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I thought the SS breakeven age was 78 for men?
Old 05-02-2012, 04:37 PM   #1
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I thought the SS breakeven age was 78 for men?

I sat down and did some simple math. This is for a male, no dependents and no spouse to consider. My age choice to start collecting is based upon my choice not providing for anyone else.

At the SSA site I got my annual SS amount for age 62 and 66. I calculated what I'd get each year to age 75 and allowed nothing for COLA. Doing the straight math I start to receive more around approximately 74 years and 8 or 9 months if I wait to start at age 66 vs 62.

I have read this is setup so that a male's breakeven point is just under 78 years. Did I overlook something? Seems breaking even just before 75 is a big difference than just before 78. A few months earlier or later OK but 3 years? The math is quite simple I wonder if I am missing something?

Thanks.
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Old 05-02-2012, 04:45 PM   #2
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Maybe the site you used assumed that you would work until 66 if you started benefits at 66?

I think the formula is .75*(48+n) = 1.00 * n

Where
1.00 = benefit starting at 66
0.75 = benefit starting at 62
n = months beyond 66 until "breakeven"
48 = months from 62 to 66

If I've got the formula correct, n = 144 months or 12 years.

Of course this assumes 0% real interest.
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Old 05-02-2012, 05:07 PM   #3
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Originally Posted by Independent View Post
Of course this assumes 0% real interest.
It also assumes:
- that you will get to age 75 (or whatever)
- that $1 (in today's terms, assuming full COLA) at age 62 is worth no more to you than that same $1 at age 66
- that "getting the largest total amount from the system that I can" is important to you.

I know a guy at my work who is 61 and has 33 years service. He could leave tomorrow with a pension of 66K. I know for a fact that he has at least a million saved, and no dependents. He's also 60 pounds overweight and has had other health issues, and probably won't live past 75-78. He doesn't really enjoy his job much any more, having been sidelined several years ago after standing up to one boss too many. I asked him why he doesn't retire, and he told me that he is hanging on for another 2 years so he can get the maximum pension (35 years service) of 70K. It's actually important to him that he ticked every box on that particular bingo card. I wonder if he imagines that a heavenly choir will sing for him on that magic day.

(Sorry for the off-topic rant, but this is meant to be about *early* retirement, darn it!)
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Old 05-02-2012, 05:34 PM   #4
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After I posted this thread I looked in my SS folder in my filing cabinet. I found some papers and a note about a SS spread sheet I downloaded that calcs this stuff. It is a pretty complex spreadsheet and I'm a novice at them but I think I can follow it. That is until I look in detail at the columns for different ages for taking SS at 62 vs 66. Here's a link.

https://docs.google.com/spreadsheet/...nc&hl=en#gid=0

You can look at the numbers in the example and see if it makes sense. I downloaded it to my pc and then it allows you to plug in your actual numbers for 62 and 66. My note says I found this here at ER.

I'd appreciate any comments. Per this spread sheet the breakeven point is out into 78 or 82 for me. I'm confused!
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Old 05-02-2012, 06:05 PM   #5
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could very well be 75 these days. I remember doing this a long time ago and concluding something like 78 also as crossover point. I'm sure in those days the time value of $$ was more than today and that I assumed some return for those 4 earlier yrs. That would have pushed the crossover point out in time.
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Old 05-02-2012, 07:04 PM   #6
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Last time I charted 62, 66 & 70 the break even was about 78 to 80...
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Old 05-02-2012, 09:21 PM   #7
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Last time I charted 62, 66 & 70 the break even was about 78 to 80...
That is about what I come up with.

Social Security Benefits Calculator
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Old 05-02-2012, 11:18 PM   #8
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Thanks, that SS calculator link is pretty easy and fast to substitute different ages and ROI percentages. 79 is the point to break even with a 0% ROI and with 1.5% it is 80. Unless you expect to live well into your 80's or beyond, taking SS at 62 seems to be a more certain outcome for someone without a spouse.
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Old 05-03-2012, 07:17 AM   #9
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Originally Posted by veremchuka View Post
Unless you expect to live well into your 80's or beyond, taking SS at 62 seems to be a more certain outcome for someone without a spouse.
Or for those whose spouse is impacted by GPO.

In fact, if your spouse is impacted by GPO and you want to provide maximum financial protection for him/her, taking SS at 62 actually increases the protection by maximizing the size of your residual FIRE portfolio should you die young. (GPO can eliminate a spouse's access to SS based on your earnings so having a spouse impacted by GPO means having someone you want/need to provide financial protection for but can't use SS to do so.)

Didn't mean to derail veremchuka but the GPO issue is a special case we seldom bring up when discussing when to start SS but I think it effects a number of posters here.
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Old 05-03-2012, 10:00 AM   #10
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I while back I posted a calculation for breakeven at age 62 and above: Calculating SS break even point

You might find some good comments here on the SS breakeven idea plus even a spreadsheet solution - 5 pages of comments!

FWIW, I started SS last month. Life is good.
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Old 05-03-2012, 10:04 AM   #11
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Quote:
Originally Posted by veremchuka
After I posted this thread I looked in my SS folder in my filing cabinet. I found some papers and a note about a SS spread sheet I downloaded that calcs this stuff. ..My note says I found this here at ER.
This business of writing notes to ourselves because we know we won't remember something is interesting. I do it myself a lot. The most difficult part is remembering that you have made a note.
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Old 05-03-2012, 11:32 AM   #12
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I just threw together an excel sheet and came up with the following:

This ignores inflation because it assumes COLA takes care of that (or at least the majority of it)

For me...
Early = 62
Full = 67
Late = 70

Strictly looking at the cash payout from SS the following:
Early is most ideal from age 62 to 77.8
Full is most ideal from age 77.9 to 81.5
Late is most ideal from age 81.6 to infinite

So from a gross payout perspective only... if you think you'll die before age 78 you're best off taking early. Otherwise you're best to go with late, unless you really feel like age 79 has your number!

Now, I wanted to make it more realistic by including another factor... that is what taking social security (or not taking it) does to your other retirement vehicles.

Lets assume that the money in your 401K would continue to grow at an average rate of 4% above inflation (about 6.5-7% overall) if it wasn't touched... this means that taking early SS leaves extra money in your 401K that is assumed to grow at 4% above inflation.

Factoring that into the mix we get the following changes:
Early is most ideal from age 62 to 84.4
Full is most ideal from age 84.5 to 87.8
Late is most ideal from age 87.9 to infinite

I think sometimes people forget that when you are taking social security early... you're freeing up additional savings to grow (ideally faster than inflation)...when factoring that in, taking early retirement becomes a lot more appealing.

Just for fun... if you were a real dare devil and invested your 401k entirely in equities and wanted to assume a 7% return (average historical equities return) above inflation on the money left in 401K because you took Early SS... you'd have to live to 112 for it to make more sense to take late retirement over early.
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Old 05-03-2012, 11:44 AM   #13
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I'm of the mindset that taking early SS is the way to go (unless you really can't survive without the late SS check and plan to work until 70)... because according to strictly the gross payouts, if I waited for late and died at 71, I would have missed out on roughly $175,000 (today's dollars) and would have collected next to nothing.

In order to miss out on that much by collecting early, I'd have to reach age 92 or above (where late finally paid out about 175K more than early)... at which point I definitely got a lot out already anyways.

If you are the FIRE type, you probably have a very healthy retirement account or taxable income that would benefit a lot from an extra 8 years of growth on the money you didn't need to take out because you chose early SS... under those circumstances... even if you lived to be 90-100, the total payout between early and late is almost the same, but if you died before 85 you would have lost out big on taking SS benefits late.
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Old 05-03-2012, 11:45 AM   #14
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[QUOTE=EvrClrx311;1191282]
Late is most ideal from age 81.6 to infinite
QUOTE]
This is my plan. So I guess the late choice will work for me.
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Old 05-03-2012, 11:53 AM   #15
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[QUOTE=MuirWannabe;1191291]
Quote:
Originally Posted by EvrClrx311 View Post
Late is most ideal from age 81.6 to infinite
QUOTE]
This is my plan. So I guess the late choice will work for me.
touche
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Old 05-03-2012, 11:54 AM   #16
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This business of writing notes to ourselves because we know we won't remember something is interesting. I do it myself a lot. The most difficult part is remembering that you have made a note.
Oh the fix for that is easy. I just write a note to myself not to forget to remember that I wrote a note about whatever it is that I wanted to remember not to forget.
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Old 05-03-2012, 11:57 AM   #17
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Oh the fix for that is easy. I just write a note to myself not to forget to remember that I wrote a note about whatever it is that I wanted to remember not to forget.
you could always do what the guy in memento did and tattoo it on your chest
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Old 05-03-2012, 01:11 PM   #18
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That is about what I come up with.

Social Security Benefits Calculator

Thanks! I have that all programmed into my retirement sim, but this is a nice simple calculator. I get so tired of seeing crossover ages quoted without a rate of return. For my nominal age 92 demise, I only have to make a 5.8% return to make taking early SS better than taking it at FRA. Of course there is then the problem of sequence of returns and other disasters...
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Old 05-03-2012, 01:54 PM   #19
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Originally Posted by veremchuka View Post
I sat down and did some simple math. This is for a male, no dependents and no spouse to consider. My age choice to start collecting is based upon my choice not providing for anyone else.

At the SSA site I got my annual SS amount for age 62 and 66. I calculated what I'd get each year to age 75 and allowed nothing for COLA. Doing the straight math I start to receive more around approximately 74 years and 8 or 9 months if I wait to start at age 66 vs 62.

I have read this is setup so that a male's breakeven point is just under 78 years. Did I overlook something? Seems breaking even just before 75 is a big difference than just before 78. A few months earlier or later OK but 3 years? The math is quite simple I wonder if I am missing something?

Thanks.
This is how I figure it. My wife will get around 9000 a year starting at age 62. If she waits to 66 she will get 12000. A 25% difference. If she starts at 62 and lives to 78 she will have collected 144,000. (16yrs x 9000 = 144000). If she starts at FRA of 66 and lives to 78 she will have collected 144000. (12yrs x 12000 = 144000). Thus break even at 78. Everybody has their own situation but we are not waiting. A bird in the hand is worth two in the bush.
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Old 05-03-2012, 02:42 PM   #20
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EvrClrx311 made some interesting observations about allowing tax deferred money grow by taking SS early. This is where it can get really complex - RMD at 70 1/2. By taking distributions from a rollover IRA from 62 to 66 or 70 it will allow the SS benefit to grow while reducing the RMD. I'm not able to do the analysis to figure that aspect into this but typically they say it is best to defer paying taxes as long as possible. That would favor taking SS at 62 to not have to take distributions from tax deferred accounts until 70 1/2.

Not having a spouse or dependents or the added consideration of these government or public service issues makes my decision a simple one.





Sorry, I wrote this in notepad and I can't get the bold off the above.
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