This is a valid concern here and on Bogleheads. I doubt majority of Americans will be saving enough to make RMDs a problem.The great majority of my savings is in tax deferred. My marginal tax is in the 25% range and may bump into 28% with RMDs. Not much I can do at this point. The lesson learned for younger folks is to put some of your nest egg in taxable savings and Roths so you have a more flexible approach to income when the time comes.
For married couples deciding whether to delay can be complicated by the dual mortality and any differences between SS payments. However, if you are single, it's quite simple. If you believe that you will live well past your expected mortality age then defer, otherwise take the money as soon as you can. A single male would have to live into his mid 80s to see any benefit from deferring....that assumes 3% inflation adjustments and that you just spend the money. Deferring clearly becomes the better choice, if amount of lifetime benefits is the criterion, if he lives into his late 80s. But factors like need for income will also be a factor.
this is very important . as kitces demonstrated taking an extra 1k in taxable distributions if it puts you over the limit for getting ss taxed can see as much as 47% of that extra 1k vanish in taxes .
it is not a given you will get a steady 6% real....
Actually, I think you mean these issues would make delaying SS advantageous for you. Others, with their own circumstances, might find these issues to be a huge disadvantage.While taking SS early is great for some, delaying it is advantageous for several reasons. They are not always obvious in the math.
Depending on your investment success with your early SS dollars, you may wind up in better shape to be able to afford LTC by taking SS early instead of delaying since you'd have more resources.LTC policy. Most LTC policies only cover ~$200 a day. No COLA. Waiting on SS can get you close to that amount, and combined with LTC premium savings it will help pay the LTC for a long time. Maybe long enough.
This definitely isn't always true. For example, when a spouse is impacted by GPO which is the case at our house.Spousal protection. If the person who collects at 70 is the one likely to die first, and has a higher SS payment, the surviving spouse can use that amount.
Of course, if you do allocate your investments well and don't screw it up, you'll have more at 70 by starting early. There's no sure fire way to predict this. If you're really afraid of poor market conditions and screwing your investments up, you should probably withdraw from the market altogether.Longevity Insurance. If you do not allocate your investments well, and screw it up, the SS will be a welcome addition at 70.
Obviously.Of course, if you cannot live without it at 62, take it or continue to work longer.
It looks like you didn't take into account that SS payments will rise with inflation.
I think you did it about as right as you could do it (all with today's dollars and real investment return rates). What you can buy with your money should be matched to the CPI that inflates SS checks. Some will argue (me included), that they're going to weasel a few tenths per year, which doesn't sound like much, but adds-up when it compounds on itself.I'm still trying to understand how inflation plays into this... I assumed that it impacted each one the same (so I assumed it was a wash, since inflation affects all dollars across all timelines indiscriminately), but maybe I'm missing something there. Does COLA lag behind inflation? If so, that would give more of an advantage to waiting... if the 70 number would be higher proportionately to the 62 number after COLA/inflation was factored in.
You are so far ahead of where I was. I never even LOOKED at post earning phase until a few years before pulling the plug. 20 years ahead of you, I still don't fret over these SS things because the smallish differences in these scenarios with their pile of assumptions could be changed significantly by the stroke of a pen. Kind of reminds me of the Roth conversion thing...I could save 10 times what that would do for me if I moved a few miles south. But that's not to say I didn't appreciate your analysis. I recall making the point in some other thread that everybody thinks 70 is best because, of course, they'll live a very, very long timeI'm only 33 (well turning 34 this week), so long way out for me. I'm just curious to run these numbers as an abstract scenario. I'm sure the rules and game will change significantly in the next three decades, for me...
My point is that the inflation indexing affects the larger, delayed SS check more than the smaller check that comes at 62. It's not a simple match that you can call a wash.I think you did it about as right as you could do it (all with today's dollars and real investment return rates). What you can buy with your money should be matched to the CPI that inflates SS checks. Some will argue (me included), that they're going to weasel a few tenths per year, which doesn't sound like much, but adds-up when it compounds on itself.
Not because I'll live a very, very, long time, but in case I do.You are so far ahead of where I was. I never even LOOKED at post earning phase until a few years before pulling the plug. 20 years ahead of you, I still don't fret over these SS things because the smallish differences in these scenarios with their pile of assumptions could be changed significantly by the stroke of a pen. Kind of reminds me of the Roth conversion thing...I could save 10 times what that would do for me if I moved a few miles south. But that's not to say I didn't appreciate your analysis. I recall making the point in some other thread that everybody thinks 70 is best because, of course, they'll live a very, very long time
For those who have a choice due to not needing to start SS at 62 and who have basic investment common sense, the decision to start or delay is interesting and the final outcome can't be predicted ahead of time. To me, that's just another one of the facinating aspects of FIRE and why I'm not a likely candidate to purchase annuities.
Not necessarily. If you start SS early, it's dependent on how your investments work out between age 62 and 70. You may (or may not) have accumulated enough to more than cover the difference between early and late SS at 70. Roll those dice!100% true. Delaying it gives the advantage of having more guaranteed income later - if you make it that far.
Yes, healthy folks with good longevity genes frequently live longer.......... unless they don't.The one thing you have in your favor is knowing your health situation. It's insider information that the SS actuaries do not have.
Every strategy has its pros and cons and none are guaranteed. The healthy guy with good longevity genes can die early in an accident. The well informed and knowledgeable investor can lose his ass in a market crash. The spouse you were trying to protect by delaying your SS can die before you. Etc., etc.
There seem to be few or no "rules of thumb" about the "when to take SS" decision that apply to everyone.
We all pay our money and take our chances........ The important thing is to pick a strategy that you're comfortable with even if plans go against you.
i don't know how many policy's cap you at 200 a day . i know none we looked at do . you take as much a day as you want . we took 400 inflation adjusted by 5% a year since homes in our area are 400-500 a day .
The Odds of a Long Nursing Facility Stay
Most people will not spend years and years in a nursing facility.
- Two-thirds of all men, and one-third of all women, age 65 and older will never spend a day in a nursing facility.
- Most nursing facility stays are brief -- only about 10% of men and 25% of women age 65 and older spend more than a year in a nursing facility.
- Only 10% of all nursing facility residents will stay longer than three years.
- More than half of all nursing facility stays last six months or less. The average stay of those who enter a custodial care facility is about 18 to 20 months.
Long-Term Care Insurance: The Risks and Benefits | Nolo.com
I understand that a lot of factors can influence the math (some are addressed below and if any are missing please chime in), but from a strictly cash-flow perspective here was my analysis of when to collect...
Well, again, if you presume that Medicare Part B premiums don't shoot up faster than inflation. This is discussed on this boggleheads thread which, at the end, points to another 'consolidated' thread. I have not read those completely, but just searched for after reading part of the 2013 thread which you referenced. The OP of the boggleheads thread points to this paragraph which says in the long run part B premiums are supposed to be about 5%, which wouldn't be bad if inflation were also 5% over that same "long run". This is kind of "old news" because they were all talking about the 2016 increase. My speculation is that if there was a kerfuffle over a 2016 increase, then there will probably be continuing kerfuffles and if you get your part B taken out of SS and you're jointly making less than $170K, you've got your part b premiums capped.You can actually Spend more money in your 60s by Delaying SS to age 70.
MEDICARE PREMIUMS SPIKE?
Some beneficiaries may face steep premium increases for Medicare Part B, which provides coverage for outpatient services.
For about 70 percent of beneficiaries, premium increases cannot exceed the dollar amount of their Social Security cost-of-living adjustment. Because no COLA is currently expected for 2016, increased costs of outpatient coverage would have to be spread among the remaining 30 percent.
That would result in an increase of about $54 in the base premium, bringing it to $159.30 a month. It works out to paying 52 percent more.
Those who would feel the impact include 2.8 million new beneficiaries, 1.6 million who pay the premium directly instead of having it deducted from their Social Security, and 3.1 million upper income beneficiaries, those making at least $85,000 for an individual and $170,000 for a married couple.
The increases for upper-income beneficiaries would be higher, up to $174 a month for those in the highest bracket.
State budgets would also take a hit, because states pay the Part B premium for low-income beneficiaries who have dual Medicare and Medicaid coverage.
Health and Human Services Secretary Sylvia M. Burwell said no final decision has been made, and that premium increases are expected to average less than 5 percent a year over the long run.
If people are deferring SS and betting they'll live longer than expected why aren't they also buying annuities?
Who says they're not!
Also, if you could buy an annuity as cheap and inflation protected with Spousal Survivor-ship, like delaying S.S. to age 70 provides, they would be selling countless more annuities.
If people are deferring SS, why aren't they also buying annuities?
They are expensive
There is insurance company risk
It is money out of pocket now, not just a delayed payment
If people are deferring SS, why aren't they also buying annuities?
"Scenario age 70.[/U] You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period."
.....
Moving 8 years' worth of future benefits from portfolio to savings ($270K+) will cause a taxable event, won't it? If taken from a taxable portfolio, it will be at cap gains rates. If from a qualified account, you're looking at paying regular income tax rates. Ouch!