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How much should the market climate affect SS Decision?
Old 10-01-2011, 01:15 PM   #1
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How much should the market climate affect SS Decision?

Assuming that you have the funds to allow you to delay making an SS choice, how much (if any) should the existing market climate affect the decision on when to take SS?

For example, if the market is in a recession is it better to use funds from your portfolio and delay SS and if the market is in a bull trend, is it reasonable to take SS at that point and let the portfolio ride the market wave? Or does the opposite apply?

Does this even make any sense or is it just a form of market timing and should be totally disregarded when making the call?
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Old 10-01-2011, 01:26 PM   #2
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Originally Posted by potto0213 View Post
For example, if the market is in a recession is it better to use funds from your portfolio and delay SS. And if the market is in a bull trend, is it reaasonable to take SS at that point and let the portfolio ride the market wave?
The opposite. Following the market timing maxim "buy low -- sell high", if the market is in recession, that should make you more willing to take SS early, so that you can avoid selling stocks low. If the market is in a bull trend, that should make you more willing to delay SS, so that you sell your stocks while prices are high.
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Old 10-01-2011, 02:49 PM   #3
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I am more interested in the affects of future changes the Gov't may make to S/S and how that might influence when to take it.
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Old 10-01-2011, 03:10 PM   #4
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Originally Posted by potto0213 View Post
Assuming that you have the funds to allow you to delay making an SS choice, how much (if any) should the existing market climate affect the decision on when to take SS?

For example, if the market is in a recession is it better to use funds from your portfolio and delay SS and if the market is in a bull trend, is it reasonable to take SS at that point and let the portfolio ride the market wave? Or does the opposite apply?

Does this even make any sense or is it just a form of market timing and should be totally disregarded when making the call?
This does not make sense. Your financial plan should already identify what your social security will be and how much income is needed from your portfolio. If nothing has changed, your plan is intact, your assets are sufficient to provide the needed income, you should continue to execute. If your assets are no longer enough to cover your expenses as planned, you should revisit your plan and rethink your expenses.

Attempting to change (pull forward) the start date of SS in response to current market conditions is to change your asset allocation in order to time the market. Good luck with that. Permanently reducing your future social security benefit increases the risk of insufficient funds in your future.
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Old 10-01-2011, 04:11 PM   #5
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I am more interested in the affects of future changes the Gov't may make to S/S and how that might influence when to take it.
+1

The wild card in this kind of speculation is the government, both Federal & State.

Their insatiable need for money will make them increase medicare premiums, institute means testing and other "revenue enhancement" activity, such that any extra money you get by waiting will simply be swallowed up by steadily increasing taxes.

I have already decided to take SS the moment I am eligible. Come what may, I will probably not regret that decision.
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Old 10-01-2011, 04:21 PM   #6
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I am more interested in the affects of future changes the Gov't may make to S/S and how that might influence when to take it.
This is my main concern, in terms of when to take SS, as well.
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Old 10-01-2011, 04:38 PM   #7
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This does not make sense. Your financial plan should already identify what your social security will be and how much income is needed from your portfolio. If nothing has changed, your plan is intact, your assets are sufficient to provide the needed income, you should continue to execute. If your assets are no longer enough to cover your expenses as planned, you should revisit your plan and rethink your expenses.
If it were that cut and dry, we wouldn't have so many threads on when to take social security.

There are some posters on this board that could get by without SS. So SS becomes more of a luxury and determining when to take it is more fluid.

-helen
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Old 10-01-2011, 05:05 PM   #8
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Does this even make any sense or is it just a form of market timing and should be totally disregarded when making the call?
When going through a financial melt down it is very tempting to apply for SS if you are 62 whether it makes sense or not .
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Old 10-01-2011, 05:10 PM   #9
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The market climate does not affect my decision on when to take SS, because I only own CDs, municipal bonds, cash or equivalent. I have never tried to time any market.
Quote:
Originally Posted by potto0213 View Post
Assuming that you have the funds to allow you to delay making an SS choice, how much (if any) should the existing market climate affect the decision on when to take SS?
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Old 10-01-2011, 05:11 PM   #10
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When going through a financial melt down it is very tempting to apply for SS if you are 62 whether it makes sense or not .
I was thinking about this a bit more. It seems that one of the biggest risk of running out of money in retirement is retiring into a down market. If cash reserves have been used up and the economic climate still doesn't have a lot of positives on the horizon then it seems like taking SS early might be a good strategy.
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Old 10-01-2011, 05:14 PM   #11
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I was thinking about this a bit more. It seems that one of the biggest risk of running out of money in retirement is retiring into a down market. If cash reserves have been used up and the economic climate still doesn't have a lot of positives on the horizon then it seems like taking SS early might be a good strategy.
+1
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Old 10-01-2011, 06:05 PM   #12
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Originally Posted by potto0213 View Post
Assuming that you have the funds to allow you to delay making an SS choice, how much (if any) should the existing market climate affect the decision on when to take SS?

For example, if the market is in a recession is it better to use funds from your portfolio and delay SS and if the market is in a bull trend, is it reasonable to take SS at that point and let the portfolio ride the market wave? Or does the opposite apply?

Does this even make any sense or is it just a form of market timing and should be totally disregarded when making the call?
It is a form of market timing, but IMO you have it backwards. If the market is low (recession), wouldn't you want to hang onto stocks and take SS? The assumption being that stocks are at or near a low and you don't want to sell them, but rather hang on for the recovery.

Likewise, in a bull market, you might want to take profits and sell high, deferring SS.

Maybe that's as much contrarian as market timing, but it really doesn't make sense to me to sell low.

Personally, it's not as big of a factor as the risk of outliving my money, which has my leaning to deferring SS and having more SS income in my 90s helps with that. When decision time comes, I'll weigh that risk with the risk of SS being cut back.
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Old 10-01-2011, 06:18 PM   #13
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People get too worked up about leaving a few SS dollars on the table when they die, rather than worrying about what happens when you end up living longer than planned. That is what scares me. I would rather spend some of my retirement dollars for 3 or 4 years and, thereby, increase my SS for the rest of my life. It's all a matter of balance. I would not put all my hopes in my own investments or SS or my pension. Diversification is still the best way to prevent disaster.
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Old 10-01-2011, 06:30 PM   #14
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Put some numbers to this. Lets say one intends to retire today at age 60, and delay social security until age 65. SS pension at 65 is $3K monthly. Total planned budget is $50K per year. $14K needs to come from investments. With a 4% withdrawal rate we need $350K in assets to fund this retirement beginning at age 65 and an additional $250K to fund expenses for the next 5 years. Total portfolio required today = $600K.

Change of plans. We decide instead to take early social security at age 62. Now we only get $2380 per month. We need to fund more budget from the portfolio, specifically $21440, so now we need $536K, plus 2 years @$50K. Now the portfolio needed is $636K. In addition, the portfolio will run out 3 years sooner. (30 year model)

Lets look instead at delaying SS until age 67. Now the monthly pension is $3500, so for your $50K budget you now have $42K coming from SS and only need $8K more from your portfolio, which means $200K in assets. Add an additional $350K to fund the budget for 7 additional years and you needs are $550K.

The best strategy is to spend your portfolio as planned and delay taking social security as long as possible. You are getting an 8% real increase in social security for every year you delay. It only makes sense to take early SS when you have no alternative (which is not the question the OP asked), or have a financial strategy that assures you of much higher portfolio returns.

If the problem is when it is time to retire your portfolio has declined in value and you feel it cannot sustain a 4% withdrawal rate, taking early social security will exacerbate the problem, not remedy it. Finally, in all cases delaying social security reduces the risk of insufficient funds after 30 years.
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Old 10-01-2011, 07:24 PM   #15
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Another way to look at this:

Your SS income is boosted each year by about 7.6% (inflation adjusted) by waiting. This is a guaranteed rate of return by not taking SS that has beat portfolio returns over the recent years.

I am personally going to assume the changes to SS will be pretty minor for those in their 60's now.

So even if the market returns better then a real 8% next year that it is not guaranteed. That's why I'm probably going to wait 2 years to take it at 66. DW would take mine now but she only gets an advisory vote on my taking SS . She took her benefit at 62 and will take the spousal at 66 for a nice little boost.

Now if your savings are very depleted maybe it makes sense to take SS early. Each case is different.
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Old 10-01-2011, 08:33 PM   #16
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Put some numbers to this. Lets say one intends to retire today at age 60, and delay social security until age 65. SS pension at 65 is $3K monthly.
According to SS the maxium SS payment is $2366 . Maximum Social Security retirement benefit
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Old 10-01-2011, 09:35 PM   #17
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According to SS the maxium SS payment is $2366 . Maximum Social Security retirement benefit
It was an example. Reduce everything by 1/4.
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Old 10-03-2011, 09:15 PM   #18
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Originally Posted by potto0213 View Post
Assuming that you have the funds to allow you to delay making an SS choice, how much (if any) should the existing market climate affect the decision on when to take SS?

For example, if the market is in a recession is it better to use funds from your portfolio and delay SS and if the market is in a bull trend, is it reasonable to take SS at that point and let the portfolio ride the market wave? Or does the opposite apply?

Does this even make any sense or is it just a form of market timing and should be totally disregarded when making the call?
IMO, the "existing market climate" is relevant only in terms of the returns you expect in the near future (between the two start dates you are comparing). If you think the market is oversold and due for a big run-up, then take SS now to keep your money invested. If you think that prices are low today, and that indicates very little near term appreciation, then go ahead and spend the money.

For my own planning, I figure I can't market time. I note there has been a very long cycle over the last 90 years, and the turning points were marked by Shiller's P/E10 statistic. But that number is inconclusive today. I don't have confidence that the past predicts the future, either. So I'm an agnostic on the market issue.
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Old 10-04-2011, 07:31 AM   #19
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What is your goal? take more risk in hopes of gaining more? Guaranteed income? Other?

DW and I both are eligible for SS. Our plan is to do both... take one early and one later (62/70).

When we are eligible to take SS, we will make assessments and take action based information available at that time.

For the portfolio... many people have fixed investments so they do not have to sell equities when the stock market is down.
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Old 10-04-2011, 08:25 AM   #20
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People get too worked up about leaving a few SS dollars on the table when they die, rather than worrying about what happens when you end up living longer than planned.
Time for my personal quote :

Money's for the living, not the dead...

DW/me are of SS age but are delaying to ensure our later income needs - assuming we live that long ...
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