

09232014, 08:06 AM

#121

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Join Date: Oct 2006
Posts: 3,636

Quote:
Originally Posted by Archman
I did a rough calculation for this. You stated that you got different results using FireCalc. Some time ago I did a couple of FireCalc calcualtions comparing taking SS at age 62 vs age 66. One calculation said at age 100, my portfoilo would be 1.37 x the amount if I waited till age 66 to take SS vs age 62. Another calculation said I would have 1.9x the amount.
Go figure.

I've got two possibilities:
1) You may have entered some age less than 62, so in both your cases SS was being deferred from your start date.
2) You looked at the average result, I looked at the downside risk.
If we made retirement income decisions based on averages, we'd all be 100% in stocks and 7% would be a SWR. Deferring SS is basically a defensive strategy that's supposed to work best in the unlikely case that we have poor investment returns and live to advanced ages. Many people on this board have enough assets or guaranteed income that they don't need to be defensive, averages work for them. Others need to think about the difficult scenarios.
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09232014, 09:04 AM

#122

Dryer sheet aficionado
Join Date: Nov 2010
Posts: 27

Quote:
Originally Posted by Independent
I've got two possibilities:
1) You may have entered some age less than 62, so in both your cases SS was being deferred from your start date.
2) You looked at the average result, I looked at the downside risk.
If we made retirement income decisions based on averages, we'd all be 100% in stocks and 7% would be a SWR. Deferring SS is basically a defensive strategy that's supposed to work best in the unlikely case that we have poor investment returns and live to advanced ages. Many people on this board have enough assets or guaranteed income that they don't need to be defensive, averages work for them. Others need to think about the difficult scenarios.

I just did a couple of FireCalc scenarios at my current situation and now it shows that my portfolio will be 1.26x at age 100 , if I wait until I'm 66 to collect SS. vs age 63.
As far as using averages, remember FireCalc takes into account the standard deviation of returns.
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09232014, 10:36 AM

#123

Recycles dryer sheets
Join Date: Jul 2013
Location: San Diego
Posts: 130

I thought I'd explore what taking SS at various ages would do to me. I took the results from the SS Benefit Calculator and plugged them into Fido's RIP. After running simulations it gave me the total assets at 'end of plan' , based on taking benefits each year from age 62 to 70. I divided each total by the first years total and plotted a graph:
Thus, if I wait until 70 to collect benefits, RIP calculates that my end of plan assets will be 2.1 times greater than if I collect them at 62.
I guess I'll be waiting!
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09232014, 12:48 PM

#124

Thinks s/he gets paid by the post
Join Date: May 2008
Posts: 2,726

Quote:
Originally Posted by Jackanory
Thus, if I wait until 70 to collect benefits, RIP calculates that my end of plan assets will be 2.1 times greater than if I collect them at 62.
I guess I'll be waiting!

So you'd have more money to leave but presumably won't be spending as much from age 62 to 70?
Seems like a choice between spending on yourself vs. leaving more money for heirs.
Or is it a concern about portfolio survivability?
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09232014, 01:15 PM

#125

Recycles dryer sheets
Join Date: Jul 2013
Location: San Diego
Posts: 130

It's simply a static measure that I can establish a baseline around. I'm not planning on leaving anything to anyone, so now it's easier to play with the spending variable. Apparently, I have to persuade myself to increase that  not easy once one realizes that ones hobby is being tightfisted!
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09232014, 04:24 PM

#126

Dryer sheet aficionado
Join Date: Nov 2010
Posts: 27

Quote:
Originally Posted by Jackanory
I thought I'd explore what taking SS at various ages would do to me. I took the results from the SS Benefit Calculator and plugged them into Fido's RIP. After running simulations it gave me the total assets at 'end of plan' , based on taking benefits each year from age 62 to 70. I divided each total by the first years total and plotted a graph:
Thus, if I wait until 70 to collect benefits, RIP calculates that my end of plan assets will be 2.1 times greater than if I collect them at 62.
I guess I'll be waiting!

Interesting. Your graph shows that assets at taking SS @66 are 1.28 times more compared to taking SS @63. Remember, I got 1.26 x using FireCalc
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09232014, 09:11 PM

#127

Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 13,195

I'm planning to take at age 70.
But ... if I take my QLP retirement projection and do a whatif comparing 62 vs 70, the crossover point is age 82... after 82 my net worth is higher taking SS at age 70.
If I compare 66 vs 70 then the crossover point is 87 so in each case I'm better off taking SS earlier for ~20 years and then I'm worse off.
While the difference between the lines of 62 vs 70 is pretty significant, the differences between 66 and 70 are not very different. My net worth at age 100 taking SS at age 70 is 160% of what it is taking SS at 62.
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09232014, 09:37 PM

#128

Recycles dryer sheets
Join Date: Jul 2013
Location: San Diego
Posts: 130

Quote:
Originally Posted by Archman
Interesting. Your graph shows that assets at taking SS @66 are 1.28 times more compared to taking SS @63. Remember, I got 1.26 x using FireCalc

Probably has to do with my start and end dates; I'm 62 this year and planning to 92. MMMV
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09242014, 08:42 AM

#129

Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 3,636

Quote:
Originally Posted by Archman
I just did a couple of FireCalc scenarios at my current situation and now it shows that my portfolio will be 1.26x at age 100 , if I wait until I'm 66 to collect SS. vs age 63.
As far as using averages, remember FireCalc takes into account the standard deviation of returns.

I have to admit that I'm confused. I read your earlier post to say that you would have more money at the end if you started SS at 63, and less money at the end if you started at 66.
This post seems to say the opposite. I'm probably misreading one of them.
FireCalc runs many possible economic scenarios. When you quoted a single number, I assumed you were looking at some average. But, now you're saying "FireCalc takes into account the standard deviation of returns". I'm not sure what that means. FireCalc can use actual past years for its scenarios, or it can randomly create scenarios, I don't know which option you chose.
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09242014, 09:00 AM

#130

Full time employment: Posting here.
Join Date: Aug 2014
Posts: 519

SS payout by itself would be a good candidate for another tool like the FireCalc simulator. Put in your income expectations, life expectancy, etc and have it go thru all the possible start dates and withdrawal schemes (including payback/reset) for singles and couples. Have the tool vary the lifespan(s) and see how likely you are to come out ahead with each scenario. There is just too much to digest for a simple discussion.
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09242014, 10:42 AM

#131

Recycles dryer sheets
Join Date: Jul 2013
Location: San Diego
Posts: 130

Just for fun, I plugged in a different 'end' date and went through the same exercise. It appears that if I were to expire at 82, it won't have made the slightest difference when I started taking SS:
Another argument for longevity?
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09242014, 11:37 AM

#132

Dryer sheet aficionado
Join Date: Nov 2010
Posts: 27

Quote:
Originally Posted by Independent
I have to admit that I'm confused. I read your earlier post to say that you would have more money at the end if you started SS at 63, and less money at the end if you started at 66.
This post seems to say the opposite. I'm probably misreading one of them.
FireCalc runs many possible economic scenarios. When you quoted a single number, I assumed you were looking at some average. But, now you're saying "FireCalc takes into account the standard deviation of returns". I'm not sure what that means. FireCalc can use actual past years for its scenarios, or it can randomly create scenarios, I don't know which option you chose.

My first post was based on MY calculations. My breakeven point for taking SS at age 66 vs age 63. was at age 97+ years old. At age 100 my portfolio would still be larger ,if I took SS at age 66, same as FireCalc.
I was using an average number from the FireCalc calculations. In my situation, I used a standard deviation of 7.5% (the S&P 500 index has a standard deviation of 15%). I chose the the portfolio with random performance, with a mean total portfolio return of 4%, 3% inflation, std dev of 7.5%
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09252014, 11:56 AM

#133

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Join Date: Oct 2006
Posts: 3,636

Quote:
Originally Posted by Archman
My first post was based on MY calculations. My breakeven point for taking SS at age 66 vs age 63. was at age 97+ years old. At age 100 my portfolio would still be larger ,if I took SS at age 66, same as FireCalc.
I was using an average number from the FireCalc calculations. In my situation, I used a standard deviation of 7.5% (the S&P 500 index has a standard deviation of 15%). I chose the the portfolio with random performance, with a mean total portfolio return of 4%, 3% inflation, std dev of 7.5%

Okay. The FireCalc result is what I'd expect. You gave FireCalc an average return of inflation + 1%. Social Security crossover ages for returns in that neighborhood are around 80, so it makes sense that deferring is solidly ahead when you get to age 100.
Your breakeven calculation seems to say something different. I'd think it takes a return of inflation + 6% to get a crossover age of 97.
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09252014, 01:44 PM

#134

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Join Date: Nov 2010
Posts: 27

Quote:
Originally Posted by Independent
Okay. The FireCalc result is what I'd expect. You gave FireCalc an average return of inflation + 1%. Social Security crossover ages for returns in that neighborhood are around 80, so it makes sense that deferring is solidly ahead when you get to age 100.
Your breakeven calculation seems to say something different. I'd think it takes a return of inflation + 6% to get a crossover age of 97.

You bring up a good point. Inflation. Using the random performance with a standard deviation of 7.5%, it was impossible to calculate a breakeven point. You can plug in the same numbers and you get totally different amounts, even showing starting SS at age 63 you had a bigger portfolio than starting at age 66. So, I chose 0% standard deviation, or you can use the consistent annual market growth. You get the same results. The break even point is at age 86.
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09262014, 09:55 AM

#135

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Join Date: Oct 2006
Posts: 3,636

Quote:
Originally Posted by Archman
You bring up a good point. Inflation.
1) Using the random performance with a standard deviation of 7.5%, it was impossible to calculate a breakeven point.
2) You can plug in the same numbers and you get totally different amounts, even showing starting SS at age 63 you had a bigger portfolio than starting at age 66.
3) So, I chose 0% standard deviation, or you can use the consistent annual market growth. You get the same results.
4) The break even point is at age 86.

1. Yes. The question "How long do I need to live in order to make deferring better than starting now?" depends on future investment returns. Each scenario has it's own answer.
2. Not sure that I understand this.
3. This makes sense in FireCalc.
4. I think I'm now lost on the input assumptions.
I set up FireCalc with a $16,000 SS benefit starting in 2014 or $20,000 starting in 2017. That seems like starting benefits at age 63 with an 80% benefit, or starting at 66 with a 100% benefit.
I specified "A portfolio with consistent annual market growth of 4%, fixed income returns of 4%, and an inflation rate of 3%".
When I compared the yearbyyear detail for the two runs, the first was ahead for the first 15 years.
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09262014, 07:30 PM

#136

Dryer sheet aficionado
Join Date: Nov 2010
Posts: 27

Quote:
Originally Posted by Archman
You bring up a good point. Inflation.
1) Using the random performance with a standard deviation of 7.5%, it was impossible to calculate a breakeven point.
2) You can plug in the same numbers and you get totally different amounts, even showing starting SS at age 63 you had a bigger portfolio than starting at age 66.
3) So, I chose 0% standard deviation, or you can use the consistent annual market growth. You get the same results.
4) The break even point is at age 86.
Quote:
Originally Posted by Independent
1. Yes. The question "How long do I need to live in order to make deferring better than starting now?" depends on future investment returns. Each scenario has it's own answer.
2. Not sure that I understand this.
3. This makes sense in FireCalc.
4. I think I'm now lost on the input assumptions.
I set up FireCalc with a $16,000 SS benefit starting in 2014 or $20,000 starting in 2017. That seems like starting benefits at age 63 with an 80% benefit, or starting at 66 with a 100% benefit.
I specified "A portfolio with consistent annual market growth of 4%, fixed income returns of 4%, and an inflation rate of 3%".
When I compared the yearbyyear detail for the two runs, the first was ahead for the first 15 years.

Point #2 : Because it is random ,due to the standard deviation, the sequence of returns can either have a positive effect or a negative effect. So even if I have an average of 4% return, due to the standard deviation my average return is 4 +/ 7.5% (3.75% to 11.5% returns)
As far as your breakeven point at 15years instead of mine of 23 years could attributed by the size of the portfolio and the spend down of that portfolio.
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09272014, 02:10 PM

#137

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Join Date: Oct 2006
Posts: 3,636

Quote:
Originally Posted by Archman
Point #2 : Because it is random ,due to the standard deviation, the sequence of returns can either have a positive effect or a negative effect. So even if I have an average of 4% return, due to the standard deviation my average return is 4 +/ 7.5% (3.75% to 11.5% returns)
As far as your breakeven point at 15years instead of mine of 23 years could attributed by the size of the portfolio and the spend down of that portfolio.

That's true. I didn't get that from the earlier post.
It seems to me that if we use the same fixed real interest rate we ought to get the same crossover year. But, it would take a lot of time comparing detailed runs to figure out if that's true  probably more than it's worth.
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05182016, 01:25 PM

#138

Confused about dryer sheets
Join Date: May 2016
Posts: 1

NJ.
Sent from my iPhone using Early Retirement Forum
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05182016, 03:09 PM

#139

Recycles dryer sheets
Join Date: Oct 2007
Posts: 422

NJ what?
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05192016, 10:31 AM

#140

Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 9,510

A number of us here on the FIRE forum have spouses who won't be collecting a spousal or survivor's benefit from our SS due to GPO. Therefore, to best protect the spouse, starting and investing SS at 62 becomes optimum.
I've been doing this for almost nine years. Thanks to fairly favorable market conditions, the nest egg that's built up from the invested SS income will easily cover the difference between the age 62 SS I'm getting and the higher age 70 SS I won't be getting. Of course, you can't count on favorable market conditions and you might start SS early and not wind up with a nest egg sizable enough to more than cover the difference. It's a crap shoot in that regard.
For married folks without the GPO problem, you should still consider the value of foregone earnings on collected early SS benefits in your calculations. It's way too big a number to ignore.
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