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Old 04-27-2020, 07:19 PM   #141
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Ah yes, I forgot about wanting to spend down tIRA funds as well, to also reduce RMDs.
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Old 06-29-2020, 05:17 AM   #142
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Originally Posted by clobber View Post
I know that this will likely be unpopular, but I did my own math and then I found the paper located here which is really good and confirmed my numbers. The conclusion is that the majority should claim at 62 unless there are extenuating circumstances.

I just read through that paper. The author left out paying 22% tax on 85% of the yearly SS payments before investing it, and possibly having yearly taxes due on dividends and interest on earnings from those invested SS payments.
The paper did make me think it's a closer call than I previously thought,
however, I'm still waiting until 70, for two reasons.


1. Not having that SS income gives me more room to do Roth Conversions
without going into a higher tax bracket.
2. My spouse can collect 100% of my higher payment if I die early but after 70 years old.


Their is a chance my wife will start SS at 62*, it depends on how much money we get Roth converted before I turn 72 and start required RMDs.


* Maybe a couple years later.
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Old 06-29-2020, 05:31 AM   #143
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Originally Posted by RunningBum View Post
He talks about life expectancy, but I'm pretty certain he is using life expectancy from birth. You don't have to make the SS decision until age 62, so the people who die before age 62 and drag down the overall life expectancy number should not be factored in. What you want to estimate is how many years longer you might expect to live starting at age 62. I would also adjust that estimate up or down based on family history and my own health at age 62.

So I have already participated in the discussion couple times and don't want to feed the bear. However wanted to get clarification if I could on this point above. When I've don't the RMDs on inherited IRAs it seems the life expectancy changes depending on your age, so seems it is based on life expectancy for your current age group. Am I wrong on this ?
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Old 06-29-2020, 06:00 AM   #144
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Originally Posted by RetireBy90 View Post
So I have already participated in the discussion couple times and don't want to feed the bear. However wanted to get clarification if I could on this point above. When I've don't the RMDs on inherited IRAs it seems the life expectancy changes depending on your age, so seems it is based on life expectancy for your current age group. Am I wrong on this ?

Please rewrite the 3rd sentence to clarify.
Here's a life expectancy by attained age from SS.
https://www.ssa.gov/oact/population/longevity.html
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Old 06-29-2020, 06:58 AM   #145
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Originally Posted by Time2 View Post
Please rewrite the 3rd sentence to clarify.
Here's a life expectancy by attained age from SS.
https://www.ssa.gov/oact/population/longevity.html
I seemed to remember that when computing my RMD for an inherited IRA that the divisor changes each year, and not just by 1 less than last year.

For example, at age 60 it is 25.2 and age 61 24.5. So thinking that the table reflects life expectancy of 25.2 for 60 YO and 24.5 for a 61 YO. 61 YO expecteded to live .3 years more ?

https://www.irs.gov/publications/p59...link1000231258
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Old 06-29-2020, 08:00 AM   #146
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Hey guys! I'm new here. Someone forwarded me the link to this thread since I'm the author of the article first mentioned in Post 10. Seems like some super smart people on here.

I'm still looking for confirmation/repudiation of the outcome of my question and you guys might be just the people for the job.

The question is simple: "If someone takes SSA benefits at 62 and invests them until 70, will they make more money living to say, 90, than if they just waited and took the payments at 70, given that the investment should continue to grow throughout the rest of their life?"

Another way to say it, "Does 8 years of investing the lower payments, make up for taking those payments early?"

Yes, there are lots of unknowns: What will the market make? When will I die? etc.

There are also a ton of peripheral issues: How will the survivor benefit be affected? How will taxes be affected?

We all know that SSA is complicated: change one variable and all the others change. Most people come at SSA benefits from the question "Will I run out of money?". I write exclusively to government employees who have inflation adjusted pensions for life. Most of the ones I have been working with lately have pensions starting out in the $40k-$60k range. And many of them have high 6 figure to 7 figure Thrift Savings Plan balances. So, running out of money is not their number one concern, at least from a SSA benefit perspective, which will be the smallest piece of their retirement. Even withdrawing 4% annually from their TSP will equate to more than the SSA benefits they'll receive.

But if we want to set those things aside and focus on just answering the SPECIFIC question in its own isolated vacuum, what do the numbers say for that specific question?

I'm not pushing my numbers on anyone or trying to recruit followers, I'm trying to see how the math holds up.

Who's willing to run their own numbers and post some data to this question?
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Old 06-29-2020, 08:38 AM   #147
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I think many of us refer to opensocialsecurity.com and firecalc.com. I'm not sure if you've used firecalc.com and would be interested in what you think of that RE calculator. Personally, we have a private pension and plan to use the 75% survivor benefit to get ~ $40K/year income. SS at FRA gives us ~$46K/year. Our portfolio at this point in time ~$1.7 50/40/10 (stocks, bonds, cash). This does not include our HSA and we're 62 years old this year.

I guess we're not concerned about running out of $ since I'll run the numbers on firecalc.com starting with less and less in the original portfolio. I've run the numbers at 50% of today's portfolio considering the possibility of an economic collapse. I guess rather than focus on our life expectancy, I'm focusing on disaster probabilities, much like an insurance company. We are fully insured house/umbrella/car etc as I have 2 DB in the insurance industry. SS is a secondary concern. Healthcare, pension and portfolio loss are more worrisome these days.
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Old 06-29-2020, 08:59 AM   #148
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[mod edit]
Not my numbers, but hypothetical with your numbers.

Someone born Jan 2, 1960... so FRA of 67. Claims at age 62 or 70 and lives to 90. Invests differential cash flows at 5%.... or IOW, invests their entire benefit until they are 70 and then at age 70 withdraw the excess of their age 70 benefit over their age 62 benefit and no longer save their age 62 benefit, so cash flow is the same as their age 70 benefit.

If the person claims at 62 then they are behind until they are between 88 and 89.... from 89 onwards they are ahead. With a 4% return the crossover is between 85 and 86.... between 83 and 84 at 3%.

However, your 5% return from the G Fund includes inflation and the cash flows exclude inflation, so the more appropriate rate to use would be 3% rather than 5% (assuming 2% inflation which conveniently is the Fed's long term target rate for inflation)... the second table is the same as the first but with the SS benefits inflated at 2% annually.... note that the breakeven point is the same as the uninflated cash flows discounted at a real rate of return of 3%. With inflation considered (or a real rate of return) the person claiming at age 62 comes out $85k behind at age 90.

 Claim at 62Claim at 70DifferenceFV at5.00%
628,400 8,4008,607 
638,400 8,40017,645 
648,400 8,40027,135 
658,400 8,40037,099 
668,400 8,40047,562 
678,400 8,40058,547 
688,400 8,40070,082 
698,400 8,40082,193 
708,40014,880-6,48079,663 
718,40014,880-6,48077,006 
728,40014,880-6,48074,216 
738,40014,880-6,48071,287 
748,40014,880-6,48068,212 
758,40014,880-6,48064,982 
768,40014,880-6,48061,591 
778,40014,880-6,48058,031 
788,40014,880-6,48054,292 
798,40014,880-6,48050,367 
808,40014,880-6,48046,245 
818,40014,880-6,48041,917 
828,40014,880-6,48037,373 
838,40014,880-6,48032,602 
848,40014,880-6,48027,592 
858,40014,880-6,48022,332 
868,40014,880-6,48016,808 
878,40014,880-6,48011,008 
888,40014,880-6,4804,919 
898,40014,880-6,480-1,475 
908,40014,880-6,480-8,189 

 Claim at 62Claim at 70DifferenceFV at5.00%
628,400 8,4008,607 
638,568 8,56817,817 
648,739 8,73927,663 
658,914 8,91438,181 
669,092 9,09249,407 
679,274 9,27461,381 
689,460 9,46074,143 
699,649 9,64987,737 
709,84217,434-7,59284,344 
7110,03917,783-7,74480,626 
7210,24018,139-7,89976,563 
7310,44418,501-8,05772,135 
7410,65318,871-8,21867,321 
7510,86619,249-8,38362,098 
7611,08419,634-8,55056,441 
7711,30520,027-8,72150,326 
7811,53120,427-8,89643,727 
7911,76220,836-9,07436,616 
8011,99721,252-9,25528,963 
8112,23721,677-9,44020,738 
8212,48222,111-9,62911,909 
8312,73222,553-9,8222,440 
8412,98623,004-10,018-7,703 
8513,24623,464-10,218-18,559 
8613,51123,934-10,423-30,167 
8713,78124,412-10,631-42,569 
8814,05724,900-10,844-55,809 
8914,33825,398-11,061-69,934 
9014,62525,906-11,282-84,991 

FWIW, a male born on Jan 2, 1960 of average health would be expected to live to age 85 and a female to age 88 according to this calculator...so on someone of average health would be better to defer to 70 then take at 62 if the decision is solely financial.
https://www.longevityillustrator.org/

Have you looked at opensocialsecurity.com? It takes these factors into account plus mortality (the likelihood of your living to receive those benefits).
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Old 06-29-2020, 09:45 AM   #149
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[mod edit]
Not my numbers, but hypothetical with your numbers.

Someone born Jan 2, 1960... so FRA of 67. Claims at age 62 or 70 and lives to 90. Invests differential cash flows at 5%.... or IOW, invests their entire benefit until they are 70 and then at age 70 withdraw the excess of their age 70 benefit over their age 62 benefit and no longer save their age 62 benefit, so cash flow is the same as their age 70 benefit.

If the person claims at 62 then they are behind until they are between 88 and 89.... from 89 onwards they are ahead. With a 4% return the crossover is between 85 and 86.... between 83 and 84 at 3%.

However, your 5% return from the G Fund includes inflation and the cash flows exclude inflation, so the more appropriate rate to use would be 3% rather than 5% (assuming 2% inflation which conveniently is the Fed's long term target rate for inflation)... the second table is the same as the first but with the SS benefits inflated at 2% annually.... note that the breakeven point is the same as the uninflated cash flows discounted at a real rate of return of 3%. With inflation considered (or a real rate of return) the person claiming at age 62 comes out $85k behind at age 90.

https://www.longevityillustrator.org/

Have you looked at opensocialsecurity.com? It takes these factors into account plus mortality (the likelihood of your living to receive those benefits).

Thank you very much for that. Clear numbers. That's a good comparison. It makes an assumption I don't make though. I don't assume cash flows to be the same at 70 in my example. IOW, the individual continues to live off the inflation adjusted 62 benefit. He doesn't withdraw from the savings account to make up for the difference between the 62 and 70 benefit. Rather he lets it grow.

That assumption changes things since in my scenario, the individual continues to live on less (the 62 amount vs the 70 amount) while the savings account continues to grow.

I used my actual numbers from my SSA statement. At 62, I am estimated to receive $2,109 a month. Invested monthly at 5% for 8 years, that's in the neighborhood of a quarter of million dollars at age 70. (Invested at only 3% net still puts it well over $200k.) If that continues to grow (vs withdrawing a little each month to make up for the amount short the age 70 amount), it reaches somewhere around $500k to $750k, depending on your 3% or 5% return. (Although I would argue that over 28 years, you can probably do better than 5%, but I'm keeping it conservative. Not sure if you saw the accompanying spreadsheet but it shows all of the investment balances out to age 100.)

In essence, my assumptions are that an age 62 payment funds an investment account until age 70. At age 70, you stop funding the account, but don't draw from it either. You start to spend or otherwise use the age 62 amount (as opposed to investing it). The value of the total payments you receive combined with the investment appreciation seems to SUGGEST to me, that someone is better off filing at 62 and investing the money until 70. As opposed to waiting to 70 to file.

I agree there are assumptions. And assumptions change things. If I assume like in your post to start drawing the account down, then yes, I see how the individual will have less money by filing early. But allowing the account to grow and living off the lesser amount forever, I think might be valid.

One could argue that one could wait until 70, file, get the larger amount, but invest the portion over the 62 amount and that would be the same thing. Which it could. Except if one croaked at 75, their survivor would not get $300,000+ that had already been set aside and accrued. Although they would theoretically get a higher monthly amount as a survivor benefit.

I think alot of this depends on how desperate the individual relies on their SSA to make it. Like I said in my paper, if you absolutely NEED to file at 62 to actually live on, then this whole exercise is pointless. You don't have the option to wait until 70. After all, pretty much everyone wants to have a roof over their head and be able to eat occasionally

But a lot of us don't need the benefit. If you don't NEED the money, is it better to take it and invest it, building up a quarter of a million dollar nest egg by 70, and then continuing to let it grow, but not feed it anymore?
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Old 06-29-2020, 11:25 AM   #150
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Please rewrite the 3rd sentence to clarify.
Here's a life expectancy by attained age from SS.
https://www.ssa.gov/oact/population/longevity.html

So to add more to my comment, It seems that as you age your life expectancy goes up. Each year some of your age group drop off the rolls and some continue to draw SS. So your number of payments would also go up. No ?
So life expectancy at 62 is one point, but then life expectancy at 70 is another to consider.



Too many moving pieces to get the "right" answer. Perhaps best is a good answer or one that works for you.
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Old 06-29-2020, 12:37 PM   #151
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My dad took SS at 65, my mom took it at 62.5. I never went thru whether it was the correct math. There was a 9.5 year age gap between my parents so that makes most calculations different and my sister was 15 when dad turned 65 so qualified as a dependent. I have never seen the latter discussed, but it just proves its a case by case calculation.
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Old 06-29-2020, 12:52 PM   #152
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My dad took SS at 65, my mom took it at 62.5. I never went thru whether it was the correct math. There was a 9.5 year age gap between my parents so that makes most calculations different and my sister was 15 when dad turned 65 so qualified as a dependent. I have never seen the latter discussed, but it just proves its a case by case calculation.
I recently worked with an individual who had his first kid at 55. Part of his retirement strategy includes filing at 62 to get the kid's portion.
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Old 06-29-2020, 01:33 PM   #153
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But a lot of us don't need the benefit. If you don't NEED the money, is it better to take it and invest it, building up a quarter of a million dollar nest egg by 70, and then continuing to let it grow, but not feed it anymore?
I actually did this and it worked for me. I started collecting and investing SS at 62 during the Great Recession and got great returns over the following years. I understand that if the markets hadn't been in my favor, the outcome might have been unfavorable. I also had the special situation that my DW, who I wanted to protect financially, cannot collect my SS as a survivor due to GPO and that was a significant factor. If I was waiting until 70 to collect and died at, say, 68, neither of us would have (or ever would) collect any of my SS. By starting at 62, she'd at least get the several years of SS I had collected and invested.

There are a lot of variables. The answer to your question: "it depends."
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Old 06-29-2020, 01:44 PM   #154
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Quote:
Originally Posted by PirtB4Forty View Post
.... The question is simple: "If someone takes SSA benefits at 62 and invests them until 70, will they make more money living to say, 90, than if they just waited and took the payments at 70, given that the investment should continue to grow throughout the rest of their life?"

Another way to say it, "Does 8 years of investing the lower payments, make up for taking those payments early?"...
Quote:
Originally Posted by PirtB4Forty View Post
Thank you very much for that. Clear numbers. That's a good comparison. It makes an assumption I don't make though. I don't assume cash flows to be the same at 70 in my example. IOW, the individual continues to live off the inflation adjusted 62 benefit. He doesn't withdraw from the savings account to make up for the difference between the 62 and 70 benefit. Rather he lets it grow.

That assumption changes things since in my scenario....
You may think it changes things, but it doesn't.... differential cash flows are differential cash flows. Below is the same scenario as before but with a twist... as you suggest, the person invests their age 62 benefit for the first 8 years... from age 70 they spend their age 62 inflation adjusted benefit... obviously if they claim at 62 their additions from age 70 onwards are zero but the balance continues to grow... but if they claim at 70 they invest the excess over the age 62 inflation adjusted benefit that they spend.

At a your 5% rate of return they end up with almost $85k more at age 90 by claiming at age 70 compared to claiming at age 62. Their nominal return would need to be 7.5% for claiming at 62 to come out ahead.... but that would be a 5.5% real return. I'm skeptical that anyone could invest and earn a 5.5% real return over the next 28 years... so from a financial perspective claiming at 62 doesn't make sense.

You seem to have a hidden agenda to advocate claiming early and that claiming early is better.... fine... but I'm not wasting any more time with someone who is unwilling take an unbiased look at the numbers.

 Claim at 62FV at5.00% Claim at 62Claim at 70Excess of 70 over 62FV at5.00%
628,4008,607    00 
638,56817,817    00 
648,73927,663    00 
658,91438,181    00 
669,09249,407    00 
679,27461,381    00 
689,46074,143    00 
699,64987,737    00 
70 92,124  9,84217,4347,5927,780 
71 96,730  10,03917,7837,74416,104 
72 101,567  10,24018,1397,89925,004 
73 106,645  10,44418,5018,05734,510 
74 111,978  10,65318,8718,21844,657 
75 117,576  10,86619,2498,38355,479 
76 123,455  11,08419,6348,55067,014 
77 129,628  11,30520,0278,72179,302 
78 136,109  11,53120,4278,89692,382 
79 142,915  11,76220,8369,074106,299 
80 150,061  11,99721,2529,255121,097 
81 157,564  12,23721,6779,440136,825 
82 165,442  12,48222,1119,629153,533 
83 173,714  12,73222,5539,822171,274 
84 182,400  12,98623,00410,018190,103 
85 191,520  13,24623,46410,218210,079 
86 201,096  13,51123,93410,423231,263 
87 211,150  13,78124,41210,631253,720 
88 221,708  14,05724,90010,844277,517 
89 232,793  14,33825,39811,061302,727 
90 244,433  14,62525,90611,282329,424 
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Old 06-29-2020, 02:04 PM   #155
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I assure you, I have zero bias about when someone files. The only thing I want to do is encourage each and every person to evaluate the best time for them to file. If they come to the conclusion that 70 is best for them, well, then I'm all for it.

I'm not sure when I'm going to file, which is why I go through all of these different scenarios. It's why I came up with the question in the first place. I see a lot of "File at 62 vs File at 70 scenarios" compared. I have never seen a "file at 62 and invest scenario." So I started with wondering if that is a viable alternative.

I'm 15 years from even being able to file so this is all still theoretical to me. I'm in search of the answer myself. I'm retiring at 50 and won't NEED to file at 62. Or even 70 for that matter. So, if someone doesn't need to file, I started wondering if there was a better use for the money, rather than let a promised payment increase at 8%, that really may never pay out for me.

Like should I get the government to fund an investment account for me, so that even if I were to pass away in my early 70's (like my Dad just did), my spouse could inherit a huge chunk of SSA money to use as she saw fit.

I apologize if I've in any way caused offense. I certainly don't mean to. Math doesn't have an objective or bias. It's one of the reasons that why I like it so much. I am not familiar with the culture on this site. (I actually had to change my user name-lol). I was just directed here by someone who told me about you guys and I thought I'd come check it out, and see if I could have a discussion about if my math holds up or not. I appreciate you engaging me. I assure you I am not arguing with anyone. I appreciate your time and wisdom.

I wish you all the best and plenty of financial freedom. And I hope the government pays out FAR more to each one of you than you ever paid into them!
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Old 06-29-2020, 02:38 PM   #156
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Originally Posted by RetireBy90 View Post
.. It seems that as you age your life expectancy goes up. Each year some of your age group drop off the rolls and some continue to draw SS. So your number of payments would also go up. No ?
So life expectancy at 62 is one point, but then life expectancy at 70 is another to consider.
...
Yes, as you survive longer, the age that you will die continues to go farther into the future at a declining rate (or some of us would be immortal).
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Old 06-29-2020, 02:50 PM   #157
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I see a lot of "File at 62 vs File at 70 scenarios" compared. I have never seen a "file at 62 and invest scenario."

We've discussed the "file at 62 and invest scenario" at length here on this forum multiple times. I've already done it. There are several others who say that's their plan too. It's common for folks that do this to have spouses impacted by GPO as it's the only way you can provide them with some financial protection from your SS, particularly if you predecease them before you reach 70.
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Old 06-29-2020, 02:54 PM   #158
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To Claim SS at age 62, FRA or at Age 70?......this is the question everyone asks and there is no easy answer. As you said it depends on each person's individual circumstances.

I am considering SS benefits like an COLA insurance benefit(which it is) ……..I would rather have more guaranteed SS Income in my older years than less to pay for my living expenses and/or nursing home bills. Our cognitive abilities tend to decrease as we age and I don't want to have to deal with more financial complications than I need to at that age. So I am deciding to claim SS at Age 70 (I am currently 60 years old). Of course, all that could change if I develop serious health issues between now and age 70.

So when to claim SS benefits? ……..it depends!
Cheers.
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Old 06-29-2020, 03:24 PM   #159
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Originally Posted by PirtB4Forty View Post
Hey guys! I'm new here. Someone forwarded me the link to this thread since I'm the author of the article first mentioned in Post 10. Seems like some super smart people on here.

I'm still looking for confirmation/repudiation of the outcome of my question and you guys might be just the people for the job.

The question is simple: "If someone takes SSA benefits at 62 and invests them until 70, will they make more money living to say, 90, than if they just waited and took the payments at 70, given that the investment should continue to grow throughout the rest of their life?"

Another way to say it, "Does 8 years of investing the lower payments, make up for taking those payments early?"

...
My normal answer for you questions would be "Possibly, but not without some risk." I didn't see where you said you got a 5% return on your government account, but if that's a true return (not a return on capital) and inflation adjusted, that's a good deal.

If you've also got medical taken care of, or otherwise not planning for an ACA subsidy, I'd say you have a very good case for taking at 62. I'd look at the numbers more closely if it were for me, but it looks like pb4 did a run for you. I'm still a bit groggy for being under anesthesia this morning (for a pretty simple procedure), so I'm not trying to do any math today. Still, it sounds right for 62 to me. And most around here know that I'm generally not a big fan of taking early.


Edited: I thought I was reading pb4's numbers as being in support of taking at 62 with that guaranteed rate on govt savings. I'm still not wanting to try to figure anything out today, so I'm just going to say ignore my post, or at least don't give it any weight or confirmation bias. I change my answer to "Do whatever you want."
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Old 06-29-2020, 04:58 PM   #160
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Originally Posted by pb4uski View Post

You seem to have a hidden agenda to advocate claiming early and that claiming early is better.... fine... but I'm not wasting any more time with someone who is unwilling take an unbiased look at the numbers.
I don't get your attitude, he has no hiddden agenda, he clearly stated he ran the numbers and thinks 62 is better, but he came here, (because of all the smart people) To ask his question.
He said, "I'm still looking for confirmation/repudiation of the outcome of my question and you guys might be just the people for the job." and "I'm not pushing my numbers on anyone or trying to recruit followers, I'm trying to see how the math holds up."
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