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Old 01-06-2013, 10:52 AM   #61
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SIGH! this is getting old. it's an emotional issue more than a practical one.

no one knows FOR SURE when your going to DIE!(at least mostly no one).

taking it early and getting it now means it does not matter if equations show you get more while waiting.

if taking it early lets you enjoy your earlier retirement years more than your later to old to do anything years than so be it.

I stole this from a very Knowledgeable poster sscritic on the Bogleheads Forum.

"If it is correct that it is more enjoyable to spend money when you are in your sixties than in your eighties, then it is probably also correct that it is more enjoyable to spend money when you are in your forties than in your sixties. And don't forget your twenties.

Why bother to save for retirement? Isn't saving a form of longevity insurance? Why should taking social security earlier on the basis of "it's better to spend it now" be any different from buying a new car at 27 on the basis of "it's better to spend it now"?

Perhaps we need a theory of enjoyment smoothing rather than consumption smoothing. Perhaps nothing is enjoyable past 80 so there isn't much need for any money'
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Old 01-06-2013, 11:08 AM   #62
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Originally Posted by Cut-Throat View Post
I stole this from a very Knowledgeable poster sscritic on the Bogleheads Forum.

"If it is correct that it is more enjoyable to spend money when you are in your sixties than in your eighties, then it is probably also correct that it is more enjoyable to spend money when you are in your forties than in your sixties. And don't forget your twenties.

Why bother to save for retirement? Isn't saving a form of longevity insurance? Why should taking social security earlier on the basis of "it's better to spend it now" be any different from buying a new car at 27 on the basis of "it's better to spend it now"?

Perhaps we need a theory of enjoyment smoothing rather than consumption smoothing. Perhaps nothing is enjoyable past 80 so there isn't much need for any money'

the difference is that a 40 year old and a 60 year old probably have energy.

based on how i feel at 60 i'm pretty sure at 80 i will have no energy
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Old 01-06-2013, 11:26 AM   #63
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Forget trying to calculate how much 'You'll Get'...Focus on How much you get to spend.

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any stupid 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.
I believe your age 70 scenario is wrong about the first 8 years. You receive nothing in SS from 62 to 70. You have portfolio spending of only $34,092 if I'm reading the "savings account" deal correctly. So your income is only that $34k, much less than the age 62 scenario. Once you reach 70 you're in good shape.

One matching scenario for 70 would be to pull $59,476 from your portfolio, replacing both the 4% and the age 62 SS benefit from the 62 case. That removes 8*59476 = $475,808 from your $1M portfolio, leaving $524,192. At age 70 you can then draw 4% of that remainder, $20,968, plus SS of $34,092 for a total of $55,060. That's much less than the age 62's $59,476 income at age 70.

And it's a big mistake to do any thing like this without considering investment returns, even if they are uncertain.
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Old 01-06-2013, 11:28 AM   #64
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I stole this from a very Knowledgeable poster sscritic on the Bogleheads Forum.

"If it is correct that it is more enjoyable to spend money when you are in your sixties than in your eighties, then it is probably also correct that it is more enjoyable to spend money when you are in your forties than in your sixties. And don't forget your twenties.

Why bother to save for retirement? Isn't saving a form of longevity insurance? Why should taking social security earlier on the basis of "it's better to spend it now" be any different from buying a new car at 27 on the basis of "it's better to spend it now"?

Perhaps we need a theory of enjoyment smoothing rather than consumption smoothing. Perhaps nothing is enjoyable past 80 so there isn't much need for any money'
As with most things, it all depends on the individual. I know people who are extremely active in their late 70's-early 80's...they travel, bike for miles, kayak for hours, walk/hike long distances, swim long distances, dance for hours, etc. Of course, they've been active all along, they just didn't start a few months ago, so their bodies are fit and capable. And being lucky recipients of good DNA always helps.

They are also social, and enjoy entertaining and dining out with friends.

I haven't seen them cutting back on their spending as it enables them to keep enjoying their activities.

I'd guess as age/disease takes its toll, spending on fun things will switch to things like spending on care, meds, etc. But until then, they keep spending on what they enjoy.

omni
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Old 01-06-2013, 11:29 AM   #65
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My original proposition was that there is not much advantage in delaying taking social security benefits once you reached full retirement age, given possibility of rule change, tax back, life span risk, health related limitation on quality of life after 80 or 85 years old for many people, and the fact that you can get return on the money if you invest the extra money to reduce the difference in further delaying taking the benefits. Actuaries who work for the government should not be taken as idiots who do not know how to do mathematics.
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Old 01-06-2013, 11:34 AM   #66
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based on how i feel at 60 i'm pretty sure at 80 i will have no energy
Just wanted to put in a word for the numerous 80 year olds who are still very active, engaged, and spending as much or more money on their hobbies, travels, pleasures, etc., as younger retired folks. My 83 year old mother, for example, still spends a couple of months a year on international cruises, belongs to numerous clubs/activities, does frequent 1-3 trips with her senior groups, and has a more active social life than I do -- with these discretionary activities by far the biggest part of her annual budget. Lest you think she's an unusual superwoman type physically, believe me she's an average 80-something and has had her fair share of health troubles -- including a few bouts with cancer, hip replacement, and even going on dialysis last year! None of this has diminished her desire and ability to enjoy her time, and to do what she wants. As she can well afford it, I say go for it!

No, not everyone lives into their 80s or 90s, or will necessarily feel up to pursuing these pleasures at such an advanced age (or will even have expensive pleasures to support!). But I'm in the 'wait until 70' SS camp. Should I be so lucky as to live that long and be relatively healthy, I definitely want the option to spend as much or more in my later years, including for the more expensive additional comfort (e.g., when traveling) that I'll almost certainly appreciate or need at that age. And if I don't feel so great, I figure there's just as much chance that I'll need the extra dough for additional health care costs in those decades. Either way, that's my rationale for waiting to take SS -- YMMV and not for everyone, of course!
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Old 01-06-2013, 11:51 AM   #67
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Just wanted to put in a word for the numerous 80 year olds who are still very active, engaged, and spending as much or more money on their hobbies, travels, pleasures, etc., as younger retired folks. My 83 year old mother, for example, still spends a couple of months a year on international cruises, belongs to numerous clubs/activities, does frequent 1-3 trips with her senior groups, and has a more active social life than I do -- with these discretionary activities by far the biggest part of her annual budget. Lest you think she's an unusual superwoman type physically, believe me she's an average 80-something and has had her fair share of health troubles -- including a few bouts with cancer, hip replacement, and even going on dialysis last year! None of this has diminished her desire and ability to enjoy her time, and to do what she wants. As she can well afford it, I say go for it!

No, not everyone lives into their 80s or 90s, or will necessarily feel up to pursuing these pleasures at such an advanced age (or will even have expensive pleasures to support!). But I'm in the 'wait until 70' SS camp. Should I be so lucky as to live that long and be relatively healthy, I definitely want the option to spend as much or more in my later years, including for the more expensive additional comfort (e.g., when traveling) that I'll almost certainly appreciate or need at that age. And if I don't feel so great, I figure there's just as much chance that I'll need the extra dough for additional health care costs in those decades. Either way, that's my rationale for waiting to take SS -- YMMV and not for everyone, of course!

relative energy
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Old 01-06-2013, 12:07 PM   #68
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Us, we can take more 0% tax rate cap gains younger by not having SS income for a while. If that's your case also, imo factor those savings into the benefit of delaying SS.
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Old 01-06-2013, 12:56 PM   #69
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on the other hand-with mandatory withdrawals at 70.5 more ss taxed in some cases.
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Old 01-06-2013, 01:06 PM   #70
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on the other hand-with mandatory withdrawals at 70.5 more ss taxed in some cases.
Actually that is another benefit of Delaying S.S. to age 70. During the age 62-70 period, you can move IRA Funds to Roth IRA at a very Low income tax rate (You won't have much of an income)...So, that your mandatory withdrawals are lower at age 70.5 and hence less taxes.

Then throw in the new Health Insurance subsidies as a result of the Affordable Health Insurance Act (Obamacares) and not having an income will help you with Health Insurance Premiums until you get to Medicare.

It's obvious that you have not studied all of the angles of this.
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Old 01-06-2013, 01:36 PM   #71
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relative energy
This is a great point. I know some people who are more energetic and overall much healthier at 55 than they were at 30, but I have never met anyone who is even merely just as energetic and healthy at 80 as they were at 55. Time takes its toll. And family history may shed a light on another reality: Macular degeneration, cancer, heart disease - nothing is inevitable, and you actually can do something to reduce the chances of all these bad things, but there's no escaping the fact that as you get older your chances of reaching that point where hiking to the top of Mt. Washington will be finally out of your reach increase.
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Old 01-06-2013, 02:19 PM   #72
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Hiking to the top of Mr Washington is out of the reach of many youngish people too. The error is in believing that if you cannot or do not want to hike to the top of Mt Washington that life holds nothing for you that might be enhanced by having wealth.

Wealth is potential energy. When you make a withdrawal for consumption, that energy is spent. So think it over, do I want to permanently decrease my store of potential energy by making this purchase?

I come from a big family that hung together, and since many of them had great longevity, I saw with my own eyes how wealth aids men and women, and IMO the least of these ways is the sort of thing that might be put in a movie about bucket lists or similar.

Wealth plus brains equals power, and although youth and strength enhances that power, these are not necessarily required. Couple that power with positive attitudes and even in todays fallen society, there is respect.

There is a lot of glib talk here about how hard it is to enjoy spending money after some age which is likely complete terra incognita to the poster. That may or may not be true, but it misses the point. The point is enjoying life, not enjoying spending per se.

Ha
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Old 01-06-2013, 02:34 PM   #73
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Hiking to the top of Mr Washington is out of the reach of many youngish people too. The error is in believing that if you cannot or do not want to hike to the top of Mt Washington that life holds nothing for you that might be enhanced by having wealth.
We're not talking about "having wealth". We're either talking about the difference between two different subsistence scenarios, or a marginal difference between two wealth scenarios (since SS will always be a marginal contribution to any retirement described as "having wealth").

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So think it over, do I want to permanently decrease the potential energy I have stored by making this purchase?
And the answer may be 'yes': Ron walks over to the thermostat, and it reads 58F. He could turn on the heat, but he knows that he barely has enough money to pay the monthly service fee, and doesn't want to start ticking up the per-kwh charges this early in the month. When does he turn on the heat? 56F? 54F? Some would say that 50F is okay - the pipes won't burst, that way - and think of all that money he saves by not heating his home beyond 50F. He could use that money twenty years from now to turn on the heat a little higher that year, if he lives that long.

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There is a lot of glib talk here about how hard it is to enjoy spending money after some age which is likely complete terra incognita to the poster. That may or may not be true, but it misses the point. The point is enjoying life, not enjoying spending per se.
But you're missing the point, that money is worthless for its own sake. The idea isn't to not spend it, but to spend it when it has the most positive impact for you. If you make the analysis so cold and calculating that you only see the money's side of it, then you cannot possible appreciate the impact what money buys can have on enjoying life. There most certainly is a connection, because otherwise we'd all be better off becoming ascetics.
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Old 01-06-2013, 02:35 PM   #74
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The error is in believing that if you cannot or do not want to hike to the top of Mt Washington that life holds nothing for you that might be enhanced by having wealth.
+1 Totally agree Ha. I would certainly hope that my ability to enjoy life to its fullest is not directly proportional to my physical 'energy' levels and capacity at any given time. Or that the only way to optimize life's enjoyment through enhanced wealth is by spending money on things that require a presumed minimum state of physicality to undertake.
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Old 01-06-2013, 02:40 PM   #75
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+1 Totally agree Ha. I would certainly hope that my ability to enjoy life to its fullest is not directly proportional to my physical 'energy' levels and capacity at any given time. Or that the only way to optimize life's enjoyment through enhanced wealth is by spending money on things that require a presumed minimum state of physicality to undertake.
Yes, that once-in-a-lifetime trip to see the Great Wall of China, or the Taj Mahal, or the pyramids of Egypt, is something that you should think about scheduling base on factors other than "saving it" until the end. We deliberately decided to take that trip when we were in our mid-forties. We'll remember it for the rest of our lives (i.e., paying dividends for a longer period of time), and we will have been able to better enjoy what the trip offered because we were mobile instead of in a wheelchair, clear eyed instead of half blind, etc.

That doesn't mean we'll use up all our money while we're young, nor does it mean we won't ever do anything else now that we're old, but rather it means that both saving and spending have equal places at the table, throughout your life. And therefore it may be advisable to have a bit more money earlier in retirement even if that means you have a bit less money later in retirement.
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Old 01-06-2013, 02:53 PM   #76
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That doesn't mean we'll use up all our money while we're young, nor does it mean we won't ever do anything else now that we're old, but rather it means that both saving and spending have equal places at the table, throughout your life. And therefore it may be advisable to have a bit more money earlier in retirement even if that means you have a bit less money later in retirement.
And remember that by delaying S.S. to age 70, you get to spend more in your 60s, as well as more in your
80s. So, either way you win if you can afford to delay SS.

That is a point that a lot are missing here.
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Old 01-06-2013, 03:45 PM   #77
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... Actuaries who work for the government should not be taken as idiots who do not know how to do mathematics.
Sometimes I think the actuaries have quite a sense of humor, too, and are just having a laugh at us as we wrestle with all the when and how and file and suspend and the late pay-it-all-back-and-refile option and all the other convolutions we are offered that are actuarially equal from the SSA's end (but not for each of us as an individual) and could just be FRA and no options, period.
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Old 01-06-2013, 03:54 PM   #78
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Actually that is another benefit of Delaying S.S. to age 70. During the age 62-70 period, you can move IRA Funds to Roth IRA at a very Low Capital Gains rate (You won't have an income)...So, that your mandatory withdrawals are lower at age 70.5 and hence less taxes.
How do you move IRA funds to a Roth and only get hit by capital gains? I thought IRA withdrawals, or conversions to a Roth, were subject to income taxes not capital gains taxes. (I'm probably missing something here which is why I'm asking).
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Old 01-06-2013, 03:57 PM   #79
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How do you move IRA funds to a Roth and only get hit by capital gains? I thought IRA withdrawals, or conversions to a Roth, were subject to income taxes not capital gains taxes. (I'm probably missing something here which is why I'm asking).
My Mistake. I meant to say lower income tax. With little or no income, you can choose your amount to convert to Roth. I fixed the post.
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Old 01-06-2013, 04:07 PM   #80
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My Mistake. I meant to say lower income tax. With little or no income, you can choose your amount to convert to Roth. I fixed the post.
Thanks. I agree with you, I also plan on continuing my conversions to Roth while delaying SS to age 70. I have added reason to delay SS since it will provide some insurance for DW if I die after age 70 and before her.
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