Theory Behind taking Social Security Early?

[joeea]

2) We both have longevity in our family and we want to maximize security if we follow suit so "insurance" makes sense. One of us will wait until 70 to file to maximize the payout for the survivor. TBD which one.

Just curious... why "TBD which one"?

Have you looked at mySSA to see your projected benefits?
What conditions that aren't clear now would favor one over the other?

 

[daylatedollarshort]

You cannot spend money you don't have yet. Your comfort isn't relevant.

An often mentioned reason to delay is so one can spend more in the present, assuming higher SS benefits in the future will make up the difference.

My comfort is relevant to my personal decision as to claiming age.

 

[Fedup]

An often mentioned reason to delay is so one can spend more in the present, assuming higher SS benefits in the future will make up the difference.

My comfort is relevant to my personal decision as to claiming age.

What I’m not seeing is that you think you can control cost like Long Term Care in the future from your frugal habit. I get your frugal point of view, but you don’t know what cost in the future, in fact, I don’t think anybody knows.

 

[Willers]

Just curious... why "TBD which one"?

Have you looked at mySSA to see your projected benefits?
What conditions that aren't clear now would favor one over the other?

It is interesting. I always thought that the higher earner of the two should be the one to file at 70 (DW is slightly higher), but some calculators suggest she file before me and I defer to 70 maybe because she is younger?). They vary by calculator, return assumptions, longevity tables, etc. I'm not sure it matters much, but I said TBD because we'll have a better idea of any unknowns once we get close and see what the calcs say then.

 

[ERD50]

Hmmmm - I think that for a lot of folks it’s much harder to spend down their own stash. If they didn’t take SS early, they might not spend that “extra” anyway.

^ This.

One of the most common laments around here is how difficult it is to suddenly switch from growing your stash to spending it.

That may be true, but I don't see how it fits into any evaluation of whether someone should be looking at delaying SS for longevity insurance.

To me that's like saying that since most people find it hard to save money and invest wisely to support an Early Retirement, we should just throw in the towel. It's too hard. Work until you die, spend, don't save.


-ERD50

 

[joeea]

It is interesting. I always thought that the higher earner of the two should be the one to file at 70 (DW is slightly higher), but some calculators suggest she file before me and I defer to 70 maybe because she is younger?). They vary by calculator, return assumptions, longevity tables, etc. I'm not sure it matters much, but I said TBD because we'll have a better idea of any unknowns once we get close and see what the calcs say then.

Right. But I'm curious as to which "unknowns" will become clarified?

 

[Fedup]

It is interesting. I always thought that the higher earner of the two should be the one to file at 70 (DW is slightly higher), but some calculators suggest she file before me and I defer to 70 maybe because she is younger?). They vary by calculator, return assumptions, longevity tables, etc. I'm not sure it matters much, but I said TBD because we'll have a better idea of any unknowns once we get close and see what the calcs say then.

I’m guessing longer time to collect SS is the reason. Some calculator suggests that I take at 65. I’m not going to, I will at least wait until FRA.

 

[Willers]

Right. But I'm curious as to which "unknowns" will become clarified?

Any changes to the SS filing rules (unlikely, but possible), ACA changes (putting 62-65 back in play) and health changes are the ones that are most relevant to us.

 

[audreyh1]

That may be true, but I don't see how it fits into any evaluation of whether someone should be looking at delaying SS for longevity insurance.

To me that's like saying that since most people find it hard to save money and invest wisely to support an Early Retirement, we should just throw in the towel. It's too hard. Work until you die, spend, don't save.


-ERD50

I'm just saying that it explains why some people will take SS early and won't get the idea of you can spend more now by delaying. They can't get past the spend down their own savings part of it.

It's up to them. I have no dog in this fight. I'm not trying to convince them otherwise.

 

[Fedup]

There is no dog in any fight. I guess we are just sharing the reasons why we are delaying or taking it early. Do I really care if people want to take it early? Not really.

 

[ERD50]

I'm just saying that it explains why some people will take SS early and won't get the idea of you can spend more now by delaying. They can't get past the spend down their own savings part of it.

It's up to them. I have no dog in this fight. I'm not trying to convince them otherwise.

Right, I understand it is an explanation for some people. I'm just saying that doesn't make it a reason for anyone.

-ERD50

 

[pb4uski]

There is no dog in any fight. I guess we are just sharing the reasons why we are delaying or taking it early. Do I really care if people want to take it early? Not really.

In fact, it is better that they take it early in that based on most likely mortality they end up with less over their lifetimes which leaves the whole system in better shape.... and if they are not spending part of their stash it results in less selling pressure on stocks which is also good.

 

[joeea]

In fact, it is better that they take it early in that based on most likely mortality they end up with less over their lifetimes which leaves the whole system in better shape....

Yup. More for me.

Same reason I smile when I see folks buy lottery tickets although I buy none. My state revenues thank you.

 

[Floridatennisplayer]

In fact, it is better that they take it early in that based on most likely mortality they end up with less over their lifetimes which leaves the whole system in better shape.... and if they are not spending part of their stash it results in less selling pressure on stocks which is also good.

Based on most likely mortality, they will break even. The government hasn’t designed SS to give you a lot of extra money ....... they know what they’re doing.

 

[braumeister]

The government ....... they know what they’re doing.

Thanks for the good chuckle.

 

[Fedup]

Based on most likely mortality, they will break even. The government hasn’t designed SS to give you a lot of extra money ....... they know what they’re doing.

That was a while ago, people live longer now.

 

[SecondCor521]

Am I correct in thinking that the proper discount rate to enter on the opensocialsecurity.com (I think that's the URL site mentioned up thread) advanced options is my expected rate of return on the investments that I would sell or not sell depending on whether I took SS earlier or later?

 

[samclem]

Based on most likely mortality, they will break even.

How can this be true? Women live longer than men, but the SS formula assumes they don't. Healthy people live longer than unhealthy ones, but the SS formula doesn't take this into account.

But the "break even" question is not a useful one, anyway.

 

[Cut-Throat]

If you believe taking SS early and thus giving up the additional benefits for the rest of your life furthers your goal of being financially independent and retiring early, then your decision is clear.

Others would do the math and come to different conclusions. Some would argue that having a larger inflation protected guaranteed income stream coming your way would mean you can spend more of your portfolio now and retire early with more confidence.

Some People are ruled by their Emotions, and some by Mathematics. And we've pretty much highlighted which group is which.

 

[Independent]

Am I correct in thinking that the proper discount rate to enter on the opensocialsecurity.com (I think that's the URL site mentioned up thread) advanced options is my expected rate of return on the investments that I would sell or not sell depending on whether I took SS earlier or later?

That depends.

If I figured that I didn't need SS for my own expenses, but I were trying to maximize the estate I leave for children or charity, I would use the expected return on the type of assets I'd buy with my SS benefit.

If I'm using SS to meet my own spending, and considering SS as longevity insurance, I'd use a pretty conservative number. The default 20 year TIPS number seems okay.

(This is like asking what investment return you use in determining a safe withdrawal rate - the most likely return on your assets, or something more conservative.)

Note that either way, I want a "real" return, not a "nominal" return.

Also, since I'm using the advanced options, I'd specify an "assumed age at death" rather than using any of the mortality tables. The math with the mortality tables assumes smaller and smaller payouts each year as I age. That's great for an insurance company pricing an SPIA, not so good for one person.

(And, if I use a mortality table, I definitely would not use the default 2015 SS Period Life table. It is not representative for anyone here who would ask this question.)

 

[CardsFan]

Some People are ruled by their Emotions, and some by Mathematics. And we've pretty much highlighted which group is which.

So, mathematicians don't have emotions?

Actually, a true mathematician could not solve the problem as X (the year of death) is an unknown.

There is NO mathematically correct answer for any individual (or couple). We are all making assumptions, and then our gut (emotion) gets a vote as well. Planning to live long, and take SS as longevity insurance is a logical plan, maybe the best to protect you, but it is NOT a mathematical certainty to be the best plan.

 

[Winemaker]

Taking SS at the optimal time is the opposite of life insurance, the only way to win is to die young!

 

[daylatedollarshort]

So, mathematicians don't have emotions?

Actually, a true mathematician could not solve the problem as X (the year of death) is an unknown.

There is NO mathematically correct answer for any individual (or couple). We are all making assumptions, and then our gut (emotion) gets a vote as well. Planning to live long, and take SS as longevity insurance is a logical plan, maybe the best to protect you, but it is NOT a mathematical certainty to be the best plan.

Besides X being unknown, there is also an unknown probability of asset or income testing or other detrimental changes to future benefits. Even if one has a greater than 50-50 chance of living past the breakeven point, there is still the possibility of lowered future benefits to be considered.

 

[ShokWaveRider]

By far The BEST time to take SS is when one feels comfortable doing so. This time is different for all individuals.

 

[Cut-Throat]

Actually, a true mathematician could not solve the problem as X (the year of death) is an unknown.

You hit your head too Hard! ........ You don't need to know the Year of Death, just like you don't when managing your portfolio. A 'Real Mathematician' would know what to solve for.