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Well, we've both set forth our positions and I suspect neither one of us is going to change, so we should probably stop this thread hijack here.......
Well, we've both set forth our positions and I suspect neither one of us is going to change, so we should probably stop this thread hijack here.......
This thread was NOT the standard question of When Should I Take my SS Benefit.
Instead, it was a hypothetical query about where would my portfolio end up if I invested all of my SS checks starting at age 62, vs 67 or 70.
To me, this looks like a fairly simple spreadsheet exercise where you invest a COLA income stream from one of the three starting ages up to age 100, say.
You need a few adjustable parameters, such as average COLA and average portfolio Total Return.
Heh, I created such a spreadsheet several years ago. You can view & download it here: https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0 Being optimistic it runs up to age 108.
If you assume 7.4% return on investments and 2.5% COLA, the breakeven age is 90 years old. That's 28 years before waiting until 70 is better.
FWIW, for an 80/20 portfolio the minimum historical return for all 28 year periods was 8.0%. The median was 10.0%.
For a 60/40 portfolio the figures are 7.8% minimum and 9.7% median.
At 9.7% return and 2.5% COLA waiting until 70 NEVER catches up.
Is it true most with large pensions wait till 70?
And those without pensions dont?
Often seems that way, but could be wrong..............
And I dont believe everyone that takes it at 62 needs the money.
Like many folks seem to think here.
A typical recommendation is for the lower earner to claim early and the higher to wait to 70.
"A typical recommendation is for the lower earner to claim early and the higher to wait to 70."
Sort of us. As the higher earner planning to wait until FRA (age 67) so that DW can get full impact of spousal benefit (as well as survivor benefit just in case). Also, I simply like our SS numbers at FRA - with pension total should amount to ~$90K, which "feels" like a nice solid income cushion to have. Though an unlikely risk, if assets got wiped out somehow, a largely COLA'd $90K/year could sustain a decent middle-class retirement lifestyle. So, I guess I'm mostly thinking about the insurance-hedging aspect of SS, rather than maximizing/optimizing the total take.
[We'll see if I have the patience to wait until FRA once we begin living off of WD's from portfolio. I give it 50/50 odds I cave in at 65, the magic age for pension, Medicare, etc.]
That seems to be the powerful part about delaying. It gives one month-to-month options. If one isn't absolutely certain at the age of 62, one can wait a month. See what the lack of SS feels like. It you are not sure after a month, wait another month. Rinse and repeat. Pull the trigger when the time seems right, whatever that means to you. You will know when that time comes. With FI, comes many options. Enjoy it.
The spreadsheet is wrong. When delaying to 70 (or any other age), your benefit increases with inflation each just as it does when taking at 62, even if you haven't started it. The spreadsheet doesn't do that, instead plugging in the benefit from 8 years ago into cell D10 without adjusting for inflation.
After reading hundreds of like these over the years I am reminded of the versatility of the SSA program. Take it @ 62 or take it @ 70; it's all the same to SSA. I began receiving my SSA @ 70 but DW (4 years younger) added me as spouse and took her's at 66. I stayed on until 70 and then began my SS and DW hopped off her SS and hoped on as my spouse.
Like I said-versatile.
I'm pretty sure that particular versatility no longer exists. In 2015 they invoked "deemed filing" meaning you had to file on your own benefit to collect spousal.
A typical recommendation is for the lower earner to claim early and the higher to wait to 70.
That is what I thought for years, but now I'm not so sure.
Hear me out. Lets say between the years of age 62-70 your money invested grows at 8%. If you're taking money out of your account thats growing at that rate because you want to wait for social security I don't think the numbers indicate waiting till 70 is the right move. When I inputted that data into the open social security calculator it confirmed that.
You do you, but as others have pointed out, this is not a good comparison, you effectively have snuck in a higher allocation to stocks by claiming early and not adjusting your portfolio and that extra risk is the reason for your perceived extra return.
Social security is an annuity and annuities use bonds so they have a definite amount available when needed. SS is inflation adjusted, so the best comparison is to TIPS. Those are earning about 1.8% after inflation. The current 20 year TIPS rate is the default in opensocialsecurity for the reason that Mike Piper, the expert who wrote the program thinks it is the most appropriate benchmark, precisely because of this issue.
To make a TIPS comparison real, you simply set aside some TIPS to fund the bridge to age 70 and let your stock allocation rise as you spend those bonds down.
Put differently, if you claim at 62, you get less of this TIPS-like thing called social security, so you need more bonds in your portfolio to have the same risk as someone who claims at 70. Plus of course, SS is also longevity insurance as continues for life, unlike TIPS, which have a definite maturity.
Certainly if you die before the properly calculated payout date, waiting to claim was a bad outcome as your estate will be lower, but a married couple at 62 have a 50% chance that one of them will make it to age 89, well after the payout date of the high earner waiting to age 70.
The TIPs comparison as a guide for how my money will grow doesn’t apply to me because that’s not where my money is invested. His inclusion of the “discount rate” in his calculator is to measure what your money is expected to grow at.
You could, then, have titled your thread "Would it be better to take more risk with my overall portfolio?"
Well, this wasn't my thread,
but my answer to that question would be absolutely yes if you want your portfolio to grow over time!
Oops, sorry about that.
I guess you must be 100% (or greater) in stocks. The problem with taking tons of risk with your investments is sometimes the risk shows up and your portfolio DOESN'T grow at the time you need it.
The TIPs comparison as a guide for how my money will grow doesn’t apply to me because that’s not where my money is invested. His inclusion of the “discount rate” in his calculator is to measure what your money is expected to grow at. Moving that rate slightly from 1.8 to 4 indicates taking earlier might make more sense. I don’t have to decide anything right now as I’m 57 , but I think it’s a factor to consider.
I think , in general , people on this board are super conservative with their asset allocations as well as withdrawal rate comfortability , but that’s a whole nother discussion.