I was surprised by FireCalc result of SS at 62 vs 70

[Time2]

Maybe I shouldn't be, because of the nest egg withdrawals while waiting until 70.
First waiting until 70 only required reducing the starting nest egg from $2M to $1.95M
to stay basically equal. EDIT to add, $75,000 starting withdrawal 30 yrs.
I figured in the SS at 62 for a married couple $1,190 ea and at 70 $2,108 ea and the different starting time.

The result starting SS at 62.

"FIRECalc looked at the 125 possible 30 year periods in the available data, starting with a portfolio of $2,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 125 cycles. The lowest and highest portfolio balance at the end of your retirement was $-83,056 (the one failure) to $11,991,967, with an average at the end of $4,396,349. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 1 cycles failed, for a success rate of 99.2%."

The result starting SS at 70,

FIRECalc looked at the 125 possible 30 year periods in the available data, starting with a portfolio of $1,950,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 125 cycles. The lowest and highest portfolio balance at the end of your retirement was $-150,831 (the one failure) to $11,574,977, with an average at the end of $4,195,209. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 1 cycles failed, for a success rate of 99.2%.

Being this is so close to equal, why not start at 62, it does have a very small balance advantage? The only disadvantage is if you want to be able to do Roth Conversions in a lower tax bracket.

For us it comes back to, the extra years waiting until 70, gave me more time to do Roth Conversions in a lower tax bracket, and I earned more and want my wife to get my bigger SS check when I'm gone. But we don't fit the scenario I have posted, it was for someone else.
Any Comments?

 

[mrfeh]

For a couple, it is often best for one to start early and one to start late.

I dig firecalc, but you might want to look at this: Open Social Security: Free, Open-Source Social Security Calculator

And, of course, there's no way to really optimize without knowing the unknowable.

 

[COcheesehead]

We’re going to take it early. I ran the numbers and we’ll get more than 90% of the benefit and get them in years when the money will have more utility to us. I watched my Dad write checks to charity in his old age because he couldn’t do anything else with the money.
My assumptions when doing our analysis to take it early were: 1. We had LTC covered by self insuring. We have a separate fund set aside already for that. 2. We have our legacy giving needs covered as well. No kids. It will all go to scholarships we created.
So all in all we’re taking it early and blowing the dough. Plus it’s a nice way to have our taxes withdrawn each check vs other methods. I am having 22% pulled from each check to pay as we go.
Yes if you wait, you’ll likely earn more over your lifetime, but does that matter? For us, no. You can pass any unspent SS you’ve saved to charity, but you can’t pass unpaid checks.

 

[FREE866]

Please don't make me go back and start playing around with these numbers

 

[engineernerd]

Hmmm...you didn't share all your assumptions so here's what I did in FIRECalc:
$100k annual expenses
Start SS in 2026 ($14,280 each annual benefit), or in 2034 with SS $25,296 each

I got 99.2% success rate with minimum balance -55,350 for starting in 2026, and
100% success rate with minimum balance +421,043 for starting SS in 2034

EDIT:

Forgot to reduce the portfolio, result for $1,950,000 was still 100% but with minimum balance +226,529.

 

[Sarah S]

Aren’t you looking at 30 years for both? 62 assumes end at 92 70 at 100. What do you get when you adjust so you end at the same age?

 

[Time2]

Aren’t you looking at 30 years for both? 62 assumes end at 92 70 at 100. What do you get when you adjust so you end at the same age?

Ah! I didn't think about that.

 

[Koolau]

As stated many times, I waited to 70 1) Because I could. 2) The survivor income to DW is much higher that way.

 

[pb4uski]

I think it is preferable to look at safe spending using the Investigate tab with $2m portfolio, 30 year time horizon solving for safe spending at 95%.

$21,000 of SS at 62 (starting in 2025): $101,768 spending per year

$37,200 of SS at 70 (starting in 2033): $105,879 spending per year

4% more. Not life changing but still worthwhile IMO.

 

[engineernerd]

I think I've figured it out...FIRECalc wants the SS inputs as annual amounts. I reproduced your "$-83,056 to $11,991,967, with an average at the end of $4,396,349" output by putting in $1190 each starting in 2027.

Though the second scenario, with $1,950,000 portfolio and $2108 each SS starting in 2035 gave different results ("$-215,726 to $11,510,861, with an average at the end of $4,134,663") from what you reported, not sure why.

 

[Time2]

I think I've figured it out...FIRECalc wants the SS inputs as annual amounts. I reproduced your "$-83,056 to $11,991,967, with an average at the end of $4,396,349" output by putting in $1190 each starting in 2027.

Though the second scenario, with $1,950,000 portfolio and $2108 each SS starting in 2035 gave different results ("$-215,726 to $11,510,861, with an average at the end of $4,134,663") from what you reported, not sure why.

Oh, ya that monthly instead of yearly was a mistake on my part, in fact I think I also messed up the collection year for SS at 70. This why you people are here!

 

[Time2]

As stated many times, I waited to 70 1) Because I could. 2) The survivor income to DW is much higher that way.

Same reasons I use, but I add, because I could do larger Roth Conversions by waiting until 70.

 

[pb4uski]

I think it is preferable to look at safe spending using the Investigate tab with $2m portfolio, 30 year time horizon solving for safe spending at 95%.

$21,000 of SS at 62 (starting in 2025): $101,768 spending per year

$37,200 of SS at 70 (starting in 2033): $105,879 spending per year

4% more. Not life changing but still worthwhile IMO.

The above FIRECalc result is very similar to the SS bridge strategy. You're 62 and have $2m and your PIA is $30,000 a year.

Your age 70 SS is $37,200 a year. (124% of your PIA). You carve 8 years of age 70 SS or $297,600 from the $2m and invest the $297,600 in an 8 year TIPS ladder that is a SS replacement for those first 8 years. The remaining $1,704,200 is subject to 4% inflation adjusted withdrawals of $68,096, which combined with the $37,200 from the TZiPS ladder and then from SS provides $105,296 of safe spending.

Alternatively, take $21,000 of SS at 62 and $80,000 of portfolio withdrawals for a total of $101,000 of safe spending.

Would you rather have $101,000 of safe spending or $105,296 of safe spending.

 

[skyking1]

For a couple, it is often best for one to start early and one to start late.

I dig firecalc, but you might want to look at this: Open Social Security: Free, Open-Source Social Security Calculator

And, of course, there's no way to really optimize without knowing the unknowable.

I'm 4 years older so that is a natural for us. Our accounts are remarkably similar. I am ready to flip that switch any time, though.

 

[Koolau]

Same reasons I use, but I add, because I could do larger Roth Conversions by waiting until 70.

Another excellent reason I also used.

 

[Retired Expat]

Sure waiting until 70 will likely mean more lifetime income or payments from SS but not at all clear if that is worth it.

I am 67 and not yet claiming but I can see how much I have slowed down in the last 3 years so imagine the decline will be the same or worse by 70. My WR now is under 1% as we have a good income stream so not worried about running out of money. But I do feel that we would live better if I had that 3-4k monthly deposit from SS appearing in my checking account every month. Much easier to spend income than savings after all.

Yet most everyone says wait! But it just doesn’t seem like an extra grand a month in 3 years will be as useful as the SS payment now. Then there is the life expectancy gamble…. I will likely reach break even age regardless but again is it all about totals received or what that money can mean to us when we are best able to enjoy it?

 

[Al18]

Make your own decision and choose when to claim. I don't agree with the wait until 70 theory, as life isn't guaranteed and none of us has an expiration date stamped on the bottom of their foot. Wife claimed at FRA and I thinking of claiming at 65.

 

[marko]

I’ve noted before that two weeks after I turned 70, the SHTF health-wise. So glad we got an extra $400k for travel and fun by taking at 62.

And $400k that we didn't have to take from the portfolio grew by about $250k over those 8 years. .

 

[Chuckanut]

Remember if you don’t care about leaving an estate, you can spend more every year starting at 62 by taking SS at 70. That’s more money to spend every year.

Just don’t tell the kids you are spending their inheritance.

 

[ShadowBloom]

I'll be turning 62 later this year and will probably start social security as well. My analyses show equal success for my plan whenever I claim it, so hopefully ultimately it doesn't matter. Logically it's probably somewhat better to wait until 70 for the insurance benefit of larger checks, but I've come to realize this decision isn't entirely about logic; it's about emotions and feelings about money etc as well, and that pushes me towards taking it sooner.

 

[Time2]

I'll be turning 62 later this year and will probably start social security as well. My analyses show equal success for my plan whenever I claim it, so hopefully ultimately it doesn't matter. Logically it's probably somewhat better to wait until 70 for the insurance benefit of larger checks, but I've come to realize this decision isn't entirely about logic; it's about emotions and feelings about money etc as well, and that pushes me towards taking it sooner.

That's fine, just keep in mind the reasons Koolau and I mentioned for waiting until 70. We wanted more room to do Roth conversions, i.e. I didn't want the $45 or $50k of SS income reducing my Roth Conversion, I wanted to stay in the 12% tax bracket. Also, my wife is 5 years younger, I delayed so she would get my larger SS check.

 

[marko]

I'll be turning 62 later this year and will probably start social security as well. My analyses show equal success for my plan whenever I claim it, so hopefully ultimately it doesn't matter. Logically it's probably somewhat better to wait until 70 for the insurance benefit of larger checks, but I've come to realize this decision isn't entirely about logic; it's about emotions and feelings about money etc as well, and that pushes me towards taking it sooner.

At 62, there's those who are desperate for the money and take it, and those who don't need it at all and take it for extra BTD money.

Those in the middle of that bell curve most often want to find the best way to maximize the benefit.

 

[skyking1]

@Time2 that is the exact game I am playing too.
I could chicken out at any time though

 

[Steeler75]

Turning 62 this year as well and leaning into take the money verses spending savings (you just never know what’s around the corner and life can turn on a dime). But my logical side wants to max out Roth conversions now to mitigate the widows torpedo if it happens to occur. Haven’t made up my mind yet on which takes priority…

 

[Exchme]

As you would expect, pb4uski is 100% correct. OP has made a comparison that isn't a great one; effectively assuming that you must hold the same stock/bond allocation in both scenarios. But greater SS benefits later functions in a portfolio like having more bonds (actually TIPS since SS is inflation adjusted), so to keep your risk more constant over time, the better plan is to spend down your bonds while waiting for SS. As his math shows, that increases the total spending you can have, not decreases.

Remember too that there are often much bigger fish to fry during the years from 62-70. Some folks just have to have the money to live or know they are in ill health. Others are in good shape physically and financially and want to optimize more than just SS benefits, for them claiming at 62 may imperil ACA premium credits or get in the way of Roth Conversions.