timing SS start

[Boston_Bulldog]

^ 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.

 

[skyking1]

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.

 

[Dash man]

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.

 

[street]

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.

 

[Dash man]

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.

 

[skyking1]

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.

 

[street]

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.

 

[target2019]

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.

 

[Blue531]

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.

 

[street]

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.

 

[skyking1]

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.

 

[youbet]

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.

 

[youbet]

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.

 

[finnski1]

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.

 

[shotgunner]

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.

 

[Dtail]

DGF is already taking SS in SSDI form at 59 y.o.
I will wait until at least 66 - 70 y.o. due to ACA management of income plus small lump sum pension at 65 y.o.

 

[finnski1]

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_Social_Security_Modelerxlsx.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. Well here's one example. If you die before age 85.5 but after age 82 it would make taking it at 67 look good...

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!

Well I understand your logic but by my calculations at your 3% return the point at which age to switch to 70 would be 83.36 not 77 as you have stated. There is a flaw in your spreadsheet. You show numbers in your age 70 column accumulating starting at age 68 in your left column. Your age 70 column should shift down 2 years. This extra 2 years plus the extra compounding @3% pushes the switch over age to 83.36 and not 77.
See my enclosed spreadsheet. Even at 0% return the switch over point is still 80.37. The reason I had asked about 0% was that I had run that on my own spreadsheet and wanted to see f you got the same answer. That led me to discover the flaw in your spreadsheet.

This would make your argument for taking it at 62 and invest it at 3% even better. But if we entered a bear market and your returns were negative 3% or worse the opposite would be true and you might be better off to wait to take ss. OK I just ran it assuming a -3% return for the years from 62 to 70 and then from 70 on put your positive 3% return in. It still looked like you would be good to age 79 (instead of the 83.36)if you took it at 62 before the age 70 total takes over. No too bad. This is the gamble one takes by taking it early. If someone took it at 62 say 8 years ago and invested it all in an index fund they would be looking pretty good right now but no guarantees going forward.

Back to assuming the positive 3% as your example spreadsheet: The age 70 total doesn't catch the age 67 total until you reach 85.5.
It's also interesting to see that if you did wait to 67 you probably would be better to take it at 68 or 69 because the age 70 never catches the total of either of these until well past 100.
Now having said all that all these totals assume that you never spend any of this money and the totals keep growing at 3%, This is fine if you want to pass the money along to heirs. In my situation we have no heirs so would be spending most or all of each years checks. This would change the "break even" numbers but wouldn't matter to me at that point.


Sorry for the long winded post and I could have missed something myself. Check my work and see if I missed something or misunderstood yours.

 

[finnski1]

DGF is already taking SS in SSDI form at 59 y.o.
I will wait until at least 66 - 70 y.o. due to ACA management of income plus small lump sum pension at 65 y.o.

Yes ACA management and pensions and roth conversions all can effect when you might take ss.

 

[finnski1]

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.

Maybe so but look at post #20 to see how you could actually spend more while younger not less by waiting to 70 to take it.

 

[RunningBum]

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.

It's simplistic, and incorrect.

Knowing that I've got more money coming at 70, I can safely spend more from my investments from 62-70, giving me just as much spending money.

 

[shotgunner]

It's simplistic, and incorrect.

Knowing that I've got more money coming at 70, I can safely spend more from my investments from 62-70, giving me just as much spending money.

You are certain you will be alive at 70 as well? I had one friend 66 and the owner of a motorcycle repair shop I use, 71. Both slim and in good shape die from Hemorrhagic strokes in the last 10 months.

 

[GenXguy]

You are certain you will be alive at 70 as well? I had one friend 66 and the owner of a motorcycle repair shop I use, 71. Both slim and in good shape die from Hemorrhagic strokes in the last 10 months.

You shouldn't plan around dying early. You need to go on the presumption that you will have a long lifetime because you don't want to run out of money, so you can plan accordingly to make it last.

 

[finnski1]

You shouldn't plan around dying early. You need to go on the presumption that you will have a long lifetime because you don't want to run out of money, so you can plan accordingly to make it last.

^+1

 

[finnski1]

You are certain you will be alive at 70 as well? I had one friend 66 and the owner of a motorcycle repair shop I use, 71. Both slim and in good shape die from Hemorrhagic strokes in the last 10 months.

Well I don't want to answer for runningbum but. Neither of those examples changes what he said. If you look at the example in post 20 that I mentioned you will see why you can spend more at 62-70 by waiting to 70. He didn't say wait to 70 and not spend anything.

 

[RunningBum]

You are certain you will be alive at 70 as well? I had one friend 66 and the owner of a motorcycle repair shop I use, 71. Both slim and in good shape die from Hemorrhagic strokes in the last 10 months.

That has absolutely nothing to do with the point you made. Not knowing when I would die, I would be spending the same total amount whether I took SS at 62 or took it at 70.

I also don't make decisions based on a couple of individual cases. If I did, maybe I'd base it on the case of the 88 year old guy I skied with last week.

And no, I'm not certain of anything. I'm not deciding when to take SS based on certainty, I'm probably going to delay to 70 in case I live to a very old age. Why do so many people fail to grasp that concept? That's the most likely case that I would run short on money. If I die at 66 there's virtually no chance I run out of money. So I'm optimizing for the "worst case" financially, of living to a very old age.