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Old 09-07-2016, 07:58 PM   #161
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Everyone here understands that "low return environment" is a forward-looking term.
I don't think that's true Michael. But I'm sure many do.
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Old 09-07-2016, 08:25 PM   #162
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I'm taking it at 70 to leave DW the most money I can (I'm older than her and have had a heart attack). I do get a pension, but it goes to 50% when I die. One of the ways I'm covering that gap is to take SS at 70.
Every situation is different. I started SS at 62 to provide DW the most financial protection. She's impacted by GPO and cannot collect any of my SS if I predecease her.
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Old 09-07-2016, 09:57 PM   #163
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Originally Posted by NW-Bound View Post
From what I have seen posted here, people will go through your sensical suggested calculations and say "the chances of me dying at 70, 80, etc... are zero, and the chance of me living till 100 is 100%". Heck, people even thought of life after death, well not quite but something like a head transplant.

So, it's back to their original premise of delaying till 70.

Lol. Yep, if i want to prolong my life by transferring my head to a younger body, ill take SS at 70 haha. But if i Want to enjoy life and stay on my current body - i will get it at 62



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Old 09-07-2016, 10:12 PM   #164
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Over the years I have written several times similarly to this article. There are all kinds of special situations which are very important to the individuals who could be affected by these other than ordinary conditions. But the idea that the general case does not present a dominant strategy seems strange to me. It is insurance, at a cheap rate, and with the worlds most secure insurance company. Nevertheless, I am sure that these threads will continue to show up, and that many people who have no immediate need for the money, are not in a special category, and who are not deathly ill, will continue ti take SS at 62. One thing that is very often given inadequate weight is the prevailing level of interest rates on long term TIPS.

It is just something about how the human brain weighs outcomes and information. If there is a general idea to be gathered from this, I think it is that we tend to overweight dramatic or available but far from determinative factors. As Bayesians emphasize, the base case should carry a heavy weight.

Ha
I think its the old psych experiment of immediate gratification: eat the marshmallow now, or wait until the experimenter returned (about 15 minutes later), and earn two marshmallows.

With SS you can have it now.... or wait and get more per month later.
It's like the candy at the checkout line.
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Old 09-08-2016, 02:02 AM   #165
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The reason most people take their social security before age 65 is they need the money!

They were not able to save enough money when they were working full time to cover their day to day expenses from the standard 4% withdrawal.

Yes, many people on this board are quite proud of yourself and had great careers, made wonderful financial decisions, saved lots of money and had great skills and a wonderful career and were able to retire early and can support yourself strictly on pension and savings and can wait until you are seventy to collect Social Security. (And you are convinced you will live to 100.) But that is not typical.

Most Americans are thrown out of the work force well before they are seventy years old. Maybe their spouse is ill. Or they are ill, or just can't get the energy to do a full time job and a two hour commute anymore. Or they are fired, like me, for being old and due to age discrimination in hiring, just can't find another career job.

Collecting Social Security at age 62 is completely logical for one very good reason- Most people at age sixty two plus are not working in their peak income job anymore and NEED THE MONEY NOW!
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Old 09-08-2016, 04:25 AM   #166
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Old 09-08-2016, 05:01 AM   #167
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Maybe the next thread concerning a SS question we can just have a boilerplate statement on post #2 saying:

It depends
YMMV
Everyone is different
Do some research
Run FireCalc
The break even is 80

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Old 09-08-2016, 05:36 AM   #168
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The break even point might be 80 but by taking SS at 62, it allows taking less from the IRA which then keeps growing.
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Old 09-08-2016, 06:16 AM   #169
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The break even point might be 80 but by taking SS at 62, it allows taking less from the IRA which then keeps growing.
EXACTLY!

Missing in the discussion about whole topic about when to take Social Security is the fact that most people who are actually retired and don't take Social Security until they are 70 years old, are pulling money out of their taxable 401K and IRA funds like crazy at an accelerated rate to cover their expenses until they reach seventy. As that money is pulled out, you are paying taxes and it and the principal $- that could have been earning all kinds of investment return, is gone.

So the break even date of 78 years old is actually much later based on the stock market returns that are lost as more principal $$ is pulled out of the retirement accounts. VS. if you collect Social Security at age 62, you don't have to withdraw as much money out of your IRA and 401K during the years you are 62-70.
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Old 09-08-2016, 06:19 AM   #170
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The break even point might be 80 but by taking SS at 62, it allows taking less from the IRA which then keeps growing.
Should say "taking less from the IRA which hopefully keeps growing." SS is guaranteed to grow between 62 and 70. Not so with an IRA. So again, it depends.
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Old 09-08-2016, 07:08 AM   #171
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The reason most people take their social security before age 65 is they need the money!

They were not able to save enough money when they were working full time to cover their day to day expenses from the standard 4% withdrawal.

Yes, many people on this board are quite proud of yourself and had great careers, made wonderful financial decisions, saved lots of money and had great skills and a wonderful career and were able to retire early and can support yourself strictly on pension and savings and can wait until you are seventy to collect Social Security. (And you are convinced you will live to 100.) But that is not typical.

Most Americans are thrown out of the work force well before they are seventy years old. Maybe their spouse is ill. Or they are ill, or just can't get the energy to do a full time job and a two hour commute anymore. Or they are fired, like me, for being old and due to age discrimination in hiring, just can't find another career job.

Collecting Social Security at age 62 is completely logical for one very good reason- Most people at age sixty two plus are not working in their peak income job anymore and NEED THE MONEY NOW!
When you make statements of assumptions and act as if they are facts, you need to back them up with references or they'll be disregarded. I disregard much of what you just wrote. While I do believe most people take SS at 62 because they didn't save enough, I totally reject your comments about most people being thrown out of the work force. I suspect most people who start at age 62 were blue collar workers who can't do that kind of work anymore, or who worked 30+ years and retired with a pension (gov't workers, cops, people like that) and want to supplement their pension with their SS.

Collecting SS at age 62 is completely logical if you've figured out the options and it makes sense for you. Collecting SS at age 62 would be about the stupidest financial decision I could make, so where's the logic in that?

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Originally Posted by Forced to Retire View Post
EXACTLY!

Missing in the discussion about whole topic about when to take Social Security is the fact that most people who are actually retired and don't take Social Security until they are 70 years old, are pulling money out of their taxable 401K and IRA funds like crazy at an accelerated rate to cover their expenses until they reach seventy. As that money is pulled out, you are paying taxes and it and the principal $- that could have been earning all kinds of investment return, is gone.

So the break even date of 78 years old is actually much later based on the stock market returns that are lost as more principal $$ is pulled out of the retirement accounts. VS. if you collect Social Security at age 62, you don't have to withdraw as much money out of your IRA and 401K during the years you are 62-70.
Have you even read the thread you started? These issues are discussed, in detail, in the posts above. And you come in with "what's missing in these discussions is...". Hyperbole won't get you too far around these parts.
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Old 09-08-2016, 07:36 AM   #172
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Should say "taking less from the IRA which hopefully keeps growing." SS is guaranteed to grow between 62 and 70. Not so with an IRA. So again, it depends.
And we all die one day. It could be at age 69 and 364 days so yes it depends. Everybody's situation is different another it depends. Are you married or single another depends and I'm not talking about the adult diapers.
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Old 09-08-2016, 08:37 AM   #173
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Originally Posted by Forced to Retire View Post

Missing in the discussion ....

So the break even date of 78 years old is actually much later based on the stock market returns that are lost as more principal $$ is pulled out of the retirement accounts. VS. if you collect Social Security at age 62, you don't have to withdraw as much money out of your IRA and 401K during the years you are 62-70.
I'm going to unsubscribe from this thread now.

I had commented on the IRA withdrawal/tax issue 20 minutes after your original first post (reply #4) as have a several others.

If you don't read the responses........
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Old 09-08-2016, 09:34 AM   #174
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Here's a link to someone that's calling it what some (I think) wise people have been calling it...longevity insurance.


Most People Take Social Security At The Worst Possible Age | Marotta On Money
While it's likely a good article,
"because most people (approximately 48% of women and 42% of men) start taking Social Security at age 62", is inherently inaccurate since either 42% or 48% of anything is most of the whole. Largest portion? Likely.
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Old 09-08-2016, 01:10 PM   #175
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Originally Posted by Forced to Retire View Post
EXACTLY!

Missing in the discussion about whole topic about when to take Social Security is the fact that most people who are actually retired and don't take Social Security until they are 70 years old, are pulling money out of their taxable 401K and IRA funds like crazy at an accelerated rate to cover their expenses until they reach seventy. As that money is pulled out, you are paying taxes and it and the principal $- that could have been earning all kinds of investment return, is gone.

So the break even date of 78 years old is actually much later based on the stock market returns that are lost as more principal $$ is pulled out of the retirement accounts. VS. if you collect Social Security at age 62, you don't have to withdraw as much money out of your IRA and 401K during the years you are 62-70.
It sounds like many folks here have given up on Forced to Retire. In case he hasn't given up on himself, I'll attempt to partially refute his statement about taxes paid on qualified money taken out INSTEAD of taking early SS.

Played correctly, many folks here have pulled money out of 401(k)s or IRAs and payed no or very low taxes. NOT taking SS early is one of the many tools in the not-paying-much-tax tool box. It lowers taxable income in a given year NOT to have SS money and lowers RMDs later on. It's part of a LONG TERM strategy. It's difficult to do it perfectly because none of us has perfect knowledge (what will tax rates be later? How much will your qualified money grow to? Will I kick early or late?) It's all part of the game. And TAXES are a big part of the game. Folks here (myself, not so much) have learned to play the tax game very well, indeed.

I am currently paying only to the top of the 15% bracket as I pull IRA/401(k) money out to either live on or convert to Roth. I'll take SS at 70. In doing so, I believe I will ultimately pay less tax in the long run - though in the long run, we are all dead.

FWIW I think Forced to Retire is probably correct that it's better for him to take SS early - he needs the money. More or less "end of story" but YMMV.
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Old 09-08-2016, 01:27 PM   #176
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I know a person with $600K to his name and he is just turning 62 next month. He is trying to figure out what to do. He can't work any longer in any job because of an injury and arthritis. So no more income from employment.

His minimum spending needs is $4000 a month. His SS at age 62 would be $1300 a month and at age 70 would be $2200 a month in 2016 dollars

Option One: Wait until he is seventy to collect Social Security and use his IRA Money ($600K) to pay for 100% of his $4000 a month living expenses from age 62-70. That would be $48,000 a year or $384,000.00 over time period, with additional uncertain amounts for inflation. To pay for his expenses without Social Security he would have to take an annual inflation adjusted withdrawal of 8% a year. So is it likely the principal of his $600K in his IRA would shrink in the coming 8 years.

But once he starts collecting Social Security at age seventy, he can drop his withdrawal to 3% of the 2016 figure, because of the larger Social Security Check for waiting until he is 70. But it is highly likely he will not have $600K in his IRA account in eight years because of this 8% annual withdrawals.

OPTION TWO: Take Social Security at age 62 and collect $1300 a month and take 4% withdrawals with minor adjustments for inflation and needs for the rest of his life. (His withdrawals are smaller because of getting Social Security)


Which option is best for my friend:

Wait until seventy and take huge annual 8% withdrawal per year for the next 8 years but smaller 2-3% withdrawals starting at age 70, or start to collect Social Security at age 62 and take smaller checks but only four percent withdrawals going forward? Your choice.
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Old 09-08-2016, 01:36 PM   #177
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How about.....ask you friend if he needs a room-mate?

Is he single? Maybe he would be open to this.....after all, it sounds like you could jhelp each other !!!!

Then you BOTH could win!!!! Lessen expenses for both, and make your money last a L-O-N-G time!!!

Or if you REALLY want to game the system, get "married". Then you'd be spouses with all that implies SS wise!!!!! (just kidding....you'd also be exposed to any judgements, liens or medical bills too).....
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Old 09-08-2016, 01:47 PM   #178
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I did read about a year ago that many people assume they will work until 65 but then illness ( themselves) or a spouse or getting laid-off happen and they find themselves not having enough $ hence taking SS earlier then originally planned.
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Old 09-08-2016, 02:10 PM   #179
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I know a person with $600K to his name and he is just turning 62 next month. He is trying to figure out what to do. He can't work any longer in any job because of an injury and arthritis. So no more income from employment.

His minimum spending needs is $4000 a month. His SS at age 62 would be $1300 a month and at age 70 would be $2200 a month in 2016 dollars

Option One: Wait until he is seventy to collect Social Security and use his IRA Money ($600K) to pay for 100% of his $4000 a month living expenses from age 62-70. That would be $48,000 a year or $384,000.00 over time period, with additional uncertain amounts for inflation. To pay for his expenses without Social Security he would have to take an annual inflation adjusted withdrawal of 8% a year. So is it likely the principal of his $600K in his IRA would shrink in the coming 8 years.

But once he starts collecting Social Security at age seventy, he can drop his withdrawal to 3% of the 2016 figure, because of the larger Social Security Check for waiting until he is 70. But it is highly likely he will not have $600K in his IRA account in eight years because of this 8% annual withdrawals.

OPTION TWO: Take Social Security at age 62 and collect $1300 a month and take 4% withdrawals with minor adjustments for inflation and needs for the rest of his life. (His withdrawals are smaller because of getting Social Security)


Which option is best for my friend:

Wait until seventy and take huge annual 8% withdrawal per year for the next 8 years but smaller 2-3% withdrawals starting at age 70, or start to collect Social Security at age 62 and take smaller checks but only four percent withdrawals going forward? Your choice.
Your friend is ~$1400/month (not $700 as I first said) short in option 2. You're comparing apples to partially eaten apples. He better figure out how to live on less than $4000/month.
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Old 09-08-2016, 02:15 PM   #180
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Originally Posted by Forced to Retire View Post
I know a person with $600K to his name and he is just turning 62 next month. He is trying to figure out what to do. He can't work any longer in any job because of an injury and arthritis. So no more income from employment.

His minimum spending needs is $4000 a month. His SS at age 62 would be $1300 a month and at age 70 would be $2200 a month in 2016 dollars

Option One: Wait until he is seventy to collect Social Security and use his IRA Money ($600K) to pay for 100% of his $4000 a month living expenses from age 62-70. That would be $48,000 a year or $384,000.00 over time period, with additional uncertain amounts for inflation. To pay for his expenses without Social Security he would have to take an annual inflation adjusted withdrawal of 8% a year. So is it likely the principal of his $600K in his IRA would shrink in the coming 8 years.

But once he starts collecting Social Security at age seventy, he can drop his withdrawal to 3% of the 2016 figure, because of the larger Social Security Check for waiting until he is 70. But it is highly likely he will not have $600K in his IRA account in eight years because of this 8% annual withdrawals.

OPTION TWO: Take Social Security at age 62 and collect $1300 a month and take 4% withdrawals with minor adjustments for inflation and needs for the rest of his life. (His withdrawals are smaller because of getting Social Security)


Which option is best for my friend:

Wait until seventy and take huge annual 8% withdrawal per year for the next 8 years but smaller 2-3% withdrawals starting at age 70, or start to collect Social Security at age 62 and take smaller checks but only four percent withdrawals going forward? Your choice.
He has $600K now which he can safely withdraw at a rate of roughly 4% per year, so $16K per year or $2000 per month.

Option 2 (take SS now, at age 62): Won't work out. He says he needs $4K per month, but his age 62 SS check is $1300 per month and he can only safely withdraw $2000 per month, so he'll have a total of $3300 per month. He'll have to make cuts to get down to $3300/mo in spending regardless of which option he chooses.

Option 1 (wait until 70 to take SS): If he withdraws at $3300 per month (same as he gets under Option 2) for 8 years. Then, when he's 70, he'll have $283K left in his account (assuming it grows at zero above inflation, which makes things simple, isn't unlikely, and is conservative). Withdrawn at 4% per year, it will give him $944 per month. Added to his SS check ($2200 per month), he'd have $3100 per month from age 70 onward.

Option 1 is what I would choose. Easily. After age 70 a higher percentage of my monthly check would be guaranteed by the government and entirely inflation adjusted, not subject to market ups and downs, and I can't outlive it. With Option 1, the SS check provides about 2/3rd of the amount he needs too live on every month, with Option 2 it covers just about 40%. That may mean that under Option 1 he'd feel comfortable with a little more annual variability in his returns (i.e. a higher percentage in equities) than he might under Option 2. That would be expected to lead to higher overall returns.

But your friend needs to cut his expenses.

Note--edited to correct a math error.
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