SS taken at 62 vs. 70, but measured from 70+

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azanon
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SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Tue Jul 03, 2018 4:47 pm

Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity".

But what about after age 70? Wouldn't the comparison continue? Then the comparison would be a larger portfolio that I could invest at 60% equity earning ~ 4% real return vs. my now large social security, or difference between my age 62 SS and age 70 SS, that's not even keeping up with inflation. (Ok, I know SS has an inflation adjustment, but I'm told its often not even equal to actual inflation) So, wouldn't the larger portfolio (or the portion of the portfolio I used to buy the SS annuity) eventually catch the larger SS payment? I would imagine that would happen by age 80 if market returns were pretty good.

I hope that makes sense. Shorted, deferring 62 to 70 earns effective 8% return. But 70+ until death, your "return" (on your now larger social security) is an inflation adjustment, which is peanuts vs a 60% equity portfolio if your time horizon is possibly age 90+.

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munemaker
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by munemaker » Tue Jul 03, 2018 5:07 pm

azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity".

But what about after age 70? Wouldn't the comparison continue? Then the comparison would be a larger portfolio that I could invest at 60% equity earning ~ 4% real return vs. my now large social security, or difference between my age 62 SS and age 70 SS, that's not even keeping up with inflation. (Ok, I know SS has an inflation adjustment, but I'm told its often not even equal to actual inflation) So, wouldn't the larger portfolio (or the portion of the portfolio I used to buy the SS annuity) eventually catch the larger SS payment? I would imagine that would happen by age 80 if market returns were pretty good.

I hope that makes sense. Shorted, deferring 62 to 70 earns effective 8% return. But 70+ until death, your "return" (on your now larger social security) is an inflation adjustment, which is peanuts vs a 60% equity portfolio if your time horizon is possibly age 90+.
If you are married, you should also consider the second phase of the SS payout in your evaluation, i.e. what your spouse receives after you pass. Not relevant if you are single. You should also consider the effect of the torpedo tax which is significant. Google it if you don't know what it is.

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steve roy
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by steve roy » Tue Jul 03, 2018 5:13 pm

There are a ton of variables as to when to take SS, and there is no ideal, one-size-fits-everybody answer.

1) If family members tend to die between 68 and 74 ... you might want to take SS as soon as possible.
2) If family members live a long time ... and you work in a job you love ... and you want to build your estate ... take SS at 70..
3) If you're overweight, have diabetes and own an enlarged heart, AND you're unable to work very much ... take SS the day you turn 62.
4) If you have a lower-earning, much younger spouse, take SS as close to 70 as possible.

Etcetera and etcetera.

My rule of thumb is, take SS when you determine you need it. In your case, do the math and take it when it's in your best perceived interest to tap into the program. (You might think about taking it between 64 and 67, forging a compromise.)

Another thread here says that projected real return for an 80/20 portfolio over the next ten years is projected at 3% real. That's less than the annual percentage increases delaying SS offers. (And a more conservative allocation will get you less than 3% real, correct?) Factor the projections in with the Social Security increases tied to delaying, see what answers you get.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by The Wizard » Tue Jul 03, 2018 5:30 pm

azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity"...
Especially if you have a large tax deferred account, then spending that down to some degree is The Whole Point of delaying SS.
That, along with Roth conversions. This reduces RMDs, you see.

And then at age 70, you get $3000 a month SS rather than just $1800.
You may well end up growing your taxable account nicely after age 70 in this situation...
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 » Tue Jul 03, 2018 5:38 pm

azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security.
On average, the total amount of Social Security benefits you receive will be the same regardless as to whether you start benefits at age 62 or age 70. This is because a 62 year old will, on average, receive benefits for 8 years longer than will a 70 year old. The benefits received at different ages are merely a reflection of that.

But as noted above, you are not an 'average'. Your personal situation determines when it is truly optimal to begin benefits.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

azanon
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Tue Jul 03, 2018 5:42 pm

The Wizard wrote:
Tue Jul 03, 2018 5:30 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity"...
Especially if you have a large tax deferred account, then spending that down to some degree is The Whole Point of delaying SS.
That, along with Roth conversions. This reduces RMDs, you see.

And then at age 70, you get $3000 a month SS rather than just $1800.
You may well end up growing your taxable account nicely after age 70 in this situation...
OK so let's use those numbers as an example. If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 » Tue Jul 03, 2018 6:01 pm

azanon wrote:
Tue Jul 03, 2018 5:42 pm
The Wizard wrote:
Tue Jul 03, 2018 5:30 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity"...
Especially if you have a large tax deferred account, then spending that down to some degree is The Whole Point of delaying SS.
That, along with Roth conversions. This reduces RMDs, you see.

And then at age 70, you get $3000 a month SS rather than just $1800.
You may well end up growing your taxable account nicely after age 70 in this situation...
OK so let's use those numbers as an example. If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
You are making assumptions about the returns you get by investing SS benefits and your withdrawal rate (i.e. '4% rule'). Consequently, you aren't comparing apples to apples per se. That doesn't mean that your analysis is wrong at all. But what if that 8 year period from age 62 to 70 looks like 2000-2008, where stocks had a real annual return of -5.42% and a 60/40 portfolio had a real annual return of -1.26%? Your strategy may be perfectly sound, but it isn't guaranteed. SS benefits are. There's definitely some value in that.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Hyperborea » Tue Jul 03, 2018 6:06 pm

azanon wrote:
Tue Jul 03, 2018 5:42 pm
OK so let's use those numbers as an example. If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
Biggest mistake is assuming a return rate and not expecting that it could be worse. Run your numbers through Firecalc - $172,800 starting amount, $0 withdrawals, 60/40 portfolio. At the end of those 8 years you have from $119,579 to $597,422, with an average at the end of $267,844. There's about half the results below your estimate.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

azanon
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Tue Jul 03, 2018 6:17 pm

Right guys, but I would KNOW from age 70 on, the effective return of the larger SS is at best the inflation rate. I'd like to think I can make age 90, so by going with the larger SS via deferral, which I would make happen by "buying" the larger SS with my portfolio, then I lock in inflation only return from age 70-90 on that larger social security i bought with part of my portfolio. So vs. the large portfolio from 62-90, surely I can outperform 8% return from 62 to 70, and no real return from 70 to 90.

I guess the main point of my post was that I noticed every time this comparison is done, they only look at age 62 to 70, and then call the comparison done at age 70 declaring the defer to age 70 the winner because of the risk-free 8% return. But in reality, from age 70 on, the person who took it early is now set up to catch the larger social security because one only has to beat the equivalent of 100% Short-term TIPS if they deferred, and the person who didn't buy the SS annuity can play catch up with an equity-based portfolio.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Portfolio7 » Tue Jul 03, 2018 6:25 pm

azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity".

But what about after age 70? Wouldn't the comparison continue? Then the comparison would be a larger portfolio that I could invest at 60% equity earning ~ 4% real return vs. my now large social security, or difference between my age 62 SS and age 70 SS, that's not even keeping up with inflation. (Ok, I know SS has an inflation adjustment, but I'm told its often not even equal to actual inflation) So, wouldn't the larger portfolio (or the portion of the portfolio I used to buy the SS annuity) eventually catch the larger SS payment? I would imagine that would happen by age 80 if market returns were pretty good.

I hope that makes sense. Shorted, deferring 62 to 70 earns effective 8% return. But 70+ until death, your "return" (on your now larger social security) is an inflation adjustment, which is peanuts vs a 60% equity portfolio if your time horizon is possibly age 90+.
There is a breakeven point, typically in your Mid 80's, where the decision to wait to 70 is superior. Depending on return assumptions and such, it can vary from 82 to 90 or so for most people and situations, I think. A lot depends upon your (nominal) return, which of course you can't predict. I tend to give weight to the idea that if I live a long life, I will be very happy having waited to 70, and if I don't, I still didn't run out of money even if my decision to wait turned out to be 'suboptimal'. Plus, waiting to 70 increases the amount my spouse is eligible for, I believe.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Hyperborea » Tue Jul 03, 2018 6:29 pm

azanon wrote:
Tue Jul 03, 2018 6:17 pm
Right guys, but I would KNOW from age 70 on, the effective return of the larger SS is at best the inflation rate. I'd like to think I can make age 90, so by going with the larger SS via deferral, which I would make happen by "buying" the larger SS with my portfolio, then I lock in inflation only return from age 70-90 on that larger social security i bought with part of my portfolio. So vs. the large portfolio from 62-90, surely I can outperform 8% return from 62 to 70, and no real return from 70 to 90.

I guess the main point of my post was that I noticed every time this comparison is done, they only look at age 62 to 70, and then call the comparison done at age 70 declaring the defer to age 70 the winner because of the risk-free 8% return. But in reality, from age 70 on, the person who took it early is now set up to catch the larger social security because one only has to beat the equivalent of 100% Short-term TIPS if they deferred, and the person who didn't buy the SS annuity can play catch up with an equity-based portfolio.
Sure, if the market returns are good to excellent then investing the money will give you more to spend than waiting on SS at 70. If the returns are below good then waiting on SS would be the winner. If you know in advance how the market is going to do then the answer is obvious.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Beehave » Tue Jul 03, 2018 6:31 pm

steve roy wrote:
Tue Jul 03, 2018 5:13 pm
There are a ton of variables as to when to take SS, and there is no ideal, one-size-fits-everybody answer.

1) If family members tend to die between 68 and 74 ... you might want to take SS as soon as possible.
2) If family members live a long time ... and you work in a job you love ... and you want to build your estate ... take SS at 70..
3) If you're overweight, have diabetes and own an enlarged heart, AND you're unable to work very much ... take SS the day you turn 62.
4) If you have a lower-earning, much younger spouse, take SS as close to 70 as possible.

Etcetera and etcetera.

My rule of thumb is, take SS when you determine you need it. In your case, do the math and take it when it's in your best perceived interest to tap into the program. (You might think about taking it between 64 and 67, forging a compromise.)

Another thread here says that projected real return for an 80/20 portfolio over the next ten years is projected at 3% real. That's less than the annual percentage increases delaying SS offers. (And a more conservative allocation will get you less than 3% real, correct?) Factor the projections in with the Social Security increases tied to delaying, see what answers you get.
+1

Create a spreadsheet that shows both what you give up and what you gain for each month that you delay. It will facilitate a truly informed decision. I think you'll see that if you choose to delay, then you may well find that claiming some time around age 64 or else 68 will be optimal timing from the pure cost-benefit perspective. Therefore, I'd suggest waiting a few months past age 62 to see what it feels like to delay. If you dislike waiting, then claim. If you can delay longer, try for either of the ages above and that may well optimize the cost-benefit analysis. My strong advice - - act based on your own, detailed mathematical understanding of what you are doing not just at the 62 and 70 endpoints, and not just at 62, 66, and 70 points, but preferably month by month; or if not that, at a minimum at 62, 64, 66, 68, and 70. Look carefully both at what the delay to each point costs and what that delay buys. Get a month-by-month printout from Social Security if you can (definitely available if you sit with a Social Security Admin person and maybe through the website). The month-by-month printout will help you do the analysis.

Best wishes.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Tue Jul 03, 2018 6:32 pm

Portfolio7 wrote:
Tue Jul 03, 2018 6:25 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
Ok, so I often hear that delaying social security until 70 vs. taking it early at 62 is often the beneficial thing to do because of the pseudo ~ 8% return that you get on delayed Social Security. In my case, for me to do that, I would have to spend down my portfolio to "buy" the "age 70 SS annuity".

But what about after age 70? Wouldn't the comparison continue? Then the comparison would be a larger portfolio that I could invest at 60% equity earning ~ 4% real return vs. my now large social security, or difference between my age 62 SS and age 70 SS, that's not even keeping up with inflation. (Ok, I know SS has an inflation adjustment, but I'm told its often not even equal to actual inflation) So, wouldn't the larger portfolio (or the portion of the portfolio I used to buy the SS annuity) eventually catch the larger SS payment? I would imagine that would happen by age 80 if market returns were pretty good.

I hope that makes sense. Shorted, deferring 62 to 70 earns effective 8% return. But 70+ until death, your "return" (on your now larger social security) is an inflation adjustment, which is peanuts vs a 60% equity portfolio if your time horizon is possibly age 90+.
There is a breakeven point, typically in your Mid 80's, where the decision to wait to 70 is superior. Depending on return assumptions and such, it can vary from 82 to 90 or so for most people and situations, I think. A lot depends upon your (nominal) return, which of course you can't predict. I tend to give weight to the idea that if I live a long life, I will be very happy having waited to 70, and if I don't, I still didn't run out of money even if my decision to wait turned out to be 'suboptimal'. Plus, waiting to 70 increases the amount my spouse is eligible for, I believe.
That's looking only at the social payments itself. What I'm saying is that actually the opposite seems to be true in some cases when you add other variables. For me to defer to age 70, I would have to "buy" the annuity with my portfolio because I would need to replace the lost income from age 62 to 70. But if I keep that money instead, then I can invest it in a 60/40 from age 62 until I die. In comparison, by buying a larger social security, you get 8% from 62 to 70, then you get 0% (real) from age 70 until you die. Looking at it that way, all of a sudden that return on the deferral doesn't look so great anymore.

azanon
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Tue Jul 03, 2018 6:37 pm

Beehave wrote:
Tue Jul 03, 2018 6:31 pm
steve roy wrote:
Tue Jul 03, 2018 5:13 pm
There are a ton of variables as to when to take SS, and there is no ideal, one-size-fits-everybody answer.

1) If family members tend to die between 68 and 74 ... you might want to take SS as soon as possible.
2) If family members live a long time ... and you work in a job you love ... and you want to build your estate ... take SS at 70..
3) If you're overweight, have diabetes and own an enlarged heart, AND you're unable to work very much ... take SS the day you turn 62.
4) If you have a lower-earning, much younger spouse, take SS as close to 70 as possible.

Etcetera and etcetera.

My rule of thumb is, take SS when you determine you need it. In your case, do the math and take it when it's in your best perceived interest to tap into the program. (You might think about taking it between 64 and 67, forging a compromise.)

Another thread here says that projected real return for an 80/20 portfolio over the next ten years is projected at 3% real. That's less than the annual percentage increases delaying SS offers. (And a more conservative allocation will get you less than 3% real, correct?) Factor the projections in with the Social Security increases tied to delaying, see what answers you get.
+1

Create a spreadsheet that shows both what you give up and what you gain for each month that you delay. It will facilitate a truly informed decision. I think you'll see that if you choose to delay, then you may well find that claiming some time around age 64 or else 68 will be optimal timing from the pure cost-benefit perspective. Therefore, I'd suggest waiting a few months past age 62 to see what it feels like to delay. If you dislike waiting, then claim. If you can delay longer, try for either of the ages above and that may well optimize the cost-benefit analysis. My strong advice - - act based on your own, detailed mathematical understanding of what you are doing not just at the 62 and 70 endpoints, and not just at 62, 66, and 70 points, but preferably month by month; or if not that, at a minimum at 62, 64, 66, 68, and 70. Look carefully both at what the delay to each point costs and what that delay buys. Get a month-by-month printout from Social Security if you can (definitely available if you sit with a Social Security Admin person and maybe through the website). The month-by-month printout will help you do the analysis.

Best wishes.
Thanks for the input. I am interested in understanding this as much as possible, and I know you guys are so knowledgeable about it. I thought i might be on to something that I just don't see discussed very much, which is what if you add in other variables other than just the SS itself. Specifically, one doesn't just defer to 70 without paying an income price. That's not free, and it may be money that's invest-able that the deferral is "purchased" with.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by nbseer » Tue Jul 03, 2018 6:40 pm

"...Especially if you have a large tax deferred account, then spending that down to some degree is The Whole Point of delaying SS.
That, along with Roth conversions. This reduces RMDs, you see..."

Ah yes... but how to pay the taxes on tIRA withdrawals and/or Roth conversions? If all of your retirement savings are tax-deferred, using SS to pay those taxes makes sense. Plus, break-even age in the mid 80s.. your healthiest retirement years will probably come before then, when you want to travel and need the SS money to do that.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Tdubs » Tue Jul 03, 2018 6:53 pm

Have you run your scenarios on I-Orp? Put in your nest egg and your expected SS at 62 and 70 and compare. Use the extended tab to put in your assumptions about the return you expect. Report back. I'd be curious.

https://i-orp.com/TermAndC/index.html

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by cutehumor » Tue Jul 03, 2018 6:59 pm

My dad is on dialysis at 73. My sister has stage IV cancer at age 46. I will be 41 this month, I had my own health problems. if SS does not change, I'll gladly take it at age 62.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by The Wizard » Tue Jul 03, 2018 7:45 pm

cutehumor wrote:
Tue Jul 03, 2018 6:59 pm
My dad is on dialysis at 73. My sister has stage IV cancer at age 46. I will be 41 this month, I had my own health problems. if SS does not change, I'll gladly take it at age 62.
Sounds like a good idea...
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by HueyLD » Tue Jul 03, 2018 8:12 pm

azanon wrote:
Tue Jul 03, 2018 4:47 pm
If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
No, you don’t get the entire 172,800 at age 62. Rather, you get 1,800 per month over a period of 8 years.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Austintatious » Tue Jul 03, 2018 8:41 pm

HueyLD wrote:
Tue Jul 03, 2018 8:12 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
No, you don’t get the entire 172,800 at age 62. Rather, you get 1,800 per month over a period of 8 years.
What, you mean the SSA's not gonna advance that $172,800 right up front so it can grow for 8 years at that guaranteed %5? Drats! Oh, well, at least the part of the plan where that $21,600 from SS each year will be invested in that tax deferred IRA is a sound plan, right?

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by #Cruncher » Tue Jul 03, 2018 10:00 pm

azanon wrote:
Tue Jul 03, 2018 5:42 pm
... I also have $172,800 ($1800x12 months x 8 years) … say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. ... And going forward, that $257,573 will have a real return of 4% ... but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) ... So the 257K will catch the 360K within a few years. … Where am I getting the math wrong? (underline added)
You're making three errors here, azanon. See the footnote [*] for the two minor ones. The major one is mentioned by willthrill81 in this post: you're not comparing "apples" to "apples". You treat the $1,800 per month from claiming at age 62 as an ongoing cash flow invested at an assumed rate of return. This is fine. But then you arbitrarily capitalize the additional benefit from waiting until 70 at 25 times the additional amount.

This leads you to getting the relationship completely backward. You imply that at age 70 claiming at 62 will put you behind claiming at age 70, but that over time the early claiming strategy will overtake claiming late.

But the additional benefit at age 70 is just as much a cash flow as the age 62 benefit itself. Viewed this way we can see the actual situation: At age 70 claiming at age 62 will put one ahead of claiming at age 70, but over time the late claiming strategy will overtake claiming early. [**] The following table illustrates this. It shows that at a constant 5% annual real rate of return, by age 91 the late claiming strategy overtakes that of claiming early.

Code: Select all

Age       at 62        at 70    Difference

Code: Select all

 63      21,600            0      (21,600)
 64      44,280            0      (44,280)
 65      68,094            0      (68,094)
 66      93,099            0      (93,099)
 67     119,354            0     (119,354)
 68     146,921            0     (146,921)
 69     175,867            0     (175,867)
 70     206,261            0     (206,261)
 71     238,174       38,016     (200,158)
 72     271,682       77,933     (193,750)
 73     306,867      119,845     (187,021)
 74     343,810      163,854     (179,956)
 75     382,600      210,062     (172,538)
 76     423,330      258,582     (164,749)
 77     466,097      309,527     (156,570)
 78     511,002      363,019     (147,983)
 79     558,152      419,186     (138,966)
 80     607,660      478,161     (129,498)
 81     659,642      540,085     (119,557)
 82     714,225      605,105     (109,119)
 83     771,536      673,377      (98,159)
 84     831,713      745,062      (86,651)
 85     894,898      820,331      (74,568)
 86     961,243      899,363      (61,880)
 87   1,030,905      982,347      (48,558)
 88   1,104,051    1,069,481      (34,570)
 89   1,180,853    1,160,971      (19,882)
 90   1,261,496    1,257,035       (4,460)
 91   1,346,171    1,357,903       11,732  <===
 92   1,435,079    1,463,814       28,735 
 93   1,528,433    1,575,021       46,588 
 94   1,626,455    1,691,788       65,333 
 95   1,729,377    1,814,393       85,016 
 96   1,837,446    1,943,129      105,683 
 97   1,950,919    2,078,302      127,383 
 98   2,070,065    2,220,233      150,168 
 99   2,195,168    2,369,260      174,092 
100   2,326,526    2,525,739      199,213
The following table uses the relative cash flows and the Excel IRR function to show the same conclusion in a different way: that if one lives to age 91, claiming at age 70 produces a 5.2% real return relative to claiming at age 62.

Code: Select all

Age    Cash Flow     IRR

Code: Select all

 63     (21,600)
 64     (21,600)
 65     (21,600)
 66     (21,600)
 67     (21,600)
 68     (21,600)
 69     (21,600)
 70     (21,600)
 71      16,416 
 72      16,416 
 73      16,416 
 74      16,416 
 75      16,416 
 76      16,416 
 77      16,416 
 78      16,416 
 79      16,416     (1.8%)
 80      16,416     (0.6%)
 81      16,416      0.5% 
 82      16,416      1.3% 
 83      16,416      2.0% 
 84      16,416      2.7% 
 85      16,416      3.2% 
 86      16,416      3.6% 
 87      16,416      4.0% 
 88      16,416      4.4% 
 89      16,416      4.7% 
 90      16,416      4.9% 
 91      16,416      5.2%  <===
 92      16,416      5.4% 
 93      16,416      5.6% 
 94      16,416      5.7% 
 95      16,416      5.9% 
 96      16,416      6.0% 
 97      16,416      6.1% 
 98      16,416      6.2% 
 99      16,416      6.3% 
100      16,416      6.4%
* Minor errors:
  • As pointed out by HueyLD in this post the 8 X 12 X $1,800 isn't all available at age 62 which your calculation assumes:
    257,573 = (1 + 0.05 / 12) ^ 96 * 8 * 12 * 1800
    The correct calculation with monthly compounding is
    211,933 = 1800 * ((1 + 0.05 / 12) ^ 96 - 1) / (0.05 / 12)
    (In my table I only get 206,261 with simpler annual compounding.)
  • Delaying from 62 to 70 increases the benefit about 76%, not the 2/3 that you assume. E.g., for a Normal Retirement Age of 66 the benefit at age 62 is 75% of the Primary Insurance Amount while at age 70 it is 132%. (See this SSA webpage.) 132 is 76% more than 75. I use this ratio in my table so that the additional benefit is $1,368 per month, not $1,200.
** There is an exception. If the constant return equals or exceeds a certain rate, then the cash balance when claiming at age 70 will never overtake the cash balance when claiming at age 62. This rate equals

Code: Select all

  rate = (late benefit / early benefit) ^ (1 / years delay) - 1
7.322% = (38016        / 21600)         ^ (1 / 8)           - 1

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by CurlyDave » Wed Jul 04, 2018 2:09 am

willthrill81 wrote:
Tue Jul 03, 2018 5:38 pm

On average, the total amount of Social Security benefits you receive will be the same regardless as to whether you start benefits at age 62 or age 70. This is because a 62 year old will, on average, receive benefits for 8 years longer than will a 70 year old. The benefits received at different ages are merely a reflection of that.

But as noted above, you are not an 'average'. Your personal situation determines when it is truly optimal to begin benefits.
It is a little more complicated than you say. There is a discount rate in the calculation that SS does in evening out the benefits no matter what age you take them. This may be public knowledge, but I have never see it anywhere. The calculation concatenates life expectancy and a discount rate. SS tells us their life expectancy tables.

I suspect the discount rate SS uses is the interest received on the SS trust fund, which is in the 2-3% nominal range.

There is an interesting implication hidden in there, which is that if one really believes she can make more than the SS discount rate on her portfolio, then the best strategy is to take SS early.

This is not a popular concept on this board, but it is an inconvenient truth. I retired in 2007 and benefitted greatly from spending SS money while letting my portfolio grow.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by SGM » Wed Jul 04, 2018 3:17 am

Decision has already been made by us to use the delay until 70 strategy. I only compared SS delay to a 10 year treasury bond return initially. Eventually I ignored the analysis altogether as I valued the insurance aspect a higher SS stream. We also used the time before taking SS to convert traditional tax deferred accounts to Roth accounts.

We also took advantage of the file and suspend and restricted spousal application at full retirement age. So a deposit larger than DWs own FRA benefit has been coming in since age 66. Her age 70 benefit will be larger than the spousal benefit.

We have exchanged some capital for income streams, At a later date I expect to exchange some more capital for additional income streams in the form of SPIA ladders.

The largest exchange of capital for an income stream was not delaying SS from 66 to 70, but exchanging a TIAA-CREF 403b for two annuities offered retired employees. This exchange has been very profitable to date because of the extremely low cost of the TIAA-CREF annuities and the shrinking pool of annuitants. It could have gone either way as the annuitants took the mortality risk and not TIAA-CREF.


I for one will be happier having deposits coming into my checking account from multiple sources. I am already seeing the utilitarian and emotional benefits of this strategy. I am looking forward to becoming a burden on society by collecting a SS payout shortly. :twisted:

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Wed Jul 04, 2018 5:25 am

Tdubs wrote:
Tue Jul 03, 2018 6:53 pm
Have you run your scenarios on I-Orp? Put in your nest egg and your expected SS at 62 and 70 and compare. Use the extended tab to put in your assumptions about the return you expect. Report back. I'd be curious.

https://i-orp.com/TermAndC/index.html
I haven't because I'm actually just an X-gen who has a passion for understanding all matters finance. I didn't mean to be misleading in that regard. I care about understanding it, and I also care about what is being taught to those who are actually at the point of making that decision whether or not to defer. Of course I do also like to consider what would I do when I get there because I am a long range thinker (it comes with being an INTJ).

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Wed Jul 04, 2018 5:30 am

HueyLD wrote:
Tue Jul 03, 2018 8:12 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
No, you don’t get the entire 172,800 at age 62. Rather, you get 1,800 per month over a period of 8 years.
I get/have $1,800 a month over a period of 8 years, and I also have an extra 172,800 when I log into Vanguard in a balanced fund if I collect SS at 62, as opposed to starting with $172,800 that I'd probably put in a ST Tips fund who's balance will be dropping to 0 by the time I make 70 because I'm "buying" the age 70 social security with it.

The only way I'm going to get, or should I say be able to afford to get, $3000 at 70 from SS is if I replace the lost income from 62 to 70 with selling the principle of part of my portfolio.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Wed Jul 04, 2018 5:35 am

Austintatious wrote:
Tue Jul 03, 2018 8:41 pm
HueyLD wrote:
Tue Jul 03, 2018 8:12 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
No, you don’t get the entire 172,800 at age 62. Rather, you get 1,800 per month over a period of 8 years.
What, you mean the SSA's not gonna advance that $172,800 right up front so it can grow for 8 years at that guaranteed %5? Drats! Oh, well, at least the part of the plan where that $21,600 from SS each year will be invested in that tax deferred IRA is a sound plan, right?
If you don't think even 5% nominal is a realistic expectation for a sum of money from 62 to age 90 (I don't plan to die at 70) is realistic, then this debate would be easy for you. Defer for sure! If that's your way of saying you prefer the 100% guaranteed outcome, I totally get your preference for deferring. I guess I haven't said it yet, I'm comfortable with less than a 100% guarantee.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Wed Jul 04, 2018 5:53 am

#Cruncher wrote:
Tue Jul 03, 2018 10:00 pm
azanon wrote:
Tue Jul 03, 2018 5:42 pm
... I also have $172,800 ($1800x12 months x 8 years) … say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. ... And going forward, that $257,573 will have a real return of 4% ... but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) ... So the 257K will catch the 360K within a few years. … Where am I getting the math wrong? (underline added)
You're making three errors here, azanon. See the footnote [*] for the two minor ones. The major one is mentioned by willthrill81 in this post: you're not comparing "apples" to "apples". You treat the $1,800 per month from claiming at age 62 as an ongoing cash flow invested at an assumed rate of return. This is fine. But then you arbitrarily capitalize the additional benefit from waiting until 70 at 25 times the additional amount.

This leads you to getting the relationship completely backward. You imply that at age 70 claiming at 62 will put you behind claiming at age 70, but that over time the early claiming strategy will overtake claiming late.

But the additional benefit at age 70 is just as much a cash flow as the age 62 benefit itself. Viewed this way we can see the actual situation: At age 70 claiming at age 62 will put one ahead of claiming at age 70, but over time the late claiming strategy will overtake claiming early. [**] The following table illustrates this. It shows that at a constant 5% annual real rate of return, by age 91 the late claiming strategy overtakes that of claiming early.

Code: Select all

Age       at 62        at 70    Difference

Code: Select all

 63      21,600            0      (21,600)
 64      44,280            0      (44,280)
 65      68,094            0      (68,094)
 66      93,099            0      (93,099)
 67     119,354            0     (119,354)
 68     146,921            0     (146,921)
 69     175,867            0     (175,867)
 70     206,261            0     (206,261)
 71     238,174       38,016     (200,158)
 72     271,682       77,933     (193,750)
 73     306,867      119,845     (187,021)
 74     343,810      163,854     (179,956)
 75     382,600      210,062     (172,538)
 76     423,330      258,582     (164,749)
 77     466,097      309,527     (156,570)
 78     511,002      363,019     (147,983)
 79     558,152      419,186     (138,966)
 80     607,660      478,161     (129,498)
 81     659,642      540,085     (119,557)
 82     714,225      605,105     (109,119)
 83     771,536      673,377      (98,159)
 84     831,713      745,062      (86,651)
 85     894,898      820,331      (74,568)
 86     961,243      899,363      (61,880)
 87   1,030,905      982,347      (48,558)
 88   1,104,051    1,069,481      (34,570)
 89   1,180,853    1,160,971      (19,882)
 90   1,261,496    1,257,035       (4,460)
 91   1,346,171    1,357,903       11,732  <===
 92   1,435,079    1,463,814       28,735 
 93   1,528,433    1,575,021       46,588 
 94   1,626,455    1,691,788       65,333 
 95   1,729,377    1,814,393       85,016 
 96   1,837,446    1,943,129      105,683 
 97   1,950,919    2,078,302      127,383 
 98   2,070,065    2,220,233      150,168 
 99   2,195,168    2,369,260      174,092 
100   2,326,526    2,525,739      199,213
The following table uses the relative cash flows and the Excel IRR function to show the same conclusion in a different way: that if one lives to age 91, claiming at age 70 produces a 5.2% real return relative to claiming at age 62.

Code: Select all

Age    Cash Flow     IRR

Code: Select all

 63     (21,600)
 64     (21,600)
 65     (21,600)
 66     (21,600)
 67     (21,600)
 68     (21,600)
 69     (21,600)
 70     (21,600)
 71      16,416 
 72      16,416 
 73      16,416 
 74      16,416 
 75      16,416 
 76      16,416 
 77      16,416 
 78      16,416 
 79      16,416     (1.8%)
 80      16,416     (0.6%)
 81      16,416      0.5% 
 82      16,416      1.3% 
 83      16,416      2.0% 
 84      16,416      2.7% 
 85      16,416      3.2% 
 86      16,416      3.6% 
 87      16,416      4.0% 
 88      16,416      4.4% 
 89      16,416      4.7% 
 90      16,416      4.9% 
 91      16,416      5.2%  <===
 92      16,416      5.4% 
 93      16,416      5.6% 
 94      16,416      5.7% 
 95      16,416      5.9% 
 96      16,416      6.0% 
 97      16,416      6.1% 
 98      16,416      6.2% 
 99      16,416      6.3% 
100      16,416      6.4%
* Minor errors:
  • As pointed out by HueyLD in this post the 8 X 12 X $1,800 isn't all available at age 62 which your calculation assumes:
    257,573 = (1 + 0.05 / 12) ^ 96 * 8 * 12 * 1800
    The correct calculation with monthly compounding is
    211,933 = 1800 * ((1 + 0.05 / 12) ^ 96 - 1) / (0.05 / 12)
    (In my table I only get 206,261 with simpler annual compounding.)
  • Delaying from 62 to 70 increases the benefit about 76%, not the 2/3 that you assume. E.g., for a Normal Retirement Age of 66 the benefit at age 62 is 75% of the Primary Insurance Amount while at age 70 it is 132%. (See this SSA webpage.) 132 is 76% more than 75. I use this ratio in my table so that the additional benefit is $1,368 per month, not $1,200.
** There is an exception. If the constant return equals or exceeds a certain rate, then the cash balance when claiming at age 70 will never overtake the cash balance when claiming at age 62. This rate equals

Code: Select all

  rate = (late benefit / early benefit) ^ (1 / years delay) - 1
7.322% = (38016        / 21600)         ^ (1 / 8)           - 1
OK, I guess where I still don't understand your comparison, is that I have to "buy" the "at 70" column to get that choice in the first place with my portfolio. I will be retired at 62, so I either need the stream of income afforded by social security then, or if I defer, I will have to replace that income with money from my portfolio.

The 172,800 figure was not calculated by estimating a rate of return. It was the "cost" of buying the "age 70" choice. I would have to spend an additional 1200 a month for 8 years from my portfolio to replace the social security I wont get from social security because I deferred it - that's the 1200x12x8. So I don't understand how you can just have a chart comparing age 62 to 70 social security streams of income when there's another variable; what I had to spend to get the age 70 chart in the first place, and if i do spend it, I don't have that $172,800 anymore at age 70 if I "bought" the "age 70" choice.

So going forward, I then would have the larger portfolio that could grow at 4% real, or the larger SS which grows at inflation rate (or lower).
Last edited by azanon on Wed Jul 04, 2018 5:55 am, edited 1 time in total.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by oldcomputerguy » Wed Jul 04, 2018 5:54 am

Beehave wrote:
Tue Jul 03, 2018 6:31 pm
Create a spreadsheet that shows both what you give up and what you gain for each month that you delay. It will facilitate a truly informed decision. I think you'll see that if you choose to delay, then you may well find that claiming some time around age 64 or else 68 will be optimal timing from the pure cost-benefit perspective. Therefore, I'd suggest waiting a few months past age 62 to see what it feels like to delay. If you dislike waiting, then claim. If you can delay longer, try for either of the ages above and that may well optimize the cost-benefit analysis. My strong advice - - act based on your own, detailed mathematical understanding of what you are doing not just at the 62 and 70 endpoints, and not just at 62, 66, and 70 points, but preferably month by month; or if not that, at a minimum at 62, 64, 66, 68, and 70. Look carefully both at what the delay to each point costs and what that delay buys. Get a month-by-month printout from Social Security if you can (definitely available if you sit with a Social Security Admin person and maybe through the website). The month-by-month printout will help you do the analysis.
I am in retirement, and I in fact went through something similar to this process, trying to figure out the balance between delaying SS and drawing extra from my retirement savings. My answer (and I'm still studying this to make sure I didn't goof up somewhere) was that the "optimum" claiming age both for me and for my wife would be around FRA. Your Mileage May Vary.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by azanon » Wed Jul 04, 2018 5:58 am

CurlyDave wrote:
Wed Jul 04, 2018 2:09 am
willthrill81 wrote:
Tue Jul 03, 2018 5:38 pm

On average, the total amount of Social Security benefits you receive will be the same regardless as to whether you start benefits at age 62 or age 70. This is because a 62 year old will, on average, receive benefits for 8 years longer than will a 70 year old. The benefits received at different ages are merely a reflection of that.

But as noted above, you are not an 'average'. Your personal situation determines when it is truly optimal to begin benefits.
It is a little more complicated than you say. There is a discount rate in the calculation that SS does in evening out the benefits no matter what age you take them. This may be public knowledge, but I have never see it anywhere. The calculation concatenates life expectancy and a discount rate. SS tells us their life expectancy tables.

I suspect the discount rate SS uses is the interest received on the SS trust fund, which is in the 2-3% nominal range.

There is an interesting implication hidden in there, which is that if one really believes she can make more than the SS discount rate on her portfolio, then the best strategy is to take SS early.

This is not a popular concept on this board, but it is an inconvenient truth. I retired in 2007 and benefitted greatly from spending SS money while letting my portfolio grow.
Well i appreciate this comment and this is the part I'm trying to discuss. From age 70 going forward, the comparison continues because I either "bought" the larger social security which will then only grow at the SS discount rate, or I didn't "buy" it and I have a larger portfolio which better darn well earn more than that if its 60% equities! If it doesn't at least match that, we'll all have big problems!

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by thx1138 » Wed Jul 04, 2018 6:23 am

One of the flaws in your earlier analysis is using the 4% rule as a direct comparison to the SS life annuity income stream. The 4% rule is a SWR for a 30 yr retirement, it does not preserve your capital but rather diminishes your portfolio to zero dollars at 30 yrs in the poor cases. As you already calculated even the 4% rule produces *less* monthly income than the deferral does but then you assume the portfolio will magically “catch up” in the non-deferred case when in fact the research behind the 4% rule says exactly the opposite!

You’ve presently got the whole thought process turned on its head. The marginal utility of money is *lower* in good times. Your non-defer plan is designed to produce even more returns that *you won’t need* if things go well.

The marginal utility of money is *highest* in bad times. The defer plan produces the most money in bad times - exactly the scenarios you need it. The non-defer plan produces the least money in bad times, essentially the worst possible outcome for a retiree.

Stop looking at “average” or “expected” outcome. Instead understand minimax outcome as that is what actually matters. Someone already pointed you to firecalc which is a quick tool for doing such analysis.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by 22twain » Wed Jul 04, 2018 6:30 am

azanon wrote:
Wed Jul 04, 2018 5:25 am
I'm actually just an X-gen
I'm in my mid 60s so I could be collecting SS right now (so I know my projected benefits pretty closely), but I'm waiting until 70, when my annual benefit will be about $35K in today's dollars. I'll need to draw only about 10% of my savings during the 6 years that I'm waiting.

I ran my numbers through Firecalc and compared the worst-case scenarios for a fixed spending rate, collecting SS early versus late. The worst-case portfolio balance varies randomly from year to year, in the ± $100K to $200K range. The general trend is that collecting late gives a lower balance through my mid 80s, and higher thereafter. This agrees with the common wisdom about the "break-even" point. In my mid 90s collecting late leaves me about $200-$400K ahead.

My wife will collect a similar amount, and is also waiting till 70. When we're both collecting SS, it will more than cover our current expenses plus the extra taxes on the SS and the RMDs on our 403b's. After that point we won't need to draw on our savings at all unless our expenses increase significantly (medical? travel? move to a retirement or assisted living facility? whatever...). This is a significant psychological factor for us.
My investing princiPLEs do not include absolutely preserving princiPAL.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Tdubs » Wed Jul 04, 2018 7:55 am

Ran your scenario on ORP with just a 5% rate of return and living till 92. You are better off waiting till 70, but as that model almost always shows, the advantage is minor.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat » Wed Jul 04, 2018 8:30 am

Tdubs wrote:
Wed Jul 04, 2018 7:55 am
Ran your scenario on ORP with just a 5% rate of return and living till 92. You are better off waiting till 70, but as that model almost always shows, the advantage is minor.
Agreed - the IORP is a valuable tool for doing comparions like the OP describes. A few observations and a few hings he could/should vary with IORP inputs for his situation and his potential simulations are:
- Calculations for what you can spend after taxes and not just for max acct balances
- how SS declaration affects a spouse
- various ages of demise for both spouses
- ability to Roth convert at variious levels
- various potential inflation rates
- various potential assett account earnings

Without comparing taxes, spousal issues, Roth converts, inflation, assett earnings etc you are only getting a partial picture.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by #Cruncher » Wed Jul 04, 2018 8:32 am

azanon wrote:
Wed Jul 04, 2018 5:53 am
The 172,800 figure was not calculated by estimating a rate of return.
Read the first footnote to my previous post more carefully, azanon, and you'll see that I wasn't questioning your $172,800 figure. I was questioning the $257,573 you said it would grow to in eight years.
azanon in same post wrote:So I don't understand how you can just have a chart comparing age 62 to 70 social security streams of income when there's another variable; what I had to spend to get the age 70 chart in the first place, and if i do spend it, I don't have that $172,800 anymore at age 70 if I "bought" the "age 70" choice.
You can compare the claiming strategies two ways:
  • Assume SS benefits are invested.
  • Assume SS benefits are used to support spending. Therefore if one delays claiming until age 70, an additional $21,600 (the age 62 benefit) must be taken from your portfolio for eight years.
The first table in my previous post takes the first approach. The following table takes the second. It assumes the same 5% annual real growth. But this time instead of the SS benefit being invested, it is assumed applied against a total $60,000 annual spending requirement. The excess of $60,000 over the SS benefit is removed from a portfolio balance that is assumed to be $1,000,000 at age 62.

Note that the "Difference" column is identical to that in the first table of my previous post. Both show that by age 91 the strategy of delaying until age 70 overtakes that of claiming at age 62. So, we can reach the same conclusion by assuming either that SS benefits will be invested or that they are spent. But you seem to want to do both , azanon! You say that if you claim at age 62, you can invest the benefit and let it grow. But then you say that if you delay claiming until age 70, you must take the age 62 benefit from your portfolio for eight years. You can't "have your cake and eat it too".

Code: Select all

     ---------- Portfolio Balance ----------
Age  Claim at 62   Claim at 70    Difference

Code: Select all

 62    1,000,000     1,000,000            0 
 63    1,011,600       990,000      (21,600)
 64    1,023,780       979,500      (44,280)
 65    1,036,569       968,475      (68,094)
 66    1,049,997       956,899      (93,099)
 67    1,064,097       944,744     (119,354)
 68    1,078,902       931,981     (146,921)
 69    1,094,447       918,580     (175,867)
 70    1,110,770       904,509     (206,261)
 71    1,127,908       927,750     (200,158)
 72    1,145,904       952,154     (193,750)
 73    1,164,799       977,778     (187,021)
 74    1,184,639     1,004,682     (179,956)
 75    1,205,471     1,032,933     (172,538)
 76    1,227,344     1,062,595     (164,749)
 77    1,250,311     1,093,741     (156,570)
 78    1,274,427     1,126,444     (147,983)
 79    1,299,748     1,160,782     (138,966)
 80    1,326,336     1,196,837     (129,498)
 81    1,354,252     1,234,695     (119,557)
 82    1,383,565     1,274,446     (109,119)
 83    1,414,343     1,316,184      (98,159)
 84    1,446,660     1,360,009      (86,651)
 85    1,480,594     1,406,026      (74,568)
 86    1,516,223     1,454,343      (61,880)
 87    1,553,634     1,505,076      (48,558)
 88    1,592,916     1,558,346      (34,570)
 89    1,634,162     1,614,280      (19,882)
 90    1,677,470     1,673,009       (4,460)
 91    1,722,943     1,734,676       11,732  <====
 92    1,770,691     1,799,426       28,735 
 93    1,820,825     1,867,413       46,588 
 94    1,873,466     1,938,800       65,333 
 95    1,928,740     2,013,756       85,016 
 96    1,986,777     2,092,459      105,683 
 97    2,047,716     2,175,098      127,383 
 98    2,111,701     2,261,869      150,168 
 99    2,178,886     2,352,979      174,092 
100    2,249,431     2,448,644      199,213

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by CurlyDave » Wed Jul 04, 2018 8:46 am

azanon wrote:
Wed Jul 04, 2018 5:58 am

...Well i appreciate this comment and this is the part I'm trying to discuss. From age 70 going forward, the comparison continues because I either "bought" the larger social security which will then only grow at the SS discount rate, or I didn't "buy" it and I have a larger portfolio which better darn well earn more than that if its 60% equities! If it doesn't at least match that, we'll all have big problems!
Actually, any SS payment grows at the inflation rate (as measured by SS, which may be substantially different than your personal inflation rate). The discount rate is a different thing, which is the rate used to determine the "time value of money".

Time value of money is a mathematical way of compensating for the fact that a dollar today is worth more than a dollar a year from today, or 10 years from today. The difference is not just inflation, but also includes the return that a person would get from investing the dollar. There is a large body of literature on time value of money, which you can explore with a simple search.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by CurlyDave » Wed Jul 04, 2018 8:57 am

Tdubs wrote:
Wed Jul 04, 2018 7:55 am
Ran your scenario on ORP with just a 5% rate of return and living till 92. You are better off waiting till 70, but as that model almost always shows, the advantage is minor.
According to SS: "About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95."

IMHO, 92 is a bit optimistic for running the calculation, even 90 is optimistic.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Austintatious » Wed Jul 04, 2018 9:04 am

azanon wrote:
Wed Jul 04, 2018 5:35 am
Austintatious wrote:
Tue Jul 03, 2018 8:41 pm
HueyLD wrote:
Tue Jul 03, 2018 8:12 pm
azanon wrote:
Tue Jul 03, 2018 4:47 pm
If i have just $1800/month cause i took it at 62, I also have $172,800 ($1800x12 months x 8 years) i invested in a 60% portfolio at 62 cause I didn't "buy" the SS deferral. Let's say I only made 5% on the 172,800 from age 62 to 70. That's $257,573 at year 70 in an investment account plus the 1800/month going forward from age 70. Using 4% rule, that's another $858/month, and its going to grow tax deferred cause its in an IRA. And going forward, that $257,573 will have a real return of 4% cause I'll use a 60% equity portfolio, but the extra "360K" SS ($1200 x 12 x 25 - valuing the annuity based on 4% rule) will only be growing at the inflation rate at best. So the 257K will catch the 360K within a few years.

Let me add, I can also withdraw that 257K in a pinch, and I cant withdraw the extra SS.

Where am I getting the math wrong? Scorecard at age 70: $1800/month SS + 257K in a tax deferred account that I'm free to invest in a 60/40 portfolio vs. $3000/month social security that will at best grow at the inflation rate.
No, you don’t get the entire 172,800 at age 62. Rather, you get 1,800 per month over a period of 8 years.
What, you mean the SSA's not gonna advance that $172,800 right up front so it can grow for 8 years at that guaranteed %5? Drats! Oh, well, at least the part of the plan where that $21,600 from SS each year will be invested in that tax deferred IRA is a sound plan, right?
If you don't think even 5% nominal is a realistic expectation for a sum of money from 62 to age 90 (I don't plan to die at 70) is realistic, then this debate would be easy for you. Defer for sure! If that's your way of saying you prefer the 100% guaranteed outcome, I totally get your preference for deferring. I guess I haven't said it yet, I'm comfortable with less than a 100% guarantee.
azanon,

your comment here emphasizes, at least for me, the key issue in making the decision. I certainly don't see delaying benefits as a 100% guarantee but it's about as close as one can get to it these days and, in my opinion, it's a far better bet than assuming the market's going to pay off as required over that very specific and short period of time perhaps most crucial to one's retirement security. So, for reasons specific to our situation and unless some major change occurs, delaying to 70 will continue to be our choice. Certainly, there are things that can and might happen in which we'd realize less money but, not having the benefit of hindsight, we think it's the more prudent option. All that said, I do think it's a highly individualized decision and cookie cutter assertions about which way is better really don't mean much when considering individual cases. Maybe the most important thing to remember is that the decision to take the money can be made at any time during those 8 years. Best of luck!

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Tdubs » Wed Jul 04, 2018 9:15 am

CurlyDave wrote:
Wed Jul 04, 2018 8:57 am
Tdubs wrote:
Wed Jul 04, 2018 7:55 am
Ran your scenario on ORP with just a 5% rate of return and living till 92. You are better off waiting till 70, but as that model almost always shows, the advantage is minor.
According to SS: "About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95."

IMHO, 92 is a bit optimistic for running the calculation, even 90 is optimistic.
Disagree, you plan for the 10 percent, and it isn't even ten percent. If you are married, your SS check (at least mine) has to last two lifetimes. So waiting to 70 is an insurance policy for my wife. What are the odds that one of us will live to 90? About 50-50.

If you retire healthy, you have to run your scenarios beyond 90. The greatest risks you run are to plan on a average life and then outlive your money. There is really little downside to planning for the long haul. I really doubt that if I lay dying at 83, I'll be thinking, "God, I got shorted on SS!" Or, I could have blown that money on a trip to Tahiti." It is more likely that I'll be reassured that I left a more certain stream of income to my wife.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by ankonaman » Wed Jul 04, 2018 9:19 am

When considering at what age to take SS one should consider other things than just $$$. First and foremost would be quality of life. How long do you think it will be for you before your daily routine revolves around doctors office visits instead of enjoyable activities? Sure you will get a larger payout by delaying SS but at what cost. Retire early and enjoy life why you are still capable of doing it. I calculated my payout from age 62 and my full retirement age which is 66 and 6 months. I looked at the median age for which a white guy dies which is 84 years of age. Quite frankly if you live past 84 what do you realistically think your capabilities will be? I am an active outdoor type who fishes, hunts, runs and engages in "physical activities". I want to do this why I still can. Anyway based on my payout calculations for SS for age 62 to 84 and SS for age 66 6 months to 84 I would make a little over a 40 grand benefit during those times frames by waiting to retire at 66 years and 6 months. For me it is not worth 40 grand to give up 4 1/2 years of life working when I can be enjoying activities; especially prime years where physical health, endurance and stamina will be much better than age 80's and beyond. YMMV but do you want to enjoy and experience life or just count your $$$.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by vested1 » Wed Jul 04, 2018 10:24 am

ankonaman wrote:
Wed Jul 04, 2018 9:19 am
When considering at what age to take SS one should consider other things than just $$$. First and foremost would be quality of life. How long do you think it will be for you before your daily routine revolves around doctors office visits instead of enjoyable activities? Sure you will get a larger payout by delaying SS but at what cost. Retire early and enjoy life why you are still capable of doing it. I calculated my payout from age 62 and my full retirement age which is 66 and 6 months. I looked at the median age for which a white guy dies which is 84 years of age. Quite frankly if you live past 84 what do you realistically think your capabilities will be? I am an active outdoor type who fishes, hunts, runs and engages in "physical activities". I want to do this why I still can. Anyway based on my payout calculations for SS for age 62 to 84 and SS for age 66 6 months to 84 I would make a little over a 40 grand benefit during those times frames by waiting to retire at 66 years and 6 months. For me it is not worth 40 grand to give up 4 1/2 years of life working when I can be enjoying activities; especially prime years where physical health, endurance and stamina will be much better than age 80's and beyond. YMMV but do you want to enjoy and experience life or just count your $$$.
How is spending down portfolio assets rather than spending greatly reduced SS payments (27.5% less in your case at age 62) going to affect your ability to fish, hunt, or run? How are you giving up 4.5 years of your life by delaying SS to FRA, and who says you have to work until you take SS?

Working and saving provides the ability to make choices. Life isn't over at 66.5 years of age, or at any age unless you want it to be. Filing early is a necessity for most retirees, or at least most think so. This bird in the hand attitude is a viable choice, but so is the more conservative and guaranteed increase in benefits that comes as a reward for patience.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by vested1 » Wed Jul 04, 2018 10:43 am

When I was young I was convinced that I would die at age 56 for some reason. I considered 56 old age. When I passed that age I gave up prognosticating my death and accepted the fact that I didn't know how long I'd live. I turned 66 (FRA) on Monday and got my confirmation snail mail from SS on my birthday that my 1st restricted application check would be direct deposited on August 8th. That extra 50k may come in handy during the next 4 years. Time flies when you're having fun.

I guess I could have filed for my own benefit at 62, telling myself that I would invest whatever I got after taxes, but since I worked until 63.5, that first year and a half would have garnered zero SS dollars due to the earnings test. Then at age 65, SS would have begun deducting my Medicare as well as taxes, so 2.5 years of a reduced amount to invest up until last Monday. Not having a crystal ball I wouldn't have known what the markets would do in the last 4 years, but who knows, maybe I would have actually resisted the urge to spend that much smaller amount from filing early and would have invested it. Somehow I think I may have spent it instead. Groceries are expensive!

Couples and older folks have more choices than younger single folks. Folks who saved diligently have more choices than those who didn't. Maybe in the far flung future, if the laws change or if a meteor is found to be hurtling toward Earth, filing for SS may be the best choice for everyone. Until then I'll continue to delay, but thanks for asking.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by CurlyDave » Wed Jul 04, 2018 10:49 am

Tdubs wrote:
Wed Jul 04, 2018 9:15 am

... It is more likely that I'll be reassured that I left a more certain stream of income to my wife.
As an old geezer who took SS at the first opportunity, and left my money in my portfolio, I am certain that the stream of income from the portfolio will benefit my wife, our children and our grandchildren...

The non-inheritability of SS loomed large in my decision. And, my actual returns have far outstripped the SS increases. My portfolio will outlive me no matter what my longevity turns out to be.

Best of all, I don't have to count on a very speculative change in SS law to keep the full returns coming from the portfolio.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by vested1 » Wed Jul 04, 2018 11:07 am

CurlyDave wrote:
Wed Jul 04, 2018 10:49 am
Tdubs wrote:
Wed Jul 04, 2018 9:15 am

... It is more likely that I'll be reassured that I left a more certain stream of income to my wife.
As an old geezer who took SS at the first opportunity, and left my money in my portfolio, I am certain that the stream of income from the portfolio will benefit my wife, our children and our grandchildren...

The non-inheritability of SS loomed large in my decision. And, my actual returns have far outstripped the SS increases. My portfolio will outlive me no matter what my longevity turns out to be.

Best of all, I don't have to count on a very speculative change in SS law to keep the full returns coming from the portfolio.
But it is inheritable unless you are single, or divorced having been married for more than 10 years. If I would have filed at age 62, one year older than my wife, with a larger SS benefit, her survivor benefit would be around $1,800 a month, rather than the approximate $3,300 it will be should I live another 4 years. I'll have to remember to ask her which amount she would prefer.

As long as we're going anecdotal: Since retirement 2.5 years ago, I've withdrawn 190k from tax-deferred, about 1/2 of that discretionary due to VPW (Variable Withdrawal Percentage) in a strong market. We have 50k more in tax-deferred than when I retired using a 4 fund indexed portfolio. That's the beauty of VPW, and SS for that matter. Once you're in that position you can change your mind at any point, that is unless you've already acted upon your choice.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by ankonaman » Wed Jul 04, 2018 11:15 am

vested1 wrote:
Wed Jul 04, 2018 10:24 am
ankonaman wrote:
Wed Jul 04, 2018 9:19 am
When considering at what age to take SS one should consider other things than just $$$. First and foremost would be quality of life. How long do you think it will be for you before your daily routine revolves around doctors office visits instead of enjoyable activities? Sure you will get a larger payout by delaying SS but at what cost. Retire early and enjoy life why you are still capable of doing it. I calculated my payout from age 62 and my full retirement age which is 66 and 6 months. I looked at the median age for which a white guy dies which is 84 years of age. Quite frankly if you live past 84 what do you realistically think your capabilities will be? I am an active outdoor type who fishes, hunts, runs and engages in "physical activities". I want to do this why I still can. Anyway based on my payout calculations for SS for age 62 to 84 and SS for age 66 6 months to 84 I would make a little over a 40 grand benefit during those times frames by waiting to retire at 66 years and 6 months. For me it is not worth 40 grand to give up 4 1/2 years of life working when I can be enjoying activities; especially prime years where physical health, endurance and stamina will be much better than age 80's and beyond. YMMV but do you want to enjoy and experience life or just count your $$$.
How is spending down portfolio assets rather than spending greatly reduced SS payments (27.5% less in your case at age 62) going to affect your ability to fish, hunt, or run? How are you giving up 4.5 years of your life by delaying SS to FRA, and who says you have to work until you take SS?

Working and saving provides the ability to make choices. Life isn't over at 66.5 years of age, or at any age unless you want it to be. Filing early is a necessity for most retirees, or at least most think so. This bird in the hand attitude is a viable choice, but so is the more conservative and guaranteed increase in benefits that comes as a reward for patience.
So spending down portfolio assets in lieu of taking SS early is a better option for everyone? No one said life was over at 66.5 years. I do not want to work that extra 4.5 years and would rather enjoy life. Not all of us have deca-million dollar portfolios. I am not interested in burning up my retirement assets and plan on a very frugal retirement lifestyle which involves an active outdoor lifestyle. My wife and I did plenty of traveling during our military years and have no desire to travel outside the US anymore. I have 2 aunts that died at age 65 and never collected a dime of SS benefits. My father-in-law died at 60. Quite frankly I wish I could have not been forced to be part of the SS ponzi scheme but that ship sailed and I plan on getting as much $$ back from the gov't that was wrangled from me as possible. Delaying SS is not right for everyone.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by mageedge » Wed Jul 04, 2018 11:32 am

As others have noted the decision should depend on your individual circumstances and, perhaps, in the immortal words of Linkin Park "it the end it doesn't even matter.." Which is the Social Security actuarial concept.

I went through a similar calculation to the OP a few years ago and decided to delay for a few years. Here's my read on the "after 70" math using fixed $'s for simplicity -

Starting with SS of $1800/mo at 62 that equates to $3168/mo at 70. So, at age 70, you'll be receiving an extra $1368/mo versus having an accumulated pot of money had you begun SS at 62.

Using the OP's assumptions the "pot" would be a gross $257,573 - but this should be reduced by the gradually diminishing return on the beginning pot that would fund the $1800/mo in lieu of SS. So it'll be around $220k net +/-.

Baseline - at age 70, you have a pot of $220k OR $1368/mo to invest. (Because 'apples to apples' says the original $1800/mo continues to be what is spent for living regardless of which choice is made). Using the 4% return assumption, at around age 86 the $1368/mo compounded will have a value which exceeds that of the $220k pot compounded.
The math is fairly straightforward, the realities of life much more complicated -

how long are your going to live; what are inflation and investment returns going to be; how secure is SS; how much do you value the "pot" versus an income stream; etc,etc?

My plan is to be singing that Linkin Park song on my deathbed!

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by vested1 » Wed Jul 04, 2018 11:40 am

ankonaman wrote:
Wed Jul 04, 2018 11:15 am



So spending down portfolio assets in lieu of taking SS early is a better option for everyone? No one said life was over at 66.5 years. I do not want to work that extra 4.5 years and would rather enjoy life. Not all of us have deca-million dollar portfolios. I am not interested in burning up my retirement assets and plan on a very frugal retirement lifestyle which involves an active outdoor lifestyle. My wife and I did plenty of traveling during our military years and have no desire to travel outside the US anymore. I have 2 aunts that died at age 65 and never collected a dime of SS benefits. My father-in-law died at 60. Quite frankly I wish I could have not been forced to be part of the SS ponzi scheme but that ship sailed and I plan on getting as much $$ back from the gov't that was wrangled from me as possible. Delaying SS is not right for everyone.
Never said it was.

Fishing, hunting, and running are low cost activities, which was my point. Describing SS as a Ponzi scheme is not allowed on this forum. Our family has very favorable longevity, so delaying is better for us in theory.

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by jjface » Wed Jul 04, 2018 11:49 am

OP I think you are getting a tad confused. You don't get an extra 8% return from 62-70 and then nothing. You give up 25% income for life by taking early at 62 and you get an extra 8% income for life each year deferring from 67-70.

Basically the SSA actuaries will have priced social security to be neutral ie you are no worse off what you do IF you live an average life span. Ignoring spousal/window benefits. The calculations are a little outdated so that it skews the advantage a little to deferring. Really the main consideration for SS is your views on how long you will live. Are you going to live beyond the average (delaying to 70 will be better) or will you die younger than the average (taking early is better). A good way to look at SS is also to consider it as insurance if you live a long time. Personally I want that safety net in case I live a long time to have a higher guaranteed income stream for life. Unless my health at 62 tells me I better take it now I will defer.

It is this way because eventually the higher income from delaying to 70 WILL catch up to the extra pot you saved by taking it early at 62 (unless you die first). You would have to invest very aggressively and be lucky and gain excessive returns for that not to be true.

You do also need to factor in spousal benefits if any, providing for a widow, cashflow, as well as inheritance into your decision - so there are other considerations.

But thinking that taking early and investing that money will produce higher income for life is not the case. It is not guaranteed and it is very difficult to achieve due to the generosity of deferring.
Last edited by jjface on Wed Jul 04, 2018 11:54 am, edited 2 times in total.

TravelforFun
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by TravelforFun » Wed Jul 04, 2018 11:52 am

Using the OP's numbers:

SS benefits at 62: $1,800 a month or $21,600 a year. That means
SS benefits at 70: $3,168 a month or $38,016 a year.

I look at the calculus this way: Say there are two guys each is 62 years old, has $1million, needs $38,016 a year to live on, and their investments keep up with inflation.

Guy A. Took SS at 62, and his investment at age 70 would be down to: $1,000,000 - ($38,016 - $21,600) x 8 = $868,672 and he would need to withdraw $16,416 a year to supplement his SS.

Guy B. Waited until 70 and his investment at age 70 would be down to: $1,000,000 - $38,016 x 8 = $695,872 or $172,800 lower than Guy A, but Guy B would need to make no further withrawal from his investments.

$172,800 ÷ $16,416 = 10.5 years. If Guy B lived past Age 80.5, he would past Guy A and never look back. The benefits compound if both guys have younger spouses.

TravelforFun

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Re: SS taken at 62 vs. 70, but measured from 70+

Post by jjface » Wed Jul 04, 2018 12:06 pm

Let me illustrate:
SS at 62 = $15k
SS at 70 = $25k

Using OPs unrealistic 4% real return taking early would give an extra nest egg of $138k at age 70. 4% return is then $5500. But you are getting $10,000 less income now at 70 for life since you took it early. So each year that nest egg of $138k will shrink and that 4% return will shrink along with it. By age 90 you would have spent all that $138k and you are better if you had deferred.

And that is using the OPs unrealistic scenario of 4% real returns for the next 30 years. It is more likely to be something like 2-3% using 60:40 with this current environment. So taking early is not going to produce more money unless you die before 80-85.
Last edited by jjface on Wed Jul 04, 2018 12:16 pm, edited 1 time in total.

Gretchen
Posts: 100
Joined: Mon Mar 19, 2007 5:48 am
Location: Southern CA

Re: SS taken at 62 vs. 70, but measured from 70+

Post by Gretchen » Wed Jul 04, 2018 12:15 pm

Two more things to consider.

-- If you choose to defer, you can change that decision at any point. Before you turn 62, it's a purely theoretical decision that you can't act on yet. Once you turn 62, you ask yourself at any given time, "Do I want to file this month, or wait till later?" You don't need to decide when; just note that today isn't as good as "some time later" and wait.

-- Also take into consideration whether your state taxes Social Security. We are in CA, where Social Security income is not taxed. The state tax increases pretty sharply at the lower income levels. We'd be into a marginal state tax of 8% if our Social Security were taxed, but it isn't. This was a good reason for DH to wait till just past age 69 to file, and for me to take only spousal at 66.

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