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Re: Delay Pension and/or Social Security
Old 01-25-2007, 01:38 PM   #121
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Re: Delay Pension and/or Social Security

Running Man:

Your numbers are not adjusted for inflation.

Using your (inflated) numbers you would need something like $404k to buy the equivalent annuity at 70.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 02:08 PM   #122
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Re: Delay Pension and/or Social Security

My numbers are certainly adjusted for 3% inflation per year. The chart inflates both the SS @ 62 and the amount forgone at age 70(last column). Which was $20,885 but is up to $26,456 at age 70. The last column inflates the number forgone into the future and is used as a deduction from the kitty.

Up until age 70 the 1st column is adding to the toal. Age 70 and beyond only ROI is added and the last column is deducted. Annuity that would buy is irrelavant since the interest rates at the time would really determine the payout amoun and a decision made on that would be subject to a large degree of variation to forecast.

Make 10% after tax and you are good until age 100. I prefer 6% as an achievable amount. In any case I really believe having the democrats and republicans hold your money for you is not a good idea.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 02:35 PM   #123
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
Here is a simple question.

1.) 70 year old Person A has a Pension worth $13K with Cola per year.

2.) 70 year old Person B has no pension, but wants to withdraw $13K+ inflation per year.

How big a portfolio does Person B need to accomplish this so he could live to age 100 and not run out of money?
Person C (Newbie ER) sees CT's simple question and this is of great interest to him, because he is 62 and is comtemplating taking SS early. It just so happens that at age 62 he will get $16K, if he waits until age 70 he will get $13K more! He decides to run FireCalc and see what amount portfoilo would produce that $13K cola adjusted amount. He decides on a 50/50 portfoilo and takes the FireCalc defaults and comes up with about $350K that is needed. Oddly enough this is 26.9 times the $13K (CT only suggested 25 times)

So Person C now takes Quicken and runs the Savings Calculator plugging in $16K every year for 8 years to see if he can turn the $16K early SS withdrawal into the $350K he needs to produce that extra $13k per year.



He finally plugs in a 27% return and after 8 years he only has $340K after compounding! - Then he remembers that he's got to pay taxes on the gains as well!

So Person C has a question to the guys that advise taking SS at 62. What investment does he make to get better than 27% (Guaranteed by the U.S. Gov. of course) to have $350K at the end of 8 years?
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 03:15 PM   #124
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
My numbers are certainly adjusted for 3% inflation per year. The chart inflates both the SS @ 62 and the amount forgone at age 70(last column). Which was $20,885 but is up to $26,456 at age 70. The last column inflates the number forgone into the future and is used as a deduction from the kitty.

Up until age 70 the 1st column is adding to the toal. Age 70 and beyond only ROI is added and the last column is deducted. Annuity that would buy is irrelavant since the interest rates at the time would really determine the payout amoun and a decision made on that would be subject to a large degree of variation to forecast.

Make 10% after tax and you are good until age 100. I prefer 6% as an achievable amount. In any case I really believe having the democrats and republicans hold your money for you is not a good idea.
Yes your columns go up with inflation, however the cost of the annuity 8 years later does not. The cost of the annuity needs to reflect the inflated dollars.

In other words you are mixing apples and oranges when you do the comparison.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 03:55 PM   #125
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Re: Delay Pension and/or Social Security

What cost of annuity? I have no column for that - only invested balance.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 04:01 PM   #126
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Re: Delay Pension and/or Social Security

Running Man:

Per an earlier post example by another poster, the 62 year old man just starting SS could save $319k and then have the same cashflow by buying an annuity as a 70 year old that started SS.

In other words, the cashflow of the 70 year old SS starter would cost the person who started at 62 $319k when they turn 70.

I was under the impression that your example was refering to the previous discussion.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 04:06 PM   #127
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Re: Delay Pension and/or Social Security

NO our calculations musthave been similar. Based on an inflation adjusted quote just now from Vanguard a 70 year old male could receive $24,154.68 with the money available on my worksheet at age 70. About 2,000 per year less than social security would pay if inflation and social security average 3% per year for the next years.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 04:47 PM   #128
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Re: Delay Pension and/or Social Security

Quote:
So Person C has a question to the guys that advise taking SS at 62. What investment does he make to get better than 27% (Guaranteed by the U.S. Gov. of course) to have $350K at the end of 8 years?
Of course the US goverment is not insuring anything close to that amount. The US government is insuring an ANNUITY not a cash balance. The difference is immense. FIRECALC is advocating a 3.7% withdrawl rate at age 70? Wow FireCalc must be have been written by heirs. Upon death there is no cash balance for social security. And with luck for the US there will be no payments ever made if death is before age 70. That reduces the amount needed to fund a retirement.

To get an annuity as quoted 15 minutes ago by Vanguard for an inflation annuity you would need $211,304 to get the inflation adjusted amount of $15,988 per year. That would require an 9.15% after tax return not 27%.

SS security @ 62 ROI YE Balance Forgone amount @ 70
62 16,000.00 732.32 16,732.32 13,000.00
63 16,480.00 3,040.26 36,252.58 13,390.00
64 16,974.40 4,872.40 58,099.37 13,791.70
65 17,483.63 6,918.87 82,501.87 14,205.45
66 18,008.14 9,200.69 109,710.70 14,631.61
67 18,548.39 11,740.84 139,999.92 15,070.56
68 19,104.84 14,564.45 173,669.21 15,522.68
69 19,677.98 17,699.00 211,046.19 15,988.36
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 04:54 PM   #129
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
FIRECALC is advocating a 3.7% withdrawl rate at age 70? Wow FireCalc must be have been written by heirs.
FireCalc does not know how old you are. - It asks for how long to plan to. I used 30 years for age 70 to 100 years old.

A lot of the folks here plan to age 120 - I don't age 100 is fine.

What age would you use?

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Re: Delay Pension and/or Social Security
Old 01-25-2007, 04:58 PM   #130
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
To get an annuity as quoted 15 minutes ago by Vanguard for an inflation annuity you would need $211,304 to get the inflation adjusted amount of $15,988 per year. That would require an 9.15% after tax return not 27%.

SS security @ 62 ROI YE Balance Forgone amount @ 70
62 16,000.00 732.32 16,732.32 13,000.00
63 16,480.00 3,040.26 36,252.58 13,390.00
64 16,974.40 4,872.40 58,099.37 13,791.70
65 17,483.63 6,918.87 82,501.87 14,205.45
66 18,008.14 9,200.69 109,710.70 14,631.61
67 18,548.39 11,740.84 139,999.92 15,070.56
68 19,104.84 14,564.45 173,669.21 15,522.68
69 19,677.98 17,699.00 211,046.19 15,988.36
I did not use annuties because most of the vocal takethe S.S. at age 62 group, would not buy an annuity either. So I tried to keep the example in their realm.

But OK let's buy an annuity where can I get 9.15% guarenteed?
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 05:07 PM   #131
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
Person C (Newbie ER) sees CT's simple question and this is of great interest to him, because he is 62 and is comtemplating taking SS early. It just so happens that at age 62 he will get $16K, if he waits until age 70 he will get $13K more! He decides to run FireCalc and see what amount portfoilo would produce that $13K cola adjusted amount. He decides on a 50/50 portfoilo and takes the FireCalc defaults and comes up with about $350K that is needed. Oddly enough this is 26.9 times the $13K (CT only suggested 25 times)

So Person C now takes Quicken and runs the Savings Calculator plugging in $16K every year for 8 years to see if he can turn the $16K early SS withdrawal into the $350K he needs to produce that extra $13k per year.
But then person C goes over to Vanguard and finds out that he can get a $13K COLAd annuity with 50-% survivor for less:
Initial Payment Amount: $13,000.00
Total Premium Amount for Fixed Joint and 50% Survivor Annuity with inflation adjustments: $228,095.26.

Of course that is buying it at age 70 today, in today's dollars. $13K would really be more inflation adjusted, but $350K?
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 05:23 PM   #132
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
I did not use annuties because most of the vocal takethe S.S. at age 62 group, would not buy an annuity either. So I tried to keep the example in their realm.

But OK let's buy an annuity where can I get 9.15% guarenteed?
Your payment is equally not guaranteed. As the baby boomers retire the government shortly will only be taking in enough to pay 2/3 of the benefits so either taxes go up or benefits are cut. That is your hidden risk. The idea that spend more of your money now because an unfunded plan will give you more later is a riskier option than the 9.15%.

If you are Warren Buffet 9.15% is a bad year
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 05:38 PM   #133
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
Your payment is equally not guaranteed. As the baby boomers retire the government shortly will only be taking in enough to pay 2/3 of the benefits so either taxes go up or benefits are cut. That is your hidden risk. The idea that spend more of your money now because an unfunded plan will give you more later is a riskier option than the 9.15%.

If you are Warren Buffet 9.15% is a bad year
OK - now your speculating, guessing, etc. etc.

Move along!
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 05:39 PM   #134
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Cut-Throat
FireCalc does not know how old you are. - It asks for how long to plan to. I used 30 years for age 70 to 100 years old.

A lot of the folks here plan to age 120 - I don't age 100 is fine.

What age would you use?
Well I do not use FireCalc, although I do understand the idea behind it, and find it a decent guide.

The most pertinent forecst to me is minimizing risk for retirement. Consuming more of my portfolio now while counting on a government grant later is not my idea of ideal risk management. I prefer more self-reliance.
I hold a red beans and rice philosophy to retirement - insure an existence of the required elements with absolute minimum risk. Everything else is the gravy for the rice. Social Security is gravy for me and I'll take my gravy before everyone else comes to the table thank you


The percentages that are required to equal what is assumed to occur in the future are not so outlandish as to be unatainable.
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 05:40 PM   #135
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by donheff
But then person C goes over to Vanguard and finds out that he can get a $13K COLAd annuity with 50-% survivor for less:
Initial Payment Amount: $13,000.00
Total Premium Amount for Fixed Joint and 50% Survivor Annuity with inflation adjustments: $228,095.26.

Of course that is buying it at age 70 today, in today's dollars. $13K would really be more inflation adjusted, but $350K?
Well, I would buy an annuity, but CFB would never buy one, so I'm just reporting the numbers that FireCalc gives. If you are going to plod along with your Portfoilo with a less than 4% withdrawal rate well into your 90's - Well, you can't be too careful!
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 05:43 PM   #136
 
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
Well I do not use FireCalc, although I do understand the idea behind it, and find it a decent guide.

The most pertinent forecst to me is minimizing risk for retirement. Consuming more of my portfolio now while counting on a government grant later is not my idea of ideal risk management. I prefer more self-reliance.
I hold a red beans and rice philosophy to retirement - insure an existence of the required elements with absolute minimum risk. Everything else is the gravy for the rice. Social Security is gravy for me and I'll take my gravy before everyone else comes to the table thank you


The percentages that are required to equal what is assumed to occur in the future are not so outlandish as to be unatainable.
Again, time for you to move on! - Only people that believe in SS need to discuss this any further. This was not a discussion of whether SS was going to survive (we've had those) - Bush was going to end it 2 years ago! If you have a Tin Hat on get your survival gear and fox hole it!
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Re: Delay Pension and/or Social Security
Old 01-25-2007, 08:04 PM   #137
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Re: Delay Pension and/or Social Security

Mr Cut-throat

Your implication that I am speculating and guessing I find amusing. My entire strategy is to minimize guesswork and concentrate on the known and available. I do not believe social security is going away, yet if you believe all is well and there will be no changes you are in disagreement with the current Fed chairman.

Firecalc will calculate a withdrawl amount that is relatively light due to the problems of early negative returns, you are proposing to ignore that for 8 years and accelerate the spending of a portfolio for the promise of a future benefit. However, that is ignoring the biggest retirement risk is in the early years of retirement and the possibility of losses early in retirement is the reason for a lower portfolio drawdown. Your strategy turns that on its head.

As an example if I am to have a porfolio of 1,000,000 and choose a withdrawl rate of 3.7% I will have $37,000 per year. Add the $16,000 from Social Security and you have $53,000 per year. If instead you want to increase your retirement income and take the future increase now you will be withdrawing $37,000 + $16,000 + $13,000 = $66,000. If there is a negative return in those 8 years the portfolio will never recover. The speculation is totally being taken by deferring the reception of social security by increasing drawdowns beyond the safe withdrawl rate.

If in year one you have a 50/50 portfolio and their is a bear market with a 29% fall your portfolio will fall by 12% (.5*-.29 + .5*.5 fixed). So your portfolio will start year 2 at 1,000,000 - 120,000 - 66,000 = $814,000 and your year 2 withdrawl will be over 8% of the portfolio, a second down year and there will not be enough to provide the needed income. That to me is a severe speculation.

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Re: Delay Pension and/or Social Security
Old 01-25-2007, 08:12 PM   #138
 
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Re: Delay Pension and/or Social Security

I never said you had to spend an extra $13K every year! - You can decide that every year - You don't give up that option! I find this amusing!

Also, I would expect that the further the market dropped the more I would be thankful that I had a bigger SS check coming down the road. And if at any time you decided that you needed the SS income, just apply. You can take it at 62, 63, 64, 65, 66, 67, 68, 69, or 70 - The more you delay the more you get!

You guys are always playing an all or nothing game! - You don't have to!

Also SS will change, but not for someone that is age 62 and making the decision today.

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Re: Delay Pension and/or Social Security
Old 01-25-2007, 08:40 PM   #139
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Re: Delay Pension and/or Social Security

Your arguement throughout the thread has been delaying Social Security is a resource to increase spending in your 60's. To state well I never said you had to increase spending is a fallacious arguement. That your entire point. The problem is there are no mathematics to back up the porfolio calculations you have stated are guaranteed.

Under your method a retiree's income at age 70 could very widely - what would you do if you started as I stated and had 2 years of a bear market and now your portfolio is at $600,000? Begin taking Social Security of $19,000 at 64 and a safe withdrawl of $22,000 for a total of $41,000? That does not appear to be to appealling to me. Cutting $25,000 of spending 2 years into retirement would certainly be burdensome.

That appears to make the promise of $13,000 additional to age 70 and beyond totally dependent on a minimium of historical returns on your portfolio for the coming 8 years with no bear markets in the early years.

You did state earlier you did not plan on leaving any money to your heirs.


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Re: Delay Pension and/or Social Security
Old 01-25-2007, 08:41 PM   #140
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Re: Delay Pension and/or Social Security

Quote:
Originally Posted by Running_Man
As an example if I am to have a porfolio of 1,000,000 and choose a withdrawl rate of 3.7% I will have $37,000 per year. Add the $16,000 from Social Security and you have $53,000 per year. If instead you want to increase your retirement income and take the future increase now you will be withdrawing $37,000 + $16,000 + $13,000 = $66,000. If there is a negative return in those 8 years the portfolio will never recover. The speculation is totally being taken by deferring the reception of social security by increasing drawdowns beyond the safe withdrawl rate.

If in year one you have a 50/50 portfolio and their is a bear market with a 29% fall your portfolio will fall by 12% (.5*-.29 + .5*.5 fixed). So your portfolio will start year 2 at 1,000,000 - 120,000 - 66,000 = $814,000 and your year 2 withdrawl will be over 8% of the portfolio, a second down year and there will not be enough to provide the needed income. That to me is a severe speculation.
You too are missing the point. Using your example the goal is to increase the amount of spending between the years 62-70 over the $37000+$16000=$53000 amount without creating any more risk (assuming SS is riskless).

So the first step is to see how much of our portfolio is required to produce $13000/yr of COLAed income. Using simple math that amount is ~$351351. (Note this means it takes $1,000,000-$351,351=$648,649 to produce $37000-$13000=$24000 per yr COLAed income).

The second step is to remove this amount from the portfolio and put it in a "savings" account paying atleast the inflation rate. This means we now only have $24000/yr COLAed income from our portfolio. At the same time we defer our SS to age 70 thus guaranteeing us our equivalent income at 70 of $24000+$16000+$13000=$53000 per yr COLAed.

The last step is to increase our spending between 62 & 70 which is accomplished by reaping the $24000/yr COLAed income from our portfolio and taking $43918/yr ($351,351/8) COLAed from our "savings" account making our total spending between 62 & 70 equal to $67918/yr COLAed.

This actually has less risk than not doing it this way because less of our income between the ages of 62 - 70 is exposed to the stock market.

Do you get it yet?
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