Actually I was being a wise guy by invoking the oh-so-simple method of calculating any complicated number...just pick something out of the air that sounds good and wish away factors that produce any results you dont like.
Woke up one day covered in money? Hmmm...sorry for the thread jack but i'll actually answer your question Moemg, a bit later in the post.
What actually happened is that I worked 60-80 hours a week, all my life from the age of 15, without the benefit of any college or industry specific education and ended up as director of strategic marketing for one of the very largest and most profitable companies in the world.
Using my salary and hard won stock options (gained largely by taking on jobs and performing tasks that nobody else wanted to do and being rewarded for my risk taking), I started investing. Selling and diversifying my holdings each year I built a fairly substantial portfolio of over 200 stocks ranging from technology issues to supermarket stocks while most of my co-workers hoarded their shares of company stock, watching them double or triple every year. I was an idiot in their eyes for about 7 years running. I spent my fairly substantial salary almost completely every year, and thoroughly enjoyed my lifestyle. My porfolio gained triple digits for 5 years and double digits for the rest of the time I've spent investing.
Coincidental with this period, I bought three homes at excellent prices in up and coming areas, fixed them up and sold them at significant profits.
In 2000 I was lucky or smart and dumped most of my stock holdings (I was practically running my own mutual fund) into REITS and balanced funds like OAKBX and DODBX. I held onto about 95% of my money while the company stock dropped 70-80% and everyone else lost their holdings. Quite a few of my peers were exercising and holding options when the price dropped. One paid 250k in AMT, another went bankrupt.
A few years later I moved my money to vanguard into a diversified portfolio that has gained roughly 13% annualized over the last three years and a little over 11% annualized over the last 5 years.
I entered ER at 39 as a single man with a plan for a 100% safe retirement to the age of 100 by taking advantage of a company separation package not intended for me that paid me a years salary and benefits.
A year later I married and a year after that, we had Gabe. Adapting my plan to accommodate a spouse and child, and my wifes small but very useful part time income, we will enjoy a 100% safe retirement together to age 100 including paying for as much schooling as Gabe ever desires, and helping him buy a home or start a business when he's older. My wife can quit working the 2-3 days a week she's currently putting in any time she wishes, but loves the job and would like to continue for a while.
So yeah, someone that was practically orphaned at age 8 and with no significant formal education, I worked hard to learn skills and position myself in front of an ATM (the tech stock boom) and a vegas slot machine (the california real estate boom) just at the time they both started spewing money, then was surprisingly lucky to make almost all the right moves at the right times to hang onto most of it. Seems a whole lot of others werent as lucky.
So sure, i'm a little bit of a wise guy, including quips directed at a few jackasses that cause more damage than good. But as far as assuming everyone will wake up rich and enjoy an easy ER? Hardly my perspective. And given the beatings I take trying to make sure the extra wealthy gigolos around here give good advice to the average ER or ER candidate, thats not particularly fair.
Gosh, it would have been a lot simpler to just say "Blow Me!".
But perhaps there are some good lessons learned about my journey about diversification, sticking with a plan even when it looks stupid for 7 years in a row, working hard and using what you've got to become successful. Beats the crap out of whining about my sorry original lot in life and sitting down next to the road with a "work for food" sign.
Now...back to our regularly scheduled program...
Moemg: I can simplify your calculations even further along than multiplying by 25. The social security payments are keyed in amount and timing to produce nearly an identical total payment for someone who reaches a particular age point, which is highly variable depending on circumstances such as taxation, investment of all or some portion of the benefit, and other minutia. The bottom line is that the break even point will be somewhere in the 80-90 year old range.
If you think based on relatives lifespans and measure of your own relative health that you'll live into your 90's, you will do better to take it at 70. If you believe that 90 is a longshot, you'll do better to take it at 62.
Excepting a short or long life span, the difference is likely to be moot if you land somewhere in the middle.
Our prior "discussions" where some posters elected to "simplify" the discussion by removing critical and measurable factors floated around whether taking the benefit early or later would result in changes to ones ability to spend more money prior to taking the benefit illustrated that such a line of thinking bears merit, although we werent really able to agree on what that was or how to measure it.
In my opinion, the procedure jdw_fire gave is a reasonable procedure that will produce a reasonable number to consider.
You may also look at
http://www.ssa.gov/OACT/quickcalc/when2retire.html
For the most simple break even analysis, exclusive of investing any/all of the benefit amounts, interest accrued, or other funds/spending you are in possession of.
This will also give a good overall perspective and access to several other calculators:
http://www.ssa.gov/retire2/breakeven.htm
Make sure when you do any of these calculations, that you're using properly inflated dollars rather than "todays dollars". The social security benefits calculator has an option to produce numbers in inflated dollars for your benefit amounts rather than using todays dollars. Also make sure when using the various calculators that you use ANNUAL benefits figures when called for and MONTHLY figures when those are called for. A very common mistake is to run firecalc or some other calc and plug in the monthly SS benefit figure when its looking for an annual number. When people make that common screw-up, it produces results but incorrect ones.
Sometimes once people realize they've made a mistake with the calculator in this or other manners, they then proclaim that the calculator is not good for the purpose of making a good decision.
