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Old 12-09-2010, 01:59 PM   #21
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Yes, I'm basically surprised that this really made it to someone's radar screen. Good or bad, it seems like a real small fry relative to the effort it would take to do something. I can only imagine that changing these rules involves a ton of bureaucracy. They gotta have bigger problems than this?

-ERD50
I suppose someone thought that it was a fairness issue. I would suppose, that when you add in the value of an interest free loan the actuarial equivalence of the SS pension regardless of age is compromised.
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Old 12-09-2010, 03:44 PM   #22
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I can't remember who posted the bit about it being threatened last August 29. Was it you, Rich? Thanks!


I raised a tentative red flag last January:

Warning: Social Security PayBack System May be Discontinued

I used to feel that taking it at 62 was best, but now I'm pretty confident that waiting until 70 is the best strategy for me. Using the age 70 rate, I should be able to live comfortably on SS even if my investments dry up.

But I don't have to decide for a few years.
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Old 12-09-2010, 07:52 PM   #23
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I may be paranoid, but I'd be really hesitant to do this even if it was still allowed, just due to the likelihood of means testing as the deficit reaches crisis proportions. I can already hear the cries of "millionaires on the SS dole".
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Old 12-09-2010, 08:12 PM   #24
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"The agency is changing its withdrawal policy because recent media articles have promoted the use of the current policy as a means for retired beneficiaries to acquire an “interest-free loan.” "
If this was their main concern, they could have retained the "repay and restart", and disallowed any tax deduction or tax credit for back taxes paid on the repaid SS distributions. This would have offset any benefit from an interest free loan, especially WRT higher income folks.

My guess is that pressure was brought on someone by the commercial annuity industry.

I think this will be a hardship to anyone who has to go back to work more than 12 months after having started SS at 62.
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Old 12-09-2010, 09:54 PM   #25
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I may be paranoid, but I'd be really hesitant to do this even if it was still allowed, just due to the likelihood of means testing as the deficit reaches crisis proportions. I can already hear the cries of "millionaires on the SS dole".

I don't think you are overly paranoid. We seen pensions slashed in several European countries with virtually no warning, to expect that nothing of the sort will happen in the US I think is being at best optimistic and a worst hopelessly naive.

As I said from a fairness perspective this is probably a good thing, but it really complicate the SS decision.

Essentially age 62,you need to decide what your likely age expectancy, your ability to have a decent lifestyle while deferring SSN, calculate the tax impact of collecting vs deferring SS. Make estimates of your investment returns over the next say 5 years. Finally, you also must make an estimate of how likely Congress is to change the benefits in the next 5 years, without warning.

Of course if you are married the situation is significantly more complicated since your spouses age, life expectancy and their benefits also need to be factored in.
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Old 12-10-2010, 08:13 AM   #26
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Originally Posted by TromboneAl View Post
I used to feel that taking it at 62 was best, but now I'm pretty confident that waiting until 70 is the best strategy for me. Using the age 70 rate, I should be able to live comfortably on SS even if my investments dry up.

But I don't have to decide for a few years.
[/FONT][/COLOR]
I think that's great strategy and plan on doing the same, all things remaining equal, unless you think that SS rules change and want to be grandfathered in. You get an extra 8% for every year you wait past your retirement age.
TJ
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Old 12-10-2010, 09:13 AM   #27
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Right. My old "take it at 62" policy was based on: Bird in the hand, and a good chance I'd get more money (investing what I don't need to withdraw).

But I like the new policy in case I live a very long time.
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Old 12-10-2010, 04:23 PM   #28
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Right. My old "take it at 62" policy was based on: Bird in the hand, and a good chance I'd get more money (investing what I don't need to withdraw).

But I like the new policy in case I live a very long time.
Yes.

They may increase the retirement age, they may tax more benefits, they may means test the benefits, they may outright reduce the benefits for everyone. However, it is difficult to imagine outliving social security in a scenario that doesn't involve the US dollar trading near par with the Confederate dollar.

Waiting to take social security seems to be the safest, and probably the cheapest, longevity insurance available in the US.
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Old 12-10-2010, 05:41 PM   #29
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There is a lot of focus on loopholes that are "in real terms" only available to affluent people.
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Old 12-29-2010, 11:10 AM   #30
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Yesterday I got a statement from SS telling me what my monthly benefit will be at age 70. Funny that they sent it, as previously I hadn't received one since I started Medicare.

Anyway, it is only about $4 off from what I projected when I was considering the re-do. $4 less that is! I feel quite good about the transaction, the biggest flaw is that a private annuity would be less likely to be yanked from me when federal budget pressures get even more acute.

They only strategy I can imagine that would not precipitate massive political fallout is some sort of divide and conquer. So that is what I expect.

Ha
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Old 12-29-2010, 11:18 AM   #31
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Originally Posted by TromboneAl View Post
I used to feel that taking it at 62 was best, but now I'm pretty confident that waiting until 70 is the best strategy for me. Using the age 70 rate, I should be able to live comfortably on SS even if my investments dry up.

But I don't have to decide for a few years.
[/FONT][/COLOR]
I have 8 years to think about it. Hopefully when my time comes, there is anything left for me to decide.

What if they say "Use up your personal stash, then we will talk", meaning apply means testing?
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Old 12-29-2010, 03:22 PM   #32
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I Exceled a scenario of taking SS at 62 vs 70 with a goal of which pays the most. I got a surprising answer and would love to have a double-check.

Actuals from SS form:
SS est at 62 = $1568 or $18,816
SS est at 70 = $2745 or $32,940

Assumptions:
1. SS checks taken at 62 would be saved and privately annuitized at 70.
2. The income after age 70 from the private annuity would not be COLA'd.
3. SS checks taken at 62 would be COLA'd at 3% and also be invested and earn 3%.


Calculations:
Future Value of SS paid from 62 to 70 = $18,816*((((1+0.03)^8)-1)/0.03) = $167,318
Private $167,318 annuity payouts beginning at 70 for single male (immediateannuities.com) = $1,203 or $14,436
Future Value of SS check begun at 62 when age 70 is reached = $18,816*(1.03^8)=$23,836

Conclusion:
At age 70, the combination of the private annuity of $14,436 and the SS(begun at 62) of $23,836 = $38,272
At age 70, the SS (begun at 70) would be $32,940.

Amazingly, running the number out from 70 till 90 shows the combo of SS/private annuity winning by $46,000 cumulatively and the yearly checks are higher than the SSat70 checks up until age 88.

Not until age 100 do the cumulative values equal each other.

What did I do wrong?
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Old 12-29-2010, 03:35 PM   #33
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What does the SSA assume for COLAs in order to arrive at the age 70 estimate? May not be the same as that which you used for the age 62 COLA growth??
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Old 12-29-2010, 03:46 PM   #34
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I went to immediateannuties.com and didn't see an single life inflation adjusted annuity that yielded $1203 pm payout?
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Old 12-29-2010, 03:47 PM   #35
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What does the SSA assume for COLAs in order to arrive at the age 70 estimate? May not be the same as that which you used for the age 62 COLA growth??
AWI is used in the estimate of benefits.
CPI-W is used once the benefits commence, so my 3% is just my WAG at what the CPI-W might be during my 8 years from 62 till 70.
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Old 12-29-2010, 04:00 PM   #36
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I went to immediateannuties.com and didn't see an single life inflation adjusted annuity that yielded $1203 pm payout?
Peter, as I said in item #2 of my assumptions, the private annutity would not be COLA's, i.e. not inflation adjusted.

The one I used was the SL, Single Life Annuity with no beneficiary payouts.

Ran it once more and it shows $1,203.
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Old 12-29-2010, 04:04 PM   #37
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Peter, as I said in item #2 of my assumptions, the private annutity would not be COLA's, i.e. not inflation adjusted.

The one I used was the SL, Single Life Annuity with no beneficiary payouts.

Ran it once more and it shows $1,203.
I haven't closely followed your plan, but isn't this an apples to oranges comparison?

Also, don't forget that you will be paying tax on that SS from age 62.

I don't have an opinion about this, I just raise these questions.

Ha
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Old 12-29-2010, 04:29 PM   #38
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EDITED: Ha, I made the changes to reflect the SS being taxed. I used provisional income of $30,000 for the SS tax calculation.
I Exceled a scenario of taking SS at 62 vs 70 with a goal of which pays the most. I got a surprising answer and would love to have a double-check.

Actuals from SS form:
SS est at 62 = $1568 or $18,816
SS est at 70 = $2745 or $32,940

Assumptions:
1. SS checks taken at 62 would be saved and privately annuitized at 70.
2. The income after age 70 from the private annuity would not be COLA'd.
3. SS checks taken at 62 would be COLA'd at 3% and also be invested and earn 3%.
4. SS taxed from 62 to 70.


Calculations:
Future Value of SS paid from 62 to 70 = $18,816*((((1+0.03)^8)-1)/0.03) = $167,318
Private $167,318 annuity payouts beginning at 70 for single male (immediateannuities.com) = $1,114 or $13,368
Future Value of SS check begun at 62 when age 70 is reached = $18,816*(1.03^8)=$23,836

Conclusion:
At age 70, the combination of the private annuity of $13,368 and the SS(begun at 62) of $23,836 = $37,204
At age 70, the SS (begun at 70) would be $32,940.

Amazingly, running the number out from 70 till 95 shows both plans are equal in cumulative amount and the yearly checks are higher than the SSat70 checks up until age 84.



What did I do wrong?
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Old 12-29-2010, 05:17 PM   #39
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I did this exercise because over on Bogleheads, Rick Ferri said he was definitely taking his SS at 62. So far nobody has changed his mind.
I think the people most in favor of taking SS at 70 are the recipient's surviving spouses.
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Old 12-29-2010, 05:37 PM   #40
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I think the people most in favor of taking SS at 70 are the recipient's surviving spouses.
Yep, this why DW plans for me taking it at 70
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