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Old 02-11-2021, 06:49 PM   #21
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Originally Posted by Boston_Bulldog View Post
I am currently 55 and DW is 57. We are a couple years away from a happy retirement. I just ran some Social Security retirement estimates for both of us and then ran a few simple models of taking the Social Security benefit at ages 62, 63, 64, 65, 66, 67 or 70. The short summary of my findings was that it is either better to take the benefit at age 62 or age 70...but nothing in between. I have often heard "wait until you reach 67", but my calculations do not support this. I have posted the model in a PDF here:

https://pdfhost.io/v/zv9u7qjc6_Socia...odelerxlsx.pdf

Assumptions and Findings

As you know, based on your age, there is a "full benefit" age. For me, my full benefit comes at age 67. If I take the benefit early, e.g., age 62, there is a reduction schedule. Alternatively, if I take the benefit at 70, there is a relatively large increase of 8% a year for every year above full retirement age. The reduction schedule for those born 1960 or after is:

Age Percent of Full Benefit Monthly Benefit
62- 70.00%
63- 75.00%
64- 80.00%
65- 86.67%
66- 93.33%
67- 100.00%
70- 124.00%

The attached PDF shows an assumed full retirement benefit of $2,000 a month. I then show the cumulative earnings for every year, if you take it at 62, 63, 64, etc. I run this through age 100. I added a modest assumed rate of return of 3% on the money (impact of rate of return will be explained later).

My findings are you are better off taking the benefit at age 62 if you are going to live through age 76. If you live to age 77 or higher, you are better off taking the benefit beginning at age 70. THERE IS NO SCENARIO WHERE YOU ARE BETTER OFF TAKING THE BENEFIT AT AGE 63, 64, 65, 66 OR 67.

If you increase the assumed rate of return/interest rate (on SS income received) to a higher rate of return, it makes the age 62 distribution more advantageous into the later years. For instance, if you make the assumed rate of return 7% (vs. 3%), you are better off taking benefit at age 62 vs. 70 until age 82. Again, there is never a scenario that you are better off taking the benefit at age 63, 64, 65, 67.

This also doesn't factor in an early death, which would almost always make the age 62 benefit a better option.

I am sure there have been other discussions on this topic and I am sure I might be missing something in my thinking. If I am wrong in my assumptions, I would appreciate some feedback.

Please review the model and provide feedback.

Thanks!
As an FYI, I did not hijack this post. I posted this as a SEPARATE post, not knowing about this post and the Mods moved my post embedded into this one...

Mods, while this is a similar topic, not real sure why you made my original post a reply to the OP's post.
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Old 02-11-2021, 06:55 PM   #22
Confused about dryer sheets
 
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Just curious if you have run this for a 0% return? Essentially modeling somebody who takes it and spends it immediately every month to pay their living expenses.
Good question. Yes, I modeled rates of return from 0% (spend immediately) to 10% (invest in sexy investments). At a 0% return, age 75 is when an age 70 distribution pays out and starts passing the age 62. Again, there is no scenario, at any rate of return, where age 63-67 distribution makes sense.

Age an 8% return, you have to get to 85 before a age 70 distribution makes sense.

9% return = age 91

10% return = age 100+

The real finding in this is that your decision is EITHER age 62 or age 70 but nothing in between.
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Old 02-11-2021, 07:50 PM   #23
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As an FYI, I did not hijack this post. I posted this as a SEPARATE post, not knowing about this post and the Mods moved my post embedded into this one...

Mods, while this is a similar topic, not real sure why you made my original post a reply to the OP's post.
It is a common practice on the forums to merge threads that are discussing the same thing.
The more info the merrier. I think it will be wife at 62 and myself at 70 for us.
It gives me something to plan around. I had figured on me at 62, as that is when we want to retire.
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Old 02-11-2021, 07:51 PM   #24
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^ that is an interesting model to share. I run numbers worked out many different scenarios look at longevity of family and for me/us was to take it at 62. I really don't need more money at 83 years old where my break even numbers worked out. If I live that long we can support any other costs, if expenses increase at that time in life. So, spend that SS now and save more for longer to use if I make it past my break even age. It doesn't work for everyone but for us I couldn't see doing it any other way. We really don't even need SS to live and I would bet most here wouldn't either. Of course I will take it because it is mine and will spend it starting on day one of eligibility.
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Old 02-11-2021, 07:55 PM   #25
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It is a common practice on the forums to merge threads that are discussing the same thing.
The more info the merrier.
Great. Just didn't want to take over the original intent. The more the merrier!
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Old 02-11-2021, 07:58 PM   #26
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^ that is an interesting model to share. I run numbers worked out many different scenarios look at longevity of family and for me/us was to take it at 62. I really don't need more money at 83 years old where my break even numbers worked out. If I live that long we can support any other costs, if expenses increase at that time in life. So, spend that SS now and save more for longer to use if I make it past my break even age. It doesn't work for everyone but for us I couldn't see doing it any other way. We really don't even need SS to live and I would bet most here wouldn't either. Of course I will take it because it is mine and will spend it starting on day one of eligibility.
This is my current thought was well. I would rather take st 62 and use it right away and even invest it into higher yielding investments.
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Old 02-11-2021, 08:07 PM   #27
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Our decision is driven by that annuity. I don't want to take a lump sum tax hit and it just works to smooth out the cash flow, and puts it behind us. It allows me to leave any other buckets alone to grow for the most part.
I can opt for a COLA'd penson. The way I look at it, our investments can cover the future needs of inflation, and taking a hit up front by opting for the COLA makes us short initially. I suppose it is there for people without significant investments.
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Old 02-11-2021, 08:17 PM   #28
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Our decision is driven by that annuity. I don't want to take a lump sum tax hit and it just works to smooth out the cash flow, and puts it behind us. It allows me to leave any other buckets alone to grow for the most part.
I can opt for a COLA'd penson. The way I look at it, our investments can cover the future needs of inflation, and taking a hit up front by opting for the COLA makes us short initially. I suppose it is there for people without significant investments.


I believe those annuities require the interest to be paid out first. So your tax hits will be higher in the early years.
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Old 02-11-2021, 08:21 PM   #29
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This is my current thought was well. I would rather take st 62 and use it right away and even invest it into higher yielding investments.
Exactly take it invest it!!!

So, many have there own way of getting to the end point and some want to spend their stash first. While others would spend SS first and spend stash late in life. I see it your way load and clear.

Take it, spend it, invest it or spend your stash till 70. The in between ages just didn't seem worth the few extra year to 66 or 67 to even consider those years to take it for me.

In my world I can do better, make more if I take early. Of course that isn't the case for a lot of folks their plan to the end point is viewed different.
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Old 02-11-2021, 08:31 PM   #30
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Exactly take it invest it!!!

So, many have there own way of getting to the end point and some want to spend their stash first. While others would spend SS first and spend stash late in life. I see it your way load and clear.

Take it, spend it, invest it or spend your stash till 70. The in between ages just didn't seem worth the few extra year to 66 or 67 to even consider those years to take it for me.

In my world I can do better, make more if I take early. Of course that isn't the case for a lot of folks their plan to the end point is viewed different.


We’re holding off until 70 (we’re both 64) because of Roth conversions. Taking the lower SS amounts at 62 and paying higher tax rates because of Roth conversions doesn’t make sense.
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Old 02-11-2021, 08:34 PM   #31
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I believe those annuities require the interest to be paid out first. So your tax hits will be higher in the early years.
It won't kick us up a bracket even if that is the case. I was hoping it was distributed through the whole payout.
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Old 02-11-2021, 09:38 PM   #32
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We’re holding off until 70 (we’re both 64) because of Roth conversions. Taking the lower SS amounts at 62 and paying higher tax rates because of Roth conversions doesn’t make sense.
Yep, that sounds like great plan. I will do some conversions after ACA (65) is done and then do as much as I can till 72. I'm also saving a huge pot of money not doing conversions now and taking advantage of ACA. For me it is better not to pay 20K plus a year in HI. Save one way pay out the nose another way. Maybe a wash in my case.

I know I will have to pay taxes on 401K's and IRA's and in my case it isn't going to matter I will be in a certain tax bracket regardless of starting now or waiting.

I personally can save in one place and pay in another.
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Old 02-12-2021, 05:42 AM   #33
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We’re holding off until 70 (we’re both 64) because of Roth conversions. Taking the lower SS amounts at 62 and paying higher tax rates because of Roth conversions doesn’t make sense.
Same for conversion factor. We also have longevity factor for lower earning spouse.

It took awhile to understand that wringing maximum lifetime payments from SSA was not the proper plan for us. That point is missed by some. One plan does not fit all.
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Old 02-12-2021, 02:08 PM   #34
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62. I could die at any time. If I were dead at age 70, what good is a larger payment going to do me? If I can afford to delay to 70 because I don't need it now, then why not get it now and invest it to maximize it? I already have "enough" without social security, but I don't see the point in delaying my benefit just to get more at an age I can't be sure I will live to.
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Old 02-12-2021, 02:15 PM   #35
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62. I could die at any time. If I were dead at age 70, what good is a larger payment going to do me? If I can afford to delay to 70 because I don't need it now, then why not get it now and invest it to maximize it? I already have "enough" without social security, but I don't see the point in delaying my benefit just to get more at an age I can't be sure I will live to.
Blue531, you have way to much common sense IMO. Lol

I like your way of thinking but that way of thinking, doesn't fit everyone's way of thinking.

Again it is one of those decisions that it isn't wrong or right, it's just what fits each of us. We all here, got to this point on many different paths but in the end, we have finished the race. IMO only.
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Old 02-12-2021, 03:45 PM   #36
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I checked and the taxable portion of the annuity payout is spread across the entire period by exclusion ratios. Therefore our little annuity will only add ~800 monthly taxable income as we cash it out. It makes a perfect little filler for us. The other option is making it a life annuity, and that just does not pencil out. Gimmie the Money!
Really, there is nothing that we can do short of foolishness that will move us out of the 12% tax bracket as long as we are together. When we are no longer working we will look at Roth conversions. Someone made some great points about NOT doing the conversions, namely if we use the tIRA's as a form of Long Term Care (LTC) self-insurance.
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Old 02-12-2021, 04:02 PM   #37
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Just curious if you have run this for a 0% return? Essentially modeling somebody who takes it and spends it immediately every month to pay their living expenses.
The reason this isn't very useful is that if someone "takes it and spends it immediately every month to pay their living expenses," the decision becomes moot. If you need SS at 62 to live, you gotta take it. No choice.

Generally, the "when to take SS" decision process assumes you have a choice.
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Old 02-12-2021, 04:13 PM   #38
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62. I could die at any time. If I were dead at age 70, what good is a larger payment going to do me? If I can afford to delay to 70 because I don't need it now, then why not get it now and invest it to maximize it? I already have "enough" without social security, but I don't see the point in delaying my benefit just to get more at an age I can't be sure I will live to.
And you may very well wind up ahead with this strategy.

I started at 62 because DW is impacted by WEP and GPO and I wanted to provide her with some financial protection from my SS if I predecease her. As it turned out, by investing the monthly proceeds in a popular passive equity fund over the 8 years between 62 and 70, we now have an incremental lump sum available which supports withdrawals in excess of the extra SS I would have gotten by waiting until 70. And whatever remains of the accumulated lump sum after I die would be available to DW whereas she would get zero of my SS.

Of course, the markets might have sucked during those 8 years and the results would not have been so happy. But it is what it is and we not only got DW some protection but our income today, in our early 70's, is greater than if I had waited until 70 to collect SS.

It's a bit of a crap shoot and always dependent on your individual circumstances and the returns you get on the early SS money.
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Old 02-12-2021, 06:56 PM   #39
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The reason this isn't very useful is that if someone "takes it and spends it immediately every month to pay their living expenses," the decision becomes moot. If you need SS at 62 to live, you gotta take it. No choice.

Generally, the "when to take SS" decision process assumes you have a choice.

Didn't say they didn't have a choice. Just said they take it and spend it right away on living expenses. There are many people who just want it as soon as they can get it regardless of whether they need it or not.
I haven't turned 62 yet and still haven't decided when I will take it. I don't need to take it at 62 but I might.
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Old 02-13-2021, 05:06 AM   #40
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It may sound simplistic but I think any "extra" money a person can have coming in at age 62 allows a person to do and enjoy more things/activities in life while they have the physical ability to do them. The value of those extra dollars at a younger age goes beyond the investment calculations. There is a good chance many us will have slowed down physically and possibly mentally between 62 and 70.
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