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Old 02-14-2011, 10:06 AM   #21
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Interesting article. It does however fail to take into account what other income you might have coming in from various investments, part time w**k, IRA minimum withdrawls, etc.

Not taking these things into consideration could vault you into a higher income bracket with the SS payments creating some significant unintended tax consequenses.
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Old 02-14-2011, 10:10 AM   #22
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Originally Posted by East Texas View Post
If the wife takes SS at age 62 and the husband takes SS at 66 and husband passes away, does the wife get his full SS as a survivor or is the amount reduced because she took early distribution on her SS?
Spousal benefits are reduced for those who file before their own FRA.

SS article on this:

http://www.ssa.gov/survivorplan/survivorchartred.htm

BTW, that's one of the reason that my DW will claim at her FRA and I'm delaying till age 70 (for her benefit).

Of course, I do get SS income when I'm 66.5 years of age - at the time my wife turns her FRA age of 66, which will be 50% of her then benefit till I turn 70, 3.5 years later.

In addition to this "solution" we're also using it to draw down our tax-deferred holdings, which will become "excess RMD's" (e.g. RMD's beyond what we need for living expenses) at age 70.5

There are a lot of things to consider concerning what is best for claiming SS, both in a total income measurement, along with trying to plan for your spouse (if you wish ).

The one thing neither of us has a problem with is getting "paid back" for what we paid in SS tax over the years. If we're alive, our plan will maximize our total income. If not, no problem. Money is for the living, not the dead...
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Old 02-14-2011, 03:48 PM   #23
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It is a tough decision. I'm currently planning on waiting until 70 because my wife is 5 years younger and in excellent shape. We have a long term payout on something we sold that will pay us until I'm 69 and she is 64; she can take her SS at 62 because there is no reason not to. However, if we can get by without mine, she may have another 30 to 35 years of getting the bigger number, so it is worth it.

Of course, I reserve the right to change my mind when get to 65 or 66 or whatever and want to have a little extra pocket money to play with!
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Old 02-14-2011, 04:49 PM   #24
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I also plan on waiting until 70 to maximize survivor benefits for DW, who will start her SS at 62.

Not only do women live longer, DW is a year younger, plus she keeps telling me she'll arrange an accident for me if I end up an old fart like my Dad.
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Old 02-14-2011, 05:10 PM   #25
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I plan to wait until full retirement age (66 and 10 mths for me) but I've decided not to wait until 70, despite the larger payout. What's missing from this discussion is the fact that most people will want to be able to enjoy that extra money when they receive it, and if i have to wait til age 70, who knows what my health will be like or if i'll have the energy to do all that travel i want to do.

I think full retirement age is a happy medium to increase your SS benefits at a time when you'll more likely be able to enjoy the $$.

Or... you can just spend other money you have knowing that you will be getting a larger check in a few years...

If you die before the checks... you enjoyed yourself... if you live... then the checks start coming... I do not have to be constrained by thinking of only a yearly budget... I can do a multi-year budget....
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Old 02-14-2011, 05:17 PM   #26
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My and my wife's SS work histories are very similar, and when we retired, our conversations with an SS agent suggested to me that there was no prospect of me ever receiving benefits from my wife's account, nor her from mine. But I certainly don't understand the ins and outs of the SS system, so maybe that's wrong. If it might be wrong, I hope someone will alert me.
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Old 02-14-2011, 07:20 PM   #27
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Originally Posted by fern View Post
I plan to wait until full retirement age (66 and 10 mths for me) but I've decided not to wait until 70, despite the larger payout. What's missing from this discussion is the fact that most people will want to be able to enjoy that extra money when they receive it, and if i have to wait til age 70, who knows what my health will be like or if i'll have the energy to do all that travel i want to do.

I think full retirement age is a happy medium to increase your SS benefits at a time when you'll more likely be able to enjoy the $$.
lets examine this a little, but 1st the assumptions:
1) you would like to maximize your income without increasing your risk. to meet this assumption we will use a SWR of 4% in all cases examined and assume your income from SS is as risky as your income from your portfolio.
2) since i dont know your SS or porfolio amounts i will have to assume numbers here but as the math is fully scaleable, i dont need your exact numbers. i will assume at your FRA age you will get $20,000/yr in SS and your portfolio is $1,000,000.

there are 3 income cases i would like to examine, the 1st has you taking SS at your FRA. the second and third have you taking SS at your FRA+3 (almost 70 yo). in all cases i will be using real (inflation adjusted) dollars.

case 1: your income = 4% * $1,000,000 + $20,000 = $60,000 for life

case 2 & 3: your SS income will be 24% higher or $24,800. to make your after FRA + 3 yo income in these cases equal to your after FRA +3 yo income from case 1 you will need to devote $880,000 of your portfolio to the 4% rule and you do this when you are at your FRA. now you need to replace the $24,800/yr for the 1st 3 yrs which takes another $74,400; $49,600 of which you put in CDs that keep up with inflation and come due at the time you need them. that leaves you $45,600 of your porfolio.

case 2: if you spend that $45,600 evenly over the next 3 years your income stream look like:
from FRA to FRA + 3: $75,200/yr
from FRA + 3 till you die: $60,000

case 3: apply the 4% rule to that $45,600, giving you an income stream of $61,824 from FRA for your whole life.

this analysis shows that (unless you doubt the security of SS) you can get a higher income by waiting to take SS as long as you can get that 8%/yr increase.
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Old 02-15-2011, 04:17 AM   #28
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it seems there are so many variables that there is no one correct answer. Everyone's situation is different.

One thing that has always made an impact for me is that if you delay your SS until age 66 (instead of 62), you are basically getting an extra 6% benefit every year. This is guaranteed. 6% In times where CDs are giving 2% or less, that seems great to me. Of course, my situation is probably different from yours.

A lot of people may be afraid that Congress will change the SS rules. I don't understand why this "unknown" would impact your decision. This could happen, but if you're 62 years old, you can take a "wait and see" approach. If Congress does change the rules, you could file for SS just before the new rules are in place. Once you've filed and your benefits are set, you're grandfathered, and I don't think your benefits can be reduced. Anyway, I just don't see the point of filing at 62 for that reason. You may find that Congress makes no changes that impact you.
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Old 02-15-2011, 06:58 AM   #29
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One thing that has always made an impact for me is that if you delay your SS until age 66 (instead of 62), you are basically getting an extra 6% benefit every year. This is guaranteed. 6% In times where CDs are giving 2% or less, that seems great to me.
The 6% vs. 2% comparison doesn't appear to take account of the 4 lost years of SS payments when you delay.
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Old 02-15-2011, 08:20 AM   #30
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There could be another possible tax angle to consider. If you face RMD's at 70.5 from an IRA or 401K consider that they add to income, waiting till 70 for SS could cost you more taxes also.
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Old 02-15-2011, 10:34 AM   #31
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There could be another possible tax angle to consider. If you face RMD's at 70.5 from an IRA or 401K consider that they add to income, waiting till 70 for SS could cost you more taxes also.
Though your RMD would be somewhat lower, if you were spending down tax-deferred accounts in lieu of earlier SS. A possible reason for some Roth conversions?
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Old 02-15-2011, 11:45 AM   #32
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If Congress does change the rules, you could file for SS just before the new rules are in place. Once you've filed and your benefits are set, you're grandfathered, and I don't think your benefits can be reduced.
I agree with your action point-just wait. In fact I paid back my benefits, hoping to restart later at a higher level. However, the quote above I believe is just a guess. There are many ways that net SS benefits might be trimmed, and a change that would allow grandfathering I believe is one of the less likely possibilities.

Wouldn't it be much more attractive to our rulers to punish wealth (as defined by them) than merely a certain position in the queue?

Ha
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Old 02-15-2011, 01:12 PM   #33
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Though your RMD would be somewhat lower, if you were spending down tax-deferred accounts in lieu of earlier SS. A possible reason for some Roth conversions?
Although you did not ask the question of me, I'll respond since we are in this situation.

Our income is such (I'm retired/DW will probably also be this year) that we are at the top of the 15% marginal rate.

The great majority of our respective retirement portfolio's are in tax-deferred funds. We're of the age (e.g. retirement investment "tweeners") that had pensions up till our mid-30's, but they were eliminated and replaced by 401(k) and TIRA contributions, if we wished. There was no Roth option at the time, only taxable and tax deferred. Of course, the thrust was to delay taxes, so that's what we did.

While we do have Roth IRA's, they are a very small portion of our overall retirement portfolio. Also, since we maximized our 401(k)/TIRA's over the years, we don't have much in taxable to pay the tax due for conversion. Taxes would have to come from our tax-deferred fund, which is generally not advised.

An additional point is that it is expected that a great deal of our tax-deferred holdings will go to charity. That is one of the reasons that we are in no hurry to convert. Assuming non-profit chartable bequests will pass nearly tax-free upon our death (based upon current laws), we would rather see as much of our bequest used to continue the "good works" of our named organizations.

The last point is we wish to delay/defer taxes for as long as we can. We don't feel we're obligated to pay tax just for the honor of converting (very little, due to our income) funds that may never be used/needed.

As I posted, the delay of SS (in our case) will allow us to drawdown from our tax-deferred funds rather than have to take out "excess RMD's" - that is RMD's that are required in excess of our expected normal income needs.

For me, the period of drawdown is expected to be eleven years. For my DW (assuming she retires on her next birthday), it will be three years.

From a tax planning perspective (discussed with our elder-law attorney), it is a way to reduce/minimize taxes and use those funds in a manner that you see fit, rather than what is dictated by the government.

That's just our situation...
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Old 02-15-2011, 01:25 PM   #34
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I plan on taking SS at 62 (2032) - because it will probably go belly up shortly thereafter - so, I'd like a little bit of my $$ back. Fortunately, this $$ will be gravy over other retirement monies. If those already collecting happen to be grandfathered in, I'd rather be "in" than postponed/cancelled against my will.

As others have mentioned, who knows what my health will be if I decide to wait until 66 or 70. Just got my SS statement and it appears there is only a several hundred dollar difference per month between age 60 and 66.
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Old 02-15-2011, 01:28 PM   #35
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I plan on taking SS at 62 (2032) - because it will probably go belly up shortly thereafter.
Probably, so will I ...
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Old 02-15-2011, 01:28 PM   #36
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Waiting till 70 is clearly the best choice under some circumstances and given some assumptions. Trouble is that the circumstances are different for each or us and the assumptions we each might make are probably different.

I'm taking SS on the first day I can because of my paranoia. The fear of government not acting in my best interest but of acting in their own best interest. When I consider whether waiting is best I can't see me winning in any scenario that makes sense.
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Old 02-15-2011, 07:13 PM   #37
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I had intended to take SS at 62 and then refile around 70 depending on my health at such. Now that the do over option is kaput, I am not sure what to do.

I feel pretty confident that things will change in the next 10 years so I am not going to worry about until I turn 60.
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Old 02-15-2011, 10:41 PM   #38
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All (most??) articles showing how much better off you'd be if you waited until 70 are ignoring the most important factors. The time-value of money and the alternative use for the money collected early.

Sure, you get more money each month if you wait until 70 vs. 62. But they almost always neglect--or mention only in passing--the fact that you've collected 96 more months of payments.

Almost all of these articles and discussions do a lot of handwaving and simplistic math. Simplistic math doesn't cut it for complex financial scenarios.

Here is a spreadsheet I worked up, feel free to plug in your own numbers & assumptions:
https://spreadsheets.google.com/ccc?...0d19pTnc&hl=en

The "quick BE" worksheet is pretty easy to understand. Depending on your assumptions for long-term average gain, the 62 vs. 66 breakeven is about 17 years. From 12 years if you "invest" in a non-interest bearing account to 30 years if your investments pay 6%.

BTW, the life expectancy for a male at 62 is 19 years. That's the breakeven time at 4% earnings. So, the question you have to ask yourself is "Can I invest and earn at least 4%?"
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Old 02-15-2011, 10:52 PM   #39
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You forgot one other questions to ask yourself.

"will I live that long"

When I turn 62 in April I'll either take it then or wait till DW turns 62 in Dec of 2012. According to the info I received this month from SS I'll get $1737 a month this April. According to my calc's if I wait till Dec of 2012 I should be around 2K a month. Add about 800 a month for DW and that's not a bad deal. I will not be waiting one second past Dec of 2012. I'm not even sure I'll wait till then, if the market dumps out I'll be in ASAP.
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Old 02-15-2011, 11:40 PM   #40
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i must be missing something, i'm not very knowledgeable about spreadsheets. to be honest about 0.01 on a scale of 1 to 100!

in post #38 i clicked on the link for the spreadsheet and it opened. i can't input my numbers in the green box. so i figured i had to save it. i did a save as but it is saved as hlm or htlm, i forgot which, and it is not a spreadsheet and i can't change anything. so i deleted that and clicked on the 2nd link to the right and it downloaded a spreadsheet. i had to read and click on submit but nothing happens.

how can i use this with my numbers? this looks like something i'd like to do but i'm lost.

thanks.
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