Social Security

[almost there]

"How many of those choking deaths happen between 62 and 80 or so?"
Not sure, but...

"choking is the fourth leading cause of unintentional injury death. Of the 5,051 people who died from choking in 2015, 2,848 were older than 74"

 

[joeea]

Am in great health. Thats why I am taking it early.
Plan to pull on it for over 30 years.
And those 8 yrs will produce $288000 in my case.
And between 70 and 92 it would grow to
just over $600k with a 3 1/2% return.
Not sure how I could ever make that up waiting to take it at 70.
Would have to live a long long Guinness book time...............

Either your math is wrong, or you are forgetting that between 70 and 92 you could have a significantly higher inflation-protected benefit coming in each month and not realizing that you don't have to make up $600k.

Those who believe in breakeven analysis find that breakeven occurs in the early 80s, not a long long Guinness book time.

"Nonetheless, the decision to delay Social Security can be evaluated based on the implicit rate of return it creates by choosing to delay, and over longer time horizons – when clients may “need the money most” as they have more years of retirement expenses to cover in the first place – the return of the Social Security delay becomes quite compelling. In fact, the return is generally far superior to any risk-adjusted returns that can be achieved over comparable time periods by the available alternatives, whether investing in risk-free bonds, growth equities, or buying a commercially available annuity. And because the system is indexed to inflation, its real returns will be maintained even if inflation rises, and will only become better if longevity continues to increase as well. In fact, ultimately the decision to delay Social Security delivers the best results when there is either unexpected inflation, unusually long longevity, or especially bad market returns, which are the exact three scenarios that traditional portfolios are the least effective at managing, making the decision to delay Social Security the ultimate form of “anti-fragile” triple hedge!"

https://www.kitces.com/blog/how-del...ong-term-investment-or-annuity-money-can-buy/

 

[joeea]

"How many of those choking deaths happen between 62 and 80 or so?"
Not sure, but...

"choking is the fourth leading cause of unintentional injury death. Of the 5,051 people who died from choking in 2015, 2,848 were older than 74"

It's sad. It indicates that 2,203 died from choking while younger than 74. If choking is a major concern, one might worry about the impact on a survivor of claiming a smaller benefit early, and choking young.

This is getting morbid.

 

[almost there]

Your right, its about even at 92 - 94 ish.
The only difference in my case is the xtra 2k a month coming in for 22 yrs.
V.S.having it in the bank the entire time....

Choking is of no concern to me. The point is, none of them planned on it.

 

[joeea]

Your right, its about even at 92 - 94 ish.

Hmm... I'd have to see the math. Seems high ish.

 

[jollystomper]

Excellent! You have done well to get yourself in that position where you can choose.

What do you feel you are gaining in exchange for giving up this $100k?

Nothing based on logic or maximizing potential income.

Since my longevity is not guaranteed, and I have little family history to go on, it is the irrational joy of getting more passive income earlier into my greedy little hands , when I am relatively more healthy and more able/willing to spend it or invest it.

I'm one of the fortunate ones who hit the maximum SS contribution from my paycheck for 35 years, so even my reduced benefit is pretty good.

It is similar to why I have a relatively conservative AA and larger cash stash than many would say I need... so that I do not need to sell equities at "down" times in the market and can sleep well at night.

 

[joeea]

Nothing based on logic or maximizing potential income.

it is the irrational joy of getting more passive income earlier into my greedy little hands , when I am relatively more healthy and more able/willing to spend it or invest it.

Okay. So this irrational joy is worth $100k to you. We all get to choose how to spend our money.

I'm one of the fortunate ones who hit the maximum SS contribution from my paycheck for 35 years, so even my reduced benefit is pretty good.

It is similar to why I have a relatively conservative AA and larger cash stash than many would say I need... so that I do not need to sell equities at "down" times in the market and can sleep well at night.

Well done!

 

[pb4uski]

Am in great health. Thats why I am taking it early.
Plan to pull on it for over 30 years.
And those 8 yrs will produce $288000 in my case.
And between 70 and 92 it would grow to
just over $600k with a 3 1/2% return.
Not sure how I could ever make that up waiting to take it at 70.
Would have to live a long long Guinness book time...............
And it would be in my account, not SS's...
There is no right answer. Thats why we have options.
Just posting the other side of waiting till 70 coin.
No harm, no foul.

Your analysis is wrong if you plan to receive 30 years of benefits. With 3.5% return, taking at 70 wins by a wide margin. I dunno your numbers but these are for someone with a FRA of 66 and a PIA of $1,000/month. If you're 66 and your PIA is $2,000/month then just double the numbers.

Even with 3.5% interest the crossover is 85... not in your 90s.

	Cash flows			Accumulated bal @ 3.5%
	75% PIA at 62	132% PIA at 70		75% PIA at 62	132% PIA at 70
62	9,000	0		9,156	0
63	9,000	0		18,633	0
64	9,000	0		28,441	0
65	9,000	0		38,593	0
66	9,000	0		49,100	0
67	9,000	0		59,974	0
68	9,000	0		71,229	0
69	9,000	0		82,879	0
70	9,000	15,840		94,935	16,115
71	9,000	15,840		107,414	32,794
72	9,000	15,840		120,330	50,056
73	9,000	15,840		133,698	67,923
74	9,000	15,840		147,533	86,415
75	9,000	15,840		161,853	105,554
76	9,000	15,840		176,674	125,364
77	9,000	15,840		192,014	145,866
78	9,000	15,840		207,890	167,086
79	9,000	15,840		224,323	189,049
80	9,000	15,840		241,330	211,781
81	9,000	15,840		258,933	235,308
82	9,000	15,840		277,152	259,659
83	9,000	15,840		296,008	284,861
84	9,000	15,840		315,525	310,946
85	9,000	15,840		335,724	337,944
86	9,000	15,840		356,631	365,887
87	9,000	15,840		378,269	394,808
88	9,000	15,840		400,664	424,741
89	9,000	15,840		423,844	455,722
90	9,000	15,840		447,834	487,787
91	9,000	15,840		472,665	520,974
92	9,000	15,840		498,364	555,323
Nominal	279,000	364,320
PV @ 3.5%	168,626	187,899

 

[CardsFan]

I have done a similar analysis, with similar results, except that I use 64 as my earliest SS date, primarily because at that is the earliest age my SS + DW SS + my pension fully covers our planned living expenses, and our savings/investments become extra money to spend/build an estate from. From opensocialsecurity, the projected lifetime difference of taking it at 64 is around $100K less that the optimal strategy... which is not a lot to sway me strongly to delay to 70. Or, perhaps I should say, there would have to be additional reasons beyond this difference to make delaying until 70 a strong case in my situation.

Curious, did you used the default discount rate of 0.16% (current TIPS rate, per the author), or did you selected advanced options and change it?

I have found it makes a big difference. For example, in our case:
Comparing at age 65 to the optimal

3% discount: $5,000 difference (about 1%)
2% discount: $19,000 difference (about 2.4%)
1% discount: $42,000 difference (about 4.7%)
Default (0.16%): $68,000 difference (about 6.6%)

So, if our real rate of return over the rest of our (statistical) lives is 3% or greater, it just doesn't matter.

And, if it really is just 0.16%, that simply means the heirs inherit $68,000 less than they MIGHT have.

These analyses leave me with the feeling I am either measuring with a micrometer and cutting with an ax, or measuring with a yard stick and cutting with a laser.

Statistically, there is little difference. And, the unknown (and unknowable) will have the greatest weight on the outcome.

 

[almost there]

pb4uski where is the $93778 of interest from the $82,879.00 (your example at 69)
(22 yrs at 3.5% at 92)) I must be missing something. lol lol screw lose perhaps...

 

[pb4uski]

Looks good. (example above) But I do not see the $93678.00 in interest from 22 yrs / 3.5% of $82,879 from 69? Would that not make it $592042 V.S $555,323 at 92?
Just having fun. Something to BS about.

The $498,364 and $555,323 are the accumulated balance if you invested all the SS cash flows in the left columns in an account that earned 3.5%/annum... so the $498,364 includes interest on the $82,879.

The balance for each year is the prior balance * (1+3.5%) plus the current year cash flow * (1+3.5%)^.5 .... since the cash flows are received evenly through the year.

Math is hard. Do you now agree that the crossover with 3.5% interest is age 85? and not some Guinness Book of Records age?

 

[almost there]

Yea, just didnt see where it was added in. Was not sure how 3.5% came into play if you take it at 70. My example banked 62-70 at 3.5%. Not possible taking it at 70.
Nominal would then be $372678 VS $364320 at 92. Using your example.
And yes, math still kicks my butt... lol lol

 

[jollystomper]

Curious, did you used the default discount rate of 0.16% (current TIPS rate, per the author), or did you selected advanced options and change it?

I have found it makes a big difference. For example, in our case:
Comparing at age 65 to the optimal

3% discount: $5,000 difference (about 1%)
2% discount: $19,000 difference (about 2.4%)
1% discount: $42,000 difference (about 4.7%)
Default (0.16%): $68,000 difference (about 6.6%)

So, if our real rate of return over the rest of our (statistical) lives is 3% or greater, it just doesn't matter.

And, if it really is just 0.16%, that simply means the heirs inherit $68,000 less than they MIGHT have.

These analyses leave me with the feeling I am either measuring with a micrometer and cutting with an ax, or measuring with a yard stick and cutting with a laser.

Statistically, there is little difference. And, the unknown (and unknowable) will have the greatest weight on the outcome.

Thanks - I used the default. Interesting. When I change it to 3%, the difference for my situation mentioned above drops to $14K.


As you mentioned, this only impacts what our heirs would inherit.

 

[pb4uski]

.... Was not sure how you used 3.5% taking it at 70?

I don't understand your question. Please elaborate.

 

[pb4uski]

Maybe this will help you.

	Cash flow difference	Accumulated difference at 3.5%
62	-9,000	-9,156
63	-9,000	-18,633
64	-9,000	-28,441
65	-9,000	-38,593
66	-9,000	-49,100
67	-9,000	-59,974
68	-9,000	-71,229
69	-9,000	-82,879
70	6,840	-78,821
71	6,840	-74,621
72	6,840	-70,274
73	6,840	-65,775
74	6,840	-61,118
75	6,840	-56,299
76	6,840	-51,310
77	6,840	-46,148
78	6,840	-40,804
79	6,840	-35,273
80	6,840	-29,549
81	6,840	-23,625
82	6,840	-17,493
83	6,840	-11,147
84	6,840	-4,578
85	6,840	2,220
86	6,840	9,257
87	6,840	16,539
88	6,840	24,077
89	6,840	31,878
90	6,840	39,953
91	6,840	48,310
92	6,840	56,959

 

[almost there]

This started when I mentioned taking SS at 62 and banking it. Then pretend you take it at 70 (stop banking it) . Using your example you would have $82,879 at that point (70). And at 3.5% it would add up over the years. And be there in the event of un planned spontaneous combustion.
For whomever....didn't get caught up in the blast.

 

[joeea]

And be there in the event of un planned spontaneous combustion.

LOL! Lightning, choking, spontaneous combustion. You've got a lot of worries going on!
Good luck. Hang in there.

 

[Floridatennisplayer]

I took in May at my current age of 64. Just went to a funeral today of a high school friend who was in fantastic shape and had an unexpected heart attack last week. Ugh!!!

I have a zero withdrawal rate. Zero........ “Oh, but you could get a higher check at age 70!” So freaking what.

I am enjoying my life...playing tennis daily, spending time with my grandkids, nice lunches with the family, reading the Word daily, playing my guitars, bike rides, sunshine, visiting friends, cruising in my Benz, heading back and forth to FLA. Whoopee....I might get an additional $300 a month if I wait until 70.

My mother is 87. An additional $300 or $3,000 a month is meaningless at that point. It would not change her life, make it better at all......or mine.

I honestly think so many people here place so much importance on ..hey...you are giving up three or four hundred a month by taking your SS early! Honestly, will that make a difference in your life?



Now awaiting death threats.....lol.

 

[almost there]

Agree, my dad is 85 and could give a crap about a few 100's a month.
He's in good shape. But still lives below CD interest and SS.
Go figure...........

 

[Navigator]

Hmm... I'd have to see the math. Seems high ish.

Actually, using historical rates of returns from 1928 forward, the break even point is typically in the mid 90s, although it can vary quite a bit from that. That doesn’t include taxes, which would lower the crossover age a bit. Of course, with the stock market priced so high, one would expect a younger crossover age. How much younger? Ask again in 30 years.

 

[pb4uski]

Actually, using historical rates of returns from 1928 forward, the break even point is typically in the mid 90s, although it can vary quite a bit from that. That doesn’t include taxes, which would lower the crossover age a bit. Of course, with the stock market priced so high, one would expect a younger crossover age. How much younger? Ask again in 30 years.

Just remember, since the cash flows increase with inflation, you should use a real rate of return, which will be lower by the amount of inflation... historically a tad below 3%.

 

[joeea]

Actually, using historical rates of returns from 1928 forward, the break even point is typically in the mid 90s,

We'll have to agree to disagree unless we can see the math.

although it can vary quite a bit from that.

Okay, it can vary.

That doesn’t include taxes, which would lower the crossover age a bit. Of course, with the stock market priced so high, one would expect a younger crossover age. How much younger? Ask again in 30 years.

I'll try to remember to do that.

So you are comparing an inflation-protected, survivor included, guaranteed source of income to stock market historical rates of return from 1928 forward. Okay.

 

[RunningBum]

Do people think not worrying about a few hundred a month is in any way a sound basis for financial decisions? I think I'll listen to the posters who are actually talking about optimizing finances, LOL. Most of us got here by watching our money for expenses like this. Why casually toss that aside now? If nothing else I'll blow that dough, or have more to pass on.

And btw if we're telling one-off experiences, my parents took SS at 62. Now 85 and 83 and in good physical health, they are very worried about running out of money, because my mom will probably need to move into a memory care place, which is quite expensive. It would've worked out better for them to take SS later. They will deplete their assets in a few years, and if Mom is still alive she will go on Medicaid. Dad will get to keep about $126k of assets, but that will start running out for his own expenses. A higher SS benefit would cover him a whole lot longer.

 

[almost there]

In that case, would they have not completely run out of money years earlier if they took it later? Sounds like they needed it for living expenses....And that they still have some assets today, as they took it early.

 

[RunningBum]

In that case, would they have not completely run out of money years earlier if they took it later? Sounds like they needed it for living expenses....And that they still have some assets today, as they took it early.

They would've cut into less than half of their assets between 62 and 70 by spending down their investments instead of getting SS income. After that, SS income would've covered a much greater part of their expenses so they probably wouldn't have even spent the dividends and interest off the rest of their investments.

I don't know how you can say what it sounds like, with so little information given. I'm not giving more details about their finances, but I'll tell you that you are wrong.

As cautious investors, they are probably at the break even point now, which means every year they would be further ahead with a higher SS benefit. Had they died before now, we would've inherited less. But our concern is not what we inherit, but rather than they don't run out of money, or be stressed about the possibility like my dad is.

For those in "fat" FIRE, this is less of a concern. But for those in "lean" FIRE like they did, it's a real thing.

23 years ago, I wasn't nearly as knowledgeable about these issues to give any guidance to them. Now it's water under the bridge so there's no point telling them what they should've done then. We're dealing with the cards they chose, and will make it work one way or another, but it won't be as easy on reduced early SS benefits.