If you are not working, why would someone wait until 70 to collect Social Security?

[Big_Hitter]

looking for the beating a dead horse gif....

 

[gerntz]

I previously posted this in another thread back in March, but it is relevant to this topic and the notion of delay being equivalent to buying longevity insurance:

pb4, good way to look at it. But...

don't you need to adjust the benefits paid 62-70 to NPV at age 70?

 

[fritz]

it could be longer than 22 years if spousal benefits are involved . as an example my wife does not get a 4500.00 dollar adder to her early benefit until i file .

As mentioned originally, I did use both our SS withdrawals @ 62 as a monthly investment input, but only looked to replace the difference between my SS @ 62 vs. @ 70. My objective was to evaluate if those earnings would make up the difference between those current SS figures (I'm dead and would my wife get a nicer amount than just my @62 SS). Our combined SS now is close to my @70 SS. It was a quick and simple estimate using calculators that don't allow for any variation like you'd find in retirement calculators with monte carlo scenarios (others state mixed results with these). Since neither we nor Joylush requires SS in retirement, we have the flexibility to explore this scenario. We went for it. If it isn't as successful as the calculators demonstrate, we can just leave it alone til it is, or not draw on it - ever (we don't depend on it for our retirement).

When I mentioned Kitches in #44, it was in reference to the 85 (actually 84) breakeven he demonstrated. I took it as confirmation that if a guy that teaches Financial Advisors is willing to show 22 years of success - that I wasn't too far off and it was a fairly decent gamble. We would be positive until at least 85 (make that 84).

 

[razztazz]

our results when spousal benefits were considered was opposite . assuming average life expectancy for a couple we had more left over of our own delaying ss . it also gave us a higher draw rate day 1 since the ss has no sequence risk to account for so no extra powder has to be kept dry . our budget is bigger day 1 delaying than taking ss since we can refill down the road with a check 69% bigger plus colas with no sequence risk to account for .

Funny you should say that. My original post was a couple paragraphs longer and included married couples "gaming the system" as it were to their advantage. As I do not have that option I edited it out

 

[Sunset]

looking for the beating a dead horse gif....

 

[Big_Hitter]

thanks - I think i've counted about 23 threads on this subject js

 

[RunningBum]

"Ignore Thread" under Thread Tools is a great resource for people who have had enough of a topic, and can't help themselves from clicking on a thread.

 

[samclem]

Folks who are modeling 7.5% or 5.2% real returns, or 3% for that matter, for a diversified portfolio in the near term (e.g. 8 years, the period affected by the "early or late SS decision") aren't viewing the investment world in the same way I am. Not that they are right or wrong. But it does impact the break-even point (which, again, is not an especially useful metric IMO).


But if one did expect something more like 1-2% real real returns for the next decade, followed by less predictable returns after that (e.g. possibly back to historical mean, or tanking for a period of a decade or more) . . . . the higher SS checks obtained by delayed SS claiming would be useful in the case of "tanking" and of no harm in the case of "portfolio growing to the sky."

 

[youbet]

I previously posted this in another thread back in March, but it is relevant to this topic and the notion of delay being equivalent to buying longevity insurance:

Have you tried the calc including earnings on the 8 years of foregone SS so you'd get more useful results?

 

[haha]

Same here. Spending more of their money and less of your own money is always good. And the benefit piles up over the years.

Moral of the story: If you want to keep more of your own money: Take SS early.

I made the same observation a long time ago, maybe it was here or maybe on another forum I used to hang at. It was not well received.

Perhaps because there is no such thing as their money and your own money. There are many way to look at this, but their money and one's own money is not likely to be a helpful way IMHO.

Ha

 

[pb4uski]

pb4, good way to look at it. But...

don't you need to adjust the benefits paid 62-70 to NPV at age 70?

Have you tried the calc including earnings on the 8 years of foregone SS so you'd get more useful results?

I did not include the time value of money only in the interest of simplicity since it doesn't change the decision but simply makes it slightly less attractive. If you want to be more precise about it, you could include the time value of money, but you also then need to include in the benefit calculation projected COLA increases.

If you include the time value of money at (a generous) 7%, the "premium" increases from $202k to $270k (ie, the fv of $2,102/month for 96 months at 7% is $270k). The benefit increases from $1,600/month to $1,950/month if benefits increase 2.5% annually for 8 years (historical is 2.7%). So the premium is $270k and the monthly benefit is $1,950 and the payout is 8.7% COLAed rather than 9.5% in the undiscounted example.

I found that at one point I had priced a COLAed annuity issued at age 70 from AIG and Principal and the payout rate was 4.9%... so "buying" a COLAed annuity from SS with an 8.7% payout rate is still extremely attractive compared to commercial COLAed annuities available and even better than fixed annuities commercially available.

Another thing to consider is that for many of us $270k is not a huge part of our wealth so IMO using a modest portion of our wealth to buy an attractively priced COLAed annuity as longevity insurance is a smart move.

 

[Sunset]

Folks who are modeling 7.5% or 5.2% real returns, or 3% for that matter, for a diversified portfolio in the near term (e.g. 8 years, the period affected by the "early or late SS decision") aren't viewing the investment world in the same way I am. ...........

+1

I'm an optimist most of the time, so I think 3% real return is probable.

I'd have to work for a Pension board to consider 7.5% real going forward

 

[Katsmeow]

I do not plan to wait until 70. Technically, I could "afford" to wait. DH and I have enough portfolio that we could cover the time from now (I'm 62) until 70 by drawing on the portfolio. But, I do not want to spend down the portfolio that much and feel more comfortable starting earlier (I will probably start next year). As mentioned by others, I think it is an individual determination.

 

[fritz]

Same here. Spending more of their money and less of your own money is always good. And the benefit piles up over the years.

Moral of the story: If you want to keep more of your own money: Take SS early.

I made the same observation a long time ago, maybe it was here or maybe on another forum I used to hang at. It was not well received.

You called that one correctly.

 

[mathjak107]

Perhaps because there is no such thing as their money and your own money. There are many way to look at this, but their money and one's own money is not likely to be a helpful way IMHO.

Ha

the funny thing is we are delaying because we rather spend just 8 years of our own money and potentially need very little of our own money for decades with the much larger ss check .

 

[Music Lover]

I find it puzzling that on an early retirement forum, which includes a lot of people that left a lot of unearned income on the table so that they could enjoy an early retirement, that so many people now find fault with those who only "might" be leaving money on the table by taking early SS or CPP.

 

[pb4uski]

Just because we've decided that we prefer free time over more money doesn't mean that we don't want to optimize the money side as long as it does not impede on our freedom. Whether we take SS at 62 or FRA or 70 or anywhere in between doesn;t change my freedom.

 

[Music Lover]

^^
I understand, but perhaps some people simply want to enjoy the extra money in their healthiest years when they are most likely able to make the best use of it??

For me, if I make it past the break even point for early CPP, I plan to celebrate that I beat the actuary calculated odds...

 

[zinger1457]

I'm sure that when you plug your numbers in - you'll see results similar to ours, if you're married. Even if you were single and earned just 5% during the accumulation and withdrawal phases - you'd still match your age 70 SS rate until you're 90. Age 70 start SS would win over 90 then, but you'd be positive at just 5% earnings during those 8 years of accumulation and aro.20 years of withdrawals up until then. Remember, you don't have to take the funds at 70 - you can let them still grow until you need them, if ever (unlike SS which stops the age increases at 70).....

Not sure your situation is typical. It sounds like the numbers you came up with were based on saving your entire SS income (between 62-70) and paying no taxes on that income. I would think many on this board, probably the majority, will pay some tax on their SS income. In my case if I take SS at 62 it will also push be into a higher tax bracket and eliminate my ACA subsidy. My current plan is to wait until FRA.

 

[jimnjana]

Ever since DW turned 62 earlier this year I consider us "Winning" in the sense we have not started her SS yet. Every month we defer her SS start date adds at least another 5 bucks to her monthly SS check. Posted on one of the other 20 something threads some of the reasons why her waiting til age 70 may not be the best decision so once a year we will revisit the subject and go from there.

 

[fritz]

Not sure your situation is typical. It sounds like the numbers you came up with were based on paying no taxes on your SS income (between 62-70). I would think many on this board, probably the majority, will pay some tax on their SS income. In my case if I take SS at 62 it will also push be into a higher tax bracket and eliminate my ACA subsidy. My current plan is to wait until FRA.

I posted on this thread earlier (#44) that we retired at 58/57 and took SS @ 62. Also posted that we've paid little to no Federal taxes during that time, and do manipulate income for ACA subsidy (wife only, I am VA and do/did not qualify). We live off SS and taxable account dividends (taxable <1/3rd of investments) Occasionally draw taxable year end CGs distribution to replenish cash held in online savings account (otherwise reinvest, but this is not taxed Federally, and helps keep taxes off SS). No TIRA withdrawals. It's not easy to make this happen as I also consult part time and have put earned income into TIRAs.

Only have to put up with this nonsense for another 1.5 years when wife goes on Medicare. I turned 65 a month ago and went on Medicare. I had to carry non-subsidized ACA insurance, as VA does not clearly state they cover emergency care in non-VA facilities (crappy ACA insurance that cost me $550/mos). Anyway I look at it - We'll most likely be subject to taxes on up to 85% of SS when we start drawing off TIRAs for Roth conversions when wife turns 65 (and probably the rest of our lives as well). It's always been just a way for the Federal government to claw back your SS, and it pretty much affects everyone...

The money invested is the equivalent amount of SS - left in our IRA which is tax deferred. You could spend it from your taxable accounts, but I would have chosen to spend down our IRAs. Again, we like Joylush don't require SS to retire and looking at these scenarios from that perspective is not typical nor for everyone as I stated. Retirement is as individual as fingerprints and none are the same IMO.

 

[Chuckanut]

^^
I understand, but perhaps some people simply want to enjoy the extra money in their healthiest years when they are most likely able to make the best use of it??

For me, if I make it past the break even point for early CPP, I plan to celebrate that I beat the actuary calculated odds...

I don't get it. Assuming one has significant individual investments - How does taking or not taking SS at 62 prevent somebody from enjoying their money? If one takes SS at 62 one has 'extra' money from the SS check to spend. If one waits until 70 to take SS one can spend 'extra' money from personal investments before 70 since the SS check at 70 will be significantly larger.

No difference. Unless one can predict the future and knows well in advance which will be the better choice. But, in that case this person would probably already have riches beyond the dreams of avarice.


I don't think most of us find 'fault' with others who use SS differently. I imagine the majority of folks would agree that when to take SS is a very personal decision for an individual or couple.

 

[W2R]

I don't think most of us find 'fault' with others who use SS differently. I imagine the majority of folks would agree that when to take SS is a very personal decision for an individual or couple.

+1
I think the question has different answers for different people in different situations. Most of us here realize that, although sometimes that doesn't come across in the written word. The few who don't see that different situations call for different strategies, will figure it out eventually.

 

[Souschef]

+1
I think the question has different answers for different people in different situations. Most of us here realize that, although sometimes that doesn't come across in the written word. The few who don't see that different situations call for different strategies, will figure it out eventually.

I absolutely agree. My wife was brain injured at 55 and I had to keep wo*rking to have her medical expenses covered until she turned 65 and was eligible for Medicare.

 

[mathjak107]

+1
I think the question has different answers for different people in different situations. Most of us here realize that, although sometimes that doesn't come across in the written word. The few who don't see that different situations call for different strategies, will figure it out eventually.

i never understood the waiting until 70 to spend more rhetoric . it is ridiculous to think anyone who delays until 70 waits to spend more .

most if not all who delay are spending either the same as they would at 70 up front or in fact more up front .

you just replace it later with a 69% bigger check .

in fact you can spend more day 1 delaying than taking ss early and investing because the ss has no sequence risk .

you do not have to keep as much dry powder with the bigger check from ss as you would investing so you can have a bigger draw early on , not less .