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Old 05-07-2015, 03:15 PM   #61
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As we've seen in various studies/reports, spending tends to decrease with age.

So it appears that if a person with longevity in their family is delaying SS until 70 and, as a result, is withdrawing a bit more than their long-term safe withdrawal rate in the years before SS, their strategy might not be as favorable as they once thought?

omni
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Old 05-07-2015, 07:05 PM   #62
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As we've seen in various studies/reports, spending tends to decrease with age.

So it appears that if a person with longevity in their family is delaying SS until 70 and, as a result, is withdrawing a bit more than their long-term safe withdrawal rate in the years before SS, their strategy might not be as favorable as they once thought?

omni
This does not make any sense to me. .... Would you rather draw less in the years before S.S.
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Old 05-08-2015, 04:17 AM   #63
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Unfortunately, my head exploded back in March as I was reading through these threads. I sort of follow the concepts, but can't seem to keep up with the math without looking at the spread sheets. Not to worry, I can trust this group to get the math right. So, just a couple of observations/questions.

Someone mentioned the value of the additional "annuity" provided by waiting until age 70. Quite honestly, I'm very much less concerned about "maxing" out the total dollars I get to spend before I kick - I'm comfortable now and plan to be into the future, assuming the economy doesn't blow up. So, leaving a higher "guaranteed" monthly income to DW is probably my MOST important consideration. I say this because we made the conscious decision to take a lower survivor pension for DW once I kick. In exchange for this reduction (from 50% to 25% survivor pension benefit) we have been receiving a higher pension amount - and will continue to do so - until I kick. So, there's that.

Next, I'm thinking about the issue of overall returns on my stash. I don't plan to do as well as most of you 70/30 kind of folks as I'm more of a 30/70 kind of guy. I'm thinking my theoretical (and so far) "smoother" ride means I have an earlier "cross-over" point than those getting the "big" returns. I could be wrong. I was once.

Someone also brought up the topic of taxes. I know it's complicated because SS is (currently) only taxed on up to 85% (and that could change as well.) BUT, I'm thinking about RMDs (looming soon for me.) On a qualitative level, I can see a point (maybe by age of late 70s or early 80s) when RMDs will really be getting heavily taxed due to their contribution to total income. One could look at this as a good problem to have, I suppose. But so far, I can't get my tax guy to help me at all in the way of planning ANYTHING. I've thought about finding a CFP or similar to run numbers on such things, but my gut tells me the folks here think about this stuff a lot more than any CFP geek. So far, I've simply come down on the side of "getting rid" of as much of my "qualified" money at the 15% (unfortunately, sometimes invading the 25%) tax level. That's why I've done Roth conversions or otherwise tried to live mostly from my modest pension and generous withdrawals from my qualified stash. Also, just at the back of my exploded head is the thought that, when they COME for me (uh, a paranoid reference to MEANS TESTING) maybe they'll just ignore me if I can get rid of a few more buckets full of qualified money. Just a thought - probably silly - or not.

So, with my exploded cranium, adequate funds, comfortable life-style, relatively smooth ride and lack of a good geek, I think I'm going to keep on doing what I'm doing. Still, it does bother me - just a bit - to think about leaving ANY money on the table. That probably indicates some sort of psychological problem, but I can always self-medicate with a frosty beverage at the beach and not worry about it (until the next time a poster here comes up with another way in which I could be leaving money on the table.)

Well, speaking of a frosty beverage, heh, heh.

Thanks to all you folks who think this stuff up - very entertaining! YMMV.
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Old 05-08-2015, 07:19 AM   #64
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Unfortunately, my head exploded back in March as I was reading through these threads. I sort of follow the concepts, but can't seem to keep up with the math without looking at the spread sheets. Not to worry, I can trust this group to get the math right.
You are writing humorously, but to me the key issue in this whole thread is getting the math right. I normally would not get involved in a "when should I claim SS?" type of thread, since it is quite well known that SS is actuarially neutral, so it's possible to make a reasonable case both for claiming early and delaying.

But the OP in this thread presented some calculations (which turned out to have a few mistakes) that appeared to show that claiming at age 66 would win vs. claiming at age 70 for far longer than most people live and without even making particularly optimistic assumptions about portfolio performance. If true, that would have forced me and many other delayed claimers to seriously reconsider our decision.

Now that we appear to be reaching a consensus on the math, with a break even point in one's mid 80s assuming 3% real returns, I think we are back to debating an issue where there is no clear cut "best" answer. 3% real returns under normal market conditions are decent, but not exceptional, for the typical balanced portfolio held by most retirees. In today's environment, with ultra low interest rates and unusually high PE10 stock valuations, 3% real returns might arguably even be considered optimistic. So claiming at 66 or 70 doesn't strike me as a clear win at either age. It all depends on the assumptions one makes - in other words "actuarially neutral". I do think, however, that delaying until 70 has the advantage of eliminating more of the worst case scenarios, which is why I decided to delay in the first place.
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Old 05-08-2015, 09:07 AM   #65
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I know I will better be able to critique my decision about when to take SS by looking in the rear view mirror some years down the road.
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Old 05-08-2015, 02:03 PM   #66
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Actually, market returns don't have to be "extremely" strong in order for the SS benefits collected during ages 62 though 69 to build into a large enough kitty to more than compensate for the difference between SS at 62 and SS at 70 payments. As Telly showed above, even moderate returns will do it.
I have a spreadsheet that I've developed over the years, for helping me decide what to do. It's gone through a few comprehensive iterations.

https://www.dropbox.com/s/gebanzrbr3...0calc.xls?dl=0

As everybody says, the breakeven age is right around your life expectancy.

One thing that has always nagged at me is just the whole concept of delaying SS until you are 70, so you can collect a higher SS payment. Just who are those people who can do this? People who don't need the money, right? People who have enough money that they can get along quite well without getting anything from SS for 8 years.

But if that's the case, what is the attraction for getting extra SS money, when you didn't need anything from SS up to then? What's the point?

Longevity insurance? In case you live longer than ~86 and have managed to lose all your investments & savings?

Seems to me to be a case of the people who need it can't afford to do it, and the people who can afford to do it - don't need to do it.
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Old 05-08-2015, 02:11 PM   #67
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...

One thing that has always nagged at me is just the whole concept of delaying SS until you are 70, so you can collect a higher SS payment. Just who are those people who can do this? People who don't need the money, right? People who have enough money that they can get along quite well without getting anything from SS for 8 years.

But if that's the case, what is the attraction for getting extra SS money, when you didn't need anything from SS up to then? What's the point?

Longevity insurance? In case you live longer than ~86 and have managed to lose all your investments & savings? ....
It's not all or nothing. I believe it is Cut-Throat who pointed out that you can withdraw more now, knowing that you have the higher income stream later.

So maybe someone allows a little extra in their WR, knowing that there is some longevity insurance there in the future if they need it. And longevity insurance is just that, insurance. When we decide to buy insurance, we shouldn't expect to 'break even' or profit, we should expect (hope?) to be covered for the unknown.

That (and spousal benefit) has me leaning towards delaying, but I will revisit in a few years.

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Old 05-08-2015, 04:58 PM   #68
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Regarding Roth conversions to minimize RMD's, has anyone investigated (or used) an Oil drilling MLP tax advantaged strategy that allows large first year deductions to offset the tax hit from the conversion? Apparently it works because for the first year you are a General Partner and can write off the large up front costs all at once. You only invest the amount you need to offset your conversion tax. After that you become a Limited Partner for the duration.
I've heard this presented by several investment advisors, claiming it is used often by people wanting to convert a significant amount over a several year period, but I don't personally know anybody that has used this technique.
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Old 05-08-2015, 06:16 PM   #69
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....I normally would not get involved in a "when should I claim SS?" type of thread, since it is quite well known that SS is actuarially neutral, so it's possible to make a reasonable case both for claiming early and delaying.....
IIRC SS is designed actuarially neutral but using single, unisex mortality. So as I understand it in theory single men who are in average or below average health would be biased to claim early and single women in average or above average health would be better off claiming later. Similarly, most couples would be better off to claim later in most cases because of joint mortality.
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Old 05-08-2015, 06:22 PM   #70
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I have a spreadsheet that I've developed over the years, for helping me decide what to do. It's gone through a few comprehensive iterations.

https://www.dropbox.com/s/gebanzrbr3...0calc.xls?dl=0

As everybody says, the breakeven age is right around your life expectancy.

One thing that has always nagged at me is just the whole concept of delaying SS until you are 70, so you can collect a higher SS payment. Just who are those people who can do this? People who don't need the money, right? People who have enough money that they can get along quite well without getting anything from SS for 8 years.

.
If one is to get SS of $20,000 per year at age 62 the age 70 SS would be right around $37,000. If you were going to retire at age 62 with a million dollars and a 4% withdrawal rate you would be having $60,000 per year to retire on. You could defer taking SS and allocate $240,000 in a separate portfolio for the $30,000 per year to fund to age 70 for an 8 year portfolio. That leaves $760,000 for the other $30,000 withdrawal. At age 70 your income would be $30,000 from the $760,000 portfolio and $37,000 from SS for a total of $67,000.

One could play to optimize the withdrawals for a blend, but as you increase the amount of current spending you are decreasing in practice your retirement portfolio, I would recommend that one wait to age 70 to see how the portfolio and SS are doing, if you were seriously going to retire on the 60K to begin with but that is certainly a personal decision.

As can be seen the more money one retires on the less percentage of your portfolio you are consuming for the wait to age 70, less than this and you are putting more of your eggs in the SS basket but also probably insuring with the best possible chance of not defaulting on a minimum payout. For instance at 1/2 million the same practice leads to a 17.5% increase in annual payout vs the 11.6% increase the million dollar portfolio gives at age 70.
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Old 05-09-2015, 07:56 AM   #71
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It's not all or nothing. I believe it is Cut-Throat who pointed out that you can withdraw more now, knowing that you have the higher income stream later.

So maybe someone allows a little extra in their WR, knowing that there is some longevity insurance there in the future if they need it. And longevity insurance is just that, insurance. When we decide to buy insurance, we shouldn't expect to 'break even' or profit, we should expect (hope?) to be covered for the unknown.

That (and spousal benefit) has me leaning towards delaying, but I will revisit in a few years.

-ERD50
+1 .... And also, it's not about how much money you get to Pile up, it's about how much you actually get to spend. Especially in your early retirement years rather than eyeing a larger pile in the nursing home.
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Old 05-09-2015, 08:30 AM   #72
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Excellent statement


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Old 05-09-2015, 08:46 AM   #73
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You are writing humorously, but to me the key issue in this whole thread is getting the math right. I normally would not get involved in a "when should I claim SS?" type of thread, since it is quite well known that SS is actuarially neutral, so it's possible to make a reasonable case both for claiming early and delaying.
/snip/

SS is neutral except when you throw a spouse into the calculations... DW is 10 years younger than me.... just that fact skews my decision into waiting as long as I can to maximize her survivor benefits... I have not done the math, but I bet that it is far from neutral for me....
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Old 05-09-2015, 12:10 PM   #74
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I have a spreadsheet that I've developed over the years, for helping me decide what to do. It's gone through a few comprehensive iterations.

https://www.dropbox.com/s/gebanzrbr3...0calc.xls?dl=0

As everybody says, the breakeven age is right around your life expectancy.

One thing that has always nagged at me is just the whole concept of delaying SS until you are 70, so you can collect a higher SS payment. Just who are those people who can do this? People who don't need the money, right? People who have enough money that they can get along quite well without getting anything from SS for 8 years.

But if that's the case, what is the attraction for getting extra SS money, when you didn't need anything from SS up to then? What's the point?

Longevity insurance? In case you live longer than ~86 and have managed to lose all your investments & savings?

Seems to me to be a case of the people who need it can't afford to do it, and the people who can afford to do it - don't need to do it.
+1 With SS, I always felt that if you think you're going to need it - consider delaying, but if you don't need it - consider taking it. What you decide is totally up to you.

We retired 58/57 (five years now), and started SS at 62 (no pensions/annuities). Paid little to no taxes each year (no tax deferred withdrawals - just qualified dividends/CGs and used a separate set-aside savings until SS kicked in).

It's a pretty complex moving target when estimating best time to take your SS with future unknowns (health, death, taxes and your own financial position if calculated on market conditions). I believe it's as individual a decision as when your can afford to retire (only you know what's right for you). I make the horrible assumption (I might be wrong here) that the folks at SS have spent many long hours running the numbers and have minimized any advantage obtained by when you decide to sign up. I don't see them leaving any advantages in the future either.
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Old 05-09-2015, 12:24 PM   #75
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I make the horrible assumption (I might be wrong here) that the folks at SS have spent many long hours running the numbers and have minimized any advantage obtained by when you decide to sign up. I don't see them leaving any advantages in the future either.
As others have pointed out, SS is apparently calculated based on a single person, and is gender-neutral. When you add in a spouse, and different salary histories, AND differences in ages, it results in an almost "anything but" neutral. Granted, the numbers may not result in much differences, but if there are significant age and/or salary record differences, it can result in a sizable difference that is worth crunching the numbers to compare.
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Old 05-09-2015, 12:51 PM   #76
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As others have pointed out, SS is apparently calculated based on a single person, and is gender-neutral. When you add in a spouse, and different salary histories, AND differences in ages, it results in an almost "anything but" neutral. Granted, the numbers may not result in much differences, but if there are significant age and/or salary record differences, it can result in a sizable difference that is worth crunching the numbers to compare.
Exactly! .... And why bother creating your own spreadsheet or trying to guess, when there is a very simple 1 page form you can fill out and immediate advice at this link..... SS Analyze.
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Old 05-09-2015, 03:29 PM   #77
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SS is neutral except when you throw a spouse into the calculations... DW is 10 years younger than me.... just that fact skews my decision into waiting as long as I can to maximize her survivor benefits... I have not done the math, but I bet that it is far from neutral for me....
Right. And it can work in the opposite direction as well. I started SS at 62 to protect DW if she outlives me. She has near zero dollars of SS on her own and is prohibited from collecting mine by GPO. So, I'm collecting SS to reduce withdrawals from our FIRE portfolio in case I die first.

If I was single or if the GPO rules didn't exist, I would have considered delaying. In any case, I'm almost 68 and began SS at 62. Thanks to a generally favorable investing climate, the SS dollars I've collected have grown nicely and will support covering the delta between my age 62 SS and the hypothetical age 70 SS I didn't take for many years.

Of course, the investing climate might not have been favorable during this time and my results would not have been as attractive as they've turned out. But DW would still have been better off and that was my target.
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Old 05-09-2015, 04:25 PM   #78
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Regarding Roth conversions to minimize RMD's, has anyone investigated (or used) an Oil drilling MLP tax advantaged strategy that allows large first year deductions to offset the tax hit from the conversion? Apparently it works because for the first year you are a General Partner and can write off the large up front costs all at once. You only invest the amount you need to offset your conversion tax. After that you become a Limited Partner for the duration.

I've heard this presented by several investment advisors, claiming it is used often by people wanting to convert a significant amount over a several year period, but I don't personally know anybody that has used this technique.

The big question is how long is the duration. Many have gone under before people collect much. My dad tried and lost with something very similar.
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Old 05-09-2015, 11:35 PM   #79
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We've debated when to take SS for years now. Once again, my principal reason for waiting is to make up the difference of taking my pension with a 25% survivor benefit rather than a 50% survivor benefit (with resultant larger pension NOW).

But, also, and along similar lines, even without the pension-survivor issue, I wanted to potentially leave DW a larger "annualized" income when I kick. That way, I will know she is in good financial shape, even though she knows virtually nothing about investing our stash. Her eyes glaze over when ever I try to discuss the issue with her. She says "Do we have enough?" When I answer in the affirmative, she shrugs and says "You handle it." So I am handling it. When she gets to heaven, I'll ask her how well I did for her after I "left" her behind.

For whomever asked about how it was possible NOT to need the money at 62 (very much paraphrasing, I'm certain): For me, I guess I actually DID have enough that I don't need the SS yet. No brag, just fact. (Full disclosure: DW DID take hers at 62, though it is maybe a third of what mine will be at 70.) It could have gone the other way if the investments I made had turned out differently. BUT, for those not in my, perhaps, enviable position, there is still the concept of using your stash faster before SS kicks in. You might do that to 1) survive or 2) other financial reasons (e.g., get "rid" of qualified money so your RMDs are lower.) YMMV as always.

This subject remains so complex that MY eyes glaze over most times anyone makes a stab at "quantitative analysis" showing the "best" strategy. Someone else suggested "hind sight" would be helpful. Knowing your date of death would be useful as well, but not sure I want that info. I'm just kind of looking forward to that first check as it will either slow my "stash burn" or else allow me to do more "stuff" (new car, more travel, remodeling, more "toys", more donations to my favorite charities, more to the kids (maybe), or maybe just save it!) Once again, YMMV.
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Old 05-10-2015, 12:36 AM   #80
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Right. And it can work in the opposite direction as well. I started SS at 62 to protect DW if she outlives me. She has near zero dollars of SS on her own and is prohibited from collecting mine by GPO. So, I'm collecting SS to reduce withdrawals from our FIRE portfolio in case I die first.

If I was single or if the GPO rules didn't exist, I would have considered delaying. In any case, I'm almost 68 and began SS at 62. Thanks to a generally favorable investing climate, the SS dollars I've collected have grown nicely and will support covering the delta between my age 62 SS and the hypothetical age 70 SS I didn't take for many years.

Of course, the investing climate might not have been favorable during this time and my results would not have been as attractive as they've turned out. But DW would still have been better off and that was my target.

Yes... exactly my point.... SS is neutral for a single person.... throw in a spouse and it is no longer neutral... that is why you need to go through this process to determine what is best for your own family...
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