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Re: Delay Pension and/or Social Security
Old 01-24-2007, 01:35 PM   #61
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by MasterBlaster
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.
Oh, I think the rules are going to change, but I think it will change like it did in the early 80's. It probably won't change at all for people that are Greater than 45 years old. Then it will change a little bit for those 40-45, a little bit more from age 30-40 etc. etc. - This is the only way it is politically palatible. It will end up being a tax increase, raising or eliminating the cap, extending the retirement age and NO Private accounts!
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 01:38 PM   #62
 
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Re: Delay Pension and/or Social Security

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Originally Posted by CCdaCE
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
Actually Not! - If you die in your early 70's, and you did not receive a dime of social security, you could spend more of your portfoilo than taking it at age 62.

The only way you spend more by taking it at age 62, is if you knew you were going to die in your early 70's. Most of us don't know when we're going to die!
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 01:44 PM   #63
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Re: Delay Pension and/or Social Security

Actually the article I referred to does consider taxes in the equation and offers advice in that area.

Bear in mind that I'm stating my opinions with an actual retiree, presumably 'early', in mind, not someone still working at 62.

Also, most people with enough earned income to trigger major tax problems due to social security in their 60's are probably doing okay enough to not worry about the decision one way or the other.
Quote:
Originally Posted by Cut-Throat
The only way you spend more by taking it at age 62, is if you knew you were going to die in your early 70's. Most of us don't know when we're going to die!
Didnt read a thing I wrote, did you? It has nothing to do with knowing when you're going to die. By the way, its 81, plus or minus 10 years.

By knowing you have an income stream showing up at 62, you can increase your withdrawal rate throughout your life, even in your 40's and 50's.

The only difference in what we're proposing is that i'm incorporating it into a plan to increase withdrawals AND portfolio safety. You're proposing to throw portfolio safety out the window in exchange for the same higher withdrawals, using the higher @70 number as a safety net.

That'll suck if they do change the rules or exclude high income participants and the net gets pulled out from under you.

Probably not going to happen for someone your age. Plausible for someone like me thats ER'ed in their late 30's or early 40's.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:07 PM   #64
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cute Fuzzy Bunny

By knowing you have an income stream showing up at 62, you can increase your withdrawal rate throughout your life, even in your 40's and 50's.

The only difference in what we're proposing is that i'm incorporating it into a plan to increase withdrawals AND portfolio safety. You're proposing to throw portfolio safety out the window in exchange for the same higher withdrawals, using the higher @70 number as a safety net.
It seems to me that if you retire early and withdraw from your portfolio at a SWR rate that anticipates SS as a factor you are taking chances that a change in the game will occur whether you plan to start SS at 62 or 70. In fact if you have already started SS you could still face a change in the game plan in the future. Bottom line, if you require SS to make your SWR, your future is in hock to the Government.

I'm with CT on this one. Assume SS will be here (discount 25% if you are worried) and make your calculations based on what you want to achieve - e.g. highest relatively SWR at initiation, large left-over for the kids, or whatever.

As for the reliability of SS I have said it before and I will say it again, when you worry about what "they" will do, you are worrying about yourselves and your elected reps. If you have to depend on SS for ER you are probably among the "them" who will benefit. If you don't need SS for ER you are probably among the "us" that will be negatively affected by the changes. But what the hey, we can afford it -- just think of it as enforced giving and take satisfaction in helping "them."
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:26 PM   #65
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Re: Delay Pension and/or Social Security

CFB - Dr. Dalton's article that you sited in the CPA Journal has some mistakes. He admitted as much to me when I e-mailed him. He made the mistake I referred to in an earlier post by not upping the initial amounts at the later ages by the assumed COLA rates..This lowers the crossover age..Also, Dr. Dalton doesn't incorporate the true impact of taxation that I also mentioned above.

To others IMHO, crossover ages should include the discussion of both spouses dying since a higher benefit will be assumed by a surviving spouse.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:26 PM   #66
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cute Fuzzy Bunny

<snip>

By knowing you have an income stream showing up at 62, you can increase your withdrawal rate throughout your life, even in your 40's and 50's.

<snip>
Isn't C-T saying the same thing? He's just saying you can spend even more now since you're expecting you can fall back a higher SS payment at 70.

Quote:
Originally Posted by Cute Fuzzy Bunny
<snip>

The only difference in what we're proposing is that i'm incorporating it into a plan to increase withdrawals AND portfolio safety. You're proposing to throw portfolio safety out the window in exchange for the same higher withdrawals, using the higher @70 number as a safety net.

<snip>
I don't see how portfolio safety is being thrown out the window if SS payments at 70 vs. 62 are the same present value, or future value or whatever based on life expectency.

-CC
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:32 PM   #67
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Re: Delay Pension and/or Social Security

How about this, if you are an early retiree (<62yo) you plan your SWR based on comparing the FIRECalc results of taking SS at both ages, like CFB said. But just before you start taking SS @ 62 you do the analysis CT described and see if you could up your current WD rate amount at that time by delaying to 70. Actually if your goal is to spend as much as you safely can while you are alive, you should probably reanalyze several times between retirement and 62.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:51 PM   #68
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by donheff
I'm with CT on this one. Assume SS will be here (discount 25% if you are worried) and make your calculations based on what you want to achieve - e.g. highest relatively SWR at initiation, large left-over for the kids, or whatever.
You'd be in good shape if thats what CT actually is proposing.

He's proposing to spend at a higher than SWR rate that may have a reasonable chance at failure, and deferring his SS to 70 to act as a safety net in the event of a failure:

Quote:
Originally Posted by Cut-Throat
Actually I am counting on Overspending before age 70
I agree with you on what you said and the way you said it.

However, if one is fairly sure SS will appear, all the lifecycle calculators suggest that you could, if you needed or wanted to, spend more in early retirement by using the social security dollars to support your portfolio later in life. All the math i've seen suggests that the most effective, highest return, and least risky approach is to take it at 62.

So far CT has not shared with me his firecalc runs that produced differing results from what I did, nor his spreadsheet, so I cant comment on what he's done or how he's come to his conclusions, other than to say that they're contrary to my triple checked math, all the calculators i've tried, the vast majority of independent experts opinions, and the majority opinion of the other participants of this board.

Quote:
Isn't C-T saying the same thing? He's just saying you can spend even more now since you're expecting you can fall back a higher SS payment at 70.
No. I'm doing a model that increases withdrawal rate for the entire term of the life cycle without reducing portfolio safety or increasing failure rates, per both firecalc and orp. CT is suggesting a higher increase in spending and presuming the higher payments from SS at 70 will save his bacon if he runs out of money too early.

CT's opinion is that its a terrible thing to die with money left over, that most plans are too conservative, and that he has no plans or interest in leaving anything to heirs or other beneficiaries. I believe that this opinion has led him to pick out a scenario that lets him spend the way he'd like to, but feel okay about the risk component by excluding a fair amount of it.

While I agree with the sentiment, I think that its a terrible thing to find oneself penniless or relying solely on $24k a year in social security income to get by when one is in their 80's/90's. My wife is also depending on me to make the right decisions towards our financial future and I take that responsibility very seriously. That "big pile of money" leftover might in fact be well spent on an in-home nurse or some really nice long term care facility rather than some dumpy dirty room in a crappy nursing home. God forbid it comes to that.

As mentioned several times now, similar sentiments, different approaches, probably not a huge difference in early spending, big difference in risks.

This strategy may be appropriate for CT because of his unusual financial situation. Which is to say that unless you do your own math and comprehend the risks as they apply to you, I wouldnt readily mimic the strategy because it sounds good. Unless you have a strong 7 figure portfolio, a wife making six figures, and significant personal property. In which case spending the time we've spent discussing this over a measly 12k a year is a bit south of foolish.

Quote:
I don't see how portfolio safety is being thrown out the window if SS payments are the same present value, or future value or whatever based on life expectency.
I'm sorry if i'm a little impatient, but I answered this already...several times. To be fair, my last few posts were long, and so is this one.

The appearance of a small income stream earlier in a portfolio life cycle run is superior in safety to a larger income stream later in the run. SS income is not dependent on portfolio returns or market movements, so the income isolates the consumer to some degree from investment failures. The earlier the better, even if the amount is smaller. Just not TOO small. Failures dont usually occur due to one bad year but to many in a row. Having a smooth and reliable income blunts those multi year 'close' failures.

Quote:
CFB - Dr. Dalton's article that you sited in the CPA Journal has some mistakes. He admitted as much to me when I e-mailed him. He made the mistake I referred to in an earlier post by not upping the initial amounts at the later ages by the assumed COLA rates..This lowers the crossover age..Also, Dr. Dalton doesn't incorporate the true impact of taxation that I also mentioned above.
Oh dear, this is repetitive, year after year. I do believe that your intentions are good but the harping on nearly irrelevant points makes me wonder if you're just practicing the sales strategies for the social security gap annuities your company sells.

As we've discussed previously, he made a small error in the numbers he used and it affected the charts and ages where things come equal by a year or two or three. Absolutely nothing to swing a decision on. Does it really matter if someone earning a perfectly reasonable 40 year 8% return on investment breaks even at 106 or 103?

Quote:
To others IMHO, crossover ages should include the discussion of both spouses dying since a higher benefit will be assumed by a surviving spouse.
Absolutely true, and thats why its been mentioned a bunch of times in this thread.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:53 PM   #69
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by jdw_fire
How about this, if you are an early retiree (<62yo) you plan your SWR based on comparing the FIRECalc results of taking SS at both ages, like CFB said. But just before you start taking SS @ 62 you do the analysis CT described and see if you could up your current WD rate amount at that time by delaying to 70. Actually if your goal is to spend as much as you safely can while you are alive, you should probably reanalyze several times between retirement and 62.
A wise idea.

"reanalyze several times" is recommended to be "once every year or two".


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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:57 PM   #70
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Re: Delay Pension and/or Social Security

CFB. Thanks, truly, for all your explanation.

-CC

Edit: can't spell.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 02:59 PM   #71
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Re: Delay Pension and/or Social Security

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Originally Posted by New Thinking
Dr. Dalton's article that you sited in the CPA Journal has some mistakes. He admitted as much to me when I e-mailed him. He made the mistake I referred to in an earlier post by not upping the initial amounts at the later ages by the assumed COLA rates..This lowers the crossover age..Also, Dr. Dalton doesn't incorporate the true impact of taxation that I also mentioned above.
So... is a corrected version out yet?
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:03 PM   #72
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Re: Delay Pension and/or Social Security

Dalton did an "letters to the editor" response and noted that he intentionally left out some COLA aspects to the numbers, and that such changes could affect the results. Last year when we had the 9000 page long social security discussion, New Thinking brought up the issue and we recalculated the numbers with some presumptions on the different numbers. There was some drift but it didnt completely throw the numbers. Dalton has seen no need to adjust the article as running the numbers is a rather specific and personal thing; figuring out which numbers to run and what things you need to think about is the hard part. I think his article is fairly good at fleshing that out, the spouse survivor piece notwithstanding.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:04 PM   #73
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cute Fuzzy Bunny
I think his article is fairly good at fleshing that out, the spouse survivor piece notwithstanding.
Spouse is shaping up to have a higher earnings history than me anyway.

Like you said, highly individualized!
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:06 PM   #74
 
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Re: Delay Pension and/or Social Security

TH,

Not even close to what I said. Look at my simple example and quote that instead.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:08 PM   #75
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cute Fuzzy Bunny

While I agree with the sentiment, I think that its a terrible thing to find oneself penniless or relying solely on $24k a year in social security income to get by when one is in their 80's/90's. My wife is also depending on me to make the right decisions towards our financial future and I take that responsibility very seriously. That "big pile of money" leftover might in fact be well spent on an in-home nurse or some really nice long term care facility rather than some dumpy dirty room in a crappy nursing home. God forbid it comes to that.
You have missed the point somewhat if you believe that you have to spend down all of your nest-egg before turning 70. The point was that you could spend down some large amount of the nestegg (was it $345k ?) between 62 and 70 and have the same cash flow as taking SS at 62.

Nobody is suggesting that you deplete everything in the nestegg by 70 and rely on Uncle Sam for their wherewithall.

The concept was to carve that piece of the nestegg and spend it of which SS would make up the cash-flow for. This SS-delay concept is for someone with a nest-egg substantially larger than $345k to consider.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:10 PM   #76
 
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Re: Delay Pension and/or Social Security

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Originally Posted by MasterBlaster
You have missed the point somewhat if you believe that you have to spend down all of your nest-egg before turning 70. The point was that you could spend down some large amount of the nestegg (was it $345k ?) between 62 and 70 and have the same cash flow as taking SS at 62.

Nobody is suggesting that you deplete everything in the nestegg by 70 and rely on Uncle Sam for their wherewithall.

The concept was to carve that piece of the nestegg and spend it of which SS would make up the cash-flow for.
Very well said MB. - Yes this is all I'm talking about.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:20 PM   #77
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Re: Delay Pension and/or Social Security

How about this scenario: begin collecting ss at age 62, but don't spend it - save or invest it until the age that you thought you'd begin collecting ss. In cut-throats case it would be age 70.
If ss = 1200 / month, 6% interest/earnings, for 8 years = $147000 at age 70
or
If ss= 1000/month, 6% interest/earnings, for 8 years = $122,000 at age 70
or
if ss = 1500/month, 6% interest/earnings, for 8 years = $184,000 at age 70.
.
then at age 70, you'd still be collecting X dollars / month SS, and you'd have a tidy
sum available to do with as you please !
In the first example above, if you wanted to pay yourself 4% per month off of the $147,000, you would get an extra $490/month. Maybe by age 70 you could be able to take an around the world cruise - all on Uncle Sam, and have a lot left over.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:23 PM   #78
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Re: Delay Pension and/or Social Security

Bennevis:

Last time I looked the $345k that could be spent is larger than your compound interest numbers of $184k.

Perhaps the best way to do this is to price an immediate annuity with the extra cashflow purchased when you are 70 years old. As I recall from another thread on this topic, the immediate annuity cost less than the amount you could spend.
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:24 PM   #79
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Re: Delay Pension and/or Social Security

This is what is called a convergent problem. If you can leave aside your worries about possible SS changes, all the facts to make a decision are clear as a bell in SS regs. Read 'em and decide.

Or if worry over solvency of the system trumps this, take it at 62. Either way, no need to wade through what is said here.

Ha
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Re: Delay Pension and/or Social Security
Old 01-24-2007, 03:32 PM   #80
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Re: Delay Pension and/or Social Security

Masterblaster,
sorry, it's too tedious to read thru the entire 6 pages, so I don't know what the $345K is.
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