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Old 11-21-2017, 06:49 PM   #121
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Not trying to be political, just a prediction ... someday when SS gets in such trouble maintaining benefit levels that Congress is forced to do something to "fix" it .... I predict rather than slashing current benefits they will just raise or perhaps eventually abolish the SS wage cap for contributions with no commensurate increase in benefits above a certain maximum benefit one can receive.

Might not be "fair" according to how one looks at it ... but that'll "fix" it. I'm not advocating for or against that idea ... I'm just saying the way I see it most voters will never earn up to the wage cap and they know it, and so they will vote to "eat the rich" before they'll see any significant reductions made in their grandparents, their parents, or their own future SS benefit. They already raised the wage cap about 7% just this year from 118k to 127k

Point being .... some here have expressed possible future benefit cuts/changes as one reason to consider taking SS early ... personally, for the reasons stated above, I'm not too concerned about future benefit cuts.
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Old 11-21-2017, 06:50 PM   #122
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I guess I assumed they wanted to get full benefits for a few years before cuts come to all. If you can get 5 years of uncut benefits before a 25% across the board cut comes, you move the breakeven point at least a couple of years.

I agree it's extremely unlikely for them to say "You've been collecting, so you'll keep getting the same amount, but this other person chose to delay, so we'll cut their benefit 25% (or more)". In fact, if they really were fair if they do a cut across the board, they'd compensate for those eligible but not yet collecting, to even them up to make up for the uncut money they did not get, but I don't think that will happen either.

My thought had been that when they make changes, anyone 62 or older would be grandfathered in at the old benefit rates for the rest of their lives, whether they are collecting or not. However, as 2034 gets closer with nothing being done, I don't know how they can afford to do this. I'm judging that it will be more likely that someone who defers will lose out by not collecting uncut benefits while they can. The worst case, as I wrote in another thread, is that you defer until 70, and at that point everyone gets hit with a 25% cut. You've missed on the uncut benefits from 62-70 and it will take more years to make up the difference.
Exactly! I've never been a successful investor. I am (now) very conservative in my investment strategy. Especially now that I am already ER'd. So if I were concerned enough about your worst case scenario then I would take SS at 62 to hedge my bets. Of course, this could be another bad investment strategy on my part so I opened this discussion to see what other thought. Not surprisingly (to me) most people don't think the worst case scenario is probable. Like most others, I don't absolutely need the SS.
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Old 11-21-2017, 06:56 PM   #123
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When they last fixed SS in the 1980s, it was with a combination of increasing payroll taxes, raising the retirement age for younger people, and making SS benefits partially taxable for some recipients. But everybody on this thread seems to assume that the next time around, the fix will simply be a big across-the-board cut. What am I missing? How is it different this time?
The politics of the 1980's is not the politics of today. Or is it? Is it a law of nature that once we have a benefit they won't take it away. Congress has voted to repeal the ACA but maybe (and probably) that was posturing because they new it ultimately wouldn't become law. But has that politics shifted in any way in the last two years? I don't know but it has got me thinking only because I'm about to become 62.
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Old 11-21-2017, 06:59 PM   #124
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Better to leave money on the table than be broke at age 90..
One is not suddenly "broke" at 90, they still get a monthly check. Perhaps needing to cut back on their expenses, but def not broke.
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Old 11-21-2017, 07:15 PM   #125
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Sure, getting 1800/month, for example, by taking at 62 may be enough to not worry, but 3000/month taking at 70 is usually better longevity insurance, don't you think? It could mean the difference between flying first class on vacation vs. coach. You're not running out of money either way, but first class sounds more comfortable, especially at old age.
First class tickets aren't the issue I replied to in my post. I replied to the comment of not taking SS at 62 in order to not run out of money.

First class tickets gets to the issue of maximizing money if one lives beyond the break even point. For our household, we're more interested in income stream diversification maintaining the current NW and lifestyle.
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Old 11-21-2017, 07:18 PM   #126
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This is an informative thread for retirees. The moderator team understands that social security is a government program and therefor somewhat political in nature. Rather than discuss the political aspects of social security, please concentrate on the personal benefits or pitfalls of taking SS at various age levels. Please refrain from discussion of the fairness of the system or the political pondering that goes into it. We understand the difficulty in separating politics out of such a discussion, but please do so such that the thread can continue.
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Old 11-21-2017, 07:26 PM   #127
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This is an informative thread for retirees. The moderator team understands that social security is a government program and therefor somewhat political in nature. Rather than discuss the political aspects of social security, please concentrate on the personal benefits or pitfalls of taking SS at various age levels. Please refrain from discussion of the fairness of the system or the political pondering that goes into it. We understand the difficulty in separating politics out of such a discussion, but please do so such that the thread can continue.


Thanks. I understand. Iíve tried not to refer to political parties or ideologies. I am appealing to future confidence in the structure of the system.
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Old 11-21-2017, 07:30 PM   #128
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First class tickets aren't the issue I replied to in my post. I replied to the comment of not taking SS at 62 in order to not run out of money.

First class tickets gets to the issue of maximizing money if one lives beyond the break even point. For our household, we're more interested in income stream diversification maintaining the current NW and lifestyle.
OK, fair enough.

If someone past the breakeven point is able to make it with a benefit from taking at 62, they'll also be able to make it with the higher benefit from taking at 70. The inverse is not always true. Someone who can make it with the 70 benefit can't necessarily make it with the lower 62 benefit.
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Old 11-21-2017, 07:31 PM   #129
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Thanks. I understand. Iíve tried not to refer to political parties or ideologies. I am appealing to future confidence in the structure of the system.
As was I .... someone in a previous comments suggested future benefit cuts as a possible reason to take SS earlier rather than later.
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Old 11-21-2017, 07:39 PM   #130
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Thanks. I understand. Iíve tried not to refer to political parties or ideologies. I am appealing to future confidence in the structure of the system.
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As was I .... someone in a previous comments suggested future benefit cuts as a possible reason to take SS earlier rather than later.
No problem. Nothing out of line yet. Just a reminder to keep political discussion from escaping to partisan politics.
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Old 11-22-2017, 03:27 AM   #131
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85 year old Dad just complained last week that he's sorry he took his at 62 instead of waiting.
DF is 77 and said the same thing many times. He never understood that delaying increased your SS, and always assumed 62 was when you were supposed to file. (But he is an immigrant that only went to school up to 5th grade. Finances were never even remotely a strong suit in our family) He understood that Only “rich” people delayed filing for some kind of tax reason. My late DM took care of filing for them, both at 62, and she was as financially ignorant as he was, just spoke better english) He lives with his current SO (unmarried) whose SS is her late husbands amount (she never worked, and was a SAHM) which is more than double what his is because her husband delayed his until his age 68. He only lived until he was 76 and she was 73. DF told me that she had to exlain it to him 50 times before he understood why hers was so much larger., even though she never worked. He was amazed that SS worked like that.

Basically, he would rather have lived off more of his savings when he had more, so that at 77 and up he would have more income and wouldn’t need any savings. He lost much if it on “bad investments with Merril Lynch” and now has a lower fixed income and lower savings.
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Old 11-22-2017, 03:44 AM   #132
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First class tickets aren't the issue I replied to in my post. I replied to the comment of not taking SS at 62 in order to not run out of money.

First class tickets gets to the issue of maximizing money if one lives beyond the break even point. For our household, we're more interested in income stream diversification maintaining the current NW and lifestyle.
So the issue is that you want to maintain your current NW (which is a valid personal decision) rather than purchase an enhanced COLA annuity (which is all that delaying SS is), but I fail to see how taking it at 62 helps your income stream diversity or lifestyle. Most all FAs will recommend delayed filing if you can afford the annuity and it allows a higher net income stream with lower risk. Of course, if ones SS is small, say less than $1k/mo. because of early retirement, then the point is almost moot. Whether it’s $900 now or $1800 later is not that big a deal, in absolute dollars. But for those with max SS, $2000 now or $4000 later IS a big deal, especially since only 85% of that extra $24k is taxed federally and none state, vs all if from tIRA, which can easily be a net $2500/yr extra, equal to needing an added $3600 withdrawal from a tIRA, which ups ones WR. Lower RMDs also help. Hold Harmless absolute amounts are same whether low SS or high SS, so as a percentage of net gain, those with lower SS see a larger percentage reduction.
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Old 11-22-2017, 04:45 AM   #133
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So the issue is that you want to maintain your current NW (which is a valid personal decision) rather than purchase an enhanced COLA annuity (which is all that delaying SS is), but I fail to see how taking it at 62 helps your income stream diversity or lifestyle. Most all FAs will recommend delayed filing if you can afford the annuity and it allows a higher net income stream with lower risk. Of course, if ones SS is small, say less than $1k/mo. because of early retirement, then the point is almost moot. Whether it’s $900 now or $1800 later is not that big a deal, in absolute dollars. But for those with max SS, $2000 now or $4000 later IS a big deal, especially since only 85% of that extra $24k is taxed federally and none state, vs all if from tIRA, which can easily be a net $2500/yr extra, equal to needing an added $3600 withdrawal from a tIRA, which ups ones WR. Lower RMDs also help. Hold Harmless absolute amounts are same whether low SS or high SS, so as a percentage of net gain, those with lower SS see a larger percentage reduction.
I'm taking the annuity today because my bet with the Social Security "insurance company" is that I will collect more from that annuity because of family history alone. I'm investing the money in paying off rental mortgages, which is a 5.875 percent return before taxes on the highest interest rate loan. Finally, the Social Security "insurance company" has warned me that in 17 years, I should expect a 25 percent cut in my annuity payment. If I waited until I was 70 to take it, I would only get the full annuity for 11 years. So much for that "enhanced COLA annuity" in my later years.
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Old 11-22-2017, 05:35 AM   #134
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We plan on retiring next year when we are 60/58 and immediately start spending our hard-earned savings on world travel (first class), fine dining and expensive booze. Then at about 65-ish, we will settle down and become conservative homebodies, maybe live off the land some (grow a little weed in the woods perhaps...), dine on cat food occasionally and aim to become wards of the state shortly before dementia sets in and/or dirt nap time.


So I will take SS at the right time to support the plan above.


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Old 11-22-2017, 06:19 AM   #135
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I waffle back and forth about whether I will take at 62. I think for me, it will boil down to whether the ACA is still around when I'm 62. If it is, I will likely hold off until I can get on Medicare. Health insurance premiums are my main financial concern for the future.
That's the only way I don't take it at 62. I have two years. We'll see if the ACA lasts.
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Old 11-22-2017, 07:39 AM   #136
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I'm taking the annuity today because my bet with the Social Security "insurance company" is that I will collect more from that annuity because of family history alone. I'm investing the money in paying off rental mortgages, which is a 5.875 percent return before taxes on the highest interest rate loan. Finally, the Social Security "insurance company" has warned me that in 17 years, I should expect a 25 percent cut in my annuity payment. If I waited until I was 70 to take it, I would only get the full annuity for 11 years. So much for that "enhanced COLA annuity" in my later years.
Well, certainly if you donít expect to live long, it makes sense to take it as soon as possible. Thatís not debatable. The concern about the solvency of SSA and cuts in SS based on the predicted shortfall in 2034 is very low in my just as valid opinion, based on more qualified opinions and history. Lower than say, another housing bubble bust causing rentals to lose 40% of value.
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Old 11-22-2017, 07:53 AM   #137
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IMO, this is a conservative way to increase your retirement spending. Let's take and example of 62 yo a retiree with $1 million saved and SS of $25k a year at their FRA of 66.

If they take SS at 62 and use a conservative 3.5% WR, then their inflation-adjusted spending can be $53,750 ($35,000 from portfolio and $25,000*75% or $18,750 from SS).

Alternatively, they carve out 8 years worth of age 70 benefits into a separate fund of $264,000 to provide $33,000 a year for ages 62-70 since their age 70 SS benefit will be $33,000 ($25,000 * (1+(8%*4))). They have $736k left and at a 3.5% WR that is $25,760... add the $33,000 and the total is $58,760.

So with some minimal financial engineering they have increased their retirement spending by 9.3%!

(I'm assuming that the $264k side fund earns the inflation rate so the $33,000 a year can be increased for inflation, but even if you bumped the $264k up a little bit to consider inflation more explicitly, it is still a winning strategy.)
The numbers bear out your strategy:

264,000 @2% less 33,000(annual withdrawal for 8 years) = ending balance of 26,125.
736,000 @6% less 25,760(annual withdrawal for 8 years) = ending balance of 922,730
At 70, SS of 33,000 plus 33,209(3.5% of 948,855) = income of 66,209

1,000,000@6% less 35,000(annual withdrawal 8 years) = ending balance of 1,203,973.

At 70, SS of 18,750 plus 42,139(3.5% of 1,203,973) = income of 60,889

This is roughly 8% less income than the wait to 70 approach.

Your heirs may prefer the take at 62 approach as it leaves them almost 300,000 more, but you live off of 6000 less per year to make that happen.

The person that claimed at 62 would need to increase his WR to 4% to match the income of the person that waited til 70. 1,203,973 x 4% = 48,158 plus 18,750 SS = 66,908.

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Old 11-22-2017, 09:04 AM   #138
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Well, certainly if you donít expect to live long, it makes sense to take it as soon as possible. Thatís not debatable. The concern about the solvency of SSA and cuts in SS based on the predicted shortfall in 2034 is very low in my just as valid opinion, based on more qualified opinions and history. Lower than say, another housing bubble bust causing rentals to lose 40% of value.
Whose "more qualified opinions?"

The stock market and the rental values may vary. What markets do and what the underlying businesses do can be very different. Some of my rentals dropped in value more than 60 percent the last go around. However, the tenants kept paying the rent, more people needed places to live because of foreclosures and short sales, and the rents went up. Had some cash, bought a few more rentals at the very depressed prices. Income went up some more. Other than the banks, most companies continued to pay dividends. My income, other than the RMD on the inherited IRA, was not negatively impacted.

I have no idea what the politicians will do about the shortfall. Likely they will cut the annuity to some extent, directly or indirectly. I'll take the cash today and build another annuity in the form of additional paid off rentals. Whatever happens, I will have used the money received now to further insulate myself from the consequences.
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Old 11-22-2017, 10:35 AM   #139
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So the issue is that you want to maintain your current NW (which is a valid personal decision) rather than purchase an enhanced COLA annuity (which is all that delaying SS is), but I fail to see how taking it at 62 helps your income stream diversity or lifestyle. Most all FAs will recommend delayed filing if you can afford the annuity and it allows a higher net income stream with lower risk. Of course, if ones SS is small, say less than $1k/mo. because of early retirement, then the point is almost moot. Whether it’s $900 now or $1800 later is not that big a deal, in absolute dollars. But for those with max SS, $2000 now or $4000 later IS a big deal, especially since only 85% of that extra $24k is taxed federally and none state, vs all if from tIRA, which can easily be a net $2500/yr extra, equal to needing an added $3600 withdrawal from a tIRA, which ups ones WR. Lower RMDs also help. Hold Harmless absolute amounts are same whether low SS or high SS, so as a percentage of net gain, those with lower SS see a larger percentage reduction.
If we take SS at 62, then we are using up less of our portfolio money, the money we control and won't be subject to a 23% future cut. And then we also have the Medicare cap at 65. If something happened to us our kids would get a bigger inheritance now when they are younger and don't have a huge amount of savings of their own yet. One actually mentioned that last night - he could take more career risks than many of his friends because his worst case option is moving back to his old room where he knows he is always welcome. If something happened to us he would have an inheritance to help see him through any financial setbacks.

I have a detailed spreadsheet and can run the numbers on taxes and SS at different ages. We're not into following one size fits all general maxims by financial writers, if that's what you mean by qualified opinions. We pay more attention to the results of my spreadsheets and what works best for our particular financial situation.
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Old 11-22-2017, 01:17 PM   #140
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If we take SS at 62, then we are using up less of our portfolio money, the money we control and won't be subject to a 23% future cut. ....
emphasis added

I don't think you are right on that... if they fail to act from everything that I have read both current and future benefits will be be haircut... essentially across the board.
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