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Old 05-04-2012, 03:19 PM   #41
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 3,801
Originally Posted by rayvt View Post
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%
I think this is the thread where I said I needed a 5.8% rate to make early and FRA SS a wash for me at 92, my nominal planning age. But I don't think that really considers the COLA. That's really a 5.8% real rate, so perhaps more like 8.8% is needed to match the COLA as well. I haven't done a quick calc on that number, though my full retirement sim does include inflation.

We'll probably take DW's SS early and mine at 70 so that we'll have a larger survivor's benefit. The probability of that one hitting age 92 is decent between us.

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