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Old 09-28-2011, 10:36 AM   #41
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That's faulty logic. Some of us choose to put it off to 70, deplete our nest egg early, then use SS at 70 to live off of. Similar to your neighbors...they could have used their $150k at 62, and then collected a much larger SS at age 70...just sayin'
Exactly.

Reduces RMD's (most of our retirement investments are in tax-deferred accounts and we're not going to convert - but that's another subject), but more importantly, we're reducing market risk (not having to worry about the market providing income in later years) along meeting my goal to give my DW her "best shot" (financialy) after I'm gone - assuming I pass first, with an adjusted benefit almost twice of what she will receive at her FRA.

There are reasons to take it early - there are reasons to take it later. No one option/opinion on this board will be the same for everybody. That's why they make more flavors of ice cream other than vanilla (the #1 selection). I don't like vanilla ...
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Old 09-28-2011, 10:37 AM   #42
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Lsbcal: Thanks for the link. It was very informative. It appears that there are a lot of options for fixing the solvency issue of SS.
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Old 09-28-2011, 10:39 AM   #43
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Yeah, but the point is ... that the government can do anything they want to about SS. You don't have any ownership right to your SS benefit. Unlike the money you have in your investment portfolio, 401k, IRA, etc. All those you DO own.

Depleting your own nest egg first, and then throwing yourself on the mercy of what the government decides to do, strikes me as very risky.

Despite any political considerations, if the money's not there, the money's not there ---- and they won't be able to pay the SS benefits you were counting on.

"Simpson Bowles recommendations" It is to laugh. Boob bait. Every few years they hold a study/commission and make recommendations about the current hot topic -- Social Security, income taxes, etc. Invariably it just ends up on a shelf, right next to the dozens of prior sets of recommendations, all ignored.
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Old 09-28-2011, 11:25 AM   #44
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First, I don't think anyone here is planning on depleting the nest egg entirely and then only relying on SS. That is just too extreme. My own choice is whether to take SS at 64 or 66 and it's not going to terribly deplete the IRA.

Second, I am not saying the commission report is going to be enacted by any particular party. Just that it shows somewhat that modifications do not have to be draconian to get the US act together on SS. Let's not forget the report was truly bipartisan with senators from both sides contributing.

Let's not get into any rancorous, heated discussion of this please.
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Old 09-28-2011, 11:41 AM   #45
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Second, I am not saying the commission report is going to be enacted by any particular party. Just that it shows somewhat that modifications do not have to be draconian to get the US act together on SS. Let's not forget the report was truly bipartisan with senators from both sides contributing.

Let's not get into any rancorous, heated discussion of this please.
Amen to that. In reality SS isn't all that "broken." The reason why statements like "it will be underfunded by 25% in 25 years" is because of the impact of an imbalance increasing by 1% per year compounded for 25 years (not the exact numbers, but you get the idea). If you could just correct that 1% cumulative imbalance between what comes in and what goes out, the "crisis" more or less vanishes. And that hardly requires draconian measures -- but the longer we wait, the more it will be.

Anyway, this thread was more about the breakeven point for determining when to take it, not the political aspects of it. Hope we can get it back there; there's other political threads about SS in the FIRE politics forum.
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Old 09-28-2011, 11:47 AM   #46
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I'll be 62 in 5 months but won't be quitting work then. I hardly even belong on an ER forum.

A year after that, I should have my mortgage and a couple other loans close to paid off, so I may pull the plug then. I'm thinking I'll start receiving SS within six months after ceasing employment, mainly to avoid drawing down my after-tax investments too much.
I've come to agree with the idea that the payout is actuarially based so that one gets a fair deal no matter when they start taking it...
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Old 09-28-2011, 11:48 AM   #47
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I've come to agree with the idea that the payout is actuarially based so that one gets a fair deal no matter when they start taking it...
I believe that has been the actuarial intent, yes. But as life expectancies increase, the actuarial calculation would necessarily increase the penalty for taking it at 62 if it were to remain "actuarially revenue neutral."
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Old 09-28-2011, 06:50 PM   #48
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But as life expectancies increase, the actuarial calculation would necessarily increase the penalty for taking it at 62 if it were to remain "actuarially revenue neutral."
Yes. But as of now, it isn't. I don't recall hearing any "official" recommendations about this, though.

The way it stands now, the break-even point stays the same (at about 16-18 years) but if you live longer than the current life expectancy this will mean that you'll live more years after the break-even point.

I would agree that political discussions belong on another thread, but financial discussions are on-topic for this thread. Particularly the risk aspect.
And it's the finacial aspect of SS that is a significant concern. If retirees live longer then they'll be collecting more SS than anticipated. Which means that workers who are paying the SS tax will have to pay more total SS tax, since SS will become cash-flow negative in a few years. Demographics is a bitch. The number of retirees taking out of SS is increasing much faster than the number of workers paying in to SS.
Workers are righ now paying 15.3% rate. Can this rate increase to 20% ot 25%? Maybe, maybe not (IMHO, probably not.)

But it seems that the easiest way to fix the imbalance is to reduce the outflow, which means that SS payments will be cut. That has already indirectly been done, in 1984 when they imposed income tax on SS payments. Bumping this from 85% to 100% would be easy to do.

When assessing risk probabilities, I think is it very realistic to give a high probability that in the future SS payments will be reduced. It would be a real bummer to delay until age 70 for the higher payment only to get to 70 and find that your actual payment has been cut significantly from what you expected.
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Old 09-28-2011, 06:58 PM   #49
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It would be a real bummer to delay until age 70 for the higher payment only to get to 70 and find that your actual payment has been cut significantly from what you expected.
I very much doubt that the rules would be changed for anyone who could currently draw SS, even if they are waiting until 70.

And in any case, such a change would not come out of the blue. If it starts to look like waiting until 70 is a bad idea, you can start drawing at any time.
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Old 09-28-2011, 08:26 PM   #50
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I very much doubt that the rules would be changed for anyone who could currently draw SS, even if they are waiting until 70.

And in any case, such a change would not come out of the blue. If it starts to look like waiting until 70 is a bad idea, you can start drawing at any time.
Well, maybe. How much notice did we really have when the rule allowing for payback of SS received in order to qualify for a higher payment amount was rescinded?
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Old 09-28-2011, 10:02 PM   #51
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According to SS website my #s are.....

$1648.....at age 62
$2339.....at FRA (66 & 4mo)
$3047.....at age 70

I know that each payment is calculated on the premise that I work until I begin collecting SS. Would someone please explain how to calculate my payments if I stop work at 62, but don't collect until FRA or age 70. I don't see this on SS website.

Thanks!
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Old 09-28-2011, 10:10 PM   #52
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. Would someone please explain how to calculate my payments if I stop work at 62, but don't collect until FRA or age 70.

Thanks!
Use the Retirement Estimator on the SS website to manually input your annual earnings, enter 0 after age 62.

I think you'll find having no earnings between 62 and 70 will have only a small negative impact on your $3047 age 70 number - probably only $100 or so and even less on your FRA number.
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Old 09-29-2011, 08:58 AM   #53
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Well, maybe. How much notice did we really have when the rule allowing for payback of SS received in order to qualify for a higher payment amount was rescinded?
That change affected very few people and was kind of an advantage that maybe shouldn't have existed. A major cut in benefits that affects nearly everyone isn't going to sneak in. It's like the difference between removing some obscure tax credit that maybe hundreds of people use, vs. raising income tax rates across the board.
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Old 09-29-2011, 09:41 AM   #54
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Amen to that. In reality SS isn't all that "broken." The reason why statements like "it will be underfunded by 25% in 25 years" is because of the impact of an imbalance increasing by 1% per year compounded for 25 years (not the exact numbers, but you get the idea). If you could just correct that 1% cumulative imbalance between what comes in and what goes out, the "crisis" more or less vanishes. And that hardly requires draconian measures -- but the longer we wait, the more it will be.

Anyway, this thread was more about the breakeven point for determining when to take it, not the political aspects of it. Hope we can get it back there; there's other political threads about SS in the FIRE politics forum.
I am not trying to get political on this, but I think most people miss the point when it comes to SS....

Sure, as a stand alone calculation, SS is not broken to much.... but what asset do they hold right now This is from memory, so I can be wrong... but I think it is close to 14 trillion of US bonds... as long as the gvmt can get enough money to pay back these bonds then SS is good to go... if they can not pay them back (which is the real issue), then it is in trouble...

IOW, you can not just look at SS by itself and ignore the big hole created by the rest of gvmt spending....
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Old 09-29-2011, 09:51 AM   #55
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I am not trying to get political on this, but I think most people miss the point when it comes to SS....

Sure, as a stand alone calculation, SS is not broken to much.... but what asset do they hold right now This is from memory, so I can be wrong... but I think it is close to 14 trillion of US bonds... as long as the gvmt can get enough money to pay back these bonds then SS is good to go... if they can not pay them back (which is the real issue), then it is in trouble...

IOW, you can not just look at SS by itself and ignore the big hole created by the rest of gvmt spending....
Social Security fund assets were around $2.5T at year end 2010. It is taking in more than $500B a year, so the value of future contributions is far greater than the current assets.

The US Treasury is considered the safest bond in the world. Why is the debt to the SS fund any different?
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Old 09-29-2011, 11:24 AM   #56
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Now we're getting political.

The SS trust fund is not real. It does not represent real assets. It's just book-keeping entries saying that one part of the government has borrowed money from another part of the government. An IOU to yourself is not an asset.
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Old 09-29-2011, 12:35 PM   #57
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Social Security fund assets were around $2.5T at year end 2010. It is taking in more than $500B a year, so the value of future contributions is far greater than the current assets.

The US Treasury is considered the safest bond in the world. Why is the debt to the SS fund any different?
Thanks for the real number....

The reason is that in total, the gvmt is borrowing 40 cents for every dollar it spends... so it was spending all that extra SS money for many years... but SS wants its money back going forward... the rest of the gvmt has to be cut a lot if you want to give SS back its money... politicians are not willing to cut the rest of gvmt down to a size that would allow it to function based on the remaining revenue after paying back SS...

SO, in the end, it is still a question of where do you get the money to pay back SS... the answer is more debt to the public or smaller gvmt... at this time neither looks like a winning position..
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Old 09-29-2011, 12:42 PM   #58
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"Simpson Bowles recommendations" It is to laugh. Boob bait. Every few years they hold a study/commission and make recommendations about the current hot topic -- Social Security, income taxes, etc. Invariably it just ends up on a shelf, right next to the dozens of prior sets of recommendations, all ignored.
It seems that something along those lines will occur.

The Simpson Bowles plan gradually reduces payments so that the top max payment goes down by almost a third. Another proposal caps payments at $1200. Other plans use means testing for any payment at all.

Perhaps it just isn't prudent to assume that things will remain as they always have. Big things are at play here.
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Old 09-29-2011, 11:53 PM   #59
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It seems that something along those lines will occur.

The Simpson Bowles plan gradually reduces payments so that the top max payment goes down by almost a third. Another proposal caps payments at $1200. Other plans use means testing for any payment at all.

Perhaps it just isn't prudent to assume that things will remain as they always have. Big things are at play here.
Medicare monthly "premiums" are based on income. I can see SS going this way too. Your benefits could be based on your other income. It is not that big of a jump to do this for SS when it is already being done for Medicare.

We are still a few years away from our SS decision and a lot of political BS can be played out before our earliest date so we will wait to see what happens. If it makes more sense to wait a few years (not until age 70 due to my family longevity) we will do so; if not then we will apply as we see fit. No crystal ball here but I don't see things easing up on SS demand or the govt. "paying" back the loan to SS. Debts will continue to mount until the American people can scale back their demands for a free lunch. Govt. is more than happy to create all the freebies they can to allow themselves to get (re)elected. .............stopping political soap box now.
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Old 09-30-2011, 07:35 AM   #60
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Medicare monthly "premiums" are based on income. I can see SS going this way too. Your benefits could be based on your other income. It is not that big of a jump to do this for SS when it is already being done for Medicare.

We are still a few years away from our SS decision and a lot of political BS can be played out before our earliest date so we will wait to see what happens. If it makes more sense to wait a few years (not until age 70 due to my family longevity) we will do so; if not then we will apply as we see fit. No crystal ball here but I don't see things easing up on SS demand or the govt. "paying" back the loan to SS. Debts will continue to mount until the American people can scale back their demands for a free lunch. Govt. is more than happy to create all the freebies they can to allow themselves to get (re)elected. .............stopping political soap box now.
Amen to MasterBlaster and SteveR.
Looks like there's a good chance that SS retirement benefits will become another vehicle for income redistribution.
Life expectancy, government rules changes and discount rates would appear to be the major unknown variables involved in making decisions about when to begin taking payments. It's quite ominous that this program is negatively characterized as a quasi-welfare Entitlement.
TexasProud explains the whole mess quite succinctly.
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