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SS strategy ... another thread?
Old Yesterday, 05:13 AM   #1
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SS strategy ... another thread?

Hi All,

I’ve been putting off thinking too much about this, but had a few weeks of near zero money thoughts while on holiday ... I have read a zillion threads in the topic ... this is then, zillion +1.

FRA is 66. I have full credits. My wife is same age and FRA, but does not have enough credits for her own SS.

We are in the 32% federal bracket - military retirement, corporate pension and NQP, rental income, saved a lot over the years.

I don’t see our income dropping below the 32% band ... and, SS will not take us into the 35% band.

Good health (so far), pretty OK gene pool for longevity, lots of interests that require spending money, Fidelity model shows no way to spend it all unless we triple or quadruple our spend rate, etc.

My gut tells me to take as much of my money back from the Federal government as possible ...

Thoughts?
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Old Yesterday, 06:13 AM   #2
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Old Yesterday, 06:23 AM   #3
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What does https://opensocialsecurity.com/ tell you to do?

Be sure to click on the Advanced Options checkbox at the top of the page.
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Old Yesterday, 06:41 AM   #4
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I modeled 90 for me and 100 for spouse.

openss provides the predictable wait to 68 answer ...
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Old Yesterday, 06:47 AM   #5
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Quote:
Originally Posted by stephenson View Post
I modeled 90 for me and 100 for spouse.

openss provides the predictable wait to 68 answer ...
Play with the real discount rate. Some here (including me) think the default is too conservative (20 year TIPS).
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Old Yesterday, 06:48 AM   #6
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Originally Posted by stephenson View Post
I modeled 90 for me and 100 for spouse.

openss provides the predictable wait to 68 answer ...
It is only predictable based on your inputs. It is giving you the age for maximum SS withdrawals based on your input for age of death.

If the maximum is not important to you, and you want to start taking sooner, by all means it is your choice. SS sounds like icing on the cake for you, so how thick do you need the icing to be?


Good luck on your decision and best to you,

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Old Yesterday, 06:56 AM   #7
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Played with the rate ... it simply nets larger or smaller outcome, but model not designed to offer anything of than net outcome, right?
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Old Yesterday, 07:00 AM   #8
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Quote:
Originally Posted by stephenson View Post
..... My gut tells me to take as much of my money back from the Federal government as possible ...

Thoughts?
Quote:
Originally Posted by stephenson View Post
... openss provides the predictable wait to 68 answer ...
opensocialsecurity does just that... it suggests the claiming strategy that gets as much as possible out of SS considering the inputs that you provide... including the mortality tables that you designate and the real interest rate that you use.

While opensocialsecurity suggests a TIPs rate, I use an estimated real portfolio rate (3% in my case). You could also use zero to see what your results would be absent any time value of money.

You can also input alternative claiming strategies like both as soon as possible, 65, FRA and as late as possible at the bottom to assess how sensitive the decision is.

In our case the difference between the highest and lowest expected present value was only 3-4%.

Another way of viewing delaying SS is as "buying" a COLA adjusted deferred annuity from the Federal government... for example, let's say that your PIA at your FRA of 66 is $2,000/month... if you start at 62 you would receive $1,500/month and if you defer to 70 you'll receive $2,640/month. Let's also assume that your health is good.

Starting at 62, you "pay" premiums of $1,500/month for 8 years by deferring social security... at 70 you begin receiving a $1,140 cola adjusted monthly benefit. You have given up $144,000 ($1,500/month * 8 years) and will receive an additional $13,680 for life. That's a payout rate of 9.5%, which is a screaming deal for a COLA adjusted annuity. In addition, this COLA adjusted deferrred annuity also includes an "option" to start enhanced benefits anytime if your health or finances change for the worse.
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Old Yesterday, 07:04 AM   #9
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Played with the rate ... it simply nets larger or smaller outcome, but model not designed to offer anything of than net outcome, right?
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Old Yesterday, 07:07 AM   #10
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Played with the rate ... it simply nets larger or smaller outcome, but model not designed to offer anything of than net outcome, right?
Yes, the "net" outcome is the expected present value of your combined benefits based on the assumptions that you chose. Another knob is what mortality table to use. It can also provide EPVs for alternative claiming strategies at the very bottom of the page.

The EPV models the cash flows assuming that you are alive based on the birth date, PIA and haircut information that you provide. It then multiplies the cash flow by the probability of your being alive based on the mortality table you select to get expected cash flows. It then discounts those cash flows for the time value money using the interest rate that you provide and that expected present value is the number that you see on the output.

All-in-all a very robust way to view the value of SS IMO.
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Old Yesterday, 07:07 AM   #11
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Quote:
Originally Posted by stephenson View Post
My gut tells me to take as much of my money back from the Federal government as possible ...

Thoughts?
I think you should use https://opensocialsecurity.com/

Most likely that will mean you delay until 70, while your wife starts at her FRA.
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Old Yesterday, 07:09 AM   #12
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I think you should use https://opensocialsecurity.com/

Most likely that will mean you delay until 70, while your wife starts at her FRA.
I guess that you missed posts 3, 8 and 10..... wake up joe! or go get some joe, joe!
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Old Yesterday, 07:14 AM   #13
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I guess that you missed posts 3, 8 and 10..... wake up joe! or go get some joe, joe!
I saw them. I was just adding my vote.

(sips more java)

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Old Yesterday, 07:37 AM   #14
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Played with various tables, as well. Also, inputted the 90 and 100 year numbers as a side check. All pretty predictable and in line with the other zillion threads on this topic :-)

Given that I prefer to save instead of spend, I was doing some nutty thinking - based on being able to spend faster when younger - how about starting at FRA, put all SS into a separate account and spend it all down to zero by year end ... every year.

Sheesh - spending is harder than saving ...
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Old Yesterday, 07:50 AM   #15
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Sheesh - spending is harder than saving ...


Hallelujah! I suspect health and physical or mental decline could change that.
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Old Yesterday, 09:04 AM   #16
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Quote:
Originally Posted by pb4uski View Post
Another way of viewing delaying SS is as "buying" a COLA adjusted deferred annuity from the Federal government... for example, let's say that your PIA at your FRA of 66 is $2,000/month... if you start at 62 you would receive $1,500/month and if you defer to 70 you'll receive $2,640/month. Let's also assume that your health is good.

Starting at 62, you "pay" premiums of $1,500/month for 8 years by deferring social security... at 70 you begin receiving a $1,140 cola adjusted monthly benefit. You have given up $144,000 ($1,500/month * 8 years) and will receive an additional $13,680 for life. That's a payout rate of 9.5%, which is a screaming deal for a COLA adjusted annuity. In addition, this COLA adjusted deferrred annuity also includes an "option" to start enhanced benefits anytime if your health or finances change for the worse.
What PB4 said above.

Also, as has been demonstrated before: taking SS at 70 lets you spend more money starting at 62, if you don't mind not leaving an estate. A big if, for many of us.
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Old Yesterday, 09:15 AM   #17
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.... Also, as has been demonstrated before: taking SS at 70 lets you spend more money starting at 62....
Since the OP or some others may not be familiar with this idea I figured I would offer a simple example.

Single retiring at 62. SS at 62 = $18,000; at 70 = $31,680 and has $1m of retirement savings. Assumes 4% SWR.

SS at 62.... safe withdrwal of $40,000 + $18,000 SS = $58,000 available for spending

SS at 70.... carve out $253,440 ($31,680 * (70-62)) to "replace" age 70 SS from ages 62 to 70... so $746,560 remainder in long-term retirement assets... * 4% = $29,862 portfolio withdrawals + $31,680 SS = $61,542 available for spending

62-69 = $29,862 portfolio withdrawals + $31,680 from side fund
70+ = $29,862 portfolio withdrawals + $31,680 from SS

So you can spend 6% more with same risk of ruin by deferring SS to 70.
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Old Yesterday, 12:42 PM   #18
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What PB4 said above.

Also, as has been demonstrated before: taking SS at 70 lets you spend more money starting at 62, if you don't mind not leaving an estate. A big if, for many of us.
For most of us, its not POSSIBLY leaving a BIGGER estate. It is feasible to be leaving a larger estate, if you live long enough. A reduction of even $400k before I file at say 69, still leaves everyone with way too much for doing nothing if I drop dead at 70, it at least I will have spent what I wanted, betting on living much longer. The difference of paying yourself the COLA equal of SS once you retire, means having use of your money that you actual saved and invested, when you are the youngest (vs, I may need more when I am old & decrepit), and worrying far less about income when the “will I still be alive, and even if, what would I do with the extra savings except leave it” phase of life occurs.

I won’t be tracking if I am ahead or behind by 4%, as I really don’t care. I know my spend, no waste, maximize value, minimize taxes tendencies. They are automatic and I intend to do or spend whatever I want, knowing what I want almost absolutely will not deplete my portfolio to any sort of dangerous level. I never spent $12k/m income average in my life, and still accumulated more than I thought I would ever have, so spending the same now, with far lower taxes and no concern about adding to saving, means no worries.
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Old Yesterday, 12:45 PM   #19
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For most of us, its not POSSIBLY leaving a BIGGER estate. It is feasible to be leaving a larger estate, if you live long enough. The difference of paying yourself the COLA equal of SS once you retire, means having use of your money when you are the youngest (vs, I may need more when I am old & decrepit), and worrying far less about income when the “will I still be alive, and even if, what would I do with the extra savings except leave it” phase of life occurs. I won’t be tracking if I am ahead or behind by 4%, as I really don’t care. I know my spend, no waste, maximize value, minimize taxes tendencies. They are automatic and I intend to do or spend whatever I want, knowing what I want almost absolutely will not deplete my portfolio to any sort of dangerous level. I never spent $12k/m income average in my life, and still accumulated more than I thought I would ever have, so spending the same now, with far lower taxes and no concern about adding to saving, means no worries.
While the post is a bit disjointed, the bolded part is a totally false premise IMO... money is fungible.
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Old Yesterday, 12:54 PM   #20
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Since the OP or some others may not be familiar with this idea I figured I would offer a simple example.

Single retiring at 62. SS at 62 = $18,000; at 70 = $31,680 and has $1m of retirement savings. Assumes 4% SWR.

SS at 62.... safe withdrwal of $40,000 + $18,000 SS = $58,000 available for spending

SS at 70.... carve out $253,440 ($31,680 * (70-62)) to "replace" age 70 SS from ages 62 to 70... so $746,560 remainder in long-term retirement assets... * 4% = $29,862 portfolio withdrawals + $31,680 SS = $61,542 available for spending

62-69 = $29,862 portfolio withdrawals + $31,680 from side fund
70+ = $29,862 portfolio withdrawals + $31,680 from SS

So you can spend 6% more with same risk of ruin by deferring SS to 70.
Even that is too simplistic, the gain is larger. First, you are paying yourself at 62 what you would be getting at 70. The COLA gains are to your benefit as the larger amount over $18k gains more. Then, the $253,440 is not spent at once. Only $2640 is taken monthly, so the remainder earns whatever interest that account carries. Even using 2% means a smaller initial reduction, (just under $240000) allowing the remaining to be used with the 4% rule, to be higher. It’s a great annuity for sure!
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