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Take SS ASAP and Invest it instead of waiting?
Old 01-18-2009, 07:28 AM   #1
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Take SS ASAP and Invest it instead of waiting?

Well, I took my SS at age 62, but Didn't need it and just invested it as Extra $ and thus into Treasuries in late 05'
It made 10% in 06' and over an ave. of +17% in 08' ( FIBIX and FLBIX )
I've diversified it into some other Bonds ( Corporates) for 09'

The way I figure it? Even if it does only 7% apy for the next 20 yrs?
It will pay me nearly 38% More vs waiting till age 66 to collect SS.

And older buddy of mine, he took his @ age 62 SS way back in 2000 and did the same thing with it..( made over 14% apy btwn 2000-2002) and made over 15% apy from 03'-07' and only lost -4% last yr on it..( On a Per $10k basis, it's now worth over $125,000 going into 2009 and if makes only 7% from now On? = $8,700 yr Plus @ $11k Yr SS is paying now..= $19k yr vs waiting till age 65 and at a Per $10k basis? Be only getting $12,450per $10k basis.. and they have that $125k in principal to their estate..and not Disappear when he dies like SS does..

And Now, his Younger ( pretty-Demi More Looking) Wife is taking her SS early as well and doing the same with her $... If even can make 7-8% on it? vs Based Upon what SS tells them what she will get waiting till age 66, it isn't worth it..

And they also got LTC ins. at age 55 as a back up plan B..
as well as have over 70% of their Assets in a Irrevocalble Trust...
so they will be Legally Poor to get alot of Benefits from the State and Fed. and not have to wait to "Spend Down" to get them...( Thanks to A sneaky Estate Attorney..lol )

Make Sense?
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Old 01-18-2009, 08:12 AM   #2
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I Wouldn't do It with risky Investments (including Treasury mutual Funds), but I Could see doing it with CD's. As we've discussed in other threads, you can also pay the money back to Uncle Sam, (for example, when you reach full retirement age) and then draw the higher Social Security payment that someone filing at that later age would have rceived.

All said, I'd either wait to collect my SS or I'd start getting the checks at 62 and reduce my monthly withdrawals from my savings by the same amount. Investing the actual SS money is a hassle and it can create negative tax consequences if you have to sell appreciated assets due to the higher monthly withdrawals from your investment. Investing the actual SS checks is just a mind trick.

Concerning the tradeoff computation: Did you remember to include the inflation adjustment on the larger portion of the SS check that you won't be getting if you take the money early? Also, I'm not very confident I can earn 7% real return on my money over the next 20 years, but maybe it will work for you. And, if the economy stays down for a long time and inflation goes up, what will be the impact on your other investments? That's exactly the kind of scenario in which a bigger SS check can help out. The larger SS check is in effect "insurance" in case your investments do poorly, and by forfeiting the larger check an investor is forfeiting some amount of insurance. It might prove to be a good bet, but it is a bet.
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Old 01-18-2009, 08:59 AM   #3
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If you don't need SS at 62 and you can save all of every check you can get, yeah -- I'd be inclined to do that and then take the mulligan at 70 if we're still healthy. Since I would have saved all the checks, I'd have no problem coming up with the money. But if I did that, I don't think I'd invest it aggressively since that chunk of cash would have a time horizon of 8 years or less.

There are a couple of reasons: one, you may keel over suddenly at (say) age 63 and that would affect surviving spouse benefits (probably negatively). The other reason is that any changes to SS or eligibility or payout formulas would probably not be applied to those already receiving benefits. (In other words, if the rules are changed to make SS stingier, current recipients would most likely be grandfathered.) This is just my opinion, of course, but this is what I'd expect from any future SS reform. And thus, it would be a good idea to be "on the take" ASAP before you can be negatively affected by rule changes in future SS reform.
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Old 01-18-2009, 10:10 AM   #4
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If you don't need SS at 62 and you can save all of every check you can get, yeah -- I'd be inclined to do that and then take the mulligan at 70 if we're still healthy. Since I would have saved all the checks, I'd have no problem coming up with the money. But if I did that, I don't think I'd invest it aggressively since that chunk of cash would have a time horizon of 8 years or less.

There are a couple of reasons: one, you may keel over suddenly at (say) age 63 and that would affect surviving spouse benefits (probably negatively). The other reason is that any changes to SS or eligibility or payout formulas would probably not be applied to those already receiving benefits. (In other words, if the rules are changed to make SS stingier, current recipients would most likely be grandfathered.) This is just my opinion, of course, but this is what I'd expect from any future SS reform. And thus, it would be a good idea to be "on the take" ASAP before you can be negatively affected by rule changes in future SS reform.
I concur, in part with what is said, I took it at 62 repaid at 68 and reapplied effective at 67.5 years. After the payback, interest earned on the benefit from age 62 to 67.5, tax refund of taxes paid on SS from age 62-66, the net cost was not too bad. The return on the new benefits result in a 17.0 return on the cost of the "mulligan" and that is "for two lives (Mine and DW), COLA'd for life with 15% of the benefit being Tax Free.
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Old 01-18-2009, 12:35 PM   #5
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I plan on saving my SS at age 62 by spending it and not withdrawing money from my IRA. I'm single so no spouse worries. Your results my differ.
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Old 01-18-2009, 05:01 PM   #6
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I plan on saving my SS at age 62 by spending it and not withdrawing money from my IRA. I'm single so no spouse worries. Your results my differ.

SS is also tax free if you are under 25k in income a year.
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Old 01-18-2009, 05:35 PM   #7
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I plan on saving my SS at age 62 by spending it and not withdrawing money from my IRA. I'm single so no spouse worries. Your results my differ.
Yep - took SS at 62 in 2005, now 65, hang in there a few more years and then??

heh heh heh - Run some numbers.
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Old 01-18-2009, 05:39 PM   #8
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And Now, his Younger ( pretty-Demi More Looking) Wife is taking her SS early as well and doing the same with her $... If even can make 7-8% on it? vs Based Upon what SS tells them what she will get waiting till age 66, it isn't worth it..

I know this wasn't where the thread was going, but couldn't the wife take 1/2 spouse benefits when the husband started his, then take her full (reduced) benefits at age 62?

My wife is older than me by a few years (but my benefit would be higher) so I figured when she hit 62, I could take 1/2 spouse bene's for a few years (or till full retirement age) then take mine. Isn't that one way to work the system?
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Old 01-18-2009, 05:55 PM   #9
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I know this wasn't where the thread was going, but couldn't the wife take 1/2 spouse benefits when the husband started his, then take her full (reduced) benefits at age 62?

My wife is older than me by a few years (but my benefit would be higher) so I figured when she hit 62, I could take 1/2 spouse bene's for a few years (or till full retirement age) then take mine. Isn't that one way to work the system?
Hers will be PERMANENTLY reduced and yours (at your age 62) will be 1/2 of her reduced benefit. When you take yours hers will increase to 1/2 of yours but will be reduced to about 75% of that amount. You really need to go the the SSA site and/or call them or, alternatively, go into your local SSA office and discuss your plans. You may be surprised on the factors involved. My DW took hers at 62 (she is older than me) I took mine at 67.5 but she gets 75% of 50% of mine because she took hers at 62. One alternative would be to have here withdraw her application, repay her benefits, and she would reapply, but that would only get her the additional 25% of 1/2 of my benefit (she earned less than I did). Gets complicated quickly.
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Old 01-18-2009, 05:57 PM   #10
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I know this wasn't where the thread was going, but couldn't the wife take 1/2 spouse benefits when the husband started his, then take her full (reduced) benefits at age 62?

My wife is older than me by a few years (but my benefit would be higher) so I figured when she hit 62, I could take 1/2 spouse bene's for a few years (or till full retirement age) then take mine. Isn't that one way to work the system?
You will have to be 62 to collect 1/2 of DW's SS. You don't get to start when she (older than you) turns 62.
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Old 01-18-2009, 11:53 PM   #11
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Spouse has a bigger earnings record than I do. Our current thinking is to have me take SS at age 62 and for her to take it at age 70. That way one of us is sure to get ahead of the payoff...
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Old 01-19-2009, 07:07 AM   #12
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I know this wasn't where the thread was going, but couldn't the wife take 1/2 spouse benefits when the husband started his, then take her full (reduced) benefits at age 62?

My wife is older than me by a few years (but my benefit would be higher) so I figured when she hit 62, I could take 1/2 spouse bene's for a few years (or till full retirement age) then take mine. Isn't that one way to work the system?
It all sounds good, but SS won't let you cherry pick. When you apply for benefits at 62 they figure your benefits first and if it is larger than the benefits you would receive from your wife's benefits they pay yours.

Been there, looked at it, no cigar and no free lunch.
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Old 01-19-2009, 07:43 AM   #13
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I can personally vouch for what UH says. Tried it, would not work.
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Old 01-19-2009, 08:14 AM   #14
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DH and I both will take ss at 62. Pay the bills with it (well some of them anyway) thus drawing less from our investments.
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Old 01-19-2009, 10:25 AM   #15
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IMO this question is the same as "Should I drop the collision insurance on my car and simply invest the premiums?". Odds are that you'll come out ahead if you drop the insurance. In fact, if 1,000 identical people all decide to drop the insurance, in total they'll come out ahead (the sum of all the premiums saved and invested will exceed the sum of all claims that would have been paid).

But, if one serious car repair is a financial catastrophe for you, than you can't afford to drop the insurance. Most of us have enough assets to go without collision insurance on an older car. But, most of us don't have the assets to go without liability insurance.

I see deferring SS as buying "longevity insurance". If you've got enough assets that you can pay your bills if you live to 100, then you don't need longevity insurance. Most of us are in that position. But, if you really need the extra money in the case that you live an unusually long life, then you may want to buy the insurance.
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Old 01-19-2009, 10:33 AM   #16
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I see deferring SS as buying "longevity insurance". If you've got enough assets that you can pay your bills if you live to 100, then you don't need longevity insurance. Most of us are in that position. But, if you really need the extra money in the case that you live an unusually long life, then you may want to buy the insurance.
Of course, "buying the longevity insurance" in this case doesn't have to mean waiting to collect until age 70. It could also mean collecting at 62, saving everything you receive and then paying it back if you approach 70 and still have plenty of good health and vitality. At least as long as that mulligan option remains on the books, anyway, which means it'll probably be gone before I get there...
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Old 01-19-2009, 10:36 AM   #17
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What you are really doing is guessing when you will die. For me if I took it at 62 it would be the right decision if I died at 78 or before and if I lived longer than 78 I should have waited. Look at your family history then roll the dice.
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Old 01-19-2009, 10:47 AM   #18
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I've done the math on this question.
I do not need to take SS at 62 but I will - for a couple of reasons - from memory.
1 - the simple break even point of taking at 62 Vs 70 (? Max amount?) - is more than 10 years - I forgot the exact #
2 - I'm estimating that my investments will earn a higher rate of return than SS - in other words the money I get and spend from SS I don't have to take out of my investments - this pushes out the beak out even time beyond 10? years.
3. If I die before 70 - I get nothing
4. Makes cash flow easier and requres a lower amount of annual expense be kept in cash equivalents (more $ in higher % return) again pushing out the break even point
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Old 01-19-2009, 11:05 AM   #19
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All these calculations, while instructive and perhaps even fun, are moot so long as you have the free option to repay and restart at a later date. Taking SS at 62, takes the risk of losing benefits altogether by dying before 66 (or 70) off the table, and therefore is the dominant strategy.
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Old 01-19-2009, 11:17 AM   #20
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All these calculations, while instructive and perhaps even fun, are moot so long as you have the free option to repay and restart at a later date. Taking SS at 62, takes the risk of losing benefits altogether by dying before 66 (or 70) off the table, and therefore is the dominant strategy.
The Inspector General has issued a report to the SSA regarding the loophole which allows people to pay back SS without interest and then reapply to get the higher benefit. http://www.ssa.gov/oig/ADOBEPDF/A-05-08-28110.pdf

As a result of this report the loophole could disappear at anytime if the SSA decided to change its current policy.

(Thanks to Intercst for the heads up on this.)
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