Would it be better to take Social Security at 62?

[mathjak107]

What I am talking about to all the posts that always seem to talk about market returns over 30 year periods.

usually standardized planning is 62 to 92 for a man and 62 to 92-95 for a women.

obviously if one is 70 they don’t plan around 30 years ..i am down to 22 years left . but i originally ran the numbers pre retirement for 30 years . i am just in to those 30 years at this point

 

[USGrant1962]

What I am talking about to all the posts that always seem to talk about market returns over 30 year periods.

Well, FIRECalc is the Financial Independence Retire EARLY Calculator.

 

[USGrant1962]

these are the worst time frames to date .

30 year numbers are fine .

but it is the 15 year numbers that did every single time frame in causing a failure


1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%
.

1929---stocks 1.07%---bonds 1.79%---rebalanced 2.29%--inflation 1.69%
.

1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%
.

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%

it is those 15 year horrible time frames that the 4% safe withdrawal rate was born out of since you had to reduce from what could have been 6.50% as a swr down to just 4% to get through those worst of times.

Good summary of the bad cases. IIRC, Bengen used those examples in his seminal paper on the 4% rule. OK, I just checked - he used the last three. The first one is why my personal FIRECalc model starts in 1906.

 

[Chuckanut]

Well, FIRECalc is the Financial Independence Retire EARLY Calculator.

+1


Sometimes we forget the basics.

 

[harley]

What I am talking about to all the posts that always seem to talk about market returns over 30 year periods.

When I was running FireCalc in preparation for my retirement at age 50, I was using 40 and 50 year rolling periods. Not that I got that much information, but I was just trying to see what my odds were. Even now, 17 years later, I run it with the default 30 years. Even though my health is poor and I'm not likely to make 75, I choose to be conservative to be as safe as I can for DW, and if I over-save/under-spend, I have family to leave the remainder to.

 

[Wile E. Coyote]

Well, FIRECalc is the Financial Independence Retire EARLY Calculator.

I understand that. Still, MJ is in his 70's and keeps talking 30 years. I think you could kid yourself about how volatile your portfolio is when death is more correctly 15-20 years away.

 

[mathjak107]

Good summary of the bad cases. IIRC, Bengen used those examples in his seminal paper on the 4% rule. OK, I just checked - he used the last three. The first one is why my personal FIRECalc model starts in 1906.

bengan actually missed the mother of poor outcomes in his work since 1965 and 1966 cycles did not show up yet since the 30 years didn’t complete yet . bengan was in 1994

that is where the trinity study took over since 1965 ,1966 was included

 

[mathjak107]

I understand that. Still, MJ is in his 70's and keeps talking 30 years. I think you could kid yourself about how volatile your portfolio is when death is more correctly 15-20 years away.

except history and research shows exactly the opposite .it is pre retirement and the first years in retirement that a volatile portfolio has the most effect on .

once out of the red zone raising equities back up is exactly the glide path you may want .

retirement planning is usually standardized on a 30 year plan since most retire in the their 60’s . it is used for setting that day one draw .

obviously if one is not retiring until 70 they may not want to plan around 30 years which is why all calculations give you choices of how many years.

it’s no different then while accumulation periods are assumed to be decades and long term money is thought of money you won’t eat with for decades , a late starter is a different story.

what is this MJ keeps talking 30 years ? i specifically said i use 22 years since i am 8-1/2 years in .

studies talk in terms of 30 years since that is the industry standard for a typical retirement..maybe not yours but the majority are based on 30 years when they start .

don’t forget even if you don’t retire in your 60’s the clock is still ticking , you just may be not spending down yet because you are working and you choose not to retire .

but that doesn’t change the fact that at age 62 your money can generate x amount over the next 30 years allocated a certain way ..you just have a low or no draw rate yet and still may be increasing savings the same as we all do from portfolio growth .

i made 30k last year with my side hustles but that does not change the capabilities of my balance , it only effects my actual draw rate as i may draw less . however portfolio capabilities are the same whether i work or not

the fact i work a bit reduces what i actually need to draw but not what i can draw
those with pensions may never have a pay check stop . so the clock is still ticking wether you retire or not at 62 or not and still likely have 30 years or less left .

since my draw method is based on our yearly balance i run firecalc for the remaining years we have left at this stage as a max which is 22 years…

no problem living longer as we have a 50% chance we are likely to die with more then we started with at 50/50 using 95/5 if we maxed out each years draw , which we don’t.

so running out because of a market dip is about on par with a lightning strike because our draw is variable based on balance

 

[Wile E. Coyote]

except history and research shows exactly the opposite .it is pre retirement and the first years in retirement that a volatile portfolio has the most effect on .

once out of the red zone raising equities back up is exactly the glide path you may want .

retirement planning is usually standardized on a 30 year plan since most retire in the their 60’s . it is used for setting that day one draw .

obviously if one is not retiring until 70 they may not want to plan around 30 years which is why all calculations give you choices of how many years.

it’s no different then while accumulation periods are assumed to be decades and long term money is thought of money you won’t eat with for decades , a late starter is a different story.

what is this MJ keeps talking 30 years ? i specifically said i use 22 years since i am 8-1/2 years in .

studies talk in terms of 30 years since that is the industry standard for a typical retirement..maybe not yours but the majority are based on 30 years when they start .

don’t forget even if you don’t retire in your 60’s the clock is still ticking , you just may be not spending down yet because you are working and you choose not to retire .

but that doesn’t change the fact that at age 62 your money can generate x amount over the next 30 years allocated a certain way ..you just have a low or no draw rate yet and still may be increasing savings the same as we all do from portfolio growth .

i made 30k last year with my side hustles but that does not change the capabilities of my balance , it only effects my draw rate as i may draw less . someone working is no different


those with pensions may never have a pay check stop . so the clock is still ticking wether you retire or not at 62 or not and still likely have 30 years or less left .

since my draw method is based on our yearly balance i run firecalc for the remaining years we have left at this stage as a max which is 22 years…

no problem living longer as we have a 50% chance we are likely to die with more then we started with at 50/50 using 95/5 if we maxed out each years draw , which we don’t.

so running out because of a market dip is about on par with a lightning strike because our draw is variable based on balance

It is just that when you think you could have a lost decade and then I may only have the same 22 years you do it' makes the whole idea of 30 years kind of preposterous to me. I realize there are a lot of younger working aged people on this forum where the 30 years makes a lot more sense.

Yes, I have run various scenarios and have more work to do on that. It is fun. I really do not plan on spending much of it and I have about a third going to friends/family/cat charity.

The problem for me is the house. I keep working for the house. Soil/foundation issues caught me by surprise and the house is demanding a new roof and air conditioner and funding for a few other predictable things. The house can also be liquidated to use for 'long term care' which I hope never happens and so it is important to keep it ready to sell (this location/development has been almost same as cash). There are so very few residential units built since the 2000's and they sell rapidly. Most of the housing stock is a lot older.

Two things I am attached to besides my demanding animals are the workforce and the house. I wish I had the excuse of kids and grandkids; but there are many things that suck money. One woman where I worked kept announcing her retirement at the beginning of every year starting around age 63 (she's a manager and her husband is an attorney). She's 71-72 now and she finally quit announcing it. She has a real estate habit. But the underlying addiction is work. We have fairly interesting work and it stretches and challenges in ways you just cannot achieve in real life. Some people really are better off retiring old (when they more completely malfunction).

With all of that being said my analysis tells me that it is less risky to retire once Medicare starts (otherwise known as 3.5 years).

 

[mathjak107]

a lost decade after having good up years isn’t a problem .

the higher balance has things hold just fine .

but what you do need is at least a 2% real return the first 15 years ..it’s poor performance up front that is hurtful not later on .

rule of thumb is what happens the first 5 years can definitely effect your 30 year outcome .

what happens the first 15 years writes it in stone .

after that not much effect if a cushion is built up in the earlier years as far as danger from a lost decade .

especially if diversified .

through the lost decade stocks averaged 1.02% cagr while bonds averaged 6.09%

100k grew to 124k in stocks and 192k in bonds. cash instruments grew to 131k if avoiding investing altogether

if someone retired in 2000 they are no different then any other below average retirement time frame but are just fine and that was getting the poor performance up front , not later on , so even then , meh.

it would take a repeat of 1965 /1966 to really do damage

 

[Wile E. Coyote]

a lost decade after having good up years isn’t a problem .

the higher balance has things hold just fine .

but what you do need is at least a 2% real return the first 15 years ..it’s poor performance up front that is hurtful not later on .

rule of thumb is what happens the first 5 years can definitely effect your 30 year outcome .

what happens the first 15 years writes it in stone .

after that not much effect if a cushion is built up in the earlier years as far as danger from a lost decade .

especially if diversified .

through the lost decade stocks averaged 1.02% cagr while bonds averaged 6.09%

100k grew to 124k in stocks and 192k in bonds.

if someone retired in 2000 they are no different then any other below average retirement time frame but are just fine and that was getting the poor performance up front , not later on , so even then , meh

Yeah, but some got harmed by both 2000 and 2008 and got scared out of the markets. I personally recovered both times and took a different path.

You always say it's as if we are all investing anew every day. So, that is in stark contrast to this new statement that it's okay to have a lost decade if it is after good up years. I think that is closer to the truth. The problem is if you are reaching closer to end of life you wonder what the point is. After a huge downturn in the market we will get more money printing (bigger than the last after a downturn bigger than the past. All the economists and demographers are talking about it.

I can get 2% in my fixed income bond situation.

 

[mathjak107]

there will always be bad investor behavior and that is true no matter what the allocation but the point is the downturn in 2000 or 2008 itself didn’t do much to effect the 4% swr.

it held just fine even if your first day of retirement was right before the debacle

EXECUTIVE SUMMARY

The 4% rule has been much maligned lately, as recent market woes of the past 15 years – from the tech crash of 2000 to the global financial crisis of 2008 – have pressured both market returns and the portfolios of retirees.

Yet a deeper look reveals that if a 2008 or even a 2000 retiree had been following the 4% rule since retirement, their portfolios would be no worse off than any of the other "terrible" historical market scenarios that created the 4% rule from retirement years like 1929, 1937, and 1966. To some extent, the portfolio of the modern retiree is buoyed by the (only) modest inflation that has been occurring in recent years, yet even after adjusting for inflation, today’s retirees are not doing any materially worse than other historical bad-market scenarios where the 4% rule worked.

Ultimately, this doesn’t necessarily mean that the coming years won’t turn out to be even worse or that the 4% rule is “sacred”, but it does emphasize just how bad the historical market returns were that created it and just how conservative the 4% rule actually is, and that recent market events like the financial crisis are not an example of the failings of the 4% rule but how robustly it succeeds!


https://www.kitces.com/blog/how-has...he-tech-bubble-and-the-2008-financial-crisis/

 

[Wile E. Coyote]

there will always be bad investor behavior and that is true no matter what the allocation but the point is the downturn in 2000 or 2008 itself didn’t do much to effect the 4% swr.

it held just fine even if your first day of retirement was right before the debacle

EXECUTIVE SUMMARY

The 4% rule has been much maligned lately, as recent market woes of the past 15 years – from the tech crash of 2000 to the global financial crisis of 2008 – have pressured both market returns and the portfolios of retirees.

Yet a deeper look reveals that if a 2008 or even a 2000 retiree had been following the 4% rule since retirement, their portfolios would be no worse off than any of the other "terrible" historical market scenarios that created the 4% rule from retirement years like 1929, 1937, and 1966. To some extent, the portfolio of the modern retiree is buoyed by the (only) modest inflation that has been occurring in recent years, yet even after adjusting for inflation, today’s retirees are not doing any materially worse than other historical bad-market scenarios where the 4% rule worked.

Ultimately, this doesn’t necessarily mean that the coming years won’t turn out to be even worse or that the 4% rule is “sacred”, but it does emphasize just how bad the historical market returns were that created it and just how conservative the 4% rule actually is, and that recent market events like the financial crisis are not an example of the failings of the 4% rule but how robustly it succeeds!


https://www.kitces.com/blog/how-has...he-tech-bubble-and-the-2008-financial-crisis/

4 more approximates the RMD schedule and I think 3 or 4 works; obviously 3 is more conservative than 4.

 

[karen1972]

Our plans is he takes his at 62, I take mine at 70. My PIA is almost 2x his. This is also what the calculators tell us to do.

1. We agree he'd just be better with a significantly bigger survivor SS check coming in MoM instead of having to manage investments as he knows he can just spend 100% of that check.

2. I have a very high probability in my family of living into my 90s.

 

[Wile E. Coyote]

Our plans is he takes his at 62, I take mine at 70. My PIA is almost 2x his. This is also what the calculators tell us to do.

1. We agree he'd just be better with a significantly bigger survivor SS check coming in MoM instead of having to manage investments as he knows he can just spend 100% of that check.

2. I have a very high probability in my family of living into my 90s.

One of my friends does that too. She plays along with his fantasy about outliving her. But, we all know how that is likely to play out in reality barring any untoward accident (if she were to ever leave the house).

 

[Koolau]

Okay.

FWIW, my original "plan" which I started when I was 60, went to age 95. I have since changed that to age 100. That plan requires neither myself or DW running out of money I might add. I cannot imagine vegetating in a state-run nursing home for several of my last years above ground.

I’m 70 and still use 30 more years for DW and I, even if I don’t believe it will happen.

I'm much more conservative(?) My plan expires at 99. Just can't bring myself to think in terms of living to 100. Having said that, I know several folks (even two guys) who have done just that.

 

[mathjak107]

planning techniques go out so far as a layer of protection since spending doesn’t always mesh .

big home repairs , cars , renovations , dental ,etc can all easily exceed a yearly budget as dictated by a swr .

so any spending not within that budget reduces the compounding for the future years .

most of us don’t expect to live to 90 but we do expect big unplanned expenses

 

[Dtail]

At ages 64/63, still using 95 as the ending target.

 

[Time2]

I know we over saved for our spending style. I've been reading this thread and realized when using FireCalc I have only used 30 years in the 'Full Years' box since I start looking at retirement with. I'm now 68 and my much younger wife is 64. I pushed Firecalc out to 80 years and we still have 100% success.
I expect within a month we will buy my son a house. Even after that expense, 80 years is still 100% success.
I'm always amazed how we did this on a middle, middle-class income.

 

[mathjak107]

I know we over saved for our spending style. I've been reading this thread and realized when using FireCalc I have only used 30 years in the 'Full Years' box since I start looking at retirement with. I'm now 68 and my much younger wife is 64. I pushed Firecalc out to 80 years and we still have 100% success.
I expect within a month we will buy my son a house. Even after that expense, 80 years is still 100% success.
I'm always amazed how we did this on a middle, middle-class income.

even s penny doubled every day is 5,000,000 dollars at the end of 30 years .

for many of us it is decades of good compounding on the little bits we do manage to save that creates real wealth .

far to many don’t take advantage of the biggest friend they have , TIME

the longer you give the money to grow the less risk there is

 

[Perryinva]

Another “it’s better to collect SS@ 62 instead of 70
and here’s the math” thread! It still amazes me that anyone thinks that anything new can be brought to the discussion that doesn’t already exist in thousands of other places. The Dunning-Kruger effect is strong when it comes to SS calculations.

 

[Time2]

Another “it’s better to collect SS@ 62 instead of 70
and here’s the math” thread! It still amazes me that anyone thinks that anything new can be brought to the discussion that doesn’t already exist in thousands of other places. The Dunning-Kruger effect is strong when it comes to SS calculations.

Not sure which side of this you fall on this, (or it just depends) but I'm waiting until I'm 70, 10-1/2 more months. This gave me more room for Roth conversions in the 12% tax bracket and will give my wife a larger SS check when I'm gone. Right or wrong the decision time has past. This is my last year to get Roths done of any decent amount, still some smaller ones after, and I will also start spending some small amount out of tax deferred accounts.



I'm whittling our tax deferred accounts down to reduce my forced taxable income (RMDs) later.
At the same time, I'm hoping the stock market increases my tax deferred accounts faster than I can spend them down. Now, there's a dichotomy!

 

[mathjak107]

the bottom line is do you want to bet more on longevity or on markets , rates and inflation .

with a well constructed plan for withdrawals ,the draw shouldn’t differ whether you file earlier or later .

personally if i delayed i would never want to wait 8 years to first draw more money .

i would want my budget the same right from day one . i wouldn’t want to live a less then life if i delayed .

so the budget is the same as one fronts themselves the social security they aren’t getting .

so delaying is more of your own money up front and less of your own later betting on longevity .

taking it early is less of your own money up front but more ss up front . but the budget is made up by more of your money as social security is less later

 

[ERD50]

I know we over saved for our spending style. I've been reading this thread and realized when using FireCalc I have only used 30 years in the 'Full Years' box since I start looking at retirement with. I'm now 68 and my much younger wife is 64. I pushed Firecalc out to 80 years and we still have 100% success.
I expect within a month we will buy my son a house. Even after that expense, 80 years is still 100% success.
I'm always amazed how we did this on a middle, middle-class income.

Be careful with time frames beyond about 50 years - you end up eliminating some of the worst periods, because they were too recent.

When you do 80 years, the most recent run in the 'test' is 1944, because starting in 1945 would only be 79 years of data (detail: it seems off by one year, but that's because the first year is 'inclusive'). FIRECalc and FIcalc only include the complete runs in the results. So a very bad cycle, like the one starting in 1966, is not included in your data set.

-ERD50

 

[Dtail]

a lost decade after having good up years isn’t a problem .

the higher balance has things hold just fine .

but what you do need is at least a 2% real return the first 15 years ..it’s poor performance up front that is hurtful not later on .

rule of thumb is what happens the first 5 years can definitely effect your 30 year outcome .

what happens the first 15 years writes it in stone .

after that not much effect if a cushion is built up in the earlier years as far as danger from a lost decade .

especially if diversified .

through the lost decade stocks averaged 1.02% cagr while bonds averaged 6.09%

100k grew to 124k in stocks and 192k in bonds. cash instruments grew to 131k if avoiding investing altogether

if someone retired in 2000 they are no different then any other below average retirement time frame but are just fine and that was getting the poor performance up front , not later on , so even then , meh.

it would take a repeat of 1965 /1966 to really do damage

I have seen some version of this post from you many times about the 15 year 2% real return minimum.
IIRC, Karsten Jeske in his Early Retirement Now Safe Withdrawal posts had stated that that after 15 years if the portfolio is inflation adjusted 0% return, then the portfolio should never fail over the full 30 year period.
Am I misquoting or perhaps there is another nuance?