Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 04-19-2012, 02:55 PM   #21
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,240
Quote:
Originally Posted by MasterBlaster View Post
You should try the same analysis with the ORP calculator. When you include taxes, the picture changes and the outcome may be very different.
My immediate thought was similar with regard to taxes.

This is the sort of thing each of us will need to model for ourselves. But with certain combinations of tIRA/401(k), pensions and other taxable income streams, it might well work out better to "use up" excess portfolio and THEN live more from SS than the remaining port. I know little about taxes, but I could imagine scenarios where this would lower the life-time tax bite. I hope ORP is capable of teasing this out as I don't think FIRECALC is.

YMMV was never truer.
__________________

__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-19-2012, 04:08 PM   #22
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
Thanks for the suggestion on running through ORP. Got the opposite result from FireCalc.

According to ORP, drawing SS @62 will provide 17% less level income than if we wait to draw @ 70.

Amazing what taxes do! I won't forget this lesson.
__________________

__________________
Learning how to be still, to really be still and let life happen - that stillness becomes a radiance -
Morgan Freeman
Lisa99 is offline   Reply With Quote
Old 04-19-2012, 04:22 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,967
Quote:
Originally Posted by Lisa99 View Post
Thanks for the suggestion on running through ORP. Got the opposite result from FireCalc.

According to ORP, drawing SS @62 will provide 17% less level income than if we wait to draw @ 70.

Amazing what taxes do! I won't forget this lesson.
And then add on top of that unknown future tax rates, deductions, credits etc. which may make it all irrelevant! Are we having fun yet...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 04-19-2012, 04:28 PM   #24
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by Midpack View Post
And then add on top of that unknown future tax rates, deductions, credits etc. which may make it all irrelevant! Are we having fun yet...
Aren't you the spoiler.

You left out future inflation, investment returns, and your personal lifespan and expenses.

All we can do is plan. When things change we can re-plan. There are many unknowns.
__________________
MasterBlaster is offline   Reply With Quote
Old 04-19-2012, 04:55 PM   #25
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by Lisa99 View Post
According to ORP, drawing SS @62 will provide 17% less level income than if we wait to draw @ 70.
Did this take into account RMD's from traditional IRA's/401k's?
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 04-19-2012, 05:04 PM   #26
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by FIRE'd@51 View Post
Did this take into account RMD's from traditional IRA's/401k's?
yes, I believe that to be the case. I would be surprised if ORP did not take that into account.
__________________
MasterBlaster is offline   Reply With Quote
Old 04-19-2012, 05:13 PM   #27
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
Quote:
Originally Posted by FIRE'd@51 View Post
Did this take into account RMD's from traditional IRA's/401k's?
Yes it did. ORP has us converting 90% of our IRAs to Roth by 70, but we will have small RMDs to account for.
__________________
Learning how to be still, to really be still and let life happen - that stillness becomes a radiance -
Morgan Freeman
Lisa99 is offline   Reply With Quote
Old 04-19-2012, 05:56 PM   #28
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,240
Quote:
Originally Posted by MasterBlaster View Post
Aren't you the spoiler.

You left out future inflation, investment returns, and your personal lifespan and expenses.

All we can do is plan. When things change we can re-plan. There are many unknowns.
We have nothing to fear but fear itself - and the bogeyman. - Pat Paulson
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 04-19-2012, 06:04 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,676
I think this is important as it screens out those portfolio declines that go down below your comfort level before going back up. At the bottom of the Investigate tab you see:
Quote:
There should be a minimum of $ left in the portfolio at all times, including at the end.
You might want to define this level before running all scenarios. Some of those "successes" may kill you.

BTW, I was holding out to take our SS at 66 based on maybe having more in very old age. But at 64 we just decided to do it. Huge relief as the portfolio withdrawals will help me to sleep much better -- probably will live longer as a result which could be a bit of a problem.
__________________
Lsbcal is offline   Reply With Quote
Old 04-19-2012, 06:10 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
SS is supposed to actuarially neutral with respect to age, isn't it?

For married folks, doesn't delaying often leave a surviving spouse with higher benefits? How would one model in FIREcalc the death of a spouse at various ages? (Is there an appropriate smiley to append to that question?)
__________________
LOL! is offline   Reply With Quote
Old 04-19-2012, 06:28 PM   #31
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
SS is supposed to actuarially neutral with respect to age, isn't it?
That is true. However if you plan on dying young you may want to get all you can when you can - and vice versa.

Things get complicated with dual earners and spousal and survivors benefit. In that case some people believe that you can game the system to your (the married couple's) favor.
__________________
MasterBlaster is offline   Reply With Quote
Old 04-19-2012, 06:28 PM   #32
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
Quote:
Originally Posted by Lsbcal
I think this is important as it screens out those portfolio declines that go down below your comfort level before going back up. At the bottom of the Investigate tab you see:
You might want to define this level before running all scenarios. Some of those "successes" may kill you.

BTW, I was holding out to take our SS at 66 based on maybe having more in very old age. But at 64 we just decided to do it. Huge relief as the portfolio withdrawals will help me to sleep much better -- probably will live longer as a result which could be a bit of a problem.
I have the minimum comfort level defined and run all scenarios with that number plugged in.

While DH wouldn't mind spending it will he can and then living on SS (he even wants to be a Walmart greeter some day!) I don't lean that way. And since I'm the finance arm of this gig we shouldn't run out of money while I'm alive.
__________________
Learning how to be still, to really be still and let life happen - that stillness becomes a radiance -
Morgan Freeman
Lisa99 is offline   Reply With Quote
Old 04-19-2012, 07:19 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,676
Quote:
Originally Posted by Lisa99 View Post
I have the minimum comfort level defined and run all scenarios with that number plugged in.

While DH wouldn't mind spending it will he can and then living on SS (he even wants to be a Walmart greeter some day!) I don't lean that way. And since I'm the finance arm of this gig we shouldn't run out of money while I'm alive.
Good job! I think many who run FIRECalc just look at the success rate number.

It would be more helpful if FIRECalc showed graphical data in a different way or provide more output options, but I'm afraid the resources for doing this are not there.
__________________
Lsbcal is offline   Reply With Quote
Old 04-20-2012, 01:45 AM   #34
Full time employment: Posting here.
 
Join Date: May 2008
Posts: 589
Ran the scenarios for my parents who have similar predicted SS payouts. Having one take it around 65-66, then the other claim a spousal benefit until 70, by far produced the best results. There is a risk that the estate would lose money if they both died before their late 70s, but past that it was a huge benefit if both or just one of them was alive (an extra $9k/year).

Definitely have to explore the spousal benefit path in most people's cases these days since most of the time both spouses work.
__________________
plex is offline   Reply With Quote
Old 04-20-2012, 07:37 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,172
Quote:
Originally Posted by youbet View Post
Try doing both and noting both results. The 30 year test uses additional data not included in the 40 year test and is sometimes worthwhile to check.

For example, the run I do which tests my current situation has a 100% success rate with either 30 or 40 years. But, the 30 year scenario shows lower early year portfolio balances than the 40 year scenario.

Just another way to get yourself confused I guess. But do try both. And note that the end result on a 30 year run is different than the 30 year point on a 40 year run, all other things being equal.
What additional data does the 30 year test include? Any idea why the 40 year test doesn't include it?

It's been awhile since I've run Firecalc. I guess I should do it again, even though not much has really changed in my situation, and I'm years from the SS decision.
__________________
RunningBum is offline   Reply With Quote
Old 04-20-2012, 11:19 AM   #36
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Quote:
Originally Posted by RunningBum View Post
What additional data does the 30 year test include? Any idea why the 40 year test doesn't include it?

It's been awhile since I've run Firecalc. I guess I should do it again, even though not much has really changed in my situation, and I'm years from the SS decision.
I'm not sure what year the latest data in FIRECalc comes from, but for a 40 year retirement FIRECalc has to stop retirement scenarios 40 years before its data ends. Not enough data available for a 40 year retirement starting in 1980 for example. A 30 year retirement scenario probably does have enough data to start in 1980, just barely. Neither retirement period can test retirements staring in 2000, for the same reason.
__________________
Animorph is offline   Reply With Quote
Old 04-20-2012, 01:29 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by RunningBum View Post
What additional data does the 30 year test include? Any idea why the 40 year test doesn't include it?
Animorph answered that nicely above.
Quote:

It's been awhile since I've run Firecalc. I guess I should do it again, even though not much has really changed in my situation, and I'm years from the SS decision.
I've been FIRE'd about 6 years. I generally construct a run testing my current situation every year. The run driven by the "Great FIRE Portfolio Dip of 2009" was interesting.....

But, so far, so good.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 04-20-2012, 02:32 PM   #38
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by Lisa99 View Post
Using Firecalc I just estimated our 'level of spending' with a 95% success rate using SS benefits starting at 62, 67 and 70.

I'm shocked to learn that our highest level of spending ability will occur if we both take SS at 62. There is a slight drop in spending level if we wait to 65 and 67, but an overall 5% drop in spending ability if we wait until 70.

I would have thought it would have been the opposite, but I will have a very small pension and DH doesn't have one so I guess spending from the portfolio only for too many years really takes a toll.

Wahoo for Firecalc!

i am late to this thread and i havent yet read all the posts but i wanted to comment while my thought are fresh, so here goes.

this topic has been discussed at length and for many years. back in 2007 i showed by example (2 actually) that a single person (62 y.o.) can actually spend more money and have a lower market risk if that person delays taking SS till age 70. ( the 1st example is extreme and was made to show off my point, the second example is more likely to be the way it is done.) Social Security at 62, 66 or 70? In this thread CFB argued your point exactly but when you run thru the numbers it turns out you can spend more by delaying SS. however, to get this additional spending, you have to be willing to spend down (some) of your portfolio (which might not be popular in today's environment).

some after thoughts on that old post: 1) i used a SWR of 4%. now days there are many people that would disagree that 4% is a SWR and would rather use something lower. however, when you do the math, the lower the SWR you use the greater the portfolio needs to be to get the income number used for the age 62 person and that leads to larger increase in monthly income from age 62-70 for the person who waits to start SS till age 70. 2) i used a MM account as keeping up with inflation for the 8 yrs between 62 and 70. now days that isn't true so i-bond might be a good alternative. however doing so means lots of i-bond would have to be purchased prior to age 62 for the i-bond technique to be comparable or maybe some kind of CD ladder could be used. (however, if the fed is to be believed, in this environment of low interest rates there isn't much inflation so maybe it isnt a problem.) when you combine 1) and 2) you could use some of the extra money you get because of 1) to gradually increase your monthly spend rate each year in order to compensate for 2). and finally 3) these examples can be reworked to make lifetime (instead of just between ages 62 and 70) income rise by taking SS at age 70. i think the key that makes these examples work is that the retiree is removing some of their portfolio from market risk when waiting till age 70 to start SS. this is possible because a higher amount of the retiree's income's longevity risk is transferred from the portfolio to SS.


when this discussion is applied to couples more income is available sooner (as pointed out by rescueme), however i think the same basic math is the same. the application, as i see it, would be for the higher (SS qualified) earner (A) to wait till 70 to claim on A's own record and the other spouse (B) starts their own at B's FRA. if B starts earlier than FRA their benefit and their percentage of A's benefit will be permanently reduced.
__________________
jdw_fire is offline   Reply With Quote
Old 04-20-2012, 03:47 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,263
Quote:
Originally Posted by jdw_fire View Post
i am late to this thread and i havent yet read all the posts but i wanted to comment while my thought are fresh, so here goes.

this topic has been discussed at length and for many years. back in 2007 i showed by example (2 actually) that a single person (62 y.o.) can actually spend more money and have a lower market risk if that person delays taking SS till age 70. ( the 1st example is extreme and was made to show off my point, the second example is more likely to be the way it is done.) Social Security at 62, 66 or 70? In this thread CFB argued your point exactly but when you run thru the numbers it turns out you can spend more by delaying SS. however, to get this additional spending, you have to be willing to spend down (some) of your portfolio (which might not be popular in today's environment). ...

Thank you jdw_fire for linking to that old thread. To save others some time, please note that CFB had an error in his numbers (the $21,348 annual SS at 70YO should be $23,748), so some later posts used this bad number before getting corrected later.

I think your numbers very clearly show how one could spend more in the early years by delaying SS, even though this may seem counter-intuitive. Looking at it another way, it is easy to see though - one is simply trading in their portfolio for the governments SS annuity. So with a fully annuitized future, you can spend the rest today. You are also trading in the chance to leave an estate to heirs/charity with that example.

But the example was picked to make the numbers 'pure' and demonstrate the principles. In reality, one would not likely give up all their portfolio to do this, but would blend it and give up a portion.

Thought provoking.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 04-20-2012, 05:03 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,172
Quote:
Originally Posted by Animorph View Post
I'm not sure what year the latest data in FIRECalc comes from, but for a 40 year retirement FIRECalc has to stop retirement scenarios 40 years before its data ends. Not enough data available for a 40 year retirement starting in 1980 for example. A 30 year retirement scenario probably does have enough data to start in 1980, just barely. Neither retirement period can test retirements staring in 2000, for the same reason.
OK, thanks. It sounded like there was some factor that wasn't being considered for the 40 year range. 1980 and the 9 years before are included in the 40 yr scenario, but not as starting points.
__________________

__________________
RunningBum is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:29 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.