New Social Security study on claiming it too early

[RunningBum]

Agree.
All good finance decisions needs to leave out the emotions.
We are spending down our taxable accounts to chase the ACA subsidy. At 65 (actually 66 due to lump sum Pension), we will do heavier Roth conversions, while then spending down the TIRA.
Goal is to then take SS at 70.
Who knows, perhaps with a huge market drop, I get emotional, but have lots of faith in historical sequences and the calculators.

As far as the SS decision goes, a huge market drop can lead to a calculated decision that future gains will be better during the recovery, which can favor starting SS at that point. This is an insight I learned here on e-r.org by participating in these discussions and being open to learning and changing.

 

[Dtail]

As far as the SS decision goes, a huge market drop can lead to a calculated decision that future gains will be better during the recovery, which can favor starting SS at that point. This is an insight I learned here on e-r.org by participating in these discussions and being open to learning and changing.

True,true.
We also have the extra concept that most of our investments are in TIRA, so the Roth conversions and using TIRA vs. taking SS early also comes into play.

 

[gwraigty]

The downside is that you need a fortitude of steel to watch your savings drop every year for 8 years.

One size does not fit all. As an income oriented investor, I can say with confidence that when my husband decides to retire, our savings will not drop at all. In fact, it will continue to increase. No pension. Even w/o SS. Our investment income (interest/dividends) already exceeds our annual spending by a healthy margin. It's about double right now.

 

[jebmke]

One size does not fit all. As an income oriented investor, I can say with confidence that when my husband decides to retire, our savings will not drop at all. In fact, it will continue to increase. No pension. Even w/o SS. Our investment income (interest/dividends) already exceeds our annual spending by a healthy margin. It's about double right now.

in fact, it could drop precipitously. I retired in December, 2007. Savings dropped like a stone for two years in a row. But you really have to be ready for something like that.

 

[gwraigty]

One size does not fit all. As an income oriented investor, I can say with confidence that when my husband decides to retire, our savings will not drop at all. In fact, it will continue to increase. No pension. Even w/o SS. Our investment income (interest/dividends) already exceeds our annual spending by a healthy margin. It's about double right now.

in fact, it could drop precipitously. I retired in December, 2007. Savings dropped like a stone for two years in a row. But you really have to be ready for something like that.

In fact, it really depends on what you're invested in. Note that I didn't specify.

 

[unclemick]

Hmmm - Hindsight being what it is. Grin

2005 Household of smokers. My old company Wellness Guide had my life expectancy at 77. Took early SS at 62. Katrina, moved inland left portfolio in 60/40 index funds, 20% down on a house. Stayed the course. Lived on early SS and a modest non -cola pension with a 6% one time portfolio hit for down payment/remodeling. Mr Market did it's thing from 2005 till now.

Hesitate to run the numbers but I remarried in 2013 and along with wife came her pension/s, portfolio, farm and of course romance.

Got hosed 25% selling my house kept hers. At age 70 my pals at the IRS jumped me a couple of tax brackets.

heh heh heh - the point. It's not just the numbers. Ala the late Yogi Berra -'predictions is hard. Especially the future.'

P.S. I also finally quit smoking at 62.

 

[jebmke]

Hmmm - Hindsight being what it is. Grin

2005 Household of smokers. My old company Wellness Guide had my life expectancy at 77. Took early SS at 62. Katrina, moved inland left portfolio in 60/40 index funds, 20% down on a house. Stayed the course. Lived on early SS and a modest non -cola pension with a 6% one time portfolio hit for down payment/remodeling. Mr Market did it's thing from 2005 till now.

Hesitate to run the numbers but I remarried in 2013 and along with wife came her pension/s, portfolio, farm and of course romance.

Got hosed 25% selling my house kept hers. At age 70 my pals at the IRS jumped me a couple of tax brackets.

heh heh heh - the point. It's not just the numbers. Ala the late Yogi Berra -'predictions is hard. Especially the future.'

P.S. I also finally quit smoking at 62.

Spousal consideration aside, anyone who thinks they are a short timer should probably start early in many cases.


Interestingly, I do taxes for a lot of retirees. Many started SS at 62 but continued to work. When I ask them why they started early, usually the answer is "I got a letter from Social Security telling me I was eligible."

 

[gwraigty]

Spousal consideration aside, anyone who thinks they are a short timer should probably start early in many cases.

It's important to know family history, going beyond just parents. My divorced parents died relatively early. Mother at 48 from cancer. Father at 67 from complications mainly related to alcoholism and Hep C. I don't feel I'm necessarily destined to not make it to 80 or 90 because of their lack of longevity.

Mother had problems with cysts at age 16 and began abusing prescription medications in early adulthood. Father started drinking heavily by mid-life. Both were smokers.

Going back further, overall, far more relatives of mine made it to their 80s/90s than didn't. Most who didn't, usually smoked heavily, and/or drank heavily (full-blown alcoholism), and even a couple of them made it to 79. I'm not counting on anything, but I feel I have a good chance of making it to mid-80s to mid-90s.

My husband's mother died of cancer at 47. His father is still alive at 86, and most of his other relatives made it to their 80s/90s. I'm hopeful for similar longevity for him also.

Of course, all hopes are based on still being mentally/physically fit enough to enjoy it.

 

[Navigator]

As far as the SS decision goes, a huge market drop can lead to a calculated decision that future gains will be better during the recovery, which can favor starting SS at that point. This is an insight I learned here on e-r.org by participating in these discussions and being open to learning and changing.

A good point.

I looked at historical returns for a 30 year retirement and a 60/40 portfolio. If the market is priced high ( as it is today), it was 50/50 as to whether taking SS was better at 62 or 70. If the market ever falls below a P/E10 of 18, taking SS at 62 was strongly favored. This is for a single person. For married couples, the situation is much more complicated.

 

[pb4uski]

I’m not sure where your data is coming from, but according to the 2016 social security life expectancy tables, the probability of a 62 year old woman living to 92 is less than 25%. However this is not my main issue.

I probably didn’t explain my point clearly enough. Your post showed an interesting analysis that seemed to indicate one could spend more money over a 30 year retirement by taking social security at age 70 over age 62. However, if we look at historical returns since 1928 for a 60/40 portfolio, that has only been true about 23% of the time. (I actually did the calculations when I was trying to decide when to take SS). The reason your analysis looked different is because you used a 4% withdrawal rate, which is the historical worst case withdrawal.

The data is coming from http://www.longevityillustrator.org/Profile?m=1 which was mentioned in another thread for a 62 yo female, non-smoker, average health born on 6/30/1957.

I don't about understand your comment about only been true 23% of the time. 4% isn't necessarily worst case but is a bad case, but if you're 62 and don't want to run out of money that is what you would use... if you base your decision on most expected case then you add more sequence of returns risk in the event it ends up that you retired at the "wrong' time.

That said, even if you use a less conservative 5% WR then deferring still provides a small benefit... at higher WR then taking at 62 wins but IMO even selecting 5% WR would be foolish for a 62 yo.

 

[Navigator]

One size does not fit all. As an income oriented investor, I can say with confidence that when my husband decides to retire, our savings will not drop at all. In fact, it will continue to increase. No pension. Even w/o SS. Our investment income (interest/dividends) already exceeds our annual spending by a healthy margin. It's about double right now.

Congratulations on being financially independent. In your case, it does not matter when you take SS, you will be fine no matter what. It is people who have enough savings to live on for eight years but not enough to cover their living expenses during a long retirement (without SS) that need to worry about when to take SS.

 

[gwraigty]

Congratulations on being financially independent. In your case, it does not matter when you take SS, you will be fine no matter what. It is people who have enough savings to live on for eight years but not enough to cover their living expenses during a long retirement (without SS) that need to worry about when to take SS.

Thank you. There are pros and cons to various scenarios, I think.

 

[ziggy29]

Congratulations on being financially independent. In your case, it does not matter when you take SS, you will be fine no matter what. It is people who have enough savings to live on for eight years but not enough to cover their living expenses during a long retirement (without SS) that need to worry about when to take SS.

It's similar to people worth (say) $10 million trying to determine the right asset allocation if they need $100K a year (1% of it). In that case, you can be as aggressive or as conservative as you want to be and it won't bust your retirement either way. (Personally, if I were in that situation I think I'd opt for about 40/60, maybe 50/50.) But if you need 3-4% of it annually, you don't have that luxury.

 

[Perryinva]

Speaking of emotional decisions, while discussing Roth conversions from tIRA before SS with a similarly retired work friend, that just retired at 67, he plainly stated he knows he could not make conversions because he could not stand to see his total portfolio drop so much because of the taxes he would pay. He doesn’t plan to use his IRA, except for emergencies, because his pension +SS would be enough. The irony of this (besides the obvious) is that he has something like 20/0/80 for AA. He’s afraid of equities and doesn’t understand bonds, so most everything is in CDs and MM funds. His current Roth is tiny, maybe $20k, and the major bulk of his savings is all pretax tIRA/401k is around $1M. He’s married & “handles all the money”, with a younger spouse.

 

[GenXguy]

If the market ever falls below a P/E10 of 18, taking SS at 62 was strongly favored. This is for a single person.

If I was to take SS at 62, I would lose a lot of money in ACA subsidies from age 62 until I turned 65, so 65 makes a lot more sense to me as long as the ACA is around.

 

[ShokWaveRider]

If I was to take SS at 62, I would lose a lot of money in ACA subsidies from age 62 until I turned 65, so 65 makes a lot more sense to me as long as the ACA is around.

Yes I agree, the whole equation changes if ACA goes the way of the DoDo. most people's SS a6 62 will not even cover their Insurance premiums, Deductibles and CoPays.