I thought the SS breakeven age was 78 for men?

veremchuka

veremchuka

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I sat down and did some simple math. This is for a male, no dependents and no spouse to consider. My age choice to start collecting is based upon my choice not providing for anyone else.

At the SSA site I got my annual SS amount for age 62 and 66. I calculated what I'd get each year to age 75 and allowed nothing for COLA. Doing the straight math I start to receive more around approximately 74 years and 8 or 9 months if I wait to start at age 66 vs 62.

I have read this is setup so that a male's breakeven point is just under 78 years. Did I overlook something? Seems breaking even just before 75 is a big difference than just before 78. A few months earlier or later OK but 3 years? The math is quite simple I wonder if I am missing something?

Thanks.
 
Maybe the site you used assumed that you would work until 66 if you started benefits at 66?

I think the formula is .75*(48+n) = 1.00 * n

Where
1.00 = benefit starting at 66
0.75 = benefit starting at 62
n = months beyond 66 until "breakeven"
48 = months from 62 to 66

If I've got the formula correct, n = 144 months or 12 years.

Of course this assumes 0% real interest.
 
Independent said:
Of course this assumes 0% real interest.
Click to expand...
It also assumes:
- that you will get to age 75 (or whatever)
- that $1 (in today's terms, assuming full COLA) at age 62 is worth no more to you than that same $1 at age 66
- that "getting the largest total amount from the system that I can" is important to you.

I know a guy at my work who is 61 and has 33 years service. He could leave tomorrow with a pension of 66K. I know for a fact that he has at least a million saved, and no dependents. He's also 60 pounds overweight and has had other health issues, and probably won't live past 75-78. He doesn't really enjoy his job much any more, having been sidelined several years ago after standing up to one boss too many. I asked him why he doesn't retire, and he told me that he is hanging on for another 2 years so he can get the maximum pension (35 years service) of 70K. It's actually important to him that he ticked every box on that particular bingo card. I wonder if he imagines that a heavenly choir will sing for him on that magic day.

(Sorry for the off-topic rant, but this is meant to be about *early* retirement, darn it!)
 
After I posted this thread I looked in my SS folder in my filing cabinet. I found some papers and a note about a SS spread sheet I downloaded that calcs this stuff. It is a pretty complex spreadsheet and I'm a novice at them but I think I can follow it. That is until I look in detail at the columns for different ages for taking SS at 62 vs 66. Here's a link.

https://docs.google.com/spreadsheet/ccc?key=0AlyWRtMroxvgdDI2MlY0UDR4WFRQRFE0Tkw0d19pTnc&hl=en#gid=0

You can look at the numbers in the example and see if it makes sense. I downloaded it to my pc and then it allows you to plug in your actual numbers for 62 and 66. My note says I found this here at ER.

I'd appreciate any comments. Per this spread sheet the breakeven point is out into 78 or 82 for me. I'm confused! :facepalm:
 
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could very well be 75 these days. I remember doing this a long time ago and concluding something like 78 also as crossover point. I'm sure in those days the time value of $$ was more than today and that I assumed some return for those 4 earlier yrs. That would have pushed the crossover point out in time.
 
Last time I charted 62, 66 & 70 the break even was about 78 to 80...
 
Thanks, that SS calculator link is pretty easy and fast to substitute different ages and ROI percentages. 79 is the point to break even with a 0% ROI and with 1.5% it is 80. Unless you expect to live well into your 80's or beyond, taking SS at 62 seems to be a more certain outcome for someone without a spouse.
 
veremchuka said:
Unless you expect to live well into your 80's or beyond, taking SS at 62 seems to be a more certain outcome for someone without a spouse.
Click to expand...

Or for those whose spouse is impacted by GPO.

In fact, if your spouse is impacted by GPO and you want to provide maximum financial protection for him/her, taking SS at 62 actually increases the protection by maximizing the size of your residual FIRE portfolio should you die young. (GPO can eliminate a spouse's access to SS based on your earnings so having a spouse impacted by GPO means having someone you want/need to provide financial protection for but can't use SS to do so.)

Didn't mean to derail veremchuka but the GPO issue is a special case we seldom bring up when discussing when to start SS but I think it effects a number of posters here.
 
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veremchuka said:
After I posted this thread I looked in my SS folder in my filing cabinet. I found some papers and a note about a SS spread sheet I downloaded that calcs this stuff. ..My note says I found this here at ER.
Click to expand...

This business of writing notes to ourselves because we know we won't remember something is interesting. I do it myself a lot. The most difficult part is remembering that you have made a note.
 
I just threw together an excel sheet and came up with the following:

This ignores inflation because it assumes COLA takes care of that (or at least the majority of it)

For me...
Early = 62
Full = 67
Late = 70

Strictly looking at the cash payout from SS the following:
Early is most ideal from age 62 to 77.8
Full is most ideal from age 77.9 to 81.5
Late is most ideal from age 81.6 to infinite

So from a gross payout perspective only... if you think you'll die before age 78 you're best off taking early. Otherwise you're best to go with late, unless you really feel like age 79 has your number!

Now, I wanted to make it more realistic by including another factor... that is what taking social security (or not taking it) does to your other retirement vehicles.

Lets assume that the money in your 401K would continue to grow at an average rate of 4% above inflation (about 6.5-7% overall) if it wasn't touched... this means that taking early SS leaves extra money in your 401K that is assumed to grow at 4% above inflation.

Factoring that into the mix we get the following changes:
Early is most ideal from age 62 to 84.4
Full is most ideal from age 84.5 to 87.8
Late is most ideal from age 87.9 to infinite

I think sometimes people forget that when you are taking social security early... you're freeing up additional savings to grow (ideally faster than inflation)...when factoring that in, taking early retirement becomes a lot more appealing.

Just for fun... if you were a real dare devil and invested your 401k entirely in equities and wanted to assume a 7% return (average historical equities return) above inflation on the money left in 401K because you took Early SS... you'd have to live to 112 for it to make more sense to take late retirement over early.
 
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I'm of the mindset that taking early SS is the way to go (unless you really can't survive without the late SS check and plan to work until 70)... because according to strictly the gross payouts, if I waited for late and died at 71, I would have missed out on roughly $175,000 (today's dollars) and would have collected next to nothing.

In order to miss out on that much by collecting early, I'd have to reach age 92 or above (where late finally paid out about 175K more than early)... at which point I definitely got a lot out already anyways.

If you are the FIRE type, you probably have a very healthy retirement account or taxable income that would benefit a lot from an extra 8 years of growth on the money you didn't need to take out because you chose early SS... under those circumstances... even if you lived to be 90-100, the total payout between early and late is almost the same, but if you died before 85 you would have lost out big on taking SS benefits late.
 
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TromboneAl said:
This business of writing notes to ourselves because we know we won't remember something is interesting. I do it myself a lot. The most difficult part is remembering that you have made a note.
Click to expand...

Oh the fix for that is easy. I just write a note to myself not to forget to remember that I wrote a note about whatever it is that I wanted to remember not to forget.
 
Walt34 said:
Oh the fix for that is easy. I just write a note to myself not to forget to remember that I wrote a note about whatever it is that I wanted to remember not to forget.
Click to expand...

you could always do what the guy in memento did and tattoo it on your chest
 
rec7 said:
That is about what I come up with.

Social Security Benefits Calculator
Click to expand...


Thanks! I have that all programmed into my retirement sim, but this is a nice simple calculator. I get so tired of seeing crossover ages quoted without a rate of return. For my nominal age 92 demise, I only have to make a 5.8% return to make taking early SS better than taking it at FRA. Of course there is then the problem of sequence of returns and other disasters...
 
veremchuka said:
I sat down and did some simple math. This is for a male, no dependents and no spouse to consider. My age choice to start collecting is based upon my choice not providing for anyone else.

At the SSA site I got my annual SS amount for age 62 and 66. I calculated what I'd get each year to age 75 and allowed nothing for COLA. Doing the straight math I start to receive more around approximately 74 years and 8 or 9 months if I wait to start at age 66 vs 62.

I have read this is setup so that a male's breakeven point is just under 78 years. Did I overlook something? Seems breaking even just before 75 is a big difference than just before 78. A few months earlier or later OK but 3 years? The math is quite simple I wonder if I am missing something?

Thanks.
Click to expand...
This is how I figure it. My wife will get around 9000 a year starting at age 62. If she waits to 66 she will get 12000. A 25% difference. If she starts at 62 and lives to 78 she will have collected 144,000. (16yrs x 9000 = 144000). If she starts at FRA of 66 and lives to 78 she will have collected 144000. (12yrs x 12000 = 144000). Thus break even at 78. Everybody has their own situation but we are not waiting. A bird in the hand is worth two in the bush.
 


EvrClrx311 made some interesting observations about allowing tax deferred money grow by taking SS early. This is where it can get really complex - RMD at 70 1/2. By taking distributions from a rollover IRA from 62 to 66 or 70 it will allow the SS benefit to grow while reducing the RMD. I'm not able to do the analysis to figure that aspect into this but typically they say it is best to defer paying taxes as long as possible. That would favor taking SS at 62 to not have to take distributions from tax deferred accounts until 70 1/2.

Not having a spouse or dependents or the added consideration of these government or public service issues makes my decision a simple one.




Sorry, I wrote this in notepad and I can't get the bold off the above.
 
The trick as I understand it is to take distributions from ira/401ks up to a targeted tax bracket--usually 15%. In this way you lower future RMDs and allow your inflation adjusted SS benefit to increase. Obviously the math becomes very specific to the person.
Nwsteve
 
Thanks for the link lsbcal. I read that thread when it was active and I just read through the entire thing again. I see that rayvt was the person who created that spreadsheet I mentioned early in this thread, thank you rayvt that's quite a spreadsheet.

Another thing I got out of re-reading that thread is the concern some stated about waiting to age 66 or especially 70 and have the SSA change their SS benefit due to SS going broke. The point was made "can you trust them to not do that to you" and I definitely do not feel comfortable trusting them.

Please let's not take a political turn here. I like reading your feedback, no need for Porky to waddle in and ruin the party! :D
 
veremchuka said:
Another thing I got out of re-reading that thread is the concern some stated about waiting to age 66 or especially 70 and have the SSA change their SS benefit due to SS going broke. The point was made "can you trust them to not do that to you" and I definitely do not feel comfortable trusting them.
Click to expand...
I doubt if it will go broke; equally, though, I doubt that the benefits will improve substantially - probably the only way is slightly down. And typically, in any pension scheme and especially one with political involvement, the existing beneficiaries are always the best protected in case of negative events of any kind.
 
Two things:

1. Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead. True you could be told you only have one year to live, and then maybe you'll think that you should have taken SS sooner.

2. What if means testing is implemented, and when you start SS they look at your net worth? In that case it would be good to wait to give yourself time to spend down your assets.
 
TromboneAl said:
Two things:

1. Dead men have no regrets. If you die at 71 you won't be sorry about your SS choices because you are dead. True you could be told you only have one year to live, and then maybe you'll think that you should have taken SS sooner.

2. What if means testing is implemented, and when you start SS they look at your net worth? In that case it would be good to wait to give yourself time to spend down your assets.
Click to expand...

I've thought about #2.

Yes, they might reduce everybody's benefit, in which case you're better off starting sooner. OTOH, they may means-test based on current assets or non-SS income, in which case you're better off starting later.

Since I don't know which way they'll zig, I figure that the political risk doesn't point me in any particular direction.
 
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