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Old 10-25-2015, 10:56 AM   #41
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Considering a modest ROI, the breakeven point is somewhere around the mid 80s. That's good enough for me. The government can always change the rules and push out that breakeven point even farther. If I had a spouse that was more dependent on my SS, I would reconsider delaying.
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Old 10-25-2015, 11:01 AM   #42
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Not to them. Most people who decide to retire will draw on some form of income, whether SS or pension or investment income. While they have all of them, but the desire to squeeze out the last drop of money before they want to retire is very strong sentiment. I understand the sentiment completely, I have 90-100% of my retirement income from the same sources, I plan not to touch my savings until I have too. But I do keep an eye out for future tax.


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Old 10-25-2015, 12:37 PM   #43
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NOT mutually exclusive
You are correct... my bad.

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Not to them. Most people who decide to retire will draw on some form of income, whether SS or pension or investment income. While they have all of them, but the desire to squeeze out the last drop of money before they want to retire is very strong sentiment. I understand the sentiment completely, I have 90-100% of my retirement income from the same sources, I plan not to touch my savings until I have too. But I do keep an eye out for future tax. ....
Seems silly to me. It seems that many people become hoarders once they have a nice nestegg saved and lose sight of the fact that they saved that money to spend it in their retirement. I'm living off savings and doing as much low tax-cost Roth conversions as I can before I start my pension and SS. According to my "at retirement" plan, I would have spent as much as 30% of my at retirement date nestegg to support us up until I started SS at age 70 (WR of 4-5% for those first 15 years), then our nestegg would actually grow as pensions and SS cover about 80% of our living expenses so would withdrawals would decline precipitously to less than 1% WR.
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Old 10-26-2015, 07:15 AM   #44
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Seems silly to me. It seems that many people become hoarders once they have a nice nestegg saved and lose sight of the fact that they saved that money to spend it in their retirement.
I don't know why you think people saved to spend.

I saved to be independent of what others think/want & thus to do as I please. If I'd spend to be near penniless when I die, I would risk becoming dependent because I couldn't perfectly judge the future. I fear that more than having funds leftover. And that's not to mention that there are others I want to help even after I'm gone. Net, spending it all seems quite selfish from here.
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Old 10-26-2015, 07:38 AM   #45
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I wasn't suggesting spending everything... dying broke.....I was more referring to those who think it is sacrilegious to "invade" principal. I'm perfectly fine with dipping into principal if we have one or more unfavorable investment return years.

While my plan had me invading 30% of my principal (portfolio declined 30%) while waiting for my pension and SS to begin and then actually building back up thereafter, that was based on relatively conservative investment return assumptions. As it turns out, the favorable investment returns over the last 4 years actually have me today at ~120% of my at retirement balance even after drawing out money to live on, build a garage, etc.

Left to our own LBYM devices we would likely leave a bundle to our kids and charity. I struggle to balance that with splurging here and there and enjoying the fruits of our labors while we can enjoy it and still being prudent in case things go sideways between now and the end.
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Wade Pfau: The new math of social security
Old 10-26-2015, 09:26 AM   #46
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Wade Pfau: The new math of social security

I have no intention of LBYM to leave my kids a bundle and they are also my charity. They need to go earn and make a bundle. While I think it's harder than when I was younger, there are still lots of opportunities out there, and I don't believe in the rhetoric especially it's election year.
However, some people are still nervous or have anxiety regarding solely depends on SS, I have exactly 3 more paychecks so I know the feeling. But living a healthy life comes first for me. Others might not see it clearly. That's why you read the news and there are homeless or near homeless people who died and left millions. I mean it's not unheard off.
Regarding SS, i have two incomes, two SS and two pensions, however small, I guess I can stretch them out comfortably.


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Old 10-26-2015, 09:31 AM   #47
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Considering a modest ROI, the breakeven point is somewhere around the mid 80s. That's good enough for me. The government can always change the rules and push out that breakeven point even farther. If I had a spouse that was more dependent on my SS, I would reconsider delaying.
With 2% inflation I find that age 82 is the break even point for taking SS at 62 or deferring to 70. But amount of lifetime payout isn't the main reason for deferring. It's to give you greater income while you are living. You are deferring to increase your payout rate, not necessarily the total amount you'll get.
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Old 10-27-2015, 09:11 AM   #48
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Current interest rates have no influence on the decision as to whether or not to take Social security other than if you are 100% fixed investor. The pile of money to separate in this example will be invested conservatively and if the markets opportunity lost is greater than the benefit of deferring then delaying SS will be financially inferior. As an example in March of 2009 interest rates were lower across the board than they are now. Anyone that held a lump of money in conservative to investments to us as the eight years payments for in replacement of SS money if they reached 62 in March of '09 is not in a better position today at age 68 by not claiming. The missed market returns overwhelm the gain in SS payments.


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Old 10-27-2015, 12:12 PM   #49
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Plan is for DW to take SS sometime while she's 62. That will pay for all medical. Will draw from deferred comp program, her pension and a bit of savings in Bucket 1. Then I'll claim at 66.2. A bit of the mix and match.
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Old 10-31-2015, 09:58 AM   #50
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I have read Pfau's article, but I don't get his example concerning waiting until 70 to claim SS.

The individual involved needs $60,000 a year to live on. Pfau'scalculation for the bridge money needed while waiting to collect SS at 70 is based upon the $39,600 that a person gets when collecting SS at age 70 - $39600x 8 = $316,800 in bridge money needed.

But, if the person retires at 62 and does not claim SS immediately, would not they need the entire - $60,000 a year x 8 = $480,000 - for their bridge money? This would leave them with only $320,000 to fund their life style after 70. And that would mean a significantly higher withdrawal rate. Or am I missing something?
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Old 10-31-2015, 10:53 AM   #51
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I saved to be independent of what others think/want & thus to do as I please. If I'd spend to be near penniless when I die, I would risk becoming dependent because I couldn't perfectly judge the future. I fear that more than having funds leftover.
Likewise, I don't really care about having funds leftover. I want to be prepared for an unknown future and having some extra resources available, not committed to maintaining whatever lifestyle I craft for myself, seems like a good part of that. Maybe I'll find a way to use them, maybe I won't. We may or may not see radical expensive medical advances, life extension, space vacations, labor market upheaval, robot butlers, rejuvenation therapies, personal self-flying cars or other attractive toys in our lifetimes, but if we do, I'd like to be able to at least contemplate if I'm interested rather than be locked in to a minimal acceptable income stream I set up years ago. I guess that's what makes me a sucker for OMY.
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Old 10-31-2015, 10:59 AM   #52
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I have read Pfau's article, but I don't get his example concerning waiting until 70 to claim SS.

The individual involved needs $60,000 a year to live on. Pfau'scalculation for the bridge money needed while waiting to collect SS at 70 is based upon the $39,600 that a person gets when collecting SS at age 70 - $39600x 8 = $316,800 in bridge money needed.

But, if the person retires at 62 and does not claim SS immediately, would not they need the entire - $60,000 a year x 8 = $480,000 - for their bridge money? This would leave them with only $320,000 to fund their life style after 70. And that would mean a significantly higher withdrawal rate. Or am I missing something?
He is just saying that the WR of deferring after considering that you have to withdraw more in those first 8 years is less than the WR of taking at 62 and the lower WR is less risky. IOW, rather than carving out of the portfolio the entire $60k as you would do , he is only carving out the SS support from 62-70 and recomputing the WR at age 62.


Another way to think of it is that the portfolio needs to provide in inflation adjusted $20,400 for life under both alternatives. So the real comparison is an inflation adjusted $17,100 for life under the take at 62 alternative compared to a $39,600 for 8 years under the take at 70 alternative.

At a 4% WR you would need $510k to fund the $20,400 for life common to both alternatives.

You would also need $428k to fund the remaining $17,200 gap if you take SS at 62... so if you take at 62 you need a total of $938k.

You would need $317k ($39,600 * 8) on top of the $510k if you take at 70, but the $317 isn't inflation adjusted.. to adjust for inflation it is probably more like $350k, so if you defer until 70 you need $860k in total.

Needing $860k is better than needing $938k so it is better to defer.

I think you can use just about any WR below 4.9% and the conclusion will be the same.
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Old 10-31-2015, 11:06 AM   #53
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It never ceases to amaze me that all of the learned ones calculations assume the present laws and benefits will continue as they are into the far future. So trading one's liquid NW for a future promise to pay by SS is perfectly all right because well, because there never has been a change to promised benefits and anyway the beneficiaries would all rise with their pitch forks once they found out about it. Besides any change would be presented and discussed for a very long time before being implemented.

Yup, just as we saw re this week's SS changes. First heard about proposed changes on Tuesday, signed sealed and delivered by Friday. There was a preview when the do over provision was removed overnight a few years ago.
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Old 10-31-2015, 11:39 AM   #54
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It never ceases to amaze me that all of the learned ones calculations assume the present laws and benefits will continue as they are into the far future. So trading one's liquid NW for a future promise to pay by SS is perfectly all right because well, because there never has been a change to promised benefits and anyway the beneficiaries would all rise with their pitch forks once they found out about it. Besides any change would be presented and discussed for a very long time before being implemented.

Yup, just as we saw re this week's SS changes. First heard about proposed changes on Tuesday, signed sealed and delivered by Friday. There was a preview when the do over provision was removed overnight a few years ago.
I'm beginning to think you're right: these changes affecting relatively small numbers of folks are really trial balloons to establish what can be gotten away with with little public discussion and "crisis" votes to deal with the foolishness of the "debt ceiling" among other things.
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Old 10-31-2015, 11:49 AM   #55
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These changes have been kicked around for longer than a week. I don't have any citations but I have been reading about them for quite a while. They just haven't gotten traction before and therefore didn't make the major media.

Anyone who thinks SS is a vested right should read Flemming v. Nestor.

That said, one has to assume something when planning the future. Up until now, assuming the law wouldn't change substantially was a fairly good assumption.
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Old 10-31-2015, 11:54 AM   #56
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I guess the new math of SS means ignoring highly relevant data like the funding projections for SS in that are in the SS Trustee's Report, free and available online.
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Old 10-31-2015, 12:03 PM   #57
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I have wondered about the future of SS for a while. I may chose to compromise and just take SS at my full retirement age rather than wait until 70. However, taking it earlier seems like to large of a cut in the benefits, assuming I live as long as my parents.
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Old 10-31-2015, 12:14 PM   #58
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These changes have been kicked around for longer than a week. I don't have any citations but I have been reading about them for quite a while. They just haven't gotten traction before and therefore didn't make the major media.
They've certainly been hinted at and as far as the file and suspend schemes probably expected by experts and those who've studied the intricacies of SS rules. IMHO, file and suspend was a form of double-dipping; my only issue with eliminating it is how short a timeframe is being used to fully implement the change.
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Old 10-31-2015, 12:16 PM   #59
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These changes have been kicked around for longer than a week. I don't have any citations but I have been reading about them for quite a while. They just haven't gotten traction before and therefore didn't make the major media.

Anyone who thinks SS is a vested right should read Flemming v. Nestor.

That said, one has to assume something when planning the future. Up until now, assuming the law wouldn't change substantially was a fairly good assumption.
There were lots of idea floated around and most were said to be roundly rejected. What is undeniable is that no bill was presented for discussion prior to Tuesday and there was no discussion of details, only passed as part of raising debt ceiling.

There is no doubt in my mind that what occurred last week makes the case for spending 316K in exchange for a higher SS at age 70 may be far more risky than Pfau or any "expert" is willing to admit.
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Old 10-31-2015, 12:35 PM   #60
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There is no doubt in my mind that what occurred last week makes the case for spending 316K in exchange for a higher SS at age 70 may be far more risky than Pfau or any "expert" is willing to admit.
That old adage "a bird in the hand is worth two in the bush" may be as useful a guide as any of the experts.
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