(Emphasis added.)
I agree that the lack of survivor benefits argues against waiting until later to file. However, you don't know the veracity of the bolded statement unless you know when you will die.
(Emphasis added.)
I agree that the lack of survivor benefits argues against waiting until later to file. However, you don't know the veracity of the bolded statement unless you know when you will die.
I should have been more specific. There will be more for her during the period I am most concerned about, which is the event of my death before the break even point, which is when she will most need it.
To illustrate:
Common assumptions - Assume that everything inflates at the same rate so use current real dollars. Assume FRA is 67 and that SS at 62 = 0.7 x SS at 67.
Scenario A -- Spending is $100k per year and that $25k comes from SS taken at 62 and the balance ($75k) from a 4% draw on a portfolio of $1.875M.
Scenario B -- Spending is $100k per year, covered for the first 5 years entirely by draw on portfolio and after year 5 (age 67) by $35.7k from SS and $64.3k from draw on portfolio.
1st Question: When will portfolio value of B be larger than A?
A: Portfolio stays at $1.875M
B: 1st 5 years - portfolio decreases to $1.750M = 1.875M - (5 yrs x $25k/yr). Subsequently, portfolio increases by $10.7 per year, representing the extra SS at FRA.
Answer: At my age 78.7 = 67 + (125/10.7)
If I assume that the portfolio performance actually exceeds inflation as it has for most of my life, this age will only increase, as unspent money in the portfolio for the first 16.7 years will compound for a longer time.
2nd question: If I die at the break even point, how much will the young wife be able to spend for the rest of her life? What if it is sooner? Later?
Answer: Under Scenario A - At the break even point and at all times both prior and after, she can spend $75k per year once I am gone, because that's what the portfolio will support . Under Scenario B, if I die before the break even point, she will be forced to spend less than $75k per year (and still follow the 4% rule). Thus, for instance, if I die the day before my 67th birthday, she could spend only $70k per year (all from the portfolio). If I die after the break even point, she could spend more than $75k/year, but that amount will increase by only $478 per year that I live after that point (= $10.7k/year extra SS added to the portfolio x 4%) or 0.63%.
*****
A more likely event is that she will want to continue spending close to $100k per year after I die, since the Gumby-specific spending is not a large proportion of our total. Up until the break even point, around my age 79, the portfolio will be larger and will last longer with spending exceeding the 4% rule. After the break even point, the portfolio will not be as large as it could have been had I taken SS at FRA, but it also has to last fewer years, since she herself will be 77.
To bridge the difference between the $75k in income that I have thus secured by taking SS early and $100k of spending, I also have a fully paid up whole life policy, which, if the death benefit is taken as an annuity, will fully make up the shortfall. And the later I die, the better the annuity rate will be for her and the higher her income.
In sum, I am concerned only with maintaining her income after I am no longer here. We have no heirs, so I am unconcerned with either maximizing the total amount of SS received or the amount of money at the end of our lives.