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Old 02-18-2011, 01:56 AM   #81
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Originally Posted by rayvt View Post
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.

--------------
oops, i didnt address this. i will start with the fact that you seemed to ignore my statement that the real value of SS is as longevity insurance.

then you ignore the fact that your income stream is only equal to the age 70 SS income stream for a period of time (the length of which we seem to disagree on but it is finite), after that your income stream drops (mine doesnt).

your only professed value (which is questionable cus your numbers are incorrect) is that if you die young enough, your estate will be larger. the BE method just doesnt fit with the goals of most people retireing early (secure, stable income for life).
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Old 02-18-2011, 11:30 AM   #82
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rayvt, I liked you BE analysis and to me that is a valid way to look at the decision, i.e. "at what age do I have the most money in the bank".

I've run very similar runs but used "future dollars" for the age 66 start date based on the understanding that the SS estimate that we all get are based on "today's dollars".

Irrespective, it still gives a BE of about 84-86 years old, depending on the return rate chosen. So it still matches your conclusions very well.

Thanks for the spreadsheet, I am currently modifying it to run cases based on Firecalc type analysis using Prof. Shiller's 140 years of data for CPI and annualized return of the market. So far, some interesting results.
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Old 02-18-2011, 01:51 PM   #83
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OK, this is embarrassing but I uploaded my spreadsheet to Google Docs and the formatting got totally hosed and it lost the comments and instruction notes. So ignore the comments and just use the instructions below. The total functionally is still there and easy to understand.

I took rayvt's approach to find Break Even (BE) based on taking at 62 versus 70. But I also added Prof. Shiller's historical data (the stuff used in FireCalc) and also allow for calculating the FV of the SS estimates. The FV is important since the SS estimate is in today's dollars and you need it in future dollars, especially if you are younger than SS retirement age.

So bottomline, the calculation applies "real" CPI (or zero if neg) to the SS year to year, and uses "real" S&P data for appreciation of the saved SS payments.

Here is what you need to do.
1. Enter your age
2. Enter your SS estimates.
3. Enter a date that you would like to see historically how your SS decision would fare.

The spreadsheet will show you when you would break even by waiting and taking it at 70 vs 62 and all calcs are based on actual CPI and S&P500 historical data.

https://spreadsheets.google.com/ccc?...CNyJtJUE#gid=0
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Old 02-18-2011, 02:56 PM   #84
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Another option that only applies probably to a few but is important when it does apply:

DH began taking SS at about 62 and 9 months (the month after he retired). Once factor for us is that we have 2 children under 18. Each of them receives 1/2 of his Full retirement benefit (subject to the family cap on benefits).

So DH receives $1767 social security. Our two children under 18 receive $841 each a month. When our older son's turn 18 our daughters payment will increase about $300 a month. So we factored in the 4 years of payments for our daughter and almost 2 years for our son.

Since our daughter is 14 I could have received half as well (again -- subject to the family maximum) but I didn't since I still work part time.

DH is 7 years older than me. However, my SS will be slightly higher than his (I will hit the max). I figure I will take a look at our financial situation and the SS landscape when I turn 62 and will decide then whether to take it then or whether to wait until later. (I probably lean to taking it sooner rather than later).
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Old 02-18-2011, 03:32 PM   #85
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Articles like this certainly have me concerned that major changes are coming in SS, and my guess is that none of the changes are gonna make anyone on this board jump for joy.

FoxNews.com - Entitlement Evolution Poses Threat to America's Finances

There seems to be a huge focus on SS/Medicare right now and the spokesperson in that article says ""So much of what the government is doing is to take money from younger people and give it to older people," Biggs said.

Talk about an inflammatory statement. Sort of neglects to mention that the "older people" paid in a goodly amount of money.

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Old 02-18-2011, 04:25 PM   #86
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There seems to be a huge focus on SS/Medicare right now and the spokesperson in that article says ""So much of what the government is doing is to take money from younger people and give it to older people," Biggs said.

Talk about an inflammatory statement. Sort of neglects to mention that the "older people" paid in a goodly amount of money.
The game now is to pretend that the raises in the payroll deduction hikes in 1977 and 1982 specifically aimed at building a reserve for when all those working boomers turned into those 'older people' didn't happen, and that that the resulting trust fund deposits aren't 'real', and so may be de-facto disappeared to offset the real debt.

The next big step will be to get the government out of Medicare, by turning it into a voucher system to be applied toward the purchase of private insurance. Current proposals being passed around in DC are to adjust the vouchers by an amount based on the general COLA allowance plus a portion of the rate of increase of medical costs, shifting more of the cost of private insurance for elders onto the elders, as a cost containment measure.

In the interest of conservative retirement planning, I'm not relying on Social Security in my planning, and am assuming I'll have to purchase private medical insurance past age 65, although probably at a better rate than the tremendous cost bump most policies show at age 65.
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Old 02-18-2011, 04:51 PM   #87
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The game now is to pretend that the raises in the payroll deduction hikes in 1977 and 1982 specifically aimed at building a reserve for when all those working boomers turned into those 'older people' didn't happen, and that that the resulting trust fund deposits aren't 'real', and so may be de-facto disappeared to offset the real debt.

The next big step will be to get the government out of Medicare, by turning it into a voucher system to be applied toward the purchase of private insurance. Current proposals being passed around in DC are to adjust the vouchers by an amount based on the general COLA allowance plus a portion of the rate of increase of medical costs, shifting more of the cost of private insurance for elders onto the elders, as a cost containment measure.

In the interest of conservative retirement planning, I'm not relying on Social Security in my planning, and am assuming I'll have to purchase private medical insurance past age 65, although probably at a better rate than the tremendous cost bump most policies show at age 65.

OMG.... OMG... are you telling me that the politicians lied... tell me it ain't so....


There is no reserve in reality.... they have to get general funds to pay off those notes... but even if you took into account the stated reserve, there is still not enough to pay for all the benefits that are promised...

Just like when we discuss the unsustainable pensions for state and local gvmt employees... not having enough money is the problem.. SS does not have enough money... increasing the taxes for the working people to pay for the retired people is not fair... I am willing to be in the group that is screwed to get it fixed... I do not think the haircut is that big... probably 15% or so...
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Old 02-18-2011, 05:01 PM   #88
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Talk about an inflammatory statement. Sort of neglects to mention that the "older people" paid in a goodly amount of money.
And they just couldn't keep their hands off it and spent it all and then quite a bit more too.

Changes for the worse are inevitable as the money for it all just isn't there. Get ready to pay more and get less than was promised. It is inevitable.
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Old 02-18-2011, 05:06 PM   #89
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The next big step will be to get the government out of Medicare, by turning it into a voucher system to be applied toward the purchase of private insurance. Current proposals being passed around in DC are to adjust the vouchers by an amount based on the general COLA allowance plus a portion of the rate of increase of medical costs, shifting more of the cost of private insurance for elders onto the elders, as a cost containment measure.
Unless people want to see sick, homeless seniors crawling along the pavement this is an absurd idea. Could you cite what these proposals are, and who is proposing them, so I do whatever I can to forestall anything this inhumane. Most advanced countries do not separate out care for various subgroups, everyone is in the same boat. The medical expenditures are what they are for the entire country, they are not Medicare expenditures, Medicaid expenditures, VA expenditures, Federal retiree expenditures, US COngressmen expenditures, Military active duty, Tricare expenditures, etc. etc.

For a look by someone who has studied healthcare around the world, and been a consumer and participant in several non-US systems, and sees America as an emperor with no clothes, see this video:

T.R. Reid talks about health care systems around the world - KCTS 9 - blip.tv

I really cannot understand the cognitive flaw that keeps American voters from doing what is obviously morally right, and cheaper and better at the same time. How often can you get the moral high ground, better results, and a cheaper price? With medical systems, anytime you adopt a model other than that of the USA.

Ha
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Old 02-18-2011, 05:26 PM   #90
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Unless people want to see sick, homeless seniors crawling along the pavement this is an absurd idea. Could you cite what these proposals are, and who is proposing them, so I do whatever I can to forestall anything this inhumane. Most advanced countries do not separate out care for various subgroups, everyone is in the same boat. The medical expenditures are what they are for the entire country, they are not Medicare expenditures, Medicaid expenditures, VA expenditures, Federal retiree expenditures, US COngressmen expenditures, Military active duty, Tricare expenditures, etc. etc.
I tend to agree. It's an absurd idea on the face of it, but it's popular with certain political factions who see it as a longer term fix for federal budget woes. I expect to see it come up again and again, until conditions are right to pass it or something similar.

The most recent back-room appearance:
Medicare voucher system weighed - Press-Telegram

CBO analysis of last year's version (PDF)
http://www.cbo.gov/ftpdocs/119xx/doc...y_Analysis.pdf

“Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrollees’ spending for health care and the uncertainty surrounding that spending would increase.”
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Old 02-18-2011, 05:31 PM   #91
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There is no reserve in reality.... they have to get general funds to pay off those notes... but even if you took into account the stated reserve, there is still not enough to pay for all the benefits that are promised...
Well, they could do something really drastic, like cut benefits to 78% of the current projected level when they exhaust the reserve in 30-40 years. Or, they could do something radical like raise the full retirement age by 1 whole month for every year that passes. Or, they could go all medieval and remove or significantly raise the income cap on the SSA payroll tax.

It's not exactly hard to fix.
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Old 02-18-2011, 05:40 PM   #92
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I'm not all that worried about Social Security going away. My plan is to wait until the (currently) 70 1/2 year old point to maximize the SS monthly income and survivor's benefit for DW. I'll spend down my IRA between 59 1/2 and then, to reduce the tax impact and leave less of a mess (inherited IRA rules and funkiness) in the estate.

I'm not worried about the whole crossover point, and whether or not I'll maximize my payout. First, I'll be dead, and won't be particularly upset about possibly missing the crossover. Second, I'm viewing SS payments as a sort of longevity insurance for DW and I, and providing the best monthly income in old age is more important to me than the 'efficiency' in beating the crossover point for maximum accrued income.
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Old 02-18-2011, 05:56 PM   #93
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From the article:
Quote:
The coming financial crisis over entitlements is so dire that Andrew Biggs said "the joke among entitlement analysts is that the government will eventually turn into a pension plan with an army."
At least we'll have the means to start new wars. All is not lost.
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Old 02-18-2011, 06:12 PM   #94
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I have a modest proposal. The government could enter the annuity market by offering (as the British, Dutch and French did in the late Middle Ages), an inflation indexed annutiy at 7%. I'd be game for some of that action.

Assume 76 million boomers from 1946-64, times and average of maybe $500,000 each and you get. $38,000,000,000,000
That should help draw the shortfall down a bit.
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Old 02-19-2011, 01:42 AM   #95
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I tend to agree. It's an absurd idea on the face of it, but it's popular with certain political factions who see it as a longer term fix for federal budget woes. I expect to see it come up again and again, until conditions are right to pass it or something similar.

The most recent back-room appearance:
Medicare voucher system weighed - Press-Telegram

CBO analysis of last year's version (PDF)
http://www.cbo.gov/ftpdocs/119xx/doc...y_Analysis.pdf

“Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrollees’ spending for health care and the uncertainty surrounding that spending would increase.”
Thanks for the links. I read them, and it appears that the weird subgroup of the Republican party is out to commit hara kiri once more. If anything could turn me into a socialist, this would be it. In fact, drop the "if" clause- I would much prefer a single payer system with no other options for every man woman and child in America than this crazy, immoral fantasy of a right wing loonie.


Ha
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Old 02-19-2011, 01:48 AM   #96
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Well, they could do something really drastic, like cut benefits to 78% of the current projected level when they exhaust the reserve in 30-40 years. Or, they could do something radical like raise the full retirement age by 1 whole month for every year that passes. Or, they could go all medieval and remove or significantly raise the income cap on the SSA payroll tax.

It's not exactly hard to fix.
An expert, Alicia Munnell of Boston College agrees with you. Not hard to fix forever. The problem seems to be that it also makes really good divisive sound bites for politicians to hammer away at.

Ha
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Old 02-19-2011, 07:34 AM   #97
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Originally Posted by haha View Post
I really cannot understand the cognitive flaw that keeps American voters from doing what is obviously morally right, and cheaper and better at the same time. How often can you get the moral high ground, better results, and a cheaper price? With medical systems, anytime you adopt a model other than that of the USA.
Ha
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Old 02-19-2011, 07:44 AM   #98
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..........
I really cannot understand the cognitive flaw that keeps American voters from doing what is obviously morally right, and cheaper and better at the same time..............
Ha
I think there is a significant portion of this country that would rather go naked than see someone else get a pair of socks for free.
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Old 02-19-2011, 08:45 AM   #99
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I see the thread hijackers have arrived.

Ponzi or Ponzi-like programs don't go on forever. They can't. All these claims in posts 86-98 have been hashed out ad infinitum elsewhere. No reason to go into that here.
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Old 02-19-2011, 08:54 AM   #100
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Ponzi or Ponzi-like programs don't go on forever. They can't.
As this applies to the federal government, why not?

Edit: Here is a comparison from the SSA of the SS system with Ponzi schemes: http://www.ssa.gov/history/ponzi.htm .
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