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Old 03-25-2015, 08:19 AM   #21
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I'm 61 my wife depends on my ss record for her benefits
My latest thinking is to buy longevity insurance by delaying SS as long as my withdrawal rate is in my comfort zone. If the market hiccups sending my withftawal rate above my comfort threshold that's when I file
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Old 03-25-2015, 08:25 AM   #22
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Telly, I have put together a spreadsheet that resembles your description of yours. I get a break even point between plans A & B around age 86 or 87. That is a similar break even point to what I've seen from online calculators. So, based on what I'm seeing, I think your calculations are well worth going through, but end up just confirming the conventional wisdom that it pays to delay taking SS if you live long enough.
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Old 03-25-2015, 08:28 AM   #23
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What I do for now is compare alternatives using the what-if function in Quicken Lifetime Planner. So my base case might be waiting until 70 and then I'll test taking it earlier with all other assumptions held constant and it gives me an idea of the crossover point.

We are a few years away from having to make a decision, but when the time comes we'll probably pony up a little money and have a professional analysis done by socialsecuritysolutions.com or one of the other similar services out there.
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Old 03-25-2015, 08:32 AM   #24
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I think that you are missing the guaranteed benefit associated with delayed SS. Although average returns may show that you would benefit by not taking the benefit early they do not address what happens if the market turns down. For me the guarantee provided by a higher permanent (not subject to loss) paycheck far outweighs the benefits you outline based on not waiting until 70.

I plan to delay until 70 unless we have a market crash between 62 and 70. If that occurs I will reevaluate. Higher guaranteed benefits for me and eventually my surviving spouse trump all other considerations.
Yes, this is one decision where I do plan on being a market timer. If I'm unsure, I'll probably wait until 70, but if the market seems low to me at 62 or takes a good fall between 62 and 70 I will probably start early.

I have gone back and forth on this over the years. During the 90s run up, I thought it was a no-brainer to take SS early because I could easily invest and beat the increased later SS payment. After the bust, I got more conservative and liked the guaranteed higher payment for longevity. Now I'm seeing that this could be a good time to try to judge the market to improve on an actuarial draw. My bias is still toward longevity insurance.
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Old 03-25-2015, 08:32 AM   #25
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I'm 61 my wife depends on my ss record for her benefits
My latest thinking is to buy longevity insurance by delaying SS as long as my withdrawal rate is in my comfort zone. If the market hiccups sending my withftawal rate above my comfort threshold that's when I file
Comments?
Been there, done that.

I hit the "withdrawal rate above my comfort threshold" in late 2008 and filed for SS at age 62. I'd planned to wait until FRA or later, but the market gods had other plans.
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Old 03-25-2015, 09:44 AM   #26
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Personally, I find the decision for when to take SS much harder cuz I think one should factor in other variables such as what would taxes do at FRA vs 70 when RMDs hit. Depending on deferred account balances, that 'double whammy' could be a factor - maybe, just maybe it makes more sense to draw SS at FRA so that your payment is lower and at age 70 your AGI won't bump you into the next marginal tax bracket when RMDs hit.

And how does what age you select SS effect your WR?

Maybe, just maybe it makes more sense given ones savings vs expenses to take SS earlier to reduce your WR and what effect that will have on savings longevity.


Still...at this point I'm with the other lemmings - going to file and suspend -start at 70.
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Old 03-25-2015, 10:22 AM   #27
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I am 63 and deferring my ss. During this time I am enjoying zero taxes on dividends (large amount close to the limit when including rental income). I fear that if I had SS income now that I would be paying 15% taxes on these dividends.
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Old 03-25-2015, 10:34 AM   #28
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Interesting discussion. I think I need to build a spreadsheet to try and figure out some of this for myself. Lots of good things to consider like have BBQ-Nut suggests.
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Old 03-25-2015, 10:37 AM   #29
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I wonder if it would be easier and more reliable to simply run different scenarios (62, FRA, 70) in firecalc, QLP or your favorite retirement planning tools and look at comparative success rates, ending balances, etc rather than building a spreadsheet since spreadsheets are notorious for having errors.
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Old 03-25-2015, 10:44 AM   #30
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I thought that as well but a quick run yesterday and I wasn't sure if it was handling things correctly (and IIRC firecalc does not do taxes/tax rates). Also I don't think it will give you a crossover point. But granted I did not use fixed numbers yesterday. Then again it will look like I'm working when really I am not
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Old 03-25-2015, 10:52 AM   #31
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Been there, done that.

I hit the "withdrawal rate above my comfort threshold" in late 2008 and filed for SS at age 62. I'd planned to wait until FRA or later, but the market gods had other plans.
That plan is in the back of my mind, too. I've been through some bad market drops and have seen the recoveries. When I was employed I had the advantage of being able to invest new money at bargain-basement valuations. That's not true anymore. I'm profoundly grateful the market has co-operated since I retired last year at 61 but if we have a major "correction" I could see filing for SS early on the assumption that it's better than taking money out of investments in a bad market.
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Old 03-25-2015, 10:55 AM   #32
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I thought that as well but a quick run yesterday and I wasn't sure if it was handling things correctly (and IIRC firecalc does not do taxes/tax rates). Also I don't think it will give you a crossover point. But granted I did not use fixed numbers yesterday. Then again it will look like I'm working when really I am not
Agree that firecalc will not give you a crossover point, it will just let you know which scenario is more successful or results in higher minimum, average and maximum balances.

What-if in QLP will show you a crossover point as it displays a line for each of two scenarios and you can see where they cross.
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Old 03-25-2015, 01:41 PM   #33
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As others have pointed out, taking taxation into effect is very important since it would change your "take home".
For those not aware of the unexpectedly high marginal tax rates that are different from your tax bracket, see the Bogleheads wiki
Taxation of Social Security benefits - Bogleheads

I have seen so many cases in my TaxAide volunteering where seniors are not aware of this as they take their IRA distributions and end up with surprising tax liabilities.
Hope congress will smoothen taxation of SS benefits at some point instead of these cliffs.
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Old 03-25-2015, 02:18 PM   #34
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I have seen so many cases in my TaxAide volunteering where seniors are not aware of this as they take their IRA distributions and end up with surprising tax liabilities.
Hope congress will smoothen taxation of SS benefits at some point instead of these cliffs.
Well since the income limits were set in 1986 and have not been adjusted for inflation I would not hold much hope that they will have a change of heart anytime soon.
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Old 03-25-2015, 03:48 PM   #35
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Personally, I find the decision for when to take SS much harder cuz I think one should factor in other variables such as what would taxes do at FRA vs 70 when RMDs hit. Depending on deferred account balances, that 'double whammy' could be a factor - maybe, just maybe it makes more sense to draw SS at FRA so that your payment is lower and at age 70 your AGI won't bump you into the next marginal tax bracket when RMDs hit.
I know this has been mentioned before but this time I decided to do a calculation of my RMD at age 70 (8 years from now) assuming 6% annual return and that we'll withdraw from only the taxable accounts until then.

Wow. My RMD would be more than I need to live on, all of it taxable as ordinary income, on top of whatever capital gains distributions I'll get from the after-tax accounts and $20K in pensions. Assuming tax rates won't decrease, that makes 85% of my SS taxable at 25%. At least.

I really need to rethink the decision to postpone SS till age 70 given how much of it will disappear in taxes. I may be better off collecting the lower amount starting now.
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Old 03-25-2015, 04:00 PM   #36
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I don't see how deferring SS and withdrawing solely from taxable helps you, but if as a result you are in the 15% bracket and can do Roth conversions (or simply withdraw from tax-deferred rather than taxable) to the top of the 15% tax bracket then that should reduce your balances subject to RMDs.

I'm deferring pensions and SS as much as possible in favor of Roth conversions to the top of the 15% tax bracket in the hope of avoiding or at least reducing my time in the 25% tax bracket once RMDs begin.
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Old 03-25-2015, 04:06 PM   #37
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I know this has been mentioned before but this time I decided to do a calculation of my RMD at age 70 (8 years from now) assuming 6% annual return and that we'll withdraw from only the taxable accounts until then.

Wow. My RMD would be more than I need to live on, all of it taxable as ordinary income, on top of whatever capital gains distributions I'll get from the after-tax accounts and $20K in pensions. Assuming tax rates won't decrease, that makes 85% of my SS taxable at 25%. At least.

I really need to rethink the decision to postpone SS till age 70 given how much of it will disappear in taxes. I may be better off collecting the lower amount starting now.
Also check if converting IRA to Roth before RMDs while delaying SS makes more sense in your case.
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Old 03-25-2015, 05:47 PM   #38
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If I was still working, I might consider holding off on collecting SS.
Being retired, my intent is to file for payments as soon as I can.

My opinion, if I can get the money, and don’t need it, then I can collect it and invest it somewhere that provides us a greater benefit then the purported difference between “early” and “full” retirement dates.

Heck, I’m not THAT positive I’ll live to full retirement, or that some other aspect might prevent any SS payment from being received by us.
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Old 03-25-2015, 06:11 PM   #39
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Also check if converting IRA to Roth before RMDs while delaying SS makes more sense in your case.
I need to play with the numbers some more. I'd planned to do the Roth conversion up to the top of the 15% tax bracket every year and I can see that taking SS will reduce the amount I can take out of my IRA and convert to a Roth. Too many variables! Fortunately, not a decision I need to make immediately.
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Old 03-25-2015, 06:14 PM   #40
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Yes, that is the principal reason I am deferring SS and pensions to maximize roth conversions before RMDs begin and pay 15% rather than 25% or more. The longevity insurance aspect of taking SS late is an added bonus.
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