The old Social Security break even dilemma

[golfnut]

Have the same FRA (66 and 2 months). I pretty decided to take at 65 and my medicare deducted from ss check. I think it was an 7-8% reduction (somebody correct of I am wrong).

[Winemaker]

We both receive pensions, and have been taking 4% or less withdrawals from tax-deferred stash now for 6 years, and receiving $10-20k in net rental income, divvies. We were planning to do ME 70 and HER at FRA, then we decided Her at 65, to do the Medicare deductions each month. Recently, we said to hell with it, take it now because it's only $30 difference/month. I spill that much wine in the garage each month.

[Ronstar]

Quote:

Originally Posted by golfnut Have the same FRA (66 and 2 months). I pretty decided to take at 65 and my medicare deducted from ss check. I think it was an 7-8% reduction (somebody correct of I am wrong).

Quote:

Originally Posted by Winemaker We both receive pensions, and have been taking 4% or less withdrawals from tax-deferred stash now for 6 years, and receiving $10-20k in net rental income, divvies. We were planning to do ME 70 and HER at FRA, then we decided Her at 65, to do the Medicare deductions each month. Recently, we said to hell with it, take it now because it's only $30 difference/month. I spill that much wine in the garage each month.

Part of my reasoning to take at 65 is the medicare payment. DW is 65 and hasn't taken SS yet - and she complains about the medicare payment.

I think I'm going to have my medicare set up to be taken from my checking account. Because I'm fairly certain that taking it from my SS check will be a snafu if I set them both up at approx the same time. Medicare probably wouldn't find that I'm taking SS until I'm entrenched in it for a while.

[Niuatoputapu]

Quote:

Originally Posted by W2R Here are my musings on the topic. In summary, I don't think the break even point is what we should be looking at when deciding on when to take SS. The total number of dollars you get from SS before you die, is not terribly important compared with the value of those dollars to you, at that time. Merely looking at the total dollars is a huge mistake, IMO, that many of us make. Timing is crucial.

+1

If my portfolio returns between 2% and 6% between now and my age 70, the dollar differences based on my SS claim age are insignificant to me.

If my portfolio has a negative return over the same 7+ years, the extra dollars I will get because I waited until age 70 will be important to me (and/or my surviving spouse).

[bobandsherry]

Quote:

Originally Posted by Ronstar I did not calculate it, but I think DW would get about $300 more per month with my benefit - and that is if I wait until 70 to take SS. Not enough to make a difference in my plans.

Each person would be different. For me, waiting would make about $800/mo difference. And opensocialsecurity.com shows that for us, optimal is for my wife to start her draw at 62y/4m, so well outside the typical wait until 70 stock answer.

As I mentioned, each person has different data points so no one size fits all answer for sure. The only correct answer requires a crystal ball. Good luck.

[RetireBy90]

Quote:

Originally Posted by levindb If you both do not die simultaneously, then one of you will have to live on the higher SSA benefit. Would delaying longer, even to age 70, make that a more comfortable situation? If SSA is not a significant portion of your retirement spending plan, it may not matter.

This is the reason I’ll delay till 70, so DW has more “fixed” income if I go before she does. We live off pension and her SS at FRA and some investment income. I want to be sure she will be OK if I go early. Maybe not biggest payout from SS but it gives us a piece of mind.

[Red Badger]

Quote:

Originally Posted by W2R Here are my musings on the topic. In summary, I don't think the break even point is what we should be looking at when deciding on when to take SS. The total number of dollars you get from SS before you die, is not terribly important compared with the value of those dollars to you, at that time. Merely looking at the total dollars is a huge mistake, IMO, that many of us make. Timing is crucial. For example, if taking SS at 62 means the difference between someone retiring comfortably at 62, or not retiring until years later, then I think that SS should be taken at 62 no matter what the total number of dollars received by the time that person croaks. Also, I think dollars have greater value to someone who is nearly broke, than to someone who is well to do. Right now, $1,000 would mean about nothing to me but when I was 20 and broke, I would have nearly sold my soul for $1,000.

+1.

DW started spousal benefit at FRA and has no SS of her own. I filed at the same time (62). Having the income streams worked for us. Longevity doesn't seem to be in the hands we were dealt. However, if we're wrong, we'll still be fine with SS, a couple of pensions, and our IRA.

[pb4uski]

Quote:

Originally Posted by Ronstar Exactly! The value of dollars (IMO) is far more to a 64 year old than to an 84 year old. ...

Money is fungible. Since we have enough and will likely leave something under most scenarios, what we spend has no relationship to whether or not we are collecting SS.... the only difference is where the money being spent will come from.

[COcheesehead]

The biggest mistake in your analysis is the consistent rate of return you use. Markets don’t act that way. You could have 1-3 down years consecutively and that could push your BE point much further out.

[RunningBum]

Quote:

Originally Posted by COcheesehead The biggest mistake in your analysis is the consistent rate of return you use. Markets don’t act that way. You could have 1-3 down years consecutively and that could push your BE point much further out.

I think it's the opposite, isn't it? 1-3 down years would move the breakeven point up, because you are keeping more in the market by taking early rather than spending some of your portfolio while delaying SS.

Conversely, a good bull market could push the BE point much further out. Or am I the one that has this backward?

Not sure I'd call using a consistent rate a mistake. One would have to do a Firecalc type analysis using multiple starting points from historical market runs to determine where breakeven points happen. I would bet that given the historical success of the market for most runs, it would favor taking at 62. But my take on this is that if the market does well, I will have much more than I will ever spend no matter when I take SS. But what's more important to me is if I have the double whammy of poor market returns, and live longer than average, such that I could outlive my assets. Holding out for the larger payment at 70 is the best protection for this, if you are able to hold out.

[Sunset]

Quote:

Originally Posted by pb4uski .. through opensocialsecurity.com? .... I use the 2017 CSO Nonsmoker Preferred mortality and a 3.3% real discount rate (I don't agree with Piper that the TIPs rate should be used because if I delay SS the money will come from my 65/35 retirement portfolio). In addition to the tool's optimal solution, I test alternative claiming strategies of 1) both taking SS now, 2) both at 65, 3) both at FRA and 4)DW at FRA, me at 70. The expected present values that the tool returns are the amounts you are due for SS based on the data that you provide times the probability of your being alive to receive them (aka expected value), and then all present valued to today at the discount rate that you provide. For us, the expected present values are not all that different. No haircut Haircut Optimal solution 100.0% 100.0% Both now 97.8% 98.9% Both 65 99.0% 99.7% Both at FRA 98.7% 96.3% Me 70/DW FRA 99.2% 99.2% ... ......

Because of your post, I figured I should play with opensocialsecurity again using the new 2020 numbers, and adjusting the discount rate as I probably didn't do that earlier.

Since DW has the higher SS, I left that at age 70, and varied my age and the discount rate. I finally settled upon a discount rate of 2.7% as I'm a little more pessimist about the next 10 years or so, and it's close to a split between Your value and the TIPs rate.

I think I found an error in the chart for "Your Annual Survivor Benefit" This number seemed to vary to compensate for my lower benefit when less than FRA, so that the final "Total" was always 94% of DW's age 70 benefit.
This seems too high to me.

I thought SS survivor benefit was the higher of: my benefit OR departed spouse benefit.

Did you notice that number seemed odd, or am I confused about the survivor amount ?

[COcheesehead]

Quote:

Originally Posted by RunningBum I think it's the opposite, isn't it? 1-3 down years would move the breakeven point up, because you are keeping more in the market by taking early rather than spending some of your portfolio while delaying SS. Conversely, a good bull market could push the BE point much further out. Or am I the one that has this backward? Not sure I'd call using a consistent rate a mistake. One would have to do a Firecalc type analysis using multiple starting points from historical market runs to determine where breakeven points happen. I would bet that given the historical success of the market for most runs, it would favor taking at 62. But my take on this is that if the market does well, I will have much more than I will ever spend no matter when I take SS. But what's more important to me is if I have the double whammy of poor market returns, and live longer than average, such that I could outlive my assets. Holding out for the larger payment at 70 is the best protection for this, if you are able to hold out.

Sorry, yes. We are on the same page, I phrased it wrong. It would move it up. My bad.

[razztazz]

Quote:

Originally Posted by davebarnes You only have to answer one question. No spreadsheet needed. What is your planned death age?

I am almost 63 and I still use 30 yrs in my projections which, even I'll admit, is hopeful to the point of almost being silly. I have run this 62 vs FRA thing for years now. The results are always the same. My MAX SPEND RATE for 30 yrs is only somewhat higher waiting till FRA. Not the kind of spend rate that makes a difference between "nice standard of living" vs "poor standard of living."

The diff is, if I take SS at 62, the end points are higher. I have more of my own money left. Ergo if I happen to live a few yrs past 93 I'll have more money left to do it on. But not that much more than if I take it at FRA.

This appears to be a game of numbers. And that's all it's about. Not what the numbers mean because it's always a difference without a distinction and a distinction without a meaningful difference.
PS: I have no wife kids or pets at this time so none of those juggling acts apply to me. But I know they might have some significance some people

[Navigator]

There is not a big enough difference between taking SS at 65 and 66 and 2 months to worry much about. The biggest concern I have is you are using a constant 2% to 6% return to do your calculations. Historically, there has been a much wider range of returns over a 15 - 25 year time frame, so taking SS at 65 is actually riskier than your analysis suggests. However, you will likely be fine either way, so just do what feels best.

[Chuckanut]

Quote:

Originally Posted by njhowie But isn't that exactly why anyone delays taking Social Security? To get more? Why else?

Why else? Longevity insurance. Also as part of a plan to pay for LTC.

Keep in mind that, if leaving an estate is not a concern, you will 'get more' in terms of having more money to spend each year starting at age 62 if you take SS at 70.

The math is here:

http://www.early-retirement.org/forums/f28/laurence-kotlikoff-maximize-my-ss-com-77660.html#post1604411


Take what you wish and leave the rest.

[wolf]

OP: IMHO, Way overthinking. It boils down to, if you are going to live a long time,
wait. If not, take SS early. No one really knows when our time will be up.

So, know one, can answer this question. Are you gambler, wait. If not, collect now.
Good luck.

[RunningBum]

Quote:

Originally Posted by wolf OP: IMHO, Way overthinking. It boils down to, if you are going to live a long time, wait. If not, take SS early. No one really knows when our time will be up. So, know one, can answer this question. Are you gambler, wait. If not, collect now. Good luck.

I agree that no one knows when our time is up. Disagree that the one who waits is a gambler.

Given that know one knows, which way would you rather be wrong?

1) If I plan for a long life (take SS at 70) but die earlier than the breakeven, I still had enough money to live on, because I didn't use all of my other funds.

2) If I thought I'd die on the early side (take SS at 62), but live longer, than I'm short the difference between SS at 70 and SS at 62 every year past the breakeven.

I'd rather be wrong on the 1) than 2). I don't see how taking longevity insurance makes you a gambler. Maybe you didn't mean it that way, but it seems like a derogatory term. I'm guessing you lean toward taking it early.

[razztazz]

Quote:

Originally Posted by RunningBum 2) If I thought I'd die on the early side (take SS at 62), but live longer, than I'm short the difference between SS at 70 and SS at 62 every year past the breakeven.

I always ask: So how short? And what does that mean? How does that impact anything? And to really, truly come out "ahead" you'd have to come out meaningfully ahead. Living one or two years past break-even is not exactly a lot of money on any scale. I as myself: Is that what my life comes down to? A few extra thousand dollars right at the end of my life?

[Sunset]

Quote:

Originally Posted by razztazz I always ask: So how short? And what does that mean? How does that impact anything? And to really, truly come out "ahead" you'd have to come out meaningfully ahead. Living one or two years past break-even is not exactly a lot of money on any scale. I as myself: Is that what my life comes down to? A few extra thousand dollars right at the end of my life?

Some folks live over a 100 , so the difference would be after you run out of money at age 85, the last 15 yrs begging people not to throw you out on the street because you are short $5,000 every year.

All those services you need at age 90+ are from people that will want "A few extra thousand dollars right at the end of my life"

[RunningBum]

Quote:

Originally Posted by razztazz I always ask: So how short? And what does that mean? How does that impact anything? And to really, truly come out "ahead" you'd have to come out meaningfully ahead. Living one or two years past break-even is not exactly a lot of money on any scale. I as myself: Is that what my life comes down to? A few extra thousand dollars right at the end of my life?

For me at last calculation of my SS benefits it's ~$1400/month, or ~$16,800/yr. I would not be spending any less between ages 62 and 70. I'm just taking more out of my portfolio between 62 and 70 to make up for not taking SS early, and then taking less out of my portfolio from 70 on because I've got the larger SS payment. So it doesn't alter my life one bit until I hit the breakeven, then I've got the extra to help live my final years in more comfort, or leave more to charity and/or heirs. Believe it or not, some people still travel well into their 80s, and that extra could go towards more comfortable first class accommodations, and perhaps a traveling companion to assist me. And why do you talk about just one or two years past the breakeven, when it could be 10 years or even more?

It presumes I've got enough in my portfolio to make it to 70 without letting my portfolio get too low. I do, but I know not everyone does, so it's not an option for everyone.

You may not care about over 16 grand a year, but I sure do, and I doubt I'm alone. I see people holding out for $10 less on their income tax program, and going to the trouble to open new accounts for a few hundred bucks bonus.

Unless you KNOW you will die younger, which allows you to spend more money in a shorter time frame, there's no reason to spend less in your 60s just because you're holding off on taking SS until 70.

So my question for you is, do you listen to the answers when you always ask this?