Consideration for taking SS early

[Exchme]

You're conflating two ideas.



100% stocks as an asset allocation is definitely not conservative.



However, if we look at historical data stocks long term average is ~10%. Deduct 3% for inflation we have 7%. So figuring 4% when history has been 7% is a pretty conservative assumption. It's assuming stocks perform only 54% of their historical return. Or actually 70% depending how you look at it.

That misses the point of SORR, you can have sickeningly long stretches where you can forget about gains, your portfolio is down hard but you still have to eat.

For folks where a poor SORR and/or a long life would run them out of money, the safer thing to do is wait. If you have plenty of money, then it's not a very important decision, though for married folks, the dice are loaded in favor of the high earner waiting.

 

[FREE866]

That misses the point of SORR, you can have sickeningly long stretches where you can forget about gains, your portfolio is down hard but you still have to eat.

For folks where a poor SORR and/or a long life would run them out of money, the safer thing to do is wait. If you have plenty of money, then it's not a very important decision, though for married folks, the dice are loaded in favor of the high earner waiting.

I’m in my 7th year of retirement and have pretty big cushion built in so I’m not too worried about that. I know anything can happen. Also, I don’t know where I’ve read it but SORR is possibly very overstated. History isn’t a guarantee but it’s a pretty good guideline and sites like FIrecalc have hard data that backs that up. As I said in my last post I still have years to make any decision.

 

[camfused]

I am not sure what to think about opensocialsecurity.com. It always says for DW to take hers early, basically asap, and me to take at 70. But, FI Calc, FireCalc, and my own spreadsheet runs always come out better with both of us taking at 70.

I do all these with and without a haircut.

So, I still lean toward both at 70, since my person goal is to max net-worth at 90, with money left over at 100.

 

[pb4uski]

I am not sure what to think about opensocialsecurity.com. It always says for DW to take hers early, basically asap, and me to take at 70. But, FI Calc, FireCalc, and my own spreadsheet runs always come out better with both of us taking at 70.

I do all these with and without a haircut.

So, I still lean toward both at 70, since my person goal is to max net-worth at 90, with money left over at 100.

What you wrote of the lower earning spouse starting at asap and the higher earning spouse starting at 70 is common where one spouse's earnings and PIA is substantially higher than the other. In our case since I was a high earner and DW was a SAHM.

While I like FIRECalc and FICalc, they are not the right tools for such a decision analysis because they implicitly assume that you live long. Opensocialsecurity.com is a better tool for the SS decision because it includes mortality... the probability that one or the other of you will be alive to collect SS over time.

 

[threeonesix]

Another thing to consider ... do robots pay taxes? The threat to American jobs at all levels of employment from artificial intelligence is very real. No job means no paying SS / Medicare taxes. That could be true for millions of Americans in the next few decades.

The Egyptian Empire lasted 3,000 years. The Roman's made it to almost 1,000. I'd be shocked if America makes it to the year 2100. Of course, I won't be around to see it unless it's just my head in a jar of formaldehyde.

 

[SevenUp]

I am not sure what to think about opensocialsecurity.com. It always says for DW to take hers early, basically asap, and me to take at 70. But, FI Calc, FireCalc, and my own spreadsheet runs always come out better with both of us taking at 70.

If you are doing significant Roth conversions, not taking SS allows more conversion at lower marginal tax rates. Given how flat an optimum the "SS benefits taken in isolation" chart shows (see the OSS output), it's plausible that deferring both SS benefits could be best in that case.

 

[camfused]

^^^ Yeah, I am doing lots of Roth conversion, so perhaps you have it.

 

[FREE866]

Just ran my numbers through the cFIREsm calculator with numbers for taking SS at 62, 67, and 70....dying at 90, 85, and 80......I'm fine in any scenario , but I think mentally now I'm leaning towards 66,67.
I could spend hours on these calculators hahaha

 

[statsman]

DW stopped working a few months before her 65th, and she started SS at that point. Between her being 6 years older than I am and having similar work credits for SS, there isn't much of a consideration for survivor benefits from me.

I'll probably start about the same time, just before or on my 65th. Avoids the "Should I take SS at 62 or 70?" position. As it is, my family's health history is not on my side.

 

[TheWizard]

Poor people and people with shorter expected lifespans should claim SS at age 62 or when they stop working, whichever is later.

For other folks, the situation is a bit complicated...

 

[lrip]

Our situation may be different than most as DW is older than me and was a stay at home mother for most of our marriage. She doesn't have enough credits to qualify for SS on her own work record. All the calculators I've run for our situation say I should claim at 62 so she can also claim using my record. Apparently, that's how we get the biggest lifetime benefit in the calculators. That said, we, don't need the money right now so undecided on what we'll do when I am eligible in a year or so.

 

[sengsational]

Poor people and people with shorter expected lifespans should claim SS at age 62 or when they stop working, whichever is later.

For other folks, the situation is a bit complicated...

The complications might extend to your first sentence if a high earner with shorter lifespan expectations is paired with a low earner with a long expected lifespan, right?

 

[cyber888]

I'm taking SS at 62, because my DW is older than me, and she gets 50% of my Full Retirement age SS which is big.
Both of our SS will cater to our basic retirement expenses at 62.
We will withdrawal very little from our retirement fund.
I think our retirement fund will grow faster and will be much bigger when I hit 70 years old, base on Firecalc and other Calculations.

If we wait for SS at 70, we will spend our retirement funds much faster.
In our case, our SS is big enough to cater to our basic expenses when I turn 62, which allows us to leave our investments growing faster.

I also watched a discussion on Youtube that if your Medicare is deducted from your SS when you hit 65 years old, rather than 67 - 70, your Medicare cost is somewhat pegged to your SS increase.
So, your Medicare cost could be much higher if you take SS at 67 - 70. There's no way I could verify if that is true, but the Youtuber did some research about it and showed some documents.

 

[Sunset]

^^^^^^ You are making the large assumption that your investments will do very well and grow a lot.
It's possible that won't be true, and they may languish at the inflation rate or less.

It is true, without SS, a person pays the medicare costs without the protection of "hold harmless" rule that says it cannot be more than the SS increase. Once a person is on SS they get the same protection even if years later.

This year our Medicare cost went down which was a surprise, we are not on SS yet.

 

[Navigator]

Our situation may be different than most as DW is older than me and was a stay at home mother for most of our marriage. She doesn't have enough credits to qualify for SS on her own work record. All the calculators I've run for our situation say I should claim at 62 so she can also claim using my record. Apparently, that's how we get the biggest lifetime benefit in the calculators. That said, we, don't need the money right now so undecided on what we'll do when I am eligible in a year or so.

Life is complicated, isn’t it? I had an unusual SS situation too and ran dozens of simulations with my wife and I living to different ages (and using different portfolio returns). Like you, I wanted to maximize our benefit. However, this seemed to be a matter of luck and I changed to a strategy of eliminating situations where the lifetime benefits could be low. At the time, I thought I had a good understanding of SS, but now realize there were several factors I hadn’t considered, such as taxes, Roth conversions and government subsidies for health insurance.

You seem to have a strong handle on SS. The good news is whatever you decide to do with SS, you’re likely to be just fine.

 

[cyber888]

Yes, I'm making that bet, and I will not lose sleep because I have part of my investment earning 5.22% fixed rate, so there's a portion that guarantees me that I will be fine withdrawing from that fixed rate.
And Because the market has been down for 2 years now and I am retiring now, so base on the law of averages, it will go up in the next 15-20 years.
I don't have to get any of my stock equity for the next 15 years if the market stagnates. I will just get my 5.22% return

^^^^^^ You are making the large assumption that your investments will do very well and grow a lot.
It's possible that won't be true, and they may languish at the inflation rate or less.

It is true, without SS, a person pays the medicare costs without the protection of "hold harmless" rule that says it cannot be more than the SS increase. Once a person is on SS they get the same protection even if years later.

This year our Medicare cost went down which was a surprise, we are not on SS yet.

 

[prototype]

Took it at 63 vs. my plan to take at FRA date (66 + 2mos), or possibly later.

Reason for going with 63, diagnosed with atherosclerosis at 62+ and got my first couple of stents soon after (seem to get another one or two every couple years in some part of body).

 

[pb4uski]

Yes, I'm making that bet, and I will not lose sleep because I have part of my investment earning 5.22% fixed rate, so there's a portion that guarantees me that I will be fine withdrawing from that fixed rate.
And Because the market has been down for 2 years now and I am retiring now, so base on the law of averages, it will go up in the next 15-20 years.
I don't have to get any of my stock equity for the next 15 years if the market stagnates. I will just get my 5.22% return

On the last part, I think you mean 5.22% for your AA that is 5.22% and then 0% on the stocks, so combined a lot less than 5.22%, right? IOW 2.61% if your AA was 50/50.

FWIW, as of the end of 2022, Vanguard is projecting equity returns for the next decade (2023 to 2032) to be 4.4%-6.4%.

https://advisors.vanguard.com/insights/article/series/vanguardmarketperspectives#projected-returns

 

[Markola]

Both my parents took SS at 62 without thinking about it and, now, at 83, both regret it. 70 for us, if at all possible.

 

[Stormy Kromer]

I'm taking SS at 62, because my DW is older than me, and she gets 50% of my Full Retirement age SS which is big.
Both of our SS will cater to our basic retirement expenses at 62.
We will withdrawal very little from our retirement fund.
I think our retirement fund will grow faster and will be much bigger when I hit 70 years old, base on Firecalc and other Calculations.

If we wait for SS at 70, we will spend our retirement funds much faster.
In our case, our SS is big enough to cater to our basic expenses when I turn 62, which allows us to leave our investments growing faster.

I also watched a discussion on Youtube that if your Medicare is deducted from your SS when you hit 65 years old, rather than 67 - 70, your Medicare cost is somewhat pegged to your SS increase.
So, your Medicare cost could be much higher if you take SS at 67 - 70. There's no way I could verify if that is true, but the Youtuber did some research about it and showed some documents.

DW and I are in the same situation and plan on doing the same. She will turn FRA, age 67, shortly after I turn 62. I will apply early at age 62 and she will apply at FRA and receive 50% of my FRA benefit. If I waited to FRA at age 67 she would miss out of 5 years of benefits with no increase in benefits.

We plan on using if for a good part of our living expense. We can let the Roth's and taxable investments grow.

I know there are some advantages to waiting til I'm older. My dad took SS at 62 since no man in his family had ever lived that long. He lived to 90. He told me he maybe should have waited. I asked him "would you spend the extra $200 a month ? He said "No". I told him to be happy, you outlived the odds and got to enjoy it.

 

[skyking1]

I'm the camp of " do what opensocialsecurity.com says is best" , which means me waiting to 70 and DW taking it shortly after 62.
It will be interesting to see what really happens when we start spending nest egg to get there. I have to hang fire and wait till 2027 and her SS will start.
If it gets painful then I can pull the trigger and swap out the roles a bit.

 

[PatrickA5]

I took mine at 62. Plan is for DW to take at 70 (higher earner), but we'll reconsider next year when she reaches full retirement age.

If you die when you're supposed to, it really doesn't matter.

 

[bobandsherry]

Both my parents took SS at 62 without thinking about it and, now, at 83, both regret it. 70 for us, if at all possible.

They regret it as they see what they COULD have had at 70 in their monthly check. But have they totaled up how much they put in their pocket each month by taking a check for those 8 years? And depending on their financial situation, did they consider what they would have lived on for those 8 years?

 

[Dtail]

They regret it as they see what they COULD have had at 70 in their monthly check. But have they totaled up how much they put in their pocket each month by taking a check for those 8 years? And depending on their financial situation, did they consider what they would have lived on for those 8 years?

Yup, plus in hindsight every decision can be different. One of the hardest things in life is to not regret past decisions.

 

[cyber888]

On the last part, I think you mean 5.22% for your AA that is 5.22% and then 0% on the stocks, so combined a lot less than 5.22%, right? IOW 2.61% if your AA was 50/50.

FWIW, as of the end of 2022, Vanguard is projecting equity returns for the next decade (2023 to 2032) to be 4.4%-6.4%.

https://advisors.vanguard.com/insights/article/series/vanguardmarketperspectives#projected-returns

No, i have both fix and stocks in my 401K. My fix income of 5.22%, and AA is about 50/50 (fix and equity/stocks). I can live on the 50% allocation of fixed income. My fixed income earns 5.22% interest rate per year.