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Old 05-18-2015, 02:48 PM   #201
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due to the funded status of SS, many would say there is a huge political risk involved with the timing and amount of payment for those of us under 55
Most of the posts here have been about longevity and the math behind making a decision.

I'm looking at it from the other end.

I fear changes to the program could be near. SS has become less and less a 'third rail' but everyone is making assumptions based on nothing changing.

Means testing, increasing the FRA age, additional taxation, decreasing the benefits, using different measurements for COLA are but a few of the wild cards.

I posted here early in the thread: how sad would it be to delay to age 70 only to no longer qualify!

My perspective: Take the money and run. If the rules change, you'll be that much ahead. If not, and you live beyond your break even, well...you got that going for ya!
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Old 05-18-2015, 03:01 PM   #202
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I should make all my clueless pension friends (for which I am one, also) read these types of threads. Our retirement planning consisted mostly of quitting the job, linking the bank account to the pension system, and then spend the monthly check. Determining optimal age to draw SS, appropriate distributions for 401ks, Roths etc, Firecalc, sound investment strategies of nest egg. The list goes on. No wonder average Joe doesn't understand retirement. They cant even get past saving 10-15% of their paycheck let alone all this.


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Old 05-18-2015, 03:09 PM   #203
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it's very complicated - that's why many early retirees are low hanging fruit for unscrupulous FAs
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Old 05-18-2015, 03:09 PM   #204
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Originally Posted by marko View Post
Most of the posts here have been about longevity and the math behind making a decision.

I'm looking at it from the other end.

I fear changes to the program could be near. SS has become less and less a 'third rail' but everyone is making assumptions based on nothing changing.

Means testing, increasing the FRA age, additional taxation, decreasing the benefits, using different measurements for COLA are but a few of the wild cards.

I posted here early in the thread: how sad would it be to delay to age 70 only to no longer qualify!

My perspective: Take the money and run. If the rules change, you'll be that much ahead. If not, and you live beyond your break even, well...you got that going for ya!
I totally agree. The sand may shift for someone like me who is 5.5 years away from 62.
I am single, actually widowed with no spousal benefit to count on, so any future spousal benefit considerations do not apply in my reasoning. I have decided to never remarry.

I see SS as the gravy on my potatoes. I paid into it all my life, therefore I am going to collect it. I like the idea of having SS benefits in place before the sand shifts.

And yes, I am going to spend it.
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Old 05-18-2015, 03:19 PM   #205
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I totally agree. The sand may shift for someone like me who is 5.5 years away from 62.
I am single, actually widowed with no spousal benefit to count on, so any future spousal benefit considerations do not apply in my reasoning. I have decided to never remarry.
I see SS as the gravy on my potatoes. I paid into it all my life, therefore I am going to collect it. I like the idea of having SS benefits in place before the sand shifts.
And yes, I am going to spend it.
Yea those ideas are popular with politicians who do not want to get elected [mod edit]
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Old 05-18-2015, 03:22 PM   #206
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What is the probability that all the factors that go into the decision will remain unchanged between now (age 48) and the time I must make the decision (Age 62)?

I am sure it is close to 0% so I will just have to wait to determine what I should do.

If I had to decide right now I would lean toward taking it early for the following (my circumstance) reasons:

1. If I waited it would only be a slight increase in expected lifetime income (assuming long life) so would not make much difference overall if everything goes as planned.

2. We expect an approximate equal weight from our portfolio, pensions, and SS. Delaying would put excess weight on social security later in life. My plan is to try to arrange it so any of these three sources would be enough to take care of the basics.

3. Lean toward depending on myself versus depending on SS (for longevity).
I tend to agree with this. We have more control of our portfolio, so I am hesitant to deplete that more than we need to in favor of SS. Future SS benefits and taxes are kind of a wild card to me, but not likely to improve, especially for households with higher than average net worth and other retirement income sources.

I like to have future expenses and income as controllable as possible. For me it cuts down stress. I can't control the stock market or what happens to SS. So we focus on liability matching and have a fixed rate mortgage, a fair bit of TIPS , I bonds and CD ladders as well as chipping away at unnecessary recurring expenses and increasing passive side business income.
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Old 05-18-2015, 03:31 PM   #207
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I totally agree. The sand may shift for someone like me who is 5.5 years away from 62.
I am single, actually widowed with no spousal benefit to count on, so any future spousal benefit considerations do not apply in my reasoning.

Why no spousal on your late DH's record? Just curious.
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Old 05-18-2015, 03:35 PM   #208
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I believe that the political risk is real, essentially unknowable, and that it is the only meaningful negative about waiting, for someone without special circumstances.

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Old 05-18-2015, 03:44 PM   #209
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Why no spousal on your late DH's record? Just curious.
He w*rked odd jobs in high school, and went into the Navy for 4 years. Then he used the GI Bill to get a Bachelor degree. He w*rked PT during college.
At age 26, he got a govt j*b under CSRS and did not pay into the SS system at all. His total w*rk record outside of the govt j*b was 4 quarters short for me to be eligible for a SS survivor benefit.
It's ok, because I receive his govt CSRS pension and lifetime medical coverage (premiums paid out of pension) as a survivor benefit, since my age 46.
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Old 05-18-2015, 04:17 PM   #210
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It varies some depending on individual circumstances, but most studies/articles seem to point to early 80's as an average breakeven. It can vary from late 70's to late 80's.

It's important to not confuse average longevity with SS breakeven. About half will live longer than average longevity, but everyone is money ahead on SS when/if they reach their individual SS breakeven age.

One of hundreds What Is Social Security's Full Retirement Age?

Even quantitative analysis like this generously provided by Midpack has its issues. For example, this analysis does not consider the time value of money. A dollar you get at age 62 is considered to have the same value as a dollar you get at age 70, per the footnote under the graph on the web page. In my case, SS dollars I received at 62 will have increased by 50% - 75% in value by the time I reach 70 (assuming the next two years of market performance are similar to the last six).

It's really a crap shoot to know when to take SS since you have to make so many assumptions concerning your longevity, market returns, your current and future tax situation, etc. Personally, I think if you handle the money prudently, your longevity is typical and if market conditions and inflation are typical rather than at some extreme, it isn't going to matter very much. This assumes no special circumstances such as a spouse impacted by GPO, etc.
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Old 05-18-2015, 05:27 PM   #211
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For us, the plan is for me to delay taking SS until 70 in order to maximize surviving spouse's income stream in the event I die first. It's also a plus that this income source is not vulnerable to market conditions or less than ethical financial investment "help." Our solution for our situation...
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Old 05-18-2015, 07:26 PM   #212
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Keep in mind that according bro social security statistics, the percentage of people that apply for ss at 70 is in the single digits. Less than 1 in 10. Very few do.


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Given the general financially illiteracy, and the "I want it now mentality of so many Americans" that seems like a good argument for waiting.

Compared to any commercial available longevity product I've look at delaying SS until 70 is much better.

I don't really get the argument taking ss early so you can spend the money when you are younger. You have a portfolio, pensions (maybe) and SS.
All three produce a stream of income, the portfolio is by far the most unreliable stream.

Why couldn't I just increase my portfolio spending to make up the difference?

Finally and I think this is important but often overlooked. The elderly are victims of financial scams. If some con man, financial adviser, insurance salesman, or Annie Nicole Smith screws me out my life savings at age 85 (clearly I hope for the Anne Nicole Smith in this situation), than I might be able to survive with a $2,500/SS check that I'd still get if I wait until age 70, (it is really hard to sign over an SS check) the $1400 I get for collecting at age 62, that is like cat food level budget.
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Old 05-18-2015, 10:33 PM   #213
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Even quantitative analysis like this generously provided by Midpack has its issues. For example, this analysis does not consider the time value of money. A dollar you get at age 62 is considered to have the same value as a dollar you get at age 70, per the footnote under the graph on the web page. In my case, SS dollars I received at 62 will have increased by 50% - 75% in value by the time I reach 70 (assuming the next two years of market performance are similar to the last six).

It's really a crap shoot to know when to take SS since you have to make so many assumptions concerning your longevity, market returns, your current and future tax situation, etc. Personally, I think if you handle the money prudently, your longevity is typical and if market conditions and inflation are typical rather than at some extreme, it isn't going to matter very much. This assumes no special circumstances such as a spouse impacted by GPO, etc.

Since we are far away from the original post.... let me remind you that the premise was that you would spend the money when taking it at 62 in addition to whatever you had planed to spend anyhow.... so no time value of money involved since it is going out the door immediately....
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Old 05-19-2015, 01:57 AM   #214
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2. We expect an approximate equal weight from our portfolio, pensions, and SS. Delaying would put excess weight on social security later in life. My plan is to try to arrange it so any of these three sources would be enough to take care of the basics.
This is a really important point to me. We don't have pensions, but do have portfolio and SS. DH took at a few months over 62. He was one of the few where not waiting had a clear financial benefit because we had 2 minor children at the time.

In my case I've always said I would decide when I got to 62 and I wasn't going to think too much about it until then. Well, I'm now less than a year to 62 so I'm thinking about it more.

Theoretically, I could wait until 66 and then take spousal while letting my benefit grow. (In our family, DH and I each have very similar benefit amounts, with miney being slight -- less than $100 a month -- larger). My benefit at 62 is almost $2000 a month so even that benefit is decent.

The concerns that I have with waiting are 3:

1. As you mention, I am concerned with depleting the portfolio to an extent that SS becomes overweighted and we don't have enough flexibility later on. Theoretically we could afford to have me wait and take spousal at 66, but I am concerned that it eats up more of the portfolio in the meantime than I would like. Bear in mind, that most of these articles that hammer the idea of people not taking SS until age 70 are assuming that you are continuing to work until then. They aren't thinking you will be spending part of your portfolio, already retired.

2. I have grave concern that the take spousal at 66 and let your benefit grow strategy will go away. I would be ticked to wait and then have it go away before I reap the benefit of it.

3. As others have mentioned, general political concerns that will reduce benefits in future. I don't think that taking at 62 will insulate me from future changes. But, I do think that if I take at 62 I may get higher benefits for a longer period of time.
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Old 05-19-2015, 03:02 AM   #215
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Since we are far away from the original post.... let me remind you that the premise was that you would spend the money when taking it at 62 in addition to whatever you had planed to spend anyhow.... so no time value of money involved since it is going out the door immediately....
but what may not be out the door is the existing investments that do not get spent down in place of not receiving ss.

spending down 8 years of a balanced portfolio adds years to break even so yes there is still a time value. you also lost the compounding on that money forever.

delaying ss can work much better when you don't need to spend down assets such as when you have a pension that covers most or all expenses.
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Old 05-19-2015, 03:07 AM   #216
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This is a really important point to me. We don't have pensions, but do have portfolio and SS. DH took at a few months over 62. He was one of the few where not waiting had a clear financial benefit because we had 2 minor children at the time.

In my case I've always said I would decide when I got to 62 and I wasn't going to think too much about it until then. Well, I'm now less than a year to 62 so I'm thinking about it more.

Theoretically, I could wait until 66 and then take spousal while letting my benefit grow. (In our family, DH and I each have very similar benefit amounts, with miney being slight -- less than $100 a month -- larger). My benefit at 62 is almost $2000 a month so even that benefit is decent.

The concerns that I have with waiting are 3:

1. As you mention, I am concerned with depleting the portfolio to an extent that SS becomes overweighted and we don't have enough flexibility later on. Theoretically we could afford to have me wait and take spousal at 66, but I am concerned that it eats up more of the portfolio in the meantime than I would like. Bear in mind, that most of these articles that hammer the idea of people not taking SS until age 70 are assuming that you are continuing to work until then. They aren't thinking you will be spending part of your portfolio, already retired.

2. I have grave concern that the take spousal at 66 and let your benefit grow strategy will go away. I would be ticked to wait and then have it go away before I reap the benefit of it.

3. As others have mentioned, general political concerns that will reduce benefits in future. I don't think that taking at 62 will insulate me from future changes. But, I do think that if I take at 62 I may get higher benefits for a longer period of time.
my own rule of thumb is just what you said . delaying works great while continuing to work or you have a pension and do not have to spend down much. but in the case of the pension that pay check never really did stop so it is akin to working.

once you are spending down a portfolio in lieu of ss the equation becomes a different story , especially if spending it down in to a down market.
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Old 05-19-2015, 03:59 AM   #217
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ORLY?

there are at least 10 things that can change (other than health) between now and then

Changes in SS law
Changes in tax rates
Changes in his portfolio or target asset allocation
Changes in his risk tolerance
Changes in ACA or in the definition of MAGI
Changes in his employment situation
Changes in employee benefits law
Changes in state law
Changes in interest rates
Changes in general mortality
etc.
Missed most important: One may not need to make the decision........
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Old 05-19-2015, 01:48 PM   #218
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but what may not be out the door is the existing investments that do not get spent down in place of not receiving ss.

spending down 8 years of a balanced portfolio adds years to break even so yes there is still a time value. you also lost the compounding on that money forever.

delaying ss can work much better when you don't need to spend down assets such as when you have a pension that covers most or all expenses.

But that is a different question than what was from the video.... that is all I was pointing out....

To summarize, from memory.....

If you do NOT need SS to live... then take it at 62 and spend it on things you would not spend on normally.... instead of flying coach, fly 1st class... take an extra cruise... etc. etc.... there was no mention of offsetting your spending from your portfolio or taking it and investing.... it was pure and simple.... instead of spending X... spend X+SS.....


Now, I still disagree with that thinking since that might not maximize family SS payments, which is where most people are going with their post...
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Old 05-19-2015, 02:04 PM   #219
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Since we are far away from the original post.... let me remind you that the premise was that you would spend the money when taking it at 62 in addition to whatever you had planed to spend anyhow.... so no time value of money involved since it is going out the door immediately....
Your statement is correct. The guy linked in the first post in this thread said that if you take SS early you can spend more while you're healthy.

The second post (by mathjak) said that's not true. You can prudently spend more in your 60's if you defer SS -- i.e. the guy in the video was simply wrong.
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Old 05-19-2015, 02:12 PM   #220
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For us inheritance is also an issue. We have a number of friends who died before collecting much or in some cases zero SS benefits. It would be nice for our kids / charities to not only not deplete the portfolio but allow them to benefit from our years of paying into SS if we don't live a long time. Barring the zombie attack, asteroid or some Black Swan event, I do not think we will run out of money either way.

Taxes will probably be our main driver as to when to take SS as we still have a couple of part-time income sources for now. We wouldn't bother with taking SS 62 if it meant reduced benefits.
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