Is an Annuity a good way to get over a SWR of 5%?

[FIRE'd@51]

Just to be clear here, I played around with the SS calculator and got numbers for my age that show that a 70 year old starting SS gets around 82 percent more income than a 62 year old starting SS.

hmmmm................ I just looked at my last SS statement and it said I would get 75% more by waiting until age 70.

 

[Cut-Throat]

hmmmm................ I just looked at my last SS statement and it said I would get 75% more by waiting until age 70.

That is only an estimate. Download the calculator from the SS website. Fill out all the forms and it may give you a different number.

 

[Dawg52]

So, if you are sctually interested in spending your money, instead of just watching the pile get bigger (which seems to be great sport here) - delay SS to age 70.

I don't think it's all about wanting a bigger pile over spending it now, some of us want to have money left for the 'old age unknowns'. Nursing homes for one. The key is trying to find the right balance.

I do like this debate. I'm not against spending a little extra in the early retirement years while I can enjoy it. I just want to be sure I have enough for the dreaded poor health years.

 

[MasterBlaster]

hmmmm................ I just looked at my last SS statement and it said I would get 75% more by waiting until age 70.

The amounts are dependant on when you were born. I just used the calculator to estimate numbers for someone my age.

The reductions at age 62 are greater for those born later, hence the greater increase when you turn 70.

http://www.ssa.gov/retire2/agereduction.htm

 

[FIRE'd@51]

That is only an estimate. Download the calculator from the SS website. Fill out all the forms and it may give you a different number.

If you are talking about the Benefit Calculator, I did that a year or so ago, and it gives the same 1.75 ratio (70 to 62) as the statement I get through the mail.

 

[haha]

This is why I compare break-even ages to the median life-expectancy. You seem to think you can forecast which side of the median you will be.

I don't know why you persist in saying this. I, and others, have said quite clearly that we are looking for insurance against a very long life that may deplete our resources. In no way are we "guessing" anything. You perhaps do not understand the concept of insurance?


Your sole interest seems to be trying (and failing) to win an argument by recasting terms, and ignoring important aspects like survivor annuities. Incidentally, you are wrong that if you had managed to prove your case for a single male, it would prove all other cases. As you know, SS does not penalize women for their longer life spans, not married people for what in effect is a joint and survivor annuity.

Rest assured, I do not in any way care when you take SS, or how you decide anything else.

Ha

 

[MasterBlaster]

The problem is you can't rely on the actuarial tables to cover your retirement. At 70 you need to figure on at least 25 years to be safe - maybe even 30. You get right back to the 4% rate. When you get to be 85 or 90 you can safely cut down the longevity, assuming no huge fountain of youth breakthroughs before we get there. But even at those advanced ages, the actuarial tables don't help much.

If you go to longer actuarial lengths then the SWR drops back closer to the SWR of 4 percent. The lower SWR only supports the case of spending down the nest-egg to be replenished by SS.

So if you want a really low SWR, then the case for delaying SS is even greater.

 

[FIRE'd@51]

The amounts are dependant on when you were born. I just used the calculator to estimate numbers for someone my age.

The reductions at age 62 are greater for those born later, which explains the hence the greater increase when you turn 70.

http://www.ssa.gov/retire2/agereduction.htm

I was aware that the "full retirement age" depended upon the year you were born (which explains the greater reduction at age 62), but I don't see where it says anything about the benefit at age 70.

 

[MasterBlaster]

I was aware that the "full retirement age" depended upon the year you were born (which explains the greater reduction at age 62), but I don't see where it says anything about the benefit at age 70.

http://www.ssa.gov/retire2/delayret.htm

Notice that for those born later that the rate of increase in delaying SS after full retirement age is larger (per year) than for those born earlier.

If I remember correctly the benefit at 70 should be independent of which year you were born. Perhaps Martha (or someone else) knows more about this.

 

[FIRE'd@51]

Your sole interest seems to be trying (and failing) to win an argument by recasting terms, and ignoring important aspects like survivor annuities. Incidentally, you are wrong that if you had managed to prove your case for a single male, it would prove all other cases.

Please go back and carefully read what I said. What I said was if it was sub-optimal for a single male, it would be sub-optimal for the other cases..

 

[FIRE'd@51]

http://www.ssa.gov/retire2/delayret.htm

Notice that for those born later that the rate of increase in delaying SS after full retirement age is larger (per year) than for those born earlier.

If I remember correctly the benefit at 70 should be independent of which year you were born. Perhaps Martha (or someone else) knows more about this.

Thanks, MB

 

[Cut-Throat]

There is no reason this thread would have to turn nasty. It is just pointing out more choices. There are reasons for taking SS at age 62 or delaying to age 70. What is important is understanding the dynamics of the choice. Once you understand that, the choice is fairly simple.

I used to run spreadsheets and try to calculate the 'break-even' point of delaying SS, and base my decision on that. This is turn led to the impossible question of 'How long will you live'?

Once you look at the problem in the insurance of a higher SWR earlier in your life, the choice becomes a lot clearer. It really boils down to whether you want to leave money to your heirs or not. Which is a much simpler choice.

I always had a very negative reaction to annuities, mostly because I was told that they were expensive and you could do better elsewhere. Now I am not so convinced. When SB pointed out that delaying SS was like a Super Great annuity, it completely changed my mind.

To me it has been the biggest eye-opener in the 5 years since I have retired. It's like found money.

 

[donheff]

Once you look at the problem in the insurance of a higher SWR earlier in your life, the choice becomes a lot clearer. It really boils down to whether you want to leave money to your heirs or not. Which is a much simpler choice.

I always had a very negative reaction to annuities, mostly because I was told that they were expensive and you could do better elsewhere. Now I am not so convinced. When SB pointed out that delaying SS was like a Super Great annuity, it completely changed my mind.

This has been my reaction to the annuity arguments as well. If you think in terms of investments (building a bigger pile for whatever reason - leave it to heirs, pay for assisted living in your 90s, etc.) annuities and delayed SS are not a good deal. If you think in terms of getting a larger safe income stream (e.g. with a 4% SWR you are barely able to cover your lifestyle) annuities and delayed SS can get you higher spendable income at the expense of a smaller estate.

 

[Animorph]

I haven't seen this case discussed:

Take SS at 62.
Invest all SS until 65, 66, 70, or whatever.
At that time buy a COLA'd annuity, with 50% surviving spouse benefit if that's relevant.
Depending on assumed investment return, did you come out better than SS or worse?

My custom simulation with taxes, 6% real return, 3% inflation (all fixed forever), and living to 100 for me and my spouse (each with our own SS) keeps telling me I'm better off taking SS early. But it is really close early or late. The insurance aspect of SS and its effect on my required withdrawals from investments might lead me to take later SS.

Dan

 

[Cut-Throat]

I haven't seen this case discussed:

Take SS at 62.
Invest all SS until 65, 66, 70, or whatever.
At that time buy a COLA'd annuity, with 50% surviving spouse benefit if that's relevant.
Depending on assumed investment return, did you come out better than SS or worse?

Well, it was kinda discussed. An annuity would pay out about 5.3% - Delaying S.S. looks to be around 8% with certain tax advantages. This is kind of how the thread got started.

SB pointed out early in the thread that the best annuity deal going was to delay SS to age 70.

You have one of the best annuities in the world available to you -- social security. You can enhance your return by deferring your withdrawl date until age 70. The cost is whatever your earlier benefit was for a few years. Your payment for life goes up about 8.5% for every year you wait -- plus it's inflation protected. That's probably a better return for your money than you'll get from any annuity but I haven't run the numbers.

 

[2B]

Actually, I ran FIRECalc out to age 100 with 55% stocks and delaying SS to age 70 works bettter.

You ran it much longer than I usually do. I usually put it in my runs to die end the plan at age 85.

 

[2B]

I don't know why you persist in saying this. I, and others, have said quite clearly that we are looking for insurance against a very long life that may deplete our resources. In no way are we "guessing" anything. You perhaps do not understand the concept of insurance?

The longer you fear think you may live the later you should take SS.

Also, the younger your spouse, the later you should wait to take SS assuming that your SS is more than theirs.

I can't believe I started all of this with my "government annuity" comment.

 

[Cut-Throat]

The longer you fear think you may live the later you should take SS.

Also, the younger your spouse, the later you should wait to take SS assuming that your SS is more than theirs.

I can't believe I started all of this with my "government annuity" comment.

Well, I for one am really glad you did. It is the most important thing I have learned on this forum since I have been here. I totally understand why delaying SS is not for everybody, but for me it fits perfectly. It's like found money and I thank you for opening my eyes.

I have always tried to be open minded and will change my mind given the facts add up!

I have always planned on living to 100 - My grandparents did. My parents are 85 and still bicycle daily and are in good health. My spouse is 8 years younger, but unfortuately she does not have as good as genes as I do. But, in case she does she will have my larger SS check coming in. I think it makes sense to delay the larger SS Check, and take the smaller SS check at 62. - I have seen some studies on this.

 

[MasterBlaster]

The longer you think you may live the later you should take SS.

Yeah really, It's bad enough just to die. Let alone thinking that you didn't optimize your social security withdrawals.

As I'm clutching my heart after it's last beat. My last thoughts will be - Man I should have taken SS at 62 !

 

[Cut-Throat]

Yeah really, It's bad enough just to die. Let alone thinking that you didn't optimize your social security withdrawals.

As I'm clutching my heart after it's last beat. I'll think - Man I should have taken SS at 62 !

ROTFLOL!

 

[Cut-Throat]

The longer you fear think you may live the later you should take SS.

Maybe I can put this another way.

If you know for absolute certainty that you will die before age 85, take your Social Security at age 62!

- Maybe that will help put things in perspective.

 

[haha]

My custom simulation with taxes, 6% real return...

Is this perhaps a rather heroic assmumption?

Ha

 

[garrynky]

I always thought I would take SS at 62 and still may. Recently my wife was diagnosed with MS. That started me thinking about the health costs involved in the future. Now maybe 70 is a better plan. If her health costs exhausts our savings, at least my SS would be better. Lots of ways to look at this.

 

[Mr._johngalt]

Is this perhaps a rather heroic assmumption?

Ha

"Assmumption"? Is this perhaps a CHP? Sorry Ha, don't mean to
make you the butt of jokes.

JG

 

[Cut-Throat]

"Assmumption"? Is this perhaps a CHP? Sorry Ha, don't mean to
make you the butt of jokes.

JG

You are the master of puns!