Consideration for taking SS early

[FREE866]

Would love to hear thoughts on this article.



It's by Mike Piper , who I really like. I'm 56 now and my plan is to wait till 70 to collect, but this article gave me pause.


https://obliviousinvestor.com/claim...ate-of-return-discount-rate-should-we-assume/


"when deciding whether to delay Social Security or claim it now and invest the money, you have to make some assumption about the rate of return that you would earn on invested benefits. The higher the rate of return you assume, the more advantageous it is to claim benefits early. Alternatively, you can think of the analysis as, “what part of my portfolio would I spend down in order to delay Social Security? And what would be the rate of return that I’d be giving up by no longer having those assets in my portfolio?”

 

[street]

Would love to hear thoughts on this article.



It's by Mike Piper , who I really like. I'm 56 now and my plan is to wait till 70 to collect, but this article gave me pause.


https://obliviousinvestor.com/claim...ate-of-return-discount-rate-should-we-assume/


"when deciding whether to delay Social Security or claim it now and invest the money, you have to make some assumption about the rate of return that you would earn on invested benefits. The higher the rate of return you assume, the more advantageous it is to claim benefits early. Alternatively, you can think of the analysis as, “what part of my portfolio would I spend down in order to delay Social Security? And what would be the rate of return that I’d be giving up by no longer having those assets in my portfolio?”

The question is very debatable and I suspect a lot will say wait till 70. I for one took it as soon as I could for many reasons other than what mentioned plus your concerns. Taking early was the best fit for me and I didn't need more money at 70 years of age. I wanted it now and take advantage of it while I am a younger person.

Good Luck and the shoe always don't fit everyone's thought on SS.

 

[bobandsherry]

I've thought the same thing. [emoji848] The biggest unknown is how long you will live. Solving for that variable makes the answer much clearer. [emoji39] Everyone has different goals and starting points so definitely a YMMV situation.

 

[FREE866]

I've thought the same thing. [emoji848] The biggest unknown is how long you will live. Solving for that variable makes the answer much clearer. [emoji39] Everyone has different goals and starting points so definitely a YMMV situation.

Right. That's obviously the biggie. But also the rate that which your money grows is a big factor too. For me, when I plug into his calculator even a 4% return on the money by claiming early the suggested time to start collecting goes to the 62 range, which isn't what I expected. Here's that calculator:


In the Open Social Security site he created https://opensocialsecurity.com/

 

[Al18]

Another factor to consider is if you had substantial earnings for 35 years, which is how SS determines your benefit. Anything less than 35 years and zero’s are added for the missing years.

 

[ejman]

Right. That's obviously the biggie. But also the rate that which your money grows is a big factor too. For me, when I plug into his calculator even a 4% return on the money by claiming early the suggested time to start collecting goes to the 62 range, which isn't what I expected. Here's that calculator:


In the Open Social Security site he created https://opensocialsecurity.com/

That;s what I did back in 2012. My rate of return on a 50/50 portfolio including the 2020 and 2022 hiccups is 6.3% so from a financial standpoint taking it at 62 was a reasonable thing to do. On top of that my health took a nasty turn at age 69 and unfortunately it doesn't look like an improvement is imminent going forward so I'm very, very glad that I took SS early. But am sure the take it at 70 no matter what brigade will make an appearance shortly with very weighty arguments.

 

[FREE866]

Another factor to consider is if you had substantial earnings for 35 years, which is how SS determines your benefit. Anything less than 35 years and zero’s are added for the missing years.

Correct..However, the SSA site will indicate exactly what you will get assuming those zeros.

 

[SevenUp]

Another factor to consider is if you had substantial earnings for 35 years, which is how SS determines your benefit. Anything less than 35 years and zero’s are added for the missing years.

That could matter if one is deciding whether or not to keep working.

It doesn't matter at all if one has already retired and is deciding when to start taking SS benefits.

 

[HenryD]

FIRECalc gives me a higher success rate taking SS @ 62 (96.4%) and declining towards 70
(93.8%). I suspect that means I am cutting it too close with my portfolio, but it is what it is.

 

[USGrant1962]

Right. That's obviously the biggie. But also the rate that which your money grows is a big factor too. For me, when I plug into his calculator even a 4% return on the money by claiming early the suggested time to start collecting goes to the 62 range, which isn't what I expected. Here's that calculator:


In the Open Social Security site he created https://opensocialsecurity.com/

Just make sure you understand that the discount rate number in opensocialsecurity is real return after inflation. So 4% plus say 3% inflation is 7% nominal return - certainly achievable but not particularly conservative for a 40/60 to 60/40 portfolio.

 

[RunningBum]

Maybe if the market has really tanked as you reach age 62, or anytime between 62-70, and your plan is already in peril, taking SS now and hoping for higher returns might get you back on track. IMO while markets have been down over the last 2 years, I wouldn't say they have tanked to the point where they have almost nowhere to go but up. Others might think differently.

 

[ShokWaveRider]

I took mine at 69, 1 year early, only forfeiting $200 a month, I thought it was worth it.

 

[Surewhitey]

Now that we will be living the reality of taking care of the shortfall of MIL, her waiting would have been less strain on the care she will need with dementia @82. We're going to split the difference between the 3 children after her pension /SS is exhausted. She made many poor or unknowing decisions financially.

Definitely don't want to do this to our DD... Lots of tax & ACA things to think about. DW is 6 years older, so waiting will possibly be better for my 6 years of ACA consideration pre-65.

 

[friar1610]

I took it at 62. I also have a robust military pension. We rarely use SS for normal living expenses. Rather, we have it sent to a savings account. When the balance starts getting hefty we transfer it to VG and invest it IAW our planned asset allocation. Rinse and repeat. Sometimes, if we have something like a cruise planned, we may let it accumulate longer to pay for it. So, from a standard of living perspective it made little difference when we took it.

But there was one factor I didn’t sufficiently consider at the time - my wife’s survivor benefit. If I go first, she would be left with a higher survivor benefit had I waited. For that reason, I regret taking it at 62. I shoulda waited at least until FRA. It would take some pressure off her if she ends up on her own.

 

[Dtail]

Ah another SS discussion.
Minimum age for me is 66, with maximum at 70.

 

[SnowballCamper]

I think there is much more than the numbers to consider for when to take SS. If one has the luxury of a long life and wants the security of inflation protection, then of course delay as long as possible (if you don't need the money to live). But we don't know ahead of time if we will have a long life, or how significant inflation will be to retirement funds. Once we're eligible, we can know what we'd spend the money on. But otherwise we pretty much make a guess about the future and go with that. I've got over a decade to make my guess ;-)

 

[COcheesehead]

We live solely off our investments. No pension of any kind and we currently earn more just from our fixed income allocation than we spend right now. So why would I take more income in the form of SS, be taxed on it, just to have to find a place to invest it when I get 8% more per year just for doing nothing. Count us in on taking it at 70.

 

[FI_RElater]

seems many people are making an assumption...

I took it at 62. I also have a robust military pension. We rarely use SS for normal living expenses. Rather, we have it sent to a savings account. When the balance starts getting hefty we transfer it to VG and invest it IAW our planned asset allocation. Rinse and repeat. Sometimes, if we have something like a cruise planned, we may let it accumulate longer to pay for it. So, from a standard of living perspective it made little difference when we took it.

But there was one factor I didn’t sufficiently consider at the time - my wife’s survivor benefit. If I go first, she would be left with a higher survivor benefit had I waited. For that reason, I regret taking it at 62. I shoulda waited at least until FRA. It would take some pressure off her if she ends up on her own.

One factor NOT mentioned, which spouse has the higher PIA !! In our case, mine was slightly lower but I'm also the older. I'd waited until FRA... started SS jan for initial payments in Feb.
-- we had done Roth conversions before that
-- by starting slightly earlier, the 8+% increase that SS was getting was going into our income and we really won't be pulling much, if anything, from investments (so we won't be selling low). Further, the current rates for fixed income/CD's....along with the SS income and my pension... means that we get to plow more into equities as the CD ladder matures (buying low for hopefully better returns in our future).

{spouse is waiting until 70; whichever spouse is the surviving spouse they will have the highest possible SS. The rest of the portfolio will be used to augment any needs/wants and for potential long term care}

 

[Katsmeow]

Look, the SS security question and when to take it only matters for a small group of people. Some people have large pensions or lots of money and they don't "need" SS in any way, shape or form. For those people, it is very obvious and simple to wait until 70.

Then there are the vast, vast, vast majority of people who retire. In order to have a reasonable quality of life they need to take SS. For many of these people if they don't take SS they will need to find a job (if that is even possible for them).

There is a group of people who could theoretically way take SS later, but to do so they have to literally spend down most of their savings. Yes, they get a big SS check at age 70 but then they have little to no savings left. I personally feel that someone who does this is likely making a mistake.

Then there is a middle group. The extra SS income would be nice. To wait until 70, they will have to deplete some of their savings but they will still have what they consider enough if they wait until 70. For the people who can easily and comfortably do this they probably better resemble the people who don't need SS at all. But, they want to preserve more of the nest egg many will choose to take SS earlier.

But, honestly if you aren't truly someone in that middle group where it is actually hard to decide what to do there really isn't much of a decision to be made for everyone else because there is only one reasonable outcome.

 

[d.davis]

Did the ER 7 years ago, living off the cash bucket and investment returns. We were blessed. Roth conversions to the max of the 15/12% MFJ bracket. High healthcare plan with HSA funding (but no expensing). No pensions, two legged stool retirement.
I'll start SS in jan 2025 almost at age 65, then the wife two years later when she turns 65. Both early relative to FRA 67. The decision is based on cash and soon tIRA burn (as we deplete the cash bucket).
My biggest driver in the ROTH conversion path (as opposed to keeping income low for ACA subsidies) was the loss of spouse hence loss of one SS income higher tax bracket scenario.
The wife is well positioned with ROTH income on top of her SS if our plans for the next 30 years are altered beyond our control.
The unknown is parents age 86, 89 and 90.

Sent from my moto g power using Early Retirement Forum mobile app

 

[pb4uski]

Right. That's obviously the biggie. But also the rate that which your money grows is a big factor too. For me, when I plug into his calculator even a 4% return on the money by claiming early the suggested time to start collecting goes to the 62 range, which isn't what I expected. Here's that calculator:


In the Open Social Security site he created https://opensocialsecurity.com/

Just remember that the interest rate input to this calculator is a REAL rate of return... nominal less inflation... 4% real return is pretty rich.

 

[FREE866]

Just remember that the interest rate input to this calculator is a REAL rate of return... nominal less inflation... 4% real return is pretty rich.

Well, looking at historical data stocks have returned ~7% inflation adjusted so from that lens I think 4% is actually pretty conservative no?

 

[CRLLS]

I didn't read the article. I am past the time to choose. I did read and calculate when I did that choice. However I will say that for any one writer's article about the best time, or any one spreadsheet, there are others, just as reputable, that will give a different best time. That's what I like about this group at ER.org. Many opinions will be found, not just one. In the end, it is a personal decision and no one person, article or website can make that decision for you.

 

[USGrant1962]

Well, looking at historical data stocks have returned ~7% inflation adjusted so from that lens I think 4% is actually pretty conservative no?

100% stocks is never “pretty conservative.”

 

[kblagron]

I took it at 62 because my wife, who has a teacher retirement, is mostly exempt from getting any survivor benefits. It at least guarantees that should I pass early, she will have benefited from it. In my opinion it's a stupid law (WEP). My ex will get 1/2 of mine when she decides to take it, but my wife gets almost nothing.

My mom, who was also a teacher, got $98 / month for my dad who died at 48 and paid into SS for over 30 years.