Suze Orman SS payments advice

[rcbrad]

I read an article from Suze Orman who says: "That when you start taking SS at age 70, when you hit your early 80s your total payments will be more than if you started getting a lower benefit at age 62"


I had also heard elsewhere as an example, that if you start taking benefits at age 67, it will take you 8 years to make up for what you missed if you had started to take benefits at age 62.


Unless I am missing something, these seem to contradict each other? Perhaps her statement is misleading or I am misreading it?



Of course we do not know how long we will live and there are other variables, but I thought that generally the idea was that the intent to get about the same amount of benefits no matter when you start taking SS.


Thanks, just thought I would get some additional input.

 

[Aerides]

Suze Orman is a bit of a polarizing figure on these boards, you can search threads to find most folks opinions of her.

Generally, I think she's a good starter for someone clueless about money, but by the time you're a bit further along (like, hopefully, a vast majority of us here), then using her for a source of serious advice is not really a fit.

Oh, and "when to take SS" is the singular most argued topic on the forum, and you will get 100 answers from 100 people here, and they'll all mostly be correct, since no one knows how long they will really live.

 

[capjak]

The optimum SS age is specific to each individual and couple. Depending on so many things it is not useful to make general statements. This calcualtor attempts to answer some of the questions in regards to when to start based on current mortality estimates. I make no claim to accuracy of the calculator use it as just another tool IMO.

https://opensocialsecurity.com/about/

 

[pb4uski]

I read an article from Suze Orman who says: "That when you start taking SS at age 70, when you hit your early 80s your total payments will be more than if you started getting a lower benefit at age 62"


I had also heard elsewhere as an example, that if you start taking benefits at age 67, it will take you 8 years to make up for what you missed if you had started to take benefits at age 62.


Unless I am missing something, these seem to contradict each other? Perhaps her statement is misleading or I am misreading it?



Of course we do not know how long we will live and there are other variables, but I thought that generally the idea was that the intent to get about the same amount of benefits no matter when you start taking SS.


Thanks, just thought I would get some additional input.

Well, while it varies based on your year of birth because of the transition of the FRA from age 65 to age 67... for someone whose full retirement age (FRA) is 66 you get 75% of what you would get at your FRA at age 62 and 132% of what you would get at your FRA at age 70 (4 years deferred * 8% a year simple).

So for the first one (x-62)*75 = (x-70)*132.... then 75x - 4,650 = 132x - 9,240... then 4,590 = 57x... then x= 80.52. Proof = (80.52-62)*75 = 1,389 = (80.52-70)*132.

For the second one (x-62)*75 = (x-66)*100.... then 75x - 4,650 = 100x - 6,600... then 1,950 = 25x... then x= 78... 78-66=12 years (not 8 years). Proof = (78-62)*75 = 1,200 = (78-66)*100.

 

[kaneohe]

I read an article from Suze Orman who says: "That when you start taking SS at age 70, when you hit your early 80s your total payments will be more than if you started getting a lower benefit at age 62"


I had also heard elsewhere as an example, that if you start taking benefits at age 67, it will take you 8 years to make up for what you missed if you had started to take benefits at age 62.


Unless I am missing something, these seem to contradict each other? Perhaps her statement is misleading or I am misreading it?



Of course we do not know how long we will live and there are other variables, but I thought that generally the idea was that the intent to get about the same amount of benefits no matter when you start taking SS.


Thanks, just thought I would get some additional input.

why do you think they contradict each other? In both cases if you start earlier, you will have a head start. However at some point the late starter will catch up because he is getting more. This point is about age 80 (roughly) and the life expectancy (2018) was 78.7 , so if you live to life expectancy you should roughly the same amount regardless of when you started.

You can calculate it using 70 if you start at age 62,100 if you start at 67, and 124 if you start at 70.

 

[jpeter1093]

I read an article from Suze Orman who says: "That when you start taking SS at age 70, when you hit your early 80s your total payments will be more than if you started getting a lower benefit at age 62"


I had also heard elsewhere as an example, that if you start taking benefits at age 67, it will take you 8 years to make up for what you missed if you had started to take benefits at age 62.


Unless I am missing something, these seem to contradict each other? Perhaps her statement is misleading or I am misreading it?



Of course we do not know how long we will live and there are other variables, but I thought that generally the idea was that the intent to get about the same amount of benefits no matter when you start taking SS.


Thanks, just thought I would get some additional input.

I don't know that they do contradict each other. In the first example, she says it will take 10-12 years to make up for 8 years of holding off. In the second, it will take 8 years to make up for 5 years of holding off. Not a math major, though

 

[pb4uski]

You don't need to be a math major... you just need remember freshman high school algebra. How many years ago was that?

 

[pb4uski]

I don't know that they do contradict each other. In the first example, she says it will take 10-12 years to make up for 8 years of holding off. In the second, it will take 8 years to make up for 5 years of holding off. Not a math major, though

Some of that is because the penalty for taking early varies but is a bit over 6% a year... but the bonus for deferring is 8% a year.

 

[clobber]

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.

 

[Rianne]

"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."


That's a nice $ for $ rather than % type analysis of taking SS at 62 rather than 70. The issue it presents today is, where would I get 8% on my investments? I've already lost [edit] 7% YTD on total investments. It may get worse. I picture SS as a savings account making 7-8% if I wait until 70. That takes into account I won't need it until then, which may or may not be the case. Oh, I wish I had a crystal ball.

 

[RunningBum]

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.

It is not a very good paper at all IMO because it misses an important point and gets another point wrong.

The missing point is longevity insurance. Most of us won't go broke if we die before the breakeven point. There is a greater chance of running out of money if you live well beyond the breakeven point. Longevity insurance is a major factor in my "when to take SS" decision.

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.

These two things change the argument and conclusion quite a bit, IMO. But if this paper resonates with you, feel free to follow it.

 

[clobber]

I've already lost [edit] 7% YTD on total investments.

The rates are long term, you can't use YTD for rightnow.

What are is your return for the last 6 months? S&P 500 is flat since October 2019 (0%) and flat for 1 year (0%) and up 23% for the last 3 years. My annualized returns for my investing career have only changed slightly due to recent events.

 

[pb4uski]

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.

Interesting paper albeit with a number of flaws. I'm not sure of the author's expertise to opine on the subject. I'll admit, I almost stopped reading where he said:

... this month marks the 50th anniversary of Stanley Kubrick filming the faked moon landing. ...

I input the author's $3,016 PIA at FRA 67 into opensocialsecurity.com with all other assumptions default and the EPVs are:

Age 62: $510,580
Age 67: $555,471
Optimal: $567,147 (at age 69 + 4 months)

So he's leaving a lot of money on the table by taking at age 62 using the default assumptions.

If I change the return assumption from -0.25% based on TIPS to 3% (both real returns... the latter based on the author's 5% nominal investment return assumption less the 2% FED target for inflation) then I get:

Age 62: $337,213
Age 67: $329,941
Optimal: $337,223 (at age 62 + 2 months)

This is consistent with my own analysis for our situation where on an EPV basis using reasonable assumptions when you claim doesn't matter much... especially for a single.

 

[pb4uski]

.... That's a nice $ for $ rather than % type analysis of taking SS at 62 rather than 70. The issue it presents today is, where would I get 8% on my investments? I've already lost [edit] 7% YTD on total investments. It may get worse. I picture SS as a savings account making 7-8% if I wait until 70. That takes into account I won't need it until then, which may or may not be the case. Oh, I wish I had a crystal ball.

The 8% is NOT a return... it is the increase in your monthly SS if you defer benefits for a year... but not anything close to a return.

	Claim at 67	Claim at 68	Diff	IRR
67	12,000		(12,000)
68	12,000	12,960	960
69	12,000	12,960	960
70	12,000	12,960	960
71	12,000	12,960	960
72	12,000	12,960	960	-24.40%
73	12,000	12,960	960	-17.65%
74	12,000	12,960	960	-12.70%
75	12,000	12,960	960	-8.98%
76	12,000	12,960	960	-6.11%
77	12,000	12,960	960	-3.86%
78	12,000	12,960	960	-2.07%
79	12,000	12,960	960	-0.62%
80	12,000	12,960	960	0.57%
81	12,000	12,960	960	1.55%
82	12,000	12,960	960	2.37%
83	12,000	12,960	960	3.06%
84	12,000	12,960	960	3.65%
85	12,000	12,960	960	4.16%
86	12,000	12,960	960	4.59%
87	12,000	12,960	960	4.96%
88	12,000	12,960	960	5.29%
89	12,000	12,960	960	5.57%
90	12,000	12,960	960	5.82%
91	12,000	12,960	960	6.04%
92	12,000	12,960	960	6.24%
93	12,000	12,960	960	6.41%
94	12,000	12,960	960	6.56%
95	12,000	12,960	960	6.70%
96	12,000	12,960	960	6.82%
97	12,000	12,960	960	6.93%
98	12,000	12,960	960	7.02%
99	12,000	12,960	960	7.11%
100	12,000	12,960	960	7.19%

 

[RunningBum]

The author also boosts his argument by saying that it is NOT FACT that deferring SS will increase the number of payments. Flaw in that argument is that I've never ever heard anyone make that claim. It would be stupid to. So it's just a waste of space to negate a statement that nobody in their right mind would ever make.

 

[timo2]

I read an article from Suze Orman who says: "That when you start taking SS at age 70, when you hit your early 80s your total payments will be more than if you started getting a lower benefit at age 62"

I had also heard elsewhere as an example, that if you start taking benefits at age 67, it will take you 8 years to make up for what you missed if you had started to take benefits at age 62.

Unless I am missing something, these seem to contradict each other? Perhaps her statement is misleading or I am misreading it?

Of course we do not know how long we will live and there are other variables, but I thought that generally the idea was that the intent to get about the same amount of benefits no matter when you start taking SS.

Thanks, just thought I would get some additional input.

It has been convincingly demonstrated by others (and their documents) on this site that when a person takes SS for themselves makes no difference at all in the grand scheme of things, if they live long enough. (How that timing fits into your personal plans is a very unique to you, however).

But there is one instance that does matter as to when you take SS. That is survivor benefits. Your survivor benefit is frozen at the monthly amount you were getting when you die. But many people don't have a need or desire to care about that.

 

[clobber]

The missing point is longevity insurance. Most of us won't go broke if we die before the breakeven point. There is a greater chance of running out of money if you live well beyond the breakeven point. Longevity insurance is a major factor in my "when to take SS" decision.

Like I said, this would be an unpopular opinion in these forums.

I think he does a good point of pointing out, "life isn’t just a math problem; there are a lot of other factors to consider" which you are pointing out. He also shows how taking SS at 62, and investing it, there is a better "chance" of having more money all the way through age 100.

But if you are looking for absolute guarantee of not running out, you are probably correct.

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.

I think the author is very upfront about his assumptions, and in fact even says, "For example, other CDC numbers claim that if you live to 65, you have, on average 18 years left to live if you are a male (so 83 years old), or 20 years left if you are a female (85 years old)."

 

[Rianne]

The 8% is NOT a return... it is the increase in your monthly SS if you defer benefits for a year... but not anything close to a return.

Thank you, I know you're an accountant. OK, monthly increase 8%. I'll take it. Here's my VG 10 returns (right?) at 50/50. We do not take RMD's and will not for ~5 years.

10 yr - 4%
5 yr - 3.7%
3 yr - 2.7%
1 yr - -3%
pb4uski, I will humbly take your corrections. Do my returns suck?

 

[clobber]

The author also boosts his argument by saying that it is NOT FACT that deferring SS will increase the number of payments. Flaw in that argument is that I've never ever heard anyone make that claim. It would be stupid to. So it's just a waste of space to negate a statement that nobody in their right mind would ever make.

The author lists 4 facts (or not facts). This is not one of them. What are you talking about?

 

[RunningBum]

The author lists 4 facts (or not facts). This is not one of them. What are you talking about?

2. Waiting equals a higher total amount of payments. Not FACT. Waiting definitely increases the monthly amount. It does not automatically increase the total amount of payments you will receive over your lifetime. This is a HUGE distinction. And one that needs to be studied closely. The total amount of benefit you will receive is based on a number of things, one of the biggest of which is the next fact….

 

[pb4uski]

Thank you, I know you're an accountant. OK, monthly increase 8%. I'll take it. Here's my VG 10 returns (right?) at 50/50. We do not take RMD's and will not for ~5 years.

10 yr - 4%
5 yr - 3.7%
3 yr - 2.7%
1 yr - -3%
pb4uski, I will humbly take your corrections. Do my returns suck?

I think the best way to assess your returns is to compare them to a similiar portfolio using Portfolio Visualizer. But the comparisons are only relevant if you have everything at Vanguard and everything is being included in the numbers that you posted above. Such a comparison wouldn't work for me because I have fair and increasing amounts outside of Vanguard.

50/50 Vanguard Total Stock/Total Bond Inv

10 years... Apr 2010 - Mar 2020.... +7.18%
5 years..... Apr 2015 - Mar 2020.... +4.79%
3 years..... Apr 2017 - Mar 2020.... +4.82%
1 year....... Apr 2019 - Mar 2020.... +0.36%

https://www.portfoliovisualizer.com...location1_1=50&symbol2=VBMFX&allocation2_1=50

 

[pb4uski]

2. Waiting equals a higher total amount of payments. Not FACT. Waiting definitely increases the monthly amount. It does not automatically increase the total amount of payments you will receive over your lifetime. This is a HUGE distinction. And one that needs to be studied closely. The total amount of benefit you will receive is based on a number of things, one of the biggest of which is the next fact….

That was good, but the most insightful fact was just after that.... that "Most of us won't live forever"... and even that is wrong.... unless I slept through some medical breakthrough shouldn't it be that "[-]Most[/-] All of us won't live forever" or "None of us will live forever"?

In any event, a perceptive glimpse of the obvious for which I will be forever indebted to the author.

 

[clobber]

2. Waiting equals a higher total amount of payments. Not FACT. Waiting definitely increases the monthly amount. It does not automatically increase the total amount of payments you will receive over your lifetime. This is a HUGE distinction. And one that needs to be studied closely. The total amount of benefit you will receive is based on a number of things, one of the biggest of which is the next fact….

Which is not what you said. He made no statement on the "number of payments."

Like I said, this post would be unpopular in this community.

And for that reason, I'm out.

 

[pb4uski]

... And for that reason, I'm out.

Good talk.

 

[Lewis Clark]

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.

One reason to claim at 62 is because the funds are needed to cover current living expenses. Most folks in general (but not most folks on E-R.org) probably DO need the funds to cover their living expenses. Concluding that the majority should claim at 62 is probably reasonable.