Would Like Some Opinions on When to Take Social Security

[erkevin]

"What about the strategy noted in post #14 above where, assuming you have some decent savings, you spend the "fun money now" from your savings with the knowledge that the higher SS benefit at 70 will compensate for having spent more aggressively from your savings between 62 and 70?"

I see that strategy's benefits; particularly if I beat the actuarial tables. But it burns my wife if I die early. Right?

 

[mebden]

Well, my thought on all this is I had this deducted from my check for 40 plus years and all my dad's 3 brothers all died before 65 and 1 didn't make it till 60 my dad made it till 72 and all took SSI at 62 to at least get some money back and my intentions if I make it to 62 is take it and invest it, piss on the Roth conversions after 62 and if I know I'm going like every one of my dad's brother and himself the year I know I'm outta here I'll convert the whole traditional IRA to a Roth before I'm gone lol Weve all earned that SSI benefit so take it before you can't because tomorrow is never promised you will get the same amount no matter what year you take it.

 

[Midpack]

Use opensocialsecurity.com for guidance, especially for couples. If you earned more than your wife she will get your benefit if you pass first, so it may be that you take hers early. That website should cover that situation.

+1. You can choose from 5 different longevity cases or even enter an exact “assumed age at death” - for you and your wife separately.

Open Social Security: Free, Open-Source Social Security Calculator

opensocialsecurity.com

 

[engineernerd]

"What about the strategy noted in post #14 above where, assuming you have some decent savings, you spend the "fun money now" from your savings with the knowledge that the higher SS benefit at 70 will compensate for having spent more aggressively from your savings between 62 and 70?"

I see that strategy's benefits; particularly if I beat the actuarial tables. But it burns my wife if I die early. Right?

Earlier you said your wife's earnings history entitles her to about the same benefit as yours, so her benefit will not be affected by when you claim or when you die.

The math all depends on how long you and she expect to live. You said she is likely to live a long time, so she should definitely wait to age 70.

When it makes sense for you to take your benefit depends on how long you will live. Your benefit at age 62 is 70% of your full-retirement-age benefit and your benefit at age 70 is 124% of your full-retirement-age benefit. All SS benefits are supposed to be inflation-adjusted (I have quibbles about that but it's a separate topic). The simple math comparing claiming at 62 versus age 70 says 62 wins if you die age 80 or less and 70 wins if you die age 81 or greater. The formula is 8x0.70 + n(1.24+0.70) = n(1.24+1.24), where n is the number of years past age 70 that you will both still be alive.

Separately, it may make sense for you to wait a few years so you can keep your taxable income low enough to take advantage of the 0% bracket for capital gains and qualified dividend income. And/or get ACA subsidies.

 

[erkevin]

"Earlier you said your wife's earnings history entitles her to about the same benefit as yours, so her benefit will not be affected by when you claim or when you die."

I was referring to the idea to hold off on SS and use our nest egg for fun. If I do this and die at 68 (or whatever early age), the nest egg has been drawn down and I never touched my SS. My wife has less to live on.

 

[Koolau]

"Earlier you said your wife's earnings history entitles her to about the same benefit as yours, so her benefit will not be affected by when you claim or when you die."

I was referring to the idea to hold off on SS and use our nest egg for fun. If I do this and die at 68 (or whatever early age), the nest egg has been drawn down and I never touched my SS. My wife has less to live on.

I guess you need to run the numbers on some scenarios with the possible conditions you are considering. You may find that there isn't a big downside of the strategy (using savings now with potential larger SS later).

 

[engineernerd]

"Earlier you said your wife's earnings history entitles her to about the same benefit as yours, so her benefit will not be affected by when you claim or when you die."

I was referring to the idea to hold off on SS and use our nest egg for fun. If I do this and die at 68 (or whatever early age), the nest egg has been drawn down and I never touched my SS. My wife has less to live on

FIRECalc has the capacity to model both approaches.

It really boils down to, how long do you expect to live? You play the percentages. Keeping in mind that your/your wife's odds of outliving your portfolio are governed by the worst-performing historical sequences of years, not by the average or best-performing ones.

 

[Koolau]

FIRECalc has the capacity to model both approaches.

It really boils down to, how long do you expect to live? You play the percentages. Keeping in mind that your/your wife's odds of outliving your portfolio are governed by the worst-performing historical sequences of years, not by the average or best-performing ones.

I agree in concept. However we'd all cut back if we saw our stash getting too low along the way. YMMV

 

[Sunset]

.......

I was referring to the idea to hold off on SS and use our nest egg for fun. If I do this and die at 68 (or whatever early age), the nest egg has been drawn down and I never touched my SS. My wife has less to live on.

Yes. But is it significant ?
Say you plan to wait until age 70 but die age 69.9 worst case scenario.
Say your SS is $30k

Set aside 8 years of $30K = $240K in Treasury ladder paying 4.2% and take out $30K per year.
The nest egg would be $1.56 M instead of $1.8 M. And your wife would have to make that last 20 years with her pension & SS.

I don't really see an issue.

 

[erkevin]

"
Set aside 8 years of $30K = $240K in Treasury ladder paying 4.2% and take out $30K per year.
The nest egg would be $1.56 M instead of $1.8 M. And your wife would have to make that last 20 years with her pension & SS."

Well-explained! Thank you for paying attention in math class

 

[TheWizard]

"
Set aside 8 years of $30K = $240K in Treasury ladder paying 4.2% and take out $30K per year.
The nest egg would be $1.56 M instead of $1.8 M. And your wife would have to make that last 20 years with her pension & SS."

Well-explained! Thank you for paying attention in math class

I delayed 7 years from age 63 to 70 and took out $3000 per month in lieu of SS.
But I didn't set the entire amount aside in "cash"; I just withdrew $3000 monthly pro-rata from the mix of investments in my tax-deferred account, mostly stock index funds.
I think I likely made out better doing it that way...

 

[Lorenzo]

I delayed 7 years from age 63 to 70 and took out $3000 per month in lieu of SS.
But I didn't set the entire amount aside in "cash"; I just withdrew $3000 monthly pro-rata from the mix of investments in my tax-deferred account, mostly stock index funds.
I think I likely made out better doing it that way...

These are the refinements I’m trying to figure out. I’m sold on delaying, but how to finance the delay?

 

[badatmath]

Just as a brief echo here, the DW came down this morning to my office crying. One of our hiking friends (I think a year younger than me), traveled to Thailand a month ago with her husband, experienced what they originally thought was a stomach virus, and found out it was liver cancer. She died this morning.
So longevity estimates are good in the average and no good for you in particular, unless you are average (we are all above average, like in Lake Woebegon).

My view has kind of been to maximize now while we are in the late 50's/60's and then see what happens.
I had two greatgrandfathers live past 95 and all four grandparents make it to 90. But my habits are bad. DW has a family history of early death but is a health nut (I assume she will outlive me since she is 4 years younger) and act accordingly.

But don't assume you will make it to 95. You should hedge.
Should we have passed up blowing 10k on the Scotland hike in June for our 40th, since we might make it to 95 and not spend as much as we are blowing this year? It's a tough question. It's dishonest, since I'm 97% sure we could afford it, even if we live to 95, but you get the point. I assume we will spend less, except upon health care in our 80's. We won't be hiking the Great Glen Way for dang sure, at least.

The biggest "health nut" in my old j*b died early from pancreas cancer. . . yet the ones who are +100 lbs overweight and diabetic are still chugging along.

 

[Koolau]

These are the refinements I’m trying to figure out. I’m sold on delaying, but how to finance the delay?

I took from my 401(k) to reduce future RMDs.

 

[Marc]

I took from my 401(k) to reduce future RMDs.

+1

 

[Midpack]

The biggest "health nut" in my old j*b died early from pancreas cancer. . . yet the ones who are +100 lbs overweight and diabetic are still chugging along.

Proof by exception

 

[badatmath]

Proof by exception

I think people here are a tad optimistic on their life expectancy. . . just based on the people in my family, the people in my friends families, and people I know from w*rk. Most aren't around to worry about if they made the optimal decision or to know if they broke even. Not saying you shouldn't plan for it. Just not something that I personally think about. (Majority of my relatives didn't live long enough to claim at 62 much less wait!)

3 of my 5 closest friends died young too (57, 60, 64). . .

 

[Markola]

Projecting one’s longevity based on family history seems too risky to me in the context of ongoing medical miracles. My 85 year-old father battled colon cancer this year and won, thanks to modern chemotherapy. He is cancer free, fortunately, but he doesn’t have enough income, partly because he took SS at 62.

We’re both waiting until 70, because we view SS as a unique form of inflation-protected longevity insurance, which we want as much of as possible. YMMV.

 

[Lorenzo]

I took from my 401(k) to reduce future RMDs.

So you’re saying you did like TheWizard?—just spent down your tax-deferred rather than something more complicated like building a TIPS ladder to SS at 70?

 

[marko]

I think overall portfolio survival is more important that just maximizing one's SS. What I wanted to see was how taking SS earlier (resulting in lower portfolio withdrawals) would make a difference.

I'm not sure if this is even relevant but I ran FireCalc using two different scenarios:

Both: $1MM portfolio and a $60K spend rate for 35 years. One person, no spouse.
SS at age 62 (2025) $20,000 'average portfolio value" $2,230,763 at the end
SS at age 70 (2033) $34,000 "average portfolio value" $2,415,393 at the end

A difference of $185K at the end of 35 years. To me, other possible variables during that time-frame sort of make it almost the same.

Obviously a spouse changes the calculation but I wonder if one could end up in a situation where maximizing SS could hurt the overall portfolio's value. Not sure.

Again, I'm not the most 'math logical' here so I'm open to insight to the contrary.

 

[pacergal]

Many of the calculators I ran during my research gave similar results, not a huge difference for us.

 

[engineernerd]

These are the refinements I’m trying to figure out. I’m sold on delaying, but how to finance the delay?

That depends on what you have, of course.

If you have a lot of unrealized capital gains in taxable investment accounts, this could be the ideal time to take advantage of the 0% bracket for capital gains (and qualified dividends).

If your living expenses can't be met within the taxable-income limit to get the 0%, you could do this in alternate years, withdrawing more than you need in the other years...

 

[Spock]

When to start SS is designed to pretty much wash-out over time. The area under the curve of "Smaller for longer" ~ "bigger for shorter". So it really comes down to your personal situation.
Bigger benefit for the survivor? = wait til 70. (assumes a delta in the two benefits)
Maximize Roth conversions? = wait until 70... this goes out the window if the "no tax on SS" actually happens.
Die early? = take it now.
longevity genes? = wait.
ACA/Obamacare subsidies? = wait until on Medicare
SS reduces benefits (or implements means testing) = take it now.
I've modeled SS in spreadsheets umpteen different ways and did find a few surprises... but the net always come down to that, while waiting until 70 may yield more total, the % difference is well within the unknown slop factors inherit in trying to model live expectancies and tax rates 25+ years into the future.

Last week Dear 90 year old Dementia patient Dad fell (again) at his ASL and refused to go to the hospital. He took a swing at an EMT, tried to bite someone, and ended up with the cop handcuffing him to the gurney.
Since that crap is apparently hereditary, I'm starting SS as soon as the ink is dry on the "tax free" legislation or I start Medicare, whichever comes first.

 

[Koolau]

I think people here are a tad optimistic on their life expectancy. . . just based on the people in my family, the people in my friends families, and people I know from w*rk. Most aren't around to worry about if they made the optimal decision or to know if they broke even. Not saying you shouldn't plan for it. Just not something that I personally think about. (Majority of my relatives didn't live long enough to claim at 62 much less wait!)

3 of my 5 closest friends died young too (57, 60, 64). . .

I guess it's a philosophical question to some extent. Which is better? Plan for a longer life and die earlier with "left over" money or live it up now and perhaps be in want in one's last days?

I don't see too much downside of planning for a longer life IF one has saved quite a bit extra. IF one needs the money now, by all means take it. Otherwise, I favor planning for the long haul. I've mentioned elsewhere that my "plan" runs out at 99. Though I've actually known several people who made it to 100 - including 3 men - that's a bit optimistic for me.

If I'm wrong and die tomorrow, I won't feel like I cheated myself with my spending. AND barring black swan events, I should never run out of money (unless I get "lucky" and live past 99.). YMMV

 

[badatmath]

I guess it's a philosophical question to some extent. Which is better? Plan for a longer life and die earlier with "left over" money or live it up now and perhaps be in want in one's last days?

I don't see too much downside of planning for a longer life IF one has saved quite a bit extra. IF one needs the money now, by all means take it. Otherwise, I favor planning for the long haul. I've mentioned elsewhere that my "plan" runs out at 99. Though I've actually known several people who made it to 100 - including 3 men - that's a bit optimistic for me.

If I'm wrong and die tomorrow, I won't feel like I cheated myself with my spending. AND barring black swan events, I should never run out of money (unless I get "lucky" and live past 99.). YMMV

I totally get that feeling and since most of you are married you have to consider at least 1 of you will live a long life. . . I don't have to worry about that part as a single. I'm not old enough to take it yet so it really hasn't come up for me.

I'm not really confident I will make 62 (no special reason).