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Would you take this risk of maybe running out of assets?
Old 06-23-2014, 04:48 PM   #1
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Would you take this risk of maybe running out of assets?

I found an online tool today that maximizes social security payouts based on assumptions you put in the tool. It basically answers the question "when should I take SS."

The tool showed that we should delay taking SS until age 70. (I'm 4 years older than DH so he will file for half of my SS at 67.)

Here's the rub though. 90% of our income will have to come from our investments since we have only one tiny pension. Doing the modeling, if we wait until 70 to take SS we completely run out of assets at age 73.

But it's not doom and gloom. By waiting until 70, SS will pay us $20k/year more than we need in expenses so our assets will start building again.

Would you take a risk like this?... running out of money is super scary but it does answer the question of longevity risk and if all of your income is coming from SS then the stock market vagaries are no longer an issue.

If you're interested, the link to the tool is When Should I Take Social Security to Maximize My Benefits? | Maximize My Social Security. The fee for use is $40/year. It was recommended by a book I'm reading called "Control Your Retirement Destiny" by Dana Aspach.
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Old 06-23-2014, 04:57 PM   #2
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Where was your money when the bottom fell out in '08-09? If you had money in equity and the market dropped by 50%, how would you feel? Would you buy more at lower prices or run for the hills?

We are about due for a drop -- it could happen tomorrow or it could be months or years away. 50-60% haircut would be normal.
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Old 06-23-2014, 04:57 PM   #3
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No way.

I would want to have an emergency fund and some cushion. To predict this close, you are probably doing a 'measure with a micrometer, cut with an ax' approach. How far are you from 70?

I would re-evaluate as I get closer, or save more, and/or take it earlier than 70 if needed. Why deplete it just to build it up again, and be razor thin for those years? How much less in $ if you take it a year or two sooner, @68 or 69?

-ERD50
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Old 06-23-2014, 05:01 PM   #4
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Would you take a risk like this?
No - absolutely, positively not.

I'd never willingly go back to living 'paycheck to paycheck', even if the checks were very nice. I spent 30+ years building up a nice nest egg and there is no way I'd ever want to give it all up.

EDIT: My reluctance with this drawdown strategy to maximize SS benefits is similar to the aversion I have to buying an annuity. It isn't going to happen.
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Old 06-23-2014, 05:02 PM   #5
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I would re-evaluate as I get closer, or save more, and/or take it earlier than 70 if needed. Why deplete it just to build it up again, and be razor thin for those years? How much less in $ if you take it a year or two sooner, @68 or 69?

-ERD50
+1

My plan is to delay SS if I am flush, and to take it early if the market turns bad. Would not want to deplete my stash during a market downturn. That would mean "sell low, and have no money to ever buy again".
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Old 06-23-2014, 05:07 PM   #6
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The idea makes me uncomfortable, but if you really do run out at 67 you could start up SS benefits then.
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Old 06-23-2014, 05:09 PM   #7
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What if SS gives everybody a 25% haircut as SS publications been clearly stating for several years now it will do when the trust fund runs out?
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Old 06-23-2014, 05:12 PM   #8
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How long would the money last in CD's?
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Old 06-23-2014, 05:15 PM   #9
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What if SS gives everybody a 25% haircut as SS publications been clearly stating for several years now it will do when the trust fund runs out?
Wow I did not know that.
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Old 06-23-2014, 05:45 PM   #10
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Thanks for your replies. I'm not at all surprised that the common answer is "absolutely not". I feel the same way. It gives me the heebee geebees to think about running out of money but DH has told me I'm way too conservative so I thought I'd toss the question to you.

Out of curiosity I ran Firecalc using the two scenarios (62 and 70) and annual spending of $85k. Starting portfolio at a 95% success rate was within $50k of each other so I'd rather have level spending ability than excess in older age.

We're still 2 years from retirement and I'm only 53, so still time to iron out the financial plan details. Lesson learned, the book answer may not be the best answer for my situation and comfort level.

For the person who asked if CDs came out better... not even close. We're fully invested in index funds and plan to stay there. If we were in CDs we'd never be able to retire!
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Old 06-23-2014, 05:48 PM   #11
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But it's not doom and gloom. By waiting until 70, SS will pay us $20k/year more than we need in expenses so our assets will start building again.
If SS at 70 exceeds your projected expense, at what age does it cover with no excess? Once your expenses are covered what is the advantage of further delaying SS?
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Old 06-23-2014, 05:49 PM   #12
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If SS at 70 exceeds your projected expense, at what age does it cover with no excess? Once your expenses are covered what is the advantage of further delaying SS?
Very good point. Not sure so I'll go figure that out.
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Old 06-23-2014, 05:55 PM   #13
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I would never wait to take SS if it meant I was going to run out of portfolio money when I turned 73.

That said, you are a long way from being eligible so I think you should revisit the issue as you and your husband become eligible for benefits. I'm older than you (60) and I haven't even decided when I will take benefits since I figure I will know more than I do now when I become eligible. I think about it a little, but no decision.
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Old 06-23-2014, 06:00 PM   #14
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I would never wait to take SS if it meant I was going to run out of portfolio money when I turned 73.
+1

That is just too risky for me. If I did that, then every time I happened to see a story about how SS is going under, I'd freak out. I'd rather lower my standard of living a little if necessary, than to go through that kind of stress.
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Old 06-23-2014, 06:00 PM   #15
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I'm a planner by nature and so I'm developing our financial plan for retirement.

A lot of 'common knowledge' like using after tax money first, tax deferred second can cause a wallop of a tax bill at 70 1/2 when RMDs start, so I'm trying to educate myself on all of the levers that can be pulled to maximize the amount of money we'll have to spend while keeping taxes as low as possible.

All this edumacation hurts my brain at times, but DH has zero interest and I'm the 'worrier' so it's up to me to build the plan. :-)
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Old 06-23-2014, 06:09 PM   #16
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If SS at 70 exceeds your projected expense, at what age does it cover with no excess? Once your expenses are covered what is the advantage of further delaying SS?
The answer is @ 66 SS covers expenses 100%. Now need to rerun the model to see how much money we'll have left @ 66 in the portfolio. Should be enough to not feel squeezed.

Thanks for suggesting that exercise.
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Old 06-23-2014, 06:19 PM   #17
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No way ! Your plan includes you both living to collect SS or eating cat food . I would collect earlier & cut the budget .
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Old 06-23-2014, 06:22 PM   #18
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No way ! Your plan includes you both living to collect SS or eating cat food . I would collect earlier & cut the budget .
hmmm, great way to look at it.

We both have extreme longevity in the family so it hadn't occurred one might pass before collecting SS which would be horrible for the person left behind monetarily.
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Old 06-23-2014, 06:35 PM   #19
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I plan to wait until 70. The way I look at it, after I'm 62 I can opt to take SS anytime my investment results make me uncomfortable waiting further.

In your situation, I would define a certain amount of assets I would not want to go below and then pull the SS trigger if you get near to that number.
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Old 06-23-2014, 06:46 PM   #20
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hmmm, great way to look at it.

We both have extreme longevity in the family so it hadn't occurred one might pass before collecting SS which would be horrible for the person left behind monetarily.
Well, it is not just that one might pass before collecting SS. It is also that the one of you is very likely to do so before the other, so there will likely be some period of time (which could be years) during which one spouse would be left and collecting only one SS. So, you have to be sure the plan will pass muster once there is only one of you collecting SS.
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