Independent
Thinks s/he gets paid by the post
- Joined
- Oct 28, 2006
- Messages
- 4,629
Correct. Happily, your figures exactly match what I came up with, so that's verified.
In fact, at 0% the break-even age is 77.8. At 3% it's 79.5%.
FWIW, the SS mortality table gives a 66 y.o. male a life expectancy of age 82.
'course, one of the other things I ponder upon is not break-evens or percentage improvements, but the absolute dollar amounts.
If you can afford to eschew getting $933/mo for 5 years, then you have a pretty comfortable income without SS.
If you have a pretty comfortable income, then you don't have an urgent need for that extra $387/mo in 5 years time.
If all you have is SS, then your annual income would be either $11,200 or $15,800. And with either of those, you are so far under the poverty line that it doesn't matter.
But suppose you have a comfortable pension of $24,000 ($2k/mo). Now your total income will be $35,200 or $39,800. Your lifestyle at either of these figures is going to be essentially the same.
Eh...when you get down to it, it's just a matter of personal preference. Whether you take SS at 62 or at 70, there will be little difference in your overall financial situation.
$387/mo is not going to lift you from poverty to opulence. If you are poor, it will relieve some of the burden -- but in that case, you can't afford to skip 5 years of income. If you are rich, it's just another shrimp on the barbie.
Which, oddly enough, is what the SSA implicitly says, when they say that they are actuarially the same.
The people who need the money can't afford to wait 5 years.
The people who don't need the money, it doesn't matter whether or not they wait 5 years.
I think the important part of my post was that if I'm going to do the math, it's important that I use real SS numbers. Right now, deferring SS is a far more efficient way of buying lifetime income than buying a private annuity, so I shouldn't use private annuity numbers and assume that SS is about the same.
The unimportant part was my choice of $1,000, which was just a handy round number. However, note that the Federal Poverty Level for a single person is $11,490. I'd disagree that I'd be so far under the poverty line with either $11,200 or $15,800 that I wouldn't notice the difference. For people I know in that income range, I expect that $387/mo is a big deal. (however, the actual lifetime income difference isn't that big)
I'm currently deferring SS. The analysis that makes sense for my situation is that deferring reduces the uncertainty of my future income. It takes away some of the potential upside in return for limiting the downside.