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Old 05-03-2012, 03:28 PM   #21
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The trick as I understand it is to take distributions from ira/401ks up to a targeted tax bracket--usually 15%. In this way you lower future RMDs and allow your inflation adjusted SS benefit to increase. Obviously the math becomes very specific to the person.
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Old 05-03-2012, 04:02 PM   #22
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Thanks for the link lsbcal. I read that thread when it was active and I just read through the entire thing again. I see that rayvt was the person who created that spreadsheet I mentioned early in this thread, thank you rayvt that's quite a spreadsheet.

Another thing I got out of re-reading that thread is the concern some stated about waiting to age 66 or especially 70 and have the SSA change their SS benefit due to SS going broke. The point was made "can you trust them to not do that to you" and I definitely do not feel comfortable trusting them.

Please let's not take a political turn here. I like reading your feedback, no need for Porky to waddle in and ruin the party!
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Old 05-03-2012, 04:46 PM   #23
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Another thing I got out of re-reading that thread is the concern some stated about waiting to age 66 or especially 70 and have the SSA change their SS benefit due to SS going broke. The point was made "can you trust them to not do that to you" and I definitely do not feel comfortable trusting them.
I doubt if it will go broke; equally, though, I doubt that the benefits will improve substantially - probably the only way is slightly down. And typically, in any pension scheme and especially one with political involvement, the existing beneficiaries are always the best protected in case of negative events of any kind.
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Old 05-03-2012, 07:57 PM   #24
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Two things:

1. Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead. True you could be told you only have one year to live, and then maybe you'll think that you should have taken SS sooner.

2. What if means testing is implemented, and when you start SS they look at your net worth? In that case it would be good to wait to give yourself time to spend down your assets.
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Old 05-03-2012, 09:13 PM   #25
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Two things:

1. Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead. True you could be told you only have one year to live, and then maybe you'll think that you should have taken SS sooner.

2. What if means testing is implemented, and when you start SS they look at your net worth? In that case it would be good to wait to give yourself time to spend down your assets.
I've thought about #2.

Yes, they might reduce everybody's benefit, in which case you're better off starting sooner. OTOH, they may means-test based on current assets or non-SS income, in which case you're better off starting later.

Since I don't know which way they'll zig, I figure that the political risk doesn't point me in any particular direction.
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Old 05-04-2012, 04:22 AM   #26
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Reporting your net worth to the government would be quite a scary turn of events. The majority of my net worth is real estate and the county appraisal district often disagrees with the majority of property owners.
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Old 05-04-2012, 09:06 AM   #27
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Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead.
I have to agree with you TA. I never worried about any "break even" point in SS.

I/we always considered it as a flexible income management tool and not necessarily an "investment account". During my/DW's employment years, we paid a tax that insured SS payments to our respective parents, grandparents, and others.

Now that we are retired (both age 64), DW will take her SS in 24 months,at age 66. I'll claim against her's (at a 50% rate) at that time, and I'll delay mine till age 70, primarily for her benefit - assuming I pass first.

If we die early? So what. We are fortunate that we don't have to claim SS before our planned dates (due to a very "healthy" retirement portfolio, along with a purchase of an SPIA), and if we don't get to claim "our value" (e.g. our contributions over the years), it will just go to others.

SS is not an indivudial investment, but rather a sharing of $$$ for the public good - much like any other tax. We don't worry about "recovering" any other tax we paid over the years, so why worry about SS contributions?

BTW, money is for the living - not the dead (so who cares if you don't get back "yours"?) ...

Just my/our POV on the subject.
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Old 05-04-2012, 10:45 AM   #28
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I did all the numbers and convinced myself to wait until later to claim SS. But DW wanted to have the money to spend right away. The stress of watching our portfolio take hits due to delayed SS plus a fairly lousy stock market over the last 9 years got me thinking maybe she had a point. I knew rationally that we could spend with the knowledge that the SS cash flow would start later but it still bugged me. I also read a lot of opinions here, pro and con.

I know it would probably work out fine either way for us as the financial calculators like FIRECalc say either approach works. So taking SS earlier then 66 works for me on a rational + emotional level. Taking SS now reduces the emotional toll of stock/bond market ups/downs for me in particular. I'm more apt to take a few vacations instead of holding off.

I'm not recommending this for others. I just found that I needed to weight the emotional side of money management a little higher, so took SS at 64.
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Old 05-04-2012, 10:50 AM   #29
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But DW wanted to have the money to spend right away.
I don't think that has any relation to the results of your investment portfolio ...
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Old 05-04-2012, 10:55 AM   #30
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I always find these discussions about SS amusing here at FIRE. What is it that FIRE is the acronym for? Oh yes, Financial Independent / Retire Early.

Not wtyd/dog (work til you drop / depend on government). Do Warren Buffet or Bill Gates spend any time debating if they should buy store brand canned peas vs. name brand?
Should people with a 7-digit liquid net worth (beginning with a number greater than 1) agonize about waiting 4-7 years to collect an extra few hundred bucks a month?

4% on $2M is $80K/yr, or $6666/mo. Add early SS of,say, $1500 = $8166 total.
How much will it improve your lifestyle if you delay 4 years to get $2000 in SS for, a total of $8666?

What can you do on $8666/mo that you can't do on $8166?

Best comment I ever came across:
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Investments, IRAs, and 401(k) to live on;
Company pension for trips to Europe or Bahamas;
Social Security for lap dances.
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Old 05-04-2012, 11:15 AM   #31
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I always find these discussions about SS amusing here at FIRE. What is it that FIRE is the acronym for? Oh yes, Financial Independent / Retire Early.

Not wtyd/dog (work til you drop / depend on government). Do Warren Buffet or Bill Gates spend any time debating if they should buy store brand canned peas vs. name brand?
Once I saw Bill Gates being interviewed. He admitted he didn't have a wallet. I think these guys are not in my league.
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Should people with a 7-digit liquid net worth (beginning with a number greater than 1) agonize about waiting 4-7 years to collect an extra few hundred bucks a month?
Many who FIRE'd are not in the 2M (liquid) and above camp. Also note, it can be fun to agonize in retirement.
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Old 05-04-2012, 11:17 AM   #32
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But DW wanted to have the money to spend right away.
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I don't think that has any relation to the results of your investment portfolio ...
No but it does affect the bottom line and my sanity.
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Old 05-04-2012, 11:22 AM   #33
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Do Warren Buffet or Bill Gates spend any time debating if they should buy store brand canned peas vs. name brand?
Should people with a 7-digit liquid net worth (beginning with a number greater than 1) agonize about waiting 4-7 years to collect an extra few hundred bucks a month?
Well, let me answer you just from my simple POV.

Yes, DW/me are fortunate to have a "liquid net worth" (in multiples, as you define), yet we still look at the "best way" to maximize our potential, be it a few dollars - or more.

Why? Simple. We started with very little, and over the last three+ decades have been fortunate (via a LBYM lifestyle, along with a bit of agressive investing) to be able to accumulate much more than we need to live the life we wish, for the ramainder of our days - including a substantial estate to pass on to our adult (disabled) "child", after we're gone.

Just because we have achieved our goal in no manner means that we will live any differently than we have, over many years.

We're happy in how we live, and we still take avantage of those financial options that will add to our wealth (not for ours, but others benefit).

It's a bit of the old saying of "just because you can, dosen't necessarily mean you should"...
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Old 05-04-2012, 11:52 AM   #34
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I always find these discussions about SS amusing here at FIRE. What is it that FIRE is the acronym for? Oh yes, Financial Independent / Retire Early.

Not wtyd/dog (work til you drop / depend on government). Do Warren Buffet or Bill Gates spend any time debating if they should buy store brand canned peas vs. name brand?
Should people with a 7-digit liquid net worth (beginning with a number greater than 1) agonize about waiting 4-7 years to collect an extra few hundred bucks a month?

4% on $2M is $80K/yr, or $6666/mo. Add early SS of,say, $1500 = $8166 total.
How much will it improve your lifestyle if you delay 4 years to get $2000 in SS for, a total of $8666?

What can you do on $8666/mo that you can't do on $8166?

Best comment I ever came across:

By the time fixed costs eat up the majority of our income, an extra $500/month represents a large fraction of our discretionary income.

While my retirement calculations do only vary a few hundred a month in extra spending by taking SS early or late, due to all the other factors, you are increasing the size of a substantial COLA'd annuity by 75%. For both DW and I SS will run about $1776/month at 62 or $3109/month at 70, each. It is a big impact.
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Old 05-04-2012, 12:33 PM   #35
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Two things:

1. Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead.
along those same lines... why buy life insurance? If you're dead, who cares if your family is taken care of... you won't know the difference*

*depending on what form of afterlife, if any, you believe in

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BTW, money is for the living - not the dead (so who cares if you don't get back "yours"?) ...

Just my/our POV on the subject.
I agree with this to a point... it can be very relevant to those you leave behind (children) if that is important to you. I know it's not for everyone. Careful/smart planning with your retirement and living expenses late in life can make a huge difference in what you pass on after you move on... (again) only if that's important to you...

This is not something people scraping by in retirement depending entirely on SS need to worry about because regardless of if they die at 65 or 105 they aren't leaving a dime to anyone. Under that case, you are both correct
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Old 05-04-2012, 12:54 PM   #36
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Reporting your net worth to the government would be quite a scary turn of events. The majority of my net worth is real estate and the county appraisal district often disagrees with the majority of property owners.
Means testing based on net worth would be an almost impossible job - especially for the federal government. My bets are means testing to a greater extent than it already is on 1040 income.
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Old 05-04-2012, 12:57 PM   #37
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Two things:

1. Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead. True you could be told you only have one year to live, and then maybe you'll think that you should have taken SS sooner.

2. What if means testing is implemented, and when you start SS they look at your net worth? In that case it would be good to wait to give yourself time to spend down your assets.
Delaying will allow us to do Roth conversions while we increase our benefit. If we die in the mean time, like you, we won't care.
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Old 05-04-2012, 01:37 PM   #38
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By the time fixed costs eat up the majority of our income, an extra $500/month represents a large fraction of our discretionary income.

While my retirement calculations do only vary a few hundred a month in extra spending by taking SS early or late, due to all the other factors, you are increasing the size of a substantial COLA'd annuity by 75%. For both DW and I SS will run about $1776/month at 62 or $3109/month at 70, each. It is a big impact.
I think in some cases the aggressiveness of one's pre-SS spending comes into play. If we run 2 FIRECalc simulations for age 62:
1) allowed spending taking SS at 62
2) allowed spending taking SS at 70
that might better show the picture then just looking at the amounts you'd get in SS.

It would show that in case #1 one would spend a higher percentage of the portfolio during ages 62 to 70. If it's well above 4% it might make one uncomfortable. Spending less in those years is an option but if you are 62 and of average health, the mortality tables say (roughly) you have about a 50% chance of getting another 20 years in. Lower your spending for 8 of those 20 years might not be to everyone's tastes.

Lots of choices and we will not all make the same trade offs.
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Old 05-04-2012, 01:44 PM   #39
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By the time fixed costs eat up the majority of our income, an extra $500/month represents a large fraction of our discretionary income.

While my retirement calculations do only vary a few hundred a month in extra spending by taking SS early or late, due to all the other factors, you are increasing the size of a substantial COLA'd annuity by 75%. For both DW and I SS will run about $1776/month at 62 or $3109/month at 70, each. It is a big impact.
This is why you must perform the financial calculations accurately, instead of the quick-and-dirty SWAG like saying "I'll need that $500 more." That's why I poured so much investigation and work into the spreadsheet that was referred to upthread.

In order to get $2000/mo at 66, you have to forego $1500/mo for 4 years, from 62 to 66. If you don't collect it, then clearly you also cannot spend it. So what if you do something similar, where you likewise do not spend it.

Suppose you do the simple method of saving the early payment until the later age and then make withdrawals from the savings account to supplement the SS benefit, so that the total of "withdrawal + SS check" is equal to what the "later" benefit would be. This is the "Quick BE table" sheet on that spreadsheet.

If the savings account earns zero interest, it would grow to $72,000 (48 * $1500) by the time you hit 66. If you then withdraw $500/mo, it will take 144 months (12 years, or age 78) until the account is depleted. Note that your total income will be the same $2000 that SS would have paid -- $1500 SS plus $500 withdrawal.

If you earn 3% it will last for 193 months (16 years, or age 82).

If you earn 7% it will last for 582 months (49 years, or age 115).

To earn 0% is easy. How difficult would you consider it to be to get 3%? 7%?

FWIW, BND is currently yielding 3.1%. My own portfolio of preferred stocks and various income ETF's & CEF's is currently yielding a tad above 7%.

PSA, a well-regarded REIT company, yields 3% and has a number of preferreds yielding around 6%.
O, another well-regarded REIT, yields 4.5%, and has preferreds around 6.5%
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Old 05-04-2012, 04:17 PM   #40
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...(snip)...
FWIW, BND is currently yielding 3.1%. My own portfolio of preferred stocks and various income ETF's & CEF's is currently yielding a tad above 7%.

PSA, a well-regarded REIT company, yields 3% and has a number of preferreds yielding around 6%.
O, another well-regarded REIT, yields 4.5%, and has preferreds around 6.5%
A bit of a quibble here -- current TIP real rates are negative. 5yr TIPS are at -1.2% and 10yr TIPS at -0.35%. So the market is saying future real returns will be subpar.
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