 2.8% assuming inflation happens as in the past - it is grossly wrong to apply COLA for 8 years to the age 62 withdraws, but not increase the withdraw beginning at age 70.


#1) It wouldn't be a bank savings account. It would be more something like bonds or CD's or preferred stocks. Anyway, don't make the mistake of projecting the current interest rates out to the indefinite future. [*]

#2) It says right there. That's been the average SS COLA for the last several years.

#1 & #2) Um, that's why those two cells are parameters---enter whatever value you like, to investigate different scenarios.

#3 & #4) Yeah. The SSA is not clear on whether or not they include prospective COLAs when they tell you the benefit amount at age 70. That's why I put in that disclaimer at J20-J27, and L30-L33 lets you plug in a COLA value for the defered period and tells you what to plug in.

All that is kinda fiddly details. The broad picture is that it takes around 15-20 years to break even. In most cases of reasonable assumptions of earnings rate and COLAs, the break-even age is beyond your life expectancy.

[*] The category of people who can afford to defer receiving SS to age 70 by definition have other assets and probably substantial investments. People who have substantial investments can probably make much more than 3% on their money.
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Hi Ray, Interestingly enough, my spreadsheet also came to the same conclusion... 62 is definitely the answer from my analysis.

If you assume that your investments will benefit (not removing this monthly amount from your account)by drawing social security early. Then even with a modest annual return estimate you are much better off.

I agree completely. Brian

P.S. If you are unfortunate and don't live long after retirement, at least you got some money from social security.
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We have never regretted that decision.

That is good because the "Do Over" option has been generally removed.

--------------


We were aware of the do-over option.
But we decided against it.
As I said, we have never regretted our decision.

AM
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We will have a choice between taxable accounts, IRAs and Roth IRAs, which have very little money in them due to only being able to contribute a handful of years, and my thinking has been that we start with IRAs to reduce what's in there for our future RMDs and use some of our taxable money with our Roths being left for later.

You've probably already thought of it, but you can use those earlier retirement years to convert parts of your traditional IRA to Roths. It is a bit of a balancing act between tax brackets, what you actually need to live on, and choosing between Roth conversions or ordinary investment accounts for any IRA withdrawals in excess of your needs.

I just wanted to toss the idea out there for lurkers.

--Peter
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There was a discussion on another forum several years ago and the theory was that if you wanted to leave an inheritance, take SS early. If you wanted to maximize income, take it later. Taking it earlier means you'll have more retirement investments which can grow bigger. Chances are you're also using a return that beats inflation, so your pot grows faster over the years you don't delay taking it.
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There was a discussion on another forum several years ago and the theory was that if you wanted to leave an inheritance, take SS early. If you wanted to maximize income, take it later.

I've actually heard it was more of the opposite. Take SS earlier if you need the money, but take it later if you want to leave something for the family.

I'm still a few years away, and so need to look at actual numbers in my situation. I had been leaning towards taking it at full retirement age, but after Ray's note, I'm thinking that taking it at 62 may be a better choice.

As I say, I need to look at the real numbers for my own situation to see what makes the most sense for us.
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...look at the real numbers for my own situation to see what makes the most sense for us.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

If you are not comfortable with spreadsheets, find a community education class in your area and take it. Or buy a book and play around. Or take Ray's spreadsheet and study it. Bottom line is there is little reason for anyone here NOT to be setting up their own models (or adapting someone else's model) to account for their own situations!!!!

On-line calculators can be a useful starting point or a verification that you've set up the primary portion of your spreadsheet correctly, but it is unlikely that they address the specifics of your situation.

Kathleen
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If you are not comfortable with spreadsheets, find a community education class in your area and take it. Or buy a book and play around. Or take Ray's spreadsheet and study it. Bottom line is there is little reason for anyone here NOT to be setting up their own models (or adapting someone else's model) to account for their own situations!!!!

Agreed. I'm just not sure where in my note you read that I didn't know how to work with a spreadsheet, particularly with you responding to my statement that explicitly says I need to look at real numbers.

Color me confused.
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Take SS earlier if you need the money,
If you need the money, the whole question of waiting until 70 is already settled -- you can't wait, since not eating for 8 years is not an option.

The question is only an issue for a very small group of people.
* People with little money cannot delay -- so no decision needs to be made.

* People with lots of money don't need SS at all (as the saying goes: "SS for lap dances") -- so the decision is of no more importance than the decision of what size latte to buy at Starbucks.

Those two groups probably total 99% of the people eligible for SS. The remaining group is people who have enough money that they can easily get by with 8 years of not receiving SS, but not so much money that SS is immaterial.

So IMHO, the whole debate is silly. The proper goal is to retire with $1M-$2M so that you don't have to depend on SS.
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Those two groups probably total 99% of the people eligible for SS.

I suspect you're off by a factor of 10. I'd put it closer to 10% of the population has such an easy decision. There are an awful lot of people who won't starve if they wait to collect Social Security. Instead, they'll keep working.

The risk for that group is to take SS early and treat it like lottery winnings. They keep working and all the SS benefit goes to finally getting the lifestyle they always thought they should have.

Then a few years later, their health intervenes or a layoff comes or something else happens that forces them to stop working. Then reality hits. Had they waited to collect, they might have had enough in SS to scrape by with the higher benefits. But since they started early, they've got a smaller benefit and don't quite have enough. And it's doubly hard because they had been collecting AND working and allowed their lifestyle to increase rather than saving their benefits for later.

Is this their own fault? Well, yes. But this talk of taking benefits at 62 or 70 being mathematically the same misses the real issue. People are different, with different skills and weaknesses and situations. While the choice might be the same when you look at a spreadsheet, when you look at the PERSON, one or the other will likely be the better choice for that person.

So IMHO, the whole debate is silly. The proper goal is to retire with $1M-$2M so that you don't have to depend on SS.

It's not silly at all. Here in the real world, people miss goals. They get off to a bad start and lose too much time to make it all up later. Or they start well, then life throws them a curveball and makes some goals impossible.

--Peter
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Agreed. I'm just not sure where in my note you read that I didn't know how to work with a spreadsheet, particularly with you responding to my statement that explicitly says I need to look at real numbers.

Color me confused. --2gifts


I apologize--the intent was to underscore your comment about looking at numbers and say I strongly agreed with you--who I assume does have a retirement spreadsheet of some sort since you frequently talk about running numbers. (And I think I have a construction planning spreadsheet that you wrote from several years ago.) The bulk of the reply was more a general response to anyone reading the thread that anyone who doesn't understand spreadsheet should consider learning about them.

Having taught a couple of short, community ed Excel classes, I am always surprised at how cowed by spreadsheets many adults are.

Kathleen
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Well, I'm definitely in the second group -- I don't need social security. But I still care about taking it the right way, as that would mean I have a few thousand more dollars to spend every year. What I can't spend I can give to charity, where a few thousand dollars can make a big difference to the recipients.

Also, if I look at SS as insurance against poverty should somehow everything go pear-shaped for me (except for SS), then delaying clearly makes sense. That's not a completely irrelevant position to take.

-IGU-
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ItsGoingUp writes,

Also, if I look at SS as insurance against poverty should somehow everything go pear-shaped for me (except for SS), then delaying clearly makes sense.

That's the primary reason SS experts like Laurence Kotlikoff advise waiting until age 70.

intercst
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The question is only an issue for a very small group of people.
* People with little money cannot delay -- so no decision needs to be made.

* People with lots of money don't need SS at all (as the saying goes: "SS for lap dances") -- so the decision is of no more importance than the decision of what size latte to buy at Starbucks.

Those two groups probably total 99% of the people eligible for SS. The remaining group is people who have enough money that they can easily get by with 8 years of not receiving SS, but not so much money that SS is immaterial.


I think you are grossly underestimating the number of people that benefit from determining the best time to take their SS. I've worked with hundreds of people that are not in the top income tax bracket to help them best determine when that year might be. In many cases, the result was to spend down some of the retirement assets now in order to secure a higher guaranteed income in the future from SS. In other cases, the result was one spouse or the other taking a small part time job to supplement income in order to postpone SS. In other cases, it was helping one spouse TURN OFF SS and repay it so that they get a better deal from SS.

The proper goal is to retire with $1M-$2M so that you don't have to depend on SS.

And how small is the percentage of people that actually do that?

There are more ways to get SS wrong than right. I strongly encourage all married individuals to spend some time determining when is the best time to take SS.
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Often in a marriage one spouse has a much lower benefit due to time out of the workforce to raise children.

Spouses are potentially entitled to three benefits-their own, 50% spousal benefit and survivor benefit.

The survivor benefit is not affected by the age of the surviving spouse starts benefits.

Each situation should be evaluated independently. It's not one size fits all.
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I'd have started at 62 even if I was still working, figuring I could always stash away some extra income.

However, we had little choice but to start at 62. (If married, check which way gives the most for the spouse -- on his or her own vs collecting against the larger one. It made a big difference to my wife.) I had been laid off at 59 and she had to quit teaching about that time because we had to take in her mom and care for her. (Her mom passed away 11 years ago.)

We're now 72 and 73, respectively, and do not regret starting early. (We might not have retired early, had we been able to go on working longer, but "maybe" doesn't count after you choose!)

However, I also have been self-managing my IRA, as I had been for years earlier, so I can balance some dividend-paying stocks (like T, BGS and some others) plus a few "fliers" for income, carefully scrutinized before buying them.

Good luck, whatever you do. Please talk directly with SS before deciding. Do NOT choose based solely on advice from a bulletin board or friends!

Vermonter
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Yes, I agree there is no single correct answer. It depends on the individual and the circumstances of the family unit. For many, taking SS at 62 isn't a choice, it's a necessity. For many more, it's just a smart decision. For others, waiting until 70 makes a lot of sense. It just depends, plain and simple.
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I've actually heard it was more of the opposite. Take SS earlier if you need the money, but take it later if you want to leave something for the family.

I look at SS being one pot of funds. If I delay taking funds from the SS pot, they then have to come from my IRA pot. In simple terms, say your SS is $15,000/year. Over 8 years, your IRA pot is $120,000 plus earnings bigger than it would have been had you waited until age 70. To me, that's a good start on an inheritance.

Now, let's say by waiting to age 70, SS is $25,000. It will take another 11 years before delayed SS matches what was saved in your IRA, for a total of 19 years your $120,000 has had a chance to grow. At 81, the SS at 70 IRA pot doesn't have too long to grow before it's likely to be inherited.

There are a lotnuancesnces that affect the comparison, like inflation could cut break eveneven point by 2 years, but the general premise favors taking SS early in order to leave a bigger inheritance. Compounding is your friend for leaving an inheritance.
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Here's another thought on a reason to wait to take SS. One of the risks of retirement is living too long. If you have enough money to delay taking SS, then yes, if you don't live long you lose by delaying SS. But you probably win in that you don't outlive your savings. If you live a long time, then taking SS later gives you more money. Delaying SS is a hedge against the costs of longevity.
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At 81, the SS at 70 IRA pot doesn't have too long to grow before it's likely to be inherited.

My great-grandmother lived to 107.

Compounding is your friend for leaving an inheritance.

Leaving an inheritance is not important to some people.

PSU
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spinning writes,

Here's another thought on a reason to wait to take SS. One of the risks of retirement is living too long. If you have enough money to delay taking SS, then yes, if you don't live long you lose by delaying SS. But you probably win in that you don't outlive your savings. If you live a long time, then taking SS later gives you more money. Delaying SS is a hedge against the costs of longevity.

</snip>


That's true -- and it's a lot cheaper than taking SS at age 62, and than buying longevity insurance (i.e., an annuity) from an insurance company to make up the difference in your monthly benefit.

intercst
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If I delay taking funds from the SS pot, they then have to come from my IRA pot.

Not necessarily. I have more in my taxable account than in my IRAs, so I have a choice on where to take the money from to support us in our retirement.

Over 8 years, your IRA pot is $120,000 plus earnings bigger than it would have been had you waited until age 70.

You still have to pay the taxes on those IRA distributions, and that is something to be considered in the grand scheme of things as well. And then there are RMDs to consider, so it's not like the IRA money will just sit there forever.

Compounding is your friend for leaving an inheritance.

I have no intentions of leaving an inheritance, and so that does not play into my plans at all. My kids have already received their inheritance. It was called "tuition in full at the college of your choice" and should be enough to give them a good head start on building their own financially secure lives.

I plan to spend every penny, but realistically, know there will be something left for the kids. It's just that this will not be because I did anything on purpose to do that, nor will I not do something in retirement because it will diminish their inheritance.

I do realize that I may be in the minority with this thinking.
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(Peter:) There are an awful lot of people who won't starve if they wait to collect Social Security. Instead, they'll keep working.

The risk for that group is to take SS early and treat it like lottery winnings. They keep working and all the SS benefit goes to finally getting the lifestyle they always thought they should have.

Then a few years later, their health intervenes or a layoff comes or something else happens that forces them to stop working. Then reality hits.

====================================
That actually is probably the most foolish (small f) option out there.
If you have to keep working, assuming you make over $15,000, your benefits are reduced for 50% of the excess. And if you're taking reduced benefits to start with, it just doesn't make sense.

I'm 60, and benefit significantly from being on the company health plan. I'm tentatively planning to do what others here have done - retire at 63-1/2 and go on COBRA for 18 months, at which point I'll be eligible for Medicare, and can get a reasonably priced supplement. Assuming that The Marketplace doesn't give a better option than COBRA.

Bill
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Leaving an inheritance is not important to some people.

PSU



You got that right. :)

AM
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retire at 63-1/2 and go on COBRA for 18 months, at which point I'll be eligible for Medicare, and can get a reasonably priced supplement. Assuming that The Marketplace doesn't give a better option than COBRA.

ACA should provide you a much better option than COBRA - assuming you qualify for a subsidy.

I met with a client today that is looking to save over $200 a month when she drops her COBRA in January. She is delaying SS, taking some IRA distributions this year to then use that to generate dividend income (tax free under current tax rules) while she postpones SS.
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Hawkwin wrote:
I met with a client today that is looking to save over $200 a month when she drops her COBRA in January. She is delaying SS, taking some IRA distributions this year to then use that to generate dividend income (tax free under current tax rules) while she postpones SS.

You say this as though it helps her end up with more money. I think, from playing around with Ray's spreadsheet, that it costs her money. Since it sounds like you are giving paid advice, can you share what financial modeling you are using to convince yourself that you are advising her correctly?

I think now I'm clear on delaying SS being useful for three things:
- if you tend to throw away money it enforces savings
- it's poverty insurance in case you invest badly
- it gets you more money if you live a really long time

But it does this at the cost of you having less money than if you just take the SS money starting at 62 and shove it in with savings. And you'll continue to have less money until around age 90 when the higher payout finally catches up.

-IGU-
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You say this as though it helps her end up with more money.

No, it helps her end up with more cash flow. It helps her increase her income. Her income at 70 would be double what her husband currently gets from SS.

what financial modeling

Monte Carlo.

She earned more income over her life than her spouse. He took SS at 62 so if she does the same, she will not have the option of retaining his SS assuming he passes first (he is less healthy and six years older).

The goal is to maximize her income at age 70 while leaving a small safety net. There is not enough IRA or taxable savings that they could live off of it so SS is very much needed - and we may find that they cannot afford to wait until 70 for her to take SS.

- if you tend to throw away money it enforces savings
- it's poverty insurance in case you invest badly
- it gets you more money if you live a really long time


All three are relevant for this couple. They have less than six figures in total savings.

But it does this at the cost of you having less money than if you just take the SS money starting at 62 and shove it in with savings. And you'll continue to have less money until around age 90 when the higher payout finally catches up.

No, as the money you get at 62 will earn you less than 1% in savings currently. The higher payout catches up in most cases around 82.

http://www.schwab.com/public/file?cmsid=P-4325250&filena...

It makes absolutely no sense to take SS at 62 if all you are going to do is park it in a low interest account. We are not trying to maximize someone's inheritance, we are trying to maximize future income. Taking SS early makes sense for some but most couples with a life expectancy greater than 82 would benefit be delaying or using other options like file and suspend. If you think you will not live that long, then by all means, file early. Average life expectancy for a male age 65 is 82. For a woman at 65 it is 85.

More:

http://www.schwab.com/public/schwab/resource_center/expert_i...

62/70 split
There is a strategy, sometimes referred to as a 62/70 split, where the lower earner files early at age 62 based on his or her own benefit and then the higher earner later files at age 70.

When a lower-earning spouse files for benefits at age 62, the benefits are reduced based on the number of months before full retirement age.

If the higher earner has not yet filed, the reduced benefit will be based on the early filer's own earnings record.

If the higher-earning spouse has already filed for benefits at his or her own full retirement age, the lower earner would receive an amount equal to 50% of the higher earner's full retirement age benefit or their own benefit, whichever is greater.

However, the early-filing penalty would be applied to any benefits the lower-earning spouse receives, whether they're calculated based on that spouse's own earnings record or the higher-earning spouse's record.

If both spouses are in good health and expect to meet or exceed average life expectancy and can afford to wait, an alternative strategy would be for both spouses to delay filing until full retirement age. At the time of filing, the higher earner files and suspends his or her benefits until age 70 to continue accruing delayed retirement credits. At the same time, the higher earner can also claim spousal benefits based on the lower-earning spouse's record and then switch at age 70 back to his or her own higher benefit. That way, there are two checks coming in during the interim period.
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My great-grandmother lived to 107.


Leaving an inheritance is not important to some people.


Great! Then you'll hopefully have a long life too.

True, an inheritance is not important to everyone, but for those who it does matter have the option to maximize it if they want.
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Not necessarily. I have more in my taxable account than in my IRAs, so I have a choice on where to take the money from to support us in our retirement.

The IRA pot was just an example. You'll get the same results no matter where the funds come from.

You still have to pay the taxes on those IRA distributions, and that is something to be considered in the grand scheme of things as well. And then there are RMDs to consider, so it's not like the IRA money will just sit there forever.

Again, it was an example. You're getting bogged down in details that will affect both cases. I never said the funds would remain in a traditional IRA account.

I have no intentions of leaving an inheritance, and so that does not play into my plans at all. My kids have already received their inheritance. It was called "tuition in full at the college of your choice" and should be enough to give them a good head start on building their own financially secure lives.

I plan to spend every penny, but realistically, know there will be something left for the kids. It's just that this will not be because I did anything on purpose to do that, nor will I not do something in retirement because it will diminish their inheritance.

I do realize that I may be in the minority with this thinking.


A perfectly fine intention.

Again, in the other forum, it was a discussion on whether you intended to leave an inheritance or not. The suggestion was made that if you intend to do so, taking SS early would leave more funds for inheritance. The inheritance was a side issue, but as an example to the OP, it shows why your investments might be better off by taking SS early. A key factor is that once you and your spouse pass, the SS pot disappears. Your other funds can be passed on.
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<There is a strategy, sometimes referred to as a 62/70 split, where the lower earner files early at age 62 based on his or her own benefit and then the higher earner later files at age 70. >

A consideration between age 62 and age 65 (Medicare eligibility) is that the Affordable Care Act (ACA) provides significant subsidies for health insurance which can be worth over $1,000 per month for a couple of this age.

Social Security is counted toward income. The ACA subsidy could be lost if the "subsidy cliff" is exceeded. This complication should be included when deciding which gives higher total benefits to the couple.

Wendy
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Having taught a couple of short, community ed Excel classes, I am always surprised at how cowed by spreadsheets many adults are.

Kathleen


Indeed, we have a frequent poster here with a name similar to yours who seems completely perplexed by the simple math that can be done in a spreadsheet.

-murray
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In our situation, nearly all of our retirement income other than SS will come from IRA distributions and will therefore be taxed and ultimately be subject to RMDs.

I haven't run the numbers, but one advantage of delaying SS is 8 years of pulling money out of the IRA at relatively low tax rates vs. SS being taxed which will raise the effective tax rate on the withdrawals.

Are tax rates of 15% vs. 25% plus factored into the spreadsheet for the 8 years of early SS?

-murray
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WendyBG writes,

A consideration between age 62 and age 65 (Medicare eligibility) is that the Affordable Care Act (ACA) provides significant subsidies for health insurance which can be worth over $1,000 per month for a couple of this age.

</snip>


Most people don't realize it, but if you manage your income correctly, Obamacare is like getting a second Social Security check right up to when you qualify for Medicare.

I've been doing tax planning with the enthusiasm of a Mitt Romney for the past 18 months.

http://retireearlyhomepage.com/obamacare_spike.html

intercst
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Several years of reduced monthly payments taken early will never fully compensate you for taking a reduced benefit for the rest of your natural life.

'never' is a pretty bold statement. It actually depends completely on how long your natural life is. If you wait for your full retirement age, but die prior to that age, or even up to a couple of years later, you would have been better off taking SS early.

AJ
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kahunacfa wrote:
Several years of reduced monthly payments taken early will never fully compensate you for taking a reduced benefit for the rest of your natural life.

AJ wrote:
'never' is a pretty bold statement.

I'm willing to go out on a limb here and say that kahunacfa never supports any of his ex cathedra pronouncements in any way.

-IGU-
(bold)
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Several years of reduced monthly payments taken early will never fully compensate you for taking a reduced benefit for the rest of your natural life.
========
'never' is a pretty bold statement. It actually depends completely on how long your natural life is. If you wait for your full retirement age, but die prior to that age, or even up to a couple of years later, you would have been better off taking SS early.


As the last post mentioned, "never" is not only a bold statement but a totally incorrect one to boot. There are caculators that show the breakeven age, and I haven't seen a caculator that takes into account the investment return value that comes from early payment. Bottom line for me: a bird in the hand. Now, I'm getting my so-called full SS benefit (as in the age 66 benefit). I don't actually need the money to live, but I take it because I have almost no chance of living long enough to hit the breakeven point due to certain health issues. True, my wife might could benefit from me waiting until age 70, but I likely won't be around by then (I hope so, though). She still would have enough money without SS, but SS gives us (her) more options in terms of gifting to adult son (and his family), charitable giving, and inheritances. I think it's good to discuss the "when to take" issue, but I think far too much oxygen is lost on the overall debate. Just my two cents.
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There are caculators that show the breakeven age, and I haven't seen a caculator that takes into account the investment return value that comes from early payment.

My SS early-or-late spreadsheet:
https://spreadsheets.google.com/ccc?key=0AlyWRtMroxvgdDI2MlY...

A 60 year old male can expect to live to 81. A 70 year old can expect to live to 84.

At 2.8% COLA and 5% earnings return, the 62 vs. 70 breakeven age is 98.
Or, if you apply COLA during the 8 year deferral period, the breakeven age is 83. The latter is probably correct (although most calculators don't do it).
Either way, the breakeven point is not significantly earlier than the average life expectancy.

If you can earn 7%, breakeven is age 87.
If you can earn 8%, breakeven is age 91.

At the bad end, is you can only earn 2.8% -- the same as the COLA, breakeven is age 80. FWIW, at 0%, BE is age 78.

Taking SS early, you are ahead for the first 18+ years. And I doubt that when I get to 83 that an extra $1000/mo will make any difference on my life-style.
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Ray I will say it again you are misleading people. While you do CYA by saying SS in not clear about COLAs on the initial amount if one delays benefits after age 62 - those COLAs are present and real.

So why not run your spread sheet either without any COLA or apply them to the delayed benefit?

I happen to be a person who actually started benefits at age 62 and used the "Do Over" option before it was essentially removed. I can say with certainty the COLA factor is present.

The net result of this is the break even age is roughly 80.5 years if one neglects interest earned - not unreasonable for people who actually start at age 62.

If you doubt this, call 800-772-1213 and ask them yourself.
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GWPotter writes,

Ray I will say it again you are misleading people. While you do CYA by saying SS in not clear about COLAs on the initial amount if one delays benefits after age 62 - those COLAs are present and real.

I agree. According to current law, you get the COLA if you delay benefits to 70. The fact that Ray's spreadsheet ignores this is a major error. The idea that breakeven is age 98 or whatever Ray comes up with is nonsense.

If you include the COLA, you get a breakeven of age 78 for a 2% investment return and age 80 for a 10% investment return,

http://retireearlyhomepage.com/bad_annuity.html



intercst
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The thing I never see mentioned in this debate is the "utility of money", it's always about the "quantity of money."

I'll try not to make this too convoluted. My father is 92; my mother died a few years ago at age 90, so I have some personal experience with old-ness. Dad is now at an assisted living place after three years of being in an independent living facility. He has a couple million dollars worth of portfolio, which does him absolutely no good, except to pay the $5,500 a month rent on his (very nice) apartment.

In fact, I would say that from the age of 85 onward, their money didn't benefit either Mom or Dad much; their ability to travel was well behind them; it's not as though they were going to fly to Greece to see the ruins, and since both gave up driving they didn't need new cars, new mink coats, or new much of anything wasn't really in the cards either.

I understand the "break-even" age for Social Security is 82, that is, if you start taking the benefit early you will get a smaller amount for longer; if you wait until age 65 you will get a larger amount for a shorter duration, and all things considered, at age 82 you will cross the line to more "quantity of money."

But as I have tried to explain in far foreshortened fashion, at a certain point the "extra" money is pretty well useless, at least if you have prepared yourself for the basic elder-care responsibilities. So if you die before age 82, you "win" with "more quantity", and if you die at age 89 you "lose" with less quantity, but I'd submit that the difference is going to be irrelevant since the extra $300 ($500, whatever) a month isn't going to buy you anything you won't already have and don't already not need at that advanced age.

I am 66. I started taking benefits when I was 62. I could have afforded to wait until age 65, or even, as some suggest, age 70, when the benefits would have been even larger. But to what point? I don't need more money when I'm 90, I find it useful now when I can use it and enjoy it.

Mrs. Goofy and I just spent four days in Manhattan seeing five shows (Matilda, Motown, Glass Menagerie, Kinky Boots, Spiderman, comments welcome) at a cost of $3,000 - not including travel; crazy, but it's how we choose to do it. I know we won't be able to sustain anything like that when we're 87. So the money now has a far greater "utility" than the money later. Other people will have different ways to use it, obviously.

In America we've become obsessed with "how much?" A better metric, at least for us, is "for what?"
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In America we've become obsessed with "how much?" A better metric, at least for us, is "for what?"

Well, along that note, just this morning I purchased from a guy in Canada a 1923 Vega 5-string banjo, with a new custom neck and other goodies. The cost was less than the SS check I recieve this coming Wednesday. I get the max SS by the way.
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Goofy you make an excellent point - one really missing.

As I look at this whole issue believe many, maybe most, people who start collecting at age 62 in their own mind don't feel they can wait. Only those making that decision really know.

My only interest in this whole discussion is making sure people have information to make informed decisions. I take the position correct information generally results in better decisions - but not always.
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Goofyhoofy writes,

The thing I never see mentioned in this debate is the "utility of money", it's always about the "quantity of money."

If you're wealthy enough to delay taking SS until age 70, what's the "utility of money"? I assume nobody in that position would delay taking the monthly SS check if it would put crimp in their lifestyle. It's really more a financial optimization exercise.

The bigger problem I see is that most people aren't going to be able say that their life expectancy will differ enough from the median to make a difference. A few people will have serious health problems that definitely argue for taking SS at age 62. And a few people will be in excellent health with parents and grandparents who lived to be 100, making delaying to age 70 a good bet. Everyone else is in that middle grey area where 62 vs. 70 based on your life expectancy isn't much more than a coin toss,

intercst
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Ray I will say it again you are misleading people. While you do CYA by saying SS in not clear about COLAs on the initial amount if one delays benefits after age 62 - those COLAs are present and real.

So why not run your spread sheet either without any COLA or apply them to the delayed benefit?


Indeed, the SSA is *not* clear about the COLAs during the deferral period. See of example: http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/3/~/bene... and http://www.ssa.gov/OACT/quickcalc/early_late.html and http://www.ssa.gov/OACT/ProgData/ar_drc.html
No mention of COLAs, just the increase of 2/3% per month.

Do you have a link to anything on the SSA site which talks about the COLAs on delayed benefits? 'cause I looked and looked and didn't find any.

Anyway ..... the figures I gave in my last post *did* apply COLA during the defered period. I think that's the right way to do it, but haven't been able to find any authoritative answer anywhere. If/when I update my spreadsheet (which was last updated 3 yeara ago), I'll include that. And remove the "do-over", since that's no longer allowed.

The net result of this is the break even age is roughly 80.5 years if one neglects interest earned - not unreasonable for people who actually start at age 62.

I dispute that last bit. The people who start at 62 fall into 2 camps: those who *need* to take it and those who don't need to but do anyway.
For people who need to, delaying to 70 is not an option, so there's no need to debate it -- they still have to eat during those 8 years. (FWIW, one of my relatives is in this situation, and that's just how he explained why he didn't wait for the larger benefit.)

For people who don't need to, but do it voluntarily, then they can invest/save the payments, so it is appropriate to include earnings on the early benefits.

Your BE age is a bit optimistic. I get, for 2.8% COLA and 0% earnings, a breakeven age of 78.3 (not 80.5) for 62 vs. 70.
Even so, that's 16 years to break even. The life expectancy at 62 is 19 years, so you're ahead for 16 years and behind for 3 years.

::shrug:: When the SSA says "Age-related adjustments to Social Security benefits are intended to be actuarially equivalent, on average, rendering lifetime benefits invariant to the timing of first receipt." they really mean it.


However, the study http://www.treasury.gov/resource-center/economic-policy/Docu... says"We find substantial deviations from actuarial equivalence".
Unfortunately, it's in the wrong direction. (Wrong for the proponents of delaying, that is.) "For delayed claims, the eight percent credit scheduled in current law is too low for actuarial equivalence. There is an actuarial premiums for males."

"most male beneficiaries face actuarial premiums that decline with benefit acceptance after age 62 and most females face actuarial losses that also decline with delayed acceptance. Thus, males have little actuarial incentive to delay their initial benefit claim."
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>>>Everyone else is in that middle grey area where 62 vs. 70 based on your life expectancy isn't much more than a coin toss,

intercst<<<


Except for a huge chunk of Americans who work by necessity after age 62.

Unless they make less than the minimum to avoid a penalty is it crazy to take benefits early.

For others delaying SS benefits to full retirement age is a hedge against longevity.
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But to what point? I don't need more money when I'm 90, I find it useful now when I can use it and enjoy it.

Those are good points. I guess I've been seeing it from a different perspective, though.

My current plan is to retire in a couple of years, not long before I turn 60. At that point I'll have been maxing out the SS contribution for quite a few years. The government website tells me that if I delay SS until age 70 I'll be getting around $40K a year. I haven't checked what I'd get at 62, but I'm guessing maybe $22K?

I don't think I'd want to depend on $22K for living expenses, even at age 85. But using your line of reasoning, which I think is realistic, at age 85 $40K a year would likely be more than enough.

What that does is give me a bit more surety in planning. I don't know how long I'll live, and from what I've read family history tells you very little. But instead of having to plan for an indefinite lifespan all I really need to know if I have enough money to last 25 years. After that it doesn't really matter.

Adds some peace of mind to the retirement planning, or at least that's how I've looked at it.
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Well, along that note, just this morning I purchased from a guy in Canada a 1923 Vega 5-string banjo, with a new custom neck and other goodies. The cost was less than the SS check I recieve this coming Wednesday. I get the max SS by the way.

Interesting.

I'm on the minority side of another retirement debate, also. I think that it makes sense to have a (low rate, 30 year fixed rate) mortgage in retirement.

So I melded these two minority positions together. I took SS at age 62, I have a mortgage (4% fixed, 28 years remaining), and I have my SS deposited into a checking account which then does automatic bill-pay for the mortgage payment. The SS is a few dollars more than the payment, so there's no money out-of-pocket. Better yet, the SS will grow over the years but the mortgage payment will not.

When the mortgage is paid off in 28 years, my net spendable income will jump by $4220/mo (assuming 2.8% COLA), as teh SS continues but the payment ceases.

intercst: I hear you. I agree that my spreadsheet is egregiously wrong to not include COLA during the defered period, and needs to be fixed. ::sigh::
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" I certainly haven't tried everything. My guess is if I make the portfolio really conservative then I'll get a different result.

This indicates to me that it's a better idea to take SS payments earlier rather than later. Usually I've been hearing the opposite advice"

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Keep in mind that ALL simulations use past data - and the past will
not predict the future.
Uncertainty is the worry that financial advisers try to handle by
running monte carlo simulations attempting to include all
probable combinations of results.
But there are problems with this approach - mainly the caveat that is
included with all investment prospectus documents and annual reports
----- the future will not of necessity look like the past.
Past performance does not predict future results.
Not even if you run simulations and have a really spiffy model.

As far as when should you take Social Security?
You need to assume the world will not go pooof - but you take it
when you need it at any age past 62.
If you get laid off at 62 and you do not have an income stream
that will let you live comfortably - you take it at 62.

There are generally two aspects that might influence you to delay -
1) If you have a spouse who does not have enough credits to
qualify on his/her own, they may have the benefit of a higher income
assistance if you delay.
Generally, when you have a spouse - you need to consider alternatives.
You can get a fair number of optional approaches to supplement
income after the spouse reaches 62.

2) If you are working and have no health issues - you might not need
the cash flow at 62 and may be able to gain later by delaying
till you need the help.

The issue is really an individual case thing. The 8% increase
in income on this supplemental support is a nice return
obtained by delaying - but then you are working - which is not
exactly what most folks really imagine their retirement
years will include.
And taking the supplement when you do not really need the
income is not exactly the thing Kennedy meant when he
said "Ask what you can do for your country."
Social Security is not really intended to be a "how do
I extract the most out of the funds" type of program.

Howie52
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al: "What that does is give me a bit more surety in planning."

That is my take. I can't think of a single investment that I can make that will safely return 8%. If I can live on my dividend and interest income from age 62 to 70, Social Security will be like a delayed lifetime annuity with an 8% return.

Furthermore, I think old people just start thinking that way - especially old men who have been married for decades. Dad worked past his 70th birthday partly because he was an old country lawyer who liked to work, and partly because he wanted to max his Social Security and then invest it alongside his mandatory minimum distributions which he simply transferred from his IRA to his main account every year. That enabled him to continue to grow their egg until he was 87.

I think he did this mostly to ensure that he provided for Mom who died before he did.

Some people get more risk averse as they age.
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Rec +1

<8% return>

One of the monkey wrenches in this discussion is the viability of the social security system itself. Can you really count on this 8% these days? I would say not in my opinion. What are the chances they will rewrite the rules? Fairly good in my opinion.......
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One of the monkey wrenches in this discussion is the viability of the social security system itself. Can you really count on this 8% these days? I would say not in my opinion. What are the chances they will rewrite the rules? Fairly good in my opinion.......

Exceptionally unlikely they will rewrite the rules in this political environment and even if they did, even more unlikely to impact ANYONE facing this decision today or the near future.

The only possible change that might impact current or nearterm retirees would be chained-CPI - but the law could easily be written so that chained-CPI only apply to those 54 and younger as of 2014. Taking money away from anyone currently on SS or very close to being elligible would be political suicide for any elected official - which is why any changes are so difficult to even make it to a vote, much less pass Congress, Senate, and POTUS.
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Soy: "One of the monkey wrenches in this discussion is the viability of the social security system itself. Can you really count on this 8% these days"

I don't want to overrun this board with my posts because I have more to learn than to teach. That being said, I can concede that Social Security is not 100% reliable and also conclude that it is more reliable than any 8% investment that I have found in this economic environment.
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One of the monkey wrenches in this discussion is the viability of the social security system itself. Can you really count on this 8% these days? I would say not in my opinion. What are the chances they will rewrite the rules? Fairly good in my opinion.......


Sure the system will change - but not in ways that will shorten life or viability of social security. As with all change, some people will be unhappy. The most likely changes are going to be extending the working life period or delaying the age for benefits. Back in the 1930s when Social Security only a small minority of folks lived long enough to collect. In recent years France raised retirement age to 70. England is in the process of that same change.

In this country we have lots of government employees (military, police, teachers, etc.) who are expecting to work collect benefits and stop working well before a normal retirement age. Places like Illinois, Chicago and multiple cities in California are now facing choices between dramatic tax increases to pay for existing or dramatic benefit cuts. So far, with the possible exception of bankruptcy, there have not been efforts to alter existing benefits - only future benefits. Any changes in benefits leave some people unhappy - even if those people have not yet earned benefits.

The 8% return exist only for those who are age 62 and choose to delay payments. Even if Congress were to change the law, anybody over age 62 could call Social Security and start benefits next month should Congress be changing the 8% number. But I don't see that changing. The 8% return only happens because funds are being moved from one retiree to another. The problem that needs to be addressed is the imbalance between income and outgo. That can be addressed by:

Lower over all payments - unlikely since Congress wants to be re-elected.
Increase social security tax rate - some less unlikely than lowering over all payments. Also unlikely for the same reason
Increasing the retirement age - something that has been done here in the past and is being done in other countries
Extend the Social Security Tax without limit in income - If a populist movement takes hold, this seems likely to me. Such an extension would result in more funds for social security than are currently being paid by the bottom 150 million wage earners according to an article I read last week.
Increase means testing - another good candidate.
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Not to argue too strenuously with your excellent post. The decision regarding SS really depends on your circumstance, as has been discussed a lot in this thread.

I'd submit that the difference is going to be irrelevant since the extra $300 ($500, whatever) a month isn't going to buy you anything you won't already have and don't already not need at that advanced age,
My 88 year old MIL, who worked, took care of an invalid son and got scr*wed in a divorce took early retirement and very much enjoyed the money. She has no additional savings that weren't spent quickly. She IS active but when she needs money for tires for the car (we gave her) we need to gift them or she drives on bad tires.

A road trip to see all her relatives -- her pride wants to pay, but we need to gift it. She has blessed our home staying with us for over 20 years, but her ability to spend would have been materially reduced had we not helped. I'm not sure an extra $300-$500 a month would have changed the necessity and joy to have her live with us, but for this independent, active woman as a means of savings at 62 (when she could have worked), it does make a big difference.

At the other end my decision to delay SS may result in your father's circumstance personally, but at the least I should be providing more using Intercst's "guaranteed annuity" for my younger wife for many reasons discussed. She has a Grandmother who lived to 101 (in her own apartment until about 98). I plan for funds to last until age 102 for DW (conservatively) or roughly 42 more years. The reality is that I/we neither delayed interesting trips before retirement (often around business trips and DW continues working), nor am I delaying them now, although I will admit that our ability to "want less" has been built up over decades.

You made the right decision for you to take SS at 62, and I absolutely agree that if your father missed opportunities to live an active life because he delayed, he perhaps did not.

I just wanted to provided another anecdotal example for the other side.

Bob
RYR Home Fool
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But as I have tried to explain in far foreshortened fashion, at a certain point the "extra" money is pretty well useless, at least if you have prepared yourself for the basic elder-care responsibilities. So if you die before age 82, you "win" with "more quantity", and if you die at age 89 you "lose" with less quantity, but I'd submit that the difference is going to be irrelevant since the extra $300 ($500, whatever) a month isn't going to buy you anything you won't already have and don't already not need at that advanced age.

It isn't irrelevant - it can be over $1000 a month, and over $200,000 extra income over a lifetime for a couple. Also, it need not be "extra" in the sense of it being a pay raise. You present it as a false choice of more money now or more money later. It is not an either/or. It can often be simply, "both."

In my experience, many couples want a consistent income stream with a hedge against inflation, that SS currently provides (though not always at parity). Often I have seen where, for example, the plan is to live off of $3000 a month now in income and wait until SS can replace that amount or higher, then turn on SS. The goal being not to get an extra few hundred more but to create consistent income that cannot be lost due to poor market performance.

Everyone's situation is different and I continue to question both the hostility and the flippant nature by which people seem to dismiss others their unique scenarios - and even that $500 a month to some couples is HUGE. Not everyone retires with a massive safety net. Most will retire with less than $100,000 in investments and will need all the SS they can get and if they are more concerned with their standard of living than their heirs, income will be more important than inheritance.
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Mrs. Goofy and I just spent four days in Manhattan seeing five shows (Matilda, Motown, Glass Menagerie, Kinky Boots, Spiderman, comments welcome)

I can't believe you didn't see Book of Mormon. Also, was Spiderman any good? Judging from all the local TV advertising they are doing, my guess is no.
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Most will retire with less than $100,000 in investments and will need all the SS they can get and if they are more concerned with their standard of living than their heirs, income will be more important than inheritance.

Yes, but those are the very same folks who take SS early if they retire or lose their jobs after 62.
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I can't think of a single investment that I can make that will safely return 8%. If I can live on my dividend and interest income from age 62 to 70, Social Security will be like a delayed lifetime annuity with an 8% return.

Delaying SS doesn't give you an 8% return. It just increases your eventual benefit by 8% for each year of delay (up to 70). But you forgo any benefit payment for that year. If you go around thinking that you're getting 8% return, then you are going to make bad decisions based on erroneous assumptions.

Example:
No delay, take for 5 years:
Total received: 5 * 12 * $1000 = $60,000
vs.
1 year delay followed by 4 years of payments.
Total received: 1 * $0 + 4 * 12 * $1080 = $51,840

You gave up $12,000 but gained $80/mo for the rest of your life (after the defer period). How long will it take you to that $12,000 you gave up? 1000/80 = 12000/960 = 12.5 years.
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ray: "Delaying SS doesn't give you an 8% return. It just increases your eventual benefit by 8% for each year of delay (up to 70). But you forgo any benefit payment for that year.

I should be more careful with my choice of words. I thought it was obvious that I knew that much.

The intended point was that even if I started withdrawing at 62, which would in my case be about $1800 per month, and even if I earned 5 or 6% per year on that money, my combined dividend income on that money and my continued payments of of 1800 would be lower than my 3300 monthly payments starting at age 70 even after adjusting for inflation. And if my investments crashed during that timeframe...

For me, the delay offers a little more security for the possibility that I or my wife or both might live well past 85 and/or the possibility that my own investments might fare less well than I hoped.
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jcg123 wrote:
I can't think of a single investment that I can make that will safely return 8%.

What? Are people here so confused? Waiting on SS returns nothing like 8%. Sure, waiting gets you approximately 8% higher payments per year. But meanwhile you are getting paid. Go play with Ray's spreadsheet to see exactly what it looks like, but simplistically if you take payments at 62 rather than waiting for age 70, come the time you would be getting your first payment at 70 you will have eight years worth of payments in the bank.

So if your age 62 payment is $10K per year (and ignoring COLA which lifts all boats equally), you've got $80K in the bank when you hit age 70. At that point you'd get about $17K per year in SS rather than $10K, but in fact your investment is down a huge amount ($0 vs. $80K). After ten years of getting payments at $17K you would have $170K, but the 62yo starter has eighteen years worth of $10K, so is still ahead with $180K.

This is a simplistic example, ignoring COLA and the effects of investing the money rather than just putting the cash in your mattress. But the point is that thinking you are in any sense getting 8% just for waiting is absurd.

-IGU-
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I am taking over the board. I apologize.

I have run the numbers in the past, including accounting for building up a corpus with the money that is taken at age 62. I again apologize for my sloppy wording because obviously two of you thought I said something that I did not intend to say. That's pretty embarrassing for a 57 year old lawyer.

My monthly benefit starting at age 62 appears to be about $1800. My monthly benefit starting at 70 appears to be about $3300. Even IF I start collecting $1800 per month at age 62, and even IF I find a way to earn 4% either after taxes and/or tax free, and even IF I can withdraw 4% per year from that investment alongside my Social Security, my monthly income stream will still be lower than the income earned as a result of waiting.

The higher benefit provides peace of mind - especially if my spouse does live beyond the break even period. And it acts as a hedge if my investments fare poorly between the ages of 62 and 70.
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GH, I agree that one should take the money when it is most useful and most enjoyable.

The thing is, though, once you have enough money, you have enough. If you don't have enough money, you are in deep trouble.

So, I'd say take the benefits when you can afford to take them or you can't afford not to take them.

So if you face the prospect of cat food at age 82, but you can afford steak today, you might want to wait. I'd imagine that most people on these boards are not in that position, however.
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jcg123 wrote:
The higher benefit provides peace of mind - especially if my spouse does live beyond the break even period. And it acts as a hedge if my investments fare poorly between the ages of 62 and 70.

Those are good reasons to wait. Essentially, as I wrote upthread, longevity insurance and poverty insurance. But they bear no resemblance to "getting an 8% return" in any sense.

Even so, your earlier figuring makes little sense. Why would you be withdrawing 4% so the money lasts forever? Let's say you get your $1800/mo at age 62 and put the cash in your mattress. By age 70 you have $172,800 you are sleeping on. If you pull out $1500 per month to get parity on your SS payment, it lasts about 10 years. Now you're 80 and living on $1800/mo instead of $3300/mo from then on. If as you said you can earn 4% on your money then you have ~$203K put away at age 70, and the drawdown at $1500/mo would take about 15 years, to age 85. Of course COLA complicates this scenario.

You talk about a hedge and peace of mind. Perhaps I'm different than most but I get a certain peace of mind from having $172,800 in cash sitting there for me to use when and how I wish. Maybe I'd get more peace of mind knowing that the government is promising to give me $3300/mo instead of only $1800/mo but I don't know that that's obvious.

Going with cash in hand clearly leads to the opportunity to do something stupid with it. Avoiding that chance is certainly worth something, but we each have to decide for ourselves.

-IGU-
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Every investment I make is a safe investment because I take and negotiate a position on the company's Board of Directors.

On how many Boards of Directors do you sit?

jkm929
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IGU: "Now you're 80 and living on $1800/mo instead of $3300/mo from then on."

$1500 fewer dollars per month would not be a trivial difference for a married 80 year old couple - and that is a real risk for us given that all four of our parents lived to be 87 or older.

And my 92 year old Dad's nursing home bill is $5400 a month - not counting AFLAC, estimated taxes and a few other things.

But I don't have to do anything more than write the checks to pay his bills because he saved enough to pay his own bills in part because he waited until he was 70 to start drawing Social Security and in part because he continued to build on his net worth thereafter.

IGU: "If as you said you can earn 4% on your money then you have ~$203K put away at age 70, and the drawdown at $1500/mo would take about 15 years, to age 85"

... at which point, I, or my wife, or both of us, would be forced to live on $1800 per month instead of $3300 per month. And nursing home bills at a decent home are roughly $5400/month for one person and $7400 for a married couple - and they are going up faster than inflation.
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So if your age 62 payment is $10K per year (and ignoring COLA which lifts all boats equally), you've got $80K in the bank when you hit age 70. At that point you'd get about $17K per year in SS rather than $10K, ...

This is a simplistic example, ignoring COLA and the effects of investing the money rather than just putting the cash in your mattress. But the point is that thinking you are in any sense getting 8% just for waiting is absurd.


Your math is not correct.

You would be getting about $20k a year, not $17k, which is why:

but the 62yo starter has eighteen years worth of $10K, so is still ahead with $180K.

is also incorrect as you would now be behind by $20k. I posted a link upthread that provides a graphical representation of the breakeven points.

When you take COLA into account, the disparity grows each as 2% COLA on $10k is a lot less than a COLA of 2% on $20k.

I don't generally consider the investment potential of early payments in this discussion since if you are someone that doesn't need the money for your or a spouse, then there is very little reason to ever wait beyond 62 or your full retirement age.
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I am taking over the board. I apologize.
Not a problem! We are here to discuss money matters, and to 1) learn something new about making/keeping money or 2) find out when we are making mistakes about making/keeping money.

Your comments about the 8% seem a case in point #2. You've said both that you know that deferring SS doesn't give a 8% return *and* that "I can't think of a single investment that I can make that will safely return 8%" - which implies that you think that SS *does* return 8%.
Sloppy terminology leads to sloppy thinking which leads to making sub-optimal financial decisions.

Re my first paragraph -- sometimes I'll confidently state a point about something that I know to be the case, and somebody (often, several somebodies) will reply that, No, I'm completely wrong. This is valuable to me, because I'd rather be rich than "right".

My monthly benefit starting at age 62 appears to be about $1800. My monthly benefit starting at 70 appears to be about $3300.
Actually, $1800 (62) -- $2400 (66) -- $3168 (70).

IF I can withdraw 4% per year from that investment alongside my Social Security
Now you are mixing the SS decision with the investment decisions and withdrawal decisions, and getting throughly confused. The 4% rule is about withdrawing from a 60/40 balanced investment account.

My spreadsheet is set up to show accumulating the SS payments from 62 to 70 into a seperate account and then at age 70 withdrawing exactly enough so that the total income (SS + withdraw) equals what you'd be getting from SS if you'd have deferred to 70. I wanted to compare like to like: $0 between 62 and 70, then the same as the deferred SS benefit, until the side account is exhausted. At that point the "early" income drops below the "late" income.

IF I start collecting $1800 per month at age 62, and even IF I find a way to earn 4% either after taxes and/or tax free
Well, plug some numbers into my spreadsheet (manually corrected for COLA during the deferal period).

Let's go with 4% after tax earnings -- everybody's tax situation is unique. 2.8% COLA, collecting $1800 at 62 vs. $3951 (with COLA) at 70. Put all the payments received into an account earning 4%, here are the account values at various years.
Age       62 acnt      70 acnt
62 $0 $0
65 70,779 0
70 223,544 0
73 340,273 164,639
75 430,374 281,880
80 706,220 662,252
81.7 816,671 816,676 <-- breakeven
85 1,069,788 1,173,781


If you can earn 6% (after tax), breakeven age is 85.
At 7%, it's 87.
At 8.9%, it's 98.
Also:
At 0%, it's 78.

Why check at 8.9% you ask?
Because average long-term return of the S&P500 is 10.5%. Reduce that by 15% income tax = 8.925%
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Hawkwin wrote:
Your math is not correct.

My math is exactly correct for my example, which ignores COLA. If you want want to use a different example than provide your own math; it doesn't invalidate mine.

In any case, use Ray's spreadsheet (or some other better one) if you want to work through accurate scenarios.

... if you are someone that doesn't need the money for your[self] or a spouse, then there is very little reason to ever wait beyond 62....

This was the question I had when I started this thread. I have learned that it does seem to be the case that taking SS at 62 is the right approach if you don't need the money but want (on average) to maximize the amount you get from the system.

-IGU-
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$1500 fewer dollars per month would not be a trivial difference for a married 80 year old couple
If that's their sole source of income, yes.

But the (2013) maximum benefit would be $1,923 if you retired at 62. So someone who would be getting $1800 is in the top tier of income earners, and should have much more retirement income source than SS. Remember, SS was not designed to keep retirees in luxury -- it is intended to keep retirees from being destitute.

A 1%'er should easily have $2M in liquid net worth when they retire at 62. Stocks, bonds, 401k, IRA, etc.

4% of $2,000,000 is $6666/mo. Assume this $6666 grows at COL rate (assume 2.8%), at 80 they'd be getting $10,958.

Their early (62) SS would now be $2959, and the late (70) SS would be $4175. That's $1216/mo. But let's go with your $1500 and say that they'd be getting $4459.

So their TOTAL income would be:
10,959 + 2959 = $13,918
vs.
10,959 + 4459 = $15,418

So, yes, I'd say that this 80 year-old couple would say this $1500/mo difference was trivial. There's nothing that you can do with $15,00 that you can't do with $14,000.
They'd not be changing their diet from filet mignon to Alpo. Although they might be dropping down from King size cut to Queen size once a month.
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However poorly I phrased my post, I estimated that my breakeven at 4% would be about 80 years old. You get 81.7:

Ray: "81.7 816,671 816,676 <-- breakeven"

I concede that your estimate is accurate especially since I was reciting from memory of something I looked up long ago.

I estimated that 6% after tax income would yield a break even of about 85. And you appear to agree:

Ray: "85 1,069,788 1,173,781"

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.

Delaying my Social Security appears to be a hedge against the risk that I will not get my desired returns.

I am not confident that both my wife and I will die at 85 given that none of our parents did - nor our aunts or uncles.

My original post was in agreement with Alchook's statement:

"I don't think I'd want to depend on $22K for living expenses, even at age 85. But using your line of reasoning, which I think is realistic, at age 85 $40K a year would likely be more than enough."


Ray: "This is valuable to me, because I'd rather be rich than "right"."

I agree with that. It seems to me that the safest way for me to prepare for retirement is to continue to grow my financial assets that I have accumulated for 30 years plus allow my Social Security entitlement to grow from $1800 per month to $3166 per month as a hedge against the possibility that I will not get my expected returns over the next ten years.

I certainly can't find an annuity that will grow in value by 8% per year.

You guys appear to have more confidence in your investing skills than I.
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Ray: "So someone who would be getting $1800 is in the top tier of income earners, and should have much more retirement income source than SS"

Ray: "A 1%'er should easily have $2M in liquid net worth when they retire at 62. Stocks, bonds, 401k, IRA, etc."

Since you chided me for sloppy reasoning, I think that the top tier for Social Security purposes is nowhere near the top 1% of wage earners. Social Security tops out at about $120,000 whereas the cutoff for the top 1% of wage earners is around $400,000.

I don't know where we go from there. A person raising a family who tops out at $120,000 at the time of his or her retiremnt probably should be able to save $500,000 or more, if s/he is frugal and invests well.

Assuming $500,000 saved, total income of $5698.75 (1/4 of 10959 plus 2959) would fall short of their monthly nursing home bill by several thousand dollars (mom's and dad were around $7400 when Mom died last summer). They would not consider the $1500 difference to be trivial.

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.

The $1500 in both cases might be the difference between being able to pay their nursing home bills or not. And in Mom and Dad's case, they had a several thousand dollar cushion when they moved in ten years ago which disappeared when their nursing home costs grew faster than Social Security and inflation.
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jgc123 writes,

I certainly can't find an annuity that will grow in value by 8% per year.

That's probably the best reason to delay taking SS to age 70. If there is any chance you might buy a Single Premium Immediate Annuity (SPIA) in the private market, it's a lot cheaper to "purchase" that same monthly benefit by delaying Social Security.

intercst
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I don't know where we go from there. A person raising a family who tops out at $120,000 at the time of his or her retiremnt probably should be able to save $500,000 or more, if s/he is frugal and invests well.

Since many people are not frugal, they may not have much if anything at all saved at 62.

PSU
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OK, a few things from this thread:

I can't believe you didn't see Book of Mormon. Also, was Spiderman any good?

Saw BoM last year. Hated it. Despised it. Not funny. Puerile. Sophomoric. We're in the minority, obviously. http://boards.fool.com/my-recommendation-is-see-book-of-morm... Spiderman had astounding staging, which didn't make up for the lousy book, music, or acting. But truly inventive and impressive scenery, set design, and, of course, the flying. (Last year: Book of Mormon, Once, Nice Work If You Can Get It, The Heiress, Newsies. Best: Once. Close call with Newsies, for the book and wonderful staging.)

We don't buy our tickets until we get there; had trouble with Saturday night and that's where Spiderman filled in. We generally get seats in the first 10 rows (or two front rows of the mezz) going Box Office to Box Office. We are rarely disappointed, though we didn't get in to see After Midnight. Cinderella, Beautiful, Snow Geese, Pippin, Peter & the Starcatcher, and The Winslow Boy were all fall backs, and we wish we'd seen any one of them than Spidey. But the staging almost made up for it.

Now the unimportant stuff:

If you're wealthy enough to delay taking SS until age 70, what's the "utility of money"?

I am/we are "wealthy" enough to delay taking it, but we liked having some cash flow coming into the house to offset our not lavish but also not penurious lifestyle. So we opted to take the benefits early knowing that they would be reduced over time, but that the "extra" money would have less marginal utility at the end of the life than for the next decade or two.

I don't think I'd want to depend on $22K for living expenses, even at age 85.

Good point, but we won't either. We have rental income and, of course, dividend and interest income. As someone else pointed out, the extra $5-10,000 won't change our lifestyle when we are 87, but does make a psychological different now at age 66. If you are going to live solely on SS, then my take is obviously irrelevant (which I thought I covered by saying that you should have elder-care contingencies in place first.)

8% return

Yes, it's an 8% "improvement." Which pays off when you are 83 and beyond. The thrust of my comment was that I think the "utility" of money is higher now, and will be lower later.

But I do not mean to hijack the thread, I just note that after some discussion of "utility" it has drifted back to "quantity," as seems to the be focus in so much of our society anymore. Quantity doesn't matter if you can't use it. Or, in my philosophy, use it well, at the very least.

Back in the 1930s when Social Security only a small minority of folks lived long enough to collect.

Last, I have to correct this old canard AGAIN. The majority of people in the 1930's and 1940's and beyond did, indeed, use it. The confusion comes because people look at "life expectancies" in the 1930's and see that most people lived to about age 63 - but that is because so many children died early, which skewed the numbers horribly. The more relevant statistic is how many people still alive at 20 (where they began contributing) lived to age 65 and beyond and could collect? The answer: most of them.

So we can observe that for men, for example, almost 54% of the them could expect to live to age 65 if they survived to age 21, and men who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women).
http://www.ssa.gov/history/lifeexpect.html

The numbers are higher now, but not vastly so. 2/3 of the increase in "life expectancy" is due to a reduction in child mortality, only 1/3 because of "safer workplaces" and "end of life care" and "surgical interventions" and so on. (And if you eliminate those who die between age 21 and 64 the number shrink even further: car accidents, drug overdoses, etc.)
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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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"I don't think I'd want to depend on $22K for living expenses, even at age 85. But using your line of reasoning, which I think is realistic, at age 85 $40K a year would likely be more than enough."

There's something I just don't get when people say stuff like this. What are you expecting to live on for the 8 years between 62 and 70? (Presumably you are retiring at 62 --- you wouldn't start taking SS while you are still working.) It's not like you get a choice between getting $1800/mo and $3300/mo. Your choice is between taking $1800/mo forever (COLA adjusted) and taking NOTHING for 8 years and only then taking $3300 forever.

I guess my point -- and question -- is: if you have other income that will sustain you for the first 8 years, then would that income source disappear when you hit 70? And if you can live comfortably on non-SS income for 8 years, what's benefit do you get by eschewing the reduced age 62 SS income? Is it like a financial trapeze act, where you let go of one bar at 70 and fly through the air counting on catching the age 70 SS trapeze? You drain that account empty the month before you turn 70?

I know lots of people who are retired --- and lots of them are working at age 65 & 70 & 75 doing janitorial work and cleaning houses and handing out carts in the Walmart lobby. Try telling them how they should have delayed taking SS until they hit 70.

Too, SS was never meant to be the primary source of retirement income. It was intended to keep retirees from being destitute. Someone who is getting $1800 at 62 is someone who has had significantly higher than average income during their working lifetime. And they should have been putting away money for retirement. Clearly they have *something* put away, or some other independent source of income, otherwise they wouldn't be able to defer SS. And by definition that non-SS income is enough to live on, so what's the big deal about getting even more money from SS in 8 years? Just take the modicum of money that you'd get by starting SS at 62.

As the saying goes:
Investments, IRAs, and 401(k) to live on;
Pension for trips to Europe or Bahamas;
Social Security for lap dances.


The whole discussion is moot anyway. The SSA itself says that taking at any age from 62 to 70 is actuarially equal. That being the case, the age at which you start is purely a matter of personal preference as to the shape of your SS income stream. And: "De gustibus non disputandum est."
Alas, keep getting drawn into these discussions when there's nothing else going on. ;-(
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If there is any chance you might buy a Single Premium Immediate Annuity (SPIA) in the private market, it's a lot cheaper to "purchase" that same monthly benefit by delaying Social Security.

That's true -- but probably inconsequential for most people. It's not like you can "purchase" whatever monthly benefit you want. In jgc's case he can buy exactly $1368/mo. The payout on this SS annuity is the difference between your age 62 benefit and your age 70 benefit, and is exactly 76% of your age 62 benefit.

While it is undoubtedly a great deal, what if jgc want to have an annuity payout of $2500/mo? Or $5000? He can't get it. All he can get is $1368. No more; no less. [*]
If he wants a different annuity payout, he can't get it from SS so he has to go into the private market.

And, maybe I'm projecting, but ... $1368? Really? That's such a piddly little amount, why bother? Okay, yeah it's COLA adjusted, but still ... What the heck can you do with $1300? If I wanted an annuity, I'd want a *real* chunk of money, like maybe $4000-$5000.

[*] Actually, he could get less. By deferring to some date before age 70.
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Rayvt,

While it is undoubtedly a great deal, what if jgc want to have an annuity payout of $2500/mo? Or $5000? He can't get it. All he can get is $1368. No more; no less. [*]
If he wants a different annuity payout, he can't get it from SS so he has to go into the private market.

</snip>

If JGC wants a $5,000/month annuity, it still makes sense to buy the first $1,368 of the monthly benefit by delaying SS.

At current annuity rates, a 70-year-old male would pay $260,000 for a $1,368/month inflation-adjusted life annuity. The net value (after taxes) of 8 years of SS benefits is $135,000 -- that's a $125,000 savings.

I don't know about you, but $125,000 is still "real" money to me.

intercst
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Rayvt wrote:
The whole discussion is moot anyway. The SSA itself says that taking at any age from 62 to 70 is actuarially equal.

When I started this thread it included pointing out that FIRECalc was telling me that it was better to start taking social security at age 62. Better in the sense that if I started with a big pot of retirement money I could draw a greater amount with no (backtested, not guaranteed future) chance of going broke if I added in SS taken at age 62 than if I added the greater amount in at age 70.

So while it may be actuarially equivalent, I don't think it's moot for my purpose. Unless there's a bug in FIRECalc's model of social security, which is entirely possible.

-IGU-
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Go play with Ray's spreadsheet to see exactly what it looks like, <<<

Ray admitted he needed to fix the spreadsheet
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see Detroit as an example of what happens when there's no money

Irrelevant. Detroit does not have the ability to print its own money, the US government does. I know, I know, inflation! eek!. Unless the deficit scolds win, some inflation is a good thing; it falls a little bit on everyone, including foreign markets (where they have bought US bonds). There have only been two times in US history where we have not had deficits and we seem to have survived. More than that, thrived!'

But if the people who think that the US government should be run like my family: "without debt", I will ask "When was the last time you built a road, didn't charge people to drive on it, and fixed it free?" And by the way, do you have a mortgage? Buy your cars on a payment plan? Have credit cards? And when, exactly, do you think the US is going to die?

Detroit. Irrelevant to Social Security. Deficit scolds: bad for economics. Of course I admit they are winning the argument at the moment, but I would submit they are causing great damage. Interesting chart here showing government hiring and spending, per capita, in the recent recession - which may answer a lot of why the recovery is slower than usual:

http://tinyurl.com/jvrrjts
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Alas, keep getting drawn into these discussions when there's nothing else going on. ;-(

I for one have found this thread interesting and enlightening. Lots of good information, different viewpoints, no nonsense or nastiness, and even some theater reviews!
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intercst:

"If JGC wants a $5,000/month annuity, it still makes sense to buy the first $1,368 of the monthly benefit by delaying SS.

"At current annuity rates, a 70-year-old male would pay $260,000 for a $1,368/month inflation-adjusted life annuity. The net value (after taxes) of 8 years of SS benefits is $135,000 -- that's a $125,000 savings."

You certainly understood my point and explained it better than I did.

Even if I manage to save $1-2 million by the age of 62, I may choose to continue to live on dividend and interest income for the next 8 years and treat Social Security as a hedge against future economic turmoil.

Growing really old is expensive and healtchare and nursing home costs seem to have their own rate of inflation.

That being said, I feel like I was arguing to 'be right on the internet' when in fact I think it is perfectly reasonable for people to make different choices. I have now beaten the horse to death and sold it to the glue factory.
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Growing really old is expensive and healtchare and nursing home costs seem to have their own rate of inflation.


I truly hope that I die at home, in bed - and never experience the horror of a nursing home. If I can manage it, I will.

AM
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I truly hope that I die at home, in bed - and never experience the horror of a nursing home. If I can manage it, I will.


Yes. I want to die like my grandfather: peacefully, surrounded by loved ones, in my sleep. Not screaming like all the passengers in his car.
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When I started this thread it included pointing out that FIRECalc was telling me that it was better to start taking social security at age 62. Better in the sense that if I started with a big pot of retirement money I could draw a greater amount with no (backtested, not guaranteed future) chance of going broke if I added in SS taken at age 62 than if I added the greater amount in at age 70.


So while it may be actuarially equivalent, I don't think it's moot for my purpose. Unless there's a bug in FIRECalc's model of social security, which is entirely possible.


Be aware that actuarially equivalent means on average, the payout for the general population will balance out to near zero. Your mileage as an individual will vary.

I don't believe there is a bug in FireCalc. Logically thinking, the sooner you take SS means your retirement investments pot will be larger at age 70. A larger pot is more likely to survive a market downturn, thus improving your chances of success. For example, what is likely to survive longer, a early SS pot at $300K vs. an age 70 SS pot at $100K? Keep in mind that there is a risk of a market downturn during that 8 year period, which likely favors the larger pot recovering.
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Be aware that actuarially equivalent means on average, the payout for the general population will balance out to near zero. Your mileage as an individual will vary.


This isn't Lake Woebegone. There is no reason to think that you'll live longer than average. It doesn't matter that your parents and grandparents were still healthy at 90, when a runaway gravel truck T-bones you.

Of course, you don't want to plan to spend your last dime on the day before your Life Expectancy, either.

There are a lot of things that are beyond your control, also. No matter how well you plan, an Argentina-level inflation will nullify any plan.

IMHO, the best solution for all of this is to plan & arrange your finances so that SS is *not* what you depending on for basic living needs. If you've got $5M+ then you could care less what amount of money you get from SS. You don't need to optimise it any more than you currently need to optimise your purchase of a paperback book.

Or, in current days, to optimise the interest you earn in your bank account. I've told the manage at our branch that the piddly little amount they pay is more nuisance to me than it is worth.
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Well, I don't want to die like several of my relatives - sitting on the toilet.
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<Well, I don't want to die like several of my relatives - sitting on the toilet. >

A fitting post for #100 in this thread?
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Rayvt writes,

This isn't Lake Woebegone. There is no reason to think that you'll live longer than average.

I think that's true for 90% to 95% of the population. But people who have some reason to believe they're on the tails of the distribution might want to take the bet. Obviously, someone with a serious, life-shortening health issue would want to take SS at 62 (assuming they're not working.) Someone in good health with parents and grandparents who lived to 100 might want to wait until age 70.

For most people in the middle of the distribution, it's a coin toss.

intercst
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"This isn't Lake Woebegone. There is no reason to think that you'll live longer than average."

Does that differ from betting that you will die earlier than average?
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Well, I don't want to die like several of my relatives - sitting on the toilet.

We've been on long cruises where a number of people died on the cruise. One was a 65-day around the world cruise -- where 8 people died. One lady bought it in the restaurant at dinner. The ship people handle it very cool and low-key. A bunch of waiters stood around the table holding up tableclothes to make a screen until the ship's doctor came, then they made a moving curtain on the way out of the crew-only exit.

That's for me! We've always considered what to do when/if either of us gets Alzheimers. Current thought is we'll jump off the balcony late at night in the mid-Altantic. Leaving a note for the Doctor so that they won't waste time circling around looking for us.
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Someone in good health with parents and grandparents who lived to 100 might want to wait until age 70.

In my 30 years at Motorola in Chicago, I knew firsthand of a number of people who left for work one morning and never got home for dinner. Hit by a train at a rail crossing, getting 20 tons of gravel dumped on their car waiting at a stoplight when a truck overturned making the corner, clipped by a cement truck chute that came loose on a curve and swung across 2 lanes of oncoming traffic, etc. One day I had a nice chat with the receptionist at the Visitor's Lobby waiting for a salesman. The next day there was a different receptionist -- the other one choked on a fishbone at dinner that night.

Perhaps all this has colored my thinking about delaying too long.

Have a SHTF plan of course --- you don't want to spend your 90'th birthday living in a refrigerator box because you ran out of money.

And now that we're retired and know a lot of retirees with various ages, we've seen how your body can fail you and you can't do the things that you now have enough money to do.

Nobody lays on their deathbed and says, "I'm glad I didn't buy that jeep."
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"This isn't Lake Woebegone. There is no reason to think that you'll live longer than average."

Does that differ from betting that you will die earlier than average?


No.

But dying before average isn't what people fear when considering their start SS age. The concern isn't even to maximize your total lifetime income from SS. The concern is outliving your money. I'm sure it REALLY SUCKS to have to learn to like the taste of Alpo at 90.

To be real blunt, I think it's stupid to voluntarily be dependant on SS for a significant part of your retirement income. Note that I said "voluntarily" -- I'll grant that many people just didn't have enough income to put away anything for retirement. And others realized too late that they should put money away and ran out of time.

I'm largely of the opinion that *if* you have the resources to survive comfortably in the 8 years between 62 and 70, then you don't need the higher SS income you'll get by waiting to 70. And why bother to optimize something that isn't necessary?
Spend that effort on optimizing and maximizing your non-SS portfolio.
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>> The concern isn't even to maximize your total lifetime income from SS. The concern is outliving your money. I'm sure it REALLY SUCKS to have to learn to like the taste of Alpo at 90. <<

EXACTLY this. I don't manage retirement savings to maximize my average case ROI. I manage it to *minimize* my chances of outliving my money. The two goals are not the same.

>> To be real blunt, I think it's stupid to voluntarily be dependant on SS for a significant part of your retirement income. <<

I might not go quite this far. I'd say that anyone under the age of 50 shouldn't plan to get as much as they are being told to expect right now, but I honestly don't think SS is going anywhere. It may be reduced for folks not at (or close to) retirement age, but even those who are younger -- especially if they aren't high-income -- are likely to receive at least 2/3 (if not more) of what they expect to get today.

That assumes, of course, common sense fiscal reforms that stop bloating the debt. And maybe that's the lynchpin on which you are speaking, and yeah, that's possible.

#29
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The GOP always needs money, how about a contribution?
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"I'm largely of the opinion that *if* you have the resources to survive comfortably in the 8 years between 62 and 70, then you don't need the higher SS income you'll get by waiting to 70."

That may be the crux of the matter. I am less certain of that than you.

When you lose the ability to care for yourself and/or your spouse, your ability to earn money by the sweat of your brow drops to zero, your costs can go up drastically if you and/or your spouse move to a nursing home, and nursing home and other costs can go up drastically every year thereafter.

That happened to Mom and Dad after Dad started retiring in 2007 at the age of 85 (it takes country lawyers a year or two to wind up old cases even after they stop taking on new ones).

He built up a margin of error which disappeared as nursing home and AFLAC costs rose, his mind dimmed, and stocks crashed in 2008-9.

I may well have enough dividend and interest income to survive comfortably between the ages of 62 and 70, and yet I may also need the increased Social Security payments to live comfortably from 70 to 90 and to pay the nursing home bills for me and/or my spouse thereafter.
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jgc123 writes,

He built up a margin of error which disappeared as nursing home and AFLAC costs rose

</snip>


What are AFLAC costs? The only AFLAC I'm familiar with is that quacking duck insurance.

intercst
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There is also an AFLAC policy which covers excess medical expenses not covered by Medicare (or did when Dad bought it).
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<to pay the nursing home bills for me and/or my spouse thereafter>

I shutter to think what nursing home costs will be 10-15 years from now. Average now per month; texas;4K......New York:10K. That is going to take a lot of dividends, and maybe some SS to top it off. You either need to be very rich or very poor and get govt. help. Those in the middle as my wife and I are could be in an uncomfortable place.
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