SWR and Social Security

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JBTX
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SWR and Social Security

Post by JBTX » Thu Mar 14, 2019 1:25 pm

I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?

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ResearchMed
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Re: SWR and Social Security

Post by ResearchMed » Thu Mar 14, 2019 1:31 pm

JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
Keep in mind that the decision of when to start SS does not need to conclude it's the same age one actually retires.

Sequence of returns is more of a problem with the actual retirement date, not the date that one starts SS, which can vary considerably.

RM
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Re: SWR and Social Security

Post by RadAudit » Thu Mar 14, 2019 1:37 pm

I've always looked at the problem of SWRs as something (when multiplied by the total portfolio) that needs to fill the gap between income and expenses in retirement. So, SS is part of the income input in the equation. You get to figure the amount and timing.
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Re: SWR and Social Security

Post by 3-20Characters » Thu Mar 14, 2019 1:44 pm

Not sure what sort of scenario there is to run. Say one retires at 62 with the intention of using savings to fund expenses and delaying SS until 70. Now say there is an immediate 50% market drop and a year (or a month) later retiree gets nervous about drawing down portfolio. Said retiree could file for SS at that point.

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alec
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Re: SWR and Social Security

Post by alec » Thu Mar 14, 2019 1:48 pm

You may be interested in these two long and short publications from Stanford showing the delay SS strategy is often very good and easy to implement. There is strategy comparison too.

http://longevity.stanford.edu/2017/11/2 ... decisions/

http://longevity.stanford.edu/2017/11/2 ... 401k-plan/
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Re: SWR and Social Security

Post by sport » Thu Mar 14, 2019 1:58 pm

JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
The way to address sequence of returns risk when retired is to have an appropriate allocation. I am retired, and my target allocation is 35/65. Since most of my holdings are bonds/CDs/cash, the gyrations of the stock market are not a problem for me. Once in a while (not often) I have to rebalance to maintain my risk level.

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JBTX
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Re: SWR and Social Security

Post by JBTX » Thu Mar 14, 2019 2:31 pm

ResearchMed wrote:
Thu Mar 14, 2019 1:31 pm
JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
Keep in mind that the decision of when to start SS does not need to conclude it's the same age one actually retires.

Sequence of returns is more of a problem with the actual retirement date, not the date that one starts SS, which can vary considerably.

RM
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?

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JBTX
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Re: SWR and Social Security

Post by JBTX » Thu Mar 14, 2019 2:33 pm

3-20Characters wrote:
Thu Mar 14, 2019 1:44 pm
Not sure what sort of scenario there is to run. Say one retires at 62 with the intention of using savings to fund expenses and delaying SS until 70. Now say there is an immediate 50% market drop and a year (or a month) later retiree gets nervous about drawing down portfolio. Said retiree could file for SS at that point.
Good point. If the market does drop 50%, does pulling SS increase your odds of success?

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JBTX
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Re: SWR and Social Security

Post by JBTX » Thu Mar 14, 2019 2:35 pm

sport wrote:
Thu Mar 14, 2019 1:58 pm
JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
The way to address sequence of returns risk when retired is to have an appropriate allocation. I am retired, and my target allocation is 35/65. Since most of my holdings are bonds/CDs/cash, the gyrations of the stock market are not a problem for me. Once in a while (not often) I have to rebalance to maintain my risk level.
True. But if drawing SS early increased your odds of success (which it may or may not, that is the question) then you could invest a bit more aggressively in the draw SS early scenario.

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Re: SWR and Social Security

Post by The Wizard » Thu Mar 14, 2019 2:36 pm

JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
We discuss this sort of thing all the time here.
There are too many variations to summarize quickly.
Generally you'll have a higher withdrawal rate for the bridge years while you delay SS. So it's nice if you have pension or annuity income so you don't overstress your portfolio...
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Re: SWR and Social Security

Post by KlangFool » Thu Mar 14, 2019 2:41 pm

JBTX wrote:
Thu Mar 14, 2019 2:31 pm
ResearchMed wrote:
Thu Mar 14, 2019 1:31 pm
JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
Keep in mind that the decision of when to start SS does not need to conclude it's the same age one actually retires.

Sequence of returns is more of a problem with the actual retirement date, not the date that one starts SS, which can vary considerably.

RM
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
JBTX,

A) In that case, the person could start SS between 62 and 70 depending on their portfolio size at 62 to 70. If they need the money, they start SS earlier. If not, later. It is not a straight forward analysis.

B) How much can SS cover the person's expense? If it is less than 10%, SS might not matter. If it is 50% or greater, it matters.

KlangFool

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Re: SWR and Social Security

Post by Dottie57 » Thu Mar 14, 2019 2:45 pm

62 and starting SS AT 70. I have CDs setup until 67. I am sure I will setup more in the coming years, so I should be fine intel 70. SS will cover basic expenses so portfolio is for more fun

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Re: SWR and Social Security

Post by delamer » Thu Mar 14, 2019 2:48 pm

JBTX wrote:
Thu Mar 14, 2019 2:31 pm
ResearchMed wrote:
Thu Mar 14, 2019 1:31 pm
JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
Keep in mind that the decision of when to start SS does not need to conclude it's the same age one actually retires.

Sequence of returns is more of a problem with the actual retirement date, not the date that one starts SS, which can vary considerably.

RM
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
There is no one answer.

For instance, the portion of your expenses covered by Social Security will determine how much you’ll need to draw down from your portfolio. That in turn will affect the success rate. If you can cover your expenses with your age 62 SS benefit, that is a different situation than if you need the age 70 benefit amount to cover them.

It also depends on what you mean by success. Do you mean a non-zero balance in your portfolio when you die?

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onthecusp
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Re: SWR and Social Security

Post by onthecusp » Thu Mar 14, 2019 3:15 pm

I've run both early and late scenarios in FireCalc. It does not change the answer very much, for me, as you might expect with a actuarially neutral thing like SS. My default selection is delay SS to 70 for me and roughly at FRA for my wife, and to include an expectation of reducing expenses as I get older than 70. I also look at withdrawing more than 4% for the first few years. In in that situation the portfolio low point for worst historical conditions tends to occur at about 70. That makes me a little more conservative in what success means to me. 100% success but a predicted low for worst historical conditions near zero is not appealing so I try for $300,000 or more when assessing different options.

Taking SS earlier raises the minimum a little, but I like the valuable inflation adjusted annuity aspect of delaying SS. So my current plan is to work part time a few years to raise the floor to an even more comfortable $500,000. If that does not work out AND we have really bad market returns then I will probably start taking SS at that point and cutting expenses a little to avoid big withdrawals and smooth out the future.

There is a lot of interaction there that something like FireCalc helps to see how it affects your particular situation and intentions. It is hard to make generalizations which might be why it is rarely presented as a cut and dried "best choice".

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Re: SWR and Social Security

Post by heyyou » Thu Mar 14, 2019 3:43 pm

Caution: Thread drift to dispel fear of sequence risk.
(1) Sequence risk does not suddenly sneak up on retirees who periodically compare their annual spending to their remaining portfolio balance. I wonder if it is just marketing to scare retirees into hiring an advisor to manage their savings.

McClung advocates starting retirement with a near 50/50 allocation, and spending from bonds first, rebalancing only when the equities are up 10-20%. The WD amount is based on each annual remaining portfolio value, boosted a little by remaining longevity. That is 10-12 years of spending from bonds (modified to fit portfolio value) and it carries the new retiree past that crucial first decade of retirement without the mindless, inflation-fueled overspending that results in sequence risk.

Using Bengen's 4% SWR, only the 1966 and 1968 retirees have had trouble, the 1967 retirees and all other years' retirees, lasted for 30 years. If the retiree pays attention for the first decade, sequence risk is not a problem. Either sensibly adapt spending during retirement, or risk overspending--it's an easy choice.

Return to initial topic:
As mentioned by others, start retirement expecting to delay SS while knowing you can initiate it sooner, if necessary.

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Re: SWR and Social Security

Post by Artful Dodger » Thu Mar 14, 2019 4:10 pm

heyyou wrote:
Thu Mar 14, 2019 3:43 pm
Caution: Thread drift to dispel fear of sequence risk.
(1) Sequence risk does not suddenly sneak up on retirees who periodically compare their annual spending to their remaining portfolio balance. I wonder if it is just marketing to scare retirees into hiring an advisor to manage their savings.

McClung advocates starting retirement with a near 50/50 allocation, and spending from bonds first, rebalancing only when the equities are up 10-20%. The WD amount is based on each annual remaining portfolio value, boosted a little by remaining longevity. That is 10-12 years of spending from bonds (modified to fit portfolio value) and it carries the new retiree past that crucial first decade of retirement without the mindless, inflation-fueled overspending that results in sequence risk.

Using Bengen's 4% SWR, only the 1966 and 1968 retirees have had trouble, the 1967 retirees and all other years' retirees, lasted for 30 years. If the retiree pays attention for the first decade, sequence risk is not a problem. Either sensibly adapt spending during retirement, or risk overspending--it's an easy choice.

Return to initial topic:
As mentioned by others, start retirement expecting to delay SS while knowing you can initiate it sooner, if necessary.
What you have outlined (McClung), is basically my plan. I'm at a 52/48 mix now, and still working some, but close to retirement. I plan to spend cash / bonds first, and let my equity percentage drift up as fixed assets are sold. Plan to take both my and spouses SS at age 70. Once I hit 70, SS & pension assets will cover 120% of everyday expenses, and I expect to be comfortable with equities at 60-65% of assets.

To the OP: I think you've identified the options to consider, but as others have said there is a lot of variability in the outcomes. If I didn't have the fixed assets to carry me to age 70, and if there was a steep market decline, I would first consider starting spouse SS earlier, then my SS earlier.

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Re: SWR and Social Security

Post by alec » Thu Mar 14, 2019 6:36 pm

Dottie57 wrote:
Thu Mar 14, 2019 2:45 pm
62 and starting SS AT 70. I have CDs setup until 67. I am sure I will setup more in the coming years, so I should be fine intel 70. SS will cover basic expenses so portfolio is for more fun
This is similar to what the Stanford project recommends.
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Re: SWR and Social Security

Post by snackdog » Thu Mar 14, 2019 7:05 pm

The closer your SS is to your required living expense, the more it matters. In an extreme case, if your age 62 SS was expected to provide 100% of your expenses including all contingencies, you could retire at age 60 with around a 30% SWR.

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Re: SWR and Social Security

Post by protagonist » Thu Mar 14, 2019 8:06 pm

When to take SS? This is really a very simple decision that many complicate needlessly.

Reposting a previous post of mine re: the same question:

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $30K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. On the other hand, if he lives a long time and if he runs out of savings before he dies, he can still live much more comfortably on $30K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math.

He who dies with the most toys does not always win. He who dies happily and in peace does.

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Re: SWR and Social Security

Post by JoeRetire » Fri Mar 15, 2019 7:43 am

JBTX wrote:
Thu Mar 14, 2019 2:31 pm
If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
It wouldn't be hard to run something like FireCalc with different SS start dates and compare the results.

For me, start at 70 is a winner as far as having the most expendable assets. Pretty much any scenario has an extremely high probability of success (i.e. not running out of money completely) for me. Your mileage may vary.
Don't be a lemming.

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Re: SWR and Social Security

Post by JoeRetire » Fri Mar 15, 2019 7:53 am

protagonist wrote:
Thu Mar 14, 2019 8:06 pm
A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"
Perhaps.
...the latter is much more correlated with peace of mind.
It's hard to determine that without defining what you mean by "peace of mind".
Delores' decision is simple. She needs to start benefits at 62 for survival.
Assuming Delores cannot live on just a $10,000 nest egg, then she clearly has no choice if for some reason she must retire. This isn't a "peace of mind" issue.

Of course she would be far better served to decide to keep working and defer her SS until 70 if at all possible. She is the classic case where those extra benefits would be helpful.
If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind.
I don't understand the concept of "peace of mind" for someone who has died unexpectedly.
So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.
So you seem to be equating "peace of mind" with "more wealth"?
If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math.
It's a bit more complicated than that. Make sure you consider any effects on your spouse when making this decision.
He who dies with the most toys does not always win. He who dies happily and in peace does.
And yet both are equally dead. Perhaps there is an "I win" factor in there, perhaps not.
Don't be a lemming.

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Re: SWR and Social Security

Post by SGM » Sat Mar 16, 2019 2:17 am

My delay was from retirement at 66 until 70. We had enough assets to delay comfortably. The decision was easier as DW was able to take a spousal benefit while delaying her own SS until 70. I also value the longevity insurance of delaying SS over break even calculations.

I am certain there are studies comparing delaying SS and safe withdrawal rates. I read study results by the actuary Joe Tomlinson comparing the success of a $1MM portfolio by delaying SS to 70 with delaying SS to 70 and adding a SPIAs. The additional SPIAs extended the longevity of the portfolio considerably per Joe's calculations. Joe recommends delaying SS until 70 if you can and adding SPIAs at a later date.

My personal experience includes additional income streams so that I haven't had to take 4% from our portfolios most years. The other thing I did was to do Roth conversions while I was delaying SS.

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Re: SWR and Social Security

Post by iceport » Sat Mar 16, 2019 10:55 am

JBTX wrote:
Thu Mar 14, 2019 2:31 pm
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
What did the results of FIRECalc and/or cFIREsim show when you tried various SS start dates and their corresponding benefit amounts?

https://www.firecalc.com/index.php

http://www.cfiresim.com/input.php
"Discipline matters more than allocation.” ─William Bernstein

2015
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Re: SWR and Social Security

Post by 2015 » Sat Mar 16, 2019 11:41 am

JBTX wrote:
Thu Mar 14, 2019 2:35 pm
sport wrote:
Thu Mar 14, 2019 1:58 pm
JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
The way to address sequence of returns risk when retired is to have an appropriate allocation. I am retired, and my target allocation is 35/65. Since most of my holdings are bonds/CDs/cash, the gyrations of the stock market are not a problem for me. Once in a while (not often) I have to rebalance to maintain my risk level.
True. But if drawing SS early increased your odds of success (which it may or may not, that is the question) then you could invest a bit more aggressively in the draw SS early scenario.
Not all of us who have "won the game" are interested in reaching for performance or yield. I have liability matched the entirety of my expenses with an additional risk portfolio whose AA is 50/50. Sure, I could invest more "aggressively", but I'm too busy enjoying life being in awe of the mountains I'm surrounded by to be interested in gambling further in the markets (anymore than I already am).

Cash is King
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Re: SWR and Social Security

Post by Cash is King » Sat Mar 16, 2019 12:14 pm

delamer wrote:
Thu Mar 14, 2019 2:48 pm
JBTX wrote:
Thu Mar 14, 2019 2:31 pm
ResearchMed wrote:
Thu Mar 14, 2019 1:31 pm
JBTX wrote:
Thu Mar 14, 2019 1:25 pm
I have seen countless SWR threads, but don't recall seeing anything that looks at SWR probabilities based upon social security, taking SS early or late. Conventional wisdom is deferring to 70 often makes sense from a longevity insurance perspective. However, taking it early seems like it may reduce sequence of returns risk.

Anything been run on such hypothetical scenarios?
Keep in mind that the decision of when to start SS does not need to conclude it's the same age one actually retires.

Sequence of returns is more of a problem with the actual retirement date, not the date that one starts SS, which can vary considerably.

RM
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
There is no one answer.

For instance, the portion of your expenses covered by Social Security will determine how much you’ll need to draw down from your portfolio. That in turn will affect the success rate. If you can cover your expenses with your age 62 SS benefit, that is a different situation than if you need the age 70 benefit amount to cover them.

It also depends on what you mean by success. Do you mean a non-zero balance in your portfolio when you die?
This^. I think there is a tendency to get analysis paralysis on both SWR and when to take SS. Keep it simple and make your decision based on your situation and not on anyone else.

Cheers.
Last edited by Cash is King on Sat Mar 16, 2019 1:55 pm, edited 3 times in total.

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JBTX
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Re: SWR and Social Security

Post by JBTX » Sat Mar 16, 2019 1:51 pm

iceport wrote:
Sat Mar 16, 2019 10:55 am
JBTX wrote:
Thu Mar 14, 2019 2:31 pm
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
What did the results of FIRECalc and/or cFIREsim show when you tried various SS start dates and their corresponding benefit amounts?

https://www.firecalc.com/index.php

http://www.cfiresim.com/input.php
Thanks. These are actually pretty interesting, and somewhat comforting. If we can grow our existing savings about 10% over the next five years, and basically save at a net rate of zero (spouse works five more years) factor in conservative amounts of social security around when I am 70, at our current level of spending over 35 years both calculators show 100% success. When I have time I'll play with other social security scenarios.

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iceport
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Re: SWR and Social Security

Post by iceport » Sat Mar 16, 2019 4:03 pm

JBTX wrote:
Sat Mar 16, 2019 1:51 pm
iceport wrote:
Sat Mar 16, 2019 10:55 am
JBTX wrote:
Thu Mar 14, 2019 2:31 pm
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
What did the results of FIRECalc and/or cFIREsim show when you tried various SS start dates and their corresponding benefit amounts?

https://www.firecalc.com/index.php

http://www.cfiresim.com/input.php
Thanks. These are actually pretty interesting, and somewhat comforting. If we can grow our existing savings about 10% over the next five years, and basically save at a net rate of zero (spouse works five more years) factor in conservative amounts of social security around when I am 70, at our current level of spending over 35 years both calculators show 100% success. When I have time I'll play with other social security scenarios.
Cool! :thumbsup 8-)

These might not be the most sophisticated analyses you could perform, but I do believe they are enormously useful. It's important to keep in mind that they are backwards-looking. However, one thing I like is that (depending on the options you select) they don't consider market returns in isolation; the effects of various inflation conditions are also represented.
"Discipline matters more than allocation.” ─William Bernstein

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JBTX
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Re: SWR and Social Security

Post by JBTX » Sat Mar 16, 2019 5:53 pm

iceport wrote:
Sat Mar 16, 2019 4:03 pm
JBTX wrote:
Sat Mar 16, 2019 1:51 pm
iceport wrote:
Sat Mar 16, 2019 10:55 am
JBTX wrote:
Thu Mar 14, 2019 2:31 pm
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
What did the results of FIRECalc and/or cFIREsim show when you tried various SS start dates and their corresponding benefit amounts?

https://www.firecalc.com/index.php

http://www.cfiresim.com/input.php
Thanks. These are actually pretty interesting, and somewhat comforting. If we can grow our existing savings about 10% over the next five years, and basically save at a net rate of zero (spouse works five more years) factor in conservative amounts of social security around when I am 70, at our current level of spending over 35 years both calculators show 100% success. When I have time I'll play with other social security scenarios.
Cool! :thumbsup 8-)

These might not be the most sophisticated analyses you could perform, but I do believe they are enormously useful. It's important to keep in mind that they are backwards-looking. However, one thing I like is that (depending on the options you select) they don't consider market returns in isolation; the effects of various inflation conditions are also represented.
I've always used IORP which is interesting but I sometimes don't trust the output, as there are so many rather sophisticated assumptions factored in.

In this one, I used an expense need number exclusive of income tax, but upon reflection would need to factor in income taxes in retirement. But I would hope we could reduce expenses somewhat. We aren't exactly frugal, at least compared to others in here.

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iceport
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Re: SWR and Social Security

Post by iceport » Mon Mar 18, 2019 12:35 pm

JBTX wrote:
Sat Mar 16, 2019 5:53 pm
iceport wrote:
Sat Mar 16, 2019 4:03 pm
JBTX wrote:
Sat Mar 16, 2019 1:51 pm
iceport wrote:
Sat Mar 16, 2019 10:55 am
JBTX wrote:
Thu Mar 14, 2019 2:31 pm
Yes, this is what I meant. If you retire, at say 55. Lets say you have 20x expenses saved. Then you can start SS somewhere between 62 and 70. What gives the greatest probability of success?
What did the results of FIRECalc and/or cFIREsim show when you tried various SS start dates and their corresponding benefit amounts?

https://www.firecalc.com/index.php

http://www.cfiresim.com/input.php
Thanks. These are actually pretty interesting, and somewhat comforting. If we can grow our existing savings about 10% over the next five years, and basically save at a net rate of zero (spouse works five more years) factor in conservative amounts of social security around when I am 70, at our current level of spending over 35 years both calculators show 100% success. When I have time I'll play with other social security scenarios.
Cool! :thumbsup 8-)

These might not be the most sophisticated analyses you could perform, but I do believe they are enormously useful. It's important to keep in mind that they are backwards-looking. However, one thing I like is that (depending on the options you select) they don't consider market returns in isolation; the effects of various inflation conditions are also represented.
I've always used IORP which is interesting but I sometimes don't trust the output, as there are so many rather sophisticated assumptions factored in.

In this one, I used an expense need number exclusive of income tax, but upon reflection would need to factor in income taxes in retirement. But I would hope we could reduce expenses somewhat. We aren't exactly frugal, at least compared to others in here.
I've tried i-ORP before, but I also don't really trust it. Somehow, I think any algorithm that determines all pre-tax holdings should be converted to post-tax holdings in one fell swoop, incurring a monumental tax bill in the single conversion year, is seriously flawed. I realize more recent iterations of the calculator allow the user to specify constraints on such conversions, but that seems more like a work-around than a legitimate fix to the tax-timing question. The user is still forced to decide on their own what level of conversion is prudent and feasible.

As far as your planning, I would just add that, besides taxes, it's also important to factor in the large, irregular expenses we all incur eventually: new cars, major car repair, new roofs, furnaces, etc. I was slow to factor those expenses in, and they made a significant difference in my own "expense need number."
"Discipline matters more than allocation.” ─William Bernstein

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JBTX
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Re: SWR and Social Security

Post by JBTX » Mon Mar 18, 2019 12:51 pm

Dottie57 wrote:
Thu Mar 14, 2019 2:45 pm
62 and starting SS AT 70. I have CDs setup until 67. I am sure I will setup more in the coming years, so I should be fine intel 70. SS will cover basic expenses so portfolio is for more fun
That is an interesting strategy. In a way it is kind of similar to a bond tent, in that you increase your fixed income through those transition years. I've always been skeptical of strategies with increasing stock allocations when you age, but it could make sense when factoring in social security. You are essentially treating social security as a fixed income source and in the pre social security years you fill that void with a higher fixed income allocation.

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JBTX
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Re: SWR and Social Security

Post by JBTX » Mon Mar 18, 2019 1:19 pm

iceport wrote:
Mon Mar 18, 2019 12:35 pm
JBTX wrote:
Sat Mar 16, 2019 5:53 pm
iceport wrote:
Sat Mar 16, 2019 4:03 pm
JBTX wrote:
Sat Mar 16, 2019 1:51 pm
iceport wrote:
Sat Mar 16, 2019 10:55 am


What did the results of FIRECalc and/or cFIREsim show when you tried various SS start dates and their corresponding benefit amounts?

https://www.firecalc.com/index.php

http://www.cfiresim.com/input.php
Thanks. These are actually pretty interesting, and somewhat comforting. If we can grow our existing savings about 10% over the next five years, and basically save at a net rate of zero (spouse works five more years) factor in conservative amounts of social security around when I am 70, at our current level of spending over 35 years both calculators show 100% success. When I have time I'll play with other social security scenarios.
Cool! :thumbsup 8-)

These might not be the most sophisticated analyses you could perform, but I do believe they are enormously useful. It's important to keep in mind that they are backwards-looking. However, one thing I like is that (depending on the options you select) they don't consider market returns in isolation; the effects of various inflation conditions are also represented.
I've always used IORP which is interesting but I sometimes don't trust the output, as there are so many rather sophisticated assumptions factored in.

In this one, I used an expense need number exclusive of income tax, but upon reflection would need to factor in income taxes in retirement. But I would hope we could reduce expenses somewhat. We aren't exactly frugal, at least compared to others in here.
I've tried i-ORP before, but I also don't really trust it. Somehow, I think any algorithm that determines all pre-tax holdings should be converted to post-tax holdings in one fell swoop, incurring a monumental tax bill in the single conversion year, is seriously flawed. I realize more recent iterations of the calculator allow the user to specify constraints on such conversions, but that seems more like a work-around than a legitimate fix to the tax-timing question. The user is still forced to decide on their own what level of conversion is prudent and feasible.

As far as your planning, I would just add that, besides taxes, it's also important to factor in the large, irregular expenses we all incur eventually: new cars, major car repair, new roofs, furnaces, etc. I was slow to factor those expenses in, and they made a significant difference in my own "expense need number."
The thread was more of a thought experiment. Our own situation is somewhat complicated. We have a special needs teen who will likely need ongoing support. But he may be eligible for benefits as an adult, either SSI or social security adult child disability. If he were eligible for the social security disability, it may make sense for one of us to take SS earlier so he can draw that benefit. And we have a daughter late teen years who I suspect is going to need help here and there down the road. 1st 4 years of college is mostly funded, but beyond that who knows. Ultimately we would like to leave a funded trust for our son once we are pushing up daisies. Determining how much that should be is difficult at this point. Down the road there will probably be some inheritances but I'm not of the mindset to plan for those.

RadAudit
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Re: SWR and Social Security

Post by RadAudit » Tue Mar 19, 2019 3:50 pm

onthecusp wrote:
Thu Mar 14, 2019 3:15 pm
.... to include an expectation of reducing expenses as I get older than 70.
I'm past 70. I'm still waiting for that reduction of expenses thing.

Back to the thread.
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Re: SWR and Social Security

Post by Johnnie » Tue Mar 19, 2019 5:53 pm

I think the "bridge" plan between retirement and SS at 70 is relevant to this, specifically it's use as a portfolio distribution "metering" device. It sounds like a bucket strategy but can also be expressed as a gradual, programmed asset allocation shift. It is used to equalize retirement income before and after taking social security at 70.

The version of it I first saw described here and plan to use is this: At retirement remove from your portfolio and place in a CD ladder (or equivalent) the annual amount you will realize from social security at age 70 * the number of years until age 70. You spend that money between retirement and collecting SS at age 70, to roughly equalize income before and after that milestone.

What's left after the bridge fund money is deducted is your "permanent" portfolio, or the amount your life-long annual distributions are based on, whatever method is used to determine those - SWR, fixed percentage of the balance, RMDs, etc. At retirement you begin distributions based on your chosen method, alongside distributions from the bridge fund during the bridge years.

As I mentioned, I find the "metering" aspect of this method useful. If you plan to retire at 60 and take SS at 70, the bridge fund would require setting aside your annual SS benefit * 10. When that amount is subtracted from the portfolio, the remaining "permanent portfolio" may not be sufficient to support you in the manner to which you plan to become accustomed. Or maybe it would be enough - performing the calculation gives you a number to judge by.
"I know nothing."

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onthecusp
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Re: SWR and Social Security

Post by onthecusp » Wed Mar 20, 2019 5:05 pm

RadAudit wrote:
Tue Mar 19, 2019 3:50 pm
onthecusp wrote:
Thu Mar 14, 2019 3:15 pm
.... to include an expectation of reducing expenses as I get older than 70.
I'm past 70. I'm still waiting for that reduction of expenses thing.

Back to the thread.
I hear you and I'm starting to question that aspect of my planning. With the current plan it does not affect our "success rate" so much as how much we might leave to heirs. (They will get millions, millions I tell you.) Or maybe I'll just spend it on long term care. :D

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marklearnsbogle
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SWR and Social Security

Post by marklearnsbogle » Wed Mar 27, 2019 9:14 am

alec wrote:
Thu Mar 14, 2019 1:48 pm
You may be interested in these two long and short publications from Stanford showing the delay SS strategy is often very good and easy to implement. There is strategy comparison too.

http://longevity.stanford.edu/2017/11/2 ... decisions/

http://longevity.stanford.edu/2017/11/2 ... 401k-plan/
Thank you for sharing the links to these two reports; looks like a thorough and thoughtful examination of strategy and I'm looking forward to digging in. A friend of mine recently created a version of his own which enabled him to stop working, live on "bridge" money, and delay his SS benefit. It's worked beautifully for him and most of all, allowed him achievement of his number one goal, which was to stop working before his FRA.
"Nothing is simpler than owning the stock market and holding it forever, and that’s essentially the idea behind the index fund.” - Bogle.

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Re: SWR and Social Security

Post by nisiprius » Wed Mar 27, 2019 10:45 am

I pretty much agree with Protagonist, maybe with a different spin.

If you are a competitive investor who is ego-involved in beating your rivals, then it is complicated. You have to begin by deciding what, exactly, you are trying to maximize. Some popular things to try to optimize are:

--Do whatever gets me the largest number of dollars (simple total, net present value, real inflation-adjusted total, statistical total, for couple or for individual, etc.)

--Do whatever optimizes my consumption smoothing (i.e. read "Spend Til the End" and go full-bore with ESPlanner)

--Do whatever costs the government the most money

Even "maximizing happiness" is tricky. What discount rate do you apply to the time value of happiness? Which is worth more, one Hedon today or two Hedons ten years from today?

If you just want to play with the grandkids, work out at the senior center, and do the scheduled oil changes on your car, just shrug and take it sometime between age 62 and 70 whenever it seems convenient.

Social Security is supposed to be "actuarially neutral," Whenever I say that, the connoisseurs come down on me like a ton of bricks pointing the unfairness of unisex standards and the difference between CPI-U and CPI-W and what have you. I say, it is what it is. It is a meaningful chunk of change. Don't overthink it. No, don't be like my late friend Paul who reached age 73 without claiming because it seemed like too much trouble! That's underthinking it!

Guesstimate it, subtract it from your expenses to get the difference that your portfolio must meet, and base SWR on that.

If the difference is close to zero, then spending from your portfolio is close to being entirely discretionary.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: SWR and Social Security

Post by willthrill81 » Wed Mar 27, 2019 11:19 am

JBTX wrote:
Thu Mar 14, 2019 2:33 pm
3-20Characters wrote:
Thu Mar 14, 2019 1:44 pm
Not sure what sort of scenario there is to run. Say one retires at 62 with the intention of using savings to fund expenses and delaying SS until 70. Now say there is an immediate 50% market drop and a year (or a month) later retiree gets nervous about drawing down portfolio. Said retiree could file for SS at that point.
Good point. If the market does drop 50%, does pulling SS increase your odds of success?
If doing so enables you to decrease your portfolio withdrawals, almost certainly yes.

There is significant value in the option of being able to claim SS benefits anytime between the ages of 62 and 70. If you encounter a poor sequence of returns that would result in you needing to make 'excessive' portfolio withdrawals, then start SS benefits. Otherwise, you can retain that option and treat it as longevity insurance. Unless you have strong reason to believe that your life expectancy will differ one way or the other from the average, this seems to be a simple yet robust strategy.
“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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