Social Security break even has been batted around on this board to the nth degree.
But I needed to make my own spreadsheet to digest my latest thought. DW is taking SS this July at FRA. My initial plan was to take mine at FRA next October. But why should I wait longer than DW to take ss? I decided that I want to start taking it at 65 instead of at 66 yrs 2 mo.
My thought is this - I don't have a pension. I'm living off investment income. Taking SS will decrease my portfolio withdrawal, so in theory an amount equal to SS in my portfolio will be allowed to stay in the portfolio and grow as opposed to being withdrawn.
So I ran the numbers based on various scenarios depending on estimated future rate of return on my portfolio. Based on the estimated rate of return and estimated spending, I was able to compare the monthly difference in estimated future portfolio value based on taking SS at 65 and at 66 yrs 2 mo.
And this provided the break even point at which taking at 66/2 starts yielding a larger portfolio value than the taking at 65 option.
At a 2% return, the break even point is in 12 yrs, 1 mo at age 76 - 8 mos
At a 3% return, the break even point is in 12 yrs, 10 mo at age 77 - 4 mos
At a 4% return, the break even point is in 13 yrs, 8 mo at age 78 - 2 mos
At a 5% return, the break even point is in 14 yrs, 9 mo at age 79 - 3 mos
At a 6% return, the break even point is in 16 yrs, 1 mo at age 80 - 7 mos
I compounded the rate of return monthly in my spreadsheet. I did not take tax implications into my model.
I don't know how the online calculators calculate break even, but the ability to reduce portfolio withdrawals creates more of an incentive to take ss earlier than what I expected. And it seems like there would be more of an incentive to take ss early for non-pension people than for those who live off pensions.
And of course there are a lot more variables that can go into this depending on each person's situation. But I'm comfortable enough with my break even findings to take SS 1 yr 2mos earlier than FRA.[/QUOTE
Just realize, in your calculations, that Soc Sec is taxed differently than IRA. It is generally 50% of soc sec is taxable, up to a certain income amount. ira, except for ROTH, is 100% taxable.Don't forget this important feature in your calcs!