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Old 04-20-2012, 07:18 PM   #41
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Originally Posted by ERD50 View Post
Thank you jdw_fire

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
I would seriously consider this approach for my own SS withdrawal if the U.S. had a rapidly diminishing budget deficit, a majority consensus on what measures need to be implemented to bring the staggering deficits into line and a political atmosphere that allowed the discussion of weighty issues in a serious manner meant to find solutions in the best interest of the country.

As I calculate it, by starting SS at 62, the equivalent funds that I do not withdraw to live on should grow to about $250,000 before I collect a single dollar of my SS at age 70. By the nominal "break even" point at age 79 those funds grow to almost $400,000. This pushes the real break even point way way out into the future.

Based on my evaluation of the factors listed above, I've decided to keep as much of my own resources as possible instead of trusting that a dysfunctional system will somehow make up for using my own resources by forking over more money 20 or 30 years from now. Thus, I've elected to start my SS at 62 at the end of this year.
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Old 04-20-2012, 07:34 PM   #42
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Originally Posted by ejman View Post
I would seriously consider this approach for my own SS withdrawal if the U.S. had a rapidly diminishing budget deficit, a majority consensus on what measures need to be implemented to bring the staggering deficits into line and a political atmosphere that allowed the discussion of weighty issues in a serious manner meant to find solutions in the best interest of the country.

As I calculate it, by starting SS at 62, the equivalent funds that I do not withdraw to live on should grow to about $250,000 before I collect a single dollar of my SS at age 70. By the nominal "break even" point at age 79 those funds grow to almost $400,000. This pushes the real break even point way way out into the future.

Based on my evaluation of the factors listed above, I've decided to keep as much of my own resources as possible instead of trusting that a dysfunctional system will somehow make up for using my own resources by forking over more money 20 or 30 years from now. Thus, I've elected to start my SS at 62 at the end of this year.
so clearly you believe there is great risk in counting on SS to pay as "advertised", and that is a valid opinion (even more valid now then when i posted the original post). but your discussion of how many dollars you will have in the future (or any discussion of the SS break even point) does not refute my post (except if your fear of SS not paying as advertised actually happens). if however SS pays as advertised (as i suggested in that earlier thread), the method i demonstrated in that post works as stated for anyone in that (or similar) situation and that retiree can increase his/her spending by delaying the start of SS.
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Old 04-20-2012, 07:40 PM   #43
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I would seriously consider this approach for my own SS withdrawal if the U.S. had a rapidly diminishing budget deficit, a majority consensus on what measures need to be implemented to bring the staggering deficits into line and a political atmosphere that allowed the discussion of weighty issues in a serious manner meant to find solutions in the best interest of the country. ...
Well, there is that.

But if things are that bad for the govt to cut SS, we'll probably see poor market returns over that time also.

Heck, it's all a crap shoot.

-ERD50
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Old 04-20-2012, 08:12 PM   #44
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so clearly you believe there is great risk in counting on SS to pay as "advertised", and that is a valid opinion (even more valid now then when i posted the original post). but your discussion of how many dollars you will have in the future (or any discussion of the SS break even point) does not refute my post (except if your fear of SS not paying as advertised actually happens). if however SS pays as advertised (as i suggested in that earlier thread), the method i demonstrated in that post works as stated for anyone in that (or similar) situation and that retiree can increase his/her spending by delaying the start of SS.
I wouldn't even dream of attempting to refute your post. I haven't checked your math but I'm sure other posters here have and are satisfied that your math is correct. As I said in my earlier post I'm very concerned that there are very powerful economic, political and social factors that will make any such calculation irrelevant. That is my belief and I certainly respect anyone's belief to the contrary. Lets check back in 30 years and see how it all turned out shall we?
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Old 04-22-2012, 06:21 PM   #45
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Not exactly on point, but an article on the value of delaying SS vs. other fixed investments:

How to Get a 7% Guaranteed Return—From Social Security - WSJ.com
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Old 04-23-2012, 06:44 AM   #46
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Of course quality of life needs to be part of this discussion. Not too many 90 year olds traveling or even driving a car! I think discrentionary spending drops as we age, so there is some benefit to weighting income up front when we still have the desire to do stuff.
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Old 04-23-2012, 07:47 AM   #47
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Based on my evaluation of the factors listed above, I've decided to keep as much of my own resources as possible instead of trusting that a dysfunctional system will somehow make up for using my own resources by forking over more money 20 or 30 years from now. Thus, I've elected to start my SS at 62 at the end of this year.
+1.

From my observations, most "now or later" calculations come out roughly even given average lifespans. That's hardly surprising, since the calculations are being done by actuaries who know their stuff. But they're only interested in how much they spend, not what people get out of it.

To add to your lack of trust in the ability of the system to pay out in future (existing beneficiaries are always the best protected when a system runs into trouble) there's the point made by jeffmete just above this one, that $1,000 now is typically worth a lot more than $1,000 at age 90, or indeed at any age 5-10 years after today's.

I'm about to take my company pension at 52, which will give me 66% of what I would have had if I waited until 60. The break-even date, assuming that I invest the money at 0-2% above inflation, is age 72. If I live to that age so that, had I known in advance, I would have had more money in total by waiting, I'm not going to feel very bad about it at that point. But I know some people for whom the thought that they might feel bad in 20 years is enough to have them defer (my brother-in-law is an example).

Finally, there's also the small matter of the roughly 10% chance of dying between 62 and 70. At least if you take the money at 62, you've got it to hand over to the grandkids.
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Old 04-23-2012, 08:28 AM   #48
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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 may like to look at delayed SS as an annuity -- but it's not actually an annuity.

It's unlikely that Congress will cut SS benefits to people who are receiving them. But for people who are *not* receiving benefits, they could easily cut the benefit that would be paid out when they actually start getting them.
The argument could go along the lines of "This is not a cut of anybody's SS check. They are not getting checks now, it's just that when they start getting checks it'll be less than they expected."

Illinois make a similar argument one time when they raised the state income tax by the 2-step shuffle. Step 1: This is not an increase in the tax, this is just a temporary surcharge. Step 2: We are making it permanent, but it's not an increase, it's the same as people have been paying for the last couple of years.

Net result: The income tax went up even though the state never "officially" increased the tax.
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Old 04-23-2012, 09:18 AM   #49
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It's unlikely that Congress will cut SS benefits to people who are receiving them.
In principle I agree with your statement but I think its important to note that the estimate as to when "trust funds" run out has been moving forward in time with the latest date being in 2036. Of course, this date is based on certain assumptions on the economy's growth rate as well as demographics.

Specifically, I don't think that the possibility of a Japan like economic stagnation scenario has been baked into a SS forecast that I'm aware of and secondly, if any of the SS privatization schemes gain traction, they can't help but draw resources away from funding the current model of SS. It certainly wouldn't be the first time in the history of the world that a Government says "look we would like to pay you but there is no money".

If this were only an economic issue I would be inclined to agree that we as a nation will solve it but, our increasingly dysfunctional political environment where any discussion of rational alternatives is a non starter in my opinion dooms the possibility of acting with enough anticipation to assure SS payments as promised. Hence my decision for taking SS at 62 regardless of some calculations in certain scenarios that show a very moderate increase in total income by taking SS later.

Incidentally, the scenario I describe above is starting to get "baked" into the national psychology. When I ask my kids (ages 34 and 32) what they think about SS the say it doesn't matter it won't be there for them anyway. We are the only ones that are really passionate about it and we are dying off...
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Old 04-23-2012, 11:51 AM   #50
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I think its important to note that the estimate as to when "trust funds" run out has been moving forward in time with the latest date being in 2036.
I don't wish to start another argument thread, but the SS "trust fund" is not real, it's only a book-keeping entry, which keeps track of money that one part of the government "owes" to another part of the government. It doesn't represent real assets.

Just like when you borrow money from your "replace the roof" e-fund to replenish your "repair the car" e-fund.
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Old 04-23-2012, 12:01 PM   #51
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I don't wish to start another argument thread, but the SS "trust fund" is not real, it's only a book-keeping entry, which keeps track of money that one part of the government "owes" to another part of the government. It doesn't represent real assets.

Just like when you borrow money from your "replace the roof" e-fund to replenish your "repair the car" e-fund.
Yes, I know that but I think politically it would be harder to lower payments while there are "funds" still "available" in the "trust fund". On the other hand, once those "funds" are gone then it is politically very simple to say the equivalent of "sorry Charlie"
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Old 04-23-2012, 12:55 PM   #52
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Based on my evaluation of the factors listed above, I've decided to keep as much of my own resources as possible instead of trusting that a dysfunctional system will somehow make up for using my own resources by forking over more money 20 or 30 years from now. Thus, I've elected to start my SS at 62 at the end of this year.
Yeah, Wouldn't that be a scream if you spent down all your nestegg, and then you didn't get what they said you would !

How can we game the system anyway, If we know that sooner or later the rules really must change for the worse due to our very poor budget situation.
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Old 04-23-2012, 01:03 PM   #53
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How can we game the system anyway, If we know that sooner or later the rules really must change for the worse due to our very poor budget situation.
Look at Europe, all the spoilsports who went along with austerity will soon be gone. The voters are speaking! Hail to the people!

Ha
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Old 04-23-2012, 03:49 PM   #54
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Yes, I know that but I think politically it would be harder to lower payments while there are "funds" still "available" in the "trust fund". On the other hand, once those "funds" are gone then it is politically very simple to say the equivalent of "sorry Charlie"
I think that focusing on the politics is correct. My view is that it takes both houses of Congress (including, these days, 60 Senators) plus the President to all agree before any law gets changed. Given the current gridlock, that is a major hurdle. So the current law could be around for a long time.

Under current law, the Secretary is both authorized and required to pay the current formula benefits as long as there is a positive balance on that accounting spreadsheet. When the balance gets too close to zero, he will have to defer a payment, probably just a week, while tax revenue builds the balance back up. We'll end up getting 9 "monthly" checks per year instead of 12.

That's my personal worst case. I'm 64 now, I think if the politicians can ever get together and actually pass a law, it will be somewhat better than that for us oldsters.
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Old 04-23-2012, 05:04 PM   #55
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Look at Europe, all the spoilsports who went along with austerity will soon be gone. The voters are speaking! Hail to the people!

Ha
Yeah, hah!

Jokes gonna be on them, when the Greek voters go to collect their benefits and discover that the cupboard is empty.
Somehow, reality doesn't change just because you vote it to. (Something I learned in the 7th grade, when our math teacher had us vote on the value of pi.)
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Old 04-23-2012, 05:22 PM   #56
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I don't wish to start another argument thread, but the SS "trust fund" is not real, it's only a book-keeping entry, which keeps track of money that one part of the government "owes" to another part of the government. It doesn't represent real assets.
rayvt,

By analogy, do you feel the same way about all US Treasury securities? (ie the ones owned by private individuals and entities)

Not looking to start a debate--just curious as one who is thinking about putting a good chunk of my funds into TIP$.
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Old 04-23-2012, 05:30 PM   #57
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By analogy, do you feel the same way about all US Treasury securities? (ie the ones owned by private individuals and entities)

Not looking to start a debate--just curious as one who is thinking about putting a good chunk of my funds into TIP$.
The same thought crossed my mind. Should Congress decide to void one series of Treasury notes (the ones behind the Social Security Trust Funds), who believes that there would be no impact on the valuation of other treasuries held by other parties?
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Old 04-23-2012, 07:17 PM   #58
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Well, it looks like my earlier posting giving 2036 as the run out of trust funds date was a bit optimistic NBC Politics - Social Security trustees see earlier fund depletion date
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Old 04-23-2012, 07:30 PM   #59
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rayvt,

By analogy, do you feel the same way about all US Treasury securities? (ie the ones owned by private individuals and entities)

Not looking to start a debate--just curious as one who is thinking about putting a good chunk of my funds into TIP$.
I own TIPS, I think the prospects are different. Congress doesn't have to "default on the bonds in the SS Trust Fund" to save money. They just reduce SS benefits and let the trust fund go its merry way - no bond default ever.

TIPS are publicly held, the only way to cut interest/maturity costs is default. That hits a different group than cutting SS benefits. I'm thinking the marketable bond holders are far fewer in number, but they have more clout.

I used to think that any default on US gov't debt was unthinkable because it's all measured in dollars (except for the TIPS, which are less than 10% of the total). Any modestly intelligent gov't would simply print currency. The events of last summer have made me rethink that assumption.
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Old 04-23-2012, 07:41 PM   #60
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Well, it looks like my earlier posting giving 2036 as the run out of trust funds date was a bit optimistic NBC Politics - Social Security trustees see earlier fund depletion date
The debt issue will show up as a crisis in the bond markets long before that. Just like Greece, the market eventually figured out that they just might not get paid back and stopped lending money at less-than extortionary rates. It wasn't long after that until they were mobs marching in the streets.
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