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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
ValueInvestor99
Posts: 69
Joined: Thu Dec 23, 2010 1:25 pm

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

Post by ValueInvestor99 »

Over 83% of the males in the US have a chronic disease by age 65, so just take your SS when you get a chronic disease or wait until age 70.
MnD
Posts: 5184
Joined: Mon Jan 14, 2008 11:41 am

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

Post by MnD »

Mike Piper's open social security calculator suggests this and seems good enough for me to use for planning purposes 6 years out from our first decision point. Coincidentally I lose a post-retirement income stream right around when DW turns 62.5 that's roughly equal to her age 62.5 SS benefit. So starting her SS then comes in real handy.

Given that the absolute perfect scheme is unknown until the recipient and their spouse are both dead precludes me from wasting a lot of time on this decision - other than I'll run a couple of calculators when the time comes to decide (which hopefully agree) and be done with it.

Social Security is rule-based and I think this is a decision where the proposed solution developed by experts is going to be better than some DIY approach, one gleaned from on-line forum armchair experts or via anecdotal stories.


https://opensocialsecurity.com/
The strategy that maximizes the total dollars you can be expected to spend over your lifetimes is as follows:
Your spouse files for his/her retirement benefit at age 62 and 6 months. (Monthly benefit: $1,501)
You file for your retirement benefit at age 70 and 0 months. (Monthly benefit: $3,649)
If your spouse outlives you, his/her total benefit (including survivor benefit) would be $3,649 per month -- assuming he/she waits at least until full retirement age to file for that survivor benefit. The present value of this proposed solution would be $955,401.
Last edited by MnD on Wed Jul 04, 2018 12:49 pm, edited 3 times in total.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
Tdubs
Posts: 1819
Joined: Tue Apr 24, 2018 7:50 pm

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

Post by Tdubs »

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.
Yes, you lived in fortunate times.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

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

Post by JoeRetire »

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.
Why do you say "at best the inflation rate"?

What about the extra $1200/month you'll be receiving ($3000 - $1800 in your scenario)? Why aren't you investing that like you do with the rest of your assets?
This isn't just my wallet. It's an organizer, a memory and an old friend.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard »

JoeRetire wrote: Wed Jul 04, 2018 3:26 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.
Why do you say "at best the inflation rate"?

What about the extra $1200/month you'll be receiving ($3000 - $1800 in your scenario)? Why aren't you investing that like you do with the rest of your assets?
He's not talking about Delayed Retirement Credits.
He's talking about the CPI-U increase SS does each year, about 2% most recently...
Attempted new signature...
Dottie57
Posts: 12349
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

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

Post by Dottie57 »

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+.
In all of these scenarios, there is no money allotted to living expenses. I am assuming you need food and a house and other things too. It seems to me you either spend the SS or you take Money out of savings/ investments. So I am not seeing why investing SS is better than selling current assets for living expenses.
User avatar
Abe
Posts: 2570
Joined: Fri Sep 18, 2009 5:24 pm
Location: Earth in the Milky Way Galaxy

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

Post by Abe »

jjface wrote: Wed Jul 04, 2018 11:49 am 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.
Question: Does this mean a social security recipient would receive roughly the same amount of money from social security regardless of when they start drawing SS, assuming they live an average lifespan?
In other words the total dollars received would be the same. The only difference would be how it is paid out.
Slow and steady wins the race.
2pedals
Posts: 1988
Joined: Wed Dec 31, 2014 11:31 am

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

Post by 2pedals »

Abe wrote: Wed Jul 04, 2018 4:23 pm
jjface wrote: Wed Jul 04, 2018 11:49 am 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.
Question: Does this mean a social security recipient would receive roughly the same amount of money from social security regardless of when they start drawing SS, assuming they live an average lifespan?
In other words the total dollars received would be the same. The only difference would be how it is paid out.
What this means to me, it depends mostly on your personal situation rather than the actuarial math. Do you want longevity insurance for your significant other or do you want the money now?
User avatar
Abe
Posts: 2570
Joined: Fri Sep 18, 2009 5:24 pm
Location: Earth in the Milky Way Galaxy

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

Post by Abe »

Social Security benefits are actuarially neutral, which means that you'll get roughly the same overall benefits (on a present value basis) if you live to average life expectancy, no matter what age you begin taking benefits.

I found the above here:
https://www.cbsnews.com/news/how-single ... -security/
Slow and steady wins the race.
User avatar
munemaker
Posts: 4338
Joined: Sat Jan 18, 2014 5:14 pm

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

Post by munemaker »

jjface wrote: Wed Jul 04, 2018 11:49 am
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.
For married people, there are 2 phases of SS income. Phase I is the series of payments before you die. Phase 2 is the series of payments after you die. A common mistake is to make the decision on claiming age based only on Phase 1 payments.
User avatar
arcticpineapplecorp.
Posts: 15014
Joined: Tue Mar 06, 2012 8:22 pm

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

Post by arcticpineapplecorp. »

Abe wrote: Wed Jul 04, 2018 5:12 pm Social Security benefits are actuarially neutral, which means that you'll get roughly the same overall benefits (on a present value basis) if you live to average life expectancy, no matter what age you begin taking benefits.

I found the above here:
https://www.cbsnews.com/news/how-single ... -security/
But that quote is taken out of context because there's much more of importance to the quote (some of which has been mentioned in the thread above by various posters who are true mensches (people of integrity and honor) especially when it concerns the welfare of their lower earning surviving spouse, of which delaying SS will always benefit. i.e., it's not always "all about you"):
Social Security benefits are actuarially neutral, which means that you'll get roughly the same overall benefits (on a present value basis) if you live to average life expectancy, no matter what age you begin taking benefits. However, keep in mind that your benefits get larger the longer you wait to begin taking them. If you live past life expectancy, you earn more by delaying benefits.

Furthermore, it's even more advantageous for women to delay filing since benefits are also gender neutral. That means that a man and a woman with identical earnings histories will receive the same benefits, even though an average woman's life expectancy is longer than the average man's.

For example, a 62-year-old female has an average life expectancy of 84. If her full retirement benefit is $1,000:

She will receive $750 per month if she files at age 62.
She will receive $1,320 per month if she files at age 70

A man of the same age gets the same benefits (assuming his full retirement benefit is also $1,000 per month). However, his average life expectancy is three years shorter. The tables below shows how a three-year difference in life expectancies between women and men changes the overall strategy for filing.

source: https://www.cbsnews.com/news/how-single ... -security/
And this is the point that Lawrence Kotlikoff stated on the James Lange show and is worth repeating:
In effect, delaying benefits is like buying longevity insurance. If you live longer than expected, you decrease the risk of running out of money. If you don't live longer than expected, you didn't need the money anyway.

source: https://www.cbsnews.com/news/how-single ... -security/
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Tdubs
Posts: 1819
Joined: Tue Apr 24, 2018 7:50 pm

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

Post by Tdubs »

I've always liked Kotlikoff's point. And historically, it has been very hard to beat the return provided by delaying SSA. There has only been a few times in history when the CAPE has been low enough that taking SS early was best. See this Morgan Stanley Analysis, page 8.

https://hsl-pnw-downloadable-files.s3.a ... eebdd5.pdf
bradpevans
Posts: 801
Joined: Sun Apr 08, 2018 1:09 pm

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

Post by bradpevans »

For every $100 at 62 it’s $175 at 70. If the money goes under a mattress then it’s 128 months to break even

If the 62 invests its longer than 128 months

Must 62 claimants are not investing but rather spending

If not needed at 62 the main reason to claim would be to leave a larger inheritance (imo)

Additionally a max of 85% of SS is taxed (and may avoid state income tax). So a dollar in SS is likely worth more than a dollar in tax deferred

It privides some level of longevity insurance as well

I favor the drawdown of taxable / tax deferred, along with Roth conversion until 70. May not leave the biggest pile at the end but I believe it will allow the most spend until that day comes

I expect to delay pension to 70 for similar reasons (realizing this is not an option for many)
Topic Author
azanon
Posts: 3142
Joined: Mon Nov 07, 2011 9:34 am

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

Post by azanon »

thx1138 wrote: 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!
So make it 3.5% real, which is a perpetual return for a 60/40 portfolio (at near zero expense). 3.5% real still destroys less than 0% real return. (source: Bengen himself).
thx1138 wrote: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.
I disagree. I think you probably spend more money when you are younger and healthier. I'll have a full BCBS (as a fed) health plan for when I'm in advanced aged, with 75% of the premiums paid.
thx1138 wrote: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.
My mini-max outcome will be a ~ 30K dollar pension + at worst an age 62 SS, which will be another 18K or so. So a higher guaranteed stream of income than the average salary in my state before I even start talking about portfolios.
Topic Author
azanon
Posts: 3142
Joined: Mon Nov 07, 2011 9:34 am

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

Post by azanon »

#Cruncher wrote: Wed Jul 04, 2018 8:32 am
azanon wrote: Wed Jul 04, 2018 5:53 amThe 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
It's perpetual stream of income, Cruncher. Are you not aware that a 60/40 comes close to earning 4% real for life? Some say it's actually 4%, I believe Bengen says 3.5% for 60/40. It's not magic. So yes, 8 years later, you can have the same amount of money, that is inflation adjusted, and have the payments from it too.

But that's worst case. AVERAGE real return of a 60/40 is actually well north of 5%. I was picking 5% to be conservative.
Topic Author
azanon
Posts: 3142
Joined: Mon Nov 07, 2011 9:34 am

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

Post by azanon »

Tdubs wrote: 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.
I'm 46, 5'11", 176, can run a 5K in 23 minutes, eat healthy, etc. I realize 90s+ is above average. I'm not average, by my estimation.

I do those realage calulators all the time, and they put me in the 90s for lifespan.
Topic Author
azanon
Posts: 3142
Joined: Mon Nov 07, 2011 9:34 am

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

Post by azanon »

jjface wrote: 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.

.............................

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.
This viewpoint I think highlights the most common mistake that I think is being made between these two choices; That being the erroneous viewpoint that you just pick one or the other and hope your choice is better.

You don't pick one or the other. You either collect at 62, or you BUY/PAY EXTRA to get the delay to 70. They don't cost the same. The collect at 70 cost at the very least the sum total of the payments that you didn't get from age 62-70, but you could also throw in there any real return earnings that money would have made had you not "spent" it to buy your larger age at 70 annuity.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

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

Post by smitcat »

azanon wrote: Thu Jul 05, 2018 7:00 am
jjface wrote: 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.

.............................

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.
This viewpoint I think highlights the most common mistake that I think is being made between these two choices; That being the erroneous viewpoint that you just pick one or the other and hope your choice is better.

You don't pick one or the other. You either collect at 62, or you BUY/PAY EXTRA to get the delay to 70. They don't cost the same. The collect at 70 cost at the very least the sum total of the payments that you didn't get from age 62-70, but you could also throw in there any real return earnings that money would have made had you not "spent" it to buy your larger age at 70 annuity.
You are not accounting for these items - after tax spendable money vs account value, a spouse, Roth conversions, inflation variations, earnings variations. Have you utilized one of the more detailed calculators to help you clearly rate your potential outcome?
FWIW - we used our own spreadsheets to compare SS , than modified them for earnings , then modified them for partial tax rates.
After all that we learned our spreadsheets were very limited to see the entire picture - then we used the IORP and RPM as well as a few others and learned much more than with our spreadsheets.
Dandy
Posts: 6701
Joined: Sun Apr 25, 2010 7:42 pm

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

Post by Dandy »

For me the decision was simple (maybe simplistic).
1. I could afford to fund the wait to age 70 as the higher wage earner.
2. My pension will be reduced by half upon my death so my wife will "need" the benefit of higher SS income.
3. Both of us are relatively healthy and our parents lived until their late 80's - one to 91.
4. I wanted a relatively conservative investment allocation so wanted to maximize my/our income floor to reduce
draw down needs.
5. My pension is not inflation protected so I wanted to maximize inflation protected income.
6. I could change my decision when to collect decision at any time if conditions changed. We didn't need to alter our lifestyle.
7. Wife (a year younger) collected her SS at 62, I took a spousal on her SS at my age 66, I collected at age 70 and she is taking a spousal on my SS now. So the "wait" was not without some SS income.
8. Happy with the decision. Have diversified our finances: Pension, larger SS, Nice size Investment portfolio conservatively invested. Income floor meets or exceeds current lifestyle needs. Sizable RMD can be used to fund early inheritance to children, extra vacation, charity, reinvested etc. Benefits from our investments but not dependent on it. Sleep well -- so far.
User avatar
#Cruncher
Posts: 3975
Joined: Fri May 14, 2010 2:33 am
Location: New York City
Contact:

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

Post by #Cruncher »

Abe wrote: Wed Jul 04, 2018 5:12 pmSocial Security benefits are actuarially neutral, which means that you'll get roughly the same overall benefits (on a present value basis) if you live to average life expectancy, no matter what age you begin taking benefits.
Those who claim at other than their Normal Retirement Age (NRA) will receive a percentage of their Primary Insurance Amount (PIA) -- the benefit if they claim at NRA. For example, as shown here, someone with an NRA of 66 who begins benefits at age 62 will receive 75% of his PIA. If he were to wait until 70, he'd receive 132%. Since these percents are applied to single men, single women, and (in effect) to couples with a 100% survivor benefit, there is no way they can be "actuarially neutral" for all three groups. I calculated the actuarily equivalent percents for each group at a 2% discount rate. [*] They are shown in the following table.

Code: Select all

                  -- Actuarially Equiv --      --- Relative Value ----
Age   SSA Pct      Male   Female    Joint       Male   Female    Joint
---   -------     -----   ------    -----      -----   ------    -----
 62    75.00%     76.3%    78.6%    81.2%      98.3%    95.4%    92.3%
 63    80.00%     81.4%    83.2%    85.4%      98.3%    96.1%    93.7%
 64    86.67%     87.0%    88.3%    89.8%      99.7%    98.1%    96.5%
 65    93.33%     93.1%    93.9%    94.7%     100.2%    99.4%    98.6%
 66   100.00%    100.0%   100.0%   100.0%     100.0%   100.0%   100.0%
 
 67   108.00%    107.6%   106.7%   105.8%    [100.3%]  101.2%   102.1%
 68   116.00%    116.1%   114.1%   112.2%      99.9%  [101.6%]  103.4%
 69   124.00%    125.7%   122.4%   119.2%      98.6%   101.3%  [104.0%]
 70   132.00%    136.5%   131.5%   126.9%      96.7%   100.4%  [104.0%]
While the SSA percents are roughly the same as mine for a single male, they differ significantly for a female and even more so for a male / female couple where the benefit will continue while either of them is alive. Based on this one can see for each group what claiming age will maximize the present value of the expected survival-weighted benefits. For a man it is 67, 68 for a woman, or 69 or 70 for the couple.

* For my calculation I used this longevity estimator for a 62-year old male and female with longevity given by the SSA 1950 Cohort Life Table to get the following present values (PV) of a survival-weighted $1,000 per month when discounted at 2%:

Code: Select all

Start  --- PV of $1,000 / mo ---
Years    Male    Female   Joint
-----  -------  -------  -------
    0  189,560  211,512  245,745 (claim at age 62)
    1  177,755  199,683  233,864
    2  166,336  188,192  222,219
    3  155,304  177,040  210,808
    4  144,662  166,228  199,631 (claim at age 66)
    
    5  134,411  155,756  188,688
    6  124,552  145,626  177,980
    7  115,087  135,837  167,509
    8  106,016  126,392  157,276 (claim at age 70)
For example my "Actuarilly Equiv" and "Relative Value" for a male claiming at age 62:
76.3% = 144,662 / 189,560
98.3% = 75% / 76.3%
User avatar
Artsdoctor
Posts: 6017
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

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

Post by Artsdoctor »

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.
Your point is a good one which is not often discussed. Health concerns matter a great deal when deciding when to start social security. It is true that, in the aggregate, the highest wage earner would probably do best if delaying social security until 70, but there are numerous factors that would argue against this.

Just remember that you won't be able to effectively start your social security at 62 if you're making a decent salary at the same time, so there's that to consider. Therein lies a bit of a paradox: if your health situation is tenuous, you'll need health insurance; most people will find that they'll probably need that through their employer, and that would complicate starting social security early.
Ron
Posts: 6972
Joined: Fri Feb 23, 2007 6:46 pm
Location: Allentown–Bethlehem–Easton, PA-NJ Metropolitan Statistical Area

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

Post by Ron »

I believe that every person who is currently drawing their own SS (not spousal) is sure what they did is the "perfect" plan :mrgreen: ...

As for myself/wife? We are currently drawing our own age-70 SS, starting this year. My wife has been receiving a spousal benefit over the last four years, with a total SS income of just over $60K for the period (my age-66 FRA SS was close to the max).

All I know is that it certainly easier today having our total retirement income coming from SS (along with two small pensions, an SPIA, and a small VA disability benefit) than deriving it from our respective retirement portfolios as each of us entered retirement; me since age 59 (retired 11 years) and my wife, since age 64 (retired six years). We no longer worry about what the market will/will not do, since our retirement expenses are covered outside of our investments. As we get older, we rather enjoy retirement without constantly planning/worrying about where our income will come from (yes, we are fortunate...). If each of us had taken SS at an earlier age, and at a lesser benefit level, we still would have to worry about how our respective portfolios are doing, since SS would not cover our planned expenses.

FWIW,

- Ron
thx1138
Posts: 1164
Joined: Fri Jul 12, 2013 2:14 pm

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

Post by thx1138 »

azanon wrote: Thu Jul 05, 2018 6:29 am
thx1138 wrote: 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!
So make it 3.5% real, which is a perpetual return for a 60/40 portfolio (at near zero expense). 3.5% real still destroys less than 0% real return. (source: Bengen himself).
As already pointed out more than once in the thread this "0% real return" is a misunderstanding on your part. More than one person has run the numbers to illustrate that point to you.

The math is abundantly clear, since you repeatedly assert you are going to live past 90 it is in your best interests to defer. Feel free to ignore the advice.
User avatar
Frugal Al
Posts: 1736
Joined: Fri May 28, 2010 10:09 am

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

Post by Frugal Al »

azanon wrote: Thu Jul 05, 2018 6:38 am It's perpetual stream of income, Cruncher. Are you not aware that a 60/40 comes close to earning 4% real for life? Some say it's actually 4%, I believe Bengen says 3.5% for 60/40. It's not magic. So yes, 8 years later, you can have the same amount of money, that is inflation adjusted, and have the payments from it too.

But that's worst case. AVERAGE real return of a 60/40 is actually well north of 5%. I was picking 5% to be conservative.
It's not only not magic, it's not true. Azanon, I believe you have a profound misunderstanding of the Trinity study. The 4% sustainable withdrawal rate + inflation only requires about a 1.25% real return to succeed. The failures are due to a bad sequence of returns. You cannot assume a 60/40 allocation will produce a 4% real return, or even a 3.5% real return.
2pedals
Posts: 1988
Joined: Wed Dec 31, 2014 11:31 am

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

Post by 2pedals »

OP

Are you married have a significant other, have kids and do you have legacy reasons to be saving your money?

If you are investing your money in retirement, sequence of return risks may reduce your safe withdrawal rate. The older you get the less time you have to make up for market drops and you may not have an income source from working. At 46 I think you are too young to be thinking about this since your financial makeup can change significantly at 62.

Delaying social security can be a great way to reduce your likelihood that you will outlive your money. Furthermore, if you have no legacy concerns you may wish to annuitize your savings. Delaying your social security effectively is a cheap form of inflation indexed annuitizing your savings.
mariezzz
Posts: 992
Joined: Mon Oct 02, 2017 11:02 pm

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

Post by mariezzz »

This discussion has been good - so many things to consider in the decision about when to take SS.

Even if you come from a family that tends to live long, there are other options:

work a couple years beyond 62 in your current job to save what is needed to offset the effect of taking SS before age 70
or
if you're uninspired/unrewarded by your current job, around age 62, you could take a different job that isn't so many hours (and perhaps pays less), but is rewarding and meaningful to you. Work a few years, save as much as you can, and that to offset the effect of taking SS before age 70. Right now, this second option is very real because the economy is so strong. In weaker economies, it might not be as easy to do this.
jfave33
Posts: 3287
Joined: Thu Mar 19, 2015 6:18 pm

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

Post by jfave33 »

azanon wrote: Thu Jul 05, 2018 7:00 am
jjface wrote: 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.

.............................

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.
This viewpoint I think highlights the most common mistake that I think is being made between these two choices; That being the erroneous viewpoint that you just pick one or the other and hope your choice is better.

You don't pick one or the other. You either collect at 62, or you BUY/PAY EXTRA to get the delay to 70. They don't cost the same. The collect at 70 cost at the very least the sum total of the payments that you didn't get from age 62-70, but you could also throw in there any real return earnings that money would have made had you not "spent" it to buy your larger age at 70 annuity.

No you have very much misunderstood what I am saying. Yes you are right that when you start off you are getting income from 62-70 when someone who defers to 70 gets nothing. But you are not understanding that the person who defers is buying something very valuable in return. At age 70 they will get a substantially higher income stream for life. 8 year of extra social security will not produce more income than what the SSA is giving to defer to 70 even if markets do really well. Run the numbers yourself - it is virtually impossible for this not to be the case. So from age 70 the one who defers will be playing catch up and will eventually overtake you in terms of net worth if they live long enough. That breakeven point is roughly 80-85 years old.

So you are missing out the most important variable in the whole equation. Your age of death. If you take early you will come out on top if you die before that breakeven point of 80-85 . But if you live beyond 80-85 you will be reaping in more and more years of that substantially higher income and pulling further and further away from if you took it early. That is why the decision is very difficult because the optimal solution you are seeking depends on a variable that is unknown - when you will die. You can only run the numbers and make the best decision for you and only time will tell if you win or lose. But the fact is if you defer you also gain something valuable and that is insurance if you live very long. It matters little if you die earlier - your heirs just get less. But if you live until you are 100 and are struggling for money then it is hard to change that situation.

And yes what I am saying is very simplistic as there are many other considerations such as your spouse to consider. However many of which will favor deferring anyway.

But the basics are that if you take early you will only come out ahead if you die earlier. So if your health is a bit iffy then you will want to take it early and enjoy that money while you can.

If you are really unsure then taking at FRA is a safe bet.
MnD
Posts: 5184
Joined: Mon Jan 14, 2008 11:41 am

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

Post by MnD »

arcticpineapplecorp. wrote: Wed Jul 04, 2018 5:47 pm But that quote is taken out of context because there's much more of importance to the quote (some of which has been mentioned in the thread above by various posters who are true mensches (people of integrity and honor) especially when it concerns the welfare of their lower earning surviving spouse, of which delaying SS will always benefit. i.e., it's not always "all about you"):
I don't think we need to equate delaying benefits with having more honor and integrity and not having an "all about you:" attitude.
I can recall several high earners that were overly miserly in retirement in various ways (including delaying retirement and delaying SS benefits in order to have "more later"). And as a result had fewer memorable and epic experiences with their spouses while in the healthy and active earlier stages of retirement. Then they got sick/disabled and died leaving the lower income spouse with "giant cash mountain" but without a spouse to enjoy it with and without the relative youth and energy they used to have to enjoy it on their own or with others.

I think a fair amount of resistance to spending in retirement by the primary breadwinner is more of an "all about me" attitude of not wanting to spend down any of the giant cash mountain they spent a lifetime and career accumulating. It becomes an exercise in money hoarding and collecting versus saving while working in order to enjoy and utilize in retirement or to better provide for a lower earning spouse.

I'd lump the ultra-low SWR thinking into this general category as well.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard »

Ron wrote: Thu Jul 05, 2018 9:29 am
...All I know is that it certainly easier today having our total retirement income coming from SS (along with two small pensions, an SPIA, and a small VA disability benefit) than deriving it from our respective retirement portfolios as each of us entered retirement; me since age 59 (retired 11 years) and my wife, since age 64 (retired six years). We no longer worry about what the market will/will not do, since our retirement expenses are covered outside of our investments. As we get older, we rather enjoy retirement without constantly planning/worrying about where our income will come from (yes, we are fortunate...)...
Right.
I'm single, but when I start my age 70 SS benefit of around $3400/month 20 months from now, I'll be in a similar situation.
My remaining portfolio will turn into a discretionary slush fund, not needed for normal expenses at all.

Now it's true that the seven year delay in retirement waiting for SS from age 63 to 70 had some risk to it starting back in 2013.
So I had some plan B options that so far haven't been needed (and probably won't be).
A key point for retirees age 62 or so is: you don't need to cast your plan for SS in cement at the start of retirement. You can adjust it based on circumstances as time goes on...
Attempted new signature...
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

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

Post by marcopolo »

MnD wrote: Thu Jul 05, 2018 2:37 pm
I don't think we need to equate delaying benefits with having more honor and integrity and not having an "all about you:" attitude.
I can recall several high earners that were overly miserly in retirement in various ways (including delaying retirement and delaying SS benefits in order to have "more later"). And as a result had fewer memorable and epic experiences with their spouses while in the healthy and active earlier stages of retirement. Then they got sick/disabled and died leaving the lower income spouse with "giant cash mountain" but without a spouse to enjoy it with and without the relative youth and energy they used to have to enjoy it on their own or with others.

I think a fair amount of resistance to spending in retirement by the primary breadwinner is more of an "all about me" attitude of not wanting to spend down any of the giant cash mountain they spent a lifetime and career accumulating. It becomes an exercise in money hoarding and collecting versus saving while working in order to enjoy and utilize in retirement or to better provide for a lower earning spouse.

I'd lump the ultra-low SWR thinking into this general category as well.
This is a really interesting point for me, and something i struggle to balance.
On the one hand, I have taken a fairly early retirement (age 51) just so my spouse and I can enjoy more of our healthy years doing things we enjoy.. On the other hand, with a 40+ year retirement ahead of us, I feel like i need to be a little conservative with planning withdrawal rates and plan B contingencies. Striking a balance is definitely challenging.

Just out of curiosity, at what SWR do you think someone starts to veer into the trap of hoarding rather than prudently spending what they have accumulated?

Having said that, my current plan is to delay SS as a form longevity insurance, and diversification
Once in a while you get shown the light, in the strangest of places if you look at it right.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

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

Post by marcopolo »

One aspect I don't think i have seen discussed above is the idea of diversification of risk, via source of income.

Delaying SS is essentially purchasing a deferred annuity. Whether that makes sense financially depends on a lot of assumptions.
But, from a diversification perspective, I think about what other sources of income are available.

For me, I have no pension, so buying an annuity (delayed SS) with a portion of my portfolio provides diversification. Not doing so just leaves more of the money in concentrated market risk. So, in my situation i think it makes sense.

On the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
Last edited by marcopolo on Thu Jul 05, 2018 3:17 pm, edited 1 time in total.
Once in a while you get shown the light, in the strangest of places if you look at it right.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

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

Post by willthrill81 »

marcopolo wrote: Thu Jul 05, 2018 3:09 pmOn the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
The Sensible Steward
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

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

Post by JoeRetire »

The Wizard wrote: Wed Jul 04, 2018 3:37 pm
JoeRetire wrote: Wed Jul 04, 2018 3:26 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.
Why do you say "at best the inflation rate"?

What about the extra $1200/month you'll be receiving ($3000 - $1800 in your scenario)? Why aren't you investing that like you do with the rest of your assets?
He's not talking about Delayed Retirement Credits.
He's talking about the CPI-U increase SS does each year, about 2% most recently...
Makes no sense to ignore the market return created by the extra money you receive monthly.
This isn't just my wallet. It's an organizer, a memory and an old friend.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard »

willthrill81 wrote: Thu Jul 05, 2018 3:16 pm
marcopolo wrote: Thu Jul 05, 2018 3:09 pmOn the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
Umm, no.
This practically never makes sense, sorry...
Attempted new signature...
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

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

Post by willthrill81 »

The Wizard wrote: Thu Jul 05, 2018 3:37 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pm
marcopolo wrote: Thu Jul 05, 2018 3:09 pmOn the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
Umm, no.
This practically never makes sense, sorry...
Why not?

I have a distaste for refutations with no explanation (I don't mean this personally towards you, and I don't take it personally either).
The Sensible Steward
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard »

willthrill81 wrote: Thu Jul 05, 2018 3:43 pm
The Wizard wrote: Thu Jul 05, 2018 3:37 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pm
marcopolo wrote: Thu Jul 05, 2018 3:09 pmOn the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
Umm, no.
This practically never makes sense, sorry...
Why not?
Because.
Commission a survey of SS recipients' response to the question: Would you be happier if we cut your monthly SS benefit by 5% from here on.

Then come back and report the results of that survey...
Last edited by The Wizard on Thu Jul 05, 2018 3:48 pm, edited 1 time in total.
Attempted new signature...
User avatar
Hyperborea
Posts: 956
Joined: Sat Apr 15, 2017 10:31 am
Location: Portugal

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

Post by Hyperborea »

willthrill81 wrote: Thu Jul 05, 2018 3:43 pm
The Wizard wrote: Thu Jul 05, 2018 3:37 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pm
marcopolo wrote: Thu Jul 05, 2018 3:09 pmOn the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
Umm, no.
This practically never makes sense, sorry...
Why not?

I have a distaste for refutations with no explanation (I don't mean this personally towards you, and I don't take it personally either).
It's not much different than saying that a smaller salary is a benefit from a tax perspective.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

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

Post by willthrill81 »

Hyperborea wrote: Thu Jul 05, 2018 3:48 pm
willthrill81 wrote: Thu Jul 05, 2018 3:43 pm
The Wizard wrote: Thu Jul 05, 2018 3:37 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pm
marcopolo wrote: Thu Jul 05, 2018 3:09 pmOn the other hand, if my retirement was being funded with a large pension, and i had a smaller portfolio, then I might be inclined to keep the portfolio intact rather than spending a chunk of it to buy yet another income stream.
In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
Umm, no.
This practically never makes sense, sorry...
Why not?

I have a distaste for refutations with no explanation (I don't mean this personally towards you, and I don't take it personally either).
It's not much different than saying that a smaller salary is a benefit from a tax perspective.
That's not a fair comparison. We're talking about a smaller income but over a longer period of time. From an actuarial standpoint, the two are equivalent. Apart from one's personal circumstances, there's no 'free lunch' to be had by deferring SS.

I can see a situation where a larger SS benefit at 70 plus RMDs starting to kick in could bump someone into a higher bracket than they need from a spending standpoint. Why not smooth that out by starting SS earlier? I don't see this as being a common circumstance, only an exception.
The Sensible Steward
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

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

Post by JoeRetire »

willthrill81 wrote: Thu Jul 05, 2018 3:16 pmIn addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
If you want to minimize taxes, spend everything in your portfolio so that you'll have no income.
This isn't just my wallet. It's an organizer, a memory and an old friend.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

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

Post by willthrill81 »

JoeRetire wrote: Thu Jul 05, 2018 3:52 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pmIn addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
If you want to minimize taxes, spend everything in your portfolio so that you'll have no income.
Or better yet, just die. Then you're done paying taxes. :D
The Sensible Steward
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard »

Hyperborea wrote: Thu Jul 05, 2018 3:48 pm
It's not much different than saying that a smaller salary is a benefit from a tax perspective.
It's possible to contrive a situation where twins have roughly the same income in retirement where twins A has AGI of $84,500, but twin B, who delayed a bit longer before claiming SS, has an AGI of $85,100, thus costing B more in Medicare IRMAA than the extra income.

But as I said: contrived...
Attempted new signature...
User avatar
Hyperborea
Posts: 956
Joined: Sat Apr 15, 2017 10:31 am
Location: Portugal

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

Post by Hyperborea »

willthrill81 wrote: Thu Jul 05, 2018 3:51 pm
Hyperborea wrote: Thu Jul 05, 2018 3:48 pm
willthrill81 wrote: Thu Jul 05, 2018 3:43 pm
The Wizard wrote: Thu Jul 05, 2018 3:37 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pm

In addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
Umm, no.
This practically never makes sense, sorry...
Why not?

I have a distaste for refutations with no explanation (I don't mean this personally towards you, and I don't take it personally either).
It's not much different than saying that a smaller salary is a benefit from a tax perspective.
That's not a fair comparison. We're talking about a smaller income but over a longer period of time. From an actuarial standpoint, the two are equivalent. Apart from one's personal circumstances, there's no 'free lunch' to be had by deferring SS.

I can see a situation where a larger SS benefit at 70 plus RMDs starting to kick in could bump someone into a higher bracket than they need from a spending standpoint. Why not smooth that out by starting SS earlier? I don't see this as being a common circumstance, only an exception.
Delay the SS and remain in a lower tax bracket until 70 and convert as much of the IRA as possible while in the lower tax bracket. That's likely to be of higher utility especially when combined with the higher SS at 70.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

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

Post by JoeRetire »

willthrill81 wrote: Thu Jul 05, 2018 3:53 pm
JoeRetire wrote: Thu Jul 05, 2018 3:52 pm
willthrill81 wrote: Thu Jul 05, 2018 3:16 pmIn addition, a smaller SS benefit may be preferable from a tax perspective (e.g. place one in a lower bracket).
If you want to minimize taxes, spend everything in your portfolio so that you'll have no income.
Or better yet, just die. Then you're done paying taxes. :D
And you'll sleep better at night!
This isn't just my wallet. It's an organizer, a memory and an old friend.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

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

Post by willthrill81 »

Hyperborea wrote: Thu Jul 05, 2018 3:57 pm
willthrill81 wrote: Thu Jul 05, 2018 3:51 pm
Hyperborea wrote: Thu Jul 05, 2018 3:48 pm
willthrill81 wrote: Thu Jul 05, 2018 3:43 pm
The Wizard wrote: Thu Jul 05, 2018 3:37 pm

Umm, no.
This practically never makes sense, sorry...
Why not?

I have a distaste for refutations with no explanation (I don't mean this personally towards you, and I don't take it personally either).
It's not much different than saying that a smaller salary is a benefit from a tax perspective.
That's not a fair comparison. We're talking about a smaller income but over a longer period of time. From an actuarial standpoint, the two are equivalent. Apart from one's personal circumstances, there's no 'free lunch' to be had by deferring SS.

I can see a situation where a larger SS benefit at 70 plus RMDs starting to kick in could bump someone into a higher bracket than they need from a spending standpoint. Why not smooth that out by starting SS earlier? I don't see this as being a common circumstance, only an exception.
Delay the SS and remain in a lower tax bracket until 70 and convert as much of the IRA as possible while in the lower tax bracket. That's likely to be of higher utility especially when combined with the higher SS at 70.
I too would think that very likely to be the case. In fact, that's precisely what I plan to do myself. But there are so many potential factors at work here that I wouldn't personally try to claim that to be universally optimal.
The Sensible Steward
User avatar
HomerJ
Posts: 21246
Joined: Fri Jun 06, 2008 12:50 pm

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

Post by HomerJ »

vested1 wrote: Wed Jul 04, 2018 10:24 amThis 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.
How is it "guaranteed"? Social Security website currently tells me they will have to reduce benefits to 75% in 2035.

https://www.ssa.gov/policy/docs/ssb/v70 ... 3p111.html

This is reality right now. We don't talk about politics here, or about possible changes to legislation. So we need to use the current statements on the ssa.gov website to make decisions today.

So, although I understand the rationale behind spending down your own money faster in your 60s in order to wait to file for SS until 70, I doubt I will follow that plan.

Because I turn 67 in 2035.

I'm planning on taking my money at 63, soon as possible. Bird in the hand, indeed.

But if things change, maybe I'll change my plan.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
Hyperborea
Posts: 956
Joined: Sat Apr 15, 2017 10:31 am
Location: Portugal

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

Post by Hyperborea »

willthrill81 wrote: Thu Jul 05, 2018 3:59 pm
Hyperborea wrote: Thu Jul 05, 2018 3:57 pm
willthrill81 wrote: Thu Jul 05, 2018 3:51 pm
Hyperborea wrote: Thu Jul 05, 2018 3:48 pm
willthrill81 wrote: Thu Jul 05, 2018 3:43 pm

Why not?

I have a distaste for refutations with no explanation (I don't mean this personally towards you, and I don't take it personally either).
It's not much different than saying that a smaller salary is a benefit from a tax perspective.
That's not a fair comparison. We're talking about a smaller income but over a longer period of time. From an actuarial standpoint, the two are equivalent. Apart from one's personal circumstances, there's no 'free lunch' to be had by deferring SS.

I can see a situation where a larger SS benefit at 70 plus RMDs starting to kick in could bump someone into a higher bracket than they need from a spending standpoint. Why not smooth that out by starting SS earlier? I don't see this as being a common circumstance, only an exception.
Delay the SS and remain in a lower tax bracket until 70 and convert as much of the IRA as possible while in the lower tax bracket. That's likely to be of higher utility especially when combined with the higher SS at 70.
I too would think that very likely to be the case. In fact, that's precisely what I plan to do myself. But there are so many potential factors at work here that I wouldn't personally try to claim that to be universally optimal.
Unfortunately, I've yet to see any real case like that brought forward in any of the numerous SS discussion by those planning to take it early at 62. The only two arguments raised are "my family all died early therefore I will too" or "I want to get back the money the gubmint done took from me as soon as possible". There is some correlation on life expectancy but a number of the causes that took previous generations we now have tests to detect earlier and treatments to cure or treat them. It's at least a plausible argument.

The second one is an emotional argument that ignores the facts and in many cases will likely hurt their surviving spouse. Most of the "get my money soon" posters seem to be men and statistically it's likely that their wife will outlive them.

There is a third reason but not usually cited on this or similar financial boards where the retiree needs to retire at 62 and doesn't have enough to afford to do so without taking the SS at 62.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard »

HomerJ wrote: Thu Jul 05, 2018 4:07 pm
vested1 wrote: Wed Jul 04, 2018 10:24 amThis 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.
How is it "guaranteed"? Social Security website currently tells me they will have to reduce benefits to 75% in 2035...
True.
But 75% of age 70 $3168/month is still lots more than 75% of age 62 $1800/month, to use numbers previously discussed...
Attempted new signature...
User avatar
HomerJ
Posts: 21246
Joined: Fri Jun 06, 2008 12:50 pm

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

Post by HomerJ »

The Wizard wrote: Thu Jul 05, 2018 4:47 pm
HomerJ wrote: Thu Jul 05, 2018 4:07 pm
vested1 wrote: Wed Jul 04, 2018 10:24 amThis 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.
How is it "guaranteed"? Social Security website currently tells me they will have to reduce benefits to 75% in 2035...
True.
But 75% of age 70 $3168/month is still lots more than 75% of age 62 $1800/month, to use numbers previously discussed...
Sure, calculations remain the same if you turn 62 (63?) AFTER 2035. 75% off both numbers keeps everything equal.

But if 2035 falls between age 62 (63?) and 70, it definitely changes the equations.

Because then you compare 100% of $1800 for a few years (before dropping to 75%) compared to 75% of $3168 at 70.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

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

Post by willthrill81 »

HomerJ wrote: Thu Jul 05, 2018 5:03 pm
The Wizard wrote: Thu Jul 05, 2018 4:47 pm
HomerJ wrote: Thu Jul 05, 2018 4:07 pm
vested1 wrote: Wed Jul 04, 2018 10:24 amThis 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.
How is it "guaranteed"? Social Security website currently tells me they will have to reduce benefits to 75% in 2035...
True.
But 75% of age 70 $3168/month is still lots more than 75% of age 62 $1800/month, to use numbers previously discussed...
Sure, calculations remain the same if you turn 62 (63?) AFTER 2035. 75% off both numbers keeps everything equal.

But if 2035 falls between age 62 (63?) and 70, it definitely changes the equations.

Because then you compare 100% of $1800 for a few years (before dropping to 75%) compared to 75% of $3168 at 70.
Is it known whether the 75% estimate applies to those starting SS benefits at approximately 2035, or will that 75% estimate apply to all of those receiving SS benefits?
The Sensible Steward
BigJohn
Posts: 2626
Joined: Wed Apr 02, 2014 11:27 pm

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

Post by BigJohn »

My two cents... you can do all the return calls you want but the big unknowns of market return and longevity make any decision an educated guess at best. I struggled with this question for a while and I’m deferring to 70 for two reasons.

First, I have a large portion of my portfolio in tax deferred IRAs. Keeping my taxable income low allows me to do more Roth conversions between now and then.

Second, I’ve become a firm believer in the concept of longevity insurance. If I live longer than average I’ll be glad I waited. If I die early, I really won’t care that it was before some currently unknown break even point.

The only thing that would change my plans is if I developed some significant health issue that made the odds of living to my life expectancy far lower.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
Post Reply