Are Early Claimers Making a Mistake?

[FreeBear]

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Originally Posted by Ticker I am taking it at 62. DW & I can almost live off of the SS payments. My strategy is to keep the portfolio as invested as possible, and the early SS payments will reduce the amount of money we would have to withdraw and minimize the risk associated with the sequencing of returns.

+1 Ditto

We'll pull at 62 unless there is a big bull market. In any event, I just don't see delaying beyond 64-65. Our current WR is 4.5%. At the onset of SS at 62 we'll be at a more confident 3.5%. We don't have any reason to expect extremely good longevity, so we'd like to enjoy the extra $$ and the added peace of a lower SWR soon.

[mathjak107]

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Originally Posted by daylatedollarshort We're taking SS at 62 and preserving the portfolio, since we have more control over that and we can leave that to the kids / charity.

sounds good except if you delay ss the amount coming out of your own portfolio for the rest of your life and spouses life drop forever .

by delaying the 8 years until 70 we fall from a 3.80% draw to just 2% when ss kicks in . with the odds of one of us seeing late eighty's to 90's being pretty good the portfolio will have more that is left.


at the point we fall to 2% we have the choice of not even needing much equity's rather then take it early and be so much more dependent on market outcomes .

[explanade]

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Originally Posted by clobber I'm the opposite. I do not even count SS in my plans, and will take it at 62. If I don't *need* it why not just start taking it early and spending it young. Since the break even point is somewhere in my 80s - what am I going to do with all that extra money that old? I predict i will spend less the older I get.

That's my thinking too.

From the previous threads we had on this subject, it's like 20 years before breaking even between taking it at 62 and taking it at 70?

So even if you don't count the money you kept invested and earning returns, what good is the higher social security payments going to do for you in your 70s vs. your 60s?

[mathjak107]

the fact ss has no sequence risk and needs less powder kept dry lets us spend more upfront day 1 by delaying .

the 69% bigger check will just refill us down the road later when it kicks in .

we actually would have to live on less income at 62 if we take ss early .


being more dependent on markets requires more money kept in reserve .


that is why at 4% 90% of the time frames ended with more then they started . that money has to be held back in case sequencing sucks .

[daylatedollarshort]

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Originally Posted by mathjak107 sounds good except if you delay ss the amount coming out of your own portfolio for the rest of your life and spouses life drop forever .

I don't know when I will die, but if I die before claiming the kids would get zero passed to them from SS.

We can live mainly off SS + pensions, once SS kicks in. We don't have a high percent of our portfolio invested in the market so there is very little sequence of returns risk for us or need for additional longevity insurance.

[marko]

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Originally Posted by HadEnuff I draw the conclusion that in some cases taking early SS is the result of poor planning, but in other cases is part of a well thought out plan. No real surprises here.

+1 I think that those who formulated the SS calculations and rules created one of the most intriguing and confounding puzzles of all time!

Accident? Design? I don't know but it would seem that when you push down in one place, something pops up somewhere else and, in the end you wind up pretty much in the same place.

Fascinating!

One would suppose that were it not so devious, a simple set of "do/don't do" rules would be easily applied, but no! Every few weeks, we go through this discussion on pluses and minuses.

"It depends" seems to be the most common answer, but it seems to me it should be more like "it doesn't matter", which was my calculation...actually I came out just a little bit better taking it at 62 vs 65 or 70.

IMO

[samclem]

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Originally Posted by marko . . . actually I came out just a little bit better taking it at 62

Wow--you know already which way comes out better? Most folks don't really know until they know they day they'll die. Even when a person passes the "breakeven" point, all they know is the raw "number of dollars" they would have gotten in each situation. To know if it really "came out better" you'd need to know which choice would have made your life better, and that is absolutely not the same as "which choice would, in retrospect, have given me the most money." But a lot of folks get those mixed up.

[marko]

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Originally Posted by samclem Wow--you know already which way comes out better? Most folks don't really know until they know they day they'll die. Even when a person passes the "breakeven" point, all they know is the raw "number of dollars" they would have gotten in each situation. To know if it really "came out better" you'd need to know which choice would have made your life better, and that is absolutely not the same as "which choice would, in retrospect, have given me the most money." But a lot of folks get those mixed up.

Well, that is what I meant.

My calculations were not about dying at a certain age, but my overall SWR based on my portfolio, allocation and portfolio survival whether I took SS at 62 or 70. In that case, my SWR results were slightly better taking SS at 62.

But I suspect you knew what I meant.

At the same time, I would guess that a positive age 62 SS calculation based on a 95 year life expectancy would bring only better results if one were to die before that age.

[pb4uski]

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Originally Posted by ShokWaveRider That is a good point. It is like putting it in a bank account really. Hmmm. Thanks

Exactly, like moving money from your deferred-tax pocket to your tax-free pocket and then taking 10% or so out of your taxable pocket to pay the taxes knowing that you are hopefully avoiding taking 25% out of your taxable pocket to pay the taxes later on.

[nash031]

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Originally Posted by Bigdawg U r right. SBP didn't work for us and what we have done will not work for most. Not an apples to apples comparison. For 1/6th the monthly cost of SBP I have a 1mil decreasing term policy that will take us up to DW's planned SS draw at age 70. Estimated to be over 3k/mo. The points you made about SBP seem to make sense for a guy like Nash(assuming his DW is not military).

She is not.

We have term that expires at 62 and I don't really intend to re-up it ever beyond that point. But looking at SBP may just seal that decision away. And if we take SBP, I think it makes sense for the lower earner to pull SS at 62 as well. That'll probably be me, just to ensure that she has a full benefit at 70 along with SBP if something happens to me.

[gerntz]

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Originally Posted by gerntz I think the wait till 70 side has a lot to do with having a spouse who could survive you & him/her getting a bigger payment for the rest of their years. Is there data that married folks wait more often than singles?

I found some kind of answer to my own question:
"In real numbers, “under the worse-case scenario,” single men could die about eight to 17 years earlier than their married male friends, says Roelfs, citing that nearly all of the data was gleaned from studies conducted in the last 60 years. Women don't fare much better. They could die seven to 15 years earlier than their married female counterparts."

The gap decreases the longer singles survive - as all of us die sooner or later.

Single people may die younger, new study finds - Health - Behavior | NBC News

I imagine both marrieds & singles know/sense this difference & act on that knowledge wrt SS timing.

[Teacher Terry]

I think if you have a partner you help to keep each other alive by insisting they go to the doctor, etc. Also you can help each other when making changes to your diet, exercise, etc.

[samclem]

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Originally Posted by Teacher Terry I think if you have a partner you help to keep each other alive by insisting they go to the doctor, etc. Also you can help each other when making changes to your diet, exercise, etc.

Also, it seems probable that people who are in poor health or likely to become sick later are less likely to be desirable mates and therefore less likely to become married. So, maybe being single doesn't cause sickness as much as being sick causes one to (more likely) be single.

[gerntz]

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Originally Posted by Teacher Terry I think if you have a partner you help to keep each other alive by insisting they go to the doctor, etc. Also you can help each other when making changes to your diet, exercise, etc.

In short, nagging helps.

[haha]

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Originally Posted by samclem Also, it seems probable that people who are in poor health or likely to become sick later are less likely to be desirable mates and therefore less likely to become married. So, maybe being single doesn't cause sickness as much as being sick causes one to (more likely) be single.

There is a correlation of looks with health.So this might support your idea.

Ha

[samclem]

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Originally Posted by gerntz In short, nagging helps.

"Married people don't live longer. It just feels like longer."
(There. Somebody had to say it!)

[Nords]

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Originally Posted by nash031 Interesting discussion, guys. Thanks! I'm leaning toward going with SBP. We have term life insurance to carry us through 62/59, which carries us through incoming DD's college years. We aren't planning any life insurance once those expire, and we will probably cancel them earlier if/when we reach FI-plus enough. I did not know the "premium" was tax-deductible. That's a good little nugget. Given that men generally die before women, and the women in her family demonstrate better longevity than the men in mine, I'm guessing she'll outlive me by 10-13 years. In that case, I think SBP makes the most sense, along with me taking SS early and delaying hers even though I am currently the primary breadwinner. She may work much longer and eventually eclipse my SS payment anyway, especially since our allowances aren't included in the SS calculation, but make up a significant portion of our pay. Admittedly, I have much more digging to do into SBP before decision time.

Keep in mind that the premium also goes up every year (the same as the pension COLA) and will be paid up only when you've made 30 years of payments and when you're also older than age 70 (both have to happen).

One problem is that life insurance is... insurance while SBP is a govt-subsidized inflation-adjusted annuity. You may need one for a limited time or neither ever... especially if your spouse has their own assets.

To make the discussion even more treacherous, many military spouses feel that they've "earned" the right to your SBP by virtue of sacrificing their career human capital earnings potential to follow your career at the whim of the military assignment officers. Not only is that decision in the hands of your spouse, but they're absolutely correct in this (emotional) behavioral financial psychology attitude.

The most balanced discussion (and financial analysis) that I've seen is Forrest Baumhover's new eBook. This grew out of his posts on MilitaryInTransition.com and I took my turn at editing it:
https://www.amazon.com/Military-Tran...H1Q/ref=sr_1_1

Personally, my spouse and I both declined each others' SBP since we both have our own military pensions and other assets... and we'd rather spend the 6.5% on each other while we're alive. In the same logic we also do not carry life insurance.

I plan to take Social Security at age 62 and invest it in a passively-managed equity index fund with low expense ratios. I won't need to touch it. It's part of my long-term care self-insurance fund that I hope I never need to tap.

My spouse has Ashkenazism genes and will likely outlive her centenarian grandparents, so she's going to wait on SS until age 70.

[Osprey]

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Originally Posted by gayl I have a COLA'd pension so I don't need it. I'm also holding off until 70 to take IRA withdrawals. That's because I don't have long-term care insurance and I really would like to be a nice place if I need it

I too am leaning on waiting until 70 to ensure additional income stream in case high medical/long term care costs drain investments and this would also provide some longevity insurance.


Sent from my iPad using Early Retirement Forum

[nash031]

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Originally Posted by Nords Keep in mind that the premium also goes up every year (the same as the pension COLA) and will be paid up only when you've made 30 years of payments and when you're also older than age 70 (both have to happen). One problem is that life insurance is... insurance while SBP is a govt-subsidized inflation-adjusted annuity. You may need one for a limited time or neither ever... especially if your spouse has their own assets. To make the discussion even more treacherous, many military spouses feel that they've "earned" the right to your SBP by virtue of sacrificing their career human capital earnings potential to follow your career at the whim of the military assignment officers. Not only is that decision in the hands of your spouse, but they're absolutely correct in this (emotional) behavioral financial psychology attitude. The most balanced discussion (and financial analysis) that I've seen is Forrest Baumhover's new eBook. This grew out of his posts on MilitaryInTransition.com and I took my turn at editing it: https://www.amazon.com/Military-Tran...H1Q/ref=sr_1_1 Personally, my spouse and I both declined each others' SBP since we both have our own military pensions and other assets... and we'd rather spend the 6.5% on each other while we're alive. In the same logic we also do not carry life insurance. I plan to take Social Security at age 62 and invest it in a passively-managed equity index fund with low expense ratios. I won't need to touch it. It's part of my long-term care self-insurance fund that I hope I never need to tap. My spouse has Ashkenazism genes and will likely outlive her centenarian grandparents, so she's going to wait on SS until age 70.

Thanks Nords. DW and I will be married eight years when my 20 hits. We've been fortunate to remain geographically stable so she hasn't had career repercussions from my service yet. With DD on the way, we plan for that to continue for the next three years, but we will see.

I'll take a look at the e book for help before we make the call.

[mickeyd]

As I see it, there are two main reasons to consider claiming SS early: 1) Poor health of SS beneficiary and 2) Lack of necessary other funds to live on for the balance of natural life.


Poor health and poor money will do you in every time.