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Old 01-10-2018, 01:28 PM   #161
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I always remember those news stories where so-and-so was keeping grandma alive...to keep collecting.

I wonder what age the SSA knocks on the door to shake hands with grandma.


I know completely off-topic. Everyone's life expectancy is different. If you needed $40k in the next year to prolong death another year, and SSA was the ticket, I don't think people would not file. But if someone said, well if you give me 50k in one year I will give you TWO more...well it's too late.
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Old 01-10-2018, 02:25 PM   #162
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LOL! I'm fairly sure it wouldn't help. This is just one of those discussions that people enter with their minds already made up.

I'm fairly sure that if I pointed out that the current SS rules regarding starting benefits early and delaying benefits were established in the days of higher interest rates, it wouldn't matter.

I'm pretty sure that if I pointed out that 8% risk free per year is much higher than other risk free investments, and thus a terrific reason to delay, it wouldn't matter.

I'm sure if I mentioned that while the rules were actuarially neutral when they were created, but no longer are, it wouldn't change anyone's mind.

So I doubt talking would help.
Itís only 8% risk free if you donít die.
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Old 01-10-2018, 03:35 PM   #163
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Itís only 8% risk free if you donít die.
Not dying and I'dd add future benefits aren't reduced in some way through overt cuts, subtle cuts like chained CPI, asset testing, tax law changes, benefits not being cut across the board by 23% in 2029 due to lack of funds, etc.
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Old 01-10-2018, 03:49 PM   #164
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Itís only 8% risk free if you donít die.
I agree. Dying isn't a good thing.
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Old 01-10-2018, 05:26 PM   #165
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And weigh against a portfolio loss due to market crash, prolonged bear, or insideous inflation. There are too many unknowns to make an absolute correct decision. All one can do is best guestimate with the current data and be as risk tolerant and diversified as is comfortable. As another poster said, its really about good and hopefully better.
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Old 01-10-2018, 06:24 PM   #166
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TL-DR summary:
Use a retirement planning tool to determine the best time to take SS. Run different scenarios.

Verbose part:
I'm afraid I had to use various retirement planning tools to determine when we should take social security. My initial inclination was to believe it shouldn't matter, but as it turns out it does matter a fair amount and particularly with regards when poor stock market conditions prevail - at least for our particular circumstances.

Background: I'm 62 this year, wife is 63. We have stock, bond, and cash assets of ~$740k and last three years our average after-tax expenses have been ~$68k/year and I don't expect that to change when we retire this summer. If we take SS this year, I would receive $1602/mo and wife $1947/mo. At age 70 the numbers (according to the worksheet I used on SS web site since the normal SS projections assume continued employment till 70) the SS would be $2811/mo and $3088/mo respectively. House was purchased for cash ~$330k in 2006 - current value unknown. So we are definitely on the low side of assets for retiring now, given our annual expenses. But I have run the numbers in Fidelity planner, Pralana Gold Retirement calculator (worth the price IMHO,) and FIRE Calc - all say the odds of living off our assets and delaying taking SS at 70 is pretty good (by my estimate of acceptable risk) and definitely superior to taking SS now or any time before 70 (or 69).

I'm attaching the graphs from the Fidelity planner (Pralana has some nice graphs of this too, but people here are probably more used to the better known Fidelity tool.) The color coding isn't quite consistent between graphs, so I'll try to explain what they show:

In this graph, the model shows what happens on average in the 10% worst conditions (kind of - read Fidelity's explanation in the last screen snip.) The dark blue curve is the asset balance when we take SS at age 70. The light blue curve is the average asset balance when we take SS this year (62 & 63). Obviously the assets decline slower by starting SS this year but run out sooner absent any expense reduction. But in bad markets we'd have a long tedious life of eking it out trying to preserve any liquid assets by taking SS now. SS at 70 allows us to live our current life style possibly indefinitely even in bad market conditions.



In this graph, the grey curve is the case of taking SS at 70 and blue curve is taking SS this year (the SS @ 70 curve that is obscured by the blue curve showed a similar though less severe decline in assets that is shown in the earlier figure.) This model shows what happens at Fidelity's 75% confidence level. Note that in 2050, when the assets for the SS@Now scenario hit zero, wife and I would be 94 & 95 years old. For a lot of people that is plenty long enough planning range (I'm a semi-optimist and put in 104 & 105 as drop-dead ages. An optimist would use 115.)



In this graph, the dark blue curve is the case of taking SS at 70 and the light blue is taking SS this year. As you can see, this "average" market case is the only one where taking SS early (in our unique set of circumstances) yields higher average assets over most of our life-spans, dipping below the SS@70 case only in the last few decades.



Lastly, here's Fidelity's explanation of their market conditions:

Attached Images
File Type: png assets_90pctl.PNG (44.4 KB, 304 views)
File Type: png assets_75pctl.PNG (43.9 KB, 305 views)
File Type: png assets_50pctl.PNG (45.0 KB, 307 views)
File Type: png market_explain.PNG (130.5 KB, 306 views)
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Old 01-10-2018, 07:34 PM   #167
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Originally Posted by joeea View Post
LOL! I'm fairly sure it wouldn't help. This is just one of those discussions that people enter with their minds already made up.

I'm fairly sure that if I pointed out that the current SS rules regarding starting benefits early and delaying benefits were established in the days of higher interest rates, it wouldn't matter.

I'm pretty sure that if I pointed out that 8% risk free per year is much higher than other risk free investments, and thus a terrific reason to delay, it wouldn't matter.

I'm sure if I mentioned that while the rules were actuarially neutral when they were created, but no longer are, it wouldn't change anyone's mind.

So I doubt talking would help.
It certainly seems reasonable that the early retirement factors may have been roughly actuarialy equivalent back when they were developed (I believe some of these date to the 1950s), but are out of date now. Of course, changing attitudes toward discount rates are important, not just changing mortality. I've never taken the time to do the calculation myself.

Regarding the "8% risk free", if the "other risk free investments" are bonds, then we have an apples-oranges comparison.

A $1,000 investment in a typical 8% bond gives the buyer an annual coupon of $80, plus a return of the entire $1,000 purchase price at maturity.

Retirees who forgo $1,000 of SS benefits this year in anticipation of an additional $80 per year in every as long as they live, get just the $80, and never get the $1,000. If they die 12.5 years after their new start date, they will have earned exactly 0% on their $1,000.


OTOH, you may have meant private annuities. Every example I've seen shows that deferring SS provides a better payout than putting the same money into a private life annuity. But, that comparison is only meaningful to people who were actually considering private annuities.
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Old 01-10-2018, 09:36 PM   #168
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No Hold Harmless clawback

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Further, when the time ends where Hold Harmless helps, then the beneficiaries of that benefit are saddened when they may have to catch up to the rest of the pack in later years reducing or eliminating any SS monthly increase while they catch up to the rest of the group.
Nope. There is no clawback to catch up. I always wondered, but could never find a definitive answer anywhere.

But I found out this year. I got the full benefit of the Hold Harmless for the last couple of years, to the tune of $17/month (paid $105 vs. $122).

But this year the 2% increase put me just over the line so I'm paying the full $134/mo. And my net SS check increased by about $2/mo.

If they were clawing back the Hold Harmless, my net SS would not have increased--the entire $2/mo would have been going to offset the accumulated $17/mo.
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Old 01-10-2018, 10:14 PM   #169
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Originally Posted by Floridatennisplayer View Post
Itís only 8% risk free if you donít die.
And it is not 8% per year compounded like an investment. it is a flat 8% a year increase above the full retirement benefit. It can't be compared to an investment, since it is not compounded.
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Old 01-11-2018, 07:43 AM   #170
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Nope. There is no clawback to catch up. I always wondered, but could never find a definitive answer anywhere.

But I found out this year. I got the full benefit of the Hold Harmless for the last couple of years, to the tune of $17/month (paid $105 vs. $122).

But this year the 2% increase put me just over the line so I'm paying the full $134/mo. And my net SS check increased by about $2/mo.

If they were clawing back the Hold Harmless, my net SS would not have increased--the entire $2/mo would have been going to offset the accumulated $17/mo.
Sorry if I mis-communicated my intent. I tried to say essentially what you just did. The hold harmless works for a short period, then when conditions change, those HH beneficiaries are paying the same as everyone else. HH does not reset the base for a life-time benefit.

In other words, you saved on Medicare premiums for a couple of years. If the Cola was a bit lower for 2018, then everyone not in "hold harmless" would be taking home more but not you. Your cola increase went to catching up to what the rest of the pack is paying.

The formula mixes percentages and actual dollars. So the results vary between individuals. All other thing being equal, the higher the SS monthly benefit, the quicker one catches up to paying full price for Medicare.

Thanks for clearing that up.
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Old 01-11-2018, 08:01 AM   #171
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Math is hard. Could you just put the Present Value of 8 years of your SS income stream into Firecalc with an 8 year life and it would show you outcomes? Or against 30 years or other variable versus what you would receive at 70. So just isolate your SS as your only asset? More fun for tomorrow when the weather goes downhill.
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Old 01-11-2018, 09:01 AM   #172
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Math is hard. Could you just put the Present Value of 8 years of your SS income stream into Firecalc with an 8 year life and it would show you outcomes? Or against 30 years or other variable versus what you would receive at 70. So just isolate your SS as your only asset? More fun for tomorrow when the weather goes downhill.
FireCalc uses 100+ investment paths. Which do you use for the pv calculation?

If you want to isolate SS as your only asset, there is no need for any pv calculation.
Suppose my annual SS benefit is X and my annual target spending is Y.
If X > Y, FireCalc will give 100% success.
If X < Y, FireCalc will give 0% success.
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Old 01-11-2018, 09:14 AM   #173
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Old 01-11-2018, 10:34 AM   #174
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And it is not 8% per year compounded like an investment. it is a flat 8% a year increase above the full retirement benefit. It can't be compared to an investment, since it is not compounded.
I see your point and agree that we must compare apples with apples. And we can do that, IMHO.

I am sure anybody with a financial calculator or computer can come up with the equivalent compounded return. I think the equivalent is about 5.75% compounded. Perhaps the financial wizards can confirm that, or show me the error of my ways.
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Old 01-11-2018, 10:44 AM   #175
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As the OP, I want to thank everyone for their replies. All of the information and discussion was very thoughtful and informative. After much consideration, DW decided to file at 62.

The reason she decided to file at 62 is because I receive a pension and am affected by GPO/WEP. If she were to past before me, I would get absolutely no SS benefits at all.

She did have one additional question though, since she has applied for Social Security and submitted her application, what is the next step? How long will it take for her to start receiving her benefits?

Please let us know, from your own application experience, how the next stage of the process plays out. Thanks!
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Old 01-11-2018, 10:45 AM   #176
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I see your point and agree that we must compare apples with apples. And we can do that, IMHO.

I am sure anybody with a financial calculator or computer can come up with the equivalent compounded return. I think the equivalent is about 5.75% compounded. Perhaps the financial wizards can confirm that, or show me the error of my ways.
The only reason the comparison should be apples to apples is that the argument is always that the person would take the SS early and invest it. They would allow it to compound and not take any money from the investment. I am not sure if this is reasonable, but it is the argument for reaching the "break even". In that situation, claiming that SS is an 8% return a year is disingenuous. It is done by many financial planners and educators.

The same could be said for the increase in SS benefits due to inflation (cola) that would affect the SS payout, and lessen the return on invested capital.
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Old 01-11-2018, 12:32 PM   #177
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As the OP, I want to thank everyone for their replies. All of the information and discussion was very thoughtful and informative. After much consideration, DW decided to file at 62.

The reason she decided to file at 62 is because I receive a pension and am affected by GPO/WEP. If she were to past before me, I would get absolutely no SS benefits at all.

She did have one additional question though, since she has applied for Social Security and submitted her application, what is the next step? How long will it take for her to start receiving her benefits?

Please let us know, from your own application experience, how the next stage of the process plays out. Thanks!
Letter within a week From Social Security confirming your decision then once you send that in it usually takes 60 days for your first check
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Old 01-11-2018, 12:55 PM   #178
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DW applied online before Xmas. She applied for her benefits at FRA (mid-Feb). She was following the application on-line. It said "processing" or some wording like that. Yesterday she received a phone call from SSA. They said that everything was good and her application was complete. They went thru everything including the Medicare change from self pay to automatic payment from SS and how much we wanted to withhold for taxes. They said that everything would be confirmed in a letter being sent to her.

With her birthdate in mid-Feb, the full month of Feb is covered. SS doesn't prorate the 1st month. However, payments are made the month following, on the 2nd 3rd and 4th Wednesday of the month. So her deposit for Feb will be made on the 3rd Wed of March.

While you won't be in the Medicare plan, I suspect the rest will go along the same schedule.
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Old 01-11-2018, 02:30 PM   #179
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We're still in our 50s, so there is more time for us to consider this. But, assuming 3% inflation, the SS break-even for 67-vs-62 is age 83 for us. And the break-even age for 70-vs-67 is 87 for us. We don't have any specific longevity concerns, but we'll probably just split the difference and start our SS payments at age 67, full retirement age for us.
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Old 01-11-2018, 02:47 PM   #180
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Just for kicks, I ran FireCalc with the following inputs:
$3MM portfolio,
One person taking SS at 62 @$21,000 annually vs taking SS at FRA of 67 @$30,000. (DW's actual SS numbers)

The result on Spending Level with a 30 year success was just over a 2% difference: $138K vs $141K; ~$3000 per year.

For some that $3K might make a be an issue, but at ~$140K income plus or minus, IMO, I don't see any real difference when factoring in other considerations like lower taxes, missed portfolio opportunity etc.

In the end it all gets down to longevity doesn't it?
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