Lsbcal
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I was thinking about taking SS a bit earlier and have heard the break even point (where you start really getting more for delaying) is about age 82 or so.
The tables for benefits are here: Full Retirement Age = 66
Then I thought maybe I could do a simple calculation to check this out for myself. Here is the calculation comparing taking SS at 64 versus 65 assuming full retirement age 66 benefit is 27,300:
1) Benefits are from the SS table above:
Age 64 = 0.867 * 27300 = 23669
Age 65 = 0.933 * 27300 = 25470
2) Delaying for 1 year versus taking now, solve for x in:
23669 * x = 25470 * (x - 1)
x = 14.1 years
3) Investment returns with that extra age 64 year's money:
Now a minor consideration about investing the SS we get in year 64. Assume it goes into a pot after paying 25% taxes (marginal rate) and that we are taking 4% out of the pot for living. Then we invest that left over pot and achieve maybe a 4% real return. That real return might be controversial, but I'm guessing here a 2% real bond return and a 6% real stock return at 50/50 allocation. This number is going to turn out kind of small anyway so this assumption is not a biggie. The extra investment gain then becomes:
gain = ((0.75 * 23669) (1 + .04)^14.1 ) - 23669 = 7192
So the investment gain just translates into about another 0.2 years before breakeven.
The final result is: break even = 14.1 + 0.2 = 14.3 years or age 78.
Does this look roughly like it makes sense?
The tables for benefits are here: Full Retirement Age = 66
Then I thought maybe I could do a simple calculation to check this out for myself. Here is the calculation comparing taking SS at 64 versus 65 assuming full retirement age 66 benefit is 27,300:
1) Benefits are from the SS table above:
Age 64 = 0.867 * 27300 = 23669
Age 65 = 0.933 * 27300 = 25470
2) Delaying for 1 year versus taking now, solve for x in:
23669 * x = 25470 * (x - 1)
x = 14.1 years
3) Investment returns with that extra age 64 year's money:
Now a minor consideration about investing the SS we get in year 64. Assume it goes into a pot after paying 25% taxes (marginal rate) and that we are taking 4% out of the pot for living. Then we invest that left over pot and achieve maybe a 4% real return. That real return might be controversial, but I'm guessing here a 2% real bond return and a 6% real stock return at 50/50 allocation. This number is going to turn out kind of small anyway so this assumption is not a biggie. The extra investment gain then becomes:
gain = ((0.75 * 23669) (1 + .04)^14.1 ) - 23669 = 7192
So the investment gain just translates into about another 0.2 years before breakeven.
The final result is: break even = 14.1 + 0.2 = 14.3 years or age 78.
Does this look roughly like it makes sense?