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Old 02-16-2011, 02:24 PM   #61
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i think i can show you that (unless you doubt SS) you will be better off waiting till age 70 to start SS. you will need to have a portfolio for this to work so to show you i will need your numbers (portfolio size, income streams, projected SS at age 62 and 70 and expenses/desired spending)
Yes, I doubt SS in terms of the amount of benefit I will receive in 10 years. I'm a natural cynic.
Yes, I have a portfolio (untouched) and a TSP derived fixed annuity (using that right now for COL and continued building of retirement portfolio) besides my current and in-the-near-future pensions.
It all depends on how much of an effect drawing SS at 62 will have on my own deferred FERS pension. I will get that calculation done by a specialist (or online calculator) at OPM retirement services when the time draws nearer.
But thank you for the offer.
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Old 02-16-2011, 02:49 PM   #62
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no, as i pointed out in multiple posts above and on previous threads the BE method is not appropriate for the analysis of when to start taking SS
But perhaps not everyone agreed with you. Money is worth more the sooner you get it, and calculating the investment value of early SS payments is a reasonable way to estimate how much more the early payments are worth. It really doesn't matter whether anyone actually invests the money and collects interest or whether people spend it early and so get the benefit that way.
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Old 02-16-2011, 03:05 PM   #63
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Yes, I doubt SS in terms of the amount of benefit I will receive in 10 years. I'm a natural cynic.
Yes, I have a portfolio and a TSP derived fixed annuity (using that right now for COL and continued building of retirement portfolio) besides my current and in-the-near-future pensions.
It all depends on how much of an effect drawing SS at 62 will have on my own deferred FERS pension. I will get that calculation done by a specialist (or online calculator) at OPM retirement services when the time draws nearer. But thank you for the offer.
your welcome but something you said confuses me, why would drawing SS at age 62 (or any age for that matter) affect your FERS pension? many years ago i spent quite a bit of time studying the FERS and i dont remember anything about taking SS affecting the FERS pension (maybe i forgot). as i remember, they are supposed to be additive.

sounds like the only one of your retirement income streams (maybe with the exception of your portfolio) that is fully COLAed will be SS, another reason to maximize its payout (i.e. wait till age 70 to start drawing it).

well the offer is still open, i cant see why me showing you what i think i would be showing you would in any way be bad for you (more information makes for a better decision, right? you could always take my analysis to your "specialist") but if you dont want it, no problem
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Old 02-16-2011, 03:19 PM   #64
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Not sure of Departure Date, starting SS right away

I just turned 62 last month & have applied for social soc. benefits. Because, I can't say for sure how long my life span will be. I know someone who retired 6months back and passed away at the age of 63. I am sure if I survive after 76, my monthly expenses should be much less than they are now. So I am going to start my social security right away.
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Old 02-16-2011, 03:20 PM   #65
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your welcome but something you said confuses me, why would drawing SS at age 62 (or any age for that matter) affect your FERS pension? many years ago i spent quite a bit of time studying the FERS and i dont remember anything about taking SS affecting the FERS pension (maybe i forgot). as i remember, they are supposed to be additive.

sounds like the only one of your retirement income streams (maybe with the exception of your portfolio) that is fully COLAed will be SS, another reason to maximize its payout (i.e. wait till age 70 to start drawing it).

well the offer is still open, i cant see why me showing you what i think i would be showing you would in any way be bad for you (more information makes for a better decision, right? you could always take my analysis to your "specialist") but if you dont want it, no problem
I did a voluntary separation (resigned) after 18 years 3 months of federal service at age 48. I will apply for my MRA+10 deferred FERS at age 56. So any 20 year service FERS benefits will not apply to me. I knew this before I FIREd.
The CSRS survivor pension is COLAd. My future FERS pension will have some sort of mini-COLA applied.
The HR personnel specialist who helped me FIRE said it may be possible that taking SS at age 62 will affect my FERS deferred pension because I am already drawing a CSRS pension (survivor). The two pensions should not have any punitive overlap, but one never knows. It is not a normal situation.
I have 10 years before I am eligible for SS at age 62. I have 4 years before I can apply for the deferred FERS pension.
My confidence in the current CRSR pension and the in-the-near-future FERS deferred pension is absolute.
My uncertainty lies in what happens in Congress with regard to SS between now and 10 years hence.
Life has taught me to always expect the unexpected.

If you feel like doing some research, I'd be interested in the results.

Please PM me so we can return the thread to the original topic.
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Old 02-16-2011, 03:24 PM   #66
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But perhaps not everyone agreed with you. Money is worth more the sooner you get it, and calculating the investment value of early SS payments is a reasonable way to estimate how much more the early payments are worth. It really doesn't matter whether anyone actually invests the money and collects interest or whether people spend it early and so get the benefit that way.
financially planning for retirement is about planning income streams that in many cases need to last a life time, so it is totally appropriate when deciding when to start one of those income streams (SS) that an income stream analysis be done. all i am trying to do with my posts is to help make peoples retirement more secure and/or show a way to spend more money with the same or less risk.

the only ways the BE method shows that for a single person taking SS at age 62 is better than delaying till age 70 are 1) using a totally unrealistic constant rate of return for that "savings account" or 2) the person dies young. however in case 2) since the person actually gets to spend more money before s/he dies the only disadvantage is that the estate s/he leaves is smaller. so, do you want to spend more while you are alive with less risk or do you want to maximize the estate you leave?
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Old 02-16-2011, 03:38 PM   #67
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I did a voluntary separation (resigned) after 18 years 3 months of federal service at age 48. I will apply for my MRA+10 deferred FERS at age 56. So any 20 year service FERS benefits will not apply to me. I knew this before I FIREd.
The CSRS survivor pension is COLAd. My future FERS pension will have some sort of mini-COLA applied.
The HR personnel specialist who helped me FIRE said it may be possible that taking SS at age 62 will affect my FERS deferred pension because I am already drawing a CSRS pension (survivor). The two pensions should not have any punitive overlap, but one never knows. It is not a normal situation.
thank you for the explanation and i can now understand why i hadnt heard of this potential, i didnt look into the effects on a CSRS survivor pension of taking SS.

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I have 10 years before I am eligible for SS at age 62. I have 4 years before I can apply for the deferred FERS pension.
My confidence in the current CRSR pension and the in-the-near-future FERS deferred pension is absolute.
My uncertainty lies in what happens in Congress with regard to SS between now and 10 years hence.
Life has taught me to always expect the unexpected.
the good thing about this is that you dont have to make the when to start taking SS decision now. it gives you plenty of time for analysis.

i still think that taking SS at age 70 would be financially advantageous to you (unless it turns out to be worse for your CSRS pension to take SS at age 70 instead of age 62)
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Old 02-16-2011, 03:45 PM   #68
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A popular topic ... seems a new article is written on this every day. Here is one from Forbes yesterday.

The Big Decision: When To Take Social Security - Janet Novack - Taxing Matters - Forbes

Some of the main points:

Quote:
  • If youíre still working, donít claim benefits before your full retirement age
  • Donít take Social Security until youíre sure you want it.
  • Consider your family genes and general health.
  • Donít get hung up on the break-even date.
  • Understand the couples game.
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Old 02-16-2011, 04:01 PM   #69
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A popular topic ... seems a new article is written on this every day. Here is one from Forbes yesterday.

The Big Decision: When To Take Social Security - Janet Novack - Taxing Matters - Forbes

This link doesn't work for me. Does it require membership or subscription?

Thx
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Old 02-16-2011, 04:19 PM   #70
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The link is publicly available, but is not working for me right now either. Maybe we overloaded their servers?
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Old 02-16-2011, 04:29 PM   #71
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I didn't see that anyone has mentioned the tax implications. My understanding is that SS goes into the Provisional Income Formula at 50% and therefore delaying can result in lower taxes. There are a number of white papers that address this but I don't have a handy link. Maybe someone else can post one.
I followed up on the link rescueme provided. It seems to be that it's correct that you can reduce your after-70 taxes by deferring SS. The key is that more of your total income will be from SS, and some of your SS income doesn't get into taxable income.

OTOH, if you defer SS, then more of your 62-69 income will be taxable IRA withdrawals, so this increases your taxes during those 8 years.

The taxable SS formula is complex, and it interacts with the FIT tax brackets. It's not immediately clear whether the pre-70 or post-70 taxes dominate. I tried a simple model and it seemed to depend on the general level of income.

I tried a total income of $44k, with a SS benefit of $24k if taken at 62. That case seemed to say that deferring raised the lifetime tax.
Then I tried a total income of $90k, with a SS benefit of $30k if taken at 62. That case seemed to say that deferring lowered the lifetime tax. This is probably the frame of reference for the Prudential article.

Modeling this is complicated by the fact that the factors that determine how much of SS gets into taxable income are not inflation adjusted. So there's an additional variable of the inflation rate.
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Old 02-16-2011, 04:41 PM   #72
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Modeling this is complicated by the fact that the factors that determine how much of SS gets into taxable income are not inflation adjusted. So there's an additional variable of the inflation rate.
I think we can generally assume that if you have enough income to retire comfortably, you are going to pay tax on 85% of your SS income. If not this year, the year after. I did during the two years I received it, and I asked a few friends and they all do too. May be easier for marrieds, as they might need less money relative to the SS allowances to pay the bills.

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Old 02-16-2011, 05:21 PM   #73
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I think 85% is a good conservative planning tool - I use it. But this hinges on the definition of "comfortably".

If I'm doing the worksheet correctly, a couple can have $25k of SS plus $25k of taxable income and only $2,750 of the SS is taxable. The median income for all couples over age 65 is about $46,000, so this would be a slightly-above-median couple.

Of course, if the cost of living doubles in the next Y years, and their nominal income doubles with it, then they'll have $50k of SS income and $32,350 of it will be taxable. That's about 65%.

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Old 02-16-2011, 07:00 PM   #74
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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%?"
They are also assuming you will live much past 70.
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Old 02-17-2011, 04:59 AM   #75
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This link doesn't work for me. Does it require membership or subscription?

Thx
It seems to be working again this morning. No membership or subscription.

The Big Decision: When To Take Social Security - Janet Novack - Taxing Matters - Forbes
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Old 02-17-2011, 05:24 AM   #76
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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%?"

Is that 4% a real or nominal return? If it is real then it is on par with standard SWR rate.
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Old 02-17-2011, 01:01 PM   #77
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if everyone in my family lived into their 90's, a few have but most only into their early to mid 80's and a few far less than that, i'd be more prone to waiting until 66 or 70. it seems to me waiting 17 years to break even is a long time to wait. i'd rather take 17 years of a bird in the hand, however, i'm going to look into waiting each year to 66 just to see how that shakes out.

taxes, we all have to pay them and the more income from whatever source the more we pay in taxes so i'm inclined to not sweat that.

as far as income streams, i don't need ss at 62 because i presently am able to lbmn. my pension pays all my expenses plus i save about 1/2 of the net check. i don't consider what i need to live on now or 10 years from now because i seem to be able to live without any distributions from investments so far. perhaps i'm the exception since my total portfolio is nowhere close to $1M. i just don't spend much money and don't find shopping to be interesting.

i find this whole ss thing confusing, i used to think taking it at 62 was a no brainer. i wonder if i should talk to a financial planner or cpa to see what they say but i suspect this issue is one of those things that it depends upon your point of view and that'll cloud any objective analysis.

this has been a very interesting thread and has given me much to consider but i still think it may be best to just take the money asap. we'll see.
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Old 02-17-2011, 09:55 PM   #78
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My plan is to take SS as late as possible because of longevity risk.

I see a lot of talk in this thread about statistical longevity, but I suspect that the life expectancy of folks on this board would tend to be longer than average because of lower stress.
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Old 02-17-2011, 11:22 PM   #79
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as i pointed out in multiple posts above and on previous threads the BE method is not appropriate for the analysis of when to start taking SS

I disagree. Why isn't it?
Consider: at 62, you could either:
1) Don't start collecting. Wait for 70 and get a larger amount.
or
2) Start collecting, but put that money into a side account and let it grow until age 70. Then take monthly withdrawals in an amount such that the total (SS check plus withdrawal) equals the amount that SS would have paid if you had waited until 70.

From the "spendable monthly income" viewpoint, these scenarios are exactly the same -- up until the side account is exhausted. From 62 to 70 you have no spendable SS income, and after 70 your spendable income is equal to the age 70 SS amount. Since they are the same until depletion, the BE point (when the side account becomes empty) is the deciding factor.

Why is this so hard to understand?

Ahhhhh, maybe I see. You said "i dont know what you are getting at here. in my example i fully consider the case of the person taking SS at age 62. that person spends it."
Then the scenarios are not even remotely the same, are they? If the person spent the money he got at 62 because he needed it to life on, then he does NOT have the option of delaying until 70. So you are trying to compare two alternatives where one of them is not, in fact, an alternative at all---it's only a fantasy.

--------------
the only ways the BE method shows that for a single person taking SS at age 62 is better than delaying till age 70 are 1) using a totally unrealistic constant rate of return for that "savings account"
Did you even bother to look at my spreadsheet?? You plug in your own estimates for rate of return and COLA. Then it shows you the break-even point.

What is the highest rate of return that you wouldn't call totally unrealistic? Plug that in and see what it says. Would you call 3% return and 3% COLA realistic? Heck, even that has a BE of 11 years (age 81). PenFed right now pays 3% on a 7 year CD.

How about 6%? Would you call that totally unrealistic ? PGF (preferred stock ETF) is currently yielding 7.3%. The BE for 6% return and 3% COLA is 15 years (age 85).

Are you calling 10% totally unrealistic? Because that's the long-term return of the S&P500. I will grant that this might be dangerous to depend on, since the short-term returns jump all over the place.
The BE for 10% return and 3% COLA is.......never. The side account never even comes close to being depleted.

Playing with the numbers, it turns out that 9% return and 3% COLA has the BE at age 101.
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Old 02-18-2011, 01:37 AM   #80
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the only ways the BE method shows that for a single person taking SS at age 62 is better than delaying till age 70 are 1) using a totally unrealistic constant rate of return for that "savings account"
Did you even bother to look at my spreadsheet?? no, i built my own. i think you didnt properly calculate (inflate) the amount of SS received at age 70, which explains the difference in our numbers You plug in your own estimates for rate of return and COLA. Then it shows you the break-even point.

What is the highest rate of return that you wouldn't call totally unrealistic? 3% real or with the inflation rate we are using (3%), 6% nominal. but in todays environment that is high Plug that in and see what it says. Would you call 3% return and 3% COLA realistic? Heck, even that has a BE of 11 years (age 81). PenFed right now pays 3% on a 7 year CD. a 3% return (nominal) when there is 3% inflation is a 0% real return and the break even point is between 78 and 79

How about 6%? Would you call that totally unrealistic ? PGF (preferred stock ETF) is currently yielding 7.3%. The BE for 6% return and 3% COLA is 15 years (age 85). the BE point of a 6% return (nominal) with 3% COLA (inflation rate) is between 80 and 81

Are you calling 10% totally unrealistic? Because that's the long-term return of the S&P500. I will grant that this might be dangerous to depend on, since the short-term returns jump all over the place.
The BE for 10% return and 3% COLA is.......never. The side account never even comes close to being depleted. the BE point of a 10% return(nominal) with 3% COLA (inflation rate) is between 84 and 85. and yes it is unrealistic, what retiree do you think will have their ENTIRE porfolio invested in stocks until they die? my answer is only if they get hit by a truck right after they retire, and then less then half of them.

Playing with the numbers, it turns out that 9% return and 3% COLA has the BE at age 101. nope, that cross over is between 83 and 84
your numbers are wrong
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