I know you're good at the math on this, but I can't map out the calculations leading to this conclusion for my situation. Like you, I have no spouse concerns. Now drawing down the TradIRA, as the remaining holdings in the taxable brokerage account have a very low cost basis. I do want to maximize my estate, and am considering drawing at 65 to preserve as much as I can for the kids.
Can you explain the math on this?
Assume you will spend the same no matter when you take SS, and whether or not you live past the breakeven. And I know that you can take SS anytime between 62 and 70, but let's use those 2 ages for this example. And suppose your spending is a little more than your age 70 benefit, just so we can always talk about spending eating into your nest egg. Investment returns add to your nest egg, and move the breakeven age to the right, and expenses eat into the nest egg.
Taking at 62, you only deplete your nest egg by the amount of spending over your age 62 benefit. So you keep more of your nest egg, and allow more of it to grow, than someone taking at age 70, up to the breakeven age. For the first 8 years you take a big hit by deferring until age 70 because all of your expenses come out of your nest egg. If you die anytime in there, your heirs certainly do better if you had taken at 62.
After 70, if you deferred to age 70 you are taking less out of your nest egg than if you claimed SS at age 62, so the total difference narrows, until you hit the breakeven point. If you die anywhere before the breakeven point, your heirs still come out ahead by you taking at 62, but by a lesser amount than dying at 70.
Once you hit the breakeven point, the benefit swings to taking at age 70, because you are taking less out of your nest egg each year than if you took at 62. Since we assumed you aren't altering your spending, your nest egg now is now increasingly higher for the rest of your life with the larger benefit of taking at 70, thus your heirs do better.
Does that make sense or I do I need to use actual numbers?
For some reason many people only look at what happens to heirs if you die early, and not if you live longer. I don't understand why. Being someone who can afford to delay taking SS until age 70, even if I die at 70 I'll still leave a decent inheritance, even if I didn't maximize it. And while I don't think I'll run out of money even if I live to 100, I would rather have the higher monthly benefit to better ensure I don't become a financial burden to my heirs. I can relate to this by being looking at my own parents, who retired at 62 and started SS immediately. It wasn't a bad move, since their health suggested they wouldn't live to any breakeven point, but they are well beyond it now. They've depleted their funds enough for Mom to go on Medicaid for her dementia (and fortunately living in a good facility that takes Medicaid or I'd be footing that bill). Dad is needing increasingly more assistance and is starting to deplete the amount he was allowed to keep, but I doubt he'd qualify for Medicaid yet. So if he lasts a couple more years but still doesn't pass the Medicaid test I will be covering the shortfall. Given a choice, and again I understand why they made their decision, I would rather risk receiving less of an inheritance to avoid having to pay their bills when they can no longer cover them in old age. I shake my head when people think they will spend more money in their so-called go-go years when they might well spend a lot more on assisted or memory care. You think you won't care how you are living then? I really doubt that. Not everyone qualifies for Medicaid, and not all places that accept Medicaid are what I'd consider acceptable to live in.
Fading fast this evening so I'm going to post this without rereading for clarity, but I can edit it tomorrow if errors are found.
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. I have done some calculations that indicate, adjusting for inflation, the difference in taking SS at my FRA vs waiting until age 70 will start at around $14K/year.In addition, since I have a non-COLA but what some might consider a good pension, my FRA SS + pension survivor benefits will exceed $100K. Given our investments, would still leave the survivor very well off.
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