Laurence Kotlikoff - Maximize my SS.com

[Cut-Throat]

Not to continue to but this article summarizes my thoughts. Others I know will disagree, however there is a link in the article to a study with some good charts.

From the Article: "Each family’s situation is unique and my analysis may not be appropriate for your situation.I recommend that you get advice from a competent financial adviser before making this important decision."

And of course this guy's occupation is a Financial Adviser.

 

[pb4uski]

The really strange thing is that he doesn't mention at all that if he dies first that his wife will 'inherit" his higher benefit and it will be even higher if he delays and will increase the cash flow they receive on a jointly which will increase the chance that he will reach the breakeven point. (not that I think BEP analysis is the optimal way to look at that decision).

 

[rayvt]

What'd ya know? The SS @ 70 still wins, but by an "astounding" 0.5% increase in spending level! Due to the Bernicke's model, either one would result in an increase of 50% of initial spending over the flat spending model, and that's more impressive.

So, do it at 62, or do it at 70. It does not seem to make a lot of difference.

Funny how a system designed to be "actuarially neutral" somehow always seems to turn out to be actuarially neutral. Damn math.

 

[Ed_The_Gypsy]

I never doubted it. My decision was based on personal concerns that could change.

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[NW-Bound]

So, do it at 62, or do it at 70. It does not seem to make a lot of difference.

Funny how a system designed to be "actuarially neutral" somehow always seems to turn out to be actuarially neutral. Damn math.

It was surprising that if we are going to both live till 100, then both of us drawing at 62 or both drawing at 70 makes no difference. We are at the same age.

But if I am going to drop dead in my 70s, which is likely, then my wife drawing at 62 followed by myself at 70 is a better strategy than both drawing at 62. It would allow us to spend another $4K/year, according to FIRECalc, and for my wife to continue to spend more till she's 100.

PS. However, if I allow for the spending to be reduced when I pass, then the advantage of delaying my SS at 70 is nullified again.

 

[tryan]

In my head I always figured a married couple should tap the smaller SS at the FIRST opportunity (grabbing the reduced bennie AND the 50% spousal bennie). Then tap the larger account later (like 70-72 yo). No spread sheets ... just what I figured would max the bennie.

The free Bedrock calulator confirmed this as the max bennie for us (tap at 62 yo for the smaller account ... 70 for the larger).

 

[jebmke]

It was surprising that if we are going to both live till 100, then both of us drawing at 62 or both drawing at 70 makes no difference. We are at the same age.

But if I am going to drop dead in my 70s, which is likely, then my wife drawing at 62 followed by myself at 70 is a better strategy than both drawing at 62. It would allow us to spend another $4K/year, according to FIRECalc, and for my wife to continue to spend more till she's 100.

PS. However, if I allow for the spending to be reduced when I pass, then the advantage of delaying my SS at 70 is nullified again.

At or about 64 I have to decide on SS, Medicare and my Pension. I'm thinking of going 100% survivor on pension and then jumping off a cliff.

 

[pb4uski]

Here's the math for taking SS at 70 vs 62. Let's say that your FRA is 67 and your FRA benefit is $1,000/month. If you claim at age 62, your benefit will be about 30% lower, or $700/month. If you claim at 70 your benefit would be 24% higher, or $1,240/month.

If you forego SS at 62 and delay to 70 then you will have forgone $700/month for 8 years, or $67,200 and you gain a $540 COLAed benefit for the rest of your life. An argument could be made that you give up more than $67,200 because of COLA, ok... so if you bake in a 2.75% annual COLA, the $67,200 becomes $74,036.

According to immediateannuities.com, $74,036 of premium at age 70 (male) would buy a $467/month non-COLA lifetime benefit, so by delaying SS you get an extra $73 per month plus COLA on the whole $540/month.

So now the question becomes whether you would be willing to pay $74k for a $540 COLAed monthly annuity benefit. IMO if your health is good that's a good deal.

I just saw an interesting article by Allen Roth that says the same thing I was trying to say in this post, albeit with different numbers.

Deferring Social Security Benefits Will Set You Up for the Long Run – AARP

 

[travelover]

I just saw an interesting article by Allen Roth that says the same thing I was trying to say in this post, albeit with different numbers.

Deferring Social Security Benefits Will Set You Up for the Long Run – AARP

Confirmation bias

 

[pb4uski]

Perhaps... I think of it more is just independent confirmation... I don't see a whole lot of experts suggesting that people take SS at 62 if they can afford to wait.....but I have found both Allen Roth and Mike Piper's stuff over the years to be pretty solid.

 

[travelover]

Perhaps... I think of it more is just independent confirmation... I don't see a whole lot of experts suggesting that people take SS at 62 if they can afford to wait.....but I have found both Allen Roth and Mike Piper's stuff over the years to be pretty solid.

I'm pullin' yer chain.

 

[pb4uski]

I know.

 

[rayvt]

So now the question becomes whether you would be willing to pay $74k for a $540 COLAed monthly annuity benefit. IMO if your health is good that's a good deal.http://blog.aarp.org/2015/09/02/reframing-the-social-security-decision-2/

IMHO, that's on the same order as buying bread at the day-old store.
Does Warren Buffett buy bread at the day-old store?

Almost anybody who has the resources to forego SS for 8 years (62 to 70) has so much that the additional $540/mo is trivial.

$2M at 4% is $6667/mo. Adding $540 to that is not going to change your lifestyle.

$500K at 4% is $1667/mo. Adding $540 to that will significantly improve your lifestyle (assuming your heath at 70 is still good enough to do all the things you want to do.) But not as much as having had the $750/mo from age 62.

The people who can afford it don't need it.
The people need it can't afford it.

 

[samclem]

Almost anybody who has the resources to forego SS for 8 years (62 to 70) has so much that the additional $540/mo is trivial.

Lots of people who can wait until age 70 don't think $540/mo (for as long as you live, adjusted up for inflation) is trivial. Some of those people are here.

 

[prose3589]

IMHO, that's on the same order as buying bread at the day-old store.
Does Warren Buffett buy bread at the day-old store?

Almost anybody who has the resources to forego SS for 8 years (62 to 70) has so much that the additional $540/mo is trivial.

$2M at 4% is $6667/mo. Adding $540 to that is not going to change your lifestyle.

$500K at 4% is $1667/mo. Adding $540 to that will significantly improve your lifestyle (assuming your heath at 70 is still good enough to do all the things you want to do.) But not as much as having had the $750/mo from age 62.

The people who can afford it don't need it.
The people need it can't afford it.

My social security estimates show an increase of almost $1000 a month from 62-70. That is no chump change in my opinion.


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[pb4uski]

.....$500K at 4% is $1667/mo. Adding $540 to that will significantly improve your lifestyle (assuming your heath at 70 is still good enough to do all the things you want to do.) But not as much as having had the $750/mo from age 62....

The $540 a month that would change your lifestyle is based on a $1,000/month benefit at age 67 and $700 at 62 and $1,240 at 70.

If I had $500k and was in good health and longevity, I would be willing to forgo $67,200 ($700/month *8 years... and use 13.5% of my $500k) to increase my pension from $700/month to $1,240/month with a COLA for the rest of my life. That's a huge increase for a modest give up IMO.

 

[daylatedollarshort]

Lots of people who can wait until age 70 don't think $540/mo (for as long as you live, adjusted up for inflation) is trivial. Some of those people are here.

I think both the trivial and nontrivial points of view are represented here which is why these threads never reach consensus. I am pretty sure there at least some posters here who would not run out of money if they lived to be 200 no matter when they took SS.

For those worried about longevity insurance, then waiting to claim may be the best choice. Or for those with a volatile portfolio who would like additional relatively stable and secure income, waiting may also be a good choice. For some of us the decision is not cut and dried. It all depends when we die and what happens to benefits and tax rates in the future, which we only know after our choices have been made.

 

[hnzw_rui]

Curious, if someone continues working past age 70 earning higher inflation-adjusted income (e.g. via a Personal Care Agreement for a parent or sibling) compared to some of the lower earning years, does that increase benefits even if you've already started claiming SS?

 

[youbet]

It all depends when we die and what happens to benefits and tax rates in the future, which we only know after our choices have been made.

And, for a few, it depends on whether one spouse is impacted by GPO. That was the decision maker for us..........

 

[jabbahop]

Does anyone know if the recommendation to delay depends on the state of the market? I am wondering whether it ever makes sense to take ss earlier if you are in a major down market. For example would you be better off taking early ss in 2008 rather than taking money out of the market?


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[pb4uski]

Opportunity cost is certainly a factor but you need to make an assumption on that.

Chillin' by the lake today... suspect that you are too.

 

[REWahoo]

Does anyone know if the recommendation to delay depends on the state of the market? I am wondering whether it ever makes sense to take ss earlier if you are in a major down market. For example would you be better off taking early ss in 2008 rather than taking money out of the market?

I don't know what Kotlikoff anyone else recommends, but it sure made sense to me to take SS early when I was in precisely that situation in late 2008. I was relieved to be able to slow the bleeding from my retirement savings, which at that time was my only source of income.

It was absolutely the right thing for me to do psychologically. I've never looked back and have zero regrets for not waiting. YMMV...

 

[jabbahop]

Chillin' by the lake today... suspect that you are too.

Actually with my son in the carolinas looking at a couple of colleges. Interestingly it is cooler here than in vermont this weekend.

 

[timo2]

I just received an email from the 'Maximize My Social Security' regarding the recent changes to SS. "[FONT=&quot]Our engineers are modifying our software in anticipation of these changes to Social Security."[/FONT] The email also listed the following changes to SS as of Oct 29, 2015
"

1. For those becoming 62 after this year, deeming is extended through age 70. Deeming is the requirement that if you take a spousal benefit or a divorcee spousal benefit you need to also take your retirement benefit and vice versa. This leaves you with roughly the larger of the two benefits.
2. Starting in 6 months, no one can collect a spousal, child, or divorcee spousal benefit based on the work record of a worker while that worker's retirement benefit is in suspension.
3. No one whose retirement benefit is in suspension can collect an excess spousal or excess widow(er) or excess divorcee spousal or excess divorcee widow(er) benefit.
4. Those who suspend their retirement benefits can no longer receive their suspended retirement benefits in a lump sum payment."

 

[pb4uski]

Interesting.. so it looks like the benefit to singles of file and suspend are being eliminated too (item 4). I'll study this more intently in a couple years as DW approaches 62 and again when we approach FRA, but I suspect the decision will be the same but just a tad less beneficial than before.