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Re: Delay Pension and/or Social Security
Old 01-23-2007, 09:28 AM   #21
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Re: Delay Pension and/or Social Security

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Originally Posted by MasterBlaster
So what's the conclusion ?

Do we have an optimal SS start age that maximizes your spendible income whilst you are alive ?

Does anyone have a link to someone who has analyzed this issue formally ?
Well, it seems like nothing is lost (other than the hassle factor) by taking it at 62, since that appears to be a free option, which eliminates the "die before 70" scenario. Then one can reassess the situation at age 70 to see if he/she wants the SS annuity.

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Re: Delay Pension and/or Social Security
Old 01-23-2007, 09:39 AM   #22
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Re: Delay Pension and/or Social Security

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Originally Posted by FIRE'd@51
Well, it seems like nothing is lost (other than the hassle factor) by taking it at 62, since that appears to be a free option, which eliminates the "die before 70" scenario. Then one can reassess the situation at age 70 to see if he/she wants the SS annuity.
Well that is true but it's kind of sidestepping the issue. Somewhere along the line one must make a decision.

I guess the question becomes... If I were to die early is it worse to not have taken SS early or is it worse to die without having spent down my nestegg.

Still I'd like to see a formal analysis of the SS and pension withdrawal scenario.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 09:42 AM   #23
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Re: Delay Pension and/or Social Security

Thanks cut throat .You just gave me something to think about. I would like to limit the amount I leave .This might do it .I'll have to run the numbers .
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 09:46 AM   #24
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Re: Delay Pension and/or Social Security

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Originally Posted by Cute Fuzzy Bunny
You should re-run the firecalc runs, and then tell me what you put in where, because i've done the SS early and SS late factors a bunch of times and the spend early benefit lies with taking SS early.
I've had similar results. I think it's due to the amount of total nest egg to the amount you will withdraw. No really, it makes a difference. A smaller portfolio is impacted more by the extra withdrawals needed to replace SS for the number of years you delay. In my case it's even worse because my pension is cut by a percentage of what I receive from SS so my withdrawals are even higher.

When I ran Firecalc the survivable rate was OK with either early or late SS but when I added the additional money to spend while I'm young the "take it early" (SS) scenario won out.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 09:56 AM   #25
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Re: Delay Pension and/or Social Security

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Originally Posted by MasterBlaster
I guess the question becomes... If I were to die early is it worse to not have taken SS early or is it worse to die without having spent down my nestegg.
Why couldn't you do both, since you have the option of repaying SS if you need the annuity at age 70? If you delay SS and die before 70 you lose the SS forever. At least what's left of your nest egg can still go to charity or your heirs?
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:07 AM   #26
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Re: Delay Pension and/or Social Security

Cut-Throat, thanks. You've given me a fundamentally different way to look at the question of when to start SS. It will be interesting to run the numbers and see what happens.

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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:16 AM   #27
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Re: Delay Pension and/or Social Security

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Originally Posted by MasterBlaster
I guess the question becomes... If I were to die early is it worse to not have taken SS early or is it worse to die without having spent down my nestegg.
I sincerely hope that this question will not cross my mind as I approach the great Divide.

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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:18 AM   #28
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Re: Delay Pension and/or Social Security

If someone is interested in this the Form is SSA Form 521 which is available at www.ssa.gov. I would be interested in knowing if anyone really follows through on this process.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:23 AM   #29
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Re: Delay Pension and/or Social Security

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Originally Posted by Cut-Throat
Yes, I'm going to delay. That way I can spend more while I'm young. If I'm dead and never get to collect it, who cares, I'm dead!

Read this thread.

http://early-retirement.org/forums/i...?topic=10189.0
This thread CT linked to is an excellent discussion. I thought about moving it to the best of threads. Thoughts?
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:25 AM   #30
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Re: Delay Pension and/or Social Security

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Originally Posted by FIRE'd@51
Why couldn't you do both, since you have the option of repaying SS if you need the annuity at age 70? If you delay SS and die before 70 you lose the SS forever. At least what's left of your nest egg can still go to charity or your heirs?
Do both ?

If you spend down the nestegg, then exactly what are you going to payback SS with ?



Martha: The linked thread gets my vote for a best of thread
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:33 AM   #31
 
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Re: Delay Pension and/or Social Security

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Originally Posted by Martha
This thread CT linked to is an excellent discussion. I thought about moving it to the best of threads. Thoughts?
Good idea, it took me awhile to find it!
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:52 AM   #32
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Re: Delay Pension and/or Social Security

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Originally Posted by MasterBlaster
Do both ?

If you spend down the nestegg, then exactly what are you going to payback SS with ?
I was assuming that a prudent person would spend down the nest egg and invest the SS (or vice-versa, or some combination of each), to preserve the option of repaying the SS.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 10:54 AM   #33
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Re: Delay Pension and/or Social Security

Well it appears i will be up against this little problem this August as the big 62nd birthday arrives in late July...wife is 3yrs younger, a RN and hates her job, but has great wages, (only works part time) & health insurance and would be able to carry me till I reach age 65 for medicare. AT that point she will be 62, could quit and we would just buy some health insurance for her....Thus I am leaning towards taking SS at age 62, and banking as much as possible. My concern is taxes, as I'm also working part time till Aug. and we will exceed the 32k per yr earnings for SS being taxed...not sure which is the best avenue of these two to take... draw starting August 1, 2007 ,or wait til Jan 1 2008...your thoughts....
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 11:01 AM   #34
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Re: Delay Pension and/or Social Security

Again, taxes matter and IRA income is taxed at a much higher marginal rate...SS is treated much more favorably than IRA income when you look at the formula that determines the taxation of SS. Here is an example...Pension of $20,000 and each spouse worked and can take $12,000 each of SS at 62 or 76% more ($21,120) at age 70...Couple taking SS early takes IRA income in the amount of $18,240 to make up for delayed SS foregone...Same pre-tax income of $62,240 for both, but taxable income is half ($24,560 vs. $49,544) for couple that delayed SS.

The differences become more pronounced at the death of the first spouse as widow is taxed at lower amounts..Sunset provisions will also kick in higher tax rates in 2010..Everyone's situationis different, but there can be tax advantages for some.

Couple One - Starts SS Early
Pension Income $20,000
Primary Social Security $12,000
Spousal Social Security $12,000
Total Social Security $24,000

IRA yearly withdrawal $18,240
Total Income (before Tax, excluding Non-Taxable) $62,240
Combined Income $50,240
50% Excess over 1st Thres. + 35% Excess over 2nd $11,304
85% of Benefits $20,400
50% of Benefits + 85% Excess over 2nd Threshold $17,304
Adjusted Taxable Gross Income $49,544

Couple Two - Delays SS
Pension Income $20,000
Primary Social Security $21,120
Spousal Social Security $21,120
Total Social Security $42,240
Other Temporary Income $0

IRA yearly withdrawal $0
Total Income (before Tax, excluding Non-Taxable) $62,240
Combined Income $41,120
50% Excess over 1st Thres. + 35% Excess over 2nd $4,560
85% of Benefits $35,904
50% of Benefits + 85% Excess over 2nd Threshold $21,120
Adjusted Taxable Gross Income $24,560
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 11:03 AM   #35
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by FIRE'd@51
I was assuming that a prudent person would spend down the nest egg and invest the SS (or vice-versa, or some combination of each), to preserve the option of repaying the SS.
If I have read the related posts correctly, You will need to generate a rate of return on your SS investments of around 9.5% or greater to match the delay strategy.

It gets tougher if you have other income above the SS income threshold for taxation. They will tax around half (give or take) of your SS payment (federal and state) if you have other income above the income threshold. In this case it gets really hard to justify taking SS at 62. Remember for every dollar of income over the income threshold you pay federal and state income taxes on that dollar. And then you get to pay an additional federal and state taxes on 50-85 % of that dollar (depending on your income level) because that dollar has made a SS dollar become now taxible. The net tax rate on those dollars over the threshold can be a tax rate over 50 percent (total federal and state).
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 11:16 AM   #36
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by MasterBlaster
If I have read the related posts correctly, You will need to generate a rate of return on your SS investments of around 9.5% or greater to match the delay strategy.
OAG said in his post that you only had to repay the dollar amount of the SS you collected (no interest). So you could stuff the SS under the mattress, and have enough to repay.

Quote:
Originally Posted by MasterBlaster
It gets tougher if you have other income above the SS income threshold for taxation. They will tax around half (give or take) of your SS payment (federal and state) if you have other income above the income threshold. In this case it gets really hard to justify taking SS at 62. Remember for every dollar of income over the income threshold you pay federal and state income taxes on that dollar. And then you get to pay an additional federal and state taxes on 50-85 % of that dollar (depending on your income level) because that dollar has made a SS dollar become now taxible. The net tax rate on those dollars over the threshold can be a tax rate over 50 percent (total federal and state).
I admit the tax situation makes the problem much harder to analyze. So you may well be right that for certain individuals (depending upon their tax situation) the option to repay the SS is not "free".
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 11:19 AM   #37
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Bikerdude
I've had similar results. I think it's due to the amount of total nest egg to the amount you will withdraw. No really, it makes a difference. A smaller portfolio is impacted more by the extra withdrawals needed to replace SS for the number of years you delay. In my case it's even worse because my pension is cut by a percentage of what I receive from SS so my withdrawals are even higher.

When I ran Firecalc the survivable rate was OK with either early or late SS but when I added the additional money to spend while I'm young the "take it early" (SS) scenario won out.
I think one option is to plan to take SS at 62 since it allows higher WR. Then every year after one reaches 62 till 70, evaluate the situation with your nest egg, tax law, surviver benefits, and other factors.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 11:24 AM   #38
 
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Re: Delay Pension and/or Social Security

New thinking got me thinking about the tax situation after age 70 as well. This did not dawn on me either!

The tax advantages I was thinking about were before age 70. The ability to draw down your IRA with less income (from not taking SS). You would be in a lower tax bracket from age 62-70 and would be paying less taxes on withdrawals. With no income except from investments, it would allow you to shift money from your IRA into a taxable account (some maybe even tax free!)
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 11:39 AM   #39
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Re: Delay Pension and/or Social Security

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Originally Posted by Cut-Throat
Regarding FireCalc. Remember this is a worst case historical planner.

I am hoping not to leave anything to heirs BTW. - If you are planning on leaving a pile to your heirs, I would suggest taking the SS early.
Be that as it may, i'm still curious as to how we both used the same tool and received very different results. When I used firecalc to do this calc, my result was a higher spending rate throughout my lifetime, starting right now when taking SS early (or injecting ANY income stream at any time) and a lower spending rate throughout my lifetime when taking the income stream later.

I heard some speculation that it might be portfolio size or equities percentage used so I did some re-runs and except for borderline high-failure-rate smaller ports I got the same results.

Aside from that, the chief difference maker for me, as mentioned, is using the SS income to defer withdrawals from my Roth and then my regular IRA. I dont see a lot of discussion around the benefits of deferring the Roth withdrawal (although I know Nords gets it) but then again many people may not have a Roth...which is a terrible shame.

I'm not planning on leaving a pile to my son, but if it works out that way, I wont be disappointed.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 02:36 PM   #40
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Re: Delay Pension and/or Social Security

CFB - I think a lot of people put the incorrect amounts into FireCalc..Not saying that you did, but many do not account for COLAs that occur between the ages being projected. In other words, the amount you plug in at age 66 and the amount you plug in at age 70 have grown by the COLA rates during the "delay" period. The SS statements that come lead people down the wrong path because they all are in today's dollars..FireCalc is not in today's dollars.
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