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Old 03-11-2010, 05:12 PM   #21
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Assuming that health is not an issue, it is not with me, my SS strategy has always been to delay SS until I need the income stream to live my life as I wish to live it or age 70, whichever comes first. I can not see beginning the cash flow just so I can stick the cash into my MMF and get 0.01% Yield.
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Old 03-11-2010, 05:16 PM   #22
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Originally Posted by mickeyd View Post
Assuming that health is not an issue, it is not with me, my SS strategy has always been to delay SS until I need the income stream to live my life as I wish to live it or age 70, whichever comes first. I can not see beginning the cash flow just so I can stick the cash into my MMF and get 0.01% Yield.
.01% yield would still let you buy back the higher SS payment at 70 and if you died in the meantime your heirs could keep the money. Sounds like a win/win for you without question.
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Old 03-11-2010, 05:25 PM   #23
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I think there are three key questions:

  1. Can you wait (do you have enough bridge assets to delay)
  2. Do you want/need to mitigate longevity risk
  3. Do you have a goal of trying to maximize your estate
In our situation, the answers are

  1. Yes
  2. Yes
  3. No
BTW - other than normal prudent behavior... I do not understand the motivation for #3.... although I am sure some people can come up with good reasons. I always liked those bumper stickers on RVs that state: I am spending my kids' inheritance
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Old 03-11-2010, 09:13 PM   #24
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Originally Posted by chinaco View Post
I think there are three key questions:

  1. Can you wait (do you have enough bridge assets to delay)
  2. Do you want/need to mitigate longevity risk
  3. Do you have a goal of trying to maximize your estate
In our situation, the answers are

  1. Yes
  2. Yes
  3. No
BTW - other than normal prudent behavior... I do not understand the motivation for #3.... although I am sure some people can come up with good reasons. I always liked those bumper stickers on RVs that state: I am spending my kids' inheritance
I think you meant to say that those are the three key questions for you and your situation. But other people with different situations have different questions to consider, goals to target and missions to accomplish. For example, the situation that Don and I post about above regarding being married with one spouse having no SS and subject to the GPO provision.
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Old 03-12-2010, 02:49 AM   #25
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a few years ago the idea that delaying SS till the age of 70 could actually allow the retiree to spend more money between the ages of 62 and 70 while leaving his/her spending the same after age 70 was discussed here. here is a post i made showing an example proving that idea When to delay pension or SS
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CFB and all who agree with him seem to me to not be understanding CT's example so let me try a different one, Ill use CFBs numbers.

The first thing I need to state is that CT example is looking at someone who is almost 62 yo making the decision to take SS at 62 or wait. So using CFBs numbers the decision is between taking $2290/mo ($27480/yr) now or delay to 70 when the number would be 76% larger ($48365/yr using the same year dollars). Now lets say this person needs the $48365/yr now for their retirement. If s/he takes SS at 62 s/he needs a portfolio to make up the difference of $20885/yr which by CT calculations would be 25 * $20885 = $522,125.

However if s/he retires at 62 but waits till 70 to start taking SS s/he can totally spend that $522,125 between now and age 70 because SS will cover his/her income needs at age 70. So how much can s/he spend per year between now and age 70? Try $522,125/8 = $65266/year! If we assume the $522,125 is invested in a tax deferred account that has a rate of return that just meets inflation, his/her yearly WD will even be inflation adjusted.

Now I think the point CT is making is that $65266 is much greater than $48365 and this fact has nothing to do with CTs personal financial picture, it is always true.

BTW CT if this is not your point please let me know.
as i look back on this post i see that it is also possible to increase the inflation adjusted WD for the retiree's entire life instead of just for the years between the ages of 62 and 70 by delaying taking SS till the age of 70. in this example, if the retiree wanted a higher lifetime inflation adjusted WD instead of just for the years between 62 and 70 the WD would be $48365 + $5408 = $53773. i arrive at this by taking the $522125 portfolio and split it into 2 parts. part 1 provides the $48365 (inflation adjusted)/yr for the 8 years between 62 & 70 and is equal to $386,920. part 2 is $522,125 - $386,920 = $135,205 which is used to provide $5408/yr from age 62 till death based on the 4% rule. (btw, if a lower SWR is used thruout this analsys a larger increase will result). of course all of this analysis assumes no change in the way SS payments are calculated.
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Old 03-12-2010, 04:49 AM   #26
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I think you meant to say that those are the three key questions for you and your situation. But other people with different situations have different questions to consider, goals to target and missions to accomplish. For example, the situation that Don and I post about above regarding being married with one spouse having no SS and subject to the GPO provision.
You are correct, there could be any number of special situations or personal reasons for delaying SS or not (rational, irrational, ignorance, or just don't care). One situation that may make one adjust their decision is if the market is severely down and they would have to sell their securities cheap to live. It is not a simple question to answer.

My comment was a generalization. But those questions cover the basics for most people (assuming you are not in the camp of believers that SS will be taken away or severely diminished and therefore decide you want to get it as soon as you can). It seems that many struggle with working through issues like: Do I need the money now? Hey, but what about my estate... If I die young I missed out? I hope I (or DW) don't run low on income in there very late years... I would hate to resort to eating cat food.

I might be missing some aspect of your point or perhaps I could have been more clear... but Item 1 covers - do you have enough money (assets or other income) to bridge the period of time you delay taking SS. Taking it as soon as possible may be the only way one could afford to retire.
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Old 03-12-2010, 08:25 AM   #27
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I think there are three key questions:

  1. Can you wait (do you have enough bridge assets to delay)
  2. Do you want/need to mitigate longevity risk
  3. Do you have a goal of trying to maximize your estate
How we faced the question of when to take SS was originally "shot in the dark" analysis, based upon the options available to a married couple, in our situation.

However, after using various "methods", it came down to using the Fidelity Retirement Income Planner (RIP) - that is the full planner - not the quick one.

For those unfamiliar with the forecast tool, it gives you a year by year breakdown of income, withdrawal rate %, and the impact of excess RMD's (and higher taxes due) after age 70.5 till your end-of-plan.

Our situation is that DW/me are the same age (currently 62), my wife being a few months younger, and during our working years her income was less than mine.

What I did was to plug into the planner the variables of SS such as taking it at age 62, 66 (FRA), and 70, and variances of each age for both of us. I also used the option for myself to claim 50% of my wife's FRA benefit (for my age 66-69).

The results turned out that for our situation, the best results would be achieved when my DW would take it at age 66, I would file the 50% spousal benefit at that time, and I would take my SS at age 70.

The reports were interesting not only in what they revealed on the effect of SS on our withdrawal rate till end-of-plan (for us, age 100), but also how delaying SS reduced the amount of excess RMD's after age 70.5, due to the draw down of retirement portfolio assets in the early years.

A couple of disclaimers. First of all, you may/may not agree with the results of RIP. As for me, I've used it in retirement planning before I retired (at age 59), and also after retirement to see if it is close in actual results vs. plan. In our case, it is.

Secondly, we don't want to take the "apply early - pay back later" option. For me, it has a couple of pitfalls, IMHO. The question of where to safely invest the money (and today, safe means a low rate), along with paying taxes on $$$ you can't currently use - even if you can reclaim it later is of little interest to us. Additionally, this action would eliminate the 50% spousal option, which would give an instant increase in spending (or reduce portfolio withdrawals).

Third, we're of the thought that we don't worry if we "die early and don't get our "value" from SS". When you're dead - well, you know. While I'm delaying SS till age 70 for the benefit of my DW (assuming I pass first), that's the only "what if I die" question that we have.

Fourth, we have little estate issues. We don't have family other than one son, who is disabled. While he will get the proceeds of our liquidated estate (managed by a trust) after we pass, his lifestyle requires very little money, and is currently handled by his SSD income, along with a bit of income from a sheltered workshop. After he passes, the remainder of the trust will be going to our named charities. Assuming tax laws are the same or similar, most of that will result in little/no tax to the folks that can continue to do their "good works".

Those being the case, in answer to your questions:
1. Yes
2. No.
3. No.


...
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Old 03-12-2010, 08:34 AM   #28
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There's also political risk -- the risk that the longer you wait, the more likely future reforms will negatively impact you. I think it's likely that future SS reform that makes it a worse deal will not affect people already in the program, so to me personally that would be a factor in taking it ASAP -- I'd more likely be grandfathered out of a worse deal.
I agree Ziggy. For the younger folks here that MIGHT have a chance at the SS buffet, we could be better off getting "in" at an earlier age - maybe just to get something for a few years before the system is completely defunct! I plan on filling all that paperwork out for collection at age 62. If 2037 is when it all goes bust, well, I'll have milked out 5 years worth of "reduced" payments, rather than missing the boat alltogether.
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Old 03-12-2010, 09:28 AM   #29
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There's also political risk -- the risk that the longer you wait, the more likely future reforms will negatively impact you. I think it's likely that future SS reform that makes it a worse deal will not affect people already in the program, so to me personally that would be a factor in taking it ASAP -- I'd more likely be grandfathered out of a worse deal.

Also, higher payouts at 70 could combine with RMDs at 70.5 to make 85% of SS income taxable instead of 50% or even not at all.
The last time they made a major change to SS in 1983, when they made FRA older than 65 for a lot of us boomers, everybody 46 and older was grandfathered in. No guarantees it will be the same next time they tinker with it, but I would think there would be a major outcry if people were 60 or 61 and they only granfathered in folks already collecting....

So my guess is as a 55 year old I will be grandfathered in based on prior outcomes.

We are planning on a restricted app where my wife draws her benefit at 62 and I file for spousal benefits at my FRA of 66 yrs 2 months - then take my own benefit at 70. She is 3 years younger and women live long in her family - I have had cancer 4x and don't rate to make it to the far side of the mean life expectancy (but you never know!).
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Old 03-12-2010, 04:23 PM   #30
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Originally Posted by rescueme View Post
...
The results turned out that for our situation, the best results would be achieved when my DW would take it at age 66, I would file the 50% spousal benefit at that time, and I would take my SS at age 70.
...
Could you describe what you mean by the best result? If it was not longevity mitigation or concern about maximizing the estate... What were you trying to achieve. Maximize early income? Reduce taxes?

I have been considering the approach where DW takes hers at 62 and I take mine at 66.x or 70 (depending on our situation at the time) to provide some mitigation against longevity and just in case something happened to our other assets such that the income they could provide were diminished. I figured that since I cannot predict the future, straddling the take it early benefit (theory) and take it late benefit (theory) might be the best approach. My rationale is that it might be the best optimization approach given the unknown factors. But I will admit, I have not run the numbers with a variety of what if scenarios.
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Old 03-12-2010, 04:53 PM   #31
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Could you describe what you mean by the best result?
At age 100, the report showed the smallest maximum annual withdrawl rate, the least amount of excess RMD withdrawls (from age 73-100) - also reducing taxes, along with the highest portfolio terminal value...

All other scenerios that I ran had results that turned out "less" in the three-axis target I was testing against. Again, our results are based upon our specific "facts", including the situation that we have quite a bit in tax-deferred instruments and can face retirement for many years - even discounting SS income and the actual content/breakdown of our joint retirement portfolio.

If you want to "run the numbers" with RIP, you will have to plug in your specific situation, and I would recommend paying attention and entering your budget numbers using the spreadsheets, including reporting variance of specific cost variations along the way (as we have for trip expenses, which are reduced by decade, as we age along with increasing projected medical expenses beyond the 7% annual increase as a product default).
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Old 03-13-2010, 02:07 PM   #32
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Maybe I missed it but I could not find recommendation in the article for the case when the lower earning's spouse's benefit is less than 40% of the higher earner. I don't know if it is best for my wife when she is 62 to 1) take her benefits or 2) for me to take my benefits but immediately suspend them and for her to get spousal benefit. Then, again when I hit FRA, should I take spousal benefits based on her account or just take full benefits?

If anyone can shine light, I would appreciate it.

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Old 03-13-2010, 02:25 PM   #33
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...
We are planning on a restricted app where my wife draws her benefit at 62 and I file for spousal benefits at my FRA of 66 yrs 2 months - then take my own benefit at 70. She is 3 years younger and women live long in her family - I have had cancer 4x and don't rate to make it to the far side of the mean life expectancy (but you never know!).
Can you file on your spouse if you have a record of your own and the benefit on your record will be larger than the spousal benefit?

From Do you also qualify for benefits on someone else's Social Security record?
If you qualify on your own record, we will pay you that amount first. But if you also qualify for a higher amount as a spouse, widow or widower on another record, you'll get a combination of benefits that equals that higher amount.
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Old 03-14-2010, 07:16 AM   #34
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Can you file on your spouse if you have a record of your own and the benefit on your record will be larger than the spousal benefit?
Yes you can. Your reference pertains to those who are looking to supplement/replace their benefit with another. This is not the case.

Back to my situation (my wife/me same age - within a few months). My PIA amount is less than double of hers at age 66 (our FRA). There is no benefit for me to file & suspend at age 66 that she may receive a higher benefit.

When I file against her (50% of her PIA at age 66), I am going against her record alone - not a combination of records.

However, assuming I live till 70, claim my SS, and pass after that date since my total benefit will be much more than hers, she will get my full benefit amount when I pass. If I pass sometime between the ages of 66 - 70, she will claim a benefit equal to 100% of the benefit I would have received on the day before I passed.
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My factors and plan
Old 03-14-2010, 08:03 AM   #35
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My factors and plan

I don't know if I have optimized but I have made a decision to postpone SS. I will retire this year at 62. My concern is my husband whose family on average lives more than 20 years longer than my own. I am two years younger and my earnings averaged more than 3 times his over our years of paying into SS. I know things can change but right now SS will at least keep up with CPI under current law.

Most of our retirement money is in deferred accounts (75-80%).

Factors:

1) Our initial income from pensions and SS (assuming I took it) would be 143% of what we currently are living on after tax based on current tax law.

2) His pension gets a plus up only if the state legislature decides to throw a bone - unlikely in todays situation. My FERS gets a diet-cola. So over 25 years his pension becomes a joke and mine erodes year by year.

3) A 1.8%/year withdrawal from our deferred accounts will almost replace my age 62 SS and will reduce the amount of money subject to RMD later on.(Reduces initial spending to 138% of current spending after tax under current tax law.)

4) At the time I retire he will be only 2 years from his full retirement age. He is currently taking his age 63 SS. My full retirement age projection with retirement at 62 under the SS intermediate estimate of inflation is about twice his projected age 66 SS income.

5) His income reduces by his SS income amount when he switches to mine if and when I die.

6) His spousal FERS is 50% of my unreduced FERS pension. Another reduction.

7) Upon my death his after tax income is reduced by at least 30% but many of his major expenses remain the same (property tax, car and property insurance, house maintenance, etc.)

8) I can worry about the future but can only make numbers based on the present so my plans are the best I can do to try to provide for my husband's cursed long lifetime projections.

So, SS under current law is the only income that promises full COLA.

The plan:

At retirement I will start a TIAA payout annuity (currently about 4% guaranteed). At the end of the ten year period the deferred savings will be reduced by 18% and the old 403b account will be depleted. If I die and he switches to my SS, he will put the TIAA and, after 70 1/2, RMD payout that he doesn't need into after tax savings or investments for his future. I really don't care if he dies with millions of dollars. I just want his last year to have enough money for what he needs. Life is never certain; you do the best you can.
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Old 02-22-2012, 07:13 PM   #36
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Yes you can. Your reference pertains to those who are looking to supplement/replace their benefit with another. This is not the case.

Back to my situation (my wife/me same age - within a few months). My PIA amount is less than double of hers at age 66 (our FRA). There is no benefit for me to file & suspend at age 66 that she may receive a higher benefit.

When I file against her (50% of her PIA at age 66), I am going against her record alone - not a combination of records.

However, assuming I live till 70, claim my SS, and pass after that date since my total benefit will be much more than hers, she will get my full benefit amount when I pass. If I pass sometime between the ages of 66 - 70, she will claim a benefit equal to 100% of the benefit I would have received on the day before I passed.
+ 1

An article in the March 2012 SmartMoney magazine by Glenn Ruffenach also tells of this.I had not noticed this strategy before. I have been planning on my SO to draw at 62 and me at 70, but this, on my SO record, will give me an additional 29k by age 70. Others may get more if SO had higher earnings than mine.
I'm posting this to maybe bring this to more folks attention.
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Old 02-22-2012, 08:12 PM   #37
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I read all these strategies than entail waiting till 70 to get SS, then as I was reading the obituaries this morning, I realized most of the people passing are in their 50's-60's and 70's. We all would like to think we're living till 90, but stuff happens and life can change pretty fast. I'll bet SS has figured out that on average, all these methods work out the same. For every person that chooses to delay and lives to 100, there are those that don't make it.
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Old 02-22-2012, 08:44 PM   #38
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If I die at 50's, 60's or 70 yo, SS means nothing. If I live to 90, SS may just mean a bunch. That is why I am trying to maximise the $$ amount in older years.
It means an extra 200k by going with the above strategy, instead of both drawing at 62.
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Old 02-22-2012, 08:53 PM   #39
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If I die at 50's, 60's or 70 yo, SS means nothing. If I live to 90, SS may just mean a bunch. That is why I am trying to maximise the $$ amount in older years.
It means an extra 200k by going with the above strategy, instead of both drawing at 62.
+1

DW, who is a year younger than me has several relatives who lived well into their 90's. It's a type of insurance than I am prepared to invest in. It only needs one of us to live into our 80's for it to have been worth waiting until I am 70 for SS.
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Old 02-22-2012, 09:32 PM   #40
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If I die at 50's, 60's or 70 yo, SS means nothing. If I live to 90, SS may just mean a bunch. That is why I am trying to maximise the $$ amount in older years.
It means an extra 200k by going with the above strategy, instead of both drawing at 62.
I guess I miss your point. The money has to come from somewhere to live from 62 till your 70 (assuming your retiring at 62)? So your effectively just trading your savings now for increased SS later. The present value of money has to be calculated into this equation, not just absolute dollars.
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