Need help convincing Sugar Mama

[f35phixer]

did again at initial default me 67/9 MAMA 70 for 1.3m, next did nonsmoker preferred me 68/4 mama 70 for 1.4, then nonsmoker except made discount 0.0, i'm not going to invest the money i'm going to blow the money 67/10 70 for again 1.3M.

So, one thought is to change my TSP over to L income and take ~ 3%/month gets me 24000/yr pretty much same as my 62 start amount. In theory 3 year return % is 4.79 , i'm still make money and ~ 65 i can then start taking SS and let all our IRAs sit...

But, Then taking $$$ still puts me maybe in a bind for Roth conversions. Right now we are in 24%, with not lots of room for this year and TBD how my lowly pension will give me room in 2020, is 50K/year conversion really worth it

i'll ask this question soon for you experts...

I certainly don't want to make a $140,000 tax payment like Corn18 did!!!

 

[DougJohnson]

Compromise and take at 64 and invest it aggressively to get more than the 8% return. Money now is better than maybe getting money later.

Not apples to apples. The SS 8% is guaranteed. 8% return these days would be very aggressive, thus very risky. -- Doug

 

[troutnut1]

I was all set to wait until 70 but changed my mind after a CT scan last November. I had been a heavy smoker and drinker, but quit both a little over 20 years ago. On a whim, I had a low dose CT scan looking for lung cancer because of my history. Good news was no cancer. Bad news was “severe emphysema” which surprised me because I am very active and downhill ski at high altitudes 70 days a year, and have no symptoms. While I don’t plan on checking out anytime soon, this one factor changed the math for me and I immediately took my SS at 67. My wife had a similar experience with a heart valve surgery recently and she took her SS too. If we had it to do over again, we would have both had complete physicals, ct scans, and colonoscopies at 62 instead of trying to outfox the system with a bunch of complicated math.

 

[imnontrad]

The general rule of thumb is that the spouse with the lower SS benefit can file early and the higher SS benefit person delay as long as possible (hopefully up until age 70) for the highest benefit.
However , if anyone files before their FRA, their SS will be reduced AND until reaching FRA, there is an income cap before being reduced further.
I am an admin for a Facebook group called "Social Security intelligence" that helps answer SS questions.

If healthcare is covered, you BOTH may want to retire now. Starting the year you turn 63, your Modified AGI is used to calculate your Medicare premiums. So you would want to start converting to Roth before that time, especially since the income tax brackets/rate is low.

you may want to consider hiring a fee-only CFP to determine the best withdrawal strategy not only for the two of you but for any heirs.

 

[Vinnygret]

To not have me take my SS at 62....

Pensions:
Sugar Mama = state employee = 7100/month take home = 85,200 COLA adjusted and health care taken out for life, full survivor benefits, reduced don’t have the amount for either pension.

Slug Daddy = federal employee = 1700/month take home= 20,400 Cola adjusted and health care taken out for life, full survivor benefits

Total year = 105600, expenses ~80k / years

Mama and Daddys IRA’s 2.2Mil total, no Roth’s yet, waiting till I retire in Dec 2020 to start Roth conversions, we made to much (MAMA made to much ;-)

SS 62/66 8 months/70 for Mr. Slug: month 1993/2817/3605, year 23900/33800/43260

So my fidelity roll over dividends for last three years in December is 2017-44.8k, 2018- 51k, 2019-32.5k
Also getting 880/month bond dividends

My TSP (I’m 62 ) I could move over to L Fund income and start a monthly check of XXX > 23900 as an example

I could take the dividends from fidelity and move them into our accounts to use as we see fit
.
My thought is either one of these is better than taking the SS at 62 which she wants me to do.

Thoughts please

Thought #1 - I don't know what state Sugar Mama worked for, but she sure picked a better one than I did! Thought #2 - I thought federal employees did not get social security? Or that if they did, the social security was offset from their pension? But I am not a federal employee so I may be all wrong on that, but my federal retiree friends have led me to believe that was the way it was done, even though that seems unfair to me. But as far as SS at age 62, our financial planners have strongly discouraged it. Your money earns 8% in the government's hands before you file for benefits. You won't get that anywhere else. Are you healthy? Is she worried you might die before your full retirement age?

 

[obsessed]

After running through the scenarios on when I should take social security a couple years ago, I came up with basically three categories to guide my decision when it comes.

1) If you need social security at 62 to have a reasonable life style then go ahead and take it at 62.
2) If you don't need the money when you are 62 but you are still concerned about outliving your assets if the market performs poorly compared to historical norms then wait until 70. It's when returns are low in your retirement that the deferral of SS seems to make the most difference if you live past the inflection point as that higher payment will be more impactful.
3) If you currently have plenty to get you through retirement and social security is just extra money for your heirs then it made sense to take it early and invest the hell out of it. If returns are at historical norms you end up better at the end.

This worked for me as I'm single with no known health issues at this time but when I get to 62 I'll have to reconsider which bucket I fall in. Your mileage might vary. If you are married with a spouse that will take SS on your record or you have major health issues this would of course change the conversation.

 

[pb4uski]

Compromise and take at 64 and invest it aggressively to get more than the 8% return. Money now is better than maybe getting money later.

Not apples to apples. The SS 8% is guaranteed. 8% return these days would be very aggressive, thus very risky. -- Doug

Pay attention. There is no 8% return to SS. Period.

If you delay SS past your full retirement date then your benefit increases 8% a year. That is 8% simple interest... so if your FRA is 66 your age 70 benefit will be 132% of what your FRA benefit is. If you live to 82.5 you break even... if you live longer then you earn a positive return.

But NOT an 8% return. The table below shows the return of deferring from 66 to 70 assuming a PIA of $1,000/month. You forgo $48,000... $1,000/month from 66 to 70. From 70 on you get $3,840/year more than you would have had you not delayed.

If you live to 85, the return is 2% a year, if you live to 90 the return is 4.2% a year and if you live to 100 the return is 6.1% a year. These are all real returns since benefits increase for COLA are no included in the cash flows.

SS at 70 vs FRA of 66
Age	n	Cash flow	IRR
66	0
67	1	-12,000
68	2	-12,000
69	3	-12,000
70	4	-12,000
71	5	3,840
72	6	3,840
73	7	3,840
74	8	3,840
75	9	3,840
76	10	3,840	-186.6%
77	11	3,840	-9.8%
78	12	3,840	-7.0%
79	13	3,840	-4.8%
80	14	3,840	-3.1%
81	15	3,840	-1.7%
82	16	3,840	-0.5%
83	17	3,840	0.5%
84	18	3,840	1.3%
85	19	3,840	2.0%
86	20	3,840	2.6%
87	21	3,840	3.1%
88	22	3,840	3.5%
89	23	3,840	3.9%
90	24	3,840	4.2%
91	25	3,840	4.5%
92	26	3,840	4.8%
93	27	3,840	5.0%
94	28	3,840	5.2%
95	29	3,840	5.4%
96	30	3,840	5.6%
97	31	3,840	5.7%
98	32	3,840	5.8%
99	33	3,840	6.0%
100	34	3,840	6.1%

 

[imnontrad]

Federal employees have been paying into SS - BUT there still may be a period under the old retirement system so there may be a SS offset. A good CFP with experience with government employees & retirement can give you the answer.
BUT, even if you had absolutely no pension and 2.2 net worth and health care coverage, you'd be fine.
When you both retire, you might consider moving to a lower cost area and/or one that does not tax pensions/ SS which will make your money go even further.

 

[obsessed]

Not apples to apples. The SS 8% is guaranteed. 8% return these days would be very aggressive, thus very risky. -- Doug

I may be thinking about this wrong but in my mind the 8% annual bump in future payments does not equate to an 8% return. I'm paying something in foregone early SS payments to get the higher payment at 70. Rather I think of it as using what I would have received between ages 62-70 as the payment for the purchase of a inflation protected SPIA at a price I probably couldn't get elsewhere.

 

[jazz4cash]

Federal employees have been paying into SS - BUT there still may be a period under the old retirement system so there may be a SS offset. A good CFP with experience with government employees & retirement can give you the answer.
BUT, even if you had absolutely no pension and 2.2 net worth and health care coverage, you'd be fine.
When you both retire, you might consider moving to a lower cost area and/or one that does not tax pensions/ SS which will make your money go even further.

The current Federal employee retirement program is FERS. FERS retirees are eligible for SS with no offset because they pay into SS just like anybody else. FERS was initiated in the mid ‘80s. CSRS is the legacy retirement program. CSRS retirees do not contribute and are not eligible for SS. If they qualify for SS due to other employment they would be subject to a benefit reduction. CSRS employees could’ve switched to FERS but I think almost none did since CSRS is generally considered to be better

 

[rayvt]

If you don't need the money, let it ride and keep increasing until 70,

If you don't need the money at 62, what is your benefit to getting a larger payout at 70? Even more money that you don't need?

 

[f35phixer]

thanks all for the comments

Ray has a point, we don't need the money, Sugar Mama has wonderful Pension, my few dollars will keep us going, will be interesting to see what my December dividends will give me this year ...

I need you all to help ME figure out the best way to start Roth conversion, period end. If i'm figuring this out correctly, if by taking ~ 24000 for SS at 62 mean that's 24000 less that i can convert to top of 24% bracket. So for 10 years that's ~240,000 less converted when RMD's start

 

[pb4uski]

Yup. That is part of the reason that DW will delay to FRA and I will wait until 70.

 

[FireProoof]

Take the Social Security Now

Social Security doesn't really penalize you for taking early benefits. The penalty that people incur is spending the benefit early. If you take it and spend it then yes you will have less money later.

If you do an analysis where you take the benefit and invest it, you will see that you need less than a 4% return to match taking the social security later. (that is if you take SS at 62 instead of 67, the income from 5 years of investing social security checks in the stock market will be more than the penalty for taking social security early.

Now if you have fixed spending so by not taking it you draw down other investments, your comparison is between social security and the loss of growth in the other investment. If the money is in the stock market, taking social security early will win. if it is in a checking, savings account, bond, T-bill waiting will win.

Having said that, I don't believe in timing the market but for once I feel this stock market is so overheated I expect a crash. If stock market returns are negative then waiting to take SS is a huge winner.

 

[pb4uski]

Social Security doesn't really penalize you for taking early benefits. The penalty that people incur is spending the benefit early. If you take it and spend it then yes you will have less money later.

If you do an analysis where you take the benefit and invest it, you will see that you need less than a 4% return to match taking the social security later. (that is if you take SS at 62 instead of 67, the income from 5 years of investing social security checks in the stock market will be more than the penalty for taking social security early. ...

Not really. Below is an example where someone takes SS at 62 and saves it for 5 years and then starts spending their age 62 SS benefit. The other columns are where someone waits until 67, but then starts but takes the extra (over the age 62 benefit that they are spending) and invest it. So both people are spending the same amount.

Assumes 4% return and 2% COLA. After age 80 the person taking at 67 has more money than the person that took at 62 and if they live to 90 they have a lot more.

	Claim at 62	FV at		Claim at 62	Claim at 67	Excess of 67 over 62	FV at	I
62	8,400	8,566				0	0	4.00%
63	8,568	17,647				0	0	4.00%
64	8,739	27,265				0	0	4.00%
65	8,914	37,446				0	0	4.00%
66	9,092	48,217				0	0	4.00%
67		50,145		9,274	13,249	3,975	4,053	4.00%
68		52,151		9,460	13,514	4,054	8,350	4.00%
69		54,237		9,649	13,784	4,135	12,901	4.00%
70		56,407		9,842	14,060	4,218	17,719	4.00%
71		58,663		10,039	14,341	4,302	22,815	4.00%
72		61,009		10,240	14,628	4,388	28,203	4.00%
73		63,450		10,444	14,920	4,476	33,896	4.00%
74		65,988		10,653	15,219	4,566	39,908	4.00%
75		68,627		10,866	15,523	4,657	46,253	4.00%
76		71,372		11,084	15,834	4,750	52,948	4.00%
77		74,227		11,305	16,150	4,845	60,007	4.00%
78		77,196		11,531	16,473	4,942	67,447	4.00%
79		80,284		11,762	16,803	5,041	75,285	4.00%
80		83,496		11,997	17,139	5,142	83,540	4.00%
81		86,835		12,237	17,482	5,245	92,230	4.00%
82		90,309		12,482	17,831	5,349	101,375	4.00%
83		93,921		12,732	18,188	5,456	110,994	4.00%
84		97,678		12,986	18,552	5,566	121,110	4.00%
85		101,585		13,246	18,923	5,677	131,743	4.00%
86		105,649		13,511	19,301	5,790	142,918	4.00%
87		109,874		13,781	19,687	5,906	154,658	4.00%
88		114,269		14,057	20,081	6,024	166,988	4.00%
89		118,840		14,338	20,483	6,145	179,934	4.00%
90		123,594		14,625	20,892	6,268	193,523	4.00%

 

[f35phixer]

Fire, My main concern is converting lots of tax deferred to Roth.... We will at some point be saving this SS money, our pensions will get us by ;-)

 

[FireProoof]

Fair Enough

Not really. Below is an example where someone takes SS at 62 and saves it for 5 years and then starts spending their age 62 SS benefit. The other columns are where someone waits until 67, but then starts but takes the extra (over the age 62 benefit that they are spending) and invest it. So both people are spending the same amount.

Assumes 4% return and 2% COLA. After age 80 the person taking at 67 has more money than the person that took at 62 and if they live to 90 they have a lot more.

	Claim at 62	FV at		Claim at 62	Claim at 67	Excess of 67 over 62	FV at	I
62	8,400	8,566				0	0	4.00%
63	8,568	17,647				0	0	4.00%
64	8,739	27,265				0	0	4.00%
65	8,914	37,446				0	0	4.00%
66	9,092	48,217				0	0	4.00%
67		50,145		9,274	13,249	3,975	4,053	4.00%
68		52,151		9,460	13,514	4,054	8,350	4.00%
69		54,237		9,649	13,784	4,135	12,901	4.00%
70		56,407		9,842	14,060	4,218	17,719	4.00%
71		58,663		10,039	14,341	4,302	22,815	4.00%
72		61,009		10,240	14,628	4,388	28,203	4.00%
73		63,450		10,444	14,920	4,476	33,896	4.00%
74		65,988		10,653	15,219	4,566	39,908	4.00%
75		68,627		10,866	15,523	4,657	46,253	4.00%
76		71,372		11,084	15,834	4,750	52,948	4.00%
77		74,227		11,305	16,150	4,845	60,007	4.00%
78		77,196		11,531	16,473	4,942	67,447	4.00%
79		80,284		11,762	16,803	5,041	75,285	4.00%
80		83,496		11,997	17,139	5,142	83,540	4.00%
81		86,835		12,237	17,482	5,245	92,230	4.00%
82		90,309		12,482	17,831	5,349	101,375	4.00%
83		93,921		12,732	18,188	5,456	110,994	4.00%
84		97,678		12,986	18,552	5,566	121,110	4.00%
85		101,585		13,246	18,923	5,677	131,743	4.00%
86		105,649		13,511	19,301	5,790	142,918	4.00%
87		109,874		13,781	19,687	5,906	154,658	4.00%
88		114,269		14,057	20,081	6,024	166,988	4.00%
89		118,840		14,338	20,483	6,145	179,934	4.00%
90		123,594		14,625	20,892	6,268	193,523	4.00%

Fair enough, I was too lazy to show my math so I can not complain about yours. The longer you live the more it will favor waiting. What my laziness failed to provide was that I was talking about a 4% return after inflation which would in fact be a 6% rate of return. What I outlined in my answer only had a real growth rate of 2% which is hardly indicative of the long term market.

 

[Quantum Sufficit]

My thought....get rid of public sector unions

To not have me take my SS at 62....

Pensions:
Sugar Mama = state employee = 7100/month take home = 85,200 COLA adjusted and health care taken out for life, full survivor benefits, reduced don’t have the amount for either pension.

Slug Daddy = federal employee = 1700/month take home= 20,400 Cola adjusted and health care taken out for life, full survivor benefits

Total year = 105600, expenses ~80k / years

Mama and Daddys IRA’s 2.2Mil total, no Roth’s yet, waiting till I retire in Dec 2020 to start Roth conversions, we made to much (MAMA made to much ;-)

SS 62/66 8 months/70 for Mr. Slug: month 1993/2817/3605, year 23900/33800/43260

So my fidelity roll over dividends for last three years in December is 2017-44.8k, 2018- 51k, 2019-32.5k
Also getting 880/month bond dividends

My TSP (I’m 62 ) I could move over to L Fund income and start a monthly check of XXX > 23900 as an example

I could take the dividends from fidelity and move them into our accounts to use as we see fit
.
My thought is either one of these is better than taking the SS at 62 which she wants me to do.

Thoughts please

 

[pb4uski]

My thought....get rid of public sector unions

My thought... get rid of irrelevant comments. Dweeb.

 

[sgstaley]

My issue was that I WANTED to retire. I also thought about the number of years of "quality" life I would have if I retired at 70. My perception for me was that I would be a tired old man with a lot of money. Didn't make sense to me so I retired at 62 + a few months.
One thing that I have going for me (at least I think) is that I don't care what the Jones' have.

 

[Perryinva]

In what way, on a FIRE forum, would anyone choose retiring at 70 vs 62 for more money, unless they absolutely had to? No one is talking about w*rking to 70 for a larger SS, everyone is planning on spending at the same level from age at 62 on, ie: the source of funding is different; basically whether the small cost from ones own portfolio is worth the longevity insurance/annuity that delayed filing brings to the mix. As long as you expect one half of a couple to live to age 80, it is a safe bet delaying makes sense. If you are single and have reasons to believe 80 is as old as you will get then there is little reason to consider it.

One refreshing thing about this forum is that I cannot recall anyone caring about what other people have. We do all, however, have different desires and acceptable levels of personal achievements. I know what I want and don’t want, and about what that cost. I have never demanded a lifestyle to impress or keep up with anyone but myself. What I did discover is that the level I thought was just fine at 25, was not good enough for me at 35, which was not good enough at 45, & then 55. But from about there, I’ve been pretty happy with everything. To each their own.

 

[dixter]

Fire, My main concern is converting lots of tax deferred to Roth.... We will at some point be saving this SS money, our pensions will get us by ;-)

The Reality... you wont be saving this SS money... all of that SS money will be going towards paying your taxes.... the IRS will get it all back from you

 

[1-31-18]

In what way, on a FIRE forum, would anyone choose retiring at 70 vs 62 for more money, unless they absolutely had to? No one is talking about w*rking to 70 for a larger SS, everyone is planning on spending at the same level from age at 62 on, ie: the source of funding is different; basically whether the small cost from ones own portfolio is worth the longevity insurance/annuity that delayed filing brings to the mix. As long as you expect one half of a couple to live to age 80, it is a safe bet delaying makes sense. If you are single and have reasons to believe 80 is as old as you will get then there is little reason to consider it.

One refreshing thing about this forum is that I cannot recall anyone caring about what other people have. We do all, however, have different desires and acceptable levels of personal achievements. I know what I want and don’t want, and about what that cost. I have never demanded a lifestyle to impress or keep up with anyone but myself. What I did discover is that the level I thought was just fine at 25, was not good enough for me at 35, which was not good enough at 45, & then 55. But from about there, I’ve been pretty happy with everything. To each their own.

Wise post regarding SS decision-making, hedonic adaptation and significance of personal ambition and desires.

 

[rayvt]

Assumes 4% return and 2% COLA. After age 80 the person taking at 67 has more money than the person that took at 62 and if they live to 90 they have a lot more.

Yes. But why did you use 4% return?

A more realistic scenario is to look at the historical long-term returns of a 60/40 portfolio.
Or perhaps the historical N-year periods, where N is the number of years you expect to live after 62.

80 - 62 is 18 years,
The average return for a 60/40 portfolio (S&P500 / 10 ytr T-bill) for 18 year periods is 9.5%. The lowest was 5.4%.
The best was 15.0%, but we are interested in the worst-case (failure) performance, so we need to look at returns on the low end.

At 5.4% and 2% COLA, the age 62 portfolio has more money up to age 85.
At 9.5% and 2% COLA, the age 62 portfolio ALWAYS has more money.

At 8.2%, the age 62 portfolio has more money up to age 100. That's below the average historical return, so the odds are in your favor of taking SS at 62.

 

[Perryinva]

With the added risk of that, and without taking in to account Roth conversions and tax preference of SS income. Our situation makes delayed filing more sense as my much larger pension disappears if I die first, and the larger SS for DW is more important than an extra $180k in the stash. She would be tax free upon my death. She is scared to death to invest.

Many of us did not FIRE at much less than 62, and are not confident that they have the ability to or DESIRE to base as much as possible of their income on their investments Sure, I did (way) better than 10%/yr avg over the last 18 years. But I believe that was the luck of a few right equity decisions, the long bull, and coupled with real estate appreciation, the egg is more than large enough. It also was because I could invest aggressively knowing I had both the time to recover and we have over $60k/yr in pensions, medical covered, and I will have max SS. I know I would have been more conservative without those safety nets.

Conversely, if you have always been a 60/40 (or better) buy & hold 100% portfolio & retired at 45 to 50 for instance and know that not only can you and have flourished will that plan & will stay that course regardless from 62 on, and especially single, then yes, then it makes little sense to file later than 62. You stick with what works for you.

Regardless, the actual difference between either choice is relatively small potatoes for all the press and threads it garners. If DW died in a year, I would file latest at FRA to take advantage of Roth conversions and the lower rate. No point in delaying past that for me then.