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Old 02-19-2011, 09:10 AM   #101
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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.
Only if they take those socks off my feet (e.g. taxes)
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Old 02-19-2011, 09:30 AM   #102
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i will start with the fact that you seemed to ignore my statement that the real value of SS is as longevity insurance.

Yes, I guess I did ignore it. It's arguably a valid way to look at SS, but I kinda ignored it because nobody thinks of SS in that way. Nobody. I've seen innumerable articles & papers discussing which age one should take SS, but have never seen even one article/paper about "SS is as longevity insurance".

The closest I've seen was the original paper about the SS Reset--and what it talked about was viewing the reset as an immediate SPIA.

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then you ignore the fact that your income stream is only equal to the age 70 SS income stream for a period of time
Did the phrase "Break Even point" escape your understanding? Or the part where I discussed comparing the break-even point with the life expectancy?

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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

Well this is annoying (for me) and embarassing (for you). You built your own spreadsheet and proceeded to think that mine had the same flaws as yours--when mine has a whole section devoted to that exact topic-the COLA-increased amount of the age 70 SS benefit.

And neither of these spreadsheets factors in a high-probability scenario. To wit: that SS benefits may be cut to ~80% of the currently projected benefit. Won't that put a crimp in the plans of people who delayed in order to get a higher amount! (If it ever happens. It might not, but it is a high probability.)

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"Would you call 3% return and 3% COLA realistic? a 3% return (nominal) when there is 3% inflation is a 0% real return "
I think that I covered that by adjusting the received benefits by the COLA. Maybe not. I dunno--my mind starts to swirl when trying to think about how to properly account for inflation & COLAs. I don't want to double count something. I think (but I might be wrong) that increasing the received benefits by the COLA while subtracting it from the return is double counting.
At any rate, you can make whichever assumption you want in my spreadsheet. If you think 6% nominal is 3% actual, then plug in 3% for the return instead of 6%.

Of course, if you want to debate about a spreadsheet that you haven't bothered to look at, then we have nothing to discuss.

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a 10% return ... yes it is unrealistic, what retiree do you think will have their ENTIRE porfolio invested in stocks until they die
Hmmm. The thrust of the argument now has switched from comparing the alternatives in pure financial terms to how you think retirees would choose to invest their portfolio.
A 10% (average) return IS realistic, because IN FACT that's what the historical S&P500 average is in the real world. Whether or not retirees would chose to invest in the S&P has no bearing on the matter.

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Old 02-19-2011, 09:55 AM   #103
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"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). "

A BE analysis is only a tool. It doesn't provide the answer to the question "When should I take SS". It provides a set of figures of the various alternatives and allows someone to decide which alternative he prefers.

A break-even spreadsheet is just another way to compute the Present Value of the SS benefits. Net present value - Wikipedia, the free encyclopedia
They'll both tell you the same thing, they just arrive at the answer in different ways.

A BE spreadsheet is more useful to most people (IMHO) because it shows the year-by-year comparison of the different ages (62 vs. 66 vs. 70). You can look at it and see for yourself the years when one is better than the other and by how much. Then you can plug in your own estimates for returns, COLAs, and look to see where is the cross-over point in comparison to your own estimate for your life expectancy.

--------------
Okay dude, I finally have to say this:
Your bad grammar and bad spelling really detract from the weight of your argument. Presentation is important, because it shapes how people think of your accuracy.
People will say to themselves, "This person doesn't write properly, doesn't capitalize sentences, has a lot of spelling errors--even spelling errors in words in the topic of discussion ("retireing"). How confident am I that he isn't just as sloppy and erroneous in his arguments and calculations? Do I want to place my retirement in the hands of a person who can't even write properly?"
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Old 02-19-2011, 10:56 AM   #104
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Only if they take those socks off my feet (e.g. taxes)
I rest my case.
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Old 02-19-2011, 10:57 AM   #105
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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.
My suggestion would be to put me on your ignore list, which I have already done for you....dude.
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Old 02-19-2011, 04:10 PM   #106
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Looking at all these discussions about when to take Social Security, it seems that the most important factor has been left out. My family considers the timing on taking social security will be a tool to reduce volatility in our portfolio. We're both 53 now and hope to have $1.5 million before we retire early at the age of 56. This amount of money isn't really enough to live off of, so we have to depend on Social Security. If we had 2X this much money, we really wouldn't care about social security. If we have a lot less, we'll take it early @ 62. However, if we are successful, we'll see 5 - 10% growth rates in our portfolio, with a supposed average growth of 7.5%. We can withdraw 4% during the years where the returns on this portfolio are good enough without needing SS. If we encounter a downturn, like the great recession of 2008, we'll stop taking anything out of our portfolio and immediately start taking SS. So, we effectively will use SS to reduce volatility in our Portfolio by switching to SS whenever that downturn occurs. If the downturn occurs when we're 69 years old, we'll get more from SS, which we will need at that time. If the downturn occurs when we are 63, we'll need it right away, giving our portfolio a chance to heal. I intend to do simulations of all this a bit later, but I expect those will confirm that this strategy will be the best for stabilizing our income.
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Old 02-19-2011, 09:56 PM   #107
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i will start with the fact that you seemed to ignore my statement that the real value of SS is as longevity insurance.

Yes, I guess I did ignore it. It's arguably a valid way to look at SS, but I kinda ignored it because nobody thinks of SS in that way. Nobody. I've seen innumerable articles & papers discussing which age one should take SS, but have never seen even one article/paper about "SS is as longevity insurance".

The closest I've seen was the original paper about the SS Reset--and what it talked about was viewing the reset as an immediate SPIA.
just because you have not seen it doesnt mean "nobody thinks of SS in that way". it has been spoken of that way several times on this very board.
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then you ignore the fact that your income stream is only equal to the age 70 SS income stream for a period of time
Did the phrase "Break Even point" escape your understanding? Or the part where I discussed comparing the break-even point with the life expectancy?
neither of these escape my understanding but apparently the concept of not out living your money (which is a major concern on this board) escapes yours. and here i could exagerate (like you have) and say that nobody on this board uses the published life expectancy tables to determine how long they want their income to continue but instead i will say that most people on this board use a life expectancy far in excess of the published tables.
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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

Well this is annoying (for me) and embarassing (for you). nope, mine didnt have the error yours appears to have You built your own spreadsheet and proceeded to think that mine had the same flaws as yours--when mine has a whole section devoted to that exact topic-the COLA-increased amount of the age 70 SS benefit. ok, lets see how correct yours is. what would be the starting SS pmt at age 70 of someone who could collect from SS $1000/mo at age 62 assuming 3% annual inflation?

And neither of these spreadsheets factors in a high-probability scenario. To wit: that SS benefits may be cut to ~80% of the currently projected benefit. Won't that put a crimp in the plans of people who delayed in order to get a higher amount! (If it ever happens. It might not, but it is a high probability.)

----------------
"Would you call 3% return and 3% COLA realistic? a 3% return (nominal) when there is 3% inflation is a 0% real return "
I think that I covered that by adjusting the received benefits by the COLA. Maybe not. I dunno--my mind starts to swirl when trying to think about how to properly account for inflation & COLAs. I don't want to double count something. I think (but I might be wrong) that increasing the received benefits by the COLA while subtracting it from the return is double counting.
At any rate, you can make whichever assumption you want in my spreadsheet. If you think 6% nominal is 3% actual, then plug in 3% for the return instead of 6%.

Of course, if you want to debate about a spreadsheet that you haven't bothered to look at, then we have nothing to discuss.
the point i was trying to make was that when returns are quoted they are normally nominal returns which when taking inflation into consideration normally results in a lower real return.
--------------------------
a 10% return ... yes it is unrealistic, what retiree do you think will have their ENTIRE porfolio invested in stocks until they die
Hmmm. The thrust of the argument now has switched from comparing the alternatives in pure financial terms to how you think retirees would choose to invest their portfolio.
A 10% (average) return IS realistic, because IN FACT that's what the historical S&P500 average is in the real world. Whether or not retirees would chose to invest in the S&P has no bearing on the matter.
a 10% return is not realistic for a retired person. we are talking about retired people, didnt you know that? and of course who is doing the investing is valid to the topic of what is a realistic return. very high returns can be obtained in business and real estate that are totally inappropriate to use for retirees.
---------------------------
see my comments in blue above
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Old 02-19-2011, 10:09 PM   #108
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"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). "

A BE analysis is only a tool. It doesn't provide the answer to the question "When should I take SS". It provides a set of figures of the various alternatives and allows someone to decide which alternative he prefers.

A break-even spreadsheet is just another way to compute the Present Value of the SS benefits. Net present value - Wikipedia, the free encyclopedia
They'll both tell you the same thing, they just arrive at the answer in different ways.

A BE spreadsheet is more useful to most people (IMHO) because it shows the year-by-year comparison of the different ages (62 vs. 66 vs. 70). You can look at it and see for yourself the years when one is better than the other and by how much. Then you can plug in your own estimates for returns, COLAs, and look to see where is the cross-over point in comparison to your own estimate for your life expectancy.
well IMHO retirees (especially early ones) are more interested in stable lifetime incomes (i.e. having as good of a lifestyle as their money can buy them while not out living their money). i'll bet you are still working for a living.
--------------
Okay dude, I finally have to say this:
Your bad grammar and bad spelling really detract from the weight of your argument. Presentation is important, because it shapes how people think of your accuracy.
People will say to themselves, "This person doesn't write properly, doesn't capitalize sentences, has a lot of spelling errors--even spelling errors in words in the topic of discussion ("retireing"). How confident am I that he isn't just as sloppy and erroneous in his arguments and calculations? Do I want to place my retirement in the hands of a person who can't even write properly?"
resorting to personal attacks are you? well i am sorry that i lack typing skills but you must not be very confident in your argument to feel you have to attack the way my ideas are presented.
again, my comments are above, in blue (except the link isnt mine)
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Old 02-19-2011, 10:42 PM   #109
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I commend the moderators. This takes patience.
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Old 02-20-2011, 10:56 PM   #110
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Old 02-21-2011, 08:41 AM   #111
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... We can withdraw 4% during the years where the returns on this portfolio are good enough without needing SS. If we encounter a downturn, like the great recession of 2008, we'll stop taking anything out of our portfolio and immediately start taking SS. So, we effectively will use SS to reduce volatility in our Portfolio by switching to SS whenever that downturn occurs.
This is an interesting idea.

I see a couple of problems, though. First, it doesn't actually reduce volatility in your portfolio. What it does is reduce the amount that you would have to withdraw from your portfolio once you start taking SS.

Second, it's a one-way street. Once you start taking SS you can't stop later when the market recovers. This isn't a fatal objection, though.

Third, of course, even if you retire at 56, you can't start taking SS until you turn 62. So you've got a 6 year period where this plan can't take effect.

All-in-all, this strikes me as a clever plan to dynamically decide when to start takling SS. For people who buy into the idea of delaying starting SS in order to get a higher monthly benefit, it's as good a plan as any.

Personally I don't agree with that idea, for the reasons I've already covered in this thread. The SSA itself says that the benefit payouts for all ages 62 thru 70 are actuarially identical.
===========================

Now, since dynamically delaying SS will not change your portfolio volatility, you might want to instead consider taking the SS at 62 and reduce your portfolio withdrawal by that amount.

Recall, the ratios for ages 62/66/70 in dollars is $750/$1000/$1320. (Assuming your FRA is 66 and your age 66 benefit would be $1000. Consult the SSA for your actual personal figures.)

If your need is $60,000/yr or $5000/mo, that's a 4% draw of a 1.5M portfolio.
If you take $750 SS and reduce your draw to $4250, that reduces your draw to 3.4%.

If you are really concerned about your portfolio survivability and stability of your withdrawals (which I am), take a look at the Guyton/Klinger rules for dynamically adjusting your withdrawals. http://schulmerichandassoc.homestead...l_Profiles.pdf
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Old 02-21-2011, 09:57 AM   #112
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re: "SS is as longevity insurance".
just because you have not seen it doesnt mean "nobody thinks of SS in that way". it has been spoken of that way several times on this very board.

On this board? Perhaps. Even quite possibly. I don't recall seeing any such discussions (except yours) but it could well be that there have been such discussions that I've missed seeing.

But in the general literature about SS? No. Never seen anything talking about SS in that way.
Don't see how it would make sense, either. SS is just an annuity with a COLA. Like any annuity, it pays a monthly benefit as long as you are alive.

-------------------

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

Well this is annoying (for me) and embarassing (for you). nope, mine didnt have the error yours appears to have

If there are errors in my spreadsheet I want to know so I can correct them. I would be happy for you to look at it an point out any errors. But just saying "the error yours appears to have" isn't any help. What that implies is that you haven't actually looked at it, but just assume there are errors.

(BTW, I did find an error after reading Zero's comments. Found it and fixed it.)

-------------------
ok, lets see how correct yours is. what would be the starting SS pmt at age 70 of someone who could collect from SS $1000/mo at age 62 assuming 3% annual inflation?

Well, that's simply a matter of math. I use $1000 at FRA (age 66) as the base for all my calculations. SSA says $1000 at 66 or 750 at 62 or 1320 at 70. (They appear to always use present dollars---but nowhere do they say so.)

So...at 62 one could take 750 now or wait 8 years and take 1320 (in present dollars). But by the time he hit 70 there would have been 8 years of compounded 3% COLAs, which would be $1672 (1320*(1+.03)^8).

Of course, we must not forget that the 750 would have also grown by the same factor, so when he actually hits 70 his benefit would be $950 if he'd started at 62.
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the point i was trying to make was that when returns are quoted they are normally nominal returns which when taking inflation into consideration normally results in a lower real return.
Agreed. But the figures in the spreadsheet are actual dollar amounts---the amount that would be printed on your bank account statement.
If you deposit $100 and earn 3%, your bank says you have $103. If inflation was 3% you still have $103 even though you have not gained any purchasing power.
It would be an error to adjust the nominal return downward by inflation, because that would say that your savings account balance would be $100--when it is actually $103.

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a 10% return is not realistic for a retired person. we are talking about retired people, didnt you know that?

Okay, I grant that 10% is too optimistic for a retiree to depend on. The volatility of being 100% equities is the killer. How about a 50/50 weighting? 50% S&P returning 10% and 50% bonds returning 3.8%. That's a weighted return of 6.9% and much reduced volatility.

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i'll bet you are still working for a living.
You would be wrong.

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resorting to personal attacks are you?
Not at all. What I said was "bad grammar and bad spelling really detract from the weight of your argument. Presentation is important, because it shapes how people think of your accuracy."

That's not a personal attack. Calling somebody stupid is a personal attack. Pointing out something that detracts from the weight of their argument isn't a personal attack.

What I'm trying to do is to HELP you make a more convincing argument.

----------
Eh, whatever. It's been interesting.

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Old 02-21-2011, 11:13 AM   #113
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Question on the break even calculator. Does the calculator take into account that the benefit rises 6.25% from age 63 to age 66 & 8% from age 67 to age 70%? I guess that I'm making the argument that that you are making a 6.25% return on your social security from age 63 to 66 & 8% from age 67 to age 70. Obviously from 1982 to 1989 & 1991 to 1999 it would have benefited one to take the benefit early & invest it in the S&P500. 1969 to 1977 or 2000 to 2010 would be a different story.
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Old 02-21-2011, 01:22 PM   #114
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re: "SS is as longevity insurance".
just because you have not seen it doesnt mean "nobody thinks of SS in that way". it has been spoken of that way several times on this very board.

On this board? Perhaps. Even quite possibly. I don't recall seeing any such discussions (except yours) but it could well be that there have been such discussions that I've missed seeing.
when should you take social security article

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 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 02-21-2011, 01:34 PM   #115
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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.
You speak of age 70 1/2. Is this a recent change to begin in the future? As far as I know, the current age for maximum benefits is 70.

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Old 02-21-2011, 04:15 PM   #116
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re: "SS is as longevity insurance".
Just for the record, I think of SS as longevity insurance.
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Old 02-21-2011, 04:44 PM   #117
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You speak of age 70 1/2. Is this a recent change to begin in the future? As far as I know, the current age for maximum benefits is 70.

Ha
D'oh. Yeah. 70. I had the pesky IRA rules rattling around the vacuum between my ears. 59 1/2 to start, 70 1/2 for forced withdrawals.
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Old 02-21-2011, 06:04 PM   #118
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The moderator team agrees that this thread has outlived its usefulness. Our thanks to those folks who contributed constructive, considerate, and interesting posts.

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