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Old 07-22-2017, 02:29 PM   #141
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Right now, my "plan" is not to file at 62, but rather for me to file between 67 and 70, and DH at 70. However, the best laid plans . . .
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Old 07-22-2017, 02:54 PM   #142
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RB, you're overthinking it.
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Old 07-22-2017, 03:15 PM   #143
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I'm using common sense.
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Old 07-23-2017, 11:45 AM   #144
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This is one of the more frustrating arguments I hear, because you are unfairly and incorrectly projecting our preparation in case we live longer to somehow be smug knowledge on our part that we are going to beat the odds.
Well, in fairness that's probably because most of the arguments he hears implicitly assume that they'll "beat the odds" and live longer than the life expectancy. Sometimes the assumption is explicit.
Example of implicit: "You will collect $X thousands more over your lifetime."
Example of explicit: "My parents/grandparents lived to 100."


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But a lot of us see SS as longevity insurance, a cheap annuity.
A small annuity/longevity insurance. An inflexible amount, determined by the SSA and not by you. If you want more? Or less? Too bad--you get exactly what they say.

Many of the claims of "longevity insurance" strike me as special pleading. Somebody who had enough income & assets to forego 100% of their SS benefit for 8 years suddenly fears that their independent income/assets will disappear and they'll be dependent on a (higher) SS benefit?

That's always seemed to me to be someone who has already made their decision and are casting around for a justification.
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Old 07-23-2017, 12:04 PM   #145
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The 8 percent argument is irksome because it is not 8 percent - it is flat eight percent of the original payment at full retirement age - for the last year the actual increase is only a 6.45% increase.
Indeed.
From my spreadsheet, the yr-yr increases (for 66 FRA) are:
63 6.67%
64 8.33%
65 7.69%
66 7.14%
67 8.00%
68 7.41%
69 6.90%
70 6.45%

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—— yet I keep seeing “where else can you get a guaranteed eight per cent per year." So the actual merits of waiting decrease by each year after the FRA.
The thing that is irksome to me is that it is NOT a return. It's just a higher payment. These are not the same thing at all.
It's the same innumeracy as when people say they are making a 5% return by prepaying their 5% mortgage. No, you are not making a return, you are just reducing an expense.
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Old 07-23-2017, 12:12 PM   #146
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A small annuity/longevity insurance. An inflexible amount, determined by the SSA and not by you. If you want more? Or less? Too bad--you get exactly what they say.

Many of the claims of "longevity insurance" strike me as special pleading. Somebody who had enough income & assets to forego 100% of their SS benefit for 8 years suddenly fears that their independent income/assets will disappear and they'll be dependent on a (higher) SS benefit?

That's always seemed to me to be someone who has already made their decision and are casting around for a justification.
Small? If a couple with 2 highish-earners both wait til 70 to collect, they can get 60-70k/year in longevity insurance and inflation protection. One can obtain those protections by other means, if one is willing to allocate assets for that purpose.

And deferring SS is not out of fear of going broke. It's just a different strategy (spend more of portfolio earlier, less later) than filing early (spend less of portfolio earlier, more later). Everyone's circumstances are different, so what works for one person may not work for someone else.
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Old 07-23-2017, 12:16 PM   #147
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That $48k was worth way more to her now, than the increase of $300/mo in 4 years, because $300/mo is didlly (sic) to our lifestyle once I retire. But $1200/mo now, while I am working and saving means $48k that is "free" for vacations, a new car, shoes, hair, whatever...because it is $1200/mo we didn't have the month before. Financially, that is all nonsense.
I highlighted the key part. "$300/mo [extra due to delaying] is didlly to our lifestyle"

"Diddly (Noun) Definition: A small worthless amount"

Why is that nonsense?
The $1200 now gets you vacations, new car, etc. but the $300 later on is diddly. Sounds to me like she make the correct decision. Get large benefits now in exchange for a foregoing a worthless amount a few years from now.
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Old 07-23-2017, 01:04 PM   #148
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Small? If a couple with 2 highish-earners both wait til 70 to collect, they can get 60-70k/year in longevity insurance and inflation protection. One can obtain those protections by other means, if one is willing to allocate assets for that purpose.
That's where I have a disconnect.

Playing with some back-of-envelope numbers...

Two highish-earners had working incomes of what? -- maybe $300,000/yr total? How large are their investments & retirement accounts when they retired at (say) 62? Surely significantly more than $1,000,000. $5,000,000? $8,000,000?

Drawing 4% SWR from $5M is $200,000/yr or $16,700/mo. Note that this is probably not much less than their working take-home pay (no FICA, no IRA or 401K contributions, etc.).

Maximum FRA SS benefit is $2,639. Let's say they'd get a bit less, so age 62 SS would be $1900 and 70 SS would be $3350, each.

At 62 their total income would be $20,500 (16,700 + 2*1900), or $246K/yr.
Or they could wait to 70 and get $16,700 ($200K/yr) now and $23,400/mo or $281K at 70.

Okay, so the amount of their " longevity insurance" is 60-70K/yr. Great. B.F.D. Compared to a $5,000,000 portfolio, that gets lost in the roundoff. Hopefully they are savvy enough to not invest their entire $5M in Enron stock or with Bernie Madoff.

The disconnect I have is -- what's the difference in their lifestyle between $20,500/mo and $23,400/mo? Heck, I would imagine there is not much difference in lifestyle between $16,700/mo and $20,500/mo.
Either way, you can do pretty much anything you want. (Well, maybe you can't buy your own Boeing 757 with your name emblazoned on it. )

People at that level don't even need any SS benefit, so what is the advantage to maximizing it?

BTW, these are just the people who are the greatest at risk for being hit with means-testing, if that gets put on SS. How'd you like to give up $3,800/mo for 8 years planning to get $6,700 and then get told "Nope, sorry, you have too much, you could get by without it for 8 years so you can get by without it forever."?
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Old 07-23-2017, 02:15 PM   #149
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That's where I have a disconnect.

Playing with some back-of-envelope numbers...

Two highish-earners had working incomes of what? -- maybe $300,000/yr total? How large are their investments & retirement accounts when they retired at (say) 62? Surely significantly more than $1,000,000. $5,000,000? $8,000,000?
I was thinking of a couple who each earned about 60k/year. With 30-plus years of work, that's enough to get around 30k/year SS each at age 70. They would not have assets or expenses anywhere near what you cite, and SS would cover the majority of their expenses when it kicked in.
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Old 07-23-2017, 03:00 PM   #150
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Why wouldn't you make the best decision for yourself, even if the difference is small? There's no guarantee which way that is, but you can still make an educated decision, or at least a guess.
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Old 07-23-2017, 03:24 PM   #151
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Many of the claims of "longevity insurance" strike me as special pleading. Somebody who had enough income & assets to forego 100% of their SS benefit for 8 years suddenly fears that their independent income/assets will disappear and they'll be dependent on a (higher) SS benefit?
Right now, I expect that my wife will draw her SS at her FRA. I will probably draw at age 70. We do not need the SS to finance our lifestyle.

If we draw before FRA, we will be giving back some of the SS because we still have earned income. After FRA, she/we can earn without affecting the SS payment.

If I pass before her, then my pension benefit will drop to 75% for her. I view the age 70 SS as longevity insurance for her benefit. My pension does not have COLA. Would there be a risk of her running out of money if I pass early? Probably not. But having a plan that shows a larger SS payment makes her more comfortable at this time.

We are roughly the same age, and about 5 years away from FRA. If the rules change, or we feel differently in the future, we can change our plans. It is nice to have options.
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Old 07-23-2017, 05:43 PM   #152
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Why wouldn't you make the best decision for yourself, even if the difference is small? There's no guarantee which way that is, but you can still make an educated decision, or at least a guess.
+1 We found something to agree on... amazing!
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Old 07-23-2017, 06:03 PM   #153
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+1 We found something to agree on... amazing!
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Old 07-24-2017, 04:32 AM   #154
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we wanted a balance between taking on more market risk or more longevity risk as well as giving up a 340 a month spousal benefit added to my wife's early benefit for every month we delayed . just filed so i will collect in october at 65
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Old 07-24-2017, 07:13 AM   #155
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Giving up a spousal kicker typically negates most reasons to delay.

Sounds to me like rayvt is victim of his own argument..a heck of a lot of justification on why it doesn't make sense to delay filing...I'm not ER yet, so I am not making excuses for a decision. Facts are facts, regardless of how they are distorted for "what if " scenarios. A two earner couple that makes $300k total, inflation adjusted most of their careers SHOULD have a huge nest egg. But I can think of a heck of a lot more reasons why they wouldn't than they would. And what percentage of people fit that description? Much more likely far less, as Which Roger said, where the SS benefit is practically the same, but savings is also far less. And for some reason rayvt assumes everyone can invest smartly and beat the averages? Again, maybe here, where it is a self fulfilling prophecy that a successful FIRE means successful investing.

The number of successful investors I know with incomes over 100k pales compared to unsuccessful ones. Years ago, when bank rates were 5-6-7 percent, and longevity was 5-7 years shorter, it was easy to dismiss delayed filing. The SS delayed benefit has not changed but rates are much lower and expectancies are way up. Maybe he is 75 and glad he filed at 62, but that is in no way any type of justification for some one that is 60-62. People with identical incomes and savings and living scenarios can easily have opposite conclusions just because they are 8 years apart in age. It is impossible to say for sure what is better until the time comes and the financial, political, and personal health issues are addressed. You have a fixed benefit definition that ignores all the current variables. Right now, it appears the variables favor a cheap annuity from SSA.

Means testing for SS? Its already there. Nothing is guaranteed in the world, but right now, SS is still the most guaranteed income one can get. There are more people that will live on just SS with minimal savings, than will ER with huge savings, by an order of magnitude or 2. I certainly agree that a wealthy, high income, FIRE retiree, that had been living for 15 years with no SS income while their NW has doubled in that time, may as well take SS at 62. It means little to them either way. Again, what percentage of the populus are we talking about here? Where I came from, the difference of $24k/yr and $43/k a year in guaranteed, lower taxed income is huge. At age 82, the difference between filing at 62 vs 69 can be enormous depending on COLA. Based on my number crunching, if I delay until 69, I will not have to depend on market returns for anything for many many years, because RMDs will exceed any SWR I require. Until inflation erodes my pension to the point where we require more.

Apparently he missed entirely the emotional justification that my wife believed. My WIFE'S argument was $300/mo in 4 years was diddly. That the $1200 now would finance those things. I'll spell it out: It makes her FEEL like she is contributing because she is already retired. But our current lifestyle changed not one iota the years she's been collecting, except now I have to work 4'months more to equal the COLA income that $300/m would have given us, since my SS is already topped out, and the difference has to be made up in pension/savings. As they say, money is fungible, as long as there is plenty to go around. She parks that SS in the credit union where it earns 0.5% because she likes to see it there, where it is safe and available. At tax time we move 6500 in to her IRA. Whether the money comes from my savings or hers makes no difference except that mine earns way more as I can stomach volatility. She can not. At all.
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Old 07-24-2017, 07:42 AM   #156
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That's where I have a disconnect.

Playing with some back-of-envelope numbers...

Two highish-earners had working incomes of what? -- maybe $300,000/yr total? How large are their investments & retirement accounts when they retired at (say) 62? Surely significantly more than $1,000,000. $5,000,000? $8,000,000?

Drawing 4% SWR from $5M is $200,000/yr or $16,700/mo. Note that this is probably not much less than their working take-home pay (no FICA, no IRA or 401K contributions, etc.).

Maximum FRA SS benefit is $2,639. Let's say they'd get a bit less, so age 62 SS would be $1900 and 70 SS would be $3350, each.

At 62 their total income would be $20,500 (16,700 + 2*1900), or $246K/yr.
Or they could wait to 70 and get $16,700 ($200K/yr) now and $23,400/mo or $281K at 70.

Okay, so the amount of their " longevity insurance" is 60-70K/yr. Great. B.F.D. Compared to a $5,000,000 portfolio, that gets lost in the roundoff. Hopefully they are savvy enough to not invest their entire $5M in Enron stock or with Bernie Madoff.

The disconnect I have is -- what's the difference in their lifestyle between $20,500/mo and $23,400/mo? Heck, I would imagine there is not much difference in lifestyle between $16,700/mo and $20,500/mo.
Either way, you can do pretty much anything you want. (Well, maybe you can't buy your own Boeing 757 with your name emblazoned on it. )

People at that level don't even need any SS benefit, so what is the advantage to maximizing it?

BTW, these are just the people who are the greatest at risk for being hit with means-testing, if that gets put on SS. How'd you like to give up $3,800/mo for 8 years planning to get $6,700 and then get told "Nope, sorry, you have too much, you could get by without it for 8 years so you can get by without it forever."?
In my case, I'm single with just over a half million in retirement savings with nearly all of it in a 401K. I plan on doubling that before I retire in 5 or 6 years. I will also be getting a pension that should be worth about $240K as a lump sum or about $1200/month when I retire that will increase 5% every year I don't draw on it.

My thinking is to live off my 401K right away, perhaps start drawing on my pension after Cobra runs out around 60 years of age and draw SS sometime between FRA and 70 years old to minimize RMDs. But, if the economy completely tanks long before that, I might draw SS sooner. But, my goal is to hold off as long as I can.
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Old 07-25-2017, 05:12 AM   #157
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One of the nicer aspects of delayed filing. Is that one can always file retroactive, and get 6 months lump sum. Or once you file, you have up to a year to use the money as you wish, then pay it back, w/o interest and start at the new higher rate. I'm surprised that doesn't get more discussion.
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Old 07-25-2017, 05:29 AM   #158
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One of the nicer aspects of delayed filing. Is that one can always file retroactive, and get 6 months lump sum.
Of course that will reduce your Delayed Retirement Credits by 6 months worth for the rest of your life.

I'm not sure how nice that is, but it an option.
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Old 07-25-2017, 06:05 AM   #159
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It's not a matter of nice or not, but as you said, its an option. No different than filing 6 months earlier. Also, after FRA, one can suspend and restart when desired. In practicality, few people do these things, but they ARE options. It's all about the options. If my spouse died before I filed, I would be much more likely to file right away. Same as a major health issue. It's not cut and dry, right or wrong, its about the options based on circumstances.
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Old 07-25-2017, 07:26 AM   #160
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One of the nicer aspects of delayed filing. Is that one can always file retroactive, and get 6 months lump sum. Or once you file, you have up to a year to use the money as you wish, then pay it back, w/o interest and start at the new higher rate. I'm surprised that doesn't get more discussion.
if ss is taxable the trade off is you have to pay taxes on it .
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