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

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

Post by HomerJ »

willthrill81 wrote: Thu Jul 05, 2018 5:19 pm
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?
That's a good question. I have no idea.

I was just throwing it out there... Obviously, we'll know more when the date gets closer. It's still nearly 20 years away.
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hoops777
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by hoops777 »

The answer to the op would be simple if we know what the market would do from years 62 to 70 and then from 70 on to his 90’s.
No one knows what the market will do or how long they will live.To me,deferring is a no brainer if you do not need the money and expect longevity.
Weighing the 8 pct or so per year increase against sequence of return risk is huge.
The op should ask,assuming he lives to be 90,what is the worst outcome if he takes it at 62 vs 70.He is looking at only the best outcome in my opinion....I invest it in the market and the market returns a positive x pct.What if the market tanks and goes into a historically bad long term period?
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by vested1 »

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.

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.
It is guaranteed right now, not in 2037 or 2035, or anytime in the distant future. Historically, current recipients are not affected by new legislation (other than taxation). The increase for delaying is guaranteed right now for those currently delaying (me). In 17 years (2035) I'll be 83, and 5 years past my personal break even point that so many put so much credence in. If I'm dead by then I won't care what they do. If I'm alive I suspect I will be one of the multitude of vociferous dissenters when they try to pry my hard earned SS away from me.

If I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60. While this may have resulted in more aggressive saving, that's not such a bad thing. Having saved diligently provides options, such as the ability to delay SS that wouldn't have been possible with a smaller savings amount.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

vested1 wrote: Thu Jul 05, 2018 6:36 pmIf I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60.
I'm planning on retiring between 50 and 55 and completely ignore SS in all of my personal planning.* The period between my retirement and ability to claim SS benefits, coupled with the uncertainty surrounding the system, leads me to view it as not being worthwhile to plan around. Whatever we get from SS will be icing on our cake.

*When I've mentioned this, one prominent Boglehead here insisted that I was being completely irrational, ignoring a huge factor. But even if the system were unchanged, the SS benefit won't likely be enough to really change much for us.
“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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HomerJ
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by HomerJ »

vested1 wrote: Thu Jul 05, 2018 6:36 pmIf I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60. While this may have resulted in more aggressive saving, that's not such a bad thing. Having saved diligently provides options, such as the ability to delay SS that wouldn't have been possible with a smaller savings amount.
Sorry, I plan to be 5 years retired by 60. As I'm only 6-7 years away from retirement at 55, I need to consider SS in my planning NOW.

I would consider it poor planning to ignore SS completely. I also would consider it poor planning (for me) to count on 100% considering ssa.gov is telling me it won't be 100% when I collect it.

Yes, if someone is 62 today, then your advice is sound.

I'm just pointing out that people need to keep in mind what ssa.gov is saying on their website when planning for Social Security. Because it applies to many of us.
Historically, current recipients are not affected by new legislation (other than taxation).
This may be true. I'm not sure how they would handle it. As far as I can tell, if nothing changes, everyone will drop to 75%. There is no new legislation involved here (unless they fix it). SS won't have the money to pay 100% to all the people already on it, and only 75% to all new people. It states that the money coming in will only cover 75% of the money going out.

So it's either 75% to everyone (even existing people) or something like 100% to all people already on it, and 50% to all new retirees (which would make taking it at 62 for me even MORE imperative to get grandfathered in).

All I'm saying is that it's something to keep in mind.
Last edited by HomerJ on Thu Jul 05, 2018 8:42 pm, edited 1 time in total.
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HomerJ
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by HomerJ »

willthrill81 wrote: Thu Jul 05, 2018 8:24 pm
vested1 wrote: Thu Jul 05, 2018 6:36 pmIf I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60.
I'm planning on retiring between 50 and 55 and completely ignore SS in all of my personal planning.* The period between my retirement and ability to claim SS benefits, coupled with the uncertainty surrounding the system, leads me to view it as not being worthwhile to plan around. Whatever we get from SS will be icing on our cake.

*When I've mentioned this, one prominent Boglehead here insisted that I was being completely irrational, ignoring a huge factor. But even if the system were unchanged, the SS benefit won't likely be enough to really change much for us.
If you're rich enough that $4000-$5000 a month (for a couple) won't impact your retirement hardly at all, well good for you.

$60,000 a year is a pretty big chunk for most of us.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by marcopolo »

HomerJ wrote: Thu Jul 05, 2018 8:37 pm
So it's either 75% to everyone (even existing people) or something 100% to all people already on it, and 50% to all new retirees (which would make taking it at 62 for me even MORE imperative to get grandfathered in).
I think it would be way worse than that if they tried to only hit new retirees.

When the "trust fund" runs out in 2034ish, it will be mostly a cliff (could be spread over 2 years). Soc Sec will go from paying all its obligations to being able to pay only 75% of all its obligations. I am not sure what the ratio of existing to new recipients is each years, but it has to be way more than 3:1. So, if they only have 75% of all obligations, they do not have enough to pay 100% to existing recipients, even if they gave 0% to all the new filers.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by hoops777 »

marcopolo wrote: Thu Jul 05, 2018 8:46 pm
HomerJ wrote: Thu Jul 05, 2018 8:37 pm
So it's either 75% to everyone (even existing people) or something 100% to all people already on it, and 50% to all new retirees (which would make taking it at 62 for me even MORE imperative to get grandfathered in).
I think it would be way worse than that if they tried to only hit new retirees.

When the "trust fund" runs out in 2034ish, it will be mostly a cliff (could be spread over 2 years). Soc Sec will go from paying all its obligations to being able to pay only 75% of all its obligations. I am not sure what the ratio of existing to new recipients is each years, but it has to be way more than 3:1. So, if they only have 75% of all obligations, they do not have enough to pay 100% to existing recipients, even if they gave 0% to all the new filers.
It will be fixed one way or another.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

HomerJ wrote: Thu Jul 05, 2018 8:41 pm
willthrill81 wrote: Thu Jul 05, 2018 8:24 pm
vested1 wrote: Thu Jul 05, 2018 6:36 pmIf I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60.
I'm planning on retiring between 50 and 55 and completely ignore SS in all of my personal planning.* The period between my retirement and ability to claim SS benefits, coupled with the uncertainty surrounding the system, leads me to view it as not being worthwhile to plan around. Whatever we get from SS will be icing on our cake.

*When I've mentioned this, one prominent Boglehead here insisted that I was being completely irrational, ignoring a huge factor. But even if the system were unchanged, the SS benefit won't likely be enough to really change much for us.
If you're rich enough that $4000-$5000 a month (for a couple) won't impact your retirement hardly at all, well good for you.

$60,000 a year is a pretty big chunk for most of us.
It wouldn't be nearly that much for us. We're a single-earner household, and I'll only have around 25 years with meaningful earnings. Combine that with a 25% shave, and we would get around $30k in today's dollars at SS's FRA. Considering that I plan to retire with a $75-$100k annual income, a $30k income 10-15 years down the road isn't a big factor, especially since it would likely push us into a higher tax bracket; under current tax law, we would likely pay over $5k of that $30k in taxes. Our planned retirement income will easily cover all of our necessities plus 1-2x that much again in dollars for discretionary spending, so an additional $25k would just be for grandchildren and charity I suppose. And all of this is ignoring a substantial inheritance that will sadly come along one day as well.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by #Cruncher »

HomerJ wrote: Thu Jul 05, 2018 5:03 pm
The Wizard wrote: Thu Jul 05, 2018 4:47 pm...But 75% of age 70 $3168/month is still lots more than 75% of age 62 $1800/month, to use numbers previously discussed...
… 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 2nd table in my first post shows the Internal Rate of Return (IRR) from delaying benefits from 62 to 70. Below is that same table with columns added for the worst case scenario (i.e., worst case for delaying) where SS benefits fall 25% in the year the recipient reaches age 70.

If he starts at 62, he'll get eight years at $21,600 (1800 X 12) which will fall to $16,200 beginning at age 70. However, if he waits to claim until age 70, he'll never get the $38,016 from my first post; he'll get only $28,512. Thus the additional amount starting at age 70 will only be $12,312 (28,512 - 16,200) instead of $16,416 (38016 - 21600).

So the same "investment" of $21,600 per year for eight years will now "buy" only $12,312 per year instead of $16,416. This has a big effect on the IRR. The 0% real return (i.e., straight dollar breakeven) rises from age 81 to 84; to get a 2% real return one must live to 88 instead of 83; and to get a 4% real return requires living to 97 instead of 87. [1]

Code: Select all

       ---- Benefit ----     ----- IRR ------
Age    No Chg     X 0.75     No Chg    X 0.75

Code: Select all

 63   (21,600)   (21,600)
 64   (21,600)   (21,600)
 65   (21,600)   (21,600)
 66   (21,600)   (21,600)
 67   (21,600)   (21,600)
 68   (21,600)   (21,600)
 69   (21,600)   (21,600)
 70   (21,600)   (21,600)
 71    16,416     12,312 
 72    16,416     12,312 
 73    16,416     12,312 
 74    16,416     12,312 
 75    16,416     12,312 
 76    16,416     12,312 
 77    16,416     12,312 
 78    16,416     12,312 
 79    16,416     12,312     (1.8%)    (5.1%)
 80    16,416     12,312     (0.6%)    (3.7%)
 81    16,416     12,312      0.5%     (2.5%)
 82    16,416     12,312      1.3%     (1.5%)
 83    16,416     12,312      2.0%     (0.7%)
 84    16,416     12,312      2.7%     (0.0%)
 85    16,416     12,312      3.2%      0.6% 
 86    16,416     12,312      3.6%      1.1% 
 87    16,416     12,312      4.0%      1.6% 
 88    16,416     12,312      4.4%      2.0% 
 89    16,416     12,312      4.7%      2.3% 
 90    16,416     12,312      4.9%      2.6% 
 91    16,416     12,312      5.2%      2.9% 
 92    16,416     12,312      5.4%      3.2% 
 93    16,416     12,312      5.6%      3.4% 
 94    16,416     12,312      5.7%      3.6% 
 95    16,416     12,312      5.9%      3.8% 
 96    16,416     12,312      6.0%      3.9% 
 97    16,416     12,312      6.1%      4.1% 
 98    16,416     12,312      6.2%      4.2% 
 99    16,416     12,312      6.3%      4.3% 
100    16,416     12,312      6.4%      4.4%

willthrill81 wrote: Thu Jul 05, 2018 3:51 pmI 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.
Quite exceptional I would say! In fact it would be difficult to construct a case where delaying SS until age 70 versus taking it at age 62 would be a worse comparison after tax than before tax. While the SS benefit would, of course, be higher; other taxable income would almost certainly be lower since more withdrawals from (or less additions to) the portfolio were made because of the forsaken SS. And SS benefits have less effect on taxes than ordinary income.

One important thing is that after the maximum 85% of SS has been taxed additional SS benefits cause only a 42.5% increase in taxable income. So for instance if one is in the 22% tax bracket, additional SS will be subject to only a 9.35% marginal tax rate. [2]

  1. The "no catch up rate" (i.e., the constant real return such that the cash flow from delaying will never catch up to the cash flow from claiming early) falls from 7.3% to 5.8%:

    Code: Select all

      rate = (1 + additional benefit / early benefit) ^ (1 / years delay) - 1
    7.322% = (1 + 16416              / 21600)         ^ (1 / 8)           - 1
    5.800% = (1 + 12312              / 21600)         ^ (1 / 8)           - 1
  2. The reason for this has to do with the way SS benefits are taxed. (See Taxation of Social Security benefits in the Wiki.) Here are the formulas for the amount of SS where this 42.5% taxability begins.

    Code: Select all

    Single: SS = (0.85 * OI - 24400) / 0.425
    Joint:  SS = (0.85 * OI - 31400) / 0.425
    For a single filer with $40,000 of other income this point is where SS benefits equal $22,588. If SS were to increase $1,000 to $23,588 only $425 of it would be taxed.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

#Cruncher wrote: Thu Jul 05, 2018 11:10 pm
willthrill81 wrote: Thu Jul 05, 2018 3:51 pmI 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.
Quite exceptional I would say! In fact it would be difficult to construct a case where delaying SS until age 70 versus taking it at age 62 would be a worse comparison after tax than before tax. While the SS benefit would, of course, be higher; other taxable income would almost certainly be lower since more withdrawals from (or less additions to) the portfolio were made because of the forsaken SS. And SS benefits have less effect on taxes than ordinary income.

One important thing is that after the maximum 85% of SS has been taxed additional SS benefits cause only a 42.5% increase in taxable income. So for instance if one is in the 22% tax bracket, additional SS will be subject to only a 9.35% marginal tax rate. [2]

  1. The "no catch up rate" (i.e., the constant real return such that the cash flow from delaying will never catch up to the cash flow from claiming early) falls from 7.3% to 5.8%:

    Code: Select all

      rate = (1 + additional benefit / early benefit) ^ (1 / years delay) - 1
    7.322% = (1 + 16416              / 21600)         ^ (1 / 8)           - 1
    5.800% = (1 + 12312              / 21600)         ^ (1 / 8)           - 1
  2. The reason for this has to do with the way SS benefits are taxed. (See Taxation of Social Security benefits in the Wiki.) Here are the formulas for the amount of SS where this 42.5% taxability begins.

    Code: Select all

    Single: SS = (0.85 * OI - 24400) / 0.425
    Joint:  SS = (0.85 * OI - 31400) / 0.425
    For a single filer with $40,000 of other income this point is where SS benefits equal $22,588. If SS were to increase $1,000 to $23,588 only $425 of it would be taxed.
Thanks again #Cruncher for yet another insightful analysis. So yes, it indeed appears very unlikely that taking early SS benefits would be beneficial on an after-tax basis, ceterus paribus.
“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
CurlyDave
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by CurlyDave »

marcopolo wrote: Thu Jul 05, 2018 8:46 pm
...When the "trust fund" runs out in 2034ish...
Before I put too much faith in that 2034 number, I would look up the previous estimates of the year the trust fund runs out for the past decade or so and plot them on a graph.

I know we held our own this year, but for quite a while the year it ran out came closer and closer every time they made an estimate.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by The Wizard »

#Cruncher wrote: Thu Jul 05, 2018 11:10 pm
...One important thing is that after the maximum 85% of SS has been taxed additional SS benefits cause only a 42.5% increase in taxable income. So for instance if one is in the 22% tax bracket, additional SS will be subject to only a 9.35% marginal tax rate. [2]
I disagree.
Take a single taxpayer with $80k of income aside from SS, thus making 85% of all SS income taxable.
His marginal rate for additional SS income is thus 0.85 * 22% = 18.7%...
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

willthrill81 wrote: Thu Jul 05, 2018 9:10 pm
HomerJ wrote: Thu Jul 05, 2018 8:41 pm
willthrill81 wrote: Thu Jul 05, 2018 8:24 pm
vested1 wrote: Thu Jul 05, 2018 6:36 pmIf I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60.
I'm planning on retiring between 50 and 55 and completely ignore SS in all of my personal planning.* The period between my retirement and ability to claim SS benefits, coupled with the uncertainty surrounding the system, leads me to view it as not being worthwhile to plan around. Whatever we get from SS will be icing on our cake.

*When I've mentioned this, one prominent Boglehead here insisted that I was being completely irrational, ignoring a huge factor. But even if the system were unchanged, the SS benefit won't likely be enough to really change much for us.
If you're rich enough that $4000-$5000 a month (for a couple) won't impact your retirement hardly at all, well good for you.

$60,000 a year is a pretty big chunk for most of us.
It wouldn't be nearly that much for us. We're a single-earner household, and I'll only have around 25 years with meaningful earnings. Combine that with a 25% shave, and we would get around $30k in today's dollars at SS's FRA. Considering that I plan to retire with a $75-$100k annual income, a $30k income 10-15 years down the road isn't a big factor, especially since it would likely push us into a higher tax bracket; under current tax law, we would likely pay over $5k of that $30k in taxes. Our planned retirement income will easily cover all of our necessities plus 1-2x that much again in dollars for discretionary spending, so an additional $25k would just be for grandchildren and charity I suppose. And all of this is ignoring a substantial inheritance that will sadly come along one day as well.
Sone of this does not make sence when looking at numbers - have you run IORP or the like and figured the outcome with and without SS?
- typically $75-100K income mfj in retirement is at or near zero taxes
- 25 years will likely put you next to the 2nd bend, did you check your actual SS at SS.gov?
- as a single earner your spouse will still get a 50% SS payment , extra valuable if you delay
- getting $30K in todays SS will be adjusted for inflation (check the IORP or similar)

Ignoring SS will impact your plan, timing, taxes, AA ,etc
Suggest you run some of the calculators with and without the SS redution but not with zeroes.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

marcopolo wrote: Thu Jul 05, 2018 8:46 pm
HomerJ wrote: Thu Jul 05, 2018 8:37 pm
So it's either 75% to everyone (even existing people) or something 100% to all people already on it, and 50% to all new retirees (which would make taking it at 62 for me even MORE imperative to get grandfathered in).
I think it would be way worse than that if they tried to only hit new retirees.

When the "trust fund" runs out in 2034ish, it will be mostly a cliff (could be spread over 2 years). Soc Sec will go from paying all its obligations to being able to pay only 75% of all its obligations. I am not sure what the ratio of existing to new recipients is each years, but it has to be way more than 3:1. So, if they only have 75% of all obligations, they do not have enough to pay 100% to existing recipients, even if they gave 0% to all the new filers.
As they have done in the past the 'easiest' solution is to raise the age to qualify for SS in the future.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by marcopolo »

smitcat wrote: Fri Jul 06, 2018 6:57 am
marcopolo wrote: Thu Jul 05, 2018 8:46 pm
HomerJ wrote: Thu Jul 05, 2018 8:37 pm
So it's either 75% to everyone (even existing people) or something 100% to all people already on it, and 50% to all new retirees (which would make taking it at 62 for me even MORE imperative to get grandfathered in).
I think it would be way worse than that if they tried to only hit new retirees.

When the "trust fund" runs out in 2034ish, it will be mostly a cliff (could be spread over 2 years). Soc Sec will go from paying all its obligations to being able to pay only 75% of all its obligations. I am not sure what the ratio of existing to new recipients is each years, but it has to be way more than 3:1. So, if they only have 75% of all obligations, they do not have enough to pay 100% to existing recipients, even if they gave 0% to all the new filers.
As they have done in the past the 'easiest' solution is to raise the age to qualify for SS in the future.
Who knows what the fix will be. I was not trying to make any prediction on how this will be adjusted.
I was just pointing out the mathematical impossibility of the "fixing" this by just reducing benefits of newly enrolled recipients. Some were suggesting that as a reason to claim early.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

marcopolo wrote: Fri Jul 06, 2018 7:04 am
smitcat wrote: Fri Jul 06, 2018 6:57 am
marcopolo wrote: Thu Jul 05, 2018 8:46 pm
HomerJ wrote: Thu Jul 05, 2018 8:37 pm
So it's either 75% to everyone (even existing people) or something 100% to all people already on it, and 50% to all new retirees (which would make taking it at 62 for me even MORE imperative to get grandfathered in).
I think it would be way worse than that if they tried to only hit new retirees.

When the "trust fund" runs out in 2034ish, it will be mostly a cliff (could be spread over 2 years). Soc Sec will go from paying all its obligations to being able to pay only 75% of all its obligations. I am not sure what the ratio of existing to new recipients is each years, but it has to be way more than 3:1. So, if they only have 75% of all obligations, they do not have enough to pay 100% to existing recipients, even if they gave 0% to all the new filers.
As they have done in the past the 'easiest' solution is to raise the age to qualify for SS in the future.
Who knows what the fix will be. I was not trying to make any prediction on how this will be adjusted.
I was just pointing out the mathematical impossibility of the "fixing" this by just reducing benefits of newly enrolled recipients. Some were suggesting that as a reason to claim early.
No problem - there are over a dozen different methods to 'correct' this problem that is 16 years in the future. Many of the methods can 'solve' the problem in its entirety and others would need to be employed in combinations to be completely effective. Given that the USA as well as other countries have faced this exact same problem in the past one would expect a plan similar to the ones that have worked in the past.
I propose that all of this factual data (proposed methods/ historical solutions) should be utilized in any rational plan.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by JoeRetire »

willthrill81 wrote: Thu Jul 05, 2018 5:19 pmIs 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?
Unless the laws are changed or funding is increased, all benefits will be reduced equally.

Bird-in-handers will be reduced the same as new recipients. Seniors who have depended on SS benefits for decades will be impacted the same as those who just started claiming.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

smitcat wrote: Fri Jul 06, 2018 6:54 am
willthrill81 wrote: Thu Jul 05, 2018 9:10 pm
HomerJ wrote: Thu Jul 05, 2018 8:41 pm
willthrill81 wrote: Thu Jul 05, 2018 8:24 pm
vested1 wrote: Thu Jul 05, 2018 6:36 pmIf I were 19 years away from FRA I wouldn't even be thinking of SS right now because so much can change in the interim. In fact, I completely ignored future SS income until I was 60.
I'm planning on retiring between 50 and 55 and completely ignore SS in all of my personal planning.* The period between my retirement and ability to claim SS benefits, coupled with the uncertainty surrounding the system, leads me to view it as not being worthwhile to plan around. Whatever we get from SS will be icing on our cake.

*When I've mentioned this, one prominent Boglehead here insisted that I was being completely irrational, ignoring a huge factor. But even if the system were unchanged, the SS benefit won't likely be enough to really change much for us.
If you're rich enough that $4000-$5000 a month (for a couple) won't impact your retirement hardly at all, well good for you.

$60,000 a year is a pretty big chunk for most of us.
It wouldn't be nearly that much for us. We're a single-earner household, and I'll only have around 25 years with meaningful earnings. Combine that with a 25% shave, and we would get around $30k in today's dollars at SS's FRA. Considering that I plan to retire with a $75-$100k annual income, a $30k income 10-15 years down the road isn't a big factor, especially since it would likely push us into a higher tax bracket; under current tax law, we would likely pay over $5k of that $30k in taxes. Our planned retirement income will easily cover all of our necessities plus 1-2x that much again in dollars for discretionary spending, so an additional $25k would just be for grandchildren and charity I suppose. And all of this is ignoring a substantial inheritance that will sadly come along one day as well.
Sone of this does not make sence when looking at numbers - have you run IORP or the like and figured the outcome with and without SS?
I've run the numbers from the SSA website. The problem is that I'll only have about 25 years with decent earnings out of the 35 that SSA examines. Having ten years with very low or zero numbers really brings down the average.
smitcat wrote: Fri Jul 06, 2018 6:54 am- typically $75-100K income mfj in retirement is at or near zero taxes
For married filing jointly using the standard deduction, the 12% bracket ends at $101,400. That's not what I would call near zero. Nearly all of our withdrawals will be from tax-deferred accounts.
smitcat wrote: Fri Jul 06, 2018 6:54 am- as a single earner your spouse will still get a 50% SS payment , extra valuable if you delay
I've already factored in the spousal benefit. The numbers I relayed are at full retirement age, so there would be a bump by deferring until 70.
smitcat wrote: Fri Jul 06, 2018 6:54 am- getting $30K in todays SS will be adjusted for inflation (check the IORP or similar)
The numbers I relayed are in today's dollars.
smitcat wrote: Fri Jul 06, 2018 6:54 amIgnoring SS will impact your plan, timing, taxes, AA ,etc
Not really. As I already noted, it would likely be around one-third of the income we'll already have, and it will be at least a decade, perhaps two, before we starting collecting it. It will be icing on the cake but not the cake itself.

Regarding taxes, there isn't much of anything that I can really do about that anyway. I intend to do as much with Roth conversions as possible anyway, which will help to reduce RMDs later.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

willthrill81 wrote: Fri Jul 06, 2018 11:19 am
smitcat wrote: Fri Jul 06, 2018 6:54 am
willthrill81 wrote: Thu Jul 05, 2018 9:10 pm
HomerJ wrote: Thu Jul 05, 2018 8:41 pm
willthrill81 wrote: Thu Jul 05, 2018 8:24 pm

I'm planning on retiring between 50 and 55 and completely ignore SS in all of my personal planning.* The period between my retirement and ability to claim SS benefits, coupled with the uncertainty surrounding the system, leads me to view it as not being worthwhile to plan around. Whatever we get from SS will be icing on our cake.

*When I've mentioned this, one prominent Boglehead here insisted that I was being completely irrational, ignoring a huge factor. But even if the system were unchanged, the SS benefit won't likely be enough to really change much for us.
If you're rich enough that $4000-$5000 a month (for a couple) won't impact your retirement hardly at all, well good for you.

$60,000 a year is a pretty big chunk for most of us.
It wouldn't be nearly that much for us. We're a single-earner household, and I'll only have around 25 years with meaningful earnings. Combine that with a 25% shave, and we would get around $30k in today's dollars at SS's FRA. Considering that I plan to retire with a $75-$100k annual income, a $30k income 10-15 years down the road isn't a big factor, especially since it would likely push us into a higher tax bracket; under current tax law, we would likely pay over $5k of that $30k in taxes. Our planned retirement income will easily cover all of our necessities plus 1-2x that much again in dollars for discretionary spending, so an additional $25k would just be for grandchildren and charity I suppose. And all of this is ignoring a substantial inheritance that will sadly come along one day as well.
Sone of this does not make sence when looking at numbers - have you run IORP or the like and figured the outcome with and without SS?
I've run the numbers from the SSA website. The problem is that I'll only have about 25 years with decent earnings out of the 35 that SSA examines. Having ten years with very low or zero numbers really brings down the average.
smitcat wrote: Fri Jul 06, 2018 6:54 am- typically $75-100K income mfj in retirement is at or near zero taxes
For married filing jointly using the standard deduction, the 12% bracket ends at $101,400. That's not what I would call near zero. Nearly all of our withdrawals will be from tax-deferred accounts.
smitcat wrote: Fri Jul 06, 2018 6:54 am- as a single earner your spouse will still get a 50% SS payment , extra valuable if you delay
I've already factored in the spousal benefit. The numbers I relayed are at full retirement age, so there would be a bump by deferring until 70.
smitcat wrote: Fri Jul 06, 2018 6:54 am- getting $30K in todays SS will be adjusted for inflation (check the IORP or similar)
The numbers I relayed are in today's dollars.
smitcat wrote: Fri Jul 06, 2018 6:54 amIgnoring SS will impact your plan, timing, taxes, AA ,etc
Not really. As I already noted, it would likely be around one-third of the income we'll already have, and it will be at least a decade, perhaps two, before we starting collecting it. It will be icing on the cake but not the cake itself.

Regarding taxes, there isn't much of anything that I can really do about that anyway. I intend to do as much with Roth conversions as possible anyway, which will help to reduce RMDs later.
Hello Wildthrill81 - sounds like you have most of this figured out for yourself.
I guess some of this is the way we look at things, like taxes.
If I am targeting replacement of a salary of $75-100K i am paying 7.4% in payroll tax even before income taxes - so my budgets atre already set for that number. For many folks an effective total tax of 7-8% is a welcome site compared to earnings years. Similarly an income from SS of $30K that will not be taxed the same as other income would represent maybe 30- 40% of that $75-100 retired budget Those are pretty significant % in our plannings and would affect both decsions and taxes.
Seems to be very prosonal and how you individually view the numbers ... good luck to you!!
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

smitcat wrote: Fri Jul 06, 2018 11:49 amHello Wildthrill81 - sounds like you have most of this figured out for yourself.
I guess some of this is the way we look at things, like taxes.
If I am targeting replacement of a salary of $75-100K i am paying 7.4% in payroll tax even before income taxes - so my budgets atre already set for that number. For many folks an effective total tax of 7-8% is a welcome site compared to earnings years. Similarly an income from SS of $30K that will not be taxed the same as other income would represent maybe 30- 40% of that $75-100 retired budget Those are pretty significant % in our plannings and would affect both decsions and taxes.
Seems to be very prosonal and how you individually view the numbers ... good luck to you!!
Thanks for the kind words and well wishes.

A lower effective tax rate will be nice, for sure, but we're generally able to stay in the 12% bracket already due to tax-deferrals, so it won't be a big difference. We can actually tax defer over $60k annually, not a common thing for a single earner W2 employee.

If I was planning on retiring closer to the time that we would start SS benefits and there wasn't so much uncertainty about the SS situation post-2034, it would play a bigger role in our planning. But when you use even a low discount rates, the present value of a $30k income that won't begin for 10-20 years isn't huge. Plus, it wouldn't really change anything about our planning, so I choose to just ignore it for now. I'm not saying that it won't be a nice plus for us because it will. And I'm definitely not saying that it's not a big deal for millions of people, because it clearly is. But the farther away one's retirement date is from the time you will start collecting SS benefits, the lesser the impact of those benefits is likely to be on your planning.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by #Cruncher »

The Wizard wrote: Fri Jul 06, 2018 2:53 am
#Cruncher wrote: Thu Jul 05, 2018 11:10 pm...One important thing is that after the maximum 85% of SS has been taxed additional SS benefits cause only a 42.5% increase in taxable income. So for instance if one is in the 22% tax bracket, additional SS will be subject to only a 9.35% marginal tax rate. [2]
I disagree. Take a single taxpayer with $80k of income aside from SS, thus making 85% of all SS income taxable.
His marginal rate for additional SS income is thus 0.85 * 22% = 18.7%...
You're right, Wizard. Thanks for getting me to rethink this. My statement in italics that you quoted is incorrect. The actual situation is more subtle. Unfortunately I don't know how to succinctly state the relationship correctly without going into detail about how taxable SS is calculated. So here goes ...

One-half of the SS benefit is added to other income to get what the Wiki calls "relevant income". (See Taxation of Social Security benefits.) 50% of relevant income in excess of a threshold is taxable up to a limit ($4,500 single / $6,000 joint). 85% of relevant income in excess of a higher threshold is also taxable. The two amounts, the 50% part and the 85% part, are combined to determine how much of SS is taxed. In the graph below this is shown by the blue Formula line. But the taxable amount is limited to 85% of the SS benefit. In the graph below, this is shown by the orange 85% Max line.

Image

For every $100 of increased SS benefit, the blue line rises $42.50 while the orange line rises $85. The portion of the SS benefit that is taxable equals the minimum of these two. Until the 85% line "catches up" with the Formula line, this means that 85% of additional SS will be taxed. But after the lines cross, only 42.5% of additional SS will be taxed. Given this I should have said something like:

When 85% of the SS benefit just reaches the point where it equals the taxable SS based on the relevant income formula, only 42.5% of any additional SS benefit will be taxed.

Whew! But even this doesn't tell the whole story because there are exceptions related to the 50% portion. I've tried to include these in the following expanded formulas:

Code: Select all

Single = MAX( 9000, (34000 - OI) / 0.5, (0.85 * OI - 24400) / 0.425)
Joint  = MAX(12000, (44000 - OI) / 0.5, (0.85 * OI - 31400) / 0.425)
We can use the first formula to solve for your case, Wizard, where other income (OI) equals $80,000 for a single taxpayer:
102,588 = MAX(9000, (34000 - 80000) / 0.5, (0.85 * 80000 - 24400) / 0.425)
Since no single SS benefit currently comes close to this amount, it means that the 42.5% point will never be reached for someone with this amount of other income. (But since the two SS thresholds are not adjusted for inflation, there may come a time in the distant future when it is.)

The following table shows when the SS benefit reaches the 42.5% point for other income ranging from $10,000 to $100,000. It shows that for taxpayers with large other income, the amount of SS will never be large enough to reach 42.5% point.

Code: Select all

  Other     -- SS Benefit --
 Income     Single     Joint
 ------     ------    ------
 10,000     48,000    68,000
 20,000     28,000    48,000
 30,000      9,000    28,000
 40,000     22,588    12,000
 50,000     42,588    26,118
 60,000     62,588    46,118
 70,000     82,588    66,118
 80,000    102,588    86,118
 90,000    122,588   106,118
100,000    142,588   126,118
This complcated relationship between other income, SS benefits, and the marginal amount of SS that is taxed can be seen on the lower graph (the one in red) on the Main sheet of my Marginal Tax Rates spreadsheet. Blank cell B7 to choose SS benefit as the variable to graph.

Edited 7/7/2018 8:00 AM to add graph and rewrite explanation.
Last edited by #Cruncher on Sat Jul 07, 2018 6:58 am, edited 1 time in total.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by wickywack »

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+.

I think the OP is asking an Asset Allocation question, not a Social Security question. The OP should probably consider SS as part of his overall portfolio based on his concerns.

Let's simplify the scenario. Let's suppose the OP is 100% equities (outside SS). Let's suppose the OP lives to exactly 90 (or whatever the crossover age for total lifetime SS payout). Let's suppose the OP's annual expenses exactly match the SS at 62 payout.

If the OP takes SS early, he's drawing down his fixed income only. In other words, he's increasing the equity portion of his total portfolio (including SS). He's increasing his risk but also his chances at reward.

If the OP delays SS, he's drawing down his equity only. In other words, he's decreasing the equity portion of his total portfolio (including SS). He's decreasing his risk but also his chances at reward.

The OP is, however, at 60% equities (outside SS). That suggests, to maintain risk, he can do one of the following:
  • Take SS early, but reduce equities to something lower than 60% in the rest of his portfolio.
  • Delay SS, but increase equities to something higher than 60% in the rest of his portfolio.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by marcopolo »

willthrill81 wrote: Fri Jul 06, 2018 12:24 pm
smitcat wrote: Fri Jul 06, 2018 11:49 amHello Wildthrill81 - sounds like you have most of this figured out for yourself.
I guess some of this is the way we look at things, like taxes.
If I am targeting replacement of a salary of $75-100K i am paying 7.4% in payroll tax even before income taxes - so my budgets atre already set for that number. For many folks an effective total tax of 7-8% is a welcome site compared to earnings years. Similarly an income from SS of $30K that will not be taxed the same as other income would represent maybe 30- 40% of that $75-100 retired budget Those are pretty significant % in our plannings and would affect both decsions and taxes.
Seems to be very prosonal and how you individually view the numbers ... good luck to you!!
Thanks for the kind words and well wishes.

A lower effective tax rate will be nice, for sure, but we're generally able to stay in the 12% bracket already due to tax-deferrals, so it won't be a big difference. We can actually tax defer over $60k annually, not a common thing for a single earner W2 employee.

If I was planning on retiring closer to the time that we would start SS benefits and there wasn't so much uncertainty about the SS situation post-2034, it would play a bigger role in our planning. But when you use even a low discount rates, the present value of a $30k income that won't begin for 10-20 years isn't huge. Plus, it wouldn't really change anything about our planning, so I choose to just ignore it for now. I'm not saying that it won't be a nice plus for us because it will. And I'm definitely not saying that it's not a big deal for millions of people, because it clearly is. But the farther away one's retirement date is from the time you will start collecting SS benefits, the lesser the impact of those benefits is likely to be on your planning.

I agree with Willthrill here. I am currently about where he is planning to be in a few years. Just retired at age 51. Soc Sec is 18+ years away. It kind of looms out there as something that will probably help me someday. If i was say 65 and entering retirement, I would definitely put a lot more emphasis on how it affects my planning. But, as it is, I more or less make sure I have enough to support our spending needs without having to consider it. As i get closer to an age where i can think about collecting, then i will certainly re-evaluate. Maybe it will be enough to offset the Medicare premium and out of pocket expenses being discussed on another thread. :?
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

marcopolo wrote: Fri Jul 06, 2018 4:05 pmMaybe it will be enough to offset the Medicare premium and out of pocket expenses being discussed on another thread. :?
That's why I'm maxing out our family HSA and no longer withdrawing anything from it unless we absolutely have to. We're saving receipts for eligible expenses. We expect to have between $100-$150k in it at the point of retirement, and I wouldn't be at all surprised if that's not even half as much as we spend in retirement on healthcare expenses, especially since we'll be at least a decade from Medicare when I plan on retiring.

Regarding ignoring SS if one is planning on an early retirement, I don't see what the real problem is with this since it leads one to be more conservative in planning than would otherwise be the case. That hardly seems to be a real issue. But some here have really berated me when I've mentioned this before. It will certainly impact our tax situation, but I don't see how much our family can do about that anyway besides the Roth conversions that we're planning on doing anyway.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by marcopolo »

willthrill81 wrote: Fri Jul 06, 2018 4:22 pm
marcopolo wrote: Fri Jul 06, 2018 4:05 pmMaybe it will be enough to offset the Medicare premium and out of pocket expenses being discussed on another thread. :?
That's why I'm maxing out our family HSA and no longer withdrawing anything from it unless we absolutely have to. We're saving receipts for eligible expenses. We expect to have between $100-$150k in it at the point of retirement, and I wouldn't be at all surprised if that's not even half as much as we spend in retirement on healthcare expenses, especially since we'll be at least a decade from Medicare when I plan on retiring.

Regarding ignoring SS if one is planning on an early retirement, I don't see what the real problem is with this since it leads one to be more conservative in planning than would otherwise be the case. That hardly seems to be a real issue. But some here have really berated me when I've mentioned this before. It will certainly impact our tax situation, but I don't see how much our family can do about that anyway besides the Roth conversions that we're planning on doing anyway.
I have only had access to an HSA eligible plan for a few years. Soon as my employer added them, I started maxing the out. I have roughly $50k. Never took any money out. I have not saved receipts though, as i figure I will have plenty of medical expenses in the future.

My plan is the same, defer SS, do Roth Conversion as much as makes sense (limited by ACA cliff for now), then accept the fact that I may pay higher tax rates.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Portfolio7 »

azanon wrote: 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.
I've been very busy at work, or I would have responded sooner. Actually, your assumption regarding what I considered in making the statement above is not true. This conclusion does not look only at the ss payments themselves. I ran a total cash flow analysis from ages 60 to 120 (so I'm optimistic, sue me) with a variety of assumptions and including all forms of income. I held all the assumptions static, only varying the age DW & I claim SS. Then I ran some sensitivity analysis regarding returns, inflation relative to SS Colas, etc. The one element I knowingly excluded was taxes, in large part because there are so many variables that are a lot of work to factor in, and my sense is that their impact on the SS decision is going to be pretty marginal for me. The conclusion I came to pretty much jived with the common wisdom regarding delaying benefits, and is as I described above. Firecalc seemed to jive with this too, though I admit I only did a cursory run through. I admit I am not sure why you are coming to the conclusion you are.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by dknightd »

It is a crap shoot. You could claim at 62 and win, Or wait till 70 and win. Or could claim at any age in between.
Folks older than me had options I do not. Apparently the magic year is 1954, wife qualifies, but I do not. Folks younger than me might also have to face changes. Born in 1958 I don't see my benefits changing much. Claim as you see fit. My plan is wife claim at FRA. In fact she just did. Too bad I can't file a restricted spouse benefit. I'll wait till 70, or when we need the money, which ever comes first. There is no right answer to this question. At least not one we can know in advance. My thinking is take it when you need it, otherwise delay as long as possible, just in case one of us lives to 100.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by arcticpineapplecorp. »

MnD wrote: Thu Jul 05, 2018 2:37 pm
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.
yes, but we don't know if the OP is a high earner or not (I re-read the original post and it's not mentioned if s/he's a high earner or not). And even if s/he is, do you think Warren Buffett (a high earner considering he qualifies for the maximum social security benefit, see link at end of this post) took SS at 62? Maybe, but I doubt it (see quote at end of this post).

Maybe the integrity/honor part was a bit heavy handed, but it's exactly how Jane Bryant Quinn has stated it (listen to her interview with James Lange). If the higher earner (which has tended to be the husband) takes SS early, he is permanently reducing the survivor's benefit for the rest of her life. Considering women tend to live longer than men on average, the wife will likely need the higher, not lower income.

Jane Bryant Quinn said all too often the man decides when he wants to take SS without any regard for the spouse. Is it a marriage or not? If it's a marriage shouldn't the decision be up to both parties since it ultimately may effect both parties?

I think the perspective of the wife and what she wishes is all too often being dismissed. I would be interested to hear what the boglehead wives (especially the lower earning ones) might think about this.

from:
https://www.aarp.org/money/credit-loans ... y-jbq.html
If your health is poor, you might also start at 62, assuming your spouse will never need a larger survivor’s benefit.

from https://www.fool.com/retirement/2018/05 ... secur.aspx
It's therefore reasonable to assume that Buffett's earnings record entitles him to the maximum benefit.

Like anyone, Buffett had to choose when to take Social Security benefits. If he'd claimed at the earliest available age of 62 back in 1992, then the maximum initial monthly payment would have been $860 per month. Thanks to cost of living adjustments along the way, that number would work out to $1,527 per month in Social Security benefits today.

Based on his birth year of 1930, Buffett's full retirement age was 65. If he waited until then before claiming benefits, then he would have gotten an initial monthly amount of $1,199 in 1995. That would have grown to $1,961 per month today.

Yet Buffett didn't really have much need to collect Social Security, and so it would have been reasonable for him to wait until the latest possible age of 70 before claiming. If he did so, then he would have been entitled to an initial monthly benefit of $1,752 in 2000. Over the following 18 years, cost of living adjustments would have boosted that amount to $2,562 per month.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by bradpevans »

dknightd wrote: Fri Jul 06, 2018 7:07 pm It is a crap shoot. You could claim at 62 and win, Or wait till 70 and win. Or could claim at any age in between.
Folks older than me had options I do not. Apparently the magic year is 1954, wife qualifies, but I do not. Folks younger than me might also have to face changes. Born in 1958 I don't see my benefits changing much. Claim as you see fit. My plan is wife claim at FRA. In fact she just did. Too bad I can't file a restricted spouse benefit. I'll wait till 70, or when we need the money, which ever comes first. There is no right answer to this question. At least not one we can know in advance. My thinking is take it when you need it, otherwise delay as long as possible, just in case one of us lives to 100.

For me, I want spending power while alive

So delaying SS makes sense. Every $100 at 62 becomes $175 at 70. Draw down tax able, tax deferred and Roth convert

At 70 SS kicks in (as well as pension), then RMDs at 70.5
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by bradpevans »

dknightd wrote: Fri Jul 06, 2018 7:07 pm It is a crap shoot. You could claim at 62 and win, Or wait till 70 and win. Or could claim at any age in between.
Folks older than me had options I do not. Apparently the magic year is 1954, wife qualifies, but I do not. Folks younger than me might also have to face changes. Born in 1958 I don't see my benefits changing much. Claim as you see fit. My plan is wife claim at FRA. In fact she just did. Too bad I can't file a restricted spouse benefit. I'll wait till 70, or when we need the money, which ever comes first. There is no right answer to this question. At least not one we can know in advance. My thinking is take it when you need it, otherwise delay as long as possible, just in case one of us lives to 100.

For me, I want spending power while alive

So delaying SS makes sense. Every $100 at 62 becomes $175 at 70. Draw down tax able, tax deferred and Roth convert

At 70 SS kicks in (as well as pension), then RMDs at 70.5
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by hoops777 »

willthrill81 wrote: Fri Jul 06, 2018 4:22 pm
marcopolo wrote: Fri Jul 06, 2018 4:05 pmMaybe it will be enough to offset the Medicare premium and out of pocket expenses being discussed on another thread. :?
That's why I'm maxing out our family HSA and no longer withdrawing anything from it unless we absolutely have to. We're saving receipts for eligible expenses. We expect to have between $100-$150k in it at the point of retirement, and I wouldn't be at all surprised if that's not even half as much as we spend in retirement on healthcare expenses, especially since we'll be at least a decade from Medicare when I plan on retiring.

Regarding ignoring SS if one is planning on an early retirement, I don't see what the real problem is with this since it leads one to be more conservative in planning than would otherwise be the case. That hardly seems to be a real issue. But some here have really berated me when I've mentioned this before. It will certainly impact our tax situation, but I don't see how much our family can do about that anyway besides the Roth conversions that we're planning on doing anyway.
I think people tend to forget what the purpose of SS is.If you do not need it,than you are secure financially.I believe it is a terrific goal to achieve to not need it.One way the system would be better off is if wealthy people did not receive it,but that is a whole different topic that I am pretty sure cannot be discussed. :D
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by munemaker »

arcticpineapplecorp. wrote: Fri Jul 06, 2018 8:23 pm
Jane Bryant Quinn said all too often the man decides when he wants to take SS without any regard for the spouse.
Talking to my (male) friends, I agree with Jane Quinn completely. Also, they calculate break-even and consider only the benefits paid to them while they are alive, not the benefits on their record paid to their surviving spouse.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by hoops777 »

munemaker wrote: Fri Jul 06, 2018 8:56 pm
arcticpineapplecorp. wrote: Fri Jul 06, 2018 8:23 pm
Jane Bryant Quinn said all too often the man decides when he wants to take SS without any regard for the spouse.
Talking to my (male) friends, I agree with Jane Quinn completely. Also, they calculate break-even and consider only the benefits paid to them while they are alive, not the benefits on their record paid to their surviving spouse.
Depends upon the man.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

hoops777 wrote: Fri Jul 06, 2018 9:15 pm
munemaker wrote: Fri Jul 06, 2018 8:56 pm
arcticpineapplecorp. wrote: Fri Jul 06, 2018 8:23 pm
Jane Bryant Quinn said all too often the man decides when he wants to take SS without any regard for the spouse.
Talking to my (male) friends, I agree with Jane Quinn completely. Also, they calculate break-even and consider only the benefits paid to them while they are alive, not the benefits on their record paid to their surviving spouse.
Depends upon the man.
Yep. I can guarantee you that if we were in any way reliant on SS income, the effect of when to begin SS benefits on my DW would be a huge factor in our decision. But truth be told, we don't even spend $20 without talking about it first unless it's a frequent purchase.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by munemaker »

hoops777 wrote: Fri Jul 06, 2018 9:15 pm
munemaker wrote: Fri Jul 06, 2018 8:56 pm
arcticpineapplecorp. wrote: Fri Jul 06, 2018 8:23 pm
Jane Bryant Quinn said all too often the man decides when he wants to take SS without any regard for the spouse.
Talking to my (male) friends, I agree with Jane Quinn completely. Also, they calculate break-even and consider only the benefits paid to them while they are alive, not the benefits on their record paid to their surviving spouse.
Depends upon the man.
Of course! Just judging from my circle of friends, I would agree with "all too often." Did not mean to imply all men.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by Murgatroyd »

I’ve been reading this blog for about a year. IMO this thread is the best on SS claiming because it thoroughly explores the effects of delay on your holdings, which adds to the complication.

When I first set up a retirement spreadsheet years ago (nowhere as expert as #cruncher), I included what i term “opportunity cost” of delaying SS. It was immediately clear that this greatly lengthened the break even crossover of early versus later claiming. In our case it’s about age 91. As many have opined, guessing longevity is a crapshoot. No one in either of our families has lived to 90. And yes, DW and I are likely healthier than our forebears.

So at the end of the day the the exercise becomes; longevity vs opportunity cost vs inheritance to our 2 children. For what it’s worth, right now we plan to time our file with Medicare in about 2 years.

Thanks to all for the blog.
Regards
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by 2pedals »

#Cruncher wrote: Fri Jul 06, 2018 1:27 pm This complcated relationship between other income, SS benefits, and the marginal amount of SS that is taxed can be seen on the lower graph (the one in red) on the Main sheet of my Marginal Tax Rates spreadsheet. Blank cell B7 to choose SS benefit as the variable to graph.
Thank you #Cruncher

FYI
An excellent Wiki showing the SS tax impact and a calculator is here. Unfortunately it has not been updated for 2018 tax laws. It looks similar to yours but has some interesting charts. Does anybody know who to contact to see if it can updated?
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

Frankly, I wouldn't be surprised that if it were possible for us to conduct a completely comprehensive, 360 degree analysis of when to take Social Security that the benefit of claiming at the 'ideal' age wasn't much better than this.
Image
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

willthrill81 wrote: Sun Jul 08, 2018 9:58 am Frankly, I wouldn't be surprised that if it were possible for us to conduct a completely comprehensive, 360 degree analysis of when to take Social Security that the benefit of claiming at the 'ideal' age wasn't much better than this.
Image
That might very well be the case with your specific situation and goals.
But I can say that it is not the case with our situation or goals so it really depends on the individual inputs and expectations.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

smitcat wrote: Sun Jul 08, 2018 10:17 am
willthrill81 wrote: Sun Jul 08, 2018 9:58 am Frankly, I wouldn't be surprised that if it were possible for us to conduct a completely comprehensive, 360 degree analysis of when to take Social Security that the benefit of claiming at the 'ideal' age wasn't much better than this.
Image
That might very well be the case with your specific situation and goals.
But I can say that it is not the case with our situation or goals so it really depends on the individual inputs and expectations.
What I was referring to was a mathematical analysis of what's 'optimal'. If it turned out to not really matter much either way, then that would mean that everyone could just start SS benefits whenever they felt it was appropriate for them in their situation, with no worry about whether their choice was 'sub-optimal' on paper.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by The Wizard »

smitcat wrote: Sun Jul 08, 2018 10:17 am
willthrill81 wrote: Sun Jul 08, 2018 9:58 am Image
That might very well be the case with your specific situation and goals.
But I can say that it is not the case with our situation or goals so it really depends on the individual inputs and expectations.
Right.
People with larger tax deferred balances will look at this option one way.
People with minimal tax deferred and larger taxable accounts (or Roth accounts) will look at this a different way...
Attempted new signature...
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

The Wizard wrote: Sun Jul 08, 2018 10:22 am
smitcat wrote: Sun Jul 08, 2018 10:17 am
willthrill81 wrote: Sun Jul 08, 2018 9:58 am Image
That might very well be the case with your specific situation and goals.
But I can say that it is not the case with our situation or goals so it really depends on the individual inputs and expectations.
Right.
People with larger tax deferred balances will look at this option one way.
People with minimal tax deferred and larger taxable accounts (or Roth accounts) will look at this a different way...
Yes, agreed - other folks reading these threads may think that it is just a toss up for everyone when it really deonds a whole bunch on your exact situation.
Whet works well for one situation may be really different for another.
Otherwise said - you cannont rely on 'someone' else's wise decision based upon his/her facts because yours will likely not be the same.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by willthrill81 »

smitcat wrote: Sun Jul 08, 2018 10:31 am
The Wizard wrote: Sun Jul 08, 2018 10:22 am
smitcat wrote: Sun Jul 08, 2018 10:17 am
willthrill81 wrote: Sun Jul 08, 2018 9:58 am Image
That might very well be the case with your specific situation and goals.
But I can say that it is not the case with our situation or goals so it really depends on the individual inputs and expectations.
Right.
People with larger tax deferred balances will look at this option one way.
People with minimal tax deferred and larger taxable accounts (or Roth accounts) will look at this a different way...
Yes, agreed - other folks reading these threads may think that it is just a toss up for everyone when it really deonds a whole bunch on your exact situation.
Whet works well for one situation may be really different for another.
Otherwise said - you cannont rely on 'someone' else's wise decision based upon his/her facts because yours will likely not be the same.
Again, my point was that I wouldn't be surprised if mathematically speaking, when you take SS doesn't matter much. If that is indeed the case, then personal circumstances would be the sole determining factor.
“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 smitcat »

willthrill81 wrote: Sun Jul 08, 2018 10:43 am
smitcat wrote: Sun Jul 08, 2018 10:31 am
The Wizard wrote: Sun Jul 08, 2018 10:22 am
smitcat wrote: Sun Jul 08, 2018 10:17 am
willthrill81 wrote: Sun Jul 08, 2018 9:58 am Image
That might very well be the case with your specific situation and goals.
But I can say that it is not the case with our situation or goals so it really depends on the individual inputs and expectations.
Right.
People with larger tax deferred balances will look at this option one way.
People with minimal tax deferred and larger taxable accounts (or Roth accounts) will look at this a different way...
Yes, agreed - other folks reading these threads may think that it is just a toss up for everyone when it really deonds a whole bunch on your exact situation.
Whet works well for one situation may be really different for another.
Otherwise said - you cannont rely on 'someone' else's wise decision based upon his/her facts because yours will likely not be the same.
Again, my point was that I wouldn't be surprised if mathematically speaking, when you take SS doesn't matter much. If that is indeed the case, then personal circumstances would be the sole determining factor.
Agreed - but in our case (specific) and likely many others cases it really does matter when you elect to take SS.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by rgs92 »

Does anyone have a histogram (or some statistics) of the ages when the general public seems to start their Social Security benefits?
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by smitcat »

rgs92 wrote: Sun Jul 08, 2018 12:06 pm Does anyone have a histogram (or some statistics) of the ages when the general public seems to start their Social Security benefits?
Most folks take SS when they need it - since the majority have little of no savings for retirement that leaves little choice but to take it when they stop working.
A chart like that was around here a while ago - maybe someone will post it back.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by hoops777 »

My wife is 68 and I am 66 and retired last year.After research and some help on this awesome forum,I determined it was optimal for us to have my wife start at 68 and myself claim spousal benefits at the same time,then my full at 70.
Last edited by hoops777 on Sun Jul 08, 2018 4:48 pm, edited 1 time in total.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by munemaker »

rgs92 wrote: Sun Jul 08, 2018 12:06 pm Does anyone have a histogram (or some statistics) of the ages when the general public seems to start their Social Security benefits?
Image

reference: https://www.cnbc.com/2018/03/09/claimin ... -move.html

Interesting that women claim earlier but live longer. Seems counter intuitive.
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Re: SS taken at 62 vs. 70, but measured from 70+

Post by 2pedals »

munemaker wrote: Sun Jul 08, 2018 2:49 pm Interesting that women claim earlier but live longer. Seems counter intuitive.
Maybe not if spousal benefits are available and lower earner.
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