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Old 08-19-2012, 01:19 PM   #141
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Originally Posted by wingfooted View Post
DW takes SS at age 62
DH takes 50% spousal benefits based on DW's plan at FRA (66 years and 2 months) for the period until age 70
DH waits until age 70 to take his plan's maximum benefits and then DW switches over to the 50% spousal benefit based on DH's plan
I'm not sure this is all that unusual. DW and myself are roughly the same age, she did the mom thing and her SS is roughly 50% of mine. If the option exists, we will do the same as you outline. She will draw on her record at 62, We will wait to draw on mine until 70.

My motivation is to maximize the survivor benefit for DW if I should croak first.

I have recently tried to find information on this scenario on the SS site, and have not been able to do so. It seems to indicate that when she applies, they will look at her benefit as a function of my record as well. Has something changed in the last year or two?
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Old 08-19-2012, 02:23 PM   #142
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One of my life rules is always make sure you are worth more alive than dead. No need to tempt destiny - or anyone else
When I retired from the military and Civil Service I elected not to take survivor benefits. I told DW I wanted to be worth more alive than dead. Did not want her to get any evil ideas.
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Old 08-19-2012, 05:54 PM   #143
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My point is, "burning up" your hard earned savings first, money that YOU have control of, and counting on the feds to provide you with longevity insurance is, in my opinion, pretty trusting. Btw, my dark side changed the word trusting to insane in the sentence above. Yes, a 8% return, sounds a little too good to be true to me. I think like megaCorp, the feds are just one little "made-up" rule change away to making this a very poor economic decision. If I make it to 80 years old, we'll see. However, at least we get a choice and I know what ours will be. Personally, we're going in the opposite direction. Good luck to you and yours.
So you're essentially saying that those of us that spent a career in the military, and rely on our pensions, were/are insane?

I don't understand after seeing Enron, Madoff, and all the rest, how anyone can think investing is more secure than a monthly check from the federal government.
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Old 08-19-2012, 06:06 PM   #144
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So you're essentially saying that those of us that spent a career in the military, and rely on our pensions, were/are insane?

I don't understand after seeing Enron, Madoff, and all the rest, how anyone can think investing is more secure than a monthly check from the federal government.
Exactly the reason you diversify, to hedge your bets, so to speak !
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Old 08-19-2012, 10:38 PM   #145
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rustward/BLS53,

The company I'm currently working for is making record profit margins and sales. The resultant reduction in benefits was entirely due to the profit taking of the evil doers in megaCorp II. That's the trouble nowadays, they've offshored so many jobs, they don't have to give a damn about employees, they just say "next". With reasonable competition for a skilled local workforce, they could not do it, as easily. They might try, but, if capitalism works correctly, workers would leave, go across the street and maximize their return(pay, benefits, etc) for their effort. In my opinion, that's why we need a return of tariffs to level the playing field for US workers vs low cost foreign competition. Yes, you will pay more for stuff bought at Wally's mart. Sorry.

And maybe you're missing my other point. In my opinion, "burning down" MY investment dollars and having a greater reliance on the government to provide me "longevity" insurance pretty much goes against ever fiber of my being. I believe it would be much harder for a government in the US to "garnish" individual retirement accounts than to "just change slightly" the future SS benefits of people not yet retired. I've seen it many times in my so-called career, a "tiered" benefit plan. One for current retirees and one for future retirees; that's how they "divide and conquer". Easy, squeezy. I believe any attempt to "nationalize" individuals personal retirements monies would be met with something no less than armed insurrection. So, given that statement, my longevity which probably is less than the "norm", and the current state of the SS system (which could turn dramatically worse if they are telling the truth, btw), we're taking it early.
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Old 08-19-2012, 11:25 PM   #146
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After reading (and participating) in a number of these SS at 62 vs 70 threads I've come to understand that some people are born with the SS at 62 gene, some with SS at 70 gene and a very few misguided souls with an in between gene. Near as I can tell either side is totally impervious to the arguments of the other side and I do not believe that a single soul has been converted. Long live the 62'ers!!!!
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Old 08-20-2012, 11:12 AM   #147
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Originally Posted by ER Fireball



I have recently tried to find information on this scenario on the SS site, and have not been able to do so. It seems to indicate that when she applies, they will look at her benefit as a function of my record as well. Has something changed in the last year or two?

I used the social security calculator SSCalc.net to derive the optimum strategy based on NPV at age 90.
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Old 08-20-2012, 12:25 PM   #148
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I have estimated my inflation adjusted expenses for each year through age 86. I have a "three legged stool" of non-Cola pension, 401k and SS. I determined 401k withdrawals based on projected spending and estimated taxes for each year for each of three scenarios of SS benefit starting ages of 62, FRA (66 y 2 mo), and age 70.

I then took the year by year withdrawals for each of the three scenarios and modeled them in Firecalc.

I used deterministic values for inflation, investment return after inflation and SS COLA.

I then calculated the sum of the PV of the 401k, pension, and SS benefits for the three scenarios.

results are:

[Age]........... [PV] ........[sum of future dollars] [Firecalc to age] [firecalc to age 86] [401k balance at age 86]
[62 ].......... [-$111k]............ [highest]................. [100% to 62]......... [98.2% success]............ [highest]
[FRA] .......... [-$42k]............ [-$239k] ................. [100% to 66-2] ...... [99.2% success]........... [-$293k]
[70]........... [highest]............. [-$339k]................. [100% to 70]........... [62% success]............. [-$560k]


Deterministic values used were:
inflation: 2.5%
return after inflation 3.5%
SS COLA: 2.5%
tax bracket inflation: 2.426% (last value they used)

The decision of when to take social security will consider:
1) at age 62, my youngest child could draw half of my SS for a few years until he gets too old
2) the later the better for my wife's benefit on my record
3) the Firecalc results
4) the future importance of preserving a lot of my 401k

I am torn between age 62 and and 66-2 for starting SS based on the Firecalc results. I think the next 5 years investment results will be the deciding factor.

I also calculated break-even dates just comparing the PV of each of the SS benefit streams. The breakeven for PV of starting at age 66-2 compared to age 62 is at age 78. The breakeven for starting at age 70 instead of age 62 is age 80. The breakeven for starting at age 70 instead of age 66-2 is between age 81-82.

I modeled to age 86 since my the oldest attained age of any of my ancestors going back two generations is age 86. Most lived to their early to late 70's. My father however is still going strong at age 83.
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Old 08-20-2012, 02:42 PM   #149
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Originally Posted by ER Fireball View Post
I'm not sure this is all that unusual. DW and myself are roughly the same age, she did the mom thing and her SS is roughly 50% of mine. If the option exists, we will do the same as you outline. She will draw on her record at 62, We will wait to draw on mine until 70.

My motivation is to maximize the survivor benefit for DW if I should croak first.

I have recently tried to find information on this scenario on the SS site, and have not been able to do so. It seems to indicate that when she applies, they will look at her benefit as a function of my record as well. Has something changed in the last year or two?
I asked about this scenario in another thread & was told that if I (same situation as your DW) were to take SS at 62 on my record, my benefit will ALWAYS be reduced, even when I later draw on my DH's record.
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Old 08-20-2012, 03:39 PM   #150
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I have estimated my inflation adjusted expenses for each year through age 86. I have a "three legged stool" of non-Cola pension, 401k and SS. I determined 401k withdrawals based on projected spending and estimated taxes for each year for each of three scenarios of SS benefit starting ages of 62, FRA (66 y 2 mo), and age 70.

I then took the year by year withdrawals for each of the three scenarios and modeled them in Firecalc.

I used deterministic values for inflation, investment return after inflation and SS COLA.

I then calculated the sum of the PV of the 401k, pension, and SS benefits for the three scenarios.

results are:

[Age]........... [PV] ........[sum of future dollars] [Firecalc to age] [firecalc to age 86] [401k balance at age 86]
[62 ].......... [-$111k]............ [highest]................. [100% to 62]......... [98.2% success]............ [highest]
[FRA] .......... [-$42k]............ [-$239k] ................. [100% to 66-2] ...... [99.2% success]........... [-$293k]
[70]........... [highest]............. [-$339k]................. [100% to 70]........... [62% success]............. [-$560k]


Deterministic values used were:
inflation: 2.5%
return after inflation 3.5%
SS COLA: 2.5%
tax bracket inflation: 2.426% (last value they used)

The decision of when to take social security will consider:
1) at age 62, my youngest child could draw half of my SS for a few years until he gets too old
2) the later the better for my wife's benefit on my record
3) the Firecalc results
4) the future importance of preserving a lot of my 401k

I am torn between age 62 and and 66-2 for starting SS based on the Firecalc results. I think the next 5 years investment results will be the deciding factor.

I also calculated break-even dates just comparing the PV of each of the SS benefit streams. The breakeven for PV of starting at age 66-2 compared to age 62 is at age 78. The breakeven for starting at age 70 instead of age 62 is age 80. The breakeven for starting at age 70 instead of age 66-2 is between age 81-82.

I modeled to age 86 since my the oldest attained age of any of my ancestors going back two generations is age 86. Most lived to their early to late 70's. My father however is still going strong at age 83.
Take a look at the I-ORP calculator.

http://www.i-orp.com/

Your results may change when you examine how Social Security is taxed. You'll need to look at the Social Security "provisional" income to show that not all dollars are equal when it comes to taxation.

Let us know what you find out
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Old 08-20-2012, 05:23 PM   #151
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Take a look at the I-ORP calculator.

http://www.i-orp.com/

Your results may change when you examine how Social Security is taxed. You'll need to look at the Social Security "provisional" income to show that not all dollars are equal when it comes to taxation.

Let us know what you find out
In the tax estimation, I basically have modeled all of the IRS tax forms. This results in treatment of different sources of income in their own different ways with their own special tax rates. ( I am talking about pension, 401k, dividends, capital gains and social security). 85% of the SS will be taxable forever or until they change the rules based on my pension alone. I also don't intend to start drawing SS until I no longer expect to have any significant earned income anymore.
Since I have modeled all of the tax credits, deductions, exemptions, taxable social security, the tax rates, the tax brackets and AMT, the estimates will be close, until the rules change.

I have looked at the i-ORP and played with it some but do not understand how they are estimating the taxes. I will visit it again in the future when I have the time and inclination.

Thanks!
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Old 08-20-2012, 05:32 PM   #152
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Exactly the reason you diversify, to hedge your bets, so to speak !
I want no part of the nightmare on Wall Street. Been ERed solely on a military pension for 17 years, and I'm not worried about the government stopping payment. If things get that bad, the nation's on it's last legs, and all your investment portfolios will be worthless as well.
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Old 08-20-2012, 05:49 PM   #153
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rustward/BLS53,

The company I'm currently working for is making record profit margins and sales. The resultant reduction in benefits was entirely due to the profit taking of the evil doers in megaCorp II. That's the trouble nowadays, they've offshored so many jobs, they don't have to give a damn about employees, they just say "next". With reasonable competition for a skilled local workforce, they could not do it, as easily. They might try, but, if capitalism works correctly, workers would leave, go across the street and maximize their return(pay, benefits, etc) for their effort. In my opinion, that's why we need a return of tariffs to level the playing field for US workers vs low cost foreign competition. Yes, you will pay more for stuff bought at Wally's mart. Sorry.

And maybe you're missing my other point. In my opinion, "burning down" MY investment dollars and having a greater reliance on the government to provide me "longevity" insurance pretty much goes against ever fiber of my being. I believe it would be much harder for a government in the US to "garnish" individual retirement accounts than to "just change slightly" the future SS benefits of people not yet retired. I've seen it many times in my so-called career, a "tiered" benefit plan. One for current retirees and one for future retirees; that's how they "divide and conquer". Easy, squeezy. I believe any attempt to "nationalize" individuals personal retirements monies would be met with something no less than armed insurrection. So, given that statement, my longevity which probably is less than the "norm", and the current state of the SS system (which could turn dramatically worse if they are telling the truth, btw), we're taking it early.
I just have a different view on the dependability of the federal government than you do. They've never let me down. I can't say that about my experiences with private employers, nor Wall Street, after I retired from the Navy. I trust the federal government more than any other entity. I know that goes against the grain on this forum. But that's just me.
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Old 08-20-2012, 08:15 PM   #154
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Originally Posted by BLS53

I just have a different view on the dependability of the federal government than you do. They've never let me down. I can't say that about my experiences with private employers, nor Wall Street, after I retired from the Navy. I trust the federal government more than any other entity. I know that goes against the grain on this forum. But that's just me.
I am with you BLS, for no other reason than I have no other choice. Life long career with a state pension and 2% cola. 10 years ago, I had no worries, and really still probably don't since the system is 90% prefunded and is a trust fund. However, cant totally get the what ifs out of my mind, so I have continued working part time to build up some personal money not dependent on my pension. Although working now p/t puts my mind at ease, in reality the only one who will benefit from my continued working are anyone in my will.
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Old 08-21-2012, 10:26 AM   #155
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I thought sscritic summed up the decision quite well here.


Bogleheads • View topic - "Wait to Begin Social Security" ?
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Old 08-21-2012, 12:09 PM   #156
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I've never bought into the idea that if the government were to somehow reduce or eliminate SS for some people that someone who takes SS at 62 was more likely to keep getting benefits than the person who is the same age who hadn't yet taken benefits.

That said, I do think it is possible that benefits will be reduced or possibly means tested out of existence for some people. If you didn't take at 62 and were waiting for the higher benefits at age 70 it would be a real kick in the teeth to get to 69 and find out you were going to get reduced or even no benefits. I would much rather in that situation have been collecting for 7 years so that when the benefits got reduced or eliminated I at least had those benefits I had collected for the past several years.

I'm personally not sure on the 62 thing and I may wait until 66 but I'll look at the political landscape when I get to 62 and decide then.
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Old 08-21-2012, 12:52 PM   #157
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In my opinion, that's why we need a return of tariffs to level the playing field for US workers vs low cost foreign competition.
OMG, ever hear of the Smoot-Hawley Tarrif Act? I've heard this topic discussed on many financial tv shows over many years on FNC, Fox Business and CNBC and from what I've heard this turned a really really bad recession into the Great Depression.

Smoot
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Old 08-21-2012, 09:10 PM   #158
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Really, the Smoot-Hawley tariff act of 1930? It, btw, was a complete over-reaction to the times; record level tariff's and even so, it had negligable economic effect. Though, we are now off-topic, what I'm talking about leveling the playing field for manufacturing in the country and the associated environmental issues caused by low-cost labor countries. The last time I was in China, they were paying $0.68USD/hr to their labor and $3.98USD/hour to their engineers. no matter what you do, you cannot compete against that here in the states. period. It's a one way flow of cash out of the country,them buying back our debt and helping us dig a bigger and deeper hole. It's not even close to sustainable. We need to get the manufacturing sector back to 20+% of our economy, live within our means, and get our economic house in order, first. Then, we can help others.
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Old 08-21-2012, 09:25 PM   #159
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The last time I was in China, they were paying $0.68USD/hr to their labor and $3.98USD/hour to their engineers. no matter what you do, you cannot compete against that here in the states.
You're raging against the rising tide. We cannot secure our prosperity with a wall of protectionism. We are very competitive with China despite the wage disparity due to other factors we have and they do not: Strong enforcement of IP laws, respect for property rights, a functioning justice system, etc. Chinese wages (and those of the developing world) will grow over time and our (along with the rest of the developed world) will decline, especially in a relative sense.
The trick is for us (and every country) to focus on those areas where we enjoy a comparative advantage. The Chinese build the IPads and make a few dollars apiece while Apple manufactures none of them and makes the lion's share of the revenue on every one.
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Old 08-21-2012, 09:27 PM   #160
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But do you understand that the trustees of the SS system have indicated that there will be a 25% reduction in SS payments as the trust fund runs out in 2033 -21 years from now?
This is untrue, or at best an incorrect restatement of the issue. When the trust fund runs out, the incoming revenue will only equal 75% of the outgoing obligations. No plan has been made by the trustees or anyone else to cut benefits to 75% on that date. Many plans have been discussed for what to do, including the idea of reducing benefits, increasing taxes, changing retirement ages, but to say that the trustees plan to reduce benefits on that date is projecting an opinion of future events as if it were fact. You may want to make plans based on this assumption, but it is speculation, nothing more. Many opinions differ about what choices will actually be made.
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