Cut-Throat
Thinks s/he gets paid by the post
For a family of 4 that looks to be right......Maybe a good reason to try and keep your income at $80K or go whole hog and make $200K
Social Security - When to start benefits..
- Thread starter walkinwood
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For a family of 4 that looks to be right......Maybe a good reason to try and keep your income at $80K or go whole hog and make $200K
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
For me diversification is also an issue. I will have three income sources at 66: SS, my pension, and my personal investments. Preferably, I would like to be able to pay for all the necessities of life with two of the three sources. That would dictate getting SS at 62. But, my pension is not fully Cola'd, and, realistically, I have to expect that it will become a smaller and smaller part of my income stream over the years. My plan is to counter that by delaying SS to 66 or maybe a bit beyond that to make up for the declining purchasing power of the pension. I'll keep an eye on the next four years to see just how much I will need to adjust my SS timing and my withdrawal rate from my personal investiments.
jeffmete
Recycles dryer sheets
Thanks for clarifying. This won't effect (affect) me as all my retirement income will be taxable.
Something to think about is not letting the 10% and 15% tax brackets go unused and then have a lot of taxable income in later years when drawing SS and end up paying 25 to 28% or more Fed Tax when you could have paid 10 or 15%. I ran Optimal Retirement Calculator and Retirement Decision Support System
about a year and a half ago and it really changed my mind on how much and what income to take when and the tax consequences of it.
Just a thought.
Cut-Throat
Thinks s/he gets paid by the post
That's why you also take some of the Traditional IRA money and Convert to a Roth inside the 15% Bracket and keeping yourself below the 200% FPL, so you can cash in on the Health care Premium Credits.
Koolau
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Okay, I admit to being ignorant about the HC legislation, but can that be right? A break point where the effective tax rate is over 100%? Can anyone direct me to a site to check this for my situation, please? I'm sure I will want to rethink some things if that is true.
marko
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Maybe I'm missing something here (I often do) but...
The break even age of taking SS at 62 vs 66/67 is about 78-79 years of age. If your break even is 17 years from now, why not take SS at 62. (Plus grandfather yourself in in case those creeps in DC want to deliver you some 'change')
Then, if you're lucky enough to live to be 79, you start 'losing' money...but by then, will you care?? You'll have been ahead for the past 17 years.
There just doesn't seem to be any motivation to waiting. You'd have to live to be almost 80 just to break even.
The break even age of taking SS at 62 vs 66/67 is about 78-79 years of age. If your break even is 17 years from now, why not take SS at 62. (Plus grandfather yourself in in case those creeps in DC want to deliver you some 'change')
Then, if you're lucky enough to live to be 79, you start 'losing' money...but by then, will you care?? You'll have been ahead for the past 17 years.
There just doesn't seem to be any motivation to waiting. You'd have to live to be almost 80 just to break even.
Independent
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We normally insure ourselves against bad things - fires, crashes, disability, etc.
Retirement income seems unique in that I might want to insure myself against a good thing. Yes, living a long time is a good thing, but living a long time when my finances were set up for a short life isn't ideal.
IMO, the primary reason for deferring SS is that the future might bring me a combination of low investment returns and a long life - the combination that could exhaust my assets too soon. Deferring SS shines in exactly that circumstance.
It's very similar to a 4% SWR. History says that stocks have earned CPI plus 6% (or something similar, depending on the data source). So why not start at 7% and increase with CPI? Because I have to think about the unlikely but possible scenarios.
Cut-Throat
Thinks s/he gets paid by the post
Yup, you are!.......When you start thinking of S.S. as 'Break even' question, you are on the wrong track.....
Think of it as old age insurance and getting to spend more in your younger years because you have more coming in later.....It's about spending, rather than piling up a stash that you die with. If you die early, who cares....You're dead! As far 'grandfathering yourself in' if you've followed S.S. discussions it won't ever be based on whether you are drawing it or not, it, it will be based on age.
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jeffmete
Recycles dryer sheets
No, your not missing anything. Your statement is a perfectly legitimate way to look at SS. Some people on here think of it more lilke an annuity and would rather use their savings now for a higher guaranteed income later. but like you point out the cost of higher payments later is lost income now.
"higher payments later" allows you to spend more now. read this post http://www.early-retirement.org/forums/f28/social-security-at-62-66-or-70-a-26354-3.html#post494511 and see how taking SS at age 70 allows you to spend more between the ages of 62 and 70
Did you read the rest of that thread, or just the one post? Same range of opinions then as now.
Offhand, his suggestion seem pretty risky to me. Spend all your own money between 62 and 70, ignoring all the SWR stuff because you only care that it lasts for 8 years.
Totally depend on snagging SS at 70. Nothing better go wrong, or you'll end up smashed on the rocks.
Offhand, his suggestion seem pretty risky to me. Spend all your own money between 62 and 70, ignoring all the SWR stuff because you only care that it lasts for 8 years.
Totally depend on snagging SS at 70. Nothing better go wrong, or you'll end up smashed on the rocks.
of course i read the rest of that thread, i was writing in it. i used a very extreme example to emphasize my point, which was (and still is) that if you delay taking SS till age 70 you can spend more between the ages of 62 and 70. however if you think about it SS is about the most secure COLAed annuity you can get.
did you read the 4th paragraph in that post? it contains a little more palletable (for alot of people) example.
did you read my post before my last 1 http://www.early-retirement.org/for...en-to-start-benefits-49142-7.html#post1166439? another example of creating more spending by taking SS at 70 instead of 62
I've read those and was not swayed. Rapidly spending down your own money with the intention of grabbing onto the SS safety net just as your rope runs out strikes me as a risky thing to do. If anything goes wrong you're f**ked.
There is no Plan B. And I learned a long time ago that the person with the best Plan B ususally comes out best.
Off the top of my head, here's some easily forseeable things that could go wrong:
* SS dramatically reduces the COLA computation. Has happened before.
* Increased income tax on SS. There used to be no tax. Increasing the tax is a much easier change than adding it on in the first place.
* Changing the ages. 62/66/70 might go to, say, 64/68/72.
* Means testing the SS benefit. With a look-back a la Indigent(?) Medicaid to prevent people from gaming the system by spending all their money in the previous few years.
Plus some low probability possibilities:
* Inflation soars to 15%. (Hello, Jimmy Carter!). SS Cola capped at a small percentage of that.
* SSA runs low on money, benefits get cut to 75% of current payout.
* SS benefits get not only taxed as income, but FICA gets tacked on.
If any of these occur, what's your Plan B?
Can't be to take a part-time job as Walmart Greeter. In my area, there's a waiting list for that job.
There is no Plan B. And I learned a long time ago that the person with the best Plan B ususally comes out best.
Off the top of my head, here's some easily forseeable things that could go wrong:
* SS dramatically reduces the COLA computation. Has happened before.
* Increased income tax on SS. There used to be no tax. Increasing the tax is a much easier change than adding it on in the first place.
* Changing the ages. 62/66/70 might go to, say, 64/68/72.
* Means testing the SS benefit. With a look-back a la Indigent(?) Medicaid to prevent people from gaming the system by spending all their money in the previous few years.
Plus some low probability possibilities:
* Inflation soars to 15%. (Hello, Jimmy Carter!). SS Cola capped at a small percentage of that.
* SSA runs low on money, benefits get cut to 75% of current payout.
* SS benefits get not only taxed as income, but FICA gets tacked on.
If any of these occur, what's your Plan B?
Can't be to take a part-time job as Walmart Greeter. In my area, there's a waiting list for that job.
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
There is no Plan B. And I learned a long time ago that the person with the best Plan B ususally comes out best.
<snip>
If any of these occur, what's your Plan B?
While I don't agree with those who think that SS will go away or be seriously damaged, I do think that the plan to spend most or all of one's personal savings before 70 and then getting a bigger SS benefit has some risk. I think diversificastion is still the best way to limit risk at the least cost. For me diviersification means having several sources of income in case one falters. For that reason alone I would not let my personal savings fall too low, no matter how much larger the SS payment will be. My 2 cents.
Cut-Throat
Thinks s/he gets paid by the post
Except no one said that.
rescueme
Thinks s/he gets paid by the post
I would agree (unless it is part of the article posted).
While DW/me could take SS at 62 (we're both currently 64), we've opted for the 66/70 split (DW at 66, with me claiming 50% of her benefits at that time).
While we're fortunate to have options - we don't need to take SS at age 62, nor will it impact us to any great extent if the government changes the rules along the way, it just came down to the best option financially, analyzed at this point in time.
That was not done in a vacuum, but using the facility of several forecast programs that not only looked at SS benefits, but also taxes and impact of drawing down our tax-deferred accounts and the impact of RMD's.
Again, it's not a simple exercise and our conclusions/decision/execution probably don't apply to everybody. That's why it's not an easy question to answer, and no answer applies to everybody - and every situation.
I'm afraid that some posters don't feel the same (but hey, that's their opinion
)...jeffmete
Recycles dryer sheets
Oh, I read it. Multiple times.
Major Tom
Thinks s/he gets paid by the post
There are several different ways you can factor SS into the equation depending on your tolerance for risk/faith in what the government will or will not do.
This has been an interesting and useful thread for me. The highest WR I think I could tolerate on my portfolio in these, my very early days of ESR/ER, is the highest one that still gives me a 100% success rate according to Firecalc. The knowledge that something at least will be coming from SS will act to help me ride out any portfolio lows I might experience. As I get closer to SS eligibility age, I'd most likely feel more comfortable about accepting a slightly higher WR.
In other words, I'm currently withdrawing less than the amount that will give me a 100% success rate according to Firecalc without SS factored in at all. It's early days, and I want to put as little strain on the portfolio as possible. However, after reading this, and similar threads, I think I'd feel comfortable going up to the highest WR that still gives me a 100% success rate, knowing that some SS will be there (if I feel that I need to).
That, to me, is the biggest advantage of insurance - the feeling of security that there will be something as a cushion just in case the main plan falters somewhat. I'm not going to rely on it completely, so that when it comes, the majority of that money will be a fun and welcome extra. (W2R's wh** word seems particularly appropriate here.)
This has been an interesting and useful thread for me. The highest WR I think I could tolerate on my portfolio in these, my very early days of ESR/ER, is the highest one that still gives me a 100% success rate according to Firecalc. The knowledge that something at least will be coming from SS will act to help me ride out any portfolio lows I might experience. As I get closer to SS eligibility age, I'd most likely feel more comfortable about accepting a slightly higher WR.
In other words, I'm currently withdrawing less than the amount that will give me a 100% success rate according to Firecalc without SS factored in at all. It's early days, and I want to put as little strain on the portfolio as possible. However, after reading this, and similar threads, I think I'd feel comfortable going up to the highest WR that still gives me a 100% success rate, knowing that some SS will be there (if I feel that I need to).
That, to me, is the biggest advantage of insurance - the feeling of security that there will be something as a cushion just in case the main plan falters somewhat. I'm not going to rely on it completely, so that when it comes, the majority of that money will be a fun and welcome extra. (W2R's wh** word seems particularly appropriate here.)
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W2R
Moderator Emeritus
Major Tom said:
Like you, I am spending less than what FIRECalc says I can spend with a 100% success rate, and I haven't claimed SS yet (I am 63). I really prefer a relatively simple life anyway so I don't feel especially deprived.
Major Tom said:
Yes, exactly! I do like the security of knowing it is there, just in case..
Well, I know how to run a PV calculation, and I know how to figure the break-even period of "take at 62 and save it for 4 or 8 years, then draw on the savings account to suppliment SS and bring the total up to the delayed benefit amount".
The break-even period is more than 15 years. Too long for my preference. Others may differ.
Like I said earlier, the right answer for you depends on how you choose to view it.
The break-even period is more than 15 years. Too long for my preference. Others may differ.
Like I said earlier, the right answer for you depends on how you choose to view it.
Cut-Throat
Thinks s/he gets paid by the post
If you die at 14 years, you will be able to tell us that you were right and are now happy that you took your SS at age 62. And your heirs will be even happier as you spent the government's money, instead of the money in your estate.
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jeffmete
Recycles dryer sheets
Now your getting it! OPM - It's like OPB (other peoples boat) except with money!
TromboneAl
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Cut-Throat said:
Are you saying that your healthcare premium for the two of you will be $1,000 per year? What do you pay now?
I think goals play a large role in the "right" answer to this question. For me personally, my goal for retirement planning is to maintain my desired spending level for as long as I live.
If I delay SS and die before the payback period, I won't care as my portfolio would have been much larger than needed to survive that short of a lifespan. My retirement planning goal would have been accomplished.
What if I live to 90-100? That is the tail end of my planning period, so there is a very real chance that my portfolio underperformed my cautious expectations and can no longer maintain my spending level. That is the scenario when delaying SS pays off.
So for myself there is no benefit to taking SS at 62, but there is a potential benefit to waiting to 70.
Now if my goal was to maximize inheritance to my children if I lived to my expected lifespan while receiving decent returns on investments, then I would certainly come to a different conclusion.
If I delay SS and die before the payback period, I won't care as my portfolio would have been much larger than needed to survive that short of a lifespan. My retirement planning goal would have been accomplished.
What if I live to 90-100? That is the tail end of my planning period, so there is a very real chance that my portfolio underperformed my cautious expectations and can no longer maintain my spending level. That is the scenario when delaying SS pays off.
So for myself there is no benefit to taking SS at 62, but there is a potential benefit to waiting to 70.
Now if my goal was to maximize inheritance to my children if I lived to my expected lifespan while receiving decent returns on investments, then I would certainly come to a different conclusion.
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