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Re: Social Security at 62, 66 or 70?
Old 03-19-2007, 09:04 PM   #41
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by Cute Fuzzy Bunny
Indeed. Pick any social security publication. The benefit amounts paid are determined to pay out, on average, exactly the same amount regardless of when you start receiving the benefits. Provided you die on time. Too soon, you lose. Too late, they lose.

I'm quite sure a couple of actuaries were involved in these determinations, although I cant say for sure any of them wrote something as an individual....

Of course, if you're one of the 5-10% of people who'll live longer than the mortality tables say you will,
This is more like I expected. In fact, a minute of searching on the SS site gave me this:
“There are disadvantages and advantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is that your benefit may be permanently reduced. Each person's situation is different, so make sure you contact Social Security before you decide to retire.”

I asked the question because of your comment, “This study seems to imply that almost everyone will be dead before they'd get any benefit out of taking a larger payment later.” Maybe you said that because you believe that only 5-10% of people will live longer than their life expectancy.

I figure that about half the people will live longer than their “life expectancy”. I also figure that some people know they have serious health problems, and they’ve already decided that they’re better off starting SS early. So the people who are actually wondering about this question have a slightly longer than average life expectancy.

To me, delaying SS amounts to buying a little longevity insurance. The Spitzer article tells me that if my after-inflation, after-tax, expected return is 3.5-4.5%, then the insurance is “free”. Above that, it costs me something. It’s not a lot of money either way.

If I’m in great shape financially (like you), I can afford to take the higher risk/return investments, and then self-insure the mortality risk. My heirs will thank me. If I’m operating closer to the edge, then I should think about whether that extra 33% in my SS benefit would make me sleep better, especially if it turns out I’m pretty long-lived.

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Re: Social Security at 62, 66 or 70?
Old 03-19-2007, 09:32 PM   #42
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Re: Social Security at 62, 66 or 70?

I said what you quoted because the study I linked said it. If you follow the spitzer calculations (and the graphs that the actual paper has but this linked document lacks certainly help), and you correlate that with the IRS mortality tables...90-95% of people WILL be dead before they'd see a significant benefit and thats almost all on the latter end of their 80's and early 90's.

Everybody has their own set of criteria for the situation. I'd just sure like everybody to look at all the risks/rewards, rather than the half truths, untruths and hamstrung diatribe materials.

I'd further postulate that if you're so close in your planning that a few hundred bucks a month extra in your 80's/90's makes you sleep better...you might consider working an extra year or two on the front end instead of counting on the united states annuity program still being there and still paying you what you expected.

I'd probably feel differently if I was already shoestringing an ER and in my early 60's. Or if my wife was making six figures and I wanted an excuse to blow a bunch of money right now in my 50's.
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Re: Social Security at 62, 66 or 70?
Old 03-19-2007, 11:21 PM   #43
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Re: Social Security at 62, 66 or 70?

CFB,

Well written posts, I think that is a very fair presentation of both sides.
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Re: Social Security at 62, 66 or 70?
Old 03-20-2007, 08:59 AM   #44
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Re: Social Security at 62, 66 or 70?

If you are interested in leaving a pile of money to your heirs, I would suggest that you take SS at age 62. If however, you don't care about piling money up and leaving it to your heirs, I would delay to age 70 and focus on income streams - IOW - How much you get to spend.

Take a simple example - At age 62, a person would receive $15K per year S.S. - Delaying to age 70 - the amount goes to 30K a year.

Age 62 - takes the $15K and invests at 6% for 8 years piling up 148K

Age 70 - receives $30K per year.

The person that took S.S. at age 62 is going to have tap the $148K for $15K per year make up the difference by not delaying.

That is a 10% withdrawal rate on that $148K at age 70 - for possibly 25-30 years. Something I'm not going to bet on!

I'm also ingnoring the taxes that would have to be paid on the gains by taking it at 62, just to keep it simple. Not to mention the spousal benefit of delaying to age 70.
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Re: Social Security at 62, 66 or 70?
Old 03-20-2007, 09:42 AM   #45
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Re: Social Security at 62, 66 or 70?

And you didnt read the article I posted, apparently.

For starters, most people wont get twice as much at 70 than at 62. My statement says $1124 at 62, $1979 at 70. $13488 and $21348...pretty far from a 15k to 30k jump.

You're also extremely unlikely to live to 95-100.

You're also not going to hit a break even until your late 80's, even with your hamstrung scenario. Hmm, a .25-.50% higher safe withdrawal rate from 45 years old until 85, or a lower withdrawal rate through that 40 year period followed by a few extra hundred bucks a month in my 90's, if I live that long. Tough tradeoff.

You're also ignoring the rest of the retirement portfolio that you've presumably got and maintained for 20-40 years of retirement that you've experienced by the time you're in your late 80's, which has grown larger due to reduced withdrawals from taking the benefit early.

Once again, a worst case scenario on one side, and none of the benefits of the other side, with some funny inaccurate numbers to attempt to support the case.

The paper I described says that the tax situation is moot for most people.

You accuse ME of not learning or having my mind made up?

Quote:
Originally Posted by Running_Man
Well written posts, I think that is a very fair presentation of both sides.
I'm trying. Not a lot of fun to be labeled the "dont delay social security troll" when i'm not even planning for the benefit to be there when i'm 62. It just bugs me to see someone twist the data and throw out inaccurate information because they're trying to 'win' a debate.

Just tell the truth, use good numbers, be fair to both sides of the equation, and dont be a jerk about it.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 02:04 AM   #46
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Re: Social Security at 62, 66 or 70?

OK, let me set the stage: You are coming up on your 62nd birthday and you need to decide if you are going to take SS at 62 or wait. You have no desire to leave an estate when you die and are reasonably healthy. Your experience and calculations tell you that you need $1979/mo (CPI adjusted annually) to have a reasonable lifestyle from now till you die but you would like to spend more than that the next several years if possible. You have a portfolio worth $256,500 in a TIRA and your SS matches CFB’s

Quote:
Originally Posted by Cute Fuzzy Bunny
My statement says $1124 at 62, $1979 at 70. $13488 and $21348.
What do you do? Well your portfolio will produce $10260/yr ($855/mo) CPI adjusted annually using a 4% SWR, which should last 30 yrs. That $855/mo plus SS of $1024/mo will provide you with the $1979/mo you are looking for.

OR you could wait and start SS at age 70 which will provide you CPI adjusted $1979/mo from age 70 until you die, but what about the time between age 62 and age 70? Well you still have $256,500 which you decide to divide into eight equal portions (for the eight years between 60 and 70) giving you $2671.87/mo to spend. You also decide to put the money in a money market account so that all eight portions keep up with inflation. Now granted if you do this you will have zero money to pass on when you die (provided you live longer than 70yo) but you do get to spend more in the next 8 years than if you took SS at 62. Also if you delay taking SS your income after age 70yo is protected by the full credit and faith of the US government (which is kind of like investing in T-bills), unlike the taking SS at 62yo plan where 60-75% of your portfolio would be invested in stocks.

With that example explained let me provide another very related example. In this example the $1979/mo number is your bare-bones retirement number, i.e. the number you absolutely need to have. But you would like a budget of $3979/mo so that you also have plenty of discretionary money. Also you have a $856,500 portfolio and the same SS options as above. If you take SS at 62 and use a 4% SWR on your portfolio you will get your $3979/mo but if you delay taking SS until 70yo then you get the same income stream after 70yo but you get $4671.87/mo (CPI adjusted) to spend between age 62 and 70. This has the same advantages as were pointed out above and the $600k of your portfolio that is producing your discretionary money has the same chance of surviving you that your entire portfolio has if you take SS at age 62.

Think about it.

BTW, for the CFB

Quote:
Originally Posted by Cute Fuzzy Bunny
You're also extremely unlikely to live to 95-100.
If you were 62 and running FIRECalc how long would you put in for your portfolio to last?

Quote:
Originally Posted by Cute Fuzzy Bunny
Just tell the truth, use good numbers, be fair to both sides of the equation, and dont be a jerk about it.
I don’t think you qualify on most of these criteria.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 06:53 AM   #47
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by jdw_fire
OK, let me set the stage: You are coming up on your 62nd birthday and you need to decide if you are going to take SS at 62 or wait. You have no desire to leave an estate when you die and are reasonably healthy. Your experience and calculations tell you that you need $1979/mo (CPI adjusted annually) to have a reasonable lifestyle from now till you die but you would like to spend more than that the next several years if possible. You have a portfolio worth $256,500 in a TIRA and your SS matches CFB’s

What do you do? Well your portfolio will produce $10260/yr ($855/mo) CPI adjusted annually using a 4% SWR, which should last 30 yrs. That $855/mo plus SS of $1024/mo will provide you with the $1979/mo you are looking for.
A quick, confused question - - Is the $1979 you will need, BEFORE taxes? Because if it is after taxes, I don't see how you can do it without working a few more years.

(Following the discussion with interest)
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 07:34 AM   #48
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Re: Social Security at 62, 66 or 70?

Don't forget your SS earnings may be taxed at a substantial rate,
and I'm sure it's only going to get worst.
Tom
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 08:39 AM   #49
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by jdw_fire
I don’t think you qualify on most of these criteria.
Maybe not, but I also dont come up with hokey ideas based on a bunch fallacious assumptions, then take it personally and whine about it for two frickin years when someone shoots holes in it. Get over it man! Criticizing your ideas is not a criticism of YOU!

As far as your example...once again loaded with assumptions and not the scenario I've discussed. Just one where you can try to 'win' the debate.

Its as easy as 1-2-3...plug all your data into firecalc, put in your social security statement figures for 62 and 70 where appropriate, and see that your lifetime withdrawal rate is higher and your survival rate is better at 62. Mine says that I could spend an extra 5k a year from age 45 to infinity, if I were willing to count on the social security income...which I dont.

Or review the well written spizter article that conclusively demonstrates that you're unlikely to outlive your benefit of waiting until even 65 years old, if you want it in a limited state fishbowl. Or the article written by the advocacy group for retired people that says with few exceptions, you should take it early.

And all this talk of weighing down the portfolio/swr/ss early situation by amplifying the additional delayed social security benefit? Poppycock. Theres absolutely nothing to suggest that the federal government will pay you the full amount 10, 20, 30, 40, 50 years from now...for those insisting on a 120 year run in order to make a delay scenario look better.

"Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because by 2042 the payroll taxes collected will be enough to pay only about 73 percent of the scheduled benefits"

Sooo...I think we can quit pretending that the higher payout rate will stick for 40 years. Plenty of current SS recipients are still stinging over the Clinton administrations changes to the CPI calc that cost them a lot of expected money. Wouldnt it suck if you waited and counted on that higher SS figure to live on, then they cut the CPI calc by another 1% like Greenspan was pushing for? You dont need a calculator to figure out the implications of a 1% loss of buying power over this persistent 30-40-50 year lifespan.

The bottom line is that its a truly fixed income, its weighed down by public policy such as a shift to personal accounts and matters of the economy that dont look good, from lower pay increases to the baby boomer retirement wave.

I'll stick with controlling my own money, investing and withdrawing prudently, taking income streams that may or may not be available in the future as soon as they're available, and as far as what age range i'll set for firecalc when i'm 62? About 25 years and the same 4% thats good enough for me right now. When I'm 72 I'll look at it again.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 11:52 AM   #50
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by Want2retire
A quick, confused question - - Is the $1979 you will need, BEFORE taxes? Because if it is after taxes, I don't see how you can do it without working a few more years.

(Following the discussion with interest)
All the monthly numbers (just like the numbers FIRECalc and the famous 4% SWR rule produce) are before taxes.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 12:45 PM   #51
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by Cute Fuzzy Bunny
Maybe not, but I also dont come up with hokey ideas based on a bunch fallacious assumptions, then take it personally and whine about it for two frickin years when someone shoots holes in it. Get over it man! Criticizing your ideas is not a criticism of YOU!
First, this just proves my point about who is "being a jerk about it". Second, what are the "fallacious assumptions" you are refering to? There are people who think it is more important to them to spend more money between the ages of 62 & 70 then to leave an estate when they die. Third, you are the one that seem to be taking it personally. Fourth, I have only been providing examples to this idea for a couple of months not years. And fifth, you haven't shot any holes in the idea, you just change the parameters to make your point (as you did in the post I am responding to).


Quote:
Originally Posted by Cute Fuzzy Bunny
As far as your example...once again loaded with assumptions and not the scenario I've discussed. Just one where you can try to 'win' the debate.
The two examples I presented are not loaded with assumptions, just one, which is that the person making the decision would rather spend more money between the ages of 62 & 70 than leave an estate.

Quote:
Originally Posted by Cute Fuzzy Bunny
Its as easy as 1-2-3...plug all your data into firecalc, put in your social security statement figures for 62 and 70 where appropriate, and see that your lifetime withdrawal rate is higher and your survival rate is better at 62. Mine says that I could spend an extra 5k a year from age 45 to infinity, if I were willing to count on the social security income...which I dont.
Here is where you are changing the parameters in that you change the age of the person to 45 which is very specific to you. On the other hand my example looks at some one making the decision at 62yo, which will happen to everyone who receives SS. Granted I used specific numbers (yours) in my examples to illustrate the point but the concept stays the same if you change said numbers.

Quote:
Originally Posted by Cute Fuzzy Bunny
And all this talk of weighing down the portfolio/swr/ss early situation by amplifying the additional delayed social security benefit? Poppycock. Theres absolutely nothing to suggest that the federal government will pay you the full amount 10, 20, 30, 40, 50 years from now...for those insisting on a 120 year run in order to make a delay scenario look better.
The government is unlikely to change the rules for computing your starting SS benefit when you are 62yo.

My example doesn't insist on a 120yr run, in fact it doesn't insist on any particular lifespan. It just uses the 4% SWR for a portfolio that you said you use.

Quote:
Originally Posted by Cute Fuzzy Bunny
"Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because by 2042 the payroll taxes collected will be enough to pay only about 73 percent of the scheduled benefits"
The old SS is broke argument (see other threads for a hashing of this). First you have to believe that these 25 years in the future estimates are solid enough for you to base a decision you make today. And second, you have to believe that the government would fix SS in the future by cutting benefits to people over the age of 62 (remember you are 62 when you are making the decision to take SS early or postpone it)


Quote:
Originally Posted by Cute Fuzzy Bunny
Sooo...I think we can quit pretending that the higher payout rate will stick for 40 years.
If you actually read my post you would realize that I said the higher payout was for the years you are 62 to 70, after that the payout is the same whether you start taking SS at 62 or 70.

Quote:
Originally Posted by Cute Fuzzy Bunny
I'll stick with controlling my own money, investing and withdrawing prudently, taking income streams that may or may not be available in the future as soon as they're available, and as far as what age range i'll set for firecalc when i'm 62? About 25 years and the same 4% thats good enough for me right now. When I'm 72 I'll look at it again.
You must not be reading the threads that are in essence stating that in the future the stock market will likely produce smaller real returns then it has in the past.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 12:55 PM   #52
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Re: Social Security at 62, 66 or 70?

I am the wife of a CSSR retiree who also has some Social Security coming because of other work. His SS will be reduced because he has a federal pension. Will mine be reduced also if he dies before me, or would I receive the whole amount, since would be the survivor and already receivng a reduced pension? I will be 62 next year and am trying to figure out if taking it then would be in my best interest.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 01:15 PM   #53
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Re: Social Security at 62, 66 or 70?

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Originally Posted by indymom
I am the wife of a CSSR retiree who also has some Social Security coming because of other work. His SS will be reduced because he has a federal pension. Will mine be reduced also if he dies before me, or would I receive the whole amount, since would be the survivor and already receivng a reduced pension? I will be 62 next year and am trying to figure out if taking it then would be in my best interest.
Are you talking about SS based on your work history or his?

The answer will depend on the rest of your financial picture as well as your motivations about increasing your income stream and leaving an estate when you die.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 03:42 PM   #54
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Re: Social Security at 62, 66 or 70?

I will get SS on my own, but I haven't made much, so half of his full SS might well be more than my full SS. However, if what I would receive as a surviving spouse will be less than my full SS, then I think I should wait to take SS. As a widow, my share of his pension is about 2/3 of what we receive now. I need to maximize the SS I would receive as a widow. SS is diminished for my husband because he is a federal retiree even tho his SS is based only on what he made under SS, not as a federal employee. Would my SS based on his work history be reduced as well?
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 04:10 PM   #55
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by Cute Fuzzy Bunny
I think we can quit pretending that the higher payout rate will stick for 40 years.
Giving more thought to the scenario there is a way to get more income for life. Using the numbers from my first example given in this thread and delaying the start of SS till age 70 as in that example but instead of splitting up the $256,500 into 8 equal portions you first split it into two pots, the first equals $189,984 and the second equals $66,516. Then split the first pot into 8 equal portions of $23,748 and put in a MMA for use over the next 8 years to give you an annually inflation adjusted WD of $1979/mo.

You now have three choices as to what to do with the second pot of $66,516 to give you an increased income for life. First you can invest it as you would any portfolio to get you a 4% SWR of $2660/yr adjusted for inflation. Second, you could get $3621.84/yr CPI adjusted from an CPI adjusted immediate annuity. Or third if you want to spend more when you are younger you could buy a fixed payment immediate annuity and get a constant $5093.64/yr which in real terms will decrease as you grow older. Note that all of these three choices produce life time income above the $1979/mo you would get if you took SS at age 62.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 04:21 PM   #56
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by indymom
I will get SS on my own, but I haven't made much, so half of his full SS might well be more than my full SS. However, if what I would receive as a surviving spouse will be less than my full SS, then I think I should wait to take SS. As a widow, my share of his pension is about 2/3 of what we receive now. I need to maximize the SS I would receive as a widow. SS is diminished for my husband because he is a federal retiree even tho his SS is based only on what he made under SS, not as a federal employee. Would my SS based on his work history be reduced as well?
If "half of his full SS" will be "well be more than my full SS" and you want "to maximize the SS I would receive as a widow" you should both delay taking his until he reaches 70yo. This will maximize your benefit both before and after he dies (unless you die first). My statements assume that when you say "half of his full SS" will be "well be more than my full SS" that when you calculated his benefit you took the WEP into account.
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Re: Social Security at 62, 66 or 70?
Old 03-21-2007, 10:52 PM   #57
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by Cute Fuzzy Bunny

Its as easy as 1-2-3...plug all your data into firecalc, put in your social security statement figures for 62 and 70 where appropriate, and see that your lifetime withdrawal rate is higher and your survival rate is better at 62. Mine says that I could spend an extra 5k a year from age 45 to infinity, if I were willing to count on the social security income...which I dont.
I did the 1-2-3 and got some interesting results. I think that part of the disagreement here is related to age. I’m thinking of this decision in terms of someone who is turning 62 in 2007, but I think that CFB is quite a bit younger. SS factors vary by year of birth.

So I put JDW's numbers into FireCalc:
Assets of $256,500, “default” investment mix of 75/25, investment expense of 0.18%, a 95% required success rate, and horizon of 30 years. Then I tried four SS strategies:

a) SS of $13,488 starting in 2007
b) SS of $21,348 starting in 2015

c) SS of $17,984 starting in 2011
d) SS of $23,739 starting in 2015

FireCalc returned 95% safe total income amounts of:
a) 23,684
b) 23,332

c) 24,960
d) 24,738

(a) and (b) are the SS amounts that CFB specified. Starting SS immediately gives an extra $352 of total income per year. It also provides a bigger estate – averaging $140,000 extra if you die at 70.

On the other hand, in the 5% of the scenarios where you exhaust your assets, waiting provides an extra $7,860 annually in those later years (if you’re still alive). It seems that most people would start SS immediately.

(c) starts with the $13,488 in (a), but adjusts it for someone turning 62 in 2007 and taking SS at 66. For people born in 1945, the benefit at age 62 is 75% of the benefit at age 66, so the $13,488 at age 62 would convert into $17,984 at age 66. For this person, deferring SS adds $1,256 per year to the total income. Of course, taking SS immediately gives the bigger estate, typically $70,000 extra for death at 70.

In the 5% of the cases where the assets run out, waiting adds $4,496 to the later years. A person who is focused on early income, and believes FireCalc, waits to 66, especially if he’s concerned about the worst 5% possibility.

Finally, (d) is for the person born in 1945 who waits to 70 to start SS. For this person, the SS benefit at 70 is 132% of the benefit at 66. Hence the $24,738. He can get an extra annual total income of $1,054 by waiting (compared to starting at 62). He gives up maybe $150,000 of estate on death at 70.

In the bad 5% of the cases, he has an extra $10,251 in annual income toward the end of his life. Someone who is very focused on the worst case possibilities goes with this option.


Now CFB is going to say that the Spitzer article says you’re almost always better off by taking the money sooner. I think the key is the “almost”. FireCalc’s safe withdrawal rates are driven by the worst 5% of the investment scenarios. It doesn’t care about “most”, just about “worst”. It’s possible (I can’t see the figures) that Spitzer has a few low interest cases where the waiting option wins. If so, that would be consistent with FireCalc.

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Re: Social Security at 62, 66 or 70?
Old 03-22-2007, 03:19 AM   #58
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by Independent
So I put JDW's numbers into FireCalc:
Assets of $256,500, “default” investment mix of 75/25, investment expense of 0.18%, a 95% required success rate, and horizon of 30 years. Then I tried four SS strategies:

a) SS of $13,488 starting in 2007
b) SS of $21,348 starting in 2015
I am going to start this reply with some housekeeping; first the numbers are not mine, I quoted CFB. Second my example used the monthly figures (which when I checked seemed to be in the proper proportion to each other), however one of the annual figures I quoted from CFB is wrong (since I didn't use them I didn't check them til now). The annual figure for SS if started at age 70 would be 1979*12 = 23748 not 21348. Using the correct SS numbers in FIRECalc and all the other parameters the same as Independent stated gives an annual WD of $23,684 when you start taking SS at age 62 and an annual WD of $24,743 when you start taking SS at age 70 (a $1059 difference which is an ~4.5% increase due to waiting).

The next point I'll make is that since in my example the motivation is to spend more between the ages of 62 & 70 (in real terms) then what will be spent after age 70, FIRECalc is not the right tool to use to try and determine how much more can be spent. Also if you will recall the investment I use for the portfolio when SS is delayed till age 70 is a money market account and not 75% stocks. This difference also makes FIRECalc the wrong tool for this side of the analysis. However what I did to make my point was to use simple mathematics with one conservative (meaning the amount I showed could be spent between ages 62 & 70 is lower than what it would really be available to spend) simplification which was that the MMA interest rate would only be equal to the inflation rate instead of something a little higher. Even with this conservative simplification I showed that a person could spend an inflation adjusted $8314.44/yr more (a 35% increase) between ages 62 & 70 by delaying the start of SS till age 70.

Quote:
Originally Posted by Independent
Now CFB is going to say that the Spitzer article says you’re almost always better off by taking the money sooner. I think the key is the “almost”. FireCalc’s safe withdrawal rates are driven by the worst 5% of the investment scenarios. It doesn’t care about “most”, just about “worst”. It’s possible (I can’t see the figures) that Spitzer has a few low interest cases where the waiting option wins. If so, that would be consistent with FireCalc.
And I think the key to what is better for a given person is said person's motivation. If said person wants to leave as large an estate as possible when they die then taking SS at 62 is probably a good plan. On the other hand if said person's motivation is to spend as much as s/he safely can between the ages of 62 & 70 then consider my example or some variation of it.

One more thought, this discussion and included examples are only addressing a couple of possible motivations. There are other considerations (eg. a desire to maximize survivor's benefits) that can weigh into the decision of when is the best time to start taking SS.
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Re: Social Security at 62, 66 or 70?
Old 03-23-2007, 11:07 AM   #59
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Re: Social Security at 62, 66 or 70?

Quote:
Originally Posted by jdw_fire
... The annual figure for SS if started at age 70 would be 1979*12 = 23748 not 21348. Using the correct SS numbers in FIRECalc and all the other parameters the same as Independent stated gives an annual WD of $23,684 when you start taking SS at age 62 and an annual WD of $24,743 when you start taking SS at age 70 (a $1059 difference which is an ~4.5% increase due to waiting).

The next point I'll make is that since in my example the motivation is to spend more between the ages of 62 & 70 (in real terms) then what will be spent after age 70, FIRECalc is not the right tool to use to try and determine how much more can be spent. .....
Thanks for the explanation. It looks like I could have saved some time and simplified my post a lot if I would have taken 10 seconds to check the monthly number vs. the annual number. This is especially embarrassing because I noticed that the ratio of the age 70 benefit to the age 62 benefit was odd, but still didn't figure out the problem.

With your correction, my (b) disappears. Note that my (d) is almost identical to the numbers you found. It's tempting to go back and edit the post to get rid of a bunch of extraneous language. But I think the general pros and cons of 62, 66, and 70 are still correct. And it's certainly true that the biggest issue is that different goals will lead to different decisions.

I'll agree that FireCalc (or at least the simple 4% SWR) is not the best tool for retirees who can see that they have more than enough resources to cover their "needs", and would like to use the extra sooner rather than later.

If I'm reading you correctly, your examples seem like "two bucket" strategies. The first bucket gets SS plus enough assets to cover the income level that represents "needs", using conservative assumptions (like MM interest rates, and 4% safe withdrawal rates). The second bucket gets everything else. Both the principle and interest in the second bucket can be spent in whatever pattern you like - like spend it all while you are young and healthy. It can use more aggressive assumptions.

I think that multiple buckets make a lot of sense for putting some structure on the confusing reality that you want a lot of confidence in you basic income, but can live with more risks on the "enjoy life" money. I'm sure I promoted this in some other thread.

However, I can also appreciate the argument that the real "optimal" analysis puts all the money together and uses a withdrawal strategy that varies as the real investment returns play out. I know that FireCalc will allow stepped withdrawals, but I didn't try that to see if I could bet "better" results. FireCalc also has withdrawal strategies that vary with returns, and I haven't tried them. I wouldn't be surprised if people with lots of assets develop a plan where that taking SS at 62 is "optimal" in that kind of analysis.

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Re: Social Security at 62, 66 or 70?
Old 03-23-2007, 11:45 AM   #60
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Re: Social Security at 62, 66 or 70?

Good posts! - I have some thoughts on this as well

1.) Since FireCalc is a 'worst case' tool, it might not tell you what you would actually do in the future. And in all probability you will not be in the Worst case situation. So again FireCalc is not the proper tool for this.

2.) The take S.S. now or later is not something you HAVE to decide at age 62. You get to decide every year until you reach age 70. If the market crashes 80-90%, at age 63, you might decide to take S.S. at age 63 and start buying stocks at bargain prices. Which is exactly what FireCalc does! If the market is fairly stable and interest rates are low, you can let your S.S. ride and get about 8% interest for your waiting. And if by chance you live to age 100, you'll be glad you did!

3.) I think the main problem with SS analysis here, is that a 40 year old sits down and runs FireCalc for a decision that does not have to made for over 20 years. He then proceeds to call everyone a moron for not taking it at age 62, and that any discussion about dellaying SS to age 70, involves 'made up math', wrong numbers etc. etc. - There are valid reasons to delay SS or take it early.

I find out more about this topic, everytime someone posts a thread like this and I'm convinced others do also, providing they have an open mind.


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