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Re: Delay Pension and/or Social Security
Old 01-23-2007, 02:58 PM   #41
 
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Re: Delay Pension and/or Social Security

Also, I think FireCalc is the wrong tool for anaylizing this type of problem. We are talking about an 8 year span, which you can make the decision at age 62 and change it at age 63.

I don't have to use FireCalc to prove that this is the right decision for me! - I can use a simple spreadsheet, look at the 8 year period with my SS numbers and portfoilo.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 04:06 PM   #42
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Re: Delay Pension and/or Social Security

All great answers and I WAS on the early 62 SS gig but need to rethink this out some. Now Tom makes a lot of sence..

"If you investments are down, take the SS to prevent drawing down your
savings, if up and you don't need it then why take it, postpone taking SS.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 04:38 PM   #43
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Re: Delay Pension and/or Social Security

I probably should point out something missing from the last couple of discussions...that the SSA lays out the numbers such that on average, you'll get paid the same regardless of whether you take it early or late. If you live longer than the mortality tables suggest, you'll get more. Otherwise you'll get the same or less regardless of when you take it...on average!

Quote:
Originally Posted by New Thinking
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.
No, i'm pretty sure I did the calcs correctly and had social security numbers correct. I and several other pretty competent numbers people did the runs a number of times. Its the nature of the beast; its finding sequences when you ran out of money. Most of the failures are barely failures, so injecting an income stream at some point always improves the # of failed sequences. Injecting a smaller income earlier will almost always give you better results than a larger amount later...in this case it eliminates minor failures for an additional 8 years.

Either CT did something funny in his run, or me and a few dozen other people all screwed it up the same way; this has been gone over to death in not just the SS discussions, but in a number of other scenario evaluations involving incorporation of an income stream, such as a pension, annuities, part time jobs, etc.

Quote:
Originally Posted by Cut-Throat
Also, I think FireCalc is the wrong tool for anaylizing this type of problem. We are talking about an 8 year span, which you can make the decision at age 62 and change it at age 63.

I don't have to use FireCalc to prove that this is the right decision for me! - I can use a simple spreadsheet, look at the 8 year period with my SS numbers and portfoilo.
CT, its your decision to make, but you're picking the tools and parameters that give you the answer you want, IMO. As with any of these decisions, while its easy to stick it in a fishbowl or limit the time period or what aspects of your financial picture you want to consider, you're not getting a full analysis.

IIRC you dont have a Roth, while many ER's might...and the interaction between that and the start date of social security is a big deal...and Firecalc wont do that calc but ORP will. For me in my plan, theres over a $100k benefit to delaying tapping my roth by taking SS at 62. That means I can spend that much extra over the next 20 years from my taxable port. Thats enough to send my kid to college fer cryin out loud.

Waiting until 62 to get the answer might also be counter productive...since we're both agreeing that the influence of SS increases spending in the years leading up to when you start taking it. I think your standpoint is that you can really spend away before 70 knowing you'll have a much larger monthly check to fall back on while mine is to spend a bit more every year for the next 20 years and inject the income stream at 62.

That having been said, all this is posturing and presuming...I dont count social security, pensions or anything other than the hard assets in my plans, and I cant spend the dividends and interest i'm receiving or think of anything I'd like to blow money on that i'm not buying already. If our social security, my wifes pension, my newly discovered miniature DEC pension and all the rest actually materializes it'll be a nice chunk of change. We'll definitely find a way to spend it.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 07:34 PM   #44
 
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Re: Delay Pension and/or Social Security

CFB,

This delay or take SS thing is a decision that you can re-visit every year from age 62-70, so you don't have to know the 'right' answer ahead of time.

But don't make this too complicated just follow me on this:

1.) Say for instance you get $16K at age 62 and $29K at age 70. That is $13K a year more at age 70 correct?

2.) If you were to advise someone at age 70 that wanted to 'withdraw' $13K a year from his portfoilo safely, would 25 times that amount be prudent? Or $325K should do the trick. Correct?

3.) The person that took $16K at age 62 would receive $128K before age 70. Their challenge to be in the same financial shape as the guy delayed it to age 70 would be to turn that $128K into $325K by age 70. What investment would you recommend to him? I know I'd be hardpressed to find a guarenteed method to equal that $325K!

So, what part of this don't you agree with?

This does not even factor in the spousal benefits, tax advantages, less exposure to the stock market in later years, and the fact that the guy that took ss earlier does not have $128k to invest from the get go, but it is paid out to him over the course of 8 years.
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Re: Delay Pension and/or Social Security
Old 01-23-2007, 07:54 PM   #45
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
Follow me on this:
C-T:

Makes sense to me (maybe because I was planning on delaying till 66, anyway ).

Now I have an explanation I can give to others (when they ask me "why delay")...

- Ron
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 09:35 AM   #46
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
CFB,


1.) Say for instance you get $16K at age 62 and $29K at age 70. That is $13K a year more at age 70 correct?

Just curious as to how you input this to FireCalc? Do you use current dollars for both? I'm having a hard time getting good results and am wondering what I'm doing wrong.

I input the current dollar figures from SS for both 62 and 70 and assume FireCalc adds inflation (but not wage inflation). Is that how you do it. When and how do you add the extra money your going to spend early? I've run it on a spread sheet and the early SS has better results.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 10:38 AM   #47
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Bikerdude
Just curious as to how you input this to FireCalc? Do you use current dollars for both? I'm having a hard time getting good results and am wondering what I'm doing wrong.

I input the current dollar figures from SS for both 62 and 70 and assume FireCalc adds inflation (but not wage inflation). Is that how you do it. When and how do you add the extra money your going to spend early? I've run it on a spread sheet and the early SS has better results.
I think FireCalc is the wrong tool for this analysis. Don't make it too complicated!
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 10:48 AM   #48
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Re: Delay Pension and/or Social Security

As an aside... no FIRECALC involved...

16k/yr * 25 = 400k
29k/yr * 25 = 725k

So, to get from 400k at year 62, to 725k at year 70, you'd need a 7.7% return, no? ...and a greater return if you were making withdrawals.

Interest-free rate, it would take you until year 79 to break even.

16k from 62 to 79 is $288k.
29k from 70 to 79 is $290k.

Add interest, inflation, etc., and I would think the results would be similar within a couple years. Now add pensions, taxes, etc. Maybe things get fuzzier, but I think that, overall, C-T is correct assuming a person lives past 79.

This topic was partially discussed in another thread (Topic 10905 - 'Retire More Than Planned').

-CC

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Re: Delay Pension and/or Social Security
Old 01-24-2007, 11:08 AM   #49
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by CCdaCE
Interest-free rate, it would take you until year 79 to break even.
I no longer think of this as a 'break even' type of problem. I now think of it as you get to spend more money in your 60's by delaying SS. IOW - you are not worried about hoarding the pile, because you know you've got a bigger COLA check coming at age 70.

So even if you die in your early 70's and 'don't break even' you are better off, because you got to spend more! This was the realization that clinched it for me!

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Re: Delay Pension and/or Social Security
Old 01-24-2007, 11:16 AM   #50
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
I no longer think of this as a 'break even' type of problem. I now think of it as you get to spend more money in your 60's by delaying SS. IOW - you are not worried about hoarding the pile, because you know you've got a bigger COLA check coming at age 70.

So even if you die in your early 70's and 'don't break even' you are better off, because you got to spend more! This was the realization that clinched it for me!
... assuming you have no heirs for whom you are trying to polish or at least guard the nest egg.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 11:32 AM   #51
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Rich_in_Tampa
... assuming you have no heirs for whom you are trying to polish or at least guard the nest egg.
Absolutely! - then take it at 62!
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 11:35 AM   #52
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Re: Delay Pension and/or Social Security

First I have to say I have just been a lurker here. I am currently 60. Starting SS early or late has been a question in the back of my mind for awhile. Can someone give me the compressed facts of early versus late? Penalty to start early while still earning. My situation is: Although I am in good health currently, I suffered a massive heart attack 7 years ago and was clinically dead for a short period. I don't expect a long and prosperous life. I have worked my entire life, I expect to retire at some point with a modest state pension, social security, and a modest payback from a deferred compensation plan. I was married 36 years to the same woman and raised six children. All those years of private schools, medical school, etc, kept me pretty much broke. I am not in the situation most of you are. My ex wife decided after the kids were grown and gone to go a different direction. As I knew I was expecting a dimished life expectancy I gave her everything to give her the opportunity for a decent retirement. I had a very good 401K and some stocks at the time. I felt that was better than giving her half of everything and betting I would live to provide spousal support. Clean break, I started over. I am now remarried and doing fine. My new wife gets a military retirement. She is five years younger than me and will probably draw against her ex's SS at some point, as she will start drawing SS before we have our 10th anniversary. Although I am active, work out everyday, and all conditions are under control, I suffered a lot of damage to my heart and will feel lucky if I actually get to retire. Both my parents died at age 66 from heart attacks. Anyone have some simple suggestions about my SS situation?
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 11:58 AM   #53
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
you don't have to know the 'right' answer ahead of time.
Asked and answered...several times. The introduction of an income stream in your 60's can affect your withdrawal rate right now, in your 40's or 50's. In my case it creates a 2-5k positive withdrawal amount starting at 45. Were I to wait until 62 and then see what I wanted to do, I couldnt safely increase my withdrawal by that amount now. ESRBob has extensively poked at this idea, only his perspective is in the form of having a small income stream on and off throughout retirement. The social security piece is simply another form of income with a variable arrival date.

Quote:
1.) Say for instance you get $16K at age 62 and $29K at age 70. That is $13K a year more at age 70 correct?
Yep, you'll get more but on average by the time you die you'll have received the same total amount, just larger chunks later in life. You will be, on average, 81 before you reach parity. Most people, according to mortality tables, will be dead by then. As I mentioned, SSA specifically sets these rates to pay, on average, exactly the same amount for the lifespan of the average person regardless of when you take the payments.

This chart shows the payment/benefit/age curve, with the funds received uninvested, as a simple function of breakeven, excluding all other factors. Break even is at 81.

"Actuarially determined life expectancies suggest that for all but low investment returns, it is better over a lifetime to take early Social Security benefits and use these benefits to defer drawing down retirement savings."

See: http://www.nysscpa.org/cpajournal/20...ges/ex1p43.pdf

Quote:
2.) If you were to advise someone at age 70 that wanted to 'withdraw' $13K a year from his portfoilo safely, would 25 times that amount be prudent? Or $325K should do the trick. Correct?
I'm afraid I dont understand the question. Where are these numbers coming from and why are they relevant?

Quote:
3.) The person that took $16K at age 62 would receive $128K before age 70. Their challenge to be in the same financial shape as the guy delayed it to age 70 would be to turn that $128K into $325K by age 70. What investment would you recommend to him? I know I'd be hardpressed to find a guarenteed method to equal that $325K!
Again, i'm afraid you need to explain the question. I'm having a hard time figuring out where these numbers come from or why this is relevant or applicable.

Quote:
So, what part of this don't you agree with?
For you without a Roth, an indefinite spousal income and a high portfolio value, I dont necessarily disagree with a decision to delay. In fact, it almost completely doesnt matter.

For someone with a Roth, no income stream and a moderate portfolio value, not deferring social security can have positive beneficial effects on todays withdrawal rates, can assure that you get a maximum payout (unless you think you'll live into your 90's), and will assure a weighting of those benefits in your 60's and 70's instead of your 80's and 90's...when you might either be dead or not interested very much in spending a lot of money.

Quote:
This does not even factor in the spousal benefits, tax advantages, less exposure to the stock market in later years, and the fact that the guy that took ss earlier does not have $128k to invest from the get go, but it is paid out to him over the course of 8 years.
You're absolutely correct. You're leaving out a lot of factors that could sway the decision either way. And I most surely have a lump of cash to invest from the get-go...the residual portfolio that I dont need to draw as much from for eight years because I have an alternate income source.

Quote:
Originally Posted by Cut-Throat
I think FireCalc is the wrong tool for this analysis. Don't make it too complicated!
I disagree. Figuring out my Schedule D is pretty complicated and I'd rather just skip it, but its rather essential to completing my tax return.

While it may not be the optimal tool for ANYTHING, Firecalc is a decent lifetime modeling tool that helps determine the effects of all the decisions you make in life, providing you're realistic about the information provided. I'd suggest running the same calculations with ORP or some other similar lifecycle financial tool.

What you're doing IMO is putting this decision in a fishbowl, limiting the factors that would make it a fully formed decision, and then backfitting the results to suit a decision that I think you already made.

Which by the way, for you and a couple of other folks on this board is perfectly suitable.

Just probably not the majority of them.

In BOTH the early and late scenarios, you do in fact get to spend more. In the former, you get to spend more because the income stream arriving early will bail out any low portfolio balance scenarios by reducing portfolio reductions late in the cycle, making your higher early withdrawals "safer". In the latter, you can spend like a drunken sailor because if you fault the portfolio, a check shows up when you're 70 and saves your late-life financial bacon.

I think if you're sitting at home thinking "gosh, I hate this safe withdrawal rate, cuz if I had more money available I'd buy xxx and do yyy but I cant", you should model and consider both alternatives as a total financial picture through the length of your expected life span.

See this document (which we've discussed ad nauseum before) for a really fully fleshed set of thoughts on the subject, written by a professor of accounting and taxation. Not by someone trying to sell a financial product or who has any vested interest in when you take your benefits.

http://www.nysscpa.org/cpajournal/20...ntials/p42.htm

Specifically:

- At an 8% return on the retirees total portfolio, the retiree would have to live to 106 to make a late social security benefit become financially advantageous
- At a 5% return the payback for taking SS late is 89
- At a 2% return the payback is after 83. Note that current life expectancy is in the early 80's.

As is the case with these sorts of discussions where the decision is already rendered and the data is no longer relevant and its turned into multi-part quotes and responses, many of which are already asked and answered in previous unread postings, I suspect not a lot of people even read this far.

If you did, my standard advice is still to look at major decisions like taking on debt, realistic cost of living changes, and when you'll bring income streams to bear on your financial picture all be done as a part of your total financial plan with a term of at least 20-30 years.

Lastly, I would also issue another point I made previously. Most of the more verbose posters here enjoy a particular financial picture that is extremely rare and unlikely to be applicable to the very vast majority of retirees...early or otherwise. Most of them work part time and/or have working spouses. Most of them have portfolios far larger than average. Many have COLA pensions or other sources of income on top of the working spouse and large portfolio. Lots have significant property carryover from their working days, like a high value home, cars and personal possessions.

As a group these aspects make us (cuz i'm one of them) able to take larger risks with our money or absurdly conservative ones. It also lets us make and implement some half baked decisions, simply because our position lets us make mistakes and recover from them. A lot of us have also benefited from the 90's bull market and/or some other piece of considerable luck that most will not enjoy. Most of us have also not had our 'plans' fully stand the test of a 40+ year retirement.

So I guess the short answer is to do the math yourself. And do all of it.

In your particular case CT, you're most welcome to email me your spreadsheet and tell me what your assumptions are in the numbers you've put in it. I'd be most pleased to look it over and tell you where you might have left something critical out or missed something. Chances are equally good its a fully formed and perfectly good idea for your relatively rare financial situation.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 12:16 PM   #54
 
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Re: Delay Pension and/or Social Security

Quote:
I'm afraid I dont understand the question. Where are these numbers coming from and why are they relevant?
Come on TH. You're smarter than that. Everyone else understood my simple example.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 12:19 PM   #55
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
I no longer think of this as a 'break even' type of problem. I now think of it as you get to spend more money in your 60's by delaying SS. IOW - you are not worried about hoarding the pile, because you know you've got a bigger COLA check coming at age 70.

So even if you die in your early 70's and 'don't break even' you are better off, because you got to spend more! This was the realization that clinched it for me!
C'mon. If you die in your early 70's you should've taken SS at 62. Then you'd get to spend the 16 k/yr vs. not spending 29 k/yr.

Hah!

-CC
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 12:33 PM   #56
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
Come on TH. You're smarter than that. Everyone else understood my simple example.
Oh I understood it. It just doesnt make a lot of sense unless you suspend an awful lot of context and reduce this to a formula that produces the result you were looking for.

Like I said, be glad to look at your spreadsheet. Send it over if you feel like it.

I think it'd be five minutes well spent for everyone else to read the article I pointed to and run their own scenarios.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 12:34 PM   #57
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cute Fuzzy Bunny
Most of the more verbose posters here enjoy a particular financial picture that is extremely rare and unlikely to be applicable to the very vast majority of retirees...early or otherwise.
So, that's my problem. I need to become more verbose (and therefore improve my financial picture).

Hah!

Smartass aside. I think you're both right. C-T is correct as far as taking SS at 70 has a higher expected payoff, provided you live long enough to collect, and therefore you can spend what SS is worth as a portfolio -- you can spend it earlier.

Outside of this, it's when you add in taxes, pensions, risk, working spouses, college-aged kids, lottery wins, and $2.73M homes...

That's the kind of financial modeling CFB is requesting.

-CC
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 12:39 PM   #58
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Re: Delay Pension and/or Social Security

With the Social Security Fund to run into the negative the prudent course as with any Ponzi scheme is to get your money out early. If the money is available it should be claimed I believe. If it is not needed it should be invested to grow over the 8 year time period. You will come out ahead if Social Security benefits are cut (and since the break-even point is 20 years away there is a darn good chance of that), if your investment returns exceed the built in SS assumptions or if you die before the break-even point, around age 81 as stated elsewhere here.

Also if you die in that 8 year period your heirs will be ahead. So by taking social security early you are actually thinking of others
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 12:47 PM   #59
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by CCdaCE
So, that's my problem. I need to become more verbose (and therefore improve my financial picture).

Hah!
You may have inverted the cause and effect in this particular situation.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 01:13 PM   #60
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
With the Social Security Fund to run into the negative the prudent course as with any Ponzi scheme is to get your money out early. If the money is available it should be claimed I believe. If it is not needed it should be invested to grow over the 8 year time period. You will come out ahead if Social Security benefits are cut (and since the break-even point is 20 years away there is a darn good chance of that), if your investment returns exceed the built in SS assumptions or if you die before the break-even point, around age 81 as stated elsewhere here.

Also if you die in that 8 year period your heirs will be ahead. So by taking social security early you are actually thinking of others
That's the real risk if I may so opine !

That is that they just may change the rules mid-stream. If you game the SS system for an optimal spending outcome it won't work if they change the rules. What if they institute a payment cap or only give everyone the same (low) payment. Or what if they have income caps where you don't get anything if you are rich - (rich = income above 30k/year ?).

I know CT believes that they won't change the rules, but I am not so sure. That is especially true when the SS and medicarte' deficit are measured in the trillions.

However if the rules stay as they are, my plan is to take it at 70.

Also, for what it's worth, the payment at 62 analysis that CFB and others refer to ignores the big tax hit of SS and 'extra' income. I beleive that when taxes are included that the optimal result for when to take SS (62 or 70) changes.

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