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Old 05-02-2014, 09:29 PM   #61
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Originally Posted by Looking4Ward View Post
According to the SSA website, I could collect:

$1500/mo at age 62
$2700/mo at age 70

If I started SS at 62 and I'm doing this math correctly, I would collect $144K by the age of 70.

If I wait until 70, it would take 10 years before I'd realize the advantage of the increased monthly amount ($144K/$14.4K a year additional SS).

So I'd have to live past 80 before I'm actually collecting $1200 a month more.

And that doesn't factor in any possible investment gains on the original $1500 a month if I start pulling it early and investing it. At 6.5%, that $1500 a month would grow to $188K over the eight year period.

I think I'll probably start at 62.
If you're serious about earning CPI + 6.5%, then you'd have to live well past 95 before delaying would be favorable.

See Wade Pfau's table here: Wade Pfau's Retirement Researcher Blog: Delaying Social Security: What an Investment!

I don't assume 6.5%. If I did, I'd plan to take 6.5% annually from my IRA.
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Old 05-02-2014, 09:36 PM   #62
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My "longevity insurance" plan is to have an investment portfolio (401K, IRAs, Roths, taxable) in the $2M range.

When you look at it carefully, people break into 3 cases:
1) Poor(ish). These people will take SS as soon as they can, because they need the money to eat.

2) Rich(ish). To these people it doesn't matter. What they receive from SS is just the sprinkles on top of the ice cream cone. The presense or absense of the SS check makes no difference in their life-style.

3) On the cusp. These people can squeak by without getting a SS check. By definition, they can eschew the SS check for 8 years. That being the case, they could probably get by without the SS check for 9 years. Or 10 years. Or perhaps forever. So they don't really need the SS money, so they don't really need to optimize what they collect from SS.

For case 1 & 2, there is no decision to be made--the category forces the decision.
And almost everybody fits into the first 2 categories.

For most of case 3, the decision is irrelevant. The only people to whom it makes a difference is those who just barely make it to year 8 on thier own money and basically run out just as they hit 70.
We're in 3. We need SS at some point to maintain our lifestyle, so we're not in 2.

Deferring to 70 means eating significantly into IRA principal. We won't "basically run out just as we hit 70", but we can't continue without SS "forever" either.
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Old 05-02-2014, 11:20 PM   #63
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3) On the cusp. These people can squeak by without getting a SS check. By definition, they can eschew the SS check for 8 years. That being the case, they could probably get by without the SS check for 9 years. Or 10 years. Or perhaps forever. So they don't really need the SS money, so they don't really need to optimize what they collect from SS.

For case 1 & 2, there is no decision to be made--the category forces the decision.
And almost everybody fits into the first 2 categories.

For most of case 3, the decision is irrelevant. The only people to whom it makes a difference is those who just barely make it to year 8 on thier own money and basically run out just as they hit 70.
I don't really agree with the category 3. I think we fit into category 3 in terms of whether I take at 62 or not. (For DH it was easy to take at 62 because we had 2 minor children so it was clearcut to be advantageous for him to take then because of the benefits for minor children). For me, Firecalc gives up modestly higher spending if I wait to 66 to take. And, we've thought about me taking Spousal at 66 and then my own benefit at 70. And we could probably do it. But, it would cut into our retirement funds to do this and if there was a bear market during that 8 years from 62 to 70 I'm not sure I would want to cut that deeply into the funds.

However, I wouldn't "run out" as we hit 70, but I don't think we could easily afford for me to never collect SS either. I mean, we could if we had to, but it would be a different lifestyle than we planned on.
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Old 05-03-2014, 07:14 AM   #64
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My main point was that for most people it's a no-brainer.

For somebody with lots of money, say ~$2M+, they don't particularly need SS at all. 4% of $2M = $80K/yr = $6667/mo.
Consider a higher-than-average benefit: $2300/mo (66) = $1725 (62) = $3036 (70).
Taking at 62, their income would be $8392 or $101,700/yr
Delaying to 70, they'd have $6667 for 8 years then $9703 thereafter. Or $80,000/yr then $116,400/yr.
I would submit that for a 70 year-old, there is no significant lifestyle difference between an income of $8400 vs. $9700. Whether they take early or late doesn't matter. Lease a Merdeces instead of an Audi. BFD.

For someone with little money, say under $750K, they need to take SS as soon as they can. They can't affored to delay, so delaying is not an option for them.
FWIW, CNN says the median net worth for 65 year olds is $232,000.

The cusp is people with a significant but not large amount of money, say between $750K and $2M. According to the 2010 Census, for net worth $750K is the 92.3 percentile, $2M is 99.7 percentile. So this category is only 7.4% of people. Thta's for all people, regardless of age.
These are the only people who realistically have a meaningful option of delaying or mot.

The reason we see all these threads debating this is that we are a self-selected group of people who are in -- or aspire to be in -- that middle category.
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Old 05-03-2014, 07:57 AM   #65
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Middle category for DH and I, using Rayvt's yardstick. But deferring to 70(which we plan to do as of now) still seems like a pot at the end of the rainbow to add to our income when the time comes 4 years from now.
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Old 05-03-2014, 08:03 AM   #66
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I thought for a long time that being single I would take SS at 62. However, this year I am enjoying the benefit of a tax credit due to the ACA. Social Security income is counted 100% for the MAGI used in determining the amount of tax credit one recieves if buying health insurance through the Marketplace. I have not studied it in detail as I am only 57, but I have a sense that from age 59 1/2 to 64 it may be tax beneficial for me to take a good chunk of my income during those years from tax deferred accounts rather than SS and delaying SS to age 65, taking a larger SS payment when I am eligible for Medicare at 65. Anyone else who is or will be subsidy eligble give any thought to using tax deferred monies before age 65 for tax reasons and the changes brought about by the ACA?
Losing the ACA benefit is making the decision to wait easier.
DW and I will be waiting until FRA to take benefits.
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Old 05-03-2014, 09:56 AM   #67
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Well, to add to the permutations possible I started taking SS at age 66. Since then every dollar has gone into an ETrade account with a diverse portfolio of conservative "Aristocrat" stocks (increased in dividends over no less than 25 years). The money is DRIPed back into the portfolio of stocks and it has done quite well (started in May 2011). My goal was to give my wife a yearly income should I predecease her.

Of course, this is on top of a couple of pensions I get, so it's not a painful way for me to go. Also have the usual Vanguard qualified accounts. Not touching them until the mandated RMD.

Rich
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Old 05-03-2014, 01:11 PM   #68
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If you're serious about earning CPI + 6.5%, then you'd have to live well past 95 before delaying would be favorable.

See Wade Pfau's table here: Wade Pfau's Retirement Researcher Blog: Delaying Social Security: What an Investment!

I don't assume 6.5%. If I did, I'd plan to take 6.5% annually from my IRA.
I suppose I was but maybe I wasn't. I didn't account for SS COLA either.
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Old 05-03-2014, 01:13 PM   #69
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I thought for a long time that being single I would take SS at 62. However, this year I am enjoying the benefit of a tax credit due to the ACA. Social Security income is counted 100% for the MAGI used in determining the amount of tax credit one recieves if buying health insurance through the Marketplace. I have not studied it in detail as I am only 57, but I have a sense that from age 59 1/2 to 64 it may be tax beneficial for me to take a good chunk of my income during those years from tax deferred accounts rather than SS and delaying SS to age 65, taking a larger SS payment when I am eligible for Medicare at 65. Anyone else who is or will be subsidy eligble give any thought to using tax deferred monies before age 65 for tax reasons and the changes brought about by the ACA?
That is certainly something to consider.
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Old 05-03-2014, 01:23 PM   #70
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2. In my case I would have to wait 16 years for my increased payments to catch up with the income I lost by not taking early SS.
Well if you don't make it 16 years you will be in heaven, hell or limo and you probably won't need that extra SS money anyway.
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Old 05-03-2014, 02:16 PM   #71
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I thought for a long time that being single I would take SS at 62. However, this year I am enjoying the benefit of a tax credit due to the ACA. Social Security income is counted 100% for the MAGI used in determining the amount of tax credit one recieves if buying health insurance through the Marketplace. I have not studied it in detail as I am only 57, but I have a sense that from age 59 1/2 to 64 it may be tax beneficial for me to take a good chunk of my income during those years from tax deferred accounts rather than SS and delaying SS to age 65, taking a larger SS payment when I am eligible for Medicare at 65. Anyone else who is or will be subsidy eligble give any thought to using tax deferred monies before age 65 for tax reasons and the changes brought about by the ACA?
I am probably missing something. If SS income is counted 100% for the MAGI used to calculate the ACA why would it help to instead withdraw from tax deferred accounts? Tax deferred account withdrawals would also count towards the MAGI calculation in the same way wouldn't they? On the other hand the SS income is reduced by taxes if your income is above certain limits, I believe. Wouldn't it seem as the way not to affect your MAGI as much to save a lot into and take from taxable accounts?
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Old 05-03-2014, 02:33 PM   #72
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I thought for a long time that being single I would take SS at 62. However, this year I am enjoying the benefit of a tax credit due to the ACA. Social Security income is counted 100% for the MAGI used in determining the amount of tax credit one recieves if buying health insurance through the Marketplace. I have not studied it in detail as I am only 57, but I have a sense that from age 59 1/2 to 64 it may be tax beneficial for me to take a good chunk of my income during those years from tax deferred accounts rather than SS and delaying SS to age 65, taking a larger SS payment when I am eligible for Medicare at 65. Anyone else who is or will be subsidy eligble give any thought to using tax deferred monies before age 65 for tax reasons and the changes brought about by the ACA?
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I am probably missing something. If SS income is counted 100% for the MAGI used to calculate the ACA why would it help to instead withdraw from tax deferred accounts? Tax deferred account withdrawals would also count towards the MAGI calculation in the same way wouldn't they? On the other hand the SS income is reduced by taxes if your income is above certain limits, I believe. Wouldn't it seem as the way not to affect your MAGI as much to save a lot into and take from taxable accounts?
I am using after tax money for my expenses during the 62-66 years.
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Old 05-03-2014, 02:35 PM   #73
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I am probably missing something. If SS income is counted 100% for the MAGI used to calculate the ACA why would it help to instead withdraw from tax deferred accounts? Tax deferred account withdrawals would also count towards the MAGI calculation in the same way wouldn't they? On the other hand the SS income is reduced by taxes if your income is above certain limits, I believe. Wouldn't it seem as the way not to affect your MAGI as much to save a lot into and take from taxable accounts?
A couple of things to consider would that if you take SS it is all or nothing, whereas you can draw smaller amounts to suit your needs from tax deferred accounts. Also your tax deferred accounts may include a substantial basis.

Of course if you have ROTH IRA's to draw on, even better.
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Old 05-03-2014, 03:40 PM   #74
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I am using after tax money for my expenses during the 62-66 years.
Same here. I've got twice the amount in my after-tax accounts as I do in my 401k, so I figured I'd just let the 401k grow over the years until RMD's kick in.
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Old 05-03-2014, 04:00 PM   #75
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heaven, hell or limo
Didn't realize you could get a limo to get from heaven to hell. Is that to visit friends?
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Probably 66
Old 05-03-2014, 05:33 PM   #76
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Probably 66

Here are my SS numbers at:
62 $1,972
66 $2,543
70 $3,430
I will retire at the end of this year at 63&1/2 I have enough taxed money I think to last until 66 and may make it to 70.
BF
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Old 05-03-2014, 07:17 PM   #77
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One retirement distraction is playing around in Excel. I made a SS benefit worksheet to help visualize the options. The visuals help, for me at least. The worksheet is brute force newbie quality, so don't expect wonders.

I only applied interest rate to benefit funds acquired up to age 70, as after that every choice is receiving funds. COLA matters and is included; I think recent historic average is around 2.5%. The second tab’s worksheet is to calculate income tax on SS benefits; it was interesting to see a larger benefit can actually reduce your taxes.

Book, tutorials, tip, recommendations for learning excel appreciated. The file might not even open, as it had to be renamed from .xlsx to .xls to upload.

As mentioned in earlier post, this will be of most value to those in category 3 most likely.
I'm shooting for 70 to take SS, but may twist off as early as 68.5 due to the small differences until rather late in life.
Attached Files
File Type: xls SS_Income and Taxes.xls (40.5 KB, 33 views)
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Old 05-03-2014, 07:40 PM   #78
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One retirement distraction is playing around in Excel. ...
Actually, that was one of my w*rk distractions.
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Old 05-03-2014, 07:55 PM   #79
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For now I am more interested in taking SS early to avoid dwindling the portfolio to leave trusts for the adult kids. Once the kids are launched in careers, and if they are doing well, then we may delay taking SS for ACA subsidy and tax reasons.

They are STEM majors with good grades in fairly marketable fields so they should be okay sans any economic outpatient care once they graduate. But I like the idea of having a financial safety net for them once we are no longer around should they ever have a major illness or car accident or whatever.
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Old 05-03-2014, 08:15 PM   #80
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Didn't realize you could get a limo to get from heaven to hell. Is that to visit friends?
In this book http://www.amazon.com/The-Great-Divo.../dp/0060652950
it's a day excursion by bus.
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