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Old 05-17-2013, 06:35 PM   #21
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I think the breakeven analysis is very limited at best if it only includes SS payouts because it ignores the return on the investments that were not withdrawn by those early retirees that do not have a pension or other sources of income to cover the age 62-70 gap. The simple attached spreadsheet shows that there is effectively no break-even point with returns in the 5-7% range. (it ignores effects of taxes)
This is what I came up with when I did a less exhaustive look at SS payouts. Because of this, I am most likely to take SS at 62.

This spreadsheet will be useful in discussing this with my wife. Thanks.
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Old 05-17-2013, 07:14 PM   #22
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Since I don't know how those tables were constructed I hope HIS spreadsheet didn't have a major bomb embedded somewhere... I didn't see a comparison of 62 vs 70 in the original article - too bad since I would guess that is what most people contemplating the problem would want to see. Apologies with the hijack. I be done.
OTOH, it's not as simple as your spreadsheet that ignores taxes either. Here's another current source/author who shows results that seem to match the fpanet article I linked to. I plan to hold off until age 70 based on my 91 yo still living independent, drivers license holding Mom & Dad, YMMV.

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Besides future rates of inflation and investment returns, Lemons also looks at claimants' federal income-tax brackets and at the percentage of their Social Security benefits that are subject to federal income taxes. This varies from zero for people in the lowest 10 percent federal tax bracket, to 50 percent for those in the 15 percent bracket, to 85 percent for people in all higher tax brackets. No more than 85 percent of Social Security benefits are taxable, regardless of income levels.

Lemons then compares two sets of claiming ages—62 versus 66, and 66 versus 70. As he stresses, making any comparisons here is very complicated. First, the calculations depend on many unknowns, beginning with future rates of inflation and investment returns. Vary either of these projections by even a little, and the calculations can change a lot.

When the dust has cleared from Lemons's calculations, a person claiming early benefits in March 2011 and one not claiming until age 66 in March 2015 would have the same amounts of money 16 years and eight months after the 66-year-old's benefits began. That amounts to age 82 and eight months for both claimants; before this age, the 62-year-old claimant comes out "ahead" by filing early. At older ages, the person who waits until full retirement age to claim would come out ahead.

This is an average. Depending on taxes, inflation, and investment returns, the range of break-even ages goes from 81 to 86 1/2. There is a similar range of break-even ages in the comparison of benefits begun at age 66 to age 70—from the age of 84 to nearly 87.
What's Your Social Security Break-Even Age? - The Best Life (usnews.com)
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Old 05-17-2013, 07:21 PM   #23
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This thread got highjacked in record time, but of course there's no universal answer...

When to Start Collecting Social Security Benefits: A Break-Even Analysis
That is interesting. I read the article and was glad to see that it considered the scenario that my DH faced which is fairly unusual and supported his decision to take SS when he retired at about 62 1/2.

That is, we had 2 children under the age of 18 at the time so if it took SS they would receive considerable benefits until the age of 18. In the scenario in the article (which I think was one 14 year old child) delaying SS would have a break even point of 89. In our case we had a 13 year old and a 16 year old so his break even point would have been considerably later than that. So he took SS at that time. In my case (I'm 59 now) I haven't decided and will look at it again when I'm 62.
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Old 05-17-2013, 07:35 PM   #24
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OTOH, it's not as simple as your spreadsheet that ignores taxes either. Here's another current source/author who shows results that seem to match the fpanet article I linked to. I plan to hold off until age 70 based on my 91 yo still living independent, drivers license holding Mom & Dad, YMMV.


What's Your Social Security Break-Even Age? - The Best Life (usnews.com)
I agree that taxes is a biggie. Now what bothers me about the SS projections that include taxes is this: Who the he** knows what taxes are going to be 20 -30 years from now? For all I know we'll have a VAT tax and no income taxes. I thought about complicating the hell out of my little simple spreadsheet by including some sort of tax estimation and promptly realized I'm not smart enough to do it.

I apologize again. I'm really done with the hijack now.
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Old 05-17-2013, 08:18 PM   #25
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I used Firecalc to evaluate the effect of starting social security at 62, 66 and 70 with various portfolio allocations to see which combination resulted in the highest safe withdrawal rate. I was a little surprised that for my situation starting social security payments at age 66 would allow for a slightly higher safe withdrawal rate than starting it at age 62 or 70. As I get closer to age 62 I'll take a more detailed look at things. It's likely that the best result occurs for an age other than 62, 66 or 70. Maybe begin by looking at it in one year increments and then home in on which starting month is best.
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Old 05-18-2013, 09:06 AM   #26
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Originally Posted by ejman View Post
I think the breakeven analysis is very limited at best if it only includes SS payouts because it ignores the return on the investments that were not withdrawn by those early retirees that do not have a pension or other sources of income to cover the age 62-70 gap. The simple attached spreadsheet shows that there is effectively no break-even point with returns in the 5-7% range. (it ignores effects of taxes)
I agree that you should include investment returns.

I downloaded your spreadsheet and noticed all the red in column K, even for very modest investment returns.

I did a little experimenting. When I set the investment return (H3) to zero, I expected column M to go to zero. It didn't.

Then I tried setting both B3 and H3 to zero. In this case, at age 70 (row 14), it appears that waiting is $285,320 worse than starting at 62. But, only $143,948 of SS benefits have been paid. I think you're double counting the first 8 years of SS benefits.
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Old 05-18-2013, 09:13 AM   #27
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Back to the OP

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Something like this must have been posted before, but I don't remember seeing it (so maybe it's been a while). Another thread on average retirement age made me look into it, and this ties in with that thread.

The 'peaks' at 62 and 66 (FRA for many) don't surprise me. Though I did expect the % of first claims at age 70 to be less than age 62 or FRA, I never would have guessed so few wait until age 70! With so many here planning to wait until age 70 this chart surprises me - yes, we all realize ER.org members are a small and unrepresentative minority, and plan may differ from actual. I guess the chart may be more evidence of how unusual the ER.org members are.
That surprised me, too. I would have thought that a few more people have the assets to spend, and the long term focus, to make deferring more likely. I guess we really are odd.
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Old 05-18-2013, 09:25 AM   #28
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I used Firecalc to evaluate the effect of starting social security at 62, 66 and 70 with various portfolio allocations to see which combination resulted in the highest safe withdrawal rate. I was a little surprised that for my situation starting social security payments at age 66 would allow for a slightly higher safe withdrawal rate than starting it at age 62 or 70. As I get closer to age 62 I'll take a more detailed look at things. It's likely that the best result occurs for an age other than 62, 66 or 70. Maybe begin by looking at it in one year increments and then home in on which starting month is best.
That is maybe not so surprising. When you delay SS, you are buying 'longevity insurance'. It may not be the optimal for a 30 year portfolio, but if you live beyond that, you've got a larger floor income, and more relative comfort in your old age.

It's like any other kind of insurance. You should not expect it to have a positive financial outcome (the seller has to make a profit), you should buy it because you want to protect something that you can't easily self-insure.

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Old 05-18-2013, 11:15 AM   #29
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I'm not going to concern myself with such trivia since I bought the winning $600 million Powerball ticket this morning.

However, just in case that doesn't work out I'll wait until either 65 or 66. My pension drops 30% if DW survives me and waiting on SS means she'd take less of a hit to net income. No children so leaving an inheritance is not a concern for either of us.
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Old 05-18-2013, 12:02 PM   #30
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Nice analysis Ejman: I took it at 62,monthly cash flow with, SS, wifes SS and my pension,enables me to not withdraw from IRA. Also figured would not make it to 78 or so,get it back now,especially what I put in since 1966 or so.
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+1

I just want to add that the tax consequences of the decision could be significant, depending upon your individual situation. Upper tax brackets will probably be all the same but for lower brackets, it could be tax free or 85% taxable. In theory, one could find it advantageous to delay SS and contribute to Roth or withdrawal from IRA.
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Old 05-18-2013, 04:44 PM   #31
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I agree that you should include investment returns.

I downloaded your spreadsheet and noticed all the red in column K, even for very modest investment returns.

I did a little experimenting. When I set the investment return (H3) to zero, I expected column M to go to zero. It didn't.

Then I tried setting both B3 and H3 to zero. In this case, at age 70 (row 14), it appears that waiting is $285,320 worse than starting at 62. But, only $143,948 of SS benefits have been paid. I think you're double counting the first 8 years of SS benefits.
Why would column M go to zero when investment return is zero? I'm still not spending my money; I'm spending the money I got from SS from age 62-70 I'm just not earning any investment returns on my money. If you set both CPI and Investment returns to zero it shows SS paid out to age 70 as $146,350 and over on column M it shows the same $146,350 as money I didn't spend from my resources. That is really the whole point of the way the spreadsheet is constructed - when I get money from SS I'm not spending my own money, hence my own money is "invested"

As to the row 14 question (age 70) I don't see the double counting. It simply shows that SS paid out $146,350 for the period from age 62 to age 70 and I didn't spend from my own resources the same amount so In reality I have a total of $292,700 minus the amount I would have collected at age 70 $2,576 since I would collect one month of SS in my first year of collection (Born in October).
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Old 05-18-2013, 04:46 PM   #32
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Originally Posted by john85259 View Post
I used Firecalc to evaluate the effect of starting social security at 62, 66 and 70 with various portfolio allocations to see which combination resulted in the highest safe withdrawal rate. I was a little surprised that for my situation starting social security payments at age 66 would allow for a slightly higher safe withdrawal rate than starting it at age 62 or 70. As I get closer to age 62 I'll take a more detailed look at things. It's likely that the best result occurs for an age other than 62, 66 or 70. Maybe begin by looking at it in one year increments and then home in on which starting month is best.
Unfortunately FIRECALC also ignores taxes. Though complicated if not impossible to include, they are a factor that can't be excluded. If anyone goes to the trouble of attempting to factor in returns and inflation, I'd think they'd also attempt to factor in a probably range of tax assumptions (several income levels and several bracket rates).
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Old 05-18-2013, 05:35 PM   #33
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Why would column M go to zero when investment return is zero? I'm still not spending my money; I'm spending the money I got from SS from age 62-70 I'm just not earning any investment returns on my money. If you set both CPI and Investment returns to zero it shows SS paid out to age 70 as $146,350 and over on column M it shows the same $146,350 as money I didn't spend from my resources. That is really the whole point of the way the spreadsheet is constructed - when I get money from SS I'm not spending my own money, hence my own money is "invested"

As to the row 14 question (age 70) I don't see the double counting. It simply shows that SS paid out $146,350 for the period from age 62 to age 70 and I didn't spend from my own resources the same amount so In reality I have a total of $292,700 minus the amount I would have collected at age 70 $2,576 since I would collect one month of SS in my first year of collection (Born in October).
I'm not sure how to express this. I'll try,

A. Suppose you start SS at 62 and put all of your SS checks in a special account earning 0%. Your living expenses from 62 to 70 are entirely covered by savings, pension, etc. At age 70, that account will have $143,948.

B. Suppose you start SS at 70, and put all of your SS in a special account earning 0%. Your living expenses from 62 to 70 are entirely covered by savings, pension, etc. At age 70, that account will have $2,576.

Your other assets will be the same in A and B. In both cases, you used non-SS income/assets to cover your living expense. The living expenses were the same. The only difference between A and B is the balance in your special SS account.

If you die at that point, your heirs will be $141,372 better off if you start at 62 than they would be if you start at 70.
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Old 05-18-2013, 06:03 PM   #34
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My parents died at 61 and 63 yrs old. DH's parents died in their 70s. GPO (government pension offset) applies to any survivor's benefits that I could receive off of my DH's record, so I would not receive any of his social security. If I finish getting my social security quarters, then WEP (windfall elimination provision) applies to my own social security and DH would not receive off of mine, since he receive far greater on his own. No need for us to wait until 66 or 70. Now if we had had parents that lived to their 90s and GPO and WEP did not apply, I would think strongly about waiting until age 70.
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Old 05-18-2013, 06:22 PM   #35
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I'm not sure how to express this. I'll try,

A. Suppose you start SS at 62 and put all of your SS checks in a special account earning 0%. Your living expenses from 62 to 70 are entirely covered by savings, pension, etc. At age 70, that account will have $143,948.

B. Suppose you start SS at 70, and put all of your SS in a special account earning 0%. Your living expenses from 62 to 70 are entirely covered by savings, pension, etc. At age 70, that account will have $2,576.

Your other assets will be the same in A and B. In both cases, you used non-SS income/assets to cover your living expense. The living expenses were the same. The only difference between A and B is the balance in your special SS account.

If you die at that point, your heirs will be $141,372 better off if you start at 62 than they would be if you start at 70.
All I'm saying is that if collect $143,948 from SS and have not spent $143,948 from my own resources, my total collected + potential spendable cash at age 70 is $287,896 (Ignoring the small amount I would collect at age 70). You are saying my additional cash flow is $143,948 and that is so and it seems to me is equivalent to what I said.
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Old 05-18-2013, 06:36 PM   #36
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Only surprise to me is that so many wait until FRA.... For me it's not going to change my lifestyle plans no matter when I take it.
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Old 05-18-2013, 06:50 PM   #37
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Only surprise to me is that so many wait until FRA.... For me it's not going to change my lifestyle plans no matter when I take it.
The little item that caught my eye from the chart is that .18% wait to age 75+ to collect SS. Why in the world would that be?
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Old 05-18-2013, 06:53 PM   #38
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I have decided to delay my SS until age 70.

Reasons: (1) We do not need the income stream from MY SS in order to live well. (2) DW is exactly 4 years younger than I am. She began her SS at age 62 under her own SS #. (3) When DW began her SS I glammed onto her SS as her spouse and my M/C payments are coming out of my spousal income stream. (4) My SS Deferred Credits will accumulate at 8% until I am age 70. (5) When I hit 70, I will begin MY SS withdrawal and end my SS spousal situation and DW will no longer receive SS under her SS# and begin receiving SS spousal benefits under my SS# at double the income that she received under her own #.(6) My SS income at age 70 will be about 8X what it was as a spouse. (7) If I die before this all plays out, I lose.
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Old 05-20-2013, 08:50 AM   #39
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All I'm saying is that if collect $143,948 from SS and have not spent $143,948 from my own resources, my total collected + potential spendable cash at age 70 is $287,896 (Ignoring the small amount I would collect at age 70). You are saying my additional cash flow is $143,948 and that is so and it seems to me is equivalent to what I said.
I think there's a definitional issue here. I noticed your first post "The simple attached spreadsheet shows that there is effectively no break-even point with returns in the 5-7% range." In a later post you speculated there was a "major bomb" in the results Midpack posted. That's why I opened your spreadsheet.

I assumed you were accumulating two streams of SS payments with interest. One started at 62, the other at 70. The one that started at 62 is, of course, higher at first. Eventually, the one that starts at 70 may overtake it. Some people refer to that crossover point as the "break-even" age.

In your spreadsheet, column J shows that calculation for 0% interest. The red turns black at ages 78-79. If your "cumulative" columns C and I were set up to accumulate at interest, than you would find that an interest rate of 1% produces the color change at 81-82, 2% gives 83-84, 3% gives 85-86, etc.

(Note that CPI=3% and Investment Return = 5% also gives 83-84 because the driver is real interest.)

I'm pretty sure that's the approach in Midpack's link. You're using a different definition of "break-even", so I can see why you'd get different numbers.
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Old 05-20-2013, 08:58 AM   #40
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For many people, of course, the choice between 62 and 70 (or their FRA or anything else in that range) is purely academic. For folks in their 50s and early 60s who can't find work, it's increasingly a matter between surviving (with a reduced living standard) at 62 or going broke before reaching 70. Hell, at least in the pre-Obamacare period, they may need SS at 62 just to pay their health insurance premium (and little else).

I'd be curious to see if there's been a spike in collecting at 62 in the last five years or so. Even a lot of folks who may have planned to wait until 70 ten years ago may have been laid off in 2008 at age 60 and realized that collecting earlier was the only way they could get by; there was no way they could wait until their FRA of 66, let alone 70.
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