"Choice Architecture" and Social Security

[RunningBum]

You're right, that article was brought up here: https://www.early-retirement.org/forums/f28/suze-orman-ss-payments-advice-103342.html#post2413567
and a few of us pointed out some major flaws with it in posts following that.

 

[wmc1000]

Yes, everyone's SS "flavor" is different! Isn't that what makes it great so we can choose based on our individual circumstances?

For us we claimed at FRA of 66. Why? Because it covered 100% of our expenses including our mortgage! Yes, we have a mortgage but the balance is so small, (less than $12K), and our monthly mortgage payment pays $1,000 per month towards the principal so in another year we have another $12,000 freed up from our SS payments for discretionary use without touching any of our retirement accounts.

If one of us passes early the remaining single SS payment would still cover 100% of essential expenses, so for our FRA "flavor" of SS we didn't need or want to wait any longer.

We feel blessed to be in this position and it is due to our living at or below our means which led to us being in this position now which we have tried to instill in our children.

 

[Audie Murphy]

I kills me all the passion and controversy around this issue. We will have our house paid in full and plenty of nest egg to look forward to. The plan is to take SS at 62 and possibly work part time if necessary. The decision is different for everyone but for us it just makes sense to get all that we can ASAP. It will not take a lot of money to live month to month with no debt. In fact, I can see living high on the hog, so to speak.

 

[pb4uski]

The actuarial SS tables haven't been updated in awhile and thus "actuarial neutral" is probably not quite correct and understates the benefits of delaying to a small extent.

+1... also, actuarial neutrality is based on uni-sex mortality... IOW there is no difference between the discounts/premia for claiming early/delaying for men vs women and we know that women typically live longer than men. All else being equal men would be better claiming earlier and women later due solely to this.

In addition, the actuarial neutrality is only for a single life.... for married people where one person had significantly higher earnings than the other, joint mortality is a significant factor. While I will likely live to be 85 and DW to 88 according to the SOA longevity calculator, one or the other of us will likely live to be 92. So it is likely that one or the other or us will collect my benefit for 27 years.

https://www.longevityillustrator.org/

 

[Perryinva]

Exactly. And since income is fungible, if there is more than adequate resources to delay, and no reason to assume a shorter life, then why not delay? Of course, since I am already delaying and past 62, it is easier to say that. DW is 67.5 and filed at 62. Time flew by.

 

[Sunset]

I kills me all the passion and controversy around this issue. We will have our house paid in full and plenty of nest egg to look forward to. The plan is to take SS at 62 and possibly work part time if necessary. The decision is different for everyone but for us it just makes sense to get all that we can ASAP. It will not take a lot of money to live month to month with no debt. In fact, I can see living high on the hog, so to speak.

If you have plenty of nest egg, why would you work out of necessity

You do understand about survivor-ship and SS , how if the higher earner or only earner waits until age 70, then that high SS amount is paid until you are both dead.

 

[Audie Murphy]

I only mean to supplement some early year income to prevent over use of nest $$. Retirement for me is not going to be like flipping a switch. It will more resemble the slow turning back of a rheostat. When we are completely not working any part time hours from early “retirement” SS and nest egg will become a two legged stool. One leg will be pretty fat. It does not cost that much to live.

 

[Chuckanut]

Then there is always this analysis.

https://www.early-retirement.org/forums/f28/laurence-kotlikoff-maximize-my-ss-com-77660.html#post1604411


If you don't care about leaving an estate to your heirs (admittedly a very big IF for many of us), taking SS at 70 gives you more money to spend each year starting at 62.

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

 

[pb4uski]

I like this analysis and just copied it from Chuckanut's link.

Forget trying to calculate how much 'You'll Get'...Focus on How much you get to spend.

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any stupid 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.

 

[RunningBum]

Then there is always this analysis.

https://www.early-retirement.org/forums/f28/laurence-kotlikoff-maximize-my-ss-com-77660.html#post1604411


If you don't care about leaving an estate to your heirs (admittedly a very big IF for many of us), taking SS at 70 gives you more money to spend each year starting at 62.

Yep. And one of the reasons I get sucked into the when to take SS threads is that there are always the people who say they want to take it at 62 when they are more active and want to spend it. It's tough for me to leave that alone.

And I think that even if you do care about leaving an estate, 70 isn't necessarily wrong. I didn't go back to that point an see what they said, but I think the breakeven point does come into play here. Once you reach breakeven you will leave more. And if you don't reach it, chances are you've still left a lot of your savings intact.

 

[Dtail]

For me with the ACA management and lump sum pension at 65, the decision is easy until 66.
Then one year at a time decision from there.

 

[Perryinva]

It doesn’t take that much to live?? Okaaaay.

Funny, I made the same point about spending more from day one on the other thread. I suspect there are just as many that not only don’t care how much they leave to heirs, but many like me, That want to leave as little to heirs as reasonably possible. Funny, too, I hadn’t considered that a lower WR meant a higher differential, but I did consider the net gains after taxes taking advantage of Roth conversions and the tax preferred treatment of SS income. We have pensions that, along with SS at any level put us in the 22/25% bracket. It all adds up to more income now, by delaying filing.

As said about 1000 times, if you need SS at age 62 to live, then there is No mo discussion. There is no choice to file later, unless you keep working, and if you can live on your savings plus age 62 SS rather than work, then do it, if you hate your job. Just state that, and not “It’s obvious that everyone should file at 62” BS.