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Old 08-28-2014, 08:09 AM   #41
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3. If you have plenty of current money, wait, so you heirs will have more.
If you are not worried about longevity risk, the studies I have seen indicate you will have a larger portfolio at death if you take SS at 62 and invest it.
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Old 08-28-2014, 08:25 AM   #42
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If you are not worried about longevity risk, the studies I have seen indicate you will have a larger portfolio at death if you take SS at 62 and invest it.
I think that would highly depend on market valuations at the time you retire.

I'm guessing most of these studies used average US historical returns which may be overly optimistic (at least right now)

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Old 08-28-2014, 10:48 AM   #43
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One thing that concerns me is in the event of change in benefits, is the possibility that the potential impact might be greater if you are not already drawing benefits (e.g. deferring to FRA - 70) vs already receiving benefits. No way to know, but nevertheless it is a concern.
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Old 08-28-2014, 11:04 AM   #44
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One thing that concerns me is in the event of change in benefits, is the possibility that the potential impact might be greater if you are not already drawing benefits (e.g. deferring to FRA - 70) vs already receiving benefits. No way to know, but nevertheless it is a concern.
I have thought about that but I can't see Congress giving early SS beneficiaries a break while hitting the those who wait until 70 harder. The idea is that SS should be actuarialy even over the entire group, no matter when one takes SS.

It's more likely, IMHO, that they will simply raise taxes on SS earnings so that people with higher income will pay more and in effect, have reduced SS benefits.

Or they might freeze current beneficiaries until they are moved 'down' to the new lower benefits. I have seen companies do this when wage scales were readjusted.

Or they might to both.

Of course, I may be wrong. And if it looks like current beneficiaries will get a better deal than those who waited, I will be first in line the next day at the SS office.
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Old 08-28-2014, 11:13 AM   #45
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If you are not worried about longevity risk, the studies I have seen indicate you will have a larger portfolio at death if you take SS at 62 and invest it.
Yes. If, for whatever reason, leaving an inheritance at your passing is your objective, you don't do that by buying an annuity.
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Old 08-28-2014, 11:27 AM   #46
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I'll be 48 next year, and plan to ER then. I'm single, never married, no kids, so no dependents to worry about.

I've written Social Security off my entire life because I never counted on it being there for me when I retired. To me, it's just icing on the cake if I get money back out of the system at some point.

Given all that, I plan on taking SS as soon as I possibly can. I want to start collecting early and get as much water from the well as I can before the well goes dry, or I kick the bucket.

Who knows, maybe the monthly check will make a car payment or something. I really am not counting on SS to provide much more than that for me. If everything goes to plan with FIRE, I won't need it anyway.
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Old 08-28-2014, 12:07 PM   #47
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@LoneAspen,

I am 49 and I use to think like you did. I would just save enough on my own. Well I finally ran the numbers for SS and what I had accrued already was huge. Between 1M & 2M in NPV 2014 dollars for my wife and myself. This was assuming that we both quit and never worked another day. I had only worked 22 years at this time. This made the difference between me being able to RE a few years ago and not.

SS is a popular program with the masses, just not with certain groups in politics.
Even if they don't adjust the system to cover more earnings, there still will be enough to pay about 70% of accrued benefits perpetually due to the current ongoing FICA taxes paid by the next, fairly large in number, generation.

If you really like your job or you have enough funds that the difference won't matter to you then this may be a non-issue for you, but you might want to run your numbers so that you have an idea of what is available if your life circumstances change suddenly and you need to make a fairly quick decision.

You can run your numbers at the SS web site -- the trick is to enter 0 for last years earnings so that it assumes that you will earn 0 going forward. This will tell you what you have already accrued under current law.

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Old 08-28-2014, 12:30 PM   #48
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If you really like your job
Unfortunately, I don't really like my job that much, and even more unfortunately, I've grown to absolutely hate the career I'm in (the IT field). I hate being a cube rat and staring at a computer all day. That's why, assuming I can FIRE when my 4-year vesting is up, I'm leaving the IT field and never coming back.

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You can run your numbers at the SS web site -- the trick is to enter 0 for last years earnings so that it assumes that you will earn 0 going forward. This will tell you what you have already accrued under current law.
Thanks for that info. I knew there were calculators on the SS site, but had never used them. I just used the one that pulls in your actual salary history, and the rough estimates are:

Age 62 = $1407
Age 67 = $1998
Age 70 = $2478

I'll go with the age 62 one. The other amounts aren't high enough for me to put off applying for that long.
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Old 08-28-2014, 03:39 PM   #49
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Thanks for that info. I knew there were calculators on the SS site, but had never used them. I just used the one that pulls in your actual salary history, and the rough estimates are:

Age 62 = $1407
Age 67 = $1998
Age 70 = $2478

I'll go with the age 62 one. The other amounts aren't high enough for me to put off applying for that long.
Hmmm, with those numbers I would probably hold off for the age 67 figure of $1998 a month. My reasoning is that if I took the $1407 a month at age 62 and put it in a mattress for 60 months, I would only have $84,420. If I waited until age 67 and got $1998 a month, the extra $591 a month or $7092 a year would require a portfolio of $177,300 to generate with a SWR of 4%. Could I grow $84,420 into $177,300 reliably in five years with a safe investment? (worse than that since I don't get it lump sum at the beginning of the five year period).
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Old 08-28-2014, 03:49 PM   #50
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Once again, singles can benefit from file & suspend. That way, if they need a lump sum of all the payments that they have deferred, then they can get them.

This is not to be ignored nor treated lightly as it is a powerful option not available with mere annuities.
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Old 08-28-2014, 03:57 PM   #51
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Once again, singles can benefit from file & suspend. That way, if they need a lump sum of all the payments that they have deferred, then they can get them.

This is not to be ignored nor treated lightly as it is a powerful option not available with mere annuities.
If you have a one worker couple, where the spouse with benefits would get $1650 at 62 could they file and suspend and have the other spouse collect $825 immediately? Could they then take a lump sum at age 67 or 70 without affecting the $825 payment?

I am guessing the answer here is yes.
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Old 08-28-2014, 11:36 PM   #52
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If you have a one worker couple, where the spouse with benefits would get $1650 at 62 could they file and suspend and have the other spouse collect $825 immediately? Could they then take a lump sum at age 67 or 70 without affecting the $825 payment?

I am guessing the answer here is yes.

I believe you have to be FRA to suspend.
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Old 08-29-2014, 07:36 AM   #53
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What about taking it at 62 and spending it, on the premise that you're more able to take advantage of higher spending at an early age.
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Old 08-29-2014, 11:20 AM   #54
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www.schwab.com_public_file_P-7107323_Q314_OIM_0815_FINAL.pdf

A good illustration of when the break even point occurs for delaying SS in in today's issue Charles Schwab: On Investing Magazine.
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Old 08-29-2014, 12:11 PM   #55
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Attachment 19776

A good illustration of when the break even point occurs for delaying SS in in today's issue Charles Schwab: On Investing Magazine.
The most important line in that whole document is the last sentence. "Time value of money not considered".

In other words, the document describing the value of your choices doesn't consider, well, the value of those choices.

I think this is called burying the lead and wasting our time.
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Old 08-29-2014, 12:21 PM   #56
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Attachment 19776

A good illustration of when the break even point occurs for delaying SS in in today's issue Charles Schwab: On Investing Magazine.
One thing I find interesting in many break even calculations is that the growth of the money invested by virtue of taking SS early is never considered ( i.e. the money that was not taken out of investments to cover one's living expenses will continue to grow at one's rate of return). Many people dismiss that potential growth as being either inconsequential or too risky compared to SS "sure" return. All I can say is that my rate of return since ER on 1/1/2003 is 8.4% which includes the great recession. My calculations show that a RR over 5-6% results in a break even point past age 100.
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Old 08-29-2014, 01:40 PM   #57
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One thing I find interesting in many break even calculations is that the growth of the money invested by virtue of taking SS early is never considered ( i.e. the money that was not taken out of investments to cover one's living expenses will continue to grow at one's rate of return). Many people dismiss that potential growth as being either inconsequential or too risky compared to SS "sure" return. All I can say is that my rate of return since ER on 1/1/2003 is 8.4% which includes the great recession. My calculations show that a RR over 5-6% results in a break even point past age 100.
+1

I built a spread sheet to investigate this a few years back and got similar results. From 1/1/2003 through the end of 2013, the S&P 500 has had a total CPAR (with dividends reinvested) of 6.7% real. According to my spreadsheet, that gives a break-even age of 110, if one took SS at 62 instead of 70.
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Old 08-29-2014, 01:43 PM   #58
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One thing I find interesting in many break even calculations is that the growth of the money invested by virtue of taking SS early is never considered ( i.e. the money that was not taken out of investments to cover one's living expenses will continue to grow at one's rate of return). Many people dismiss that potential growth as being either inconsequential or too risky compared to SS "sure" return. All I can say is that my rate of return since ER on 1/1/2003 is 8.4% which includes the great recession. My calculations show that a RR over 5-6% results in a break even point past age 100.
+1 on this. Thank you ejman. This is exactly our situation. Regardless of the scenario I have modeled, every one comes out with us being better off taking SS early. I have not calculated the break even point - I just calculated the living standard and saw that taking SS early would leave our portfolio "unmolested" for a while, so we'd end up with a higher living standard or more money left to our heirs.

BTW I had to think for a while in order to fit in the "unmolested" term. Other people would call it "untapped". They all refer to the same thing - leaving the portfolio intact. (This language and behavior indicates both a frugal mind and a twisted sense of humor.)
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Old 08-30-2014, 11:28 AM   #59
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Rough numbers:

If I stick with an assumption I'm not working to earn a living after reaching age 62, I've never ran a spreadsheet where it made sense to hold of on turning on the promised SS payment.

If I'm 62 and don't need the SS money until age 70, that's 8 years of SS money I can put into investments.

$1,628 - Age 62 monthly payment
$2, 279 – Full retirement age (age 66yr 2 mo) monthly payment.

50 months between earliest retirement & full payment age.

$81, 400 (if the cash is just stuffed into a mattress)

$651 monthly difference in the payments.

If I at full retirement age I just pulled $651 out the mattress each month, the cash would last 125 months (10 years 5 months). So if I take SS at the earliest date, just stack the cash without interest or investment, and start spending it later, I'm 76 and 7 months before I "break even".

If I die anywhere between age 62 & 76yr 7mo, there's a pile of cash there for the heirs that otherwise would not exist.

If the early cash is invested at 4% interest, the break even point becomes age 81 or so.

If I use the early cash to pay off the mortgage on a small rental property I have some pocket cash from the SS at age 62, and by age 66+ I have "free and clear" rental income that exceeds the full SS payment difference.
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Old 08-30-2014, 11:57 AM   #60
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I'm going with 62. For me, it absolutely means pulling the money from the 403b if I don't take Social Security. The time value of money must be included in the calculations.
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