Calculation of Social Security

You’re still misunderstanding the actuarial science. If I have a larger inflation-adjusted SS check when I’m age 80, I can safely withdraw more from my retirement saving at age 62. The question is which strategy gives you the most money over your expected lifetime.

^ This is the part that gets overlooked all too often in these discussions. A while back I ran some scenarios in cFIREsim and each scenario showed that delaying SS either increased the SWR and/or improved portfolio survival.

At least for the inputs I used, if you want to spend the maximum amount of money in your early years, you should delay SS.

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Just for fun, plug your data into a life expectancy calculator- you might be surprised by the number. https://www.blueprintincome.com/tools/life-expectancy-calcul…… Obviously, just a guestimate, but it might help you realize that you aren’t destined to check out at 72. - SnootFool


That calculator was fun. I was surprised that it did not ask about the longevity of your parents. I have consistently heard that is a factor.

Also, the only specific chronic disease it asked about was diabetes, everything else about your health was captured in the overall health question. So all other things being equal being treated for high blood pressure or cancer would score the same.

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I was surprised that it did not ask about the longevity of your parents. I have consistently heard that is a factor.

That was dispelled back in 2018 by a “big data” analysis of the Ancestry.com database performed by the geniuses at Google.

A Longer Life May Not Be in Your Genes
https://www.livescience.com/64018-longevity-genetic-question…

Long life spans tend to run in families, a phenomenon that’s often attributed to people’s genes. But now, a large new study of data from the genealogy website Ancestry reveals that genetics may play less of a role in life span than previously thought.

The reason? Previous studies failed to take into account a quirk of human relationships: that people tend select romantic partners with similar traits to their own. The findings mean that previous studies may have substantially overestimated the heritability of life span, the researchers said.

Diet, exercise, and lifestyle choices are much more important than your genes.

intercst

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Just for fun, plug your data into a life expectancy calculator- you might be surprised by the number. https://www.blueprintincome.com/tools/life-expectancy-calcul…… Obviously, just a guestimate, but it might help you realize that you aren’t destined to check out at 72.

The most interesting thing with this calculator was that it pushed annuities for both DH and I, given how long they say we are going to live. I played with some of the questions and still got 93 for both of us, even after checking off “diabetic.”

I wouldn’t bet on this calculator.

IP

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You’re still misunderstanding the actuarial science.

I’m not sure he is. Rayvt is simply pointing out that most people, in fact the vast majority, do not live to 100. Is that a misunderstanding of actuarial science? What I get from Ray is that 62 may sometimes be a good age to take SS (not for me, BTW) v. waiting until 70 is always the right move.

I also agree with you about this: “Diet, exercise, and lifestyle choices are much more important than your genes.” I’ve seen this over and over throughout my decades on earth.

Pete

I was reading recently, and now can’t find the article (of course!), that in some circumstances one may want to take the option of “resetting” SS. Apparently you can do that. For example, you can start taking SS, and then “change your mind”, repay the benefits, and start taking (increased) benefits at a later age.

Repaying the benefits received could be a problem for a lot of people. But I thought it was interesting that this option even existed.

1poorguy

What I get from Ray is that 62 may sometimes be a good age to take SS

What I have gotten from Ray’s posts over the years is that 62 is always a good age to take SS.

PSU

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What I get from Ray is that 62 may sometimes be a good age to take SS (not for me, BTW) v. waiting until 70 is always the right move.

Then you must be reading different posts from Ray than I have been because it seems to me that he has pretty much insisted that taking SS at 62 is the only way to go. From my reading, he does not consider that folks may have different circumstances for which a different choice is better.

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Previous studies failed to take into account a quirk of human relationships: that people tend select romantic partners with similar traits to their own.

My wife is praying that quirk is incorrect.

AW

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Rayvt is simply pointing out that most people, in fact the vast majority, do not live to 100. Is that a misunderstanding of actuarial science? What I get from Ray is that 62 may sometimes be a good age to take SS (not for me, BTW) v. waiting until 70 is always the right move.

Right. Very few people live to 100. And not that many life to 90.

Let’s take the 2019 SSA table https://www.ssa.gov/oact/STATS/table4c6.html
Table says average life expectancy at 70 is 14.60 years. 62 is 20.28. 65 is 18.09.

Let’s say that for Financially Independent people (ahem, like us) do better than this. As intercst says: “the people with the retirement savings required to delay benefits to age 70 are almost exclusively high income earners who live 4 or 5 years longer than average.”
So let’s shift the Avg Life Expectancy for 70 years old to the 65 YO figure.
Then avg life expectancy is 70 + 18 = 88.
Orig table LE is 70 + 14.6 = 85.

If we want to be really generous, use the LE for 62 year olds.
70 + 20 = 90.

Back to the table, ask what percentage of XX year olds live to 90.
70 YO’s: 18,913 / 72,924 = 25.9%

If we use the figure for an extra 5 years, the number for 75 YO’s:
18,913 / 63,739 = 29.7%

So for us 70 years olds that are high income earners who live 4 or 5 years longer than average, a little less than one-third of us will see 90.

That’s what I can glean from the actuarial data. Maybe I’m all wet, though.

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What I have gotten from Ray’s posts over the years is that 62 is always a good age to take SS.

Bird in the hand.
Bird in the hand vs. 1.77 birds in the bush. Not even the 2.

SSA: “only 5% of men wait until 70, according to Social Security Administration data.”

Those 95% of people see something that the 5% don’t (or won’t). The 5% assume that they are right and everybody else is wrong and stupid. And a lot of these 5% staunchly refuse to consider looking at it from the other people’s point of view.

(Not actually “62” though. Actually the earliest age after you are retired.
Which, granted, is probably 62 for most financially independent folks. I retired at 58.)

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…it seems to me that he has pretty much insisted that taking SS at 62 is the only way to go…

Well, if that is what he is saying, that 62 is always the best age to take SS, then I disagree with him as well. I do not think there is a “one size fits all” for taking SS benefits.

Pete

The most interesting thing with this calculator was that it pushed annuities for both DH and I, given how long they say we are going to live.

There’s a good “side point” in this discussion: If you’re tempted to buy an annuity, run the numbers of the annuity vs. delaying SS and living off the money you would have spent on that annuity. I know of one person who did that, and found he was money ahead the latter way.

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Well, if that is what he is saying, that 62 is always the best age to take SS, then I disagree with him as well. I do not think there is a “one size fits all” for taking SS benefits.

Exactly. Different strokes for different folks. And that’s what I’ve been saying.

When discussing life expectancy in the context of Social Security, it’s critical to remember the S in OASDI- Survivor.
While the chance of any particular 70 year old reaching 90 or 95 may be relatively low, the odds that a married couple that age will have a surviving widow/widower who reaches 90 are quite high- about 45%.
I got that number from this Michael Kitces article, which links to a Joint Life Mortality Calculator excel file. https://www.kitces.com/blog/rigorous-analysis-of-pension-opt…

The spreadsheet is based on SSA’s “Period Life Table 2004” which I assume is fairly conservative for 2022, since life expectancy tends to get longer over the years (post-USSR Russia excepted!).

An event that has almost a 1 in 2 chance of happening has to be planned for. I don’t recommend playing Russian roulette with 3 bullets loaded!

Waiting until 70 to take SSI can be seen as an insurance policy for the couple, increasing the odds that the survivor never runs out of money since the increased benefit becomes the couple’s survivor benefit.
Obviously, with health, diet & lifestyle issues YMMV to the point where claiming at 62 makes total sense.
My take: if you & your spouse are in average to above average health, planning for at least one you to reach 95 seems prudent.

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Waiting until 70 to take SSI can be seen as an insurance policy for the couple, increasing the odds that the survivor never runs out of money since the increased benefit becomes the couple’s survivor benefit.
Obviously, with health, diet & lifestyle issues YMMV to the point where claiming at 62 makes total sense.
My take: if you & your spouse are in average to above average health, planning for at least one you to reach 95 seems prudent.

And this is why, as I understand it, it makes a great deal of sense for many couples for the lower earning spouse to take benefits at 62 and the higher earning one to take benefits at 70. But it makes sense to run the numbers to see what works out the best for the couple’s unique circumstances.

Bird in the hand.
Bird in the hand vs. 1.77 birds in the bush. Not even the 2.

SSA: “only 5% of men wait until 70, according to Social Security Administration data.”

Those 95% of people see something that the 5% don’t (or won’t). The 5% assume that they are right and everybody else is wrong and stupid. And a lot of these 5% staunchly refuse to consider looking at it from the other people’s point of view.

Delayed gratification is a powerful tool. Studies show that delayed gratification is one of the most effective personal traits of successful people. ... Over time, delaying gratification will improve your self-control and ultimately help you achieve your long-term goals faster.

https://www.psychologytoday.com/us/blog/your-emotional-meter….

Last time we discussed Roth Conversions and mentioned the tax rate changes when one goes from MFJ to Single filing, you acknowledged you had not taken that into consideration and finally realized you needed to do so. I don’t see that analysis here. Did you ever get around to considering that?

IP

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Last time we discussed Roth Conversions and mentioned the tax rate changes when one goes from MFJ to Single filing, you acknowledged you had not taken that into consideration and finally realized you needed to do so. I don’t see that analysis here. Did you ever get around to considering that?

Considering what? Roth conversions or delayed gratification?

At some point you need to realize that you’ve run out near the end of the rope.

My mom – a depression baby – couldn’t bear to spend her money right up to the end. We told her, “Mom, you and Dad saved all your life for a rainy day. Now Dad’s dead and you are old, THIS is the rainy day you saved for. For goodness sake, spend some of it and enjoy it while you can.”

As for us, we delayed our gratification from our 20’s to our 60’s. Now it is time to enjoy the gratification that we delayed.

Over time, delaying gratification will improve your self-control and ultimately help you achieve your long-term goals faster.

And when you’ve achieved your long-term goal, then what? Keep delaying? Why?

intercst keeps making a motte-and-bailey argument.
There is a minority of people who have the resources to delay SS. Some of these can just barely afford to. The others have so much money that they can easily afford to.

Those that can easily afford to have so much money that the extra SS benefit they collect is essentially pocket change.

There’s 3 groups of people.

  1. Those who cannot afford to defer SS. They need that money.
  2. Those who can barely afford to defer. These are doing it on a shoestring.
  3. Those who can defer without blinking.

Apparently group 1 is 95% of people.
Hence groups 2 & 3 are 5% of people.
Knowing the rapidity which money grows with compounding, I suspect that the majority of this 5% is in group 3.

The only group that needs to think seriously about deferring is group 2.
Group 1 doesn’t need to think about deferring–because they can’t defer.
Group 3 has no need to think about deferring–because they don’t really need the extra SS benefit, they already have plenty enough.

Jim Cramer has a saying about stock management, “Sell them when you can, not when you have to.”

The wife and I were talking about a related thing today. We are glad that we went on cruises in 2006 to 2019. If we had waited until nowadays, we’d be out of luck.
As long as you can afford it, do it now instead of putting it off for the future. When the future comes about, the opportunity may no longer be available.

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Those 95% of people see something that the 5% don’t (or won’t).

Probably 95% of the 95% see an immediate need for income to support their current lifestyle. That’s way different than making a choice to claim early, even if you don’t need the income.

And a lot of these 5% staunchly refuse to consider looking at it from the other people’s point of view.

And I could say the same about you, since you always seem to advocate for claiming early, no matter what the circumstances and motivations for any individual are.

AJ

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Rayvt analyzes

intercst keeps making a motte-and-bailey argument.
There is a minority of people who have the resources to delay SS. Some of these can just barely afford to. The others have so much money that they can easily afford to.

Those that can easily afford to have so much money that the extra SS benefit they collect is essentially pocket change.

That’s right. It’s those people who “can just barely afford to delay SS” are the ones that would benefit the most from the extra $100,000 to $200,000. That’s why the widespread innumeracy is so damaging. An extra $100,000 for me is probably lost in the round off.

For example, if you have $500,000 in retirement savings and are in good health, it would make a world of sense to spend down half of that $500,000 to delay SS for as long as you can.

We see the same idiocy in the extra 300,000 unvaccinated people who have died of COVID since the vaccine was readily available in April/May of last year.

You make your choices and live with the results.

intercst

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