Anyone "Pre-spending" SS?

[rodi]

Yes. My question was whether people use their savings to make up for their SS benefit until it become available or if they wait and consider SS as a 'raise'.

By this definition, I am pre-spending SS. I didn't really think of it that way. I am also pre-spending tax preferred accounts till age 59.5. At this moment I'm pre-spending a very small pension I'll turn on later this year.

I never thought of it in those terms. I have a steady spending in firecalc, i-orp, etc... (Adjusted for inflation). I guess you could say I'm pre-paying taxes too - through Roth conversions now (pre-59.5), and tapping/reducing tax deferred accounts pre RMD.

 

[bingybear]

You spend more from savings today based on the fact you'll have SS coming in the future. It's a basic premise in the "delay until 70" strategy.

Think of it this way......

If you would spend less today if SS didn't exist in your future, then you're pre-spending SS.

based on this definition, I don't pre-spend SS, but I don't look at it as a raise either.

OP here.

Yes. My question was whether people use their savings to make up for their SS benefit until it become available or if they wait and consider SS as a 'raise'.

If your calculated SWR minus SS is $50K and your SS is $10K, do you withdraw $60K from your savings until SS arrives or do you live on $50K until then?

SWR is often a misused term. Many use it for in place of WR (whatever someone is withdrawing from their assets). When I calculated my SWR, I used SS in the calculation. However, I defined my WR at 1.5% which was well below my SWR (the maximum WR where Firecalc gives 100% success rate). So far I have failed to spend my planned WR... something I need to work on. So, I really don't know where I fit in the OP question since I did not calculate w/o SS. However, my WR would be safe if I had left SS out of the calculation.

Well, actually we are.

In our case, I'm drawing from my IRA and DW turns 59.5 in 18 months. We each have sizable IRAs and I consider her's as part of the total portfolio from which we draw.

It's just a matter of where the withdrawal comes from. That was kind of the point of my original question.

She'll be getting SS in four years and we're supplementing that with additional withdrawals until then.

If we had to make a 15 or 20 year bridge, that might be different, but we view the four year bridge as a minor additional withdrawal.

If you plan on SS in a 2 earner/SS family and one passes, you're assumptions and SS income can be significantly off assuming SS is a significant part of spending rate.

 

[hankster]

I'll be bridging the gap between ER and SS eligibility at age 62 with withdrawals from taxable accounts and 401k. Overall planned withdrawal of about 4% the first year (medical premiums covered by HRA) and 7% the second year. This leaves the nest egg at about 88% of original balance when SS comes into play.

For those of you who have bridged the gap with savings, what % of nest egg draw down did you find acceptable?

 

[Hermit]

Well, that's up to you what kind of risk you want to take. To answer your original question, I do not, and would not, take a extra withdrawal for the full future SS amount.

I would and, in fact, do take something very close to my full future SS. It increases my income by about one third. My basic living expenses are covered by pension and SS on the late DWs account. If I don't bump my income up my WR is zero. I am 66 and am only doing this for another 4 years. When my SS kicks in, my WR will be back down to zero and my "risk" will be that I am adding to my nest egg which means I waited until way too late to retire. So you might say I am working at lowering my "risk"!

 

[marko]

My understanding is that in its simulations that Firecal withdraws from the portfolio spending in excess of SS (aka the gap). You provide the spending and it returns the success rate. Firecalc does not provide a WR to my knowledge... it can provide the amount you can spend at different success rates.

What I do is run two simulations, setting the scenario for 'Spending Level'.

One with SS and another with no SS at all. The one without SS gives me what my portfolio alone should provide as a spending level and I then back fill with SS benefits.

My assumption (yes, I know, 'when you assume') is that the calculation for WR includes taking SS at a later date and implies that I'll be making up the difference until then with additional portfolio withdrawals.

 

[marko]

If you plan on SS in a 2 earner/SS family and one passes, you're assumptions and SS income can be significantly off assuming SS is a significant part of spending rate.

Of course! In our case, we have a fairly sizable portfolio (and family trust fund income), relatively short bridging gap (4 years) period coupled to fairly good longevity odds.

 

[RunningBum]

What I do is run two simulations, setting the scenario for 'Spending Level'.

One with SS and another with no SS at all. The one without SS gives me what my portfolio alone should provide as a spending level and I then back fill with SS benefits.

My assumption (yes, I know, 'when you assume') is that the calculation for WR includes taking SS at a later date and implies that I'll be making up the difference until then with additional portfolio withdrawals.

I don't think that assumption is correct, though I'm not 100% clear what you are saying.

The results screen says

This spending level is x.xx% of your starting portfolio.

It does not say this is your withdrawal rate, because it goes on to say:

(Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)

It seems pretty clear to me that they say you can spend that amount using all sources. Meaning that if you aren't getting SS yet, you spend it all from the portfolio. Later, when you start SS, you take less from your portfolio.

Look at the results with and without SS. With SS they allow you a higher spending level, which makes sense because they know that later you can start tapping into SS and take less out of your portfolio. This tells me they have included the full value of SS in that calculation. There's no way they are giving you a bigger number, and then imply that you can also tack SS income on top of that for an even bigger number.

Maybe I'm misunderstanding what you are trying to say.

 

[dixonge]

Since our income will be 100% pension/SS we have projected smaller expenditures in the early years to maximize savings and give ourselves a nest egg. We don't want to rely on either pension or SS, just to be safe and/or prudent. As our different pension and SS plans kick in, we will only slightly increase our budget while continuing to save most of the money back. Once we reach a comfortable level in our nest egg investments, then we'll feel more free for the occasional splurge. Fortunately we're very much the LBYM/sustainability types who enjoy living in countries with rich cultures and reasonable lifestyles.

 

[ownyourfuture]

"Or do you view it as a 'raise' ?

That's how I view it

 

[marko]

It seems pretty clear to me that they say you can spend that amount using all sources. Meaning that if you aren't getting SS yet, you spend it all from the portfolio. Later, when you start SS, you take less from your portfolio.

That is exactly how I understand it and what I meant be 'pre-spending' SS.

My original question was whether people spend less until SS arrives and then consider it a raise that brings them up to their calculated spending level when it does arrive.

 

[INTJ10]

It makes a difference for our retirement date decision(s). Without SS, we are at a 4.4% WR and with it we are 2.8%. So I am in a bit of a quandary about it.

 

[adrift]

Actually, the Social Security Administration is pre-spending SS. According to current estimates the trust fund runs out in 18 years. It was 19 years before the last budget raided retirement benefits to pay for SSDI. After that, only 79% of benefits can be paid.

This could be earlier, if say, a bunch of 30 year olds decide to retire early.

 

[Independent]

If "pre-spending SS" is defined as withdrawing more from an IRA today because we know we will eventually get SS,

then, sure, that's what we're doing.

 

[pb4uski]

That is exactly how I understand it and what I meant be 'pre-spending' SS.

My original question was whether people spend less until SS arrives and then consider it a raise that brings them up to their calculated spending level when it does arrive.

Still not clear but our retirement plan spending does not change for anything other than inflation. Current WR (2017 withdrawals/proj Dec 2016 balance) is 4.3%. WR in first full year of SS is 2.6% (2026 withdrawals/proj Dec 2016 Balance)

As a practical matter once those income streams are online we might well splurge more but no "plan" to consider it a raise. We should probably be spending more now.

 

[mh]

Anyone "Pre-spending" SS?

It's been quite awhile since I've used Firecalc so I can't say for sure but I didn't think Firecalc gives you a SWR. From what I see, you give it your portfolio and SS with planned begin date, along with your expenses, and Firecalc tells you if that plan works based on history. If you go take 4 extra years out of your portfolio to make up for the shortfall before you start collecting SS, you are no longer following the plan that you entered into Firecalc.

If you use a tool like I-orp, it would have you taking more out of your portfolio early, then reducing that when your SS kicks in.

Someone more familiar with those tools can correct me if I'm wrong.

Like you say, it's only 4 years. But if you were doing this for 20 years, I think you could see clearly this is wrong and puts your portfolio at risk. For 4 years, or even 1 year, is still wrong, but just not nearly as risky as 20 years.

In the "investigate" page of firecalc, there is a "Given a success rate, determine spending level for a set portfolio" this takes into account the data you enter regarding your SS benefits

When I run in this mode and don't include SS the difference in what it says my speeding level is is about 14000 a year less which is less than my as benefits at FRA so it is accounting for SS input in a manner that one would expect


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