When To Take Social Security

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Black Knights
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When To Take Social Security

Post by Black Knights »

Recently hit 61. Now need to start analysis of when to begin SS. Anyone have recommendations on articles, books, past posts, etc. on making that decision? Have been retired 8 years. Don't need the income to make ends meet. Reasonable longevity in family (parents lived to 85 and 89). Married with wife a year younger. She does not have enough quarters to qualify for SS. I paid maximum for about 30 years before retiring at end of 1999.

Have done simple spreadsheets in the past that showed breakeven (between taking it at 62 or 66) if one lives to mid-to-late-70's or so. Would feel better with a more sophisticated analysis and any pointers about practicalities (applying, buying back eligibility later, tax issues, etc.) and potential political impacts (law changes, tax changes, etc.).

Would appreciate any thoughts or just pointing me in the right direction.
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From the IDR M* Forum (#3161)

Post by Ron »

From "Joe84" on the IDR M* Forum:

"Every situation is different, but there is a lot of misinformation that circles about the benefits of waiting to take SS. SS is a big source of income for the most retirees. I suggest you read my paper, "Rethinking Social Security in a 401(k) World" which is now posted at The Pension Research Council website. Registration is free...We have discussed most of these issues before on this board, but we were able to prove that for a certain segment of the population, it is much more advantageous to delay SS for at least one member of a married couple. Most people don't understand the tax advantages, but we have tried to lay them out.

Here is the link to my paper."
http://www.pensionresearchcouncil.org/p ... p?file=389

- Ron
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Post by Cb »

You might want to take a look over this thread from an Early Rtirement board, and the detailed analysis linked in the first post:

http://www.early-retirement.org/forums/ ... 29819.html

Cb 8)
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Post by White Coat Investor »

If the expected return of your portfolio is less than 8%, I think it will pay to wait.
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Post by nisiprius »

I plan to start taking social security at age 62, for several reasons. The simplest is that it looks as if we can just about retire at age 62 by starting social security at that age!

I've read a number of analyses and they seem to come out the same way. In theory, on a spreadsheet, all things being equal and everything going as planned for the next thirty years, and if you live out your life expectancy or beyond, then over your lifetime the number of interest-adjusted, inflation-adjusted dollars you get out of Social Security will probably be larger if you wait until age 66 to start drawing benefits.

But. It's not a huge difference. (It looks big, but almost anything looks bit if you accumulate it for thirty years with compound interest). And it takes something like fifteen years before you break even.

When I read at http://www.msnbc.msn.com/id/15240918/ that "there is no one-size-fits-all answer for this one," the conclusion I come to is that if the difference is not big enough for there to be a no-brainer one-size-fits-all answer, then the difference is small enough that any theoretical advantage of waiting could easily be wiped out by any future decreases in benefits.

Although I'm not one of those people who believe Social Security will vanish in a puff of blue smoke, I do believe that a rational person must have some uncertainties about whether Social Security will ultimately pay the level of benefits that are now promised. It's about eight congressional sessions (and four Presidential terms) until breakeven, and a lot can happen. I think some form of benefits reduction is likely. Indeed, I think the PEBS form even warns about this.

So, what I've done is to shrug my shoulders and say "it's probably somewhat better to wait but it's not a sure thing and it's not a huge difference, so I say, what the heck, get it while the getting's good."
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Post by nisiprius »

I've hastily skimmed the Mahaney and Carlson paper linked above. I intend to make time to look at it more closely.

A couple of things do leap out. The analysis does seem to have been done on the assumption that Social Security will go on pretty much as promised and planned. For example, they make a point of saying that their analysis counts on and places great weight on the value of continuing COLA adjustments:
Although, COLAs are not guaranteed by law, we believe that COLAs should be considered as part of the value proposition of weighing whether to delay Social Security benefits.
I think the truth lies somewhere in between "it's a Ponzi scheme and it will go bankrupt!" and "Social Security will return exactly the number of dollars my PEBS says it will, adjusted for inflation, for the rest of my lifetime."

Also, I was very interested in the comment
As of this time, we believe only a couple insurers are offering CPI-adjusted immediate annuities in the U.S. to allow individuals to transfer inflation risk to the insurer. By taking Social Security early (while not purchasing a private inflation-adjusted annuity), a retiree “chooses” to retain the inflation risk on the difference in annual income between the early Social Security amount chosen and the delayed Social Security income foregone.
I'm interested in it for two reasons. First, I have already purchased a small CPI-adjusted immediate annuity and intend to purchase more. It is definitely an important part of my plans. Actually I intend to buy a total of about $125,000 with me as owner and about $125,000 with my wife as owner (so as not to go too far over the insured $100,000).

Second, "a couple?" Please, please, what's the other one! The only insurer I've found with a CPI-adjusted-payout annuity is AIG. (Offered by Vanguard, among others).

I want to annuitize more than $250,000 and I'm planning to fill out with a TIAA "graded payout" annuity and an annuity that offers a you-choose-the-annual-percentage-increase increasing payment. Dithering about whether to specify 3% or 4%!
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Post by dcd »

I've decided on 62 and am expecting my first check soon. The deciding factor for me was my 14 year old daughter. She will be eligible for 41 months of SS dependent benefit-until she's 18. If I wait until I'm 65.5, this benefit won't be available. When I run the numbers including her benefit, my break even age is about 83 so I decided to go for it now.

Also, taking the benefit now will help assure that I can leave my Vanguard portfolio alone and let it grow. I will also save my daughter's portion for college expenses and invest half of mine in my Vanguard account. My wife will most likely take hers at 62 in one year. Spouse benefit is about half of mine.

I have a pension but the additional income stream from SS kind of takes away the pressure or temptation to touch my investments which I don't want to do for several years.

Did I make the right decision? I don't know but it feels like the right one to me right now.
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Post by alexander »

nisiprius wrote: I'm interested in it for two reasons. First, I have already purchased a small CPI-adjusted immediate annuity and intend to purchase more. It is definitely an important part of my plans. Actually I intend to buy a total of about $125,000 with me as owner and about $125,000 with my wife as owner (so as not to go too far over the insured $100,000).

Second, "a couple?" Please, please, what's the other one! The only insurer I've found with a CPI-adjusted-payout annuity is AIG. (Offered by Vanguard, among others).

I want to annuitize more than $250,000 and I'm planning to fill out with a TIAA "graded payout" annuity and an annuity that offers a you-choose-the-annual-percentage-increase increasing payment. Dithering about whether to specify 3% or 4%!
Taking SS a year early decreases benefits by 6% for the rest of your lives. For a man and wife of your ages, a lifetime annuity with COLA adjustments will return 4.4% of the initial premium for life. Delaying SS for a year, you're effectively getting a 6% annuity to FRA. Thereafter, you get an 8% annuity per year delayed. Seems not so bad to me.

SS will start having a yearly deficit 16 years from now. So what? There are a number of easy fixes for SS, which will likely involve increasing FRA. We're running a deficit RIGHT NOW and I don't see people running away from treasuries because the US government is GOING BANKRUPT!!11
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Post by nisiprius »

alexander wrote:
nisiprius wrote:Taking SS a year early decreases benefits by 6% for the rest of your lives. For a man and wife of your ages, a lifetime annuity with COLA adjustments will return 4.4% of the initial premium for life. Delaying SS for a year, you're effectively getting a 6% annuity to FRA.
So far, I'm with you.
Thereafter, you get an 8% annuity per year delayed. Seems not so bad to me.
You've lost me there.

Oddly enough, I was just doing exactly the same calculations. Mine were a hair less favorable for delaying Social Security, but, yeah, you can "buy" about 1.6X as much monthly income by delaying Social Security as by buying a CPI-adjusted or 3%-graded annuity.

I should probably explain that my wife and I intend to stop working full-time when I reach age 62, no matter what. This complicates things since virtually all the "early-or-late" articles I've read are comparing working until 62 versus working until 66, as opposed to working until 62 but not drawing Social Security until age 66.

I am somewhat nervous about how Social Security calculating benefits as a function of earnings history though, and I am not sure about what happens when an earnings history shows $X for 2004, 5, 6, 7 but ZERO for 2008, 9, 10, and 11. Any wisdom?
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Post by SideShow »

A quote from the SSA (http://www.ssa.gov/planners/faqs.htm)

Q. Are my benefits figured on my last five years of earnings?

A. No. Retirement benefit calculations are based on your average earnings during a lifetime of work under the Social Security system. For most current and future retirees, we will average your 35 highest years of earnings. Years in which you have low earnings or no earnings may be counted to bring the total years of earnings up to 35.

You can also do some what-if calculations at http://www.ssa.gov/retire2/index.htm
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Post by nisiprius »

alexander wrote:Taking SS a year early decreases benefits by 6% for the rest of your lives. For a man and wife of your ages, a lifetime annuity with COLA adjustments will return 4.4% of the initial premium for life. Delaying SS for a year, you're effectively getting a 6% annuity to FRA. Thereafter, you get an 8% annuity per year delayed. Seems not so bad to me.

SS will start having a yearly deficit 16 years from now. So what? There are a number of easy fixes for SS, which will likely involve increasing FRA. We're running a deficit RIGHT NOW and I don't see people running away from treasuries because the US government is GOING BANKRUPT!!11
1) OK, I'm going to spend a little more quality time with a spreadsheet and the Social Security website. In part I'm struggling with irrational anxiety at the idea of living for a few years entirely by drawing down savings. I've been a little fixated on the idea of "no income! Eek! Gotta line up income streams! Gotta get them started. In a hurry." I know that there's never really a hurry.

2) Social Security does have a problem and it will need to get fixed and it can only be fixed by effectively reducing benefits in some way. I believe that the reduction will be enough to have a noticeable effect on all these 62-versus-66 calculations. It's hard even to guess at when it will happen and how much. And it's possible that whatever is done will be done by year of birth, and affect us older boomers less than later ones.

For purposes of comparing commercial annuities versus delaying drawing Social Security, what adjustment factor would you use for the Social Security value? My gut feeling is that a 62-year-old will probably receive about 90% of the promised benefits. Probably not 100%, probably less than 95%, probably much more than the worst-case 70%.

My gut feeling is that the chances of an insurance company defaulting on paying an annuity is nonzero, but much smaller. But likely to be more traumatic: no effect on many people, but a big effect on a small number of people who chose the wrong company, whereas Social Security's problems are likely to solved in some soft, gradual way.
SideShow wrote:You can also do some what-if calculations at http://www.ssa.gov/retire2/index.htm
Thanks!

P. S. I take it that one's benefits are the greater of a) one's own benefits, or b) the "spousal benefit" which is about half of the spouse's own benefits, and therefore for some couples, if the--OK, husband's--FRA benefit is more than double the wife's FRA benefit, then if the husband waits until FRA, the wife can start drawing benefits at 62 "for free;" she draws her age-62-reduced benefit until age 66, then the spousal benefit kicks in and she receives exactly the same benefit as if she'd waited...
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SSA Benefit Estimates

Post by earlyout »

nisiprius wrote: I am somewhat nervous about how Social Security calculating benefits as a function of earnings history though, and I am not sure about what happens when an earnings history shows $X for 2004, 5, 6, 7 but ZERO for 2008, 9, 10, and 11. Any wisdom?
nispirus

The annual estimates provided by SSA for your benefit at full retirement age assume you will work until your full retirement age and that your annual earnings will not decrease until then. The estimated earnings for age 62 - 66. when your salary is probably much higher than it was in the past, are used in the benefit calculation. Since your plan to have no earnings from age 62- 66, your actual SS benefit if you wait until 66 would be less than your current estimate from SSA. You can use one of the calculators at ssa.gov or contact SSA to get a more accurate estimate of your benefit since you plan to stop working at age 62.

EO
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Post by gkaplan »

I plan to work until I'm at least seventy and, hopefully, beyond seventy; consequently, I plan on waiting until I turn seventy before I start drawing my Social Security.
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Post by alexander »

nisiprius wrote:
alexander wrote:Taking SS a year early decreases benefits by 6% for the rest of your lives. For a man and wife of your ages, a lifetime annuity with COLA adjustments will return 4.4% of the initial premium for life. Delaying SS for a year, you're effectively getting a 6% annuity to FRA.
So far, I'm with you.
Thereafter, you get an 8% annuity per year delayed. Seems not so bad to me.
You've lost me there.
Depending on when you were born, if you delay SS beyond FRA (66 in your case) by 1 year, you will get 108% per year of what you would have gotten by taking SS the year prior. The comparison is saving up that 1 year's SS payments to buy an annuity the following year. They're called Delayed Retirement Credits: http://www.socialsecurity.gov/retire2/delayret.htm
nisiprius wrote: 1) OK, I'm going to spend a little more quality time with a spreadsheet and the Social Security website. In part I'm struggling with irrational anxiety at the idea of living for a few years entirely by drawing down savings. I've been a little fixated on the idea of "no income! Eek! Gotta line up income streams! Gotta get them started. In a hurry." I know that there's never really a hurry.
If you're buying single-premium annuities, you're doing exactly that: spending money now in exchange for a "guaranteed" income stream going forward.
nisiprius wrote:
2) Social Security does have a problem and it will need to get fixed and it can only be fixed by effectively reducing benefits in some way. I believe that the reduction will be enough to have a noticeable effect on all these 62-versus-66 calculations. It's hard even to guess at when it will happen and how much. And it's possible that whatever is done will be done by year of birth, and affect us older boomers less than later ones.
True. That makes it difficult to predict, but the root of the problem is the growing fraction of the population drawing SS. Solutions are increasing the age requirement, increasing taxes on SS to 100% of SS benefit, or increasing FICA. Given that the FICA rate is ~15%, increasing it by 1-2% would extend the point at which SS stops generating a surplus by a big margin.
nisiprius wrote:
For purposes of comparing commercial annuities versus delaying drawing Social Security, what adjustment factor would you use for the Social Security value? My gut feeling is that a 62-year-old will probably receive about 90% of the promised benefits. Probably not 100%, probably less than 95%, probably much more than the worst-case 70%.

My gut feeling is that the chances of an insurance company defaulting on paying an annuity is nonzero, but much smaller. But likely to be more traumatic: no effect on many people, but a big effect on a small number of people who chose the wrong company, whereas Social Security's problems are likely to solved in some soft, gradual way.
With an SPIA, if the insurance company goes bankrupt, you lose everything above your state's guarantee agency limit. For many states, that's 100k per annuitant, but you can look yours up. Over 100 insurance companies have gone bankrupt since mid-90's, so anything annuitized above the state limit strikes me as far more risky than SS cuts. Given the AARP's lobbying power, significant cuts are unlikely in my opinion, though minor ones are of course possible.
nisiprius wrote:
P. S. I take it that one's benefits are the greater of a) one's own benefits, or b) the "spousal benefit" which is about half of the spouse's own benefits, and therefore for some couples, if the--OK, husband's--FRA benefit is more than double the wife's FRA benefit, then if the husband waits until FRA, the wife can start drawing benefits at 62 "for free;" she draws her age-62-reduced benefit until age 66, then the spousal benefit kicks in and she receives exactly the same benefit as if she'd waited...
Unfortunate, but no. If you take it early, instead of her getting 50% of your benefit, she'd get even less. For the numbers: http://www.socialsecurity.gov/retirement/1943.html In that scenario, she'd get her benefit from 62-66, then 35% of your benefit for the rest of her life (assuming that's still greater than her benefit).

All of the above are your options to meet your expenses, but if you don't know what those are, it's cart-before-the-horse. Start with the expenses. How much cash flow do you need annually to survive comfortably without eating dogfood? How much would you like to have each year? If early SS meets both those numbers, go for it.
Otherwise, you may want to wait: you increase your "guaranteed" for-life income by 6-8% a year by waiting, compared to the 3-4% safe withdrawal rates that have had historical 95+% probabilities of success, as long as you or your wife don't live too long.

If you don't have enough saved up to pay expenses until SS covers comfortable-survival expense, you need to reduce expenses or get additional income (go back to work, beg from relatives, etc).
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Post by sscritic »

Some social security facts:

You do not gain 8% for every year delay after 66 (full retirement age). Your FRA benefit is multiplied respectively by 1.08, 1.16, 1.24, 1.32 at ages 67, 68, 69, and 70. While the gaps are 8% of your age 66 benefit, they are not each 8% increases. The gains from waiting an additional year are 8.0%, 7.41%, 6.90%. and 6.45%, e.g., if you are already 69 and have not started benefits, waiting until age 70 increases your benefit by 6.45%, not 8%.

The gains from waiting from age 62 to age 66 are computed from the ratios of 45, 48, 52, 56, 60 (divide these numbers by 60 to get the percent of your full benefit at each age). The gains from waiting past age 62 are 6.67%, 8.33%, 7.68%, and 7.14% respectively, e.g., the benefit at age 64 is 8.33% higher than the benefit at age 63.

If your spouse (with lower earnings) begins benefits early, these benefits are permanently reduced. Spousal benefits are actually add on benefits. For example, your benefit at FRA will be $1800. Your spouse's benefit at FRA will be $800. Your spouse begins benefits at age 62 and gets $600 a month after the 25% reduction. When you reach FRA and begin your benefits, your spouse will receive an additional $100, the difference between what your spouse would have received as your spouse ($900, half of your benefit) and your spouse's own full benefit ($800). Your spouse's new benefit is $700, $200 below what it would have been if your spouse had not taken early benefits, i.e., the spouse's reduction for taking benefits early is permanent. This assumes you and your spouse are the same age. If your spouse is 65 when you turn 66, the additional spousal benefit will be reduced for being early by one year and then added to the reduced benefit being taken on your spouse's own work record.

Your benefit is based on your highest 35 years of indexed earnings. Earnings after age 60 are not adjusted for the average wage in the US. If your earnings go up 2% when the average US earnings go up 3%, your indexed earnings will go down. Your best 35 years are not necessarily your last 35 years. If you stop work at age 64 and already have 35 good years, the loss from not having any earnings for the two years between 64 and 66 may be relatively small. For example, if you were to earn $75,000 at age 64 which replaces a year from your top 35 with indexed earnings of $60,000, your average yearly earnings will increase by 15000 divided by 35 or 428. Your average indexed monthly earnings will increase by $35 a month. At the upper end of the benefit scale, each additional dollar of average earnings gains $0.15 in benefits. In this example, not working the year you are 64 costs you about $5 a month in benefits if you wait until age 66 to begin benefits.
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Post by ddb »

Here's a related article (not sure if it has been posted here before):

The Cheapest Annuity You'll Ever Buy
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Post by BigFoot48 »

I retired at 50, and I am now 59. We have lived in a conservative, modest way off our investments and anticipate being able to continue doing that, so SS will be a "raise" in our living standard.

I plan on taking it at 62 because I want that $25,000 a year for enhancing my life. Take a trip around the world in Year 1 of SS payments, a new kitchen in Year 2, a new car in Year 3, and a donation to my charity in Year 4. So I will have benefited from those events by the time those who waited until 66+ start getting their SS.

There is so much risk in life (I have many friends already dead of cancer), that waiting for a few extra percent (unless you absolutely need it to survive) is a number-crunching mistake, IMHO.
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Post by SpringMan »

I like the idea of taking the SS at 62 and optionally paying the government back at a later date to get a higher monthly amount. Do folks that apply to do this ever get rejected? Is this a right or a privilege? Of course, there is always the chance the government could stop allowing it in the future.

Best,
Best Wishes, SpringMan
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Post by Jazztonight »

BigFoot48 wrote: I plan on taking it at 62 because I want that $25,000 a year for enhancing my life. Take a trip around the world in Year 1 of SS payments, a new kitchen in Year 2...
Unless you live in a VERY small apartment, a new kitchen will most likely cost you between $50K and 90K.

The trip around the world, that depends on how you travel!

So, I'll assume you'll be using the extra $25K in SS payments to "help with" the costs of these expenditures.
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Post by tc101 »

I am somewhat nervous about how Social Security calculating benefits as a function of earnings history though, and I am not sure about what happens when an earnings history shows $X for 2004, 5, 6, 7 but ZERO for 2008, 9, 10, and 11. Any wisdom?
There is a publication available on line that shows exactly how this calculation works. It is a complex convoluted calculation. I looked at the publication about a year ago and got totally clear on it.

I can't find it now, but I bet in 10 minutes of googleing someone here could locate it.
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Great Book on Topic

Post by lucky7 »

A book I recommend on this topic, "Retire Early?" by S. Silberger. Easy and well written book loaded with data.
Best of luck.

Bob
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Post by ddb »

Jazztonight wrote:Unless you live in a VERY small apartment, a new kitchen will most likely cost you between $50K and 90K.
Huh? For our kitchen (fairly large), we can get a complete set of high-end consumer-grade appliances for $10K, very nice cabinetry for $5K, and stone countertops and sink for another few thousand dollars. That's only $18K. Throw in another $2,000 for tile (floor and backsplash), faucet, and various tools and supplies/paint, and you're still at $20K. Do your own demo, and that still leaves $5K for somebody to do the installation (better yet, do that yourself, too).

Obviously, you CAN spend upwards of $50K or more on a kitchen remodel if you accept retail pricing, buy Viking commercial-grade appliances, and pay expensive installers to do everything. But I would think somebody who is retired would have the time to shop around and do a lot of the work him/herself.

- DDB
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Post by nisiprius »

alexander wrote:
alexander wrote:All of the above are your options to meet your expenses, but if you don't know what those are, it's cart-before-the-horse. Start with the expenses. How much cash flow do you need annually to survive comfortably without eating dogfood? How much would you like to have each year? If early SS meets both those numbers, go for it.

Otherwise, you may want to wait: you increase your "guaranteed" for-life income by 6-8% a year by waiting, compared to the 3-4% safe withdrawal rates that have had historical 95+% probabilities of success, as long as you or your wife don't live too long.

If you don't have enough saved up to pay expenses until SS covers comfortable-survival expense, you need to reduce expenses or get additional income (go back to work, beg from relatives, etc).
OK:

I consider "comfortable survival" expenses to be our current actual expenses for food, clothing, shelter; all costs required to run one automobile (instead of two. I'm including replacement every ten years, which is close to our "historical" rate); and medical costs. Medical costs are based on Medicare A + B + D + Medigap, with a level of coverage that seems broadly comparable to what I have now (which is very good), pluas out-of-pocket costs.

Social-security-at-62 covers 3/4 of those expenses.

There are already considerable short-term expenditures associated with the first few years of retirement which I've factored in; notably medical insurance during between ages 62 and 65, and remaining payments on my ten-payment LTCI policy, and my wife is a year younger than me so we would in any case have to make up her age-62 benefits for about a year.

My plan had been subtract those transition costs from the "nest egg" and annuitize about half of the remainder, using a combination of policies that don't put more than $120,000 in the hands of any single insurer-plus-owner, and all of which have some provision for keeping up with inflation: CPI-index on AIG's, TIAA's weird "graded payout" option on TIAA's and a 3%-per-year-compound increase option on (probably) one from The Principal.

That produces an (initial) income stream of about 20% more than "comfortable survival" while leaving about half of the nest egg to play around with. In Fidelity's planning tool, they assume a 7% per year inflation rate for medical costs, meaning that total "comfortable survival" costs keep increasing even when adjusted for inflation, which is a very unpleasant assumption, but it all just about works.

(Without annuitizing, it doesn't quite work. And, yes, I don't care for "historical 95+% probabilities of success, as long as you or your wife don't live too long" and if history is a good guide to the future and if the bear market is conveniently timed to occur late in retirement etc. etc.)

It does appear as if, when analyzed, it will probably turn out that living off the next egg for up to four years before starting to draw Social Security benefits will probably work better, but I have to say the idea induces panicky feelings in me.

(P. S. My wife and I do expect to work part-time, but since we're not at all sure exactly what we'll be doing or how much we'll be able to earn I've been very, very conservative about factoring that in.)
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Post by BigFoot48 »

Jazztonight wrote:So, I'll assume you'll be using the extra $25K in SS payments to "help with" the costs of these expenditures.
No, I could easily do all for $25,000 as I know how, and besides, those were just examples of how funds could be used, in case you somehow missed that point.
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$90,000 Kitchen?

Post by Prokofiev »

" No, I could easily do all for $25,000 as I know how "

No need to do-it-yourself. I have had 2 kitchens re-done over the last 3 years. Each was well under $25k and included granite countertops and marble flooring. All I did was paint . . .
Everything should be made as simple as possible, but not simpler - Einstein
Jack Cook
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Ron, thanks for your article

Post by Jack Cook »

it is very enlightening. I have a question on delaying SS for a high income couple.
Upon retirement in 2010 my wife and I will have defined benefit pension income of about 117,000 (with a 3%cola). W is taking her SS now (she is about 18 months older then me) that is about 600 per month. We will have significant IRA and 401K funds along with Roths for us both.
According to my SS yearly statement I would have benefits of about 2200 per month at FTA. If I wait until 70 that will increase to about 2900. We both come from long lived families.
Do you think I would avoid the "tax torpedo" if I delayed benefits to 70 or would I just be delaying an even bigger tax bill when I have to begin take my RMD at 70 1/2? Any other considerations I am missing? Are there any studies you are aware of dealing with high retirement income individuals and the advantages or disadvantages of delaying SS benefits? Thanks, Jack
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nisiprius
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Post by nisiprius »

SpringMan wrote:I like the idea of taking the SS at 62 and optionally paying the government back at a later date to get a higher monthly amount. Do folks that apply to do this ever get rejected? Is this a right or a privilege? Of course, there is always the chance the government could stop allowing it in the future.
Never heard of this option. What's it called? Where do I read about it?
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ddb
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Post by ddb »

nisiprius wrote:
SpringMan wrote:I like the idea of taking the SS at 62 and optionally paying the government back at a later date to get a higher monthly amount. Do folks that apply to do this ever get rejected? Is this a right or a privilege? Of course, there is always the chance the government could stop allowing it in the future.
Never heard of this option. What's it called? Where do I read about it?
Posted earlier in this thread:

The Cheapest Annuity You'll Ever Buy
alexander
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Post by alexander »

nisiprius wrote: It does appear as if, when analyzed, it will probably turn out that living off the next egg for up to four years before starting to draw Social Security benefits will probably work better, but I have to say the idea induces panicky feelings in me.
Living off your nest egg for 4 years is just like buying an annuity from Uncle Sam instead of a commercial company. If it makes it easier to think about, write a check to a money market fund with 4 years of expenses in it, then pull it out on a monthly schedule.

Of course, if the panicky feelings mean you wouldn't be able to sleep at night, then by all means write the checks for an annuity instead.
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SpringMan
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Post by SpringMan »

ddb,
I have read about paying back received social security and having them recalculate it based on a later starting date in other threads. I could not find any reference after looking briefly. I don't know what it is called or what forms need to be filed. I hope somebody else can help out and chime in here with more info. I have heard this from a variety of independent sources. Sorry I don't have specific references.

edit: see #6 here
http://socialize.morningstar.com/NewSoc ... vId=205490
Best,
Best Wishes, SpringMan
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nisiprius
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Post by nisiprius »

alexander wrote:
nisiprius wrote: It does appear as if, when analyzed, it will probably turn out that living off the next egg for up to four years before starting to draw Social Security benefits will probably work better, but I have to say the idea induces panicky feelings in me.
Living off your nest egg for 4 years is just like buying an annuity from Uncle Sam instead of a commercial company. If it makes it easier to think about, write a check to a money market fund with 4 years of expenses in it, then pull it out on a monthly schedule.

Of course, if the panicky feelings mean you wouldn't be able to sleep at night, then by all means write the checks for an annuity instead.
That is precisely the way I've framed the decision to myself. Including the detail that Vanguard (and doubtless others) let you set up automatic transfers online, directly into a bank account, so in terms of our mental ecology I could make our day-to-day financial lives look just as if we were getting direct-deposit payments from Social Security.

Actually, if I understand this "withdrawal of application" business that I've been pointed at (twice!) above, The Cheapest Annuity You'll Ever Buy, I can also stall the decision. I can start drawing Social Security at age 62, see how things go, and then if I decide that I wished I had wait until 66 after all, perform a "withdrawal of application."

I'd had the misconception that this "62 versus 66" was some big, hairy, irrevocable deal where you had make a one big, important, yes-or-no decision. In fact, you can start Social Security any time you please... it's not 62 versus 66 but a smooth gradation. And if you earn more than you thought you woul during those pre-FRA years, you don't really pay a penalty, it's more like forced savings: they treat you as not fully retired both in counting your pre-FRA benefits and calculating your post-FRA benefits. And, finally, if you change your mind, you can get a do-over: withdraw your application, pay back the benefits, and proceed along the other path.
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nisiprius
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Post by nisiprius »

alexander wrote:
nisiprius wrote: It does appear as if, when analyzed, it will probably turn out that living off the next egg for up to four years before starting to draw Social Security benefits will probably work better, but I have to say the idea induces panicky feelings in me.
Living off your nest egg for 4 years is just like buying an annuity from Uncle Sam instead of a commercial company. If it makes it easier to think about, write a check to a money market fund with 4 years of expenses in it, then pull it out on a monthly schedule.

Of course, if the panicky feelings mean you wouldn't be able to sleep at night, then by all means write the checks for an annuity instead.
I'm about 90% convinced. Effect on spreadsheets and on Fidelity's Income Planner tool are very impressive. Now I need to be sure my wife is on board.

After all, it appears as if we can turn on the Social Security spigot on a couple of month's notice if we start to feel insecure about it.
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