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No. of Recommendations: 8
Barron's has an article about delaying SS to age 70. Few retirees understand enough actuarial science to do the arithmetic and as a result leave a lot of money on the table. The difference for delaying SS from age 62 to 70 is about $200,000 for someone getting the maximum SS check, $300,000 if you're married.)

If the Federal Gov't is willing to sell me an inflation-adjusted life annuity for half the cost of what a private insurer would charge for the same benefit, I'm a buyer.

Bridges’ to Maximize Social Security Benefits Should Be Built Into 401(k)s, Researchers Say
https://www.barrons.com/articles/bridges-to-maximize-social-...

</snip>


Link to Boston College research paper on the subject mentioned in the article.
https://crr.bc.edu/wp-content/uploads/2020/12/IB_21-1.pdf

intercst
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No. of Recommendations: 29
Few retirees understand enough actuarial science to do the arithmetic and as a result leave a lot of money on the table.

This idea is brought up here in one form or another every few months. The difficulty with saying that folks 'leave a lot of money on the table' is that **every person** has different circumstances.

What if, for example, the person has a family history of close members dying in their early 70s? If they took SS at 70 v. 62, wouldn't they have left a lot of money on the table?

What if a person has only $50K or $100K of "bridge" money? Should someone spend all of that while waiting to take SS at 70?

What if you have no bridge money at all?

If you have millions in investment assets and a potential mortality of 95 or 100, then the waiting option makes a lot more sense. Of course, at a certain asset level, you really wouldn't need SS at all.

Pete
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No. of Recommendations: 7
MataroPete writes,

<<Few retirees understand enough actuarial science to do the arithmetic and as a result leave a lot of money on the table.>>

This idea is brought up here in one form or another every few months. The difficulty with saying that folks 'leave a lot of money on the table' is that **every person** has different circumstances.

What if, for example, the person has a family history of close members dying in their early 70s? If they took SS at 70 v. 62, wouldn't they have left a lot of money on the table?

What if a person has only $50K or $100K of "bridge" money? Should someone spend all of that while waiting to take SS at 70?

What if you have no bridge money at all?

If you have millions in investment assets and a potential mortality of 95 or 100, then the waiting option makes a lot more sense. Of course, at a certain asset level, you really wouldn't need SS at all.

</snip>


The issues you cite are all part of the analysis. The problem is that waiting until age 70 has the largest "wealth maximizing effect" on people of average income and wealth (i.e., middle income folks with some savings.) And those are the folks most likely to take Social Security at age 62 on the financial theory that "Social Security is going broke and "a bird in the hand is better than one in the bush"" rather than doing any kind of detailed examination of the issue."

Obviously, if you have no savings you take SS at age 62. Ditto if you have a medical diagnosis that predicts an early death. But the vast majority of Americans have no clue on their longevity. Having a parent or grandparent who lived to an old age only transmits a small longevity benefit to their progeny. And if all the men in your family died in their early 60's, there's no guaranty you'll suffer the same fate unless you're engaging in whatever behavior killed them. For most of us, we won't be able to do better than to follow the average life expectancy for people in our ethnic, social, or economic bracket. I suspect most of people who post on TMF are in the top half of the income pyramid. Those folks, on average, live about 5 years longer than those in the bottom half. If you're in the Top 10% of income, you can probably add another couple of years to that. Absent a grave medical diagnosis, waiting until age 70 makes sense if you're upper income.

The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age
https://fas.org/sgp/crs/misc/R44846.pdf

</snip>


Just look at the comments to the Barron's article. I assume that the average Barron's reader is much more financially astute and a lot wealthier than the average American. Yet only about 10% of the comments in that thread seem to show any awareness of actuarial science and the relevant data.

It's kind of like the difference between buying an index fund or believing that you're going to be one of the few people who beat the market averages over the long term. Most end up poorer by believing they're smarter than an index fund. Same thing for the people that ignore the average life expectancy data on the assumption that they're smarter than the mortality tables. Most aren't and leave a lot of money on the table as a result.

intercst
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No. of Recommendations: 1
Not waiting until 70 isn't half the problem that starting at 62 is. Though it used to be worse.

Some 31% of women and 27% of men signed up for Social Security at age 62 in 2018, down from around 54% of women and 50% of men in 2005, according to Social Security Administration data.

https://money.usnews.com/money/retirement/social-security/ar...

My wife was ten years older than me, and when she died I had not yet reached my own Full Retirement Age. I started collecting survivor benefits based on my wife's SS, which came to almost as much as she had been receiving. That made it easy for me to wait until 70. Two more birthdays and I will get 32% more than my SS base, which was already going to be much more than my wife's.
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In our position, we decided I'd take my SS at full retirement age, and DW would take half of mine and switch to hers when she reaches 70. The break-even point compared to our both waiting until 70 is in our early 90's.

A break even point in your early 80's may be worth waiting for, break even in early 90's, much less likely of both of us reaching that age.
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With married couples, the odds seem to favor the lowest earning spouse taking early and the higher earning spouse delaying because the tables are designed to be actuarially neutral for each wage earner but the widow's benefits are awarded at no additional cost.

Since we get widow's benefits for no additional cost there is about a 72% chance that one of the two of us will live past my FRA. Therefore, the arithmetic favored my decision to delay my SS which would provide full benefits to me or Ispouse depending on who lived the longest. Then I read some analyses by Kitces showing that it was much less likely that both of us would live past our FRA (14%?), and that in a marital situation the lower wage earner generally should go ahead and collect early (from a statistical perspective). Accordingly, I persuaded Ispouse to retire and collect early (and she did and is). I am delaying for now, unless Congress starts threatening to implement a 'means testing' scheme in which case I will file for SS right away.
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Your statements are correct only to the extent your assumptions apply.

Averages just don't apply to every person in the social security system - and in fact the social security system publicly admits that - they have different life expectancy tables for males and females.

I wonder where you be on this subject if your payments were actuarily adjusted for your sex and racial status?
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GWPotter writes,

Your statements are correct only to the extent your assumptions apply.

Averages just don't apply to every person in the social security system - and in fact the social security system publicly admits that - they have different life expectancy tables for males and females.

I wonder where you be on this subject if your payments were actuarily adjusted for your sex and racial status?

</snip>


Exactly! And the fact that the Social Security system allows you to choose to take your benefit early or late affords you the advantage of bending the "adverse selection" in your favor. The whole point of the research is to show that "Social Security is going broke and taking the benefit at age 62 is a "bird in the hand", is unlikely to be the optimal selection for the vast majority of the people.

My statements are correct given the system we have. If you change the payment scheme based on race, sex, or health status, I'd look at the data and adapt my SS start date to maximize my benefit over time under the new rules. Actually I'd support giving lower income SS beneficiaries a boost and taxing someone in my position to fund it.

intercst
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No. of Recommendations: 5
With married couples, the odds seem to favor the lowest earning spouse taking early and the higher earning spouse delaying because the tables are designed to be actuarially neutral for each wage earner but the widow's benefits are awarded at no additional cost.

Be very careful with a statement like this. Your starting premise is faulty. It isn't the lower earning spouse, but the spouse with the lower calculated SS benefit. With the various equalization factors that are applied to each year's qualifying earnings, someone who earned the maximum qualifying earnings early in life, but less in later years could have a higher benefit than someone who maxed out their SS earnings later in life.

Ira
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"Be very careful with a statement like this. Your starting premise is faulty. It isn't the lower earning spouse, but the spouse with the lower calculated SS benefit."

True. Thank you for correcting my oversimplification. Ispouse collected early because she had the lower calculated SS benefit. Given that SS does not charge extra for the widow's benefit, and given that the tables showed that the odds of both of us living past FRA was less than 50%, and the odds of both of us dying before FRA was significantly less than 50%, we just played the odds by having the person with the lowest benefit taking ASAP, and the higher benefit delaying till 70.

But intercst also makes a good point. There is a correlation between wealth and longevity and on that score we may have a better than average chance of living past our calculated FRA.

As far as family history versus habits, it seems that habits have a stronger correlation than family history in general. Again, there are zillions of studies all over the place, and I am oversimplifying in a message board setting. My grandmother who did not smoke lived to 100. My grandparents who smoked died at 72, 69 and 64, respectively. Dad quit smoking when he was in his 30S (except for a stinky stogie during his Thursday bridge game) and lived to 93. Mom quit smoking in her 40's and lived to 87. I have never smoked, Ispouse has not smoked except episodically in college 50 years ago, and we both walk a lot and eat relatively well.

We could afford to draw or not draw, and we chose to go with the actuarial tables since there is a 72% chance that one of the two of us will live long enough to benefit from my widow's benefits, and something like a 14% chance that both of us will die before our FRA - which makes it a bad idea for both of us to take early.

In the end we all have to place our bets and take our chances.
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irasmilo writes,

With the various equalization factors that are applied to each year's qualifying earnings, someone who earned the maximum qualifying earnings early in life, but less in later years could have a higher benefit than someone who maxed out their SS earnings later in life.

</snip>


That must be what I'm seeing with my SS benefit. I paid max FICA from age 25 to 38, earned enough as an engineer in the oil & gas industry to retire early, then had lots of zeros in my earnings statement from age 39 to 64. I've been astonished at the size of the SS benefit given that I haven't paid very much into it in the past 25 years.

intercst
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No. of Recommendations: 6
If you're in the Top 10% of income, you can probably add another couple of years to that. Absent a grave medical diagnosis, waiting until age 70 makes sense if you're upper income.

If you are upper income, you don't need ANY Social Security money. Deferring it is kinda like plating silver on a gold bar.


I assume that the average Barron's reader is much more financially astute and a lot wealthier than the average American. Yet only about 10% of the comments in that thread seem to show any awareness of actuarial science and the relevant data.

You keep making the mistake of thinking that everybody else must have the same opinions and values as you, and that therefore they are wrong and you are right.

And you keep ignoring that a sum of money at different points in your lifetime have the same utility value regardless of your age.

You are a smart guy, and it is frustrating that you absolutely refuse to look at the issue from the other person's viewpoint.
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No. of Recommendations: 9
Rayvt writes,

<<If you're in the Top 10% of income, you can probably add another couple of years to that. Absent a grave medical diagnosis, waiting until age 70 makes sense if you're upper income.>>

If you are upper income, you don't need ANY Social Security money. Deferring it is kinda like plating silver on a gold bar.

</snip>


Sure. It just means that a larger pot of money will go to charity when I die. But since making a poor, suboptimal SS claiming decision takes about as much time as making a good one, I may as well make the one that yields the most money over time.

And you keep ignoring that a sum of money at different points in your lifetime have the same utility value regardless of your age.

</snip>


I think you meant to write that a sum of money has a "different utility value" as you age.

But that's the whole point of doing the actuarial analysis. If you're getting an extra 200-300k by claiming SS at age 70, you can spend more at all ages. If you know you'll be getting a 75% larger SS check at age 70 vs. age 62, you can spend today and save less money for old age. That's the beauty of a "guaranteed inflation-adjusted life annuity".

intercst
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unless Congress starts threatening to implement a 'means testing' scheme in which case I will file for SS right away.

The moment Social Security became taxable income it became means tested. Whether the government gives you less on the front end or takes back more on the back end, your annual usable income is reduced.
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If you are upper income, you don't need ANY Social Security money. Deferring it is kinda like plating silver on a gold bar.

Not sure about that. At least you have been consistent with your attempts on this board to continually justify why you decided to take it earlier than 70. ;-)

The Census Bureau had a nice graphic with stats a few years back that listed what percentage of income in retirement came from Social Security...

100% of income - 11.5% of people
90-99% of income - 11% of people
50-89.9% of income - 24% of people
Less than 50% of income - 54% of people

BB
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No. of Recommendations: 4
I elected to wait until 70.5. My justification was pretty simple....the additional 8% for every year I waited represented a return which exceeds that of bonds (which I don't own) and represented a diversification of my assets. Now its useful in helping to pay taxes on RMDs.

Bill
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"My justification was pretty simple....the additional 8% for every year I waited represented a return which exceeds that of bonds (which I don't own) and represented a diversification of my assets."

That too. If you don't need the money now, why NOT treat SS as longevity insurance?
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I elected to wait until 70.5. My justification was pretty simple....the additional 8% for every year I waited represented a return which exceeds that of bonds (which I don't own) and represented a diversification of my assets. Now its useful in helping to pay taxes on RMDs.

Bill


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

The extra 8% per year increase in benefit stops at age 70. You are forgoing 6 months of payments for nothing if you wait until 70.5.

70.5 was the age associated with RMD's which has now been raised to 72.
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Not sure about that. At least you have been consistent with your attempts on this board to continually justify why you decided to take it earlier than 70. ;-)

And I'm in good company. "Fully 57 percent of Social Security recipients take their benefits before reaching full retirement age. That compares to just 10 percent waiting beyond full retirement age." [Note that is is 10% beyond FRA (~66) _not_ 10% wait to 70.]
Looks like 34.3% of people claim at 62.
...
"Waiting eight years to claim Social Security at 70 instead of 62 can boost your monthly payments by more than 75 percent — but at the cost of missing out on those eight years' worth of benefits. Most retirees either can't afford to wait or don't think the trade-off is worth it,"

When you see that people to X and you think that the obviously correct thing is to do not-X, then there are 2 ways you can go.
Either: "I am right and the majority of people are stupid / wrong."
or
"What are those people seeing that I am not seeing. What am I missing?"

If only 3.7% defer to 70 while 94% don't, then that 94% think they have a good reason. They might be wrong, but that isn't automatically the case. The 3.7% are the outliers, not the 94%.
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When you see that people do X and you think that the obviously correct thing is to do not-X, then there are 2 ways you can go.
Either: "I am right and the majority of people are stupid / wrong."
or
"What are those people seeing that I am not seeing. What am I missing?"


I usually choose a third way: think harder about the problem while testing hypotheses and gathering evidence. And what do you think I find?

-IGU-
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Rayvt: "And you keep ignoring that a sum of money at different points in your lifetime have the same utility value regardless of your age."

No. A sum of money at different points in one's lifetime does not have the same utility value regardless of age.

$1,000 when you are 21 and struggling to pay tuition, room and board has for more utility value to you then, than that same $1,000 when you are 50 and a millionaire (even assuming zero inflation); adding inflation only tilts it more. Sustained deflation might lead to a different result, but seems very unlikely.

Regards, JAFO
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"And you keep ignoring that a sum of money at different points in your lifetime have the same utility value regardless of your age."

No. A sum of money at different points in one's lifetime does not have the same utility value regardless of age.


Yeah, sorry, that's what I meant to say.
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70.5 was the age associated with RMD's which has now been raised to 72.

70.5 is still the age when you can donate to a charity from your IRA without it being taxed. It used to line up with starting RMDs - and it qualifies to apply to the RMD - but when they pushed out that start the charitable transfer start was left as is.
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A sum of money at different points in one's lifetime does not have the same utility value regardless of age.

So, so true. I've thought about this often and it does impact what I am doing with my money.
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JonathanRoth writes:

In our position, we decided I'd take my SS at full retirement age, and DW would take half of mine and switch to hers when she reaches 70. The break-even point compared to our both waiting until 70 is in our early 90's.

A break even point in your early 80's may be worth waiting for, break even in early 90's, much less likely of both of us reaching that age.


Social Security's Primary Insurance Amount are actuarially adjusted so that the cumulative amount of PIA is received by all recipients at the average life expectancy regardless of the age that they claim benefits. Currently, this somewhere between 80 and 82. This is the break-even age for those claiming at 62, FRA, or 70.

How can the early 90s become the break-even age if you both claim benefits at 70?

One's monthly Social Security benefit includes all COLA adjustments from age 62 to the age that benefits are claimed. I claimed benefits at 68. As a result my break-even age is 77 when I will have received more in benefits than I would be claiming at age 62.
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MCCrockett asks,

How can the early 90s become the break-even age

It depends on what rate of investment return you use for the funds withdrawn from your retirement portfolio to cover living expenses from age 62 to 70. The higher the return, the further out the break-even age will be.

If I assumed the money I'm currently withdrawing from my portfolio while I wait until age 70 to collect SS could have been invested in another DELL computer, the break-even age would be North of 200.

intercst
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How can the early 90s become the break-even age if you both claim benefits at 70?

Sorry for being unclear. For purposes of this discussion, DW & I are the same age, same FRA, (65) and SS benefits. Our calculations were made using our actual statistics.

90ish is the break even age when comparing

A) both of us waiting until we each turn 70

B) my taking SS @ my FRA and DW getting 1/2 of my SS at the same time until she turn 70, then taking her increased SS.
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intercst:

One's break-even point has always been associated with claiming Social Security benefits at different ages. It never occurred to me that one would compare Social Security benefits to withdrawals from an IRA or investment account.

But then, I didn't quit working until I was 68 and claimed Social Security benefits starting the month after I retired. Interestingly, my monthly benefit was just $150 less than what Social Security projected my PIA would be at at age 70.
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One's break-even point has always been associated with claiming Social Security benefits at different ages. It never occurred to me that one would compare Social Security benefits to withdrawals from an IRA or investment account.

That's right. But you have to assign some rate for the time value of money in delaying taking the benefit to age 70. Since we're talking about a "guaranteed" inflation-adjusted life annuity, the interest rate on the 30-year TIPS might be the best benchmark. That's currently -0.30% (i.e., a negative yield.)

intercst
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"That's currently -0.30% (i.e., a negative yield.)

intercst "

************************************************

Oh, brave new world.
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**every person** has different circumstances.

Also, when will a person be most likely to "enjoy" the SS money? Take it at 62, more likely to be traveling, doing things, etc., etc., etc. while wait till 70 you might be splurging on an upgraded pill box and life alert bracelet.

JLC
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No. of Recommendations: 5
**every person** has different circumstances.

Also, when will a person be most likely to "enjoy" the SS money? Take it at 62, more likely to be traveling, doing things, etc., etc., etc. while wait till 70 you might be splurging on an upgraded pill box and life alert bracelet.

JLC


Hopefully everyone on this board has done their best to build a large enough asset base in their retirement plans and taxable accounts to provide more than enough bridge money to do plenty of traveling, and doing all those fun things you mention in the early Go-Go years of the spending smile so that delaying to take SS at 70 is fine and dandy.

BB
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No. of Recommendations: 4
"Hopefully everyone on this board has done their best to build a large enough asset base in their retirement plans and taxable accounts to provide more than enough bridge money to do plenty of traveling, and doing all those fun things you mention in the early Go-Go years of the spending smile so that delaying to take SS at 70 is fine and dandy.

BB "

****************************************************************************

The world is made up of quite a large variety of people who save and spend and view
saving and spending and investing quite differently from one another.
Personally, I would be shocked if everyone on any board had done anything the same or
even "done their best" - or considered such issues as critical.
Good for you that you have a plan - or implemented a plan - to take your Social Security at
age 70. But people can and will have a successful retirement and a happy life taking
their Social Security at any point they wish.

Howie52
Also, consider that some folks may take their Social Security at 62 and invest the funds
to get a better return than the government provides under current guidelines for waiting
until age 70. These folks might get more enjoyment from the process of investing than they
might by waiting for government's Godot.
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"Hopefully everyone on this board has done their best to build a large enough asset base in their retirement plans and taxable accounts to provide more than enough bridge money to do plenty of traveling, and doing all those fun things you mention in the early Go-Go years of the spending smile so that delaying to take SS at 70 is fine and dandy.

BB "

********************************************************************

Thought you might like to see some data on the net worth of retired folks:

https://dqydj.com/retiree-net-worth-retiree-wealth-america/

The second table shows the net worth for different age groups and includes the
65-69 age. Course, cash flow from investments/net worth is not a fixed thing - but
the data is interesting.

Howie52
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No. of Recommendations: 12
Also, when will a person be most likely to "enjoy" the SS money? Take it at 62, more likely to be traveling, doing things, etc., etc., etc. while wait till 70 you might be splurging on an upgraded pill box and life alert bracelet.


While I wouldn't tell anyone when they should take SS, I do think you make a good point. Over the past 18 months I have come to realize -unfortunately- that "average life expectancy" is an average. A large number of people never reach that average number, pretty much by definition of "average". There are no guarantees. Eighteen months ago I thought I had a glioma (which is usually a death sentence). Then 1poorlady was diagnosed with cancer (still recovering from surgery and chemo). And neither of us is age 60 yet.

I plan to take SS at FRA. I'm not going to wait. I've run the numbers and if SS disappeared tomorrow, we could still retire. The point for me is not maximizing the benefit assuming I'll live to be 100. I'm happy that we'll likely to make it to FRA (both our prognoses are good). Be grateful for the money we receive and not sweat over it. When COVID is "lifted" and we can travel again, there is so much of the world I want to experience. Things I want to see. While I still can before I'm relegated to an assisted living home. Worrying about "break even" for SS at an given retirement age just isn't even on my radar. I don't care.

Just my perspective. I won't say everyone should do that, I won't tell what age they should take SS. Just some input that isn't all about the money. FWIW.

1poorguy
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JLC analyzes,

Also, when will a person be most likely to "enjoy" the SS money? Take it at 62, more likely to be traveling, doing things, etc., etc., etc. while wait till 70 you might be splurging on an upgraded pill box and life alert bracelet.

</snip>


That's where the understanding of mortality tables and actuarial science comes in. Making the "correct" choice adds $200,000 to $300,000 to the amount of money you can enjoy over the course of your retirement. You can spend more at age 62 if you know you'll be getting a much bigger SS check at age 70 and will need to withdraw less at that age from your retirement savings. That's the power of being able to "buy" an inflation-adjusted life annuity from the US Gov't for half the cost of what a private insurer would charge for the same benefit.

It's no different from understanding compound interest and the fact that if you're losing 2% per year to a financial advisor and excessive fees, you have to save about twice as much money for retirement. It's just arithmetic.

intercst
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BruceBrown writes,

Hopefully everyone on this board has done their best to build a large enough asset base in their retirement plans and taxable accounts to provide more than enough bridge money to do plenty of traveling, and doing all those fun things you mention in the early Go-Go years of the spending smile so that delaying to take SS at 70 is fine and dandy.

</snip>


If you're relatively wealthy it doesn't make much difference whether you take SS early, late, or not at all. It's not going to make much difference in your spending or lifestyle since it's a small part of your annual cash flow.

The big benefit is for middle-income retirees with modest savings where SS is a much larger part of their wealth. For these people, spending up to 40% of their nest egg to delay taking SS increases the amount they can spend overall. Even if they don't have enough savings to delay to age 70. If they can delay to 67 or 68, it still adds to what they can spend over the course of their retirement.

intercst
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Howie52 analyzes,

Also, consider that some folks may take their Social Security at 62 and invest the funds
to get a better return than the government provides under current guidelines for waiting
until age 70. These folks might get more enjoyment from the process of investing than they
might by waiting for government's Godot.


</snip>


That would be a very interesting study. "What percentage of people who "enjoy investing" and take their SS benefit early to pursue that passion actually become wealthier as a result?

https://assetbuilder.com/knowledge-center/articles/are-inves...

Each year, Dalbar publishes its Quantitative Analysis of Investor Behavior. The study shows how the stock market performed over a period of time, compared to how investors performed in stock market funds. For example, the S&P 500 dropped 4.38 percent in 2018. But according to Dalbar’s research, the average investor in U.S. stock market funds lost 9.42 percent.

Here’s how this can happen. When markets rise, investors are often confident. They might increase the amount they’re investing every month. But when markets drop, many people get the jitters. They often sell when they shouldn’t, instead of riding out the storm. As a result, many investors buy high and sell low.

</snip>


intercst
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ipoorguy writes,

A large number of people never reach that average number, pretty much by definition of "average". There are no guarantees. Eighteen months ago I thought I had a glioma (which is usually a death sentence). Then 1poorlady was diagnosed with cancer (still recovering from surgery and chemo). And neither of us is age 60 yet.

</snip>


Absolutely! If I got a medical diagnoses today that significantly shortened my expected lifespan, I wouldn't wait until FRA (i.e., Full Retirement Age.) I'd immediately claim my SS benefit with a start date 6 months prior. (You're allowed to get the previous 6 months of benefits in a lump sum if you like. Of course, that reduces your monthly benefit going forward.)

But most people don't have any additional information on their longevity beyond what the mortality tables say, so it's best to play the game with those odds. And we know that Americans in the top 20% of wealth and income pyramid live a lot longer than the "average" SS beneficiary.

The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age
https://fas.org/sgp/crs/misc/R44846.pdf

</snip>


intercst
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...Things I want to see. While I still can ...

DH: "If we take SS now, we'll be able to do more now while we're young enough to afford it."
me: "We're already doing whatever we want (pre- and post-pandemic of course)." (A very lucky position to be in, I realize.)
DH: "OK, but if we die before our break-even ages, we'll leave money on the table."
me: "Then we'll be dead, and won't care."

...before I'm relegated to an assisted living home...

If I ever have to go to an AL place, I want the best possible, and that'll be expensive. So I'm in favor of maximizing income later, when I'll need it for that.

So, DH & I have decided to wait until 70, but the discussion comes up sometimes anyway.
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* young enough to enjoy it *
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But in the case of a married couple the odds favor the spouse with the lower SS entitlement taking as early as possible and the one with the higher entitlement taking as late as possible:

https://www.kitces.com/blog/why-it-rarely-pays-for-both-spou...
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iampops5 writes,

But in the case of a married couple the odds favor the spouse with the lower SS entitlement taking as early as possible and the one with the higher entitlement taking as late as possible:

</snip>


Sure. That's because the lower earning spouse can switch over to claiming the 50% spousal benefit from the higher earning spouse at age 70. You can have your cake and eat it, too.

Social Security has all kinds of hidden loopholes available to those with reading and arithmetic skills.

intercst
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Few retirees understand enough actuarial science to do the arithmetic and as a result leave a lot of money on the table.

Define “a lot.”

If I take it at 62, I’m collecting for 8 full years before someone who waits until they are 70. When they are 71 they’re getting more than me each month, but I am tens of thousands of dollars ahead of them overall. When they are 72? 75?

As it turns out, the crossover point is around 78 years, plus a few months. And actuarial if you are alive at 62 you will live until you are 83. So there will be roughly 5 years of getting less, but you will still be getting something, it’s not as though the late taker gets a lot and you get nothing.

So the decision is whether the 8 years of early benefits has time value to you, or whether you want to die with more money in your bank account. For me taking it early was indeed a good idea, even though I didn’t really need it. My physical health started going to crap at about 65, I’m unlikely to travel as I once did, I can’t walk far enough to hike, I don’t have the strength to drive our 27,000 pound RV anymore. More money means almost nothing to me now, unless it is a lottery windfall allowing me to set up a charitable or political foundation.

“More” isn’t always better. “Better” is better.
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Goofy writes,

My physical health started going to crap at about 65.

Exactly!

The Social Security option to take it at age 62 or 70 allows you to game the "Adverse Selection" contingency that a for-profit insurer has to add to the premium. Since Social Security doesn't do adverse selection and gives everyone the "average" rate, you can "buy" a life annuity for about half what an insurer would change for the same monthly benefit. If you know your health is crap, you take it early.

Most retirees with a nest egg of sufficient size to wait until age 70 are also in the Top 20% of the wealth and income pyramid where the life expectancy is well above average. Absent a medical diagnosis that reduces your lifespan, the odds favor waiting until age 70. I know you don't like it, but it's just arithmetic.

intercst
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Define “a lot.”

Roughly between 100k and 200k for a married couple over the rest of their life expectancy - assuming top quartile of income/wealth.
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Hopefully everyone on this board has done their best to build a large enough asset base in their retirement plans and taxable accounts to provide more than enough bridge money to do plenty of traveling, and doing all those fun things you mention in the early Go-Go years of the spending smile...

Everyone? Is this board is limited to people who have already achieved their financial goals? Are we just swapping success stories rather than helping the rest with what we have learned?

(Sorry, I guess that pushed one of my buttons. Of course that isn't where the board, or members, are at. A great place to learn regardless of background.)
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Also, consider that some folks may take their Social Security at 62 and invest the funds
to get a better return than the government provides under current guidelines for waiting
until age 70.


This.
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Just as the vast majority of people have insignificant savings for retirement, very few who take SS early are investing it. They are spending it, just as they spent whatever they had all along. And as usual, the few who invest it do better, just as they probably had been doing all along.
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My physical health started going to crap at about 65.

Exactly!

The Social Security option to take it at age 62 or 70 allows you to game the "Adverse Selection" contingency that a for-profit insurer has to add to the premium. Since Social Security doesn't do adverse selection and gives everyone the "average" rate, you can "buy" a life annuity for about half what an insurer would change for the same monthly benefit. If you know your health is crap, you take it early.


My health was excellent, right up until it wasn’t. The diagnosis was spinal spondylosis, a tightening of the spine around the nerve bundle that runs to the brain. The impulses telling the arms and legs to move get cut off, and it happened so slowly as to not be noticeable - until suddenly it was. The whole thing happened in 3 months, as spinal flexing abrades the nerve bundle, preventing transmission of instructions to the muscles. (Surgery has locked several spinal joints with titanium plates, arresting further degradation.)

Now. My father died at 94. My mother at 93. My grandmother at 96. My grandfather, don’t know, he was an alcoholic that nobody ever heard from again. My family history was excellent, my health was excellent, and suddenly it wasn’t. Having an extra $8,000 a year when I am 79 (assuming I make it there) will be meaningless. I will have food, I will have Medicare, my home is paid for. Counseling that the everyones who don’t wait to get the maximum payout is just blind. Everyone’s circumstances are different, everyone’s risk profiles are different, everyone has different goals.

Point out that you can get a bigger paycheck when you’re 83, fine. Calling them numerically ignorant is uncalled for, rude, and unnecessary.

Define “a lot.”

Roughly between 100k and 200k for a married couple over the rest of their life expectancy - assuming top quartile of income/wealth.


It’s actuarially closer to zero than it is to $200,000, but I acknowledge that *could* happen. It’s just less likely than likely.
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Goofy,

Now. My father died at 94. My mother at 93. My grandmother at 96.

Actually, parents transfer very little of their longevity to their offspring. Your current health and lifestyle (e.g., smoking, diet, dangerous hobbies, etc.) is much more predictive.

Again, I know you don't like it. But that's what the data shows.

intercst
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It’s actuarially closer to zero than it is to $200,000, but I acknowledge that *could* happen. It’s just less likely than likely.

False. Income and wealth have been proven to correlate highly with longer life expectancy. This is not a case of 'could' (as even the poorest person could live to 100+). We are talking about probability. If you have more wealth, then it is probable that you will live longer than the average.


https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/#:~:tex....
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A lot of people I respect are talking past each other but I haven't seen anyone present the math. Waiting to take SS does not mean having to spend less during the time from age 62-70. Rather, one can wait and take SS at 70 and have constant spending by spending more from their portfolio from age 62-70 and less from the portfolio after age 70. Here is the calculation I did that led me to decide to wait. It involves high school algebra and since high school was long time ago I will be happy if anyone finds a mistake. Since safe withdrawal rates and social security are both inflation adjusted, I think I am safe ignoring inflation but if that is wrong I'm sure someone will let me know.

I compare two scenarios.

--------
Scenario 1, take SS at age 62: I have a portfolio with a value of P. My annual social security at age 62 is S62. I follow the SWR and take 4% of my portfolio as income. So my total income is

I62 = 0.04 P + S62

--------
Scenario 2, take SS at age 70: I take a chunk of money out of my portfolio and put it in TIPS so it keeps pace with inflation. I use algebra to decide how much money to put in TIPS. Call it T. I have a new reduced portfolio value P - T. For the rest of my life I withdraw 4% of the reduced portfolio.

During the 8 years from age 62 through 69 I also spend 1/8 of the money in TIPS. Call the total income I70a

I70a = 0.04(P - T) + T/8

After age 70, the TIPS are gone but I get social security that is 77% more than I would have gotten at age 62: S70 = 1.77 S62 (https://www.ssa.gov/oact/ProgData/ar_drc.html). My income for the rest of my life is then

I70b = 0.04(P - T) + 1.77 S62

I find T by imposing the goal that I have same income over my entire life, I70a = I70b. This works if I choose T so that T/8 = 1.77 S62 giving

T = 14.17 S62

My income in scenario 2 is then I70 = I70a = I70b

I70 = 0.04(P - 14.17 S62) + 1.77 S62
= 0.04 P + 1.20 S62


--------

Now I can compare incomes in the scenarios and see that

I70 = I62 + 0.2 S62.

In other words, by spending from my portfolio and waiting to claim social security, I can spend an extra 20% of my age 62 social security, inflation adjusted, each and every year of my life.

This also shows how much savings you need to pull this off. You need a portfolio that is 14.17 times bigger than your annual age 62 social security. If you don't have that much, P-T < 0 and the calculation fails. In this case, you can redo the calculation assuming you only wait until age 69 and see if now P > T. If not, rinse and repeat. My guess is that every bit of waiting gives an advantage, even if you spend down your entire portfolio waiting.

One major downside of this calculation is that by spending at the 4% SWR you are extremely likely to have an enormous portfolio and can then increase spending, probably far beyond the extra you get from waiting to take social security. But there is no guarantee and that strategy is more risky.

One also sees that, as many have said, this is not a lot of money for those who are well off. Google tells me the maximum SS at age 62 is $2324 per month, so the maximum benefit for waiting is $5577 per year. Someone pulling the maximum SS has had a nice lifetime income and hopefully significant savings, and so an extra $5577 is a small percentage, but it still pays for a nice toy or two.

This strategy benefits people with small retirement savings more than the rich. Consider someone getting the average SS at age 62, $13,562 per year. Assume they have exactly 14.17 times this in savings, or $192,172. This is a bit less than the average retirement savings of $221K for people age 60-64. If they take SS at 62, then SS plus the 4% SWR gives an income of $21,249. If they wait and put their entire portfolio into TIPs and spend it to zero while waiting to claim SS, they get an income that is 12.8% higher at $23,961. At that level of spending, the extra $2712 in income probably makes a big difference. However, they then have no savings and no flexibility in the case of a large expense.
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As interest stated, longevity has very little to do with family history. Most things I've read (BBC had some good articles a while ago) indicate maybe 15% is do to family history/genetics.

Goofy and others have mentioned aging isn't a linear progression but usually something you mostly have until it goes downhill.

Both my father and uncle are 80s and they both tell me enjoy things now while you can because injuries and medical things either don't heal or gang up on you quickly. Fortunately both are still doing well mentally and can live on their own but with increasing medical issues.

While I've had my medical issues only a few years ago I did something to my back doing leg presses. For a number of months it was like a raw nerve pain and standing or sitting was quite painful. Even now, 2 yrs later, it still can be painful and I have to be careful what I do. In the scheme of life, fairly minor but something that probably would have gone away if I was younger.

And the whole bridging/when to collect social security is something you won't know until you are dead. You can collect it earlier to avoid spending as much of your savings and that would benefit heirs and the spouse, especially if you die early. You can spend more of your savings while waiting for the social security payments to increase.

Of course right now, most of us aren't spending a lot due to the current virus situation. Whether that gets resolved this year or never gets resolved will factor on a lot of budgets.

I'm still in my 50s but I ponder retirement on a near daily basis. Not because I can't do my work or don't like thinking/solving problems or have ever gotten a bad performance review but right now I have no real interest in what I'm doing and especially don't care for the extra risk of going into the office.

I'm trying to either find a new job, or tough it out until June where I'm within 18 months of my pension/health insurance.

There really isn't a right answer for this question. If you have too much money it doesn't matter and if you have too little you have no real choice.
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Just my perspective. I won't say everyone should do that, I won't tell what age they should take SS. Just some input that isn't all about the money.

My Dad retired and wanted my Mom to also retire so they could travel the US as they always wanted. But she decided to keep working another 4 years to maximize her pension. They could have easily retired on his pension and her reduced pension, and had plenty enough to do the traveling.

Forward 4 years, she retired at full pension. But Dad had gotten ill and could not travel.

I got a good example of what "ashes in your mouth" means. She spent the next 15 years regretting working those 4 extra years.
The goal is not to have the most income. The goal is what you can _do_ with the income you have. After Dad died, she had lots of income....and nothing she wanted to spend it on.
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The big benefit is for middle-income retirees with modest savings where SS is a much larger part of their wealth. For these people, spending up to 40% of their nest egg to delay taking SS increases the amount they can spend overall.

"...with modest savings..."

And as they have Ramen noodles and Spam for dinner every night, they can just think about all the steaks they will be able to have in a few years.

They have modest savings, so they will not mind at all seeing their already-small nest egg dwindle away.

Right.
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“More” isn’t always better. “Better” is better.

That's something that he can't get his head around. He focuses entirely on the amount of the money and ignores that what really matters is the utility of what money buys and _when_ it buys it.

Extra money at 87 doesn't get you an excursion to Machu Pichu at 65.
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There really isn't a right answer for this question. If you have too much money it doesn't matter and if you have too little you have no real choice.


That actually seems to be it in a nutshell
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This strategy benefits people with small retirement savings more than the rich. Consider someone getting the average SS at age 62, $13,562 per year. Assume they have exactly 14.17 times this in savings, or $192,172. This is a bit less than the average retirement savings of $221K for people age 60-64. If they take SS at 62, then SS plus the 4% SWR gives an income of $21,249. If they wait and put their entire portfolio into TIPs and spend it to zero while waiting to claim SS, they get an income that is 12.8% higher at $23,961. At that level of spending, the extra $2712 in income probably makes a big difference. However, they then have no savings and no flexibility in the case of a large expense. </i<

This is crazy.
Nobody who has only $192K or $221K is going to plan to spend it all down to zero in order to get a higher SS benefit at 70.

Nobody.

Yes, the math may work out, but in the real world nobody is going to have this plan.

"However, they then have no savings and no flexibility in the case of a large expense."


And this is why. Because everybody knows that unexpected sh... uh, "stuff" happens.


******************************
If you want to run another scenario, try this one.

Assume you take SS at 62 and invest it in the S&P 500 which earns below average annual return of 8.5%. FWIW, the average S&P500 total return is 10.5%.
Starting when you turn 70, stop new investments and start spending your SS and withdraw just enough from the investment to total up to the SS benefit you would have gotten if you had deferred.
Assume COLA of 2.5%.

Q: What is the break-even age?

A: 98.

If you manage to earn the S&P500 average return (and remember this is a a 30+ year period, so this is very likely) then there is NEVER a breakeven age.

Math.
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BB wrote:

Hopefully everyone on this board has done their best to build a large enough asset base in their retirement plans and taxable accounts to provide more than enough bridge money to do plenty of traveling, and doing all those fun things you mention in the early Go-Go years of the spending smile...

RHinCT replied:

Everyone? Is this board is limited to people who have already achieved their financial goals? Are we just swapping success stories rather than helping the rest with what we have learned?

(Sorry, I guess that pushed one of my buttons. Of course that isn't where the board, or members, are at. A great place to learn regardless of background.)


I can see how my post provoked some ire, and I apologize as that was not my intent.

I've been a member here at the Fool for 23 years where plenty of education, articles, posts and help has guided households to contribute to their retirement plans along the way, even max out their plans (be they 401k/403b/457b or some form of a tIRA), max out their Roth IRA's, take advantage of their HSA, how to best handle RSU's and ESPP's, invest in a taxable account in the most tax efficient manner, excellent threads and articles on taxes, how to have a proper asset allocation that you can tolerate, invest automatically from the paycheck month in and month out, year in and year out to build up a nest egg for retirement - and on and on.

Granted, not everyone may have been doing that, and I certainly get that. I'm not myopic about it. I was simply pointing out that hopefully those that have taken the past few decades to save and invest for their retirements have taken advantage of all the education that has been available here at TMF (as well as other sites) and been able to put it into practice over their working years to build the retirement nest egg with all of the investment vehicles available to them. Combined with living within their means enough to contribute throughout their working years has been in the past, a recipe for success.

The bridge between when one can take SS at 62 and age 70 is not only filled with a wide range of scenarios regarding a nest egg and household's preparation for it, but also an oft discussed topic of one's working career perhaps not allowing for one to work until age 62 or 65 due to health issues (self or spouse/partner), loss of job for somebody in their 50's, etc... . Again, all things that I have recollections of reading in depth about here at the Fool via articles as well as discussions on various message forums over the past 23 years.

That's where my comment was coming from, that hopefully households have been making plans over their working decades to prepare for the phase in their 60's to have options during the bridge years of 62-70 regarding SS, travel and the Go-Go years when it comes to the spending smile,.

If it pushes a button - or buttons - to even bring it up, my apologies.

BB
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If you want to run another scenario, try this one.

Assume you take SS at 62 and invest it in the S&P 500 which earns below average annual return of 8.5%. FWIW, the average S&P500 total return is 10.5%.


Does that include sequence of return risk or is it a straight 8.5%?

Where are you getting your income from between 62 and 70? Does that also include sequence of return risk?
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Yes, the math may work out, but in the real world nobody is going to have this plan.

The point of doing the math is not that nothing else matters. It is a starting point. There are few things in life that I know for sure but 1+1=2 is one of them. If I can reduce the uncertainty by doing math then I do it. Math lets me dispense with the quantitative issues and focus on the harder, less certain issues. Many have said that the tradeoff is more money now vs. more money later. The math says that is not the tradeoff. Other issues can and should override the strict more $ vs. less $ but, at least for me, I like to start with any certainties I can.

I find taking simple models like the one I used to extremes helps me understand the nonmathematical issues. In this case, considering spending all your money before taking SS highlights that waiting to take SS may give you more money but at the difficult to quantify price of less flexibility. I didn't realize this as clearly when I first considered the more realistic case for me of spending down 10% of my portfolio to delay SS. Considering the extreme case brought into focus the much harder and more personal question of how much less flexibility do I have if I spend down 10% of my portfolio and is the loss of that flexibility worth the gain in annual income.

If you want to run another scenario, try this one.

I think the math for this one is easy :). SS increases by 8% plus inflation. If you can do better than inflation-adjusted 8% you will have more money by investing. If you do worse than inflation-adjusted 8% you will have less money by investing. But the risk profiles of the scenarios are different. Can you do better than 8% with the same risk as SS? Depends on what you think the risk is of SS going broke and the rules changing. Hard to quantify, but again, doing the math lets me focus on the difficult question of relative risk.

The math, IF I did it right, says IF SS rules stay the same and IF you plan a 4% portfolio withdrawal THEN you get more money every year by delaying social security. That's a lot of ifs that need consideration but the math is the math and provides a starting point, not an ending point.
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Where are you getting your income from between 62 and 70?

Either way, you depend on your other resources between 62 and 70.

Either you don't take SS at 62 or you take in but put it all into investments.

Starting at 70, you get the higher income, either your enhanced SS benefit or your reduced SS benefit plus a withdrawal from the investments to total up to the deferred SS benefit.

Sequence of return risk doesn't come into play.
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spinning writes,

A lot of people I respect are talking past each other but I haven't seen anyone present the math. Waiting to take SS does not mean having to spend less during the time from age 62-70. Rather, one can wait and take SS at 70 and have constant spending by spending more from their portfolio from age 62-70 and less from the portfolio after age 70. Here is the calculation I did that led me to decide to wait. It involves high school algebra and since high school was long time ago I will be happy if anyone finds a mistake. Since safe withdrawal rates and social security are both inflation adjusted, I think I am safe ignoring inflation but if that is wrong I'm sure someone will let me know.

</snip>


Like with COVID, you're not going to convince anyone on the workings of Social Security with math. People have their own ideas of arithmetic and data -- largely informed by the old adage "a bird in hand is better than one in the bush". <LOL>

intercst
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Rayvt analyzes,

That's something that he can't get his head around. He focuses entirely on the amount of the money and ignores that what really matters is the utility of what money buys and _when_ it buys it.

Extra money at 87 doesn't get you an excursion to Machu Pichu at 65.

</snip>


Sure it does.

If you understand arithmetic and the time value of rising payments, having an extra $200,000 to spend over you lifetime allows you to spend more on Machu Pichu at age 65 because the portfolio withdrawal at 87 will be less due to the larger Social Security check. That's what is missing in the "bird in the hand" analysis.

intercst
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Rayvt: Either you don't take SS at 62 or you take in but put it all into investments.

Starting at 70, you get the higher income, either your enhanced SS benefit or your reduced SS benefit plus a withdrawal from the investments to total up to the deferred SS benefit.

Thank you for this. I was too lazy to do the numbers.

I started SS at age 68, the Countess at 65. With those plus my retirement annuity from Boeing, we don't need much else. Our savings have more than doubled because we never had to touch them. (Grew at a nice rate.) We have traveled a lot - annual trips to Hawaii, touring the West Coast (Best Coast) and the Southwest extensively.

CNC
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Rayvt analyzes,

Assume you take SS at 62 and invest it in the S&P 500 which earns below average annual return of 8.5%. FWIW, the average S&P500 total return is 10.5%.

</snip>


Why stop at the S&P 500? If I assume I invest my SS benefit in another DELL, the break even age is North of 200. <LOL>

Of course, you're mixing apples and oranges. By waiting, you're "buying" a guaranteed inflation-adjusted life annuity and you're comparing it to the variable, non-inflation adjusted 30-year return on the S&P 500 which is about a 5% return in the worst historical 30-year period.

intercst
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No apology needed BB, nor even appropriate except perhaps from me. My apologies.
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There are few things in life that I know for sure but 1+1=2 is one of them.

Not once taxes are taken out. 8-)

Yes, I am being flippant. My real point, which I think everyone here appreciates, is that useful as numbers are they only apply until countless other real-world factors, death and taxes among them, upset the apple cart.
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having an extra $200,000 to spend over you lifetime allows you to spend more on Machu Pichu at age 65 because the portfolio withdrawal at 87 will be less due to the larger Social Security check.

I give up.

Just who are these people that will spend more money now because they expect to get an income boost 22 years from now.
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There are few things in life that I know for sure but 1+1=2 is one of them.

Not so. Ask an accountant "What is 1 + 1?" and the answer you are likely to receive is, "What do you want it to be?"

Ira
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"Just who are these people that will spend more money now because they expect to get an income boost 22 years from now."

I don't know about 'more money' but we are spending down some of our fixed income now (along with a pension with an inflation adjustment and a 3% withdrawal from one sheltered account combined with Ispouse's SS) while treating my larger SS entitlement as longevity insurance.

This makes sense to me because our fixed income assets, including preferred's are paying nowhere near 8%, and the increased SS would go to either or both of us if we live past the breakeven point. It looks to me like a good deal just like your decision to refi whenever it looks like a good deal to you.

You say, 'Why not refi and get a better deal if you can afford it?'

I say, 'Why not buy longevity insurance at a fair price that protects both spouses in the event they live a long life, if you can afford it?'

Plus, I can always change my mind and take SS between now and 70.5 if I feel like it.
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Just who are these people that will spend more money now because they expect to get an income boost 22 years from now.

I think you are confused. Delaying allows one to spend more NOW with increased confidence that they can maintain that increased spending (with inflation included) throughout the rest of their life.

The higher guaranteed income removes a significant portion risk associated with sequence of returns since a smaller portion of ones income would come from variable sources.

I know you think sequence of return risk is irrelevant, but one can not do a valid analysis without allowing for the possibility that a 100% stock investment performs poorly for a number of years, as well as bad timing of starting such distributions when the market is in a recession.

Hawkwin
Not trying to convince you, just tearing down your strawman.
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our fixed income assets, including preferred's are paying nowhere near 8%,

Yes, but percents are not all the same, just because they have the same symbols. Delaying SS is not an 8% return. Delaying SS gets you a larger payment because it is more money per month spread out over fewer months. That's not a return, it's just a different shape of the income/cash flow.

(Yeah, I just looked and my basket of preferreds is getting only about 6% now. The CEFs are a bit more, about 7%. Except for a few that I bought in the March 2020 firesale. Those were yields at 12% to 23%.)



'Why not buy longevity insurance at a fair price...'

It's not really longevity insurance...although you could arguably think of it somewhat that way. It's kind of like a deferred annuity (at a good price), but with the restriction that you cannot decide on when you would like it to start or the amount you would like to have or the way you would like to pay for it.

The SSA determines the earliest you can start the premiums, the amount of your monthly premium payment, the latest you can start collecting, and the amount of the monthly annuity payout. If all these are acceptable to you, then go for it.

Oh, and they can also change the terms of the deal whenever they want to.
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"Delaying SS gets you a larger payment because it is more money per month spread out over fewer months. That's not a return, it's just a different shape of the income/cash flow.

Sure, but if you are spending money that yields far less than 8% in the meantime, you are maximizing your returns in a safe way, aren't you? Which was my point. Am I talking past you or are you talking past me?


"but with the restriction that you cannot decide on when you would like it to start"

Why do you keep saying that? Don't you have the flexibility to change your mind at any time between your decision to delay and your 70.5th birthday?

"It's kind of like a deferred annuity (at a good price)..."

Exactly. Compared to what I saw when I looked it up, SS sells at a very good price when you consider that the surviving widow gets the benefit of it at no additional cost. Every time I looked it up in the past, the so-called comparable annuities either cost more or did not carry a survivor's benefit.


I recall your purchase of preferreds last March. I commented on it at the time. That was a good call as it turns out. I recall things like that because it was one of the few times somebody made the call in real time as opposed to claiming they made it sometime later.
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Yes, but percents are not all the same, just because they have the same symbols. Delaying SS is not an 8% return. Delaying SS gets you a larger payment because it is more money per month spread out over fewer months. That's not a return, it's just a different shape of the income/cash flow. - Rayvt

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For this to be literally true, wouldn't it require the recipient to die on the exact date of the actuarial break even point?

If you think, for whatever reason you have, that you will outlive the break even date, then you are money ahead* by waiting to age 70 to start.

* assuming your investing prowess is insufficient to take early, invest, and generate performance that will more than bridge the gap.
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Why do you keep saying that? Don't you have the flexibility to change your mind at any time between your decision to delay and your 70.5th birthday? - iampops<.I>

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Under what circumstance would you wait until age 70.5?
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None. I meant 70, if that is the date at which it stops increasing. Brain f#rt.
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She spent the next 15 years regretting working those 4 extra years.

I won't recap the entire story (I've done it several times over the past few years). Suffice to say that she worked into her 70s. Then she retired planning to travel with her BFF, who promptly got sick and died. She never traveled again, and now at 88 she never can. She's in AL with dementia (moderate, but getting worse). I guess one could say "she saved the money for a nice AL facility", though I expect in a few more years she won't know the difference. She already doesn't remember the name of our daughter or my MiL.

A missed opportunity. And there are no do-overs. Maybe if she retired a few years earlier she would have had those years with her BFF.

I'm going to do my best to see that doesn't happen to us. Like Gh said: your health may be great until is suddenly isn't. You can't predict. He who dies with the most cash still dies.

I'm not advocating this position, just relating it. I don't care about maximizing SS. Not even on my radar. If I had to rely on SS for retirement then I probably couldn't retire (which would be a tragedy for me). So SS is just icing on the cake because I've spent the last 25+ years learning about investing, and saving my money so I could retire safely. Some people won't be able to survive without as much as they can get from SS, and I get that. It's not a one-size-fits-all approach. I can wait till FRA, but I don't really see the value waiting much beyond that. So I can have a more expensive funeral? What's the point in that.
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...Accordingly, I persuaded Ispouse to retire and collect early (and she did and is)...

Pops, just curious, does "early" mean before FRA, or just earlier than the 70 year mark that you are shooting for? As I understand the rules (not real sure I do), if ispouse claimed before FRA, she got a certain % of what she would have received at FRA. After you claim yours, ispouse can apply for her spousal benefit, but that percentage that her early claim was reduced by will still apply to her spousal benefit.

Do I have that right?

Jim
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"Pops, just curious, does "early" mean before FRA, or just earlier than the 70 year mark that you are shooting for?"

She collected as soon as she retired at 64 (FRA for her would have been 66 and 2 months) and claimed her own benefit on her own wage record because it was smaller than mine but more than half. I am talking about spousal survivor's benefit.

The arithmetic for married couples favors the person with the lower calculated benefit retiring as early as possible and the higher benefit retiring as late as possible because there is something like a 72% chance that one of the two will outlive the higher earning spouse but the benefit goes to the longest living spouse.
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SIAP, but this calculator is handy for figuring out various scenarios from the SSA.

https://opensocialsecurity.com/

How to maximize your distribution, and also allows you to run different simulations.
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SIAP, but this calculator is handy for figuring out various scenarios from the SSA.

https://opensocialsecurity.com/

How to maximize your distribution, and also allows you to run different simulations along with your spouse. None of these really make sense for me.

For example, I'm 59 and I'd like to maximize my draw. It directs me to have my wife start in 2026 (she's the smaller earner and is a few years younger), while I will start drawing at age 70.
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The arithmetic for married couples favors the person with the lower calculated benefit retiring as early as possible and the higher benefit retiring as late as possible because there is something like a 72% chance that one of the two will outlive the higher earning spouse but the benefit goes to the longest living spouse.

Retirement decisions are not always based on arithmetic.

PSU
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"Retirement decisions are not always based on arithmetic."

Obviously. And I am pretty confident that that point has been made by me, and others here, hundreds of times. But as others also have suggested, it's not a bad starting point.
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PSUEngineer writes,

Retirement decisions are not always based on arithmetic.

</snip>


Of course.

The conventional wisdom is that one should take SS as soon as possible, because SS is going broke and a "bird in the hand is better than a bird in the bush.". It's simple, direct, and doesn't require much in the way of examination or thinking.

If you dig a little deeper, read the relevant research, and learn a little bit about mortality tables and actuarial science, you'll find that by giving you the option to take SS at any age between 62 and 70, the US Gov't is effectively allowing you to buy an inflation-adjusted life annuity for about half the premium that a commercial insurer would change for the same monthly benefit if you wait until age 70. That amounts to about a $200,000 savings for single person getting the maximum Social Security check and $300,000 if you add the 50% spousal benefit for a non-working spouse.

Nobody is more anti-annuity than me, largely because of the high fees, commissions and costs associated with any kind of for-profit insurance product. But if I find someone willing to sell me an annuity for 1/2 price, I'm at least going to put pencil to paper to see if it's a good deal. And if mortality tables and actuarial math are beyond me, this might be one of the few instances where paying a financial advisor to run through the calculation would be worthwhile.

Even for someone like me, $200,000 to $300,000 is a lot of money to leave on the table.

intercst
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Of course.

The conventional wisdom is that one should take SS as soon as possible, because SS is going broke and a "bird in the hand is better than a bird in the bush.". It's simple, direct, and doesn't require much in the way of examination or thinking.

If you dig a little deeper, read the relevant research, and learn a little bit about mortality tables and actuarial science, you'll find that by giving you the option to take SS at any age between 62 and 70, the US Gov't is effectively allowing you to buy an inflation-adjusted life annuity for about half the premium that a commercial insurer would change for the same monthly benefit if you wait until age 70. That amounts to about a $200,000 savings for single person getting the maximum Social Security check and $300,000 if you add the 50% spousal benefit for a non-working spouse.


You missed my point but then you are single. The post I responded to was saying the lower earning person in a married couple retire early and the higher earning person retire later. That arithmetic did take into account age of each person in the couple and any job satisfaction or dissatisfaction by one of them. Cold arithmetic doesn't take into account couple dynamics.

PSU
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...while treating my larger SS entitlement as longevity insurance.

One lesson I've learned from watching Dad as he aged was the need to protect ourselves from ourselves as we get older. As he descended into what we believe was Alzheimer's, he became his own worst enemy. He lost hundreds of thousands of dollars that we could not rescue him from, though Sis and I were able to get him out of many of his other ventures when he would come to us for rescue after descending into a depressed cycle following the manic. Yes, probably on the bipolar spectrum as well, particularly after a 10 hour operation around 80 where being under anesthesia so long sent him into a 6 month manic phase. Putting off taking SS until DH is 70 and I reach FRA is one tool towards that. Even though we retired in our 50's, we can afford to spend what we want from our taxable accounts, (in part because we are easily content and not big spenders, with the exception perhaps of real estate,) as well as prepay taxes via Roth Conversions while it makes sense. Putting off taking SS til then will max out our fixed income at that age, something that may be needed if I go off the rails mentally.

Having run the numbers we believe waiting to take SS makes dollar sense for us, but it also offers us peace of mind. I will continue to look at it every year, but unless something changes, that is when we are likely to take it, for insurance purposes.

IP
very late to this thread
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