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MOST middle class folks who plan to retire early need to take SS at 62
Old 05-10-2017, 08:45 AM   #1
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MOST middle class folks who plan to retire early need to take SS at 62

If you are middle class, have less than a million in investments, and plan to retire before you are 63, it is necessary for you to start collecting Social Security at age 62. Here is why:

If you retire at age 62 and don't have a regular paycheck anymore, to continue your middle-class lifestyle between ages 62 and 67 (the regular SS age), you should limit your annual withdrawals to 4-5%. Unless you have a million dollars or more, or a pension, you can't live that middle-class lifestyle until your Social Security checks come in.

Here is my real life example:

Assets $600K in my 401k, IRA and taxable accounts total.

I have no other income such as a pension, annuity, real estate or other money making products.

A 4% withdrawal of that is $24K a year or $2000 a month. (Not enough to continue my middle-class lifestyle and pay the bills.)

But if I collected Social Security at age 62, I would get another $1500 a month in income which would give me $3500 a month. Enough for my middle-class lifestyle and pay my bills.

If I stop working at age 62, there is no other option than collecting SS early.
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Old 05-10-2017, 08:54 AM   #2
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Sorry to rain on your parade, but a 5% WR at age 62 is risky... a 47% chance of success.... 53% chance of failure.

$48k spending, $600k investments, 60/40 AA, $18k SS starting immediately, 38 year time horizon



You can look at scenarios your situation using firecalc.
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Old 05-10-2017, 09:03 AM   #3
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If I had less than 1 M in investments, I would seriously look at:
- paying less fees on my investments by going with index funds.
- work until I was 65, because taking SS early means a 25% haircut on SS forever.
- work until 65 because medicare does not start until 65, and I need health insurance and otherwise couldn't afford the $12,000 premiums.
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Old 05-10-2017, 09:07 AM   #4
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If you collect SS early, you will collect it for a longer period of time and thus collect, on average, the same amount of money. There is no built-in penalty for when you start your SS. On the more negative side, you will collect a smaller SS for the rest of your life. It really depends on your personal situation. Folks on this forum are, for the most part, in agreement. If you need SS to maintain your lifestyle, there is nothing wrong with starting it at 62.

Now if you want to get into a raging debate, the timing for starting SS to maximize the dollars that wind up in your pocket is a great subject!
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Old 05-10-2017, 09:09 AM   #5
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Working past 62 was not an option in this situation.

I am paying low fees with VTI and AGG investments.

Yes, I understand the 25% haircut argument. But my break even point is uncertain because if someone collects SS at age 62, they won't have to pull the money they are getting in Social Security out of the stock market and lose that investment return. If got a 4% conservative return on the money I don't have to pull out because I am collecting SS, the break-even date would go well into my early 80s. I may be dead by then.

Quote:
Originally Posted by Sunset View Post
If I had less than 1 M in investments, I would seriously look at:
- paying less fees on my investments by going with index funds.
- work until I was 65, because taking SS early means a 25% haircut on SS forever.
- work until 65 because medicare does not start until 65, and I need health insurance and otherwise couldn't afford the $12,000 premiums.
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Old 05-10-2017, 09:20 AM   #6
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Total nonsense. You could take out more now and then less when you get the larger SS check. Either way works as well as the other. If you die before the break even point you won't have run out of money either way so that is not a point worth mentioning.
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Old 05-10-2017, 09:31 AM   #7
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Originally Posted by Early SS View Post
.....If got a 4% conservative return on the money I don't have to pull out because I am collecting SS, the break-even date would go well into my early 80s. I may be dead by then.
Ignoring the 47% chance of success already mentioned; And you may not be dead by then. What then? You need a plan B and Plan C IMO.

From the SS pages: The average age expectancy for a 62 yr old male is 83.7 yrs.
Quote:
About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age*95.
If you are in the 10th percentile that means about a 50/50 chance of having 33 yrs of retirement(95-62).
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Old 05-10-2017, 09:37 AM   #8
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So you want me to take an 8-10% annual withdrawal of my $600K from age 62-67 so I can get more money in SS by waiting to my full retirement age. (Vs my plan of collecting SS at age 62 and only taking out 4% a year.)

Under your idea, I could cut that withdrawal down to 4% at age 67 once I start collecting SS at the higher amount.

Maybe, but that is a real gamble taking out so much money during those 5 years if we go into a bear market.


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Originally Posted by RunningBum View Post
Total nonsense. You could take out more now and then less when you get the larger SS check. Either way works as well as the other. If you die before the break even point you won't have run out of money either way so that is not a point worth mentioning.
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Old 05-10-2017, 09:40 AM   #9
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Originally Posted by Hermit View Post
If you collect SS early, you will collect it for a longer period of time and thus collect, on average, the same amount of money. There is no built-in penalty for when you start your SS. On the more negative side, you will collect a smaller SS for the rest of your life. It really depends on your personal situation. Folks on this forum are, for the most part, in agreement. If you need SS to maintain your lifestyle, there is nothing wrong with starting it at 62.

Now if you want to get into a raging debate, the timing for starting SS to maximize the dollars that wind up in your pocket is a great subject!
Agree here - SS uses actuarial tables. It's not a "penalty," but often perceived that way.

In our case, taking SS early is a win-win. My DW is, and always has been, a stay at home DM and DW. So, her SS will be based on my SS PIA and the age she starts drawing. She is also a few years older than I. When I turn 62, she will be within a few months of her FRA. So I will start SS at 62, DW will start at FRA, thereby securing 50% of my PIA (also, because her benefit is spousal, she can't draw unless I have started drawing my benefit).

The only (minor) downside, is if I reach room temperature before she does, she'll then receive my (reduced) benefit and cease receiving here spousal benefit. However, I have two pensions that she'll continue to receive, plus drawing 3-4% from our portfolio. So we're happy to start SS early, and as OP noted, let it help us maintain a comfy, middle class lifestyle.

One other caveat that helped nudge us to the above plan is the Bernicke's spending model (thanks FIRECalc!), where empirical data indicates that the majority of retirees spend substantially less as age progress.

Anyway, glad to be here cussin' and discussin' all things retirement.
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Old 05-10-2017, 09:41 AM   #10
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Also, have to factor in the person's health. A spry, fit person is more suited to start SS later than a frail 62 year old.
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Old 05-10-2017, 09:44 AM   #11
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Originally Posted by Early SS View Post
If you are middle class, have less than a million in investments, and plan to retire before you are 63, it is necessary for you to start collecting Social Security at age 62.
A very shortsighted statement. Here's why:

1. A lot of "most" folks have other income streams (real estate, pensions, annuities, royalties) besides their investment returns and SS benefits.
2. It is foolish to extrapolate from what is applicable to you in particular onto what "most" folks should do.
3. It is unclear what exactly is this "middle-class lifestyle" you speak of. There is a middle-class income level, and there is a middle-class net worth level, each of which influence one's lifestyle to some extent, but there is no defined "middle-class lifestyle".

Do I smell a troll?
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Old 05-10-2017, 09:49 AM   #12
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I don't have a wife so that is not an option.

I am talking about my middle-class lifestyle which I suspect is similar to many people.

There is no other income, which I suspect is common.

Regardless of a break even point two things are lost on the average person;

If you start collecting at 62 you get more SS checks.

The typical person's health goes down hill in their late 60s. I consider the years between 62-67 to be my last period where I will have the energy and clear mind to really enjoy myself as a retired person. I can use those five years to work on my golf game, bowl, hunt, fish, and travel. Which I never had much time for before.

If I keep working until I am 67-70 like the experts tell me I should, I may have more money but will likely not be in good enough health to enjoy it.
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Old 05-10-2017, 09:52 AM   #13
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Do I smell a troll?
One give-away for these might be when the user creates an ID/profile name that is exactly the singular narrow topic or "question" they propose?

Add to that a number of posts < 2?

I may be totally wrong, though........
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Old 05-10-2017, 09:54 AM   #14
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One give-away for these might be when the user creates an ID/profile name that is exactly the singular narrow topic or "question" they propose?

Add to that a number of posts < 2?

I may be totally wrong, though........
No troll here. It's funny how every time someone has an viewpoint on a message board, people who disagree will call troll.
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Old 05-10-2017, 09:57 AM   #15
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No troll here. It's funny how every time someone has an option on a message board, people who disagree will call troll.
Sounds like the voice of experience there.

Actually, someone who joins a new forum and immediately starts passing out advice with an air of certainty should have a reasonable expectation of being accused of trolling.

Not saying that fits you, but
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Old 05-10-2017, 09:59 AM   #16
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Quote:
Originally Posted by Early SS View Post
......

The typical person's health goes down hill in their late 60s. I consider the years between 62-67 to be my last period where I will have the energy and clear mind to really enjoy myself as a retired person. I can use those five years to work on my golf game, bowl, hunt, fish, and travel. Which I never had much time for before.

If I keep working until I am 67-70 like the experts tell me I should, I may have more money but will likely not be in good enough health to enjoy it.
If you can "golf game, bowl, hunt, fish, and travel" then you could work, so it is an option, just a choice you don't want to make.

You didn't mention that most folks at age 62 have their mortgage paid off. Do you ??
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Old 05-10-2017, 10:10 AM   #17
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Regardless of a break even point two things are lost on the average person;

If you start collecting at 62 you get more SS checks.
Do you really think this fact is lost on the average person?
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Old 05-10-2017, 10:18 AM   #18
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I've run my own numbers, and if I retire before SS age, it looks like it doesn't make much difference at what year I take the SS.

It turns out my current forecast is a bit too conservative, so I ran a second set of riskier numbers, to see if that made much difference. Anyway, here's the data:

First, the assumptions: Retire in 2020, at age 50. First set of numbers, I set a figure of $65000 per year to live off of. I got a 100% chance of success in every scenario for taking SS from 62 to 70 with two exceptions. Those were ages 67 and 68, where my chance of success dropped slightly to 98.9%.

For the second set, I set a figure of $70000 per year to live off of. Here I got the following success rates:
Take SS at...
62: 94.6%
63: 93.5%
64: 93.5%
65: 93.5%
66: 93.5%
67: 92.5%
68: 94.6%
69: 96.8%
70: 98.9%

I'll probably take SS as soon as I'm eligible, just so I can get grandfathered in if they start monkeying around too much with it. But success rates for each year don't really have anything to do with my decision.
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Old 05-10-2017, 10:31 AM   #19
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I do not take SS and have 3 years to FRA, Yes, it may look and feel very different by the time I am 70.
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Old 05-10-2017, 10:33 AM   #20
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Actually, someone who joins a new forum and immediately starts passing out advice with an air of certainty should have a reasonable expectation of being accused of trolling.

Not saying that fits you, but
The one thing I've learned on this forum is that an 'air of certainty' doesn't apply to just about anything relating to FI-RE.

"It depends" seems to be the two most used words.
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