Delay Social Security to age 70 and Spend more money at 62

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midareff
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Re: Delay Social Security to age 70 and Spend more money at

Post by midareff »

billyt wrote:Midareff: You are needlessly confusing yourself and perhaps others. None of these things will matter in an apples to apples comparison, as any future stock market changes and different annual withdrawal amounts will affect both scenarios (62 and 70) in an identical fashion. You are simply buying a higher guaranteed income stream with money from your portfolio.
While guaranteeing an earlier demise to your portfolio.
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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic »

midareff wrote:
billyt wrote:Midareff: You are needlessly confusing yourself and perhaps others. None of these things will matter in an apples to apples comparison, as any future stock market changes and different annual withdrawal amounts will affect both scenarios (62 and 70) in an identical fashion. You are simply buying a higher guaranteed income stream with money from your portfolio.
While guaranteeing an earlier demise to your portfolio.
But if social security is paying you $2 million a year inflation adjusted, you don't need a portfolio. This assumes you want to eat, not leave millions to your heirs, although $2 million a year from SS might help.

The amount you get from SS matters. Don't ignore it. It isn't part of your portfolio until it is.

P.S. I actually have never wanted a portfolio; I always wanted money.
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Re: Delay Social Security to age 70 and Spend more money at

Post by red5 »

I think the point for #1 is based on the original premise that one does not care how much money is left for heirs. Did that cash enjoy the returns of the last few years, no, but it does not matter according to the original premise that one does not care about how much money is left for heirs. Also, I think it assumes someone will strictly follow a fixed withdrawal rate (as in 3 or 4%, which was stated by the OP).

#3, I did not say the same $$ withdrawal, rather, the same % withdrawal.
midareff wrote:
Does it basically boil down to this (Age 70 scenario)?
1. More money to spend each year .... without knowing what stock market performance will be over the 8 years this is a meaningless statement, that large chunk in cash would have been an extreme detriment the last two years. ... just as an example..

2. Lower portfolio value for all of time ... due to a large cash withdrawal this will probably be true at all times.

3. Similar risk to portfolio depletion even though it will be lower (since we are taking same % as a withdrawal) ... bad assumption, taking the same $$ withdrawal with a lower balance always depletes sooner. Unless you know how much of a person's income is contributed by the portfolio and how much by SS all of this is speculative.

4. Lower risk to lowered lifestyle in the event of portfolio depletion since SS will be higher ..... again, how much income comes from the portfolio and how much from SS?
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Re: Delay Social Security to age 70 and Spend more money at

Post by billyt »

No Midareff, that is dead wrong. For a given withdrawal rate, both scenarios are equal. If you claim at 62 you have a larger portfolio at 70 (and larger annual withdrawal at a given rate), but less in SS income. If you claim at 70 you have a smaller portfolio (and annual withdrawal), but higher SS income. Its a wash.
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Re: Delay Social Security to age 70 and Spend more money at

Post by red5 »

Anyways, there will be no consensus as everyone has their own circumstances. It should just be considered as a generalized scenario and merely a starting point in formulating a retirement plan.
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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic »

midareff wrote:
billyt wrote:Midareff: You are needlessly confusing yourself and perhaps others. None of these things will matter in an apples to apples comparison, as any future stock market changes and different annual withdrawal amounts will affect both scenarios (62 and 70) in an identical fashion. You are simply buying a higher guaranteed income stream with money from your portfolio.
While guaranteeing an earlier demise to your portfolio.
My earnings are greater than my withdrawals. My portfolio is growing not dying. If you get more at 70 from SS, your withdrawal from your portfolio is smaller than it otherwise would have been. With a smaller withdrawal, the chance of your portfolio's death is reduced. It's not really the dollars, but the percentages. Given earnings of 4%, 3% withdrawals and 5% withdrawals will have different impacts on the life of your portfolio.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Aptenodytes »

I think people are mixing up maximizing expected values and managing risk. You buy the annuity to manage risk, at least that's how I'm looking at it.
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Re: Delay Social Security to age 70 and Spend more money at

Post by midareff »

sscritic wrote:
midareff wrote:
billyt wrote:Midareff: You are needlessly confusing yourself and perhaps others. None of these things will matter in an apples to apples comparison, as any future stock market changes and different annual withdrawal amounts will affect both scenarios (62 and 70) in an identical fashion. You are simply buying a higher guaranteed income stream with money from your portfolio.
While guaranteeing an earlier demise to your portfolio.
My earnings are greater than my withdrawals. My portfolio is growing not dying. If you get more at 70 from SS, your withdrawal from your portfolio is smaller than it otherwise would have been. With a smaller withdrawal, the chance of your portfolio's death is reduced. It's not really the dollars, but the percentages. Given earnings of 4%, 3% withdrawals and 5% withdrawals will have different impacts on the life of your portfolio.
If we mindlessly follow a fixed percentage anything is possible to prove numerically. Somehow I think there will be adjustments in life based on needs and desires, as well as portfolio performance. Are you married to a fixed finite WR, come what may, or are you free to increase or decrease it as needs, wants and longer term performance dictates?
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Re: Delay Social Security to age 70 and Spend more money at

Post by billyt »

No Midareff, that is again dead wrong. You can use any withdrawal rate you care to or change it on a daily basis, but you have to apply the same withdrawal rate history to both scenarios. Makes not one bit of difference.
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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic »

midareff wrote: Are you married to a fixed finite WR, come what may, or are you free to increase or decrease it as needs, wants and longer term performance dictates?
Mine is negative, and I am married to keeping it that way. My pension and social security covers my spending and then some. If your guaranteed income covers all your expenses, then you don't need to withdraw. That is why some people prefer higher levels of guaranteed income to lower levels of guaranteed income. Starting SS early gets you the latter; starting later gets you the former.
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midareff
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Re: Delay Social Security to age 70 and Spend more money at

Post by midareff »

billyt wrote:No Midareff, that is again dead wrong. You can use any withdrawal rate you care to or change it on a daily basis, but you have to apply the same withdrawal rate history to both scenarios. Makes not one bit of difference.
Life makes a difference. Unfortunately, you pass away due to a traffic accident (or illness) at age 62, 63, 64, 65, 66, 67, 68, etc. and let's not ignore that silly break even analysis, how did your kids do? LEAVE A SMALLER OR LARGER ESTATE?
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Re: Delay Social Security to age 70 and Spend more money at

Post by longinvest »

midareff wrote:
billyt wrote:No Midareff, that is again dead wrong. You can use any withdrawal rate you care to or change it on a daily basis, but you have to apply the same withdrawal rate history to both scenarios. Makes not one bit of difference.
Life makes a difference. Unfortunately, you pass away due to a traffic accident (or illness) at age 62, 63, 64, 65, 66, 67, 68, etc. and let's not ignore that silly break even analysis, how did your kids do? LEAVE A SMALLER OR LARGER ESTATE?
midareff,

The OP made the following assumption:
Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate.
If you worry about leaving a bigger estate, the proposed calculation is not for you.
Last edited by longinvest on Mon May 05, 2014 12:47 pm, edited 1 time in total.
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Re: Delay Social Security to age 70 and Spend more money at

Post by gerrym51 »

my wife and i took at 62 and did not need to. now i don't have to dither over it. OY!
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Re: Delay Social Security to age 70 and Spend more money at

Post by Professor Emeritus »

midareff wrote:
billyt wrote:No Midareff, that is again dead wrong. You can use any withdrawal rate you care to or change it on a daily basis, but you have to apply the same withdrawal rate history to both scenarios. Makes not one bit of difference.
Life makes a difference. Unfortunately, you pass away due to a traffic accident (or illness) at age 62, 63, 64, 65, 66, 67, 68, etc. and let's not ignore that silly break even analysis, how did your kids do? LEAVE A SMALLER OR LARGER ESTATE?
Did you buy insurance against that risk like I did?

I bought term insurance as part of my financial plan. I actually have no dog in this fight, since my wife collects SSDI and I can file for spousal benefits at age 66. In my case not deferring would be irrational.

People fool themselves because they look at only portfolio wealth rather than total wealth. I have a DB pension that is worth more than twice my SS benefit. That is real wealth, even if it is non liquid. Sure you can't put it on a spreadsheet and play the "self pleasuring" game of manipulating the numbers but it is real wealth. So is a right to SS benefits or an annuity. (or a home you own or a rent controlled apartment) In my case I used some of that non portfolio income/wealth to buy life insurance. That puts me in exactly the same estate/financial position as a person with the same wealth in a portfolio
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Re: Delay Social Security to age 70 and Spend more money at

Post by midareff »

Quote: Longinvest

midareff,

The OP made the following assumption:


Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate.


If you worry about leaving a bigger estate, the proposed calculation is not for you.

The OP also failed to adjust the "You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736." for the eight years it takes to get from 62 to 70. Do we expect zero inflation? Average inflation 1960 to date is 3.9%. Your $34,092, on average inflation, will have lost 31.2% of it's purchasing power and certainly had some kind of effect on your budget, perhaps drastic. The OP has ignored taxes on removing $272,736 from an investment portfolio. The OP has presented a nice numerical model which ignores inflation, taxes, white and black swans, sequences of returns and many real world factors. Does the OP's model work exactly as stated, absolutely YES. Is it a real world construction of market forces, life expectancy, portfolio legacy, inflation, changing needs and many other REAL WORLD factors, NO. Is it as simple as do this and you have more money every year for life... well, if you think so, do it. LOL.. I'm done here.
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Re: Delay Social Security to age 70 and Spend more money at

Post by longinvest »

midareff wrote:Quote: Longinvest

midareff,

The OP made the following assumption:


Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate.


If you worry about leaving a bigger estate, the proposed calculation is not for you.

The OP also failed to adjust the "You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736." for the eight years it takes to get from 62 to 70. Do we expect zero inflation? Average inflation 1960 to date is 3.9%. Your $34,092, on average inflation, will have lost 31.2% of it's purchasing power and certainly had some kind of effect on your budget, perhaps drastic. The OP has ignored taxes on removing $272,736 from an investment portfolio. The OP has presented a nice numerical model which ignores inflation, taxes, white and black swans, sequences of returns and many real world factors. Does the OP's model work exactly as stated, absolutely YES. Is it a real world construction of market forces, life expectancy, portfolio legacy, inflation, changing needs and many other REAL WORLD factors, NO. Is it as simple as do this and you have more money every year for life... well, if you think so, do it. LOL.. I'm done here.
midareff,

You do raise valid points, but I think that you overestimate the risk of inflation over a short period of time. Historically, there has not been a big risk to invest money in CDs over a 1 to 7-year period. (On average, the money will only be exposed to inflation 3.5 years).

If high inflation happens, you'll be happy to get higher SS payments! Historically, inflation was bad for all of cash, bonds, and stocks. It's only over longer periods of time that stocks and bonds were able to catch up with inflation. The proposed model lowers the risks and allows (in most likely scenarios) higher spending during the earliest years of retirement. (Yes, there's this possibility of a bigger portfolio (with SS at 62) leading to higher spending if one was to live long enough and markets were to shoot up, but many of us would enjoy spending the money earlier).

As for sequence of return, that's why he suggested using cash/savings (which I extend to CDs). Personally, I would use VPW, instead of SWR, getting rid of the sequence of return problem. The higher SS would give me a higher spending floor.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

midareff wrote:Quote: Longinvest

midareff,

The OP made the following assumption:


Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate.


If you worry about leaving a bigger estate, the proposed calculation is not for you.

The OP also failed to adjust the "You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736." for the eight years it takes to get from 62 to 70. Do we expect zero inflation? Average inflation 1960 to date is 3.9%. Your $34,092, on average inflation, will have lost 31.2% of it's purchasing power and certainly had some kind of effect on your budget, perhaps drastic. The OP has ignored taxes on removing $272,736 from an investment portfolio. The OP has presented a nice numerical model which ignores inflation, taxes, white and black swans, sequences of returns and many real world factors. Does the OP's model work exactly as stated, absolutely YES. Is it a real world construction of market forces, life expectancy, portfolio legacy, inflation, changing needs and many other REAL WORLD factors, NO. Is it as simple as do this and you have more money every year for life... well, if you think so, do it. LOL.. I'm done here.
Inflation was addressed in this post in this very thread, But I am guessing you didn't bother to read it.

http://www.bogleheads.org/forum/viewtop ... 9#p1488000
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

longinvest wrote: As for sequence of return, that's why he suggested using cash/savings (which I extend to CDs). Personally, I would use VPW, instead of SWR, getting rid of the sequence of return problem. The higher SS would give me a higher spending floor.
Personally I am using VPW also. But I did not want to introduce another variable into my simple example. There are some folks here that have a hard enough time grasping the original concept. I tried to make it as simple as possible for all Levels.
Last edited by Cut-Throat on Mon May 05, 2014 2:38 pm, edited 1 time in total.
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Re: Delay Social Security to age 70 and Spend more money at

Post by longinvest »

Cut-Throat wrote:
longinvest wrote: As for sequence of return, that's why he suggested using cash/savings (which I extend to CDs). Personally, I would use VPW, instead of SWR, getting rid of the sequence of return problem. The higher SS would give me a higher spending floor.
Personally I am using VPW also. But I did not want to introduce another variable into my simple example. There are some folks here that have a hard enough time grasping the original concept.
I agree that you keep it simple as it is.

Your idea is so clever! It is was a revelation to me. You showed me how I can increase my retirement spending safely and cheaply. Thanks!
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Re: Delay Social Security to age 70 and Spend more money at

Post by Rodc »

midareff wrote:Quote: Longinvest

midareff,

The OP made the following assumption:


Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate.


If you worry about leaving a bigger estate, the proposed calculation is not for you.

The OP also failed to adjust the "You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736." for the eight years it takes to get from 62 to 70. Do we expect zero inflation? Average inflation 1960 to date is 3.9%. Your $34,092, on average inflation, will have lost 31.2% of it's purchasing power and certainly had some kind of effect on your budget, perhaps drastic. The OP has ignored taxes on removing $272,736 from an investment portfolio. The OP has presented a nice numerical model which ignores inflation, taxes, white and black swans, sequences of returns and many real world factors. Does the OP's model work exactly as stated, absolutely YES. Is it a real world construction of market forces, life expectancy, portfolio legacy, inflation, changing needs and many other REAL WORLD factors, NO. Is it as simple as do this and you have more money every year for life... well, if you think so, do it. LOL.. I'm done here.
He did not "fail" to adjust for inflation.
Let's assume no inflation for ease of calculations.
Note: it only complicates things a little if you wish to make an assumption about inflation and unless you predict high inflation it is not a major factor. Indeed, let's just assume the money pulled out to cover the 8 years is stashed in a mini TIPS ladder.

Note: this helps the start at 70. If you want constant consumption, and you want to cover $34,092 at age 70, you only need to pull out $26,912 for the first year at age 62 if you assume 3% inflation. So, in fact your remaining portfolio after taking out 8 years of "SS coverage" money is larger than the OP stated, and thus the take SS at 70 income is actually larger than stated, and thus the advantage to waiting is larger than originally estimated.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Delay Social Security to age 70 and Spend more money at

Post by ginmqi »

I was relooking at Cut-Throat's idea and I've come around on my original thinking. Indeed there may be great benefit to delaying...especially if you do have a large portfolio to do the method of stashing away some money. A couple of questions

-Instead of a savings/cash like account, maybe put that money into a TIPS/US treasury bond ladder of some sort? So this way can combat inflation and maybe even gain a little.

-How would someone go about actually moving the money without incurring any taxes? I'm guessing if this is part of the retirement plan, then one would simply build this into their re-adjustment of their AA as they age. As those nearing retirement naturally pull out of equities and put more into bonds...maybe setup some kind of bond ladder as they move more into bonds specifically for this purpose?
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Re: Delay Social Security to age 70 and Spend more money at

Post by Rodc »

ginmqi wrote:I was relooking at Cut-Throat's idea and I've come around on my original thinking. Indeed there may be great benefit to delaying...especially if you do have a large portfolio to do the method of stashing away some money. A couple of questions

-Instead of a savings/cash like account, maybe put that money into a TIPS/US treasury bond ladder of some sort? So this way can combat inflation and maybe even gain a little.

-How would someone go about actually moving the money without incurring any taxes? I'm guessing if this is part of the retirement plan, then one would simply build this into their re-adjustment of their AA as they age. As those nearing retirement naturally pull out of equities and put more into bonds...maybe setup some kind of bond ladder as they move more into bonds specifically for this purpose?
In many retirement accounts you can buy TIPS, so no problem with taking money out and paying taxes until you actually need the money to spend.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Ticktock »

This has been a very interesting post.. A topic I have thought about for quite awhile.. What would the forum say to using the same scenario Cut-T presented and scaled it starting at 52 years old ve 62? how does 18 years vs 8 years affect the risk profile and hence the choices one might make?
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Re: Delay Social Security to age 70 and Spend more money at

Post by Rodc »

Ticktock wrote:This has been a very interesting post.. A topic I have thought about for quite awhile.. What would the forum say to using the same scenario Cut-T presented and scaled it starting at 52 years old ve 62? how does 18 years vs 8 years affect the risk profile and hence the choices one might make?

The main issue that comes readily to mind is that you are now asking the portfolio to last quite a few more years (assuming you live a nice long life). So you would want to scale back the 4% withdrawal rate to something lower as that is predicated on assuming you live an additional 30 years, here you might want to think in terms of 40 years.

Keeping in mind that in all cases the percentage is a planning number, not a guaranteed payout amount. The earlier you retire the more squishy all the estimates become.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Delay Social Security to age 70 and Spend more money at

Post by longinvest »

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Last edited by longinvest on Mon May 05, 2014 8:00 pm, edited 1 time in total.
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Re: Delay Social Security to age 70 and Spend more money at

Post by gerrym51 »

Ticktock wrote:This has been a very interesting post.. A topic I have thought about for quite awhile.. What would the forum say to using the same scenario Cut-T presented and scaled it starting at 52 years old ve 62? how does 18 years vs 8 years affect the risk profile and hence the choices one might make?

why don't you just ask cut-throat. he retired at 52 and is now 62 he said.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

gerrym51 wrote:
Ticktock wrote:This has been a very interesting post.. A topic I have thought about for quite awhile.. What would the forum say to using the same scenario Cut-T presented and scaled it starting at 52 years old ve 62? how does 18 years vs 8 years affect the risk profile and hence the choices one might make?

why don't you just ask cut-throat. he retired at 52 and is now 62 he said.
Actually I retired 12 years ago at age 50......But I don't understand the age 52 scenario as S.S. cannot be taken until age 62.
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Re: Delay Social Security to age 70 and Spend more money at

Post by archbish99 »

The scenario is that there's no reason one couldn't calculate their age 70 inflation-adjusted benefit from SS (assuming no more earnings), buy a TIPS ladder that will pay that from now until age 70, and figure out a sustainable withdrawal rate from the remainder of the portfolio. The risks there would be:
  • Inflation - Since SS indexes your earnings to age 60, doing this before age 60 is a little less precise.
  • Withdrawal rate - as noted, 4% is a workable rule of thumb for 30 years; the longer you plan to stretch, the lower you may want to target your withdrawals from the "main" portfolio
  • Legislative - the further from SS age you try this, the more vulnerable you are to your expected benefits not being your actual benefits when you reach age 70.
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Re: Delay Social Security to age 70 and Spend more money at

Post by CFM300 »

midareff wrote:To be clear, you are saying delaying SS to 70 and instead taking a 6.318% withdrawal rate from your portfolio is the better numerical thing to do, and doing so produces less risk of premature portfolio depletion. Is that correct Oblivious?
I'm a little late to this party, but if you're still sceptical midareff, Wade Pfau ran Monte Carlo simulations and also found that:

"combining the annuity and delaying Social Security makes retirement spending plan more sustainable over the long-term horizon and reduces the harm caused by financial asset depletion. In other words, running out of financial assets is both less likely to happen and less damaging when it does happen."

http://wpfau.blogspot.com/2013/06/claim ... or-70.html
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Re: Delay Social Security to age 70 and Spend more money at

Post by schannel »

Back to the original post here: Cut Throat, you run a scenario that shows that monthly income is higher if you delay receiving SS benefits until age 70. I apologize in advance if this has already been addressed: wouldn't we predict the $1 Million portfolio would earn a higher rate of return if only 4% were withdrawn per year (under the withdraw at age 62 scenario) rather than depleting the portfolio by $272,736 before withdrawing 4% (under the defer to age 70 scenario)?

How is this potential loss of revenue accounted for?
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

schannel wrote:Back to the original post here: Cut Throat, you run a scenario that shows that monthly income is higher if you delay receiving SS benefits until age 70. I apologize in advance if this has already been addressed: wouldn't we predict the $1 Million portfolio would earn a higher rate of return if only 4% were withdrawn per year (under the withdraw at age 62 scenario) rather than depleting the portfolio by $272,736 before withdrawing 4% (under the defer to age 70 scenario)?

How is this potential loss of revenue accounted for?
As you said it's a "potential loss". What if the portfolio drops? Then you would be ahead taking the $272,736 and sticking it in cash instead of keeping it in the market.

You have no idea, that's why you only take 4%.
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Re: Delay Social Security to age 70 and Spend more money at

Post by gw »

This thread doesn't make sense.

As Ketawa mentioned, you can't compare Social Security, which is an annuity, to a 4% (or any X%) "SWR," which is something else. You'll just get silly results. Apples and oranges and all that.

The issue is that 4% is too conservative unless you're worried about leaving an estate. In fact you can afford to withdraw something like 6-8%, by annuitizing. That's the proper comparison to SS.

If you do the math correctly, you might get a different answer. (Hint: don't use FireCalc.)
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

gw wrote:This thread doesn't make sense.

As Ketawa mentioned, you can't compare Social Security, which is an annuity, to a 4% (or any X%) "SWR," which is something else. You'll just get silly results. Apples and oranges and all that.

The issue is that 4% is too conservative unless you're worried about leaving an estate. In fact you can afford to withdraw something like 6-8%, by annuitizing. That's the proper comparison to SS.

If you do the math correctly, you might get a different answer. (Hint: don't use FireCalc.)
Talk about comparing apples to oranges!..... Social Security is inflation protected. There is no annuity that will pay 6-8% with inflation protection at age 62-70. Also, try that for a couple with survivor benefits, which Social Security has.

You need to do the math correctly!
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Re: Delay Social Security to age 70 and Spend more money at

Post by Ketawa »

Inflation-adjusted annuities are currently paying 3-5%, so delaying SS is a good deal compared to what the market will offer now. Depending on the level of real interest rates, it's possible that delaying SS could become a bad deal, but that doesn't seem likely anytime soon.
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Re: Delay Social Security to age 70 and Spend more money at

Post by gw »

Now you're doing it right. :happy
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Cut-Throat
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

gw wrote:Now you're doing it right. :happy
Well Now you understand it! --- It's what I said in the Original Post!
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Re: Delay Social Security to age 70 and Spend more money at

Post by gw »

Cut-Throat wrote:
gw wrote:Now you're doing it right. :happy
Well Now you understand it! --- It's what I said in the Original Post!
Here's what I think is the right way to frame the issue, using your numbers and Ketawa's:

Scenario 1: Take SS at 62

SS income is $19.5K, vs. $34.1K if you wait until age 70. So you have a $14.6K shortfall to make up from age 62 until death. Modulo survivorship issues, this is equivalent to an inflation-indexed annuity bought at age 62. Ketawa says such SPIAs pay at a rate of something like 3-5% now, so the $14.6K/year has a value of $292K - $365K.

Scenario 2: Take SS at 70

Here SS income is going to be $34.1K in today's dollars, but you don't get it until age 70, so you need to make up 8 years of inflation-indexed $34.1K payments. For example, you could buy an 8-year TIPS bond ladder. The current 5-year yield on TIPS is very close to zero (actually a little negative), so the cost of that ladder is simply 8*$34.1K = $272.8K.

Now we have apples and apples.

So we compare the Scenario 1 cost ($292K-$365K) to the Scenario 2 cost ($273K) and conclude it's marginally a better deal to delay SS if current SPIA rates are 5%, and it's a considerably better deal to delay if current SPIA rates are only 3%.

This assumes you need at least $34.1K of guaranteed income. If you need less, you might get a different answer.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

You can choose to frame the problem any way you like. I chose to lay out a simpler example.

I have seen other examples using annuities, but they are complex enough that a lot of people's eyes glaze over.

I attempted to describe a new simpler way to look at the problem.
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Re: Delay Social Security to age 70 and Spend more money at

Post by gw »

Cut-Throat wrote:You can choose to frame the problem any way you like. I chose to lay out a simpler example.

I have seen other examples using annuities, but they are complex enough that a lot of people's eyes glaze over.

I attempted to describe a new simpler way to look at the problem.
One should strive to make things as simple as possible, and no simpler.

Anyway, just trying to help; sorry if it came across otherwise.

A little more food for thought --- if you assume a "safe withdrawal rate" that's more attractive than the appropriate annuity rate, then it's probably not "safe."
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Re: Delay Social Security to age 70 and Spend more money at

Post by fmzip »

Interesting post.

My wife and I have no plans to leave anything behind.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Runalong »

If I may veer off, ever so slightly, on a bit of a rabbit trail here...

One of the big problems in retirement planning is the need to effectively fund one's self "forever". What if, thanks to science and good fortune, I live to be 110? If everyone died on their 90th birthday it would be a lot easier to plan. So...

I've wondered why they only allow you to delay til 70. Why not allow you to delay indefinitely with benefits going up by an actuarially adjusted amount. At some point your projected inflation-adjusted SS payments would be at a level you would feel comfortable with, with no other supplementation. Pulling numbers out of the air just to make my point: if SS paid you $80K a year (infl-adj) if you waited until age 84 to start drawing and you felt that was plenty to live on, then you would know that you only NEED to fund yourself from the time you retire until age 84. That is a much more manageable objective, the "infinite" need has become a finite need. You could much more easily calculate how much to save and when to retire.

This approach would not satisfy everybody but it would meet the real needs (financial and emotional) of most people as they face retirement.

But I must be crazy because, as far as I can tell, no one else ever even broaches this.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

Runalong wrote:If I may veer off, ever so slightly, on a bit of a rabbit trail here...

One of the big problems in retirement planning is the need to effectively fund one's self "forever". What if, thanks to science and good fortune, I live to be 110? If everyone died on their 90th birthday it would be a lot easier to plan. So...

I've wondered why they only allow you to delay til 70. Why not allow you to delay indefinitely with benefits going up by an actuarially adjusted amount. At some point your projected inflation-adjusted SS payments would be at a level you would feel comfortable with, with no other supplementation. Pulling numbers out of the air just to make my point: if SS paid you $80K a year (infl-adj) if you waited until age 84 to start drawing and you felt that was plenty to live on, then you would know that you only NEED to fund yourself from the time you retire until age 84. That is a much more manageable objective, the "infinite" need has become a finite need. You could much more easily calculate how much to save and when to retire.

This approach would not satisfy everybody but it would meet the real needs (financial and emotional) of most people as they face retirement.

But I must be crazy because, as far as I can tell, no one else ever even broaches this.
I have always said that if I could continue to delay past age 80, and grow my benefit by 8%, I would. Too bad it doesn't work that way.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Ketawa »

Cut-Throat wrote:I have always said that if I could continue to delay past age 80, and grow my benefit by 8%, I would. Too bad it doesn't work that way.
Actually, I don't think you would delay much longer. The current 8% increase is based on the PIA, not the prior year amount, so it doesn't compound. That increase is buying you a smaller and smaller inflation-adjusted SPIA. Delaying from 69 to 70 for single people is a 6.5% payout.

Delaying from 75 to 76 would be like buying a 4.7% inflation-adjusted SPIA. Here is a quote for some inflation-adjusted SPIAs, although they are outdated. 6.3% for men and 5.7% for women. So even when rates are low, going much past 70 doesn't make sense.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat »

Ketawa wrote:
Cut-Throat wrote:I have always said that if I could continue to delay past age 80, and grow my benefit by 8%, I would. Too bad it doesn't work that way.
Actually, I don't think you would delay much longer. The current 8% increase is based on the PIA, not the prior year amount, so it doesn't compound. That increase is buying you a smaller and smaller inflation-adjusted SPIA. Delaying from 69 to 70 for single people is a 6.5% payout.

Delaying from 75 to 76 would be like buying a 4.7% inflation-adjusted SPIA. Here is a quote for some inflation-adjusted SPIAs, although they are outdated. 6.3% for men and 5.7% for women. So even when rates are low, going much past 70 doesn't make sense.
Hypotheticals are just that. I had said "Grow my Benefit by 8%". Obviously, if the 'deal' was not as beneficial from 62-70 is, I would choose otherwise.
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Re: Delay Social Security to age 70 and Spend more money at 62

Post by LadyGeek »

New member ssw603 is asking for help with his retirement accounts, which I moved into a stand-alone thread: [Delay Social Security to age 70 - How to handle my retirement account?]
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Re: Delay Social Security to age 70 and Spend more money at 62

Post by jfave33 »

Resurrecting this thread as it was being discussed recently. I still think considering break even analysis / estimating life expectancy is necessary if all you care about is income.

Extending the example say I believe I will live less than average age of 82 for a man at 62. So break even analysis says take SS early. Say I think I will live until 80.

I could then take SS early and spread that $272,736 over my expected remaining life. So $272,736/18 = $15152

So I would have $15,152 + $19,476 (SS) + $29,090 ($727,264 * 4%) = $63,718

which is more than your $63,182 from delaying and we end at 80 with the same amount of assets.

Of course after 80 you will have more income but that is the point of break even analysis. Delaying provides more if you believe you'll live longer than average and taking early provides more if you'll live shorter than average.
Last edited by jfave33 on Thu Apr 21, 2016 9:20 am, edited 1 time in total.
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Re: Delay Social Security to age 70 and Spend more money at 62

Post by azanon »

Quick question: So I'm married, and I've made considerably more than my spouse (easily more than 2x what she has made). Would the OP advice also still apply to me? The reason I ask is because my understanding with the recent changes on SS, is that my spouse cannot collect on my income unless I also file and collect. So if I'm delaying, I'm also delaying her. She could file on her own modest income amount, but my understanding of the new rules is that she can no longer switch to my SS when I file down the line.

I'm assuming her eventually received amount will also be higher, but the math would be 8% inflation adjusted/2 for her, meaning not nearly as good of a benefit by virtue of my delaying.
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Re: Delay Social Security to age 70 and Spend more money at 62

Post by ObliviousInvestor »

azanon wrote:Quick question: So I'm married, and I've made considerably more than my spouse (easily more than 2x what she has made). Would the OP advice also still apply to me? The reason I ask is because my understanding with the recent changes on SS, is that my spouse cannot collect on my income unless I also file and collect. So if I'm delaying, I'm also delaying her. She could file on her own modest income amount, but my understanding of the new rules is that she can no longer switch to my SS when I file down the line.

I'm assuming her eventually received amount will also be higher, but the math would be 8% inflation adjusted/2 for her, meaning not nearly as good of a benefit by virtue of my delaying.
To give good input, we'd need to know 1) how old each of you are and 2) your PIAs.

But, it is possible to file for retirement benefits then file later for spousal benefits (in cases in which the person isn't eligible for spousal benefits when they first file for retirement benefits, that is).

You may want to post your question in a separate thread.
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Re: Delay Social Security to age 70 and Spend more money at 62

Post by azanon »

ObliviousInvestor wrote:
azanon wrote:To give good input, we'd need to know 1) how old each of you are and 2) your PIAs.

But, it is possible to file for retirement benefits then file later for spousal benefits (in cases in which the person isn't eligible for spousal benefits when they first file for retirement benefits, that is).

You may want to post your question in a separate thread.
So oh cool, I just realized I follow you on twitter.

Ok, so I have to tell on myself. I'm actually just 44, and my wife is 42, but I'm hopelessly interested in anything finance or investing, and was just curious how my eventual situation would work under the new rule. My PIA would be roughly 3x hers, so when she reached 62 (and I was 64), I understand her choices are she could either file based on her own earnings, or I could then file at 64, and she could receive half what I would get. However, my understanding is that if she files on her amount at 62, then she can never switch to mine when I eventually file, per the new rule.

So that would make the math a little bit more tricky. I'm guessing it'll still come out to at least 6% inflation adjusted when viewed together, but not a full 8%?
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Re: Delay Social Security to age 70 and Spend more money at 62

Post by ObliviousInvestor »

azanon wrote:Ok, so I have to tell on myself. I'm actually just 44, and my wife is 42, but I'm hopelessly interested in anything finance or investing, and was just curious how my eventual situation would work under the new rule. My PIA would be roughly 3x hers, so when she reached 62 (and I was 64), I understand her choices are she could either file based on her own earnings, or I could then file at 64, and she could receive half what I would get. However, my understanding is that if she files on her amount at 62, then she can never switch to mine when I eventually file, per the new rule.
If you file at 64 and she files at 62 (thereby automatically filing for retirement benefits and spousal benefits), she wouldn't exactly get half of your retirement benefit. Rather, she would get:
1) Her retirement benefit, which would be 70% of her PIA due to filing 5 years prior to full retirement age, plus
2) Her spousal benefit, which would be calculated as 0.65 x (50% of your PIA, minus her PIA).

If she files at 62 for her own retirement benefit (and you have not filed for your retirement benefit by then, such that she isn't also filing for a spousal benefit at that time), then she would get her retirement benefit of 70% of her PIA. When you later file for your retirement benefit, she would then automatically be deemed to file for a spousal benefit at that time -- the calculation of which would depend upon how old she is at the time.
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