Trade off between SS starting age and withdrawal rate

[pb4uski]

Same here.

+3

 

[ShokWaveRider]

Mine is actually about $700 more if I wait till 70 vs take at FRA and $850 if I take at 65. I am still considering taking at 65 based on my families life expectancy.

 

[harley]

The math works the same, instead of 96k, you'll have way more. My thing is why leave money on the table. You and your employers paid the government for this benefit. This has been deducted from your checks. For me I will have 44 yrs of investing into SS when I retire @ 60. If you die the government keeps YOUR investment. They key work is that if you don't need it before 70 you've done well and most likely won't run out of money. My difference between $886 from 62-70. If I take at 62 by 70 I will have 187K, at 70 I can draw 2800.00, if I withdraw 886.00 per month it will take 21 years to deplete 187K that puts me at 91yrs old

Even if your math was right, and it's not, your point would only be valid if all you're talking about is the absolute SS dollars. But there are many other factors that people other than yourself may be taking into consideration. If you add in the dollars saved by working around ACA costs, Roth conversions, and other possible factors it will change the math significantly. And the peace of mind of a higher survivor benefit for a spouse may not even be quantifiable. This is a complicated subject.

 

[Rksolid]

You messed up your numbers somewhere. The break-even point between 62 and 70 is in your early 80s..... the BEP is long before 91.

I didn't use break even point, I took my investments from 62-70 to carry me into 91 that's my break even point. The break even point only considers money if you need it, to hold out for more. I'm investing 62-70 then taking it to off set early withdraws. To me it's all about taking the money investing it to work form me. Everybody complains about taxes and how the government is ran, why not get back what you paid.

 

[pb4uski]

What would the benefits be invested in? What assumed earnings rate did you use? Did you consider the possibility of sequence of returns risk?

Adding in investment returns does extend the breakeven point.

 

[Rksolid]

I don't have to invest it. If I take payments at 62 place, it in a savings account or jar in my back yard I will collect 187K by the time I'm 70. Continue drawing 1950.00 per month take 886.00 out of my jars( money I already collected) equals $2836 the same amount I would collect at 70. Divide 886 into 187K gives me 17.5 yrs before being 187k is exhausted that's not even including simple bank interest. Break even points only take into consideration if I take at 62 or 65 and use the money, when will it be a lost of income. I'm looking at not needing the money but taking it and banking it.

 

[Rksolid]

I have a co-worker who will retire this fall @67.75 who has been collecting and saving since 65 his current salary is 120K. There's no penalty after 65 on collecting SS.

 

[pb4uski]

I don't have to invest it. If I take payments at 62 place, it in a savings account or jar in my back yard I will collect 187K by the time I'm 70. Continue drawing 1950.00 per month take 886.00 out of my jars( money I already collected) equals $2836 the same amount I would collect at 70. Divide 886 into 187K gives me 17.5 yrs before being 187k is exhausted that's not even including simple bank interest. Break even points only take into consideration if I take at 62 or 65 and use the money, when will it be a lost of income. I'm looking at not needing the money but taking it and banking it.

I don't think that your numbers are right. You are correct that if you collect $1,950 per month at age 62 and put it in a jar that at age 70 you would have $187,200 [$1,950 * 12 * (70-62)].

However, if your age 62 benefit is $1,950/month, then your age 70 benefit would be ~$3,432/month so the difference is $1,482. The exact amounts vary a little based on your birth year. $187,200/$1,482 is 127 months or 10 years, 7 months, not 17 1/2 years. With no interest your breakeven is age 80 and 7 months.

I think that perhaps the $882 that you are using is the difference between your FRA benefit and age 70 benefit rather than the difference between your age 62 benefit and age 70 benefit which is what you have to take out each month.

 

[GravitySucks]

It's not all about inheritance, the difference between 62 and 70 is less than couple hundred a month. If you don't need the money invested it and the difference of 14k will be almost even. Why leave money on the table if you die before 70 all you hard work will be for nothing. If you don't need it before 70 I highly doubt you'll be short of money. Even at minimum your retirement is 12K a year that's 96k in 8 yrs that can be invested, even at bank rate it will be over a 100k. If you wait and collect 15K a years at 70, that's it. I take it at 62 still get 12k a year but have a bonus 100k in the bank to use. You hold out for 300.00 extra a month, if I take out 300.00 a month from my 96k saved it will take me 26.6 yrs without interest to deplete the 96K.

Its close to$1,200 a month difference.
If my investments go to 0 i can live on the COLAd SS. at 70 fairly comfortably. Not so with SS at 62.
Not expecting my investments to go to 0, but I don't expect my house to burn down either. It's nice to be able to insure against both.

 

[Rksolid]

On the SS page mine show 1950.00 (62) and 2836.00 (70). Doesn't matter I'll be taking @62. It's my money, were all playing numbers with odds, there's no guarantee how long we'll live. Planning your life expectancy is like playing the Lotto you never know what the numbers are. I plan on retiring in 6yrs or sooner currently 53 who knows I could be dead by then.

 

[Hermit]

Even if your math was right, and it's not, your point would only be valid if all you're talking about is the absolute SS dollars. But there are many other factors that people other than yourself may be taking into consideration. If you add in the dollars saved by working around ACA costs, Roth conversions, and other possible factors it will change the math significantly. And the peace of mind of a higher survivor benefit for a spouse may not even be quantifiable. This is a complicated subject.

Once you start Medicare, you can get bumped up into the premium range which is no different than another tax, and the added income from early SS could make the difference. I have a pension so I have little control over my income. On the other hand, the higher income if you wait could put you in a premium situation after 70. Many moving parts. I have a spread sheet with 30 or 40 columns and still don't feel comfortable I have enough info to make the "correct" decision.

 

[pb4uski]

On the SS page mine show 1950.00 (62) and 2836.00 (70). Doesn't matter I'll be taking @62. It's my money, were all playing numbers with odds, there's no guarantee how long we'll live. Planning your life expectancy is like playing the Lotto you never know what the numbers are. I plan on retiring in 6yrs or sooner currently 53 who knows I could be dead by then.

That is really odd. Your age 70 benefit is 145% of your age 62 benefit.

My age 70 benefit is 175% of my age 62 benefit per my SSA statement.

My age 62 benefit is 74.6% of my FRA benefit, which is typical. My age 70 benefit is 130.7% of my FRA benefit... which is spot on.. 3 years and 10 months or 3.833 years times 8% a year is 30.7%.

130.7%/74.6% = 175%

At your age, your age 62 benefit would be 70.42% of your FRA benefit and your age 70 benefit would be 124% of your FRA benefit (+8% a year for 3 years)... so your difference would be 176% (124%/70.42%)... not 145%.

See https://www.ssa.gov/oact/quickcalc/early_late.html for details.

If the difference is $1,482 rather than $886 would that change your decision?

 

[Rksolid]

That is really odd. Your age 70 benefit is 145% of your age 62 benefit.

My age 70 benefit is 175% of my age 62 benefit per my SSA statement.

My age 62 benefit is 74.6% of my FRA benefit, which is typical. My age 70 benefit is 130.7% of my FRA benefit... which is spot on.. 3 years and 10 months or 3.833 years times 8% a year is 30.7%.

130.7%/74.6% = 175%

At your age, your age 62 benefit would be 70.42% of your FRA benefit and your age 70 benefit would be 124% of your FRA benefit (+8% a year for 3 years)... so your difference would be 176% (124%/70.42%)... not 145%.

See https://www.ssa.gov/oact/quickcalc/early_late.html for details.

If the difference is $1,482 rather than $886 would that change your decision?

No, like I said I won't leave money on the table. There's only one person who knows how long I'll live. I have a pension, 401k, Ira's as well as cash savings. Most friends who have retired from where I work wished they would have retired earlier than 60. Most stayed until 60-62 afraid they would need the money but that hasn't happened. One guy I work with that 67 enjoys his job and lost his wife 7 yrs ago, instead of retiring he's find comfort with his co workers he's been her for 41 yrs.

 

[meierlde]

Note that in addition one needs to consider possible RMDs in deciding. If significant then taking SS earlier than 70 makes sense if the RMDs are going to be significant.

 

[omni550]

Note that in addition one needs to consider possible RMDs in deciding. If significant then taking SS earlier than 70 makes sense if the RMDs are going to be significant.

As RMD %-age values are spelled out by the IRS, could you define "significant", please?

omni

 

[Dtail]

Note that in addition one needs to consider possible RMDs in deciding. If significant then taking SS earlier than 70 makes sense if the RMDs are going to be significant.

If RMD's are significant, wouldn't one take TIRA earlier than 70 and delay SS to 70?

 

[meierlde]

As RMD values are spelled out by the IRS, could you define "significant", please?

omni

If they push you into a higher tax bracket then taking the SS earlier would be a win, since the RMDs only increase as you age.

 

[meierlde]

If RMD's are significant, wouldn't one take TIRA earlier than 70 and delay SS to 70?

Money is fungable, and also by starting SS at 65 your part B is deducted before the SS money starts. It all depends on the relative sizes of SS and RMDs. If RMDs are larger than SS then taking it early is a good thing, and you won't miss the additional SS payments. So as is stated it depends on your personal/family situation. (Being single in my case simplifies this)

 

[Dtail]

If they push you into a higher tax bracket then taking the SS earlier would be a win, since the RMDs only increase as you age.

The RMD % increases but not necessarily the RMD$ amount. So if the SS and TIRA monies are interchangeable, why not reduce the TIRA subject to RMD's by taking it earlier instead of taking the SS earlier?

Edit - ok I see your new post.

 

[meierlde]

The RMD % increases but not necessarily the RMD$ amount. So if the SS and TIRA monies are interchangeable, why not reduce the TIRA subject to RMD's by taking it earlier instead of taking the SS earlier?

Edit - ok I see your new post.

It depends somewhat on what rate of growth you expect as to how RMDs grow or shrink, but the percentage to withdraw starts by dividing the amount in the account by 27.4 the first year, this decreases to 22 by 76 17.9 by 81, 14.1 by 86 etc. So in all likelihood (unless the market goes into a 2008/2009 style decline your RMD will increase year by year as the divisor gets smaller.

 

[Dtail]

It depends somewhat on what rate of growth you expect as to how RMDs grow or shrink, but the percentage to withdraw starts by dividing the amount in the account by 27.4 the first year, this decreases to 22 by 76 17.9 by 81, 14.1 by 86 etc. So in all likelihood (unless the market goes into a 2008/2009 style decline your RMD will increase year by year as the divisor gets smaller.

Yes, conceptually one is paying taxes on RMD% which would eventually be higher than one's typical WR% (even though of course one doesn't have to use those withdrawn monies).
I have most of my investments in TIRA assets (didn't know better while saving...) so the tax aspect differentials between SS and TIRA withdrawals is something to think about.

 

[pb4uski]

Note that in addition one needs to consider possible RMDs in deciding. If significant then taking SS earlier than 70 makes sense if the RMDs are going to be significant.

Nonsense. If RMDs/tax torpedo is an issue, then it is better to defer SS and use any headroom to reduce tIRAs through withdrawals or Roth conversions before starting SS.

 

[Independent]

The math works the same, instead of 96k, you'll have way more. My thing is why leave money on the table. You and your employers paid the government for this benefit. This has been deducted from your checks. For me I will have 44 yrs of investing into SS when I retire @ 60. If you die the government keeps YOUR investment. They key work is that if you don't need it before 70 you've done well and most likely won't run out of money. My difference between $886 from 62-70. If I take at 62 by 70 I will have 187K, at 70 I can draw 2800.00, if I withdraw 886.00 per month it will take 21 years to deplete 187K that puts me at 91yrs old

I think if you look at the actual SS cash flow, there is no "investment".

I paid taxes to the gov't. The gov't used my tax money to pay benefits to my parents, grandparents, and possibly other people in their generation. My taxes were spent and gone in the year I paid them. The gov't didn't keep any of my money.

That was an okay deal to me. It means my MIL did not live with us.

Now, the gov't will tax my children and possibly grandchildren to pay benefits to me and people in my generation. That's okay, too.

 

[Independent]

Data for survival rates take in genetics, a fatal accident either your fault or some else can't be calculated.

Individual date of death can't be predicted for people who are currently in normal good health.

However, we do know mortality rates for recent years, and we can calculate average expected dates of death from that information.

These observed mortality rates include accidental deaths.

 

[Independent]

Well, no. Actually that higher SS at 90-95 just means I can go to Monaco for 8 weeks a year instead of merely 7.

What's a few extra $$ going to buy you at 95? A better grade of gruel in the nursing home?

That's not my plan.
The plan is not to just barely get by. The plan is for the SS benefit to be lost in the roundoff.

If you follow the 4% guideline, you can spend more in the early years of retirement if you defer your SS start date.

Of course, people with enough savings to make SS a rounding error probably don't need to use the 4% guideline.