You should take SS at 62

[Independent]

https://www.fidelity.com/annuities/immediate-fixed-income-annuities/overview Then click on "estimator" at the bottom. They just say, "Fixed annuities available at Fidelity are issued by third-party insurance companies..." no companies named.

With your inputs I get $637 for $100K. Same ballpark as you got.
For $129,600, $826 for no cola, $691 for 2% annual increase. I must have used different parameters yesterday, when I posted $940.

So...for $129K a cola SPIA pays $691 and SS pays $1026. As we all say, the SS "annuity" is cheaper. So if you want the longevity insurance and are okay with the limitations on timing and amount that the SS annuity will give you, that's the way to go.

Thanks for following up on this. I've occaisionally said that delaying SS is a significantly better deal than any private SPIA available today (impacted by low interest rates). Your earlier post said it was way closer than I thought.

 

[eta2020]

Thanks for following up on this. I've occaisionally said that delaying SS is a significantly better deal than any private SPIA available today (impacted by low interest rates). Your earlier post said it was way closer than I thought.

I find this analysis more clearly done by pb4uski:

That is essentially the math for taking SS at 70 vs 62. Let's say that your FRA is 67 and your FRA benefit is $1,000/month. If you claim at age 62, your benefit will be about 30% lower, or $700/month. If you claim at 70 your benefit would be 24% higher, ore $1,240/month.

If you delay to 70 then you will have forgone $700/month for 8 years, or $67,200 and you gain a $540 COLAed benefit for the rest of your life. An argument could be made that you give up more than $67,200 because of COLA, ok... so if you bake in a 2.75% annual COLA, the $67,200 becomes $74,036.

According to immediateannuities.com, $74,036 of premium at age 70 (male) would buy a $467/month non-COLA lifetime benefit, so by delaying SS you get an extra $73 per month plus COLA on the whole $540/month. Good deal IMO.

So you can buy 467 non-COLA lifetime benefit...I would expect 200-300 range for COLA lifetime benefit. Compare this to 540 Cola from SS. That looks like incredible deal.

Collecting SS early is good if: You need the money or you are in poor health or you are a financial genius.

 

[Theseus]

DH and I visited a fee only FP at the point that DH retired in 2008. The visit was to have a set of eyes other than our own review our plan once to validate our numbers/assumptions. One of his suggestions was to defer taking SS until 70 and intentionally take RMD's in the amount that SS would have been between retirement(62) and 70. Doing so would keep our income taxes the same during that period but reduce the amount of future RMD's that would need to be taken once reaching 70.5. Furthermore, Converting those 8 years of annual withdrawals into a Roth IRA and investing them also avoided the concern of liquidating during a down market and in fact the Roth grew handsomely as the market since 2009 has outperformed historical returns. And now that Roth is worth a considerable amount and can never be taxed. Not to mention that the SS to be claimed at 70 will be 164 percent of its original amount, not including COLA's. I am well aware that many could not afford to take this path but would need to spend the WD's to live but as a pure math play I think this advise was flawless. Our FP earned his fee for that suggestion alone.

Because we heavily relied on 401, 403, & 457 plan deferrals to keep our taxable income low while working, I've been thinking along those lines too. Modeling potential RMD's is subject to the variability of market returns, but it does have a shorter duration than the entire retirement plan horizon so I consider that a short-term plan, and can utilize taking SS earlier if things go south. Originally I was in the take it early camp on SS, but another point I see in delaying - we can utilize AA to shield against market downturns, although that doesn't necessarily work so well for inflation protection. Delaying SS handles that aspect, with the added benefit of providing a bonus should deflation hit. That said, our situation seems to be leaning towards FRA, maybe stretch further if things are going well. But, that is 10 years out, things can change - so I''m saying plan, but be flexible.

 

[pb4uski]

Two different views on taxes:

I side with misanman... I want to delay so I can do more Roth conversions before RMDs begin and minimize my time in the 25% tax bracket. That 10% makes a big difference.

Delaying till 65 will maximize Obamacare Subsidies .....

True, but I concluded that the value of the Obamacare subsidies were dwarfed by the tax torpedo and I am better off foregoing the subsidies in favor or Roth conversions.

 

[haha]

I find this analysis more clearly done by pb4uski:


So you can buy 467 non-COLA lifetime benefit...I would expect 200-300 range for COLA lifetime benefit. Compare this to 540 Cola from SS. That looks like incredible deal.

Collecting SS early is good if: You need the money or you are in poor health or you are a financial genius.

You are exactly right. Truly, no contest.I've shown this several times. It does not gt accepted.
Ha

 

[RetireAge50]

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).

 

[Big_Hitter]

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.

not close to zero, equal to zero

 

[eta2020]

not close to zero, equal to zero

I would disagree...

The only changed technical factor that may influence decision is your health at 62. All other considerations will remain nearly same.

But for people with lack of planning that will not be a case

And if you really will live long as you claimed you are looking at difference of few 100k. If I treated every few 100k earned in some investment like who cares if I make it or not I would not plan to fire at 55

 

[RetireAge50]

Yeah, equal to zero and then you have the unknowns beyond age 62:
Social Security: Would only get worse (means testing, etc) or remain unchanged
Pension: Only worse or unchanged
Portfolio Value: Can go up or down but with all the conservative estimates would likely be better.

 

[Big_Hitter]

I would disagree...

The only changed technical factor that may influence decision is your health at 62. All other considerations will remain nearly same.

But for people with lack of planning that will not be a case

And if you really will live long as you claimed you are looking at difference of few 100k. If I treated every few 100k earned in some investment like who cares if I make it or not I would not plan to fire at 55

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.


If you want I can rattle off another 10


Bottom line - 14 years is an awfully long time.


Planning is great but it's based on several volatile assumptions, especially on an individual basis.

 

[Independent]

Delaying till 65 will maximize Obamacare Subsidies ...

Just collect 60k in dividends get another 60k from cash and you have 10k a month plus Health Care subsidies (I am talking about couple)

Add to this 20k - 30k in SS and say goodbye to subsidies. You can go and spend half of SS on Health Care Insurance for a privilege of collecting it early.

The issue was taxes. Though I'm sure a full analysis for some people includes ACA subsidies.

I'm not sure if your smilies mean that you're joking. In my world, $60,000 in dividends means approx $3 million in taxable stocks. A $60,000 annual withdrawal from "cash" means a couple hundred thousand in cash. People with those numbers probably have at least equal amounts in other assets.

If I had that kind of money, I'd find these SS discussion boring.

 

[eta2020]

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.


If you want I can rattle off another 10


Bottom line - 14 years is an awfully long time.


Planning is great but it's based on several volatile assumptions, especially on an individual basis.

But the fact that for someone who will live above average length of life taking it early is financial mistake is a fact today as it was 30 years ago and as it will be 20 years from now.

And that is a case no matter what happened in last 30 years to all the things you are listing here actually it is unrelated to most of the things you are listing....

 

[Big_Hitter]

But the fact that for someone who will live above average length of life taking it early is financial mistake is a fact today as it was 30 years ago and as it will be 20 years from now.

and who will be that someone?

none of us know

if you ask me to estimate how many people of a 100,000 cohort will be alive 10 years from now, I can do that pretty accurately

if you ask me if someone will be alive 10 years from now, I can't give you an answer

 

[eta2020]

and who will be that someone?

none of us know

if you ask me to estimate how many people of a 100,000 cohort will be alive 10 years from now, I can do that pretty accurately

if you ask me if someone will be alive 10 years from now, I can't give you an answer

Most of us here (those who FIRE) will live above average length of the life .

 

[eta2020]

The issue was taxes. Though I'm sure a full analysis for some people includes ACA subsidies.

I'm not sure if your smilies mean that you're joking. In my world, $60,000 in dividends means approx $3 million in taxable stocks. A $60,000 annual withdrawal from "cash" means a couple hundred thousand in cash. People with those numbers probably have at least equal amounts in other assets.

If I had that kind of money, I'd find these SS discussion boring.

For most part I have that kind of money and I don't find planing how to maximize SS boring in any way. That could mean few 100k for me and few 100k for DW.

That is LOT of money even for people with millions in equities.

 

[RetireAge50]

To get to the few 100k you must be assuming social security will not change and the market will have below average returns. Not sure either are probable over a long period of time.

Also trading some of my portfolio for more reliance on the government makes me less financially independent it seems to me.

 

[eta2020]

To get to the few 100k you must be assuming social security will not change and the market will have below average returns. Not sure either are probable over a long period of time.

Also trading some of my portfolio for more reliance on the government makes me less financially independent it seems to me.

Well if I start with maximum benefit which is about 2500 (really 2663) a month that is 60000 dollars a year per couple (both collecting maximum).

Now step 60k down by taking it at 62...step 60k up by taking it late at 70 and after age about 79 you are cashing that money in (difference between SS at 62 versus at 70 which is about 33k).

And that has nothing to do with how market performs. We are just talking about how much we collect from SS.

Please refer to graph in: http://www.schwab.com/public/schwab/nn/articles/When-Should-You-Take-Social-Security

 

[Big_Hitter]

Most of us here (those who FIRE) will live above average length of the life .

since most early retirements are health related I doubt that will be the case...not that I don't hope that all forum posters live longer than expected

 

[eta2020]

since most early retirements are health related I doubt that will be the case...not that I don't hope that all forum posters live longer than expected

So many early retirees here do so because they have a means. Lets call them "Upper middle class".

Statistically this part of population lives longer. I am not trying to be rude or ahole.... It is just a simple fact. Same as statistically Asian Americans live longer then whites.

So I claim they will most likely live longer then 79-80 years a breakeven point of taking SS at 62 as compared to 70.

 

[Big_Hitter]

the life expectancy for a male in the US currently aged 62 isn't 79 or 80, it's much longer than that


you don't want to argue life expectancies with me. let's just say I'm a pro and leave it at that

 

[RetireAge50]

I do not expect the minimum social security to go down but I would put a high probability on the maximum being capped either directly or by taxation.

You cannot make a decision without taking into account the time value of money (market return).

In any event, I probably agree financially it is better to delay but after taking into account the probabilities and other income sources it is not a black and white decision.

 

[Big_Hitter]

I do not expect the minimum social security will go down but I would put a high probability on the maximum being capped either directly or by taxation.

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

 

[robertf57]

Life expectancy for a male at 62 from the Social Security Actuarial Table (likely a little conservative) is 82 Census life table is about the same

 

[Big_Hitter]

yeah those are old tables 84 is the new 82...


https://www.soa.org/Research/Experience-Study/pension/research-2014-rp.aspx

 

[eta2020]

Life expectancy for a male at 62 from the Social Security Actuarial Table (likely a little conservative) is 82 Census life table is about the same

Actually to correct myself break even point is between 80-81. I was just eyeballing graph when I stated 79-80.

So in the way SS is computed to be fair whether you take it at 62 or 70 for average person.

Really taking it at 70 means you are making bet on your longevity. So for 2 pack a day smoker this is a bad deal

From article break-even points:

$1,992 Age 62 vs. 66 Between 77 and 78
$2,676 Age 62 vs. 70 Between 80 and 81
$3,557 Age 66 vs. 70 Between 83 and 84