Opinois needed: I delayed SS, now 63 = Mistake?

[ERD50]

Originally Posted by Sam

Want2retire,

I agree with you, but I have exceptions to the general rule.

Let's say I'm 62 today, I have no need for SS because I'm withdrawing from my saving/retirement account at a percentage I'm comfortable with.

I'm now 63, the market tanks. My portfolio took a 10% hit in inflation adjusted dollar. I bite my tongue, and continue to uncomfortably withdraw from my account at a higher percentage.

I'm now 64, and the market tanks again. I'm no longer comfortable with the now too high percentage rate of withdrawal. I would start my SS now to reduce the burden on my portfolio.

Would you do the same?

My only problem with that, is we can only know that the market has *been* down for the past two years, we don't know that it will continue.

So, after a two year bear, you might decide to supplement with SS to reduce your withdraw rate. Then, the next four years, the market looks rosy, and you wonder what all the excitement was about.

I'm just not sure I would know what to do two years into a bear. I would know what I *should* have done looking in the rear-view mirror. But that is easy (but so *hard* to avoid!)

-ERD50

[Sam]

And that's fine. Everyone has a different level of "courage". I was just giving an example. You could extend that example to 3, 4, or more years.

When I look at the historical data for 1973 and 1974 (2 consecutive very bad years), I know I had to do something.

[SecondCor521]

Orchidflower,

I can't tell from your post, but you actually can start taking your Social Security any time after your early retirement age. For every month your SS start date is before your full retirement age, your monthly benefit amount is cut by a certain percentage. For every month your SS start date is after your full retirement age, your monthly benefit amount is increased by a certain percentage. However, your monthly benefit amount will not increase after age 70.

Also, I don't think there is any way to tell the government that you changed your mind and want to start taking at age 62 last year, and would they please pay you the year of SS you missed. It's water under the bridge now.

I have no advice as to when you should start taking it except I would definitely start it by age 70, since there is absolutely now benefit to starting it beyond that date.

2Cor521

[Independent]

Originally Posted by Sam

Want2retire,

I agree with you, but I have exceptions to the general rule.

Let's say I'm 62 today, I have no need for SS because I'm withdrawing from my saving/retirement account at a percentage I'm comfortable with.

I'm now 63, the market tanks. My portfolio took a 10% hit in inflation adjusted dollar. I bite my tongue, and continue to uncomfortably withdraw from my account at a higher percentage.

I'm now 64, and the market tanks again. I'm no longer comfortable with the now too high percentage rate of withdrawal. I would start my SS now to reduce the burden on my portfolio.

Would you do the same?

I'm pretty sure that this is true:

If you have a crystal ball, and it tells you that market returns are going to be good, then you want to take SS now. This lets you keep more money in the market so you ride it up. If the crystal ball tells you that the market is going down, then you want to defer SS. Get the money out of the market, buy stuff with it today before it shrinks. Meanwhile, your SS benefit grows.

But if that's true, then I think I make a different decision at 64 then you do (maybe I'm reading the post wrong).

If the two years of poor markets after 62 make you think that a sharp upturn is coming, then you may want to get SS now. If the two poor years make you think that the market is going to continue down, then you want to keep deferring.

If the two poor years simply tell you that the market has ups and downs and you don't have a crystal ball, then you don't have any new information about where the market will go in the future. In this case the two poor years shouldn't make you change your plans.

[chinaco]

Taking SS at 62 vs 66.x vs 70 depends on your situation. What other finances you have, other income sources during retirement, Do you have a spouse, expected longevity, etc.

Sorry, but there is not a simple answer. In the end, if you can afford to wait (money wise), you will need to make the decision based on your expectations of what the future holds.

[Bikerdude]

Originally Posted by chinaco

Sorry, but there is not a simple answer. In the end, if you can afford to wait (money wise), you will need to make the decision based on your expectations of what the future holds.

I tend to agree with this. If I defer SS at 62 and at 63 we enter a bear market (20% down or more) I would apply for SS. The average bear market lasts about 18 to 24 months, so I would protect my capital by reducing my SWR.

Doing this would help to avoid the dreaded down years early in my retirement IMHO. But each person must decide on their own. No "one size fits all" in this decision.

[cute fuzzy bunny]

So if we were having a huge bull market, would you immediately apply for SS so that you could reduce your withdrawals and your invested portfolio could continue to grow at the bull market rate?

[megacorp-firee]

There are very few irreparable decisions we make in life (like taking that last drink before driving or pulling a trigger ...). This is definately NOT one of them. If you take it now, you didn't miss out on much. If you take it later, ...well that could be ok too.
As stated many times previously,
... if you NEED the money ... take it now
... if you WANT the money ... take it now
otherwise flip a coin.
There are many pros and cons on either side. In the long run, unless you are in conditions 1 or 2 above, .. it really won't make an appreciable difference. Do what feels right to you and don't look back. IMO, I differ from most in that I am not as analytical and a .01 difference is not signifcant to me. One should not exceed the precision of the model. It only leads a lot of agonizing and your hair hurting.
my 2 cents worth

[kaneohe]

As many have said, this decision may depend on your particular circumstances such as your financial status and longevity in your genes.
There are various mathematical models, some of mind-blowing complexity, but in the end, they depend on your actual lifetime which cannot really be known for sure. In the end, I decided, perhaps irrationally, that I wanted
to diversify my risk by taking SS early. If I had a short life, then I got something back instead of nothing. If I had an average life, I probably did as well as the person who took it late. If I had a long life, then I didn't do as well as the person who started it late but I did get a long life.

The worst thing in my mind would be to live a short life and get nothing back from SS which is the gamble you take when you decide to take SS
at 70, for example. Maybe that's why I don't walk under ladders either.
Irrational and superstitious. I prefer to think of it as risk diversification
----to reduce the risk of a bad outcome rather than going for the highest
return.

[Martha]

Originally Posted by kaneohe

The worst thing in my mind would be to live a short life and get nothing back from SS which is the gamble you take when you decide to take SS
at 70, for example.

Well, you will be dead and it won't matter to you. And on your death bed I will bet you won't give a thought to any failure to take SS early.

[kaneohe]

Originally Posted by Martha

Well, you will be dead and it won't matter to you. And on your death bed I will bet you won't give a thought to any failure to take SS early.

Very true, Martha, but this is the "leaving the bigger pile" school of thought while I can still think.

[cute fuzzy bunny]

I guess if death resolves everything, get your revolver out now. Anything that might have come after that then becomes irrelevant?

SS payments will provide about 18k/yr (in todays dollars) at about the time my son is going off to college, and the deferral of withdrawals from our portfolio means a larger nest egg to leave him when we're gone.

But I guess if you've got no kids and cant think of anyone you want to leave your money to...

[Bikerdude]

Originally Posted by cute fuzzy bunny

So if we were having a huge bull market, would you immediately apply for SS so that you could reduce your withdrawals and your invested portfolio could continue to grow at the bull market rate?

Interesting point. However, I would say I'm not interested in protecting myself from good times. So I would say no, I would not apply for SS in a bull market and 8%/yr. plus inflation is a fair return for waiting.

[cute fuzzy bunny]

Interesting. So in a bull market where returns are pulling 15-25+% per year for an average of 7 years vs the social security adjustment of ~8%, you'd sit tight. But in a bear market of -10-15% for an average of 3 years, you pull the trigger?

[EngineeringMyFinances]

You haven't provided a lot of information about your personal situation. How long can you live on your savings if you don't take retirement?

As others have pointed out, you have not screwed yourself out of benefits because your future monthly benefits will be larger and eventually you'll break even and come out ahead. Unless you're hit by a bus in which case you won't care anyway.

Being a woman with a long-lived heredity, chances are that you'll collect more over your lifetime by waiting. On my blog, I have a relevant post on delaying Social Security that concludes that it compares favorably to immediate annuities and the 4% SWR. At your age and life expectancy 4% may be too high.

Some of the other commenters have mentioned the possibility of a down market cutting into your nest egg. If you delay taking Social Security, you can change your plans and go back to work for a few years. On the other hand, if you take SS now and go back to work, then you'll have to start giving back benefits if your wages exceed $12,960.

[cute fuzzy bunny]

Originally Posted by EngineeringMyFinances

As others have pointed out, you have not screwed yourself out of benefits because your future monthly benefits will be larger and eventually you'll break even and come out ahead.

Statistically, you wont. Odds are that at best you've got a 50/50 chance, since the whole thing is geared to pay the same amount regardless of when you start, providing you die at the average age. However, since people who live longer tend to live a LOT longer, they skew the results. the data says that reinvestment of the benefit or reduction of withdrawals when taking it early means that you have about a 10-15% chance of making more money if you take the benefit later vs earlier. A nice benny if you live to 100. All 1% of you. *shrug*

Unless you're hit by a bus in which case you won't care anyway.

A perspective that continues to interest me. If nothing that has gone before or after matters after you're dead, then nothing matters. Spend it all now, have a great time, and reserve a few hundred bucks for a revolver or step in front of a bus.

Seriously. If theres an afterlife, its value probably has no differential based on how much money you spent and how much you enjoyed your life while you lived it. Will God step forward and turn you back from the pearly gates because you took a few extra trips, ate some better food and lived in a nicer house?

If there is no afterlife, then it's all valueless. Either way...enjoy it while it lasts.

I went through all of this in my "changing the balance of quality of life and financial independence" thread. If the best I've come down to is fervently protecting a marginal difference in quality of life when i'm in my 90's or worrying for 5 decades about whether I'll make it or not, then the whole plan sucks.

I mean...dont be stupid about it...but also dont be stupid about it.

My parting thought...

[haha]

Originally Posted by cute fuzzy bunny

I mean...dont be stupid about it...but also dont be stupid about it.

My parting thought...

You wouldn't be drinking would you?

[EngineeringMyFinances]

Statistically, you wont. Odds are that at best you've got a 50/50 chance, since the whole thing is geared to pay the same amount regardless of when you start, providing you die at the average age.

Life expectancy for a 63-year-old female is almost 84. Cross-over point for lifetime benefits is before the age of 81 when comparing benefit starting ages of 70 Vs 63. And what is the probability that you'll die when you reach your average age? For a 65-year-old, the probability of dying during any particular year in the future is less than 5%. Meaning the probability that you'll die at an other-than-average age is greater than 95%.

However, since people who live longer tend to live a LOT longer, they skew the results.

So you're saying that if I looked at a distribution curve of when people die, most would be before the average age because there's a few who live an extraordinary long time. What is your source for this? By how much do median and average life expectancies differ?

... if you live to 100. All 1% of you.

According to Social Security Administration 2003 mortality data, a 65-year-old female has a better than 2% chance of reaching 100.

... and reserve a few hundred bucks for a revolver ...

Given your approach, something you should consider. Just in case you turn out to be unlucky enough to live longer than average. I'm guessing your withdrawal rate is well above 4%. How does your withdrawal rate compare to the chart on my blog?

I mean...dont be stupid about it...but also dont be stupid about it.

Stupid is as stupid does.