WaPo on seniors delaying SS in the wake of the pandemic

[youbet]

^^^^ In most cases that's a bit of a red herring argument for anyone who has more than 8 years of SS at 62 in savings and that would be most people here.

In most cases? Care to elaborate or just blowin' some more smoke?

 

[Chuckanut]

Or IMHO missing out on living their life while they have the opportunity. I am finding out that while I was bullet proof at 64 suddenly at 65 I'm not so sure.

Possibly. But, that is an issue that each individual/ couple needs to decide for themselves. 'Living their life' is a very individual thing.

 

[pb4uski]

In most cases? Care to elaborate or just blowin' some more smoke?

I guess I need to clarify. The whole argument that one should take SS early because you're healthier and more active and can spend more from 62 to 70 than from 70 onwards is a red herring for anyone who has more than 8 years of age 62 SS of retirement savings. Money is fungible, so it doesn't matter if the money for higher spending from 62 to 70 comes from SS income or from savings, and most posters here have much more than 8 years of age 62 SS in savings.

Pretty elementary... I'm surprised that you didn't get it.

 

[foxfirev5]

My personal concern has nothing to do with spending more now. It is simply a realization that my expected time after age 70 is likely to be short. On the other hand the funds in my Roth that I have not touched (VTSAX) have grown far more than the extra I would get from waiting to collect SS. Lucky me. I would gladly give that up in exchange for a better personal outlook.

 

[RetMD21]

My personal concern has nothing to do with spending more now. It is simply a realization that my expected time after age 70 is likely to be short. On the other hand the funds in my Roth that I have not touched (VTSAX) have grown far more than the extra I would get from waiting to collect SS. Lucky me. I would gladly give that up in exchange for a better personal outlook.

Different perspectives I guess. The run up in VTSAX makes me concerned that a correction is coming or at least that future returns will n less.

 

[Chuckanut]

I guess I need to clarify. The whole argument that one should take SS early because you're healthier and more active and can spend more from 62 to 70 than from 70 onwards is a red herring for anyone who has more than 8 years of age 62 SS of retirement savings. Money is fungible, so it doesn't matter if the money for higher spending from 62 to 70 comes from SS income or from savings, and most posters here have much more than 8 years of age 62 SS in savings.

+1

I love that word fungible. If I ever get another pet, I think I will name it Fungible - Fungy for short.

Another thing to consider if you want to spend more money is this: If you don't care about leaving an estate, granted a big IF for most of us, you can spend more money each year starting at 62 by taking SS at 70. Of course, you also need the money to fund those 8 years.

This link shows the math:

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


If people don't have the money to fund the 8 years, then perhaps they should consider retiring later than 62 if possible. They might choose their Full Retirement Age, for example. It's not a binary choice between 62 and 70.

 

[Time2]

Different perspectives I guess. The run up in VTSAX makes me concerned that a correction is coming or at least that future returns will n less.

Me too!

But what do you do, Sell some stocks and have more bonds, If/when rates go up bonds lose value. Go to cash, then hope for what, a tanking market where you lose value of the stocks you still own, or hope stocks keep growing and wishing you had stayed in stocks. I'm contemplating selling some and holding cash. Being up 35% over two years is scary, but that is illogical.

 

[ERhoosier]

"Another pandemic factor which may have contributed to the drop in applications is that a lot of SSA offices were closed or had limited service during a significant span of the pandemic."

Spot on. SS services are STILL limited with offices being closed to in person service.
https://www.ssa.gov/agency/emergency/
In theory that should free up personnel to process on-line & phone-in applications (as private financial service & insurance companies have done) but apparently that has not been the case. And they have now had 18 months to adapt.
The OIG's report earlier this year is pretty damning, with some offices having many applications and documents unprocessed for a year or more.
https://oig-files.ssa.gov/audits/full/A-08-21-51036InterimReport.pdf

 

[USGrant1962]

In June the President issued an executive order requiring return-to-work plans for all Federal agencies. It appears that only one out of 20 agencies contacted by some Senators has complied with the EO.

 

[pb4uski]

^^^ Off with their heads!

Strike that... a .01% budget reduction for each business day that they don't comply... I bet that would get their attention.

 

[explanade]

Me too!

But what do you do, Sell some stocks and have more bonds, If/when rates go up bonds lose value. Go to cash, then hope for what, a tanking market where you lose value of the stocks you still own, or hope stocks keep growing and wishing you had stayed in stocks. I'm contemplating selling some and holding cash. Being up 35% over two years is scary, but that is illogical.

So you sell shares now, when market is at all time highs, and then delay taking SS?

I just checked my SS account. The difference between taking at 62 and at 70 is about 76% higher for the age 70 payment.

But even with such a difference, it would take until age 80-81 for the higher payments to break even with the lower payments started 8 years earlier. That's without even accounting for COLA though. So approximately 18-19 years of payments starting at age 62 vs. 10-11 years starting at age 70 for the breakeven point.

Also not accounting for the high COLA which is coming starting next year so presumably the current starting numbers will be at least 5-6% higher?

 

[Time2]

So you sell shares now, when market is at all time highs, and then delay taking SS?

I'm already delaying SS until 70 yrs old. I have not sold anything yet, We'll see, I might sell enough to cover this years gains, from my tax deferred accounts.

I just checked my SS account. The difference between taking at 62 and at 70 is about 76% higher for the age 70 payment.

But even with such a difference, it would take until age 80-81 for the higher payments to break even with the lower payments started 8 years earlier. That's without even accounting for COLA though. So approximately 18-19 years of payments starting at age 62 vs. 10-11 years starting at age 70 for the breakeven point.

Not having SS, allows more room for Roth Conversions.

Also not accounting for the high COLA which is coming starting next year so presumably the current starting numbers will be at least 5-6% higher?

Yes, we are getting a raise each year whether we start SS now or at 70.

 

[pb4uski]

So you sell shares now, when market is at all time highs, and then delay taking SS?

I just checked my SS account. The difference between taking at 62 and at 70 is about 76% higher for the age 70 payment.

But even with such a difference, it would take until age 80-81 for the higher payments to break even with the lower payments started 8 years earlier. That's without even accounting for COLA though. So approximately 18-19 years of payments starting at age 62 vs. 10-11 years starting at age 70 for the breakeven point.

Also not accounting for the high COLA which is coming starting next year so presumably the current starting numbers will be at least 5-6% higher?

On the last part the 2022 COLA would be added to both age 62 payments and age 70 payments, so I'm not sure that makes a difference.

I agree with your 76%... so if your FRA is age 66 and your PIA $1,000 you would get $750 at age 62 or $1,320 at age 70 and ($1,320-$750)/$750 = 76%.

So the way I think of it is if you take at age 70 you forgo $72,000 [$750*12*(70-62)] to receive an extra $570/month or $6,840/year starting at age 70... so as you correctly observe, your breakeven point is ~80 1/2 ignoring the time value of money.

I think of it as, for each $1,000 of PIA, using $72,000 of your stash to buy a COLA adjusted life annuity that pays $570/month starting at age 70. If you bought a fixed annuity at age 70 for $72,000 for a male it would only pay $415/month... so not only are you getting more, you are getting the COLA adjustment as the cherry on top.

IOW, delaying SS is a screaming deal way of using what is for many here a small part of your retirement savings to buy a COLA-adjusted life annuity and to increase the portion of your income that is not dependent on investment markets.

 

[finnski1]

So you sell shares now, when market is at all time highs, and then delay taking SS?

I just checked my SS account. The difference between taking at 62 and at 70 is about 76% higher for the age 70 payment.

But even with such a difference, it would take until age 80-81 for the higher payments to break even with the lower payments started 8 years earlier. That's without even accounting for COLA though. So approximately 18-19 years of payments starting at age 62 vs. 10-11 years starting at age 70 for the breakeven point.

Also not accounting for the high COLA which is coming starting next year so presumably the current starting numbers will be at least 5-6% higher?

well if you are 62 or older(maybe even 60 or 61) the COLA gets applied to your benefit whether you take it at 62 or 70. It does not change your breakeven number. It is already factored in.

Break even age by full retirement age

Date of birth...... FRA .... ... FRA v 62 .....70 v 62 .... 70 v FRA
1943-1954 .........66 ............ 78.00........ 80.53........ 82.50
1955 ................ 66,2 mos.... 78.11 ........80.49........ 82.50
1956 ................ 66,4 mos.... 78.25 ........80.48 ........82.50
1957 ................ 66,6 mos.... 78.36 ....... 80.45 ....... 82.50
1958................. 66,8 mos.... 78.47 ........80.42 ....... 82.50
1959 .................66,10 mos.. 78.57........ 80.40 ........82.50
1960 or later...... 67 ............. 78.67........ 80.37 ........82.50
I have put this info out there before but got a little flamed for it because posters argued you can't really calculate the breakeven because of returns if invested etc. or other reasons.

These numbers are calculated using the exact formula that the SSA uses to calculate you benefits so I stand by it.

And yes you are correct the increase from age 62 to age 70 is about 76%( exactly 76% if you were born before 1955) and a tiny bit above for birth years from 1955 up to 1960.
You can see how consistent they are regardless of your FRA. That makes sense to me.

 

[youbet]

I have put this info out there before but got a little flamed for it because posters argued you can't really calculate the breakeven because of returns if invested etc. or other reasons.

Not to flame you in any way finnski1, but the time value of money can be very significant. Your analysis is interesting and useful and it avoids having to make any decisions/assumptions of future earnings. But in reality, and especially this past decade+ while the markets have been so kind to us, having money earlier has been a very good thing.

 

[explanade]

Time value of money is about accumulating over a long period?

But one argument for taking early is if you can actually increase your spending at earlier age.

 

[jIMOh]

“Health concerns are unique to this recession and may be playing a role, especially because workers ages 65 and above are less likely to be able to telework than younger workers,” Coile said.

Why are older people less likely to work remotely?

 

[youbet]

Time value of money is about accumulating over a long period?

Not sure if you meant that for me or not explanade.

The time value of money doesn't have to be about accumulating over a "long" period. But the longer the period of time, the more influential it is. The dollars I received during the year following my 62nd birthday more than doubled by the time I reached 70 for example. The dollars I received in the year following my 69th birthday grew much less in the much shorter time period.

But one argument for taking early is if you can actually increase your spending at earlier age.

I've never, not once, not ever, never said that "the argument for taking early is if you can actually increase your spending at earlier age." Although it probably has been said by somebody. Everything that it is possible to say about when to take SS (early, at FRA or later) has been said in one of the many threads we've had on the subject. Probably several times!

The fact is that there are many, many individual scenarios to be considered and anyone who tries to generalize the decision on the "best" age to start SS to cover broad swaths of people is treading on shaky ground.

 

[Chuckanut]

IOW, delaying SS is a screaming deal way of using what is for many here a small part of your retirement savings to buy a COLA-adjusted life annuity and to increase the portion of your income that is not dependent on investment markets.

+1

Besides being a screaming deal, it's also the drug and gadget free method I use to sleep well at night.

 

[MarieIG]

This is so strange. My expenses didn't drop after retiring. I always brought my own lunch. My work clothes were still going strong ten years after buy ing them.

Everything else costs what it did before.

We use the car less, is all. And gas was not a big line item for us, even when working.

Our expenses are/ will drop. Income tax was our biggest expense and since our income is dropping our taxes will drop. Property tax is another big one (which will be dropping); and then there was saving for retirement.

I wasn't one to buy lunch out at work either. Some kiddos were dropping off the dole about the same time as DH retired, with the youngest launching this year, so that was a reduction in overhead expenses.

 

[finnski1]

Not to flame you in any way finnski1, but the time value of money can be very significant. Your analysis is interesting and useful and it avoids having to make any decisions/assumptions of future earnings. But in reality, and especially this past decade+ while the markets have been so kind to us, having money earlier has been a very good thing.

No worries. I'm not advocating for one way or another just trying to show some basic numbers. I can't predict whether someones future 8 years of returns will be positive or negative. You're right this past decade has seen some incredible returns. Odds probably are that if someone was really well disciplined and took the money at 62 and like clockwork invested it each month in say a low cost index fund then they will probably do pretty good and may well push out their "breakeven point" to well over 100 years old or longer, if breakeven is even a factor at all. Of course the "past returns are no guarantee of future performance" applies and the next decade could have negative annual returns. I obviously have no clue.
To be honest , I still haven't decided exactly when I'll file myself. I am 62 and 1/2 right now and haven't filed yet. DW just turned 66 a few days ago with her FRA in 2 months .We haven't filed hers yet either.

 

[MarieIG]

A lot of people in the Great Resignation, are going to be surprised to find the money dropping from the sky stops.

I wonder if a few years from now we hear of the Great Job Hunting done by a bunch of folks that retired this past year

Covid actually pushed me back for a year. (Since I would be "trapped" I figured I might as well be "trapped" at work.) Otherwise, I have been doggedly, if someone slowly, ticking off the boxes, and my retirement was pre-planned. However, another DGC is making an appearance and the kiddos need our help, so for me, the jig is up.

 

[MarieIG]

+1

Besides being a screaming deal, it's also the drug and gadget free method I use to sleep well at night.

+2

 

[youbet]

. Odds probably are that if someone was really well disciplined and took the money at 62 and like clockwork invested it each month in say a low cost index fund then they will probably do pretty good and may well push out their "breakeven point" to well over 100 years old or longer

Yep. That's pretty much what happened to me. I started SS at 62 because, like some other members of this forum, my DW cannot collect any of my benefits either spousal or survivor and I wanted to provide for her. The accumulated sum, with earnings, that accumulated over the 8 years has been very, very nice. My estimated break even point is way, way out there. But you can't plan for that.

It's kind of a crap shoot........

 

[camfused]

I remind folks that it is not just 62 or 70...you can take it at any age between those too. In my modeling, 68 for me and 69 for DW (who is 1 year older) is the optimal ages. I am not totally sure why, but I have modeled all ages and those two are the best for us. YMMV.