Take it now or wait?

[guest]

I thought that “Budatx’s” thread “Help! Retire now or in 8 years” raised an interesting side discussion possibility. To take it now or wait? Meaning, lots of advice I have read or even plans shared by folks under threads of a different topic, show many people deferring their potential earnings to a later time. A common example might be social security (“I am going to wait until 66”) or maybe a life annuity (I am taking a COLA with my annuity). I have ran the math and if I should opt for an annuity for example, I will not opt for a “COLA” annuity. It reduces the annuity by a dollar amount that will take close to twenty years to recapture! I would rather take the money and depend on my own abilities than have them dole out another 3% each year saying they are keeping me up with inflation. (I’ll save it and be way ahead of the COLA steps!)

Besides having more faith in me and my abilities vice a system, I also believe that aging has its own limitations. I want my money when I am able to enjoy it. When I am 75 I don’t believe I will have the same desires and energy I will have at 55! Show me the money! I need to play while I still can or while I am still around to play!!

Any thoughts?

 

[Rustic23]

We have just about made the decission to wait till 70 for SS. From 66 to 70 you get 8% (last article I read) We don't need the money now, and FIL and MIL lived past 94!

 

[RetireeRobert]

Besides having more faith in me and my abilities vice a system, I also believe that aging has its own limitations. I want my money when I am able to enjoy it. When I am 75 I don’t believe I will have the same desires and energy I will have at 55! Show me the money! I need to play while I still can or while I am still around to play!!

Any thoughts?

A lot of the decision to defer pensions to later, or draw now, depends on the total circumstances of the person. If you have a great need/want for the money now, of course that makes sense.

Or, as in Budatx's case, current income stream seemed more than adequate without drawing the pensions now. In his case it was perfectly logical to defer if he felt like it, without greatly impacting his current lifestyle one way or the other. And he and his DW said they would continue working regardless---precluding lots of time to "live it up" and therefore have a great current need for more dough.

Most people likely are somewhere in the middle. They have enough to live on now, but not so much that drawing more bucks now from pensions wouldn't sweeten their current lifestlye noticably.

Your point about energy levels at age 55 as compared to age 75 also is a good one. Definitely something to be considered---when *is* one going to be able to do his "living it up" (and likely to need more money to do that living it up)?

 

[clifp]

As long as the option exist payback Social Security and refile latter at the higher benefit rate, I think there is no reason no take Social Security as early as possible.
This is literally having your cake and eating it too.

I estimate for the majority of people on the board the total SS benefits collected between 62 and 69 will between 100-200K/person. Now this obviously a significant amount of money but in relationship to the fairly typical (for the board) $1 million nest egg. It isn't a huge sum. It will require good financial plan and some intelligence use of a tax defered money, but I suspect many of us will be in the position at a round age 68 or 69 to make more intelligent tradeoffs about continuing with existing benefits vs paying back and getting much higher payouts.

I am guessing that at some point this loophole will be fixed but right now I see no reason to not take the money, and worry about my age 70 benefits at age 70.

 

[Independent]

A common example might be social security (“I am going to wait until 66”) or maybe a life annuity (I am taking a COLA with my annuity). I have ran the math and if I should opt for an annuity for example, I will not opt for a “COLA” annuity. It reduces the annuity by a dollar amount that will take close to twenty years to recapture! I would rather take the money and depend on my own abilities than have them dole out another 3% each year saying they are keeping me up with inflation. (I’ll save it and be way ahead of the COLA steps!)

Apparantly the "COLA" that you've looked at (maybe in your pension plan?) is a fixed 3% regardless of inflation.

Recognize that SS and private products offered by Vanguard and a few others are indexed to the CPI. People using them are probably quite risk averse wrt inflation.

 

[guest]

Civil Servant

"Apparantly the "COLA" that you've looked at (maybe in your pension plan?) is a fixed 3% regardless of inflation"

That is not totally true. Increasing payments are one option in my available annuity but the increase cannot exceed 3%. To quote from the manual:

"The amount of
the change is based on the change in the consumer
price index. When annuity payments start, they
are smaller than they would be if you had
selected level payments, but usually there is an
annual increase in monthly payments. Increases​

cannot exceed 3 percent per year"

I did the math at 3% as it would be a best case scenario. It appears that it could be even longer to catch up to what is referred to as "level payments".