Consideration for taking SS early

[pb4uski]

Quote:

Originally Posted by FREE866 An average of 5.4% for stocks is a really really pessimistic assumption. Significantly below the averages. but sure that’s possible. I think it’s highly improbable, but it doesn’t matter I guess. I think it’s an interesting conversation, as I said I’m 56 now and prior to reading the article and putting in the discount rate in his calculator I was dead set on waiting until 70. Will see. Lot can happen before I have to decide anyway.

I'll be 68 in November. I haven't taken SS yet, but one way to look at it is that from age 62 to 70 you essentially have an option to start taking whenever you wish to. I'm planning to wait till 70, but like that I have that option available to me.

[jollystomper]

I read the article. His points are worth considering *if* one is unmarried (and the bulk of his analysis makes that assumption). From my simple point of view, if one is married, a bigger consideration is "do you need/want to maximize SS for the surviving spouse?". That has to be balanced against do you really need SS to support your desired lifestyle. For us, we do not currently need my SS (which is fortunately the maximum possible), so delaying to 70 to maximize survivors benefits makes sense. Our cash will make up the delta between my pension and our needs, so no need (yet) for us to be forced to touch either our stocks or bonds). One's mileage may vary (apologizes to Koolau for the plagiarism ).

[MikeTN]

I think the discussion about what one can expect to earn in the stock market is misplaced. Nearly all of us have part of our savings invested in relatively safe investments outside the stock market. So, if you use some of "safe" your money to defer SS to 70, and you want to use the calculator under discussion, think of it this way: you are buying an inflation protected annuity, and giving up some of your "safe" money to do so. If you are giving up the purchase of some I-bonds you are giving up about 1.2% real, not 4%.
I think it makes sense for most people to put part of their retirement funds in an annuity --as longevity insurance. I also think that deferring SS is the best annuity available, in part because it is the only one that is inflation adjusted.

[RunningBum]

Quote:

Originally Posted by qwerty3656 If you focus on what return you CAN make in the market you'll convince yourself to take early. If you focus on protecting your downside with a bad market run, you'll convince yourself to wait (setting aside extraneous circumstances like bad health)

+1

[threeonesix]

TLR Has anyone mentioned the possibility that what the SS website says you will receive as of today could easily go much lower in the coming years as the trust depletes without Congressional modification? Americans seem to live by the theory that the government will always do what's right and take care of citizens. Don't buy it. Things are much, much different today than they were 40+ years ago, and there doesn't appear to be an attitude shift in politics coming anytime soon. We are headed, rapidly, to an "every man for himself" type of government. As such I'm taking SS at 62, regardless. I won't need it then but I'd rather have it in MY pocket than keep it in Uncle Sam's pocket for another up to 8 years.

[rmorris50]

Quote:

Originally Posted by threeonesix TLR Has anyone mentioned the possibility that what the SS website says you will receive as of today could easily go much lower in the coming years as the trust depletes without Congressional modification? Americans seem to live by the theory that the government will always do what's right and take care of citizens. Don't buy it. Things are much, much different today than they were 40+ years ago, and there doesn't appear to be an attitude shift in politics coming anytime soon. We are headed, rapidly, to an "every man for himself" type of government. As such I'm taking SS at 62, regardless. I won't need it then but I'd rather have it in MY pocket than keep it in Uncle Sam's pocket for another up to 8 years.

I can appreciate this point of view. Congress could with a stroke of a pen end social security. It’s nearly impossible to plan for future potential political outcomes, so all we can collectively do is plan with the best information we have at any moment.

I could see social security becoming more and more means tested over time. From that perspective I would then prob want to take it as soon as possible. But for me 62 is still 13 years away, so a lot could happen between now and then. Or nothing (politically speaking).

[Out of Steam]

Quote:

Originally Posted by rmorris50 I could see social security becoming more and more means tested over time.

This is the most likely result, I think. As I understand it, similar payments in Canada and the UK don't increase much as lifetime income increases.

[bada bing]

Quote:

Originally Posted by USGrant1962 100% stocks is never “pretty conservative.”

That is one of the flaws in the "beat SS returns with investments" idea. Most analysis compares to 100% equity returns. That isn't an apples=apples comparison when you back up and look at the overall financial picture. Presumably, almost every retiree with savings has some allocation to bonds/FI. Most, I would suspect, have conservative portfolios with significant FI allocations. If you don't stretch the analogy too far, pensions and annuities are FI "investments" as well. The apples=apples comparison would more appropriately be to compare the "investment" of delaying SS to the return on the FI portion of the portfolio. That is the more correct risk parity analysis.

Another way of stating the same thing is that if you take SS early and dump the proceeds into the equity market, you may very well out perform, but you are doing so by assuming a bunch more risk. You could accomplish the same thing by delaying SS and adjusting your equity allocation upwards on portfolio (which is sort of what I personally am doing now). There is no free lunch with respect to risk/return.

My personal plan has always been to take it one month at a time with respect to evaluating my best SS claiming strategy. I'm 64 now and delaying still looks best for the foreseeable future.

[pb4uski]

Quote:

Originally Posted by threeonesix TLR Has anyone mentioned the possibility that what the SS website says you will receive as of today could easily go much lower in the coming years as the trust depletes without Congressional modification? Americans seem to live by the theory that the government will always do what's right and take care of citizens. Don't buy it. Things are much, much different today than they were 40+ years ago, and there doesn't appear to be an attitude shift in politics coming anytime soon. We are headed, rapidly, to an "every man for himself" type of government. As such I'm taking SS at 62, regardless. I won't need it then but I'd rather have it in MY pocket than keep it in Uncle Sam's pocket for another up to 8 years.

Of course that is something that has been considered... we write about it frequently.

Opensocialsecurity.com has an option to do calculations with or without a haircut. While I think it is foolish to assume a haircut, if you do it does indeed steer the decision to take earlier, but not necessarily at 62.

If one assumes a 23% haircut beginning in 2034 and 2017 Preferred Nonsmoker mortality then the EPVs are $132,638 at 62, $135,752 at 65 and 11 months (optimal solution) and $133,397 at 70... so 70 is actually slightly better even with a haircut, but the reality is that the EPVs are all so close that when you take in that case doesn't matter very much.

If you assume no haircut and 2017 Preferred Nonsmoker mortality then the EPVs are $157,253 at 62, $173,569 at 69 and 4 months (optimal solution) and $173,243 at age 70, substantially different and favoring deferring.

So if you take at 62 and there is a haircut then it doesn't much matter but if you take at 62 and it turns out that there is not a haircut then you have left 10% on the table.

[FREE866]

Given the only focus of politicians is getting elected coupled with the fact that arguably one of the largest voting blocks is people over 60 I have zero concern SS benefits will be cut at all, much less drastically.

As stated before I’m
Glad I’m not making a decision on this anytime soon given I’m 6 years away from claiming earliest. More will be revealed.

[Exchme]

Quote:

Originally Posted by FREE866 You're conflating two ideas. 100% stocks as an asset allocation is definitely not conservative. However, if we look at historical data stocks long term average is ~10%. Deduct 3% for inflation we have 7%. So figuring 4% when history has been 7% is a pretty conservative assumption. It's assuming stocks perform only 54% of their historical return. Or actually 70% depending how you look at it.

That misses the point of SORR, you can have sickeningly long stretches where you can forget about gains, your portfolio is down hard but you still have to eat.

For folks where a poor SORR and/or a long life would run them out of money, the safer thing to do is wait. If you have plenty of money, then it's not a very important decision, though for married folks, the dice are loaded in favor of the high earner waiting.

[FREE866]

Quote:

Originally Posted by Exchme That misses the point of SORR, you can have sickeningly long stretches where you can forget about gains, your portfolio is down hard but you still have to eat. For folks where a poor SORR and/or a long life would run them out of money, the safer thing to do is wait. If you have plenty of money, then it's not a very important decision, though for married folks, the dice are loaded in favor of the high earner waiting.

I’m in my 7th year of retirement and have pretty big cushion built in so I’m not too worried about that. I know anything can happen. Also, I don’t know where I’ve read it but SORR is possibly very overstated. History isn’t a guarantee but it’s a pretty good guideline and sites like FIrecalc have hard data that backs that up. As I said in my last post I still have years to make any decision.

[camfused]

I am not sure what to think about opensocialsecurity.com. It always says for DW to take hers early, basically asap, and me to take at 70. But, FI Calc, FireCalc, and my own spreadsheet runs always come out better with both of us taking at 70.

I do all these with and without a haircut.

So, I still lean toward both at 70, since my person goal is to max net-worth at 90, with money left over at 100.

[pb4uski]

Quote:

Originally Posted by camfused I am not sure what to think about opensocialsecurity.com. It always says for DW to take hers early, basically asap, and me to take at 70. But, FI Calc, FireCalc, and my own spreadsheet runs always come out better with both of us taking at 70. I do all these with and without a haircut. So, I still lean toward both at 70, since my person goal is to max net-worth at 90, with money left over at 100.

What you wrote of the lower earning spouse starting at asap and the higher earning spouse starting at 70 is common where one spouse's earnings and PIA is substantially higher than the other. In our case since I was a high earner and DW was a SAHM.

While I like FIRECalc and FICalc, they are not the right tools for such a decision analysis because they implicitly assume that you live long. Opensocialsecurity.com is a better tool for the SS decision because it includes mortality... the probability that one or the other of you will be alive to collect SS over time.

[threeonesix]

Another thing to consider ... do robots pay taxes? The threat to American jobs at all levels of employment from artificial intelligence is very real. No job means no paying SS / Medicare taxes. That could be true for millions of Americans in the next few decades.

The Egyptian Empire lasted 3,000 years. The Roman's made it to almost 1,000. I'd be shocked if America makes it to the year 2100. Of course, I won't be around to see it unless it's just my head in a jar of formaldehyde.

[SevenUp]

Quote:

Originally Posted by camfused I am not sure what to think about opensocialsecurity.com. It always says for DW to take hers early, basically asap, and me to take at 70. But, FI Calc, FireCalc, and my own spreadsheet runs always come out better with both of us taking at 70.

If you are doing significant Roth conversions, not taking SS allows more conversion at lower marginal tax rates. Given how flat an optimum the "SS benefits taken in isolation" chart shows (see the OSS output), it's plausible that deferring both SS benefits could be best in that case.

[camfused]

^^^ Yeah, I am doing lots of Roth conversion, so perhaps you have it.

[FREE866]

Just ran my numbers through the cFIREsm calculator with numbers for taking SS at 62, 67, and 70....dying at 90, 85, and 80......I'm fine in any scenario , but I think mentally now I'm leaning towards 66,67.
I could spend hours on these calculators hahaha

[statsman]

DW stopped working a few months before her 65th, and she started SS at that point. Between her being 6 years older than I am and having similar work credits for SS, there isn't much of a consideration for survivor benefits from me.

I'll probably start about the same time, just before or on my 65th. Avoids the "Should I take SS at 62 or 70?" position. As it is, my family's health history is not on my side.

[TheWizard]

Poor people and people with shorter expected lifespans should claim SS at age 62 or when they stop working, whichever is later.

For other folks, the situation is a bit complicated...