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Old 02-27-2012, 11:39 AM   #141
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So your saying I should give up $172,000 of income (1,800/month from 62 to 70 years old) and that is superior to waiting till I'm 70 to start collecting $3300/month? What is the value of that 172,000? Even at a modest 4% return, that 172,000 is probably worth $205,000 when I turn 70. So that is a stream of income of $683/month plus I still have the 205,00 in the bank. I am not trying to be thick headed, but I can't see what I'm missing that makes waiting till 70 better financial sense?
I have been pretty casual about this thread because my decision is history, hence there is no pressing reason to be sure I understand or to spend time in re-analyzing. However yesterday while cleaning the kitchen I did think of a technique that I think will give a useful answer for those who do have a pressing need to understand. Your investment of the payments between age 62 and 70 will not be a lump sum available at the start, but only a monthly sum. So the correct framing is to do a sinking fund analysis, using each month's payment as it becomes available. Assume a reasonable real interest rate, which IMO today is not 4%. Mapping from 10 year TIPS you get the real rate of return to use for the sinking fund. Currently this is -0.35%. See what your sinking fund is worth in real terms at age 70. Price a fully COLA annuity for a 62 year old man, and a fully COLA annuity for a 70 year old man.

Compare the prices. This will tell you if you got a hit or a miss by waiting, ignoring the cheap and secure longevity insurance aspect of waiting for the higher monthly payout which IMO cannot be reasonably ignored.

Also remember that we are not all men, a woman gets more bang for her buck if she waits.

Ha
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Old 02-27-2012, 01:26 PM   #142
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I'll give you another reason to delay S.S. to age 70......The Afordable Health Care Insurance reform that was passed by both houses of Congress and signed into law by the President specifies Health Care exchanges and Tax Credits for lower income people.

This all takes effect in January of 2014. When my wife retires then we will have very little income as we will be living on savings from taxable accounts. Our Health insurance will probably only cost us $1K with the tax credits. It is not tested on Net Worth, but A.G. Income.

When we start drawing S.S., we will be eligible for Medicare.

try this Calculator out........I for one am very thankful for this legislation.
Health Reform Subsidy Calculator - Kaiser Health Reform (Health Reform Subsidy Calculator - Kaiser Health Reform)
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Old 02-27-2012, 01:40 PM   #143
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Originally Posted by Cut-Throat View Post
I'll give you another reason to delay S.S. to age 70......The Afordable Health Care Insurance reform that was passed by both houses of Congress and signed into law by the President specifies Health Care exchanges and Tax Credits for lower income people.

This all takes effect in January of 2012. When my wife retires then we will have very little income as we will be living on savings from taxable accounts. Our Health insurance will probably only cost us $1K with the tax credits. It is not tested on Net Worth, but A.G. Income.

When we start drawing S.S., we will be eligible for Medicare.

try this Calculator out........I for one am very thankful for this legislation.
Health Reform Subsidy Calculator - Kaiser Health Reform (Health Reform Subsidy Calculator - Kaiser Health Reform)
The exchanges are mandated for implementation in January of 2014, along with the subsidies. Other aspects are already being implemented.
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Old 02-27-2012, 02:15 PM   #144
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Originally Posted by Cut-Throat View Post
I'll give you another reason to delay S.S. to age 70......The Afordable Health Care Insurance reform that was passed by both houses of Congress and signed into law by the President specifies Health Care exchanges and Tax Credits for lower income people.

This all takes effect in January of 2014. When my wife retires then we will have very little income as we will be living on savings from taxable accounts. Our Health insurance will probably only cost us $1K with the tax credits. It is not tested on Net Worth, but A.G. Income.

When we start drawing S.S., we will be eligible for Medicare.

try this Calculator out........I for one am very thankful for this legislation.
Health Reform Subsidy Calculator - Kaiser Health Reform (Health Reform Subsidy Calculator - Kaiser Health Reform)
Cut-throat, if your figure above is annual rather than monthly, you should try to avoid going on Medicare, as Medicare and a Medigap and a Part D supplement for 1 person at today’s rates will cost roughly $100+$200+$40 per month. So $340*2 puts you at $680/month, or $8160 annually for the two of you.
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Old 02-27-2012, 02:42 PM   #145
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Cut-throat, if your figure above is annual rather than monthly, you should try to avoid going on Medicare, as Medicare and a Medigap and a Part D supplement for 1 person at today’s rates will cost roughly $100+$200+$40 per month. So $340*2 puts you at $680/month, or $8160 annually for the two of you.
Mikey,

The above figure is for an annual amount and should hold until age 64, but if you notice in the calculator the premium tax credits are for ages 19-64, after that medicare takes over...

....And at any rate our income will be wayyyyyy over the FPL then when SS and our RMD from the Tax Deferred accounts start.

Are you sure of your figures for a couple on Medicare?......I very much doubt that the average couple on Medicare is shelling out over $8 Grand a year for health insurance.
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Old 02-27-2012, 03:02 PM   #146
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Are you sure of your figures for a couple on Medicare?......I very much doubt that the average couple on Medicare is shelling out over $8 Grand a year for health insurance.
We are paying $6,600 but I've often thought it should be less.
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Old 02-27-2012, 03:12 PM   #147
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Originally Posted by Cut-Throat View Post
I'll give you another reason to delay S.S. to age 70......The Afordable Health Care Insurance reform that was passed by both houses of Congress and signed into law by the President specifies Health Care exchanges and Tax Credits for lower income people.

This all takes effect in January of 2014. When my wife retires then we will have very little income as we will be living on savings from taxable accounts. Our Health insurance will probably only cost us $1K with the tax credits. It is not tested on Net Worth, but A.G. Income.

When we start drawing S.S., we will be eligible for Medicare.

try this Calculator out........I for one am very thankful for this legislation.
Health Reform Subsidy Calculator - Kaiser Health Reform (Health Reform Subsidy Calculator - Kaiser Health Reform)
So your saying that by defering social security, your retirement income is not taxed putting you below the poverty level so you get free/reduced health insurance? I just tried to read the 13 page summary, somebody must be paid by the word in congress!
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Old 02-27-2012, 03:14 PM   #148
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Originally Posted by Cut-Throat View Post
Mikey,

The above figure is for an annual amount and should hold until age 64, but if you notice in the calculator the premium tax credits are for ages 19-64, after that medicare takes over...

....And at any rate our income will be wayyyyyy over the FPL then when SS and our RMD from the Tax Deferred accounts start.

Are you sure of your figures for a couple on Medicare?......I very much doubt that the average couple on Medicare is shelling out over $8 Grand a year for health insurance.
The figures I gave for one are what I pay for Medicare Pt B (basic rate, it goes up if I have a big income year), Medigap, and slightly more than I pay for PtD, as I take the absolute minimum policy that doesn't cover much but allow you to not pay a surcharge if and when you do start a Pt D policy.

Nice to see you again!

Ha
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Old 02-27-2012, 03:21 PM   #149
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So your saying that by defering social security, your retirement income is not taxed putting you below the poverty level so you get free/reduced health insurance? I just tried to read the 13 page summary, somebody must be paid by the word in congress!
I am saying by deferring S.S and not withdrawing from my tax deferred accounts ......I won't have much of an income. I'll be living off savings in our taxable accounts. Only Dividend, Interest and Capital Gains from the Taxable Account will be our only income.

You don't have to be poverty level for the premium discounts. You could be 400% of FPL and still get a discount.
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Old 02-27-2012, 06:15 PM   #150
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Originally Posted by Cut-Throat View Post
I'll give you another reason to delay S.S. to age 70......The Afordable Health Care Insurance reform that was passed by both houses of Congress and signed into law by the President specifies Health Care exchanges and Tax Credits for lower income people.

This all takes effect in January of 2014. When my wife retires then we will have very little income as we will be living on savings from taxable accounts. Our Health insurance will probably only cost us $1K with the tax credits. It is not tested on Net Worth, but A.G. Income.

When we start drawing S.S., we will be eligible for Medicare.

try this Calculator out........I for one am very thankful for this legislation.
Health Reform Subsidy Calculator - Kaiser Health Reform (Health Reform Subsidy Calculator - Kaiser Health Reform)
If I entered the data right the penalty for increasing your income for a 58 year old from 80K to 100K is 14K more to pay for your health care with no tax credit! After taxes the impact after SS & state and federal will be over 100% of income can that be right?
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Old 02-27-2012, 06:22 PM   #151
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If I entered the data right the penalty for increasing your income for a 58 year old from 80K to 100K is 14K more to pay for your health care with no tax credit! After taxes the impact after SS & state and federal will be over 100% of income can that be right?
For a family of 4 that looks to be right......Maybe a good reason to try and keep your income at $80K or go whole hog and make $200K
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Old 02-27-2012, 07:55 PM   #152
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For me diversification is also an issue. I will have three income sources at 66: SS, my pension, and my personal investments. Preferably, I would like to be able to pay for all the necessities of life with two of the three sources. That would dictate getting SS at 62. But, my pension is not fully Cola'd, and, realistically, I have to expect that it will become a smaller and smaller part of my income stream over the years. My plan is to counter that by delaying SS to 66 or maybe a bit beyond that to make up for the declining purchasing power of the pension. I'll keep an eye on the next four years to see just how much I will need to adjust my SS timing and my withdrawal rate from my personal investiments.
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Old 02-27-2012, 08:46 PM   #153
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I am saying by deferring S.S and not withdrawing from my tax deferred accounts ......I won't have much of an income. I'll be living off savings in our taxable accounts. Only Dividend, Interest and Capital Gains from the Taxable Account will be our only income.

You don't have to be poverty level for the premium discounts. You could be 400% of FPL and still get a discount.
Thanks for clarifying. This won't effect (affect) me as all my retirement income will be taxable.
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Old 02-27-2012, 09:30 PM   #154
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I am saying by deferring S.S and not withdrawing from my tax deferred accounts ......I won't have much of an income. I'll be living off savings in our taxable accounts. Only Dividend, Interest and Capital Gains from the Taxable Account will be our only income.

.
Something to think about is not letting the 10% and 15% tax brackets go unused and then have a lot of taxable income in later years when drawing SS and end up paying 25 to 28% or more Fed Tax when you could have paid 10 or 15%. I ran Optimal Retirement Calculator and Retirement Decision Support System
about a year and a half ago and it really changed my mind on how much and what income to take when and the tax consequences of it.
Just a thought.
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Old 02-28-2012, 06:39 AM   #155
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Something to think about is not letting the 10% and 15% tax brackets go unused and then have a lot of taxable income in later years when drawing SS and end up paying 25 to 28% or more Fed Tax when you could have paid 10 or 15%. I ran Optimal Retirement Calculator and Retirement Decision Support System
about a year and a half ago and it really changed my mind on how much and what income to take when and the tax consequences of it.
Just a thought.
That's why you also take some of the Traditional IRA money and Convert to a Roth inside the 15% Bracket and keeping yourself below the 200% FPL, so you can cash in on the Health care Premium Credits.
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Old 02-28-2012, 01:49 PM   #156
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If I entered the data right the penalty for increasing your income for a 58 year old from 80K to 100K is 14K more to pay for your health care with no tax credit! After taxes the impact after SS & state and federal will be over 100% of income can that be right?
Okay, I admit to being ignorant about the HC legislation, but can that be right? A break point where the effective tax rate is over 100%? Can anyone direct me to a site to check this for my situation, please? I'm sure I will want to rethink some things if that is true.
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Old 02-28-2012, 04:15 PM   #157
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Maybe I'm missing something here (I often do) but...

The break even age of taking SS at 62 vs 66/67 is about 78-79 years of age. If your break even is 17 years from now, why not take SS at 62. (Plus grandfather yourself in in case those creeps in DC want to deliver you some 'change')

Then, if you're lucky enough to live to be 79, you start 'losing' money...but by then, will you care?? You'll have been ahead for the past 17 years.

There just doesn't seem to be any motivation to waiting. You'd have to live to be almost 80 just to break even.
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Old 02-28-2012, 05:34 PM   #158
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Maybe I'm missing something here (I often do) but...

The break even age of taking SS at 62 vs 66/67 is about 78-79 years of age. If your break even is 17 years from now, why not take SS at 62. (Plus grandfather yourself in in case those creeps in DC want to deliver you some 'change')

Then, if you're lucky enough to live to be 79, you start 'losing' money...but by then, will you care?? You'll have been ahead for the past 17 years.

There just doesn't seem to be any motivation to waiting. You'd have to live to be almost 80 just to break even.
We normally insure ourselves against bad things - fires, crashes, disability, etc.

Retirement income seems unique in that I might want to insure myself against a good thing. Yes, living a long time is a good thing, but living a long time when my finances were set up for a short life isn't ideal.

IMO, the primary reason for deferring SS is that the future might bring me a combination of low investment returns and a long life - the combination that could exhaust my assets too soon. Deferring SS shines in exactly that circumstance.

It's very similar to a 4% SWR. History says that stocks have earned CPI plus 6% (or something similar, depending on the data source). So why not start at 7% and increase with CPI? Because I have to think about the unlikely but possible scenarios.
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Old 02-28-2012, 05:44 PM   #159
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Maybe I'm missing something here (I often do) (Plus grandfather yourself in in case those creeps in DC want to deliver you some 'change')
Yup, you are!.......When you start thinking of S.S. as 'Break even' question, you are on the wrong track.....

Think of it as old age insurance and getting to spend more in your younger years because you have more coming in later.....It's about spending, rather than piling up a stash that you die with. If you die early, who cares....You're dead! As far 'grandfathering yourself in' if you've followed S.S. discussions it won't ever be based on whether you are drawing it or not, it, it will be based on age.
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Old 02-28-2012, 05:59 PM   #160
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Maybe I'm missing something here (I often do) but...

The break even age of taking SS at 62 vs 66/67 is about 78-79 years of age. If your break even is 17 years from now, why not take SS at 62. (Plus grandfather yourself in in case those creeps in DC want to deliver you some 'change')

Then, if you're lucky enough to live to be 79, you start 'losing' money...but by then, will you care?? You'll have been ahead for the past 17 years.

There just doesn't seem to be any motivation to waiting. You'd have to live to be almost 80 just to break even.
No, your not missing anything. Your statement is a perfectly legitimate way to look at SS. Some people on here think of it more lilke an annuity and would rather use their savings now for a higher guaranteed income later. but like you point out the cost of higher payments later is lost income now.
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