Fidelity modeling of SS at 66 or 70

[stephenson]

So, I was messing around with the Fidelity modeling tool this morning.

Did a very basic comparo changing only the point at which I would draw social security ... 70 vs 66 (FRA).

66 showed a 1.6% improvement over 70 in “average” market conditions (the best of the three circumstances the model allows).

The model is pretty basic ...so, doesn’t account for what one does with the additional income.

Thoughts?

 

[GravitySucks]

How's it do in the very bad setting? (Worse than 90%?)

 

[RunningBum]

What does a "1.6% improvement" mean? More SS money? If so, at what point in time? Better chance to "get my money back?"

I'm most concerned with longevity insurance, protecting in case I live long and the market doesn't do that well. Others have different goals for SS money. Which ones of us see this 1.6% improvement?

The model doesn't even account for investing the extra money you get by taking early? So it's not even a good model?

My thoughts? I don't see this adding any useful information to all the SS discussions we've had on this site. Am I missing something?

 

[KenZ71]

Are we talking about the tool under Fido's Planning section?

If yes, I find it quite useful. Increasing SS benefits would mean less retirement savings needs to be withdrawn and therefore is invested longer.

They also give the option to plug expenses both one time and recurring.

 

[COcheesehead]

Did you increase the input for SS at 70 or keep it the same as 66?
I’ve done the same exercise and found waiting until 70 produced the better results.

 

[Dtail]

Did you increase the input for SS at 70 or keep it the same as 66?
I’ve done the same exercise and found waiting until 70 produced the better results.

+1

 

[joeea]

So, I was messing around with the Fidelity modeling tool this morning.

Did a very basic comparo changing only the point at which I would draw social security ... 70 vs 66 (FRA).

66 showed a 1.6% improvement over 70 in “average” market conditions (the best of the three circumstances the model allows).

The model is pretty basic ...so, doesn’t account for what one does with the additional income.

Thoughts?

What is the link to this model?
What did you enter for an age of death?
What spousal information did it ask for?

I have no idea what "a 1.6% improvement" means in this context. And with no idea what factors the model uses, it's hard to comment.

But if this implies that starting at 66 is 1.6% "better" than starting at 70 on average, it seems rather flawed.

 

[stephenson]

Gah - my bad - I thought I had inputted both numbers - for 66 and 70.

When I manually developed and used my 66 and 70 numbers...got the opposite findings ... pretty basic Fidelity model.

In worst market “Significantly Below Average” 66 was 3.3% lower than 70
In best market “Average” 66 was 0.8% lower than 70

Wish there was a way to specify growth rates by category of income - for instance, if I could take my SS payment and figure future values inside the model, it would be very cool ... maybe I just don’t understand the model well enough.

 

[COcheesehead]

Gah - my bad - I thought I had inputted both numbers - for 66 and 70.

When I manually developed and used my 66 and 70 numbers...got the opposite findings ... pretty basic Fidelity model.

In worst market “Significantly Below Average” 66 was 3.3% lower than 70
In best market “Average” 66 was 0.8% lower than 70

Wish there was a way to specify growth rates by category of income - for instance, if I could take my SS payment and figure future values inside the model, it would be very cool ... maybe I just don’t understand the model well enough.

It’s actually a pretty robust model. You can change your growth rates by changing your asset allocation for total return. They give you the option to play around with different options and see the results in real time. The budget builder inside the model is the real value of the tool. Without knowing your expenses everything else is moot.
As with any planning tool, garbage in, garbage out.

 

[2retireearly]

What is the link to this model?
What did you enter for an age of death?
What spousal information did it ask for?

I have no idea what "a 1.6% improvement" means in this context. And with no idea what factors the model uses, it's hard to comment.

But if this implies that starting at 66 is 1.6% "better" than starting at 70 on average, it seems rather flawed.

Well starting at 66 gives you 4 full years of full benefits, to invest...and if you die at 85, then getting at 66 would be better at 70.

 

[pb4uski]

Well starting at 66 gives you 4 full years of full benefits, to invest...and if you die at 85, then getting at 66 would be better at 70.

It all depends on the rate of return. I recall a thread recently where if one assumed a 3.5% real rate of return that the breakeven point was age 85.

3.5% real going forward from here is IMO a pretty good return depending on your AA.

 

[rayvt]

It all depends on the rate of return. I recall a thread recently where if one assumed a 3.5% real rate of return that the breakeven point was age 85.

Actually, 88 not 85. And the SS cohort life expectancy for a 70 year old is 84.

That's for nominal return of 6.0% with 2.5% inflation, which is 3.5% real return.

Link to spreadsheet: https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0

The median return for a 60/40 portfolio (1950-2016) was 4.6% real (after actual official inflation). If you plug 4.5% real into that spreadsheet (6.5% return and 2.5% inflation) the breakeven age is 89.6.

 

[joeea]

Well starting at 66 gives you 4 full years of full benefits, to invest...and if you die at 85, then getting at 66 would be better at 70.

Unless you have a lower-earning spouse who would get a higher survivor benefit if you took your benefits at 70.

 

[big-papa]

So, I was messing around with the Fidelity modeling tool this morning.

Did a very basic comparo changing only the point at which I would draw social security ... 70 vs 66 (FRA).

66 showed a 1.6% improvement over 70 in “average” market conditions (the best of the three circumstances the model allows).

The model is pretty basic ...so, doesn’t account for what one does with the additional income.

Thoughts?

I assume you mean the Fidelity RIP tool? You said the only thing you changed was the age 70 vs 66. Did you also change the amount you would receive per year?

 

[street]

My goal isn't to get a higher survivor benefit, if you took your benefits at 70. I'm sure I'm not alone with that strategy because we have plenty to survive without SS, if that program ended today. I'm sure there are plenty here that have confessed that they could live without SS nicely. My goal is to get and use as much of it, SS as I can, while I'm still breathing in air. LOL

A gamble any which way you decide to go, from the day you are elidable to receive SS.

 

[Floridatennisplayer]

My goal isn't to get a higher survivor benefit, if you took your benefits at 70. I'm sure I'm not alone with that strategy because we have plenty to survive without SS, if that program ended today. I'm sure there are plenty here that have confessed that they could live without SS nicely. My goal is to get and use as much of it, SS as I can, while I'm still breathing in air. LOL

A gamble any which way you decide to go, from the day you are elidable to receive SS.

Best post ever.

 

[joeea]

My goal isn't to get a higher survivor benefit, if you took your benefits at 70.

My goal is to get and use as much of it, SS as I can, while I'm still breathing in air.

Makes perfect sense when you'll have no survivor.