SS Strategy Metric

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rkhusky
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SS Strategy Metric

Post by rkhusky » Wed Apr 16, 2014 12:19 pm

What metric do/did you use to determine which Social Security strategy to choose? Total amount received over a particular period? Total return by factoring in a particular rate of return? Factor in inflation?

I now have a spreadsheet that looks at 11 taking strategies for my wife and me. I have included the rate of return. I have not included inflation since SS is inflation-adjusted (should I adjust the rate of return by a bit to account for any discrepancy in the SS inflation adjustment?).

I intend to look at a range of time periods (death at 75 - 100 years) and a variety of investment return rates (1% - 8%) to see if I can eliminate some of the 11 strategies as never being optimal (and also see if there are any other strategies that may be better).

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VictoriaF
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Re: SS Strategy Metric

Post by VictoriaF » Wed Apr 16, 2014 12:21 pm

My strategy is to wait collecting Social Security until the age of 70, so that I will maximize my inflation-adjusted income for the remainder of my life.

Victoria
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rkhusky
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Re: SS Strategy Metric

Post by rkhusky » Wed Apr 16, 2014 12:44 pm

Some initial calculations show that one would have to live a very long time to recoup the cost of waiting, if the rate of return is above a certain level. But perhaps if the rate of return is high enough, one does not need SS as much.

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Re: SS Strategy Metric

Post by sscritic » Wed Apr 16, 2014 12:46 pm

rkhusky wrote: But perhaps if the rate of return is high enough, one does not need SS as much.
I think that is true with your 8% real return, say when inflation is 4% and you are making 12%.

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rkhusky
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Re: SS Strategy Metric

Post by rkhusky » Wed Apr 16, 2014 12:52 pm

Also, does/did anyone factor in that by delaying SS one could convert more tax-deferred savings to a Roth at lower rates?

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VictoriaF
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Re: SS Strategy Metric

Post by VictoriaF » Wed Apr 16, 2014 12:55 pm

rkhusky wrote:Also, does/did anyone factor in that by delaying SS one could convert more tax-deferred savings to a Roth at lower rates?
I do/did.

Victoria
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Re: SS Strategy Metric

Post by sscritic » Wed Apr 16, 2014 12:55 pm

rkhusky wrote:Also, does/did anyone factor in that by delaying SS one could convert more tax-deferred savings to a Roth at lower rates?
People do, but I didn't. I didn't delay, but I also never saw the lower tax rates I was promised (a pension can do that to you).

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Re: SS Strategy Metric

Post by The Wizard » Wed Apr 16, 2014 12:57 pm

rkhusky wrote:Also, does/did anyone factor in that by delaying SS one could convert more tax-deferred savings to a Roth at lower rates?
Poor people (80%+ of the population age 62 to 70) don't have much tax-deferred $$ to worry about...
Attempted new signature...

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Re: SS Strategy Metric

Post by Ron » Wed Apr 16, 2014 1:01 pm

rkhusky wrote:What metric do/did you use to determine which Social Security strategy to choose?
http://individual.troweprice.com/public ... urity-Tool :mrgreen:

I filed/suspended my SS benefit in January upon reaching FRA. My wife will turn FRA next month, and has already filed for a spousal benefit (at 50%). Her first deposit will occur June 25th.

We both plan to claim our indivudial regular SS payments to start when we turn 70. That gives us the option to start SS earlier if life conditions warrant such a move. In additon, we also looked at the tax implications of RMD's at age 70.5. Since we have substantial TIRA holdings, our RMD's (along with a higher SS benefit at age 70) would have resulted in much more FIT due to having to take a larger amount out of our TIRA investments than needed for projected living expenses. By delaying SS, we are able to put a good dent in those TIRA holdings over our preceding retirement years (I've been retired seven years, wife two years).

On the tax side, 15% of our SS will not be taxed (under current rules) on a much higher base than benefits at FRA. This will also save a few dollars on the FIT side.

As to any "metric", our goal was to have the highest cola adjusted income source as we age. While we are fortunate to have done well in the market (equities/bonds) over the last 32+ years, we would rather start to put our income plans on automatic as we age, as we have started to do so with an SPIA upon my retirement. And no, we're not willing to give somebody else our joint portfolio to manage (e.g. Where Are The Customers' Yachts).

FWIW,

- Ron

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BigFoot48
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Re: SS Strategy Metric

Post by BigFoot48 » Wed Apr 16, 2014 1:37 pm

We took at 62 after I did numerous calculations too (we're now 65), but I have just used my Roth model which includes a SS benefit comparison option to look at our situation as of 62 again, using this much more sophisticated model (includes determining taxable SS benefits, and all the usual factors in retirement models). Because of expected inheritances and other factors, waiting to the optimum time of 70 resulting in only a 2.4% higher portfolio value at 91 (30 years from 62).

So I don't really have regret for my decision, but do think based on all the more recent thinking and papers on this topic that the vast majority should wait until 70, or as long as possible, for that possibility that the surviving spouse will live a long, long time and really need those extra funds.

I'm currently improving the reporting on the benefit comparison portion of my model for a future release, but for those doing this calculation please try my model and give me some ideas for improving this function. Retiree Roth Conversion Decision Model
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Re: SS Strategy Metric

Post by lawman3966 » Wed Apr 16, 2014 1:41 pm

I have reproduced below a prior post that I believe addresses this subject in detail.

I wanted to take a moment to address a pet peeve of mine. The commonly touted 8% annual return for delaying SS benefits is misleading. The number is off based on at least two factors. The first error is one of basic arithmetic. (I will use the data for people born between 1948 and 1954 for simplicity. For this crowd, the percentages of FRA paid per month at ages 66, 67, 68, 69, and 70 are 100%, 108%, 116%, 124%, and 132% respectively. Thus, we are dealing with 8% simple interest increases using the FRA as the denominator. 108% is indeed 8% more than 100%. But the other increases are not 8% year over year increases. For example, 132% is only 6.45% more than 124%. That addressed factor one. The second factor arises from the tendency to ignore life expectancy at different ages.

For males at age 69, most of the 6.45% increase in monthly benefits that arises by waiting until age 70 to take benefits is a mortality credit, not an increase in the expected total value of this person's SS benefit. It should be remembered that the 6.45% year over year increase from the age-69 benefit to the age-70 benefit is the increase in monthly benefits, but the 70 year old will collect benefits for fewer months than the 69 year old.

The following is from my former post on the subject.

* *

There is a series of papers by Slavov and Shoven that address this topic in extensive detail.

The determination of when to take benefits with the 62-70 age range depends on two main variables: (1) whether you think your life expectancy is greater or less than the mean life expectancy for your condition (age, gender etc); and (2) the real interest rate at the time you make the decision to delay for another year (or shorter period).

Two resources are needed to determine whether to delay taking benefits: (a) the changes in monthly payouts with age; and (b) the social security actuarial life table, both of which I've linked to below:
http://www.ssa.gov/OACT/ProgData/ar_drc.html
http://www.ssa.gov/OACT/STATS/table4c6.html

I'll provide one example using male life expectancy from the actuarial table for a person born in 1960. In theory, hundreds of calculations could be made since the SS benefit amount increases in one-month increments.

I will use generic units. These can be readily scaled to actual dollars.
At age 69, the monthly benefit is 124, and at age 70 is 132.
The life expectancies for this person are14.4 at age 69 and 13.73 at age 70.
This provides total expected benefit amounts according to the following:
Age 69: 124*14.4 = 1785.6
Age 70: 132*13.73 = 1812.36
Thus the after-inflation, mean expected lifetime SS benefit at age 70 is about 1.5% greater than at age 69 (NOT the commonly touted "8%" figure commonly cited on network news programs).

Does that mean one should necessarily wait until age 70? It depends.
The prevalence of low real interest rates (which is our current situation), shifts the decision towards delaying taking benefits.
Moreover, a belief that your life expectancy is greater than the mean also shifts the decision toward waiting.
Another factor is the balance of concerns between taking benefits early or late.

Even assuming one's life expectancy exactly matched the mean, and that current real interest rates were 1.5%, thereby making the benefits at age 69 and 70 actuarially equal, there is still an argument in favor of waiting.
Specifically, if you take benefits at 70 and unexpectedly become ill at 75, at worst you could lie in bed and ponder what additional fun you might have had between 62 and 70 had you taken benefits earlier.
On the other side of things, if you live to be 85 and beyond, and have to live on a reduced income, you will regret having taken benefits early, over an extended period.
Thus, I expect to wait until age 70 to take benefits and would need a very good reason to do otherwise.

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jjustice
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Re: SS Strategy Metric

Post by jjustice » Wed Apr 16, 2014 2:13 pm

What metric did I use? I saw that I had no hope of being in the 1%, but since only 2% delay social security until 70, I jumped at the chance to join that somewhat less elite group.

More seriously, my metric is a variant on VictoriaF's: I choose to maximize my inflation-adjusted income for as long as either I or my wife lives.

John

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Re: SS Strategy Metric

Post by neurosphere » Wed Apr 16, 2014 2:31 pm

lawman3966 wrote: I wanted to take a moment to address a pet peeve of mine. The commonly touted 8% annual return for delaying SS benefits is misleading. The number is off based on at least two factors. The first error is one of basic arithmetic. (I will use the data for people born between 1948 and 1954 for simplicity. For this crowd, the percentages of FRA paid per month at ages 66, 67, 68, 69, and 70 are 100%, 108%, 116%, 124%, and 132% respectively. Thus, we are dealing with 8% simple interest increases using the FRA as the denominator. 108% is indeed 8% more than 100%. But the other increases are not 8% year over year increases. For example, 132% is only 6.45% more than 124%. That addressed factor one. The second factor arises from the tendency to ignore life expectancy at different ages.
Yes, people claim an 8% "return" for waiting. But how can one calculate "total return" in the first place, because the return is dependent on your age of death? I think people are just being imprecise with their words as a shorthand. A better way to phrase this might be "waiting one year entitles you to monthly payments 8% greater than not waiting". What's the return on this?

Next, yes, it's not 8% year over year, but I guess with the shorthand we often use perhaps that detail gets lost. That 8% (or 16 or 24 etc) is an increased payment when compared to FRA, and not compared to the previous year, as you note.

These are important points you bring up, but do you think people at the cusp of collecting a benefit are using these imprecise phrases/metrics to make a decision? I.e. if one is 67 years old today thinking about whether to collect benefits now vs waiting a year, do you think he is thinking, "hmm, I could collect now, but if I wait I'll get an 8% return vs the 3% I might make in bonds"? I can't imagine that anyone is forgetting the year of lost benefits, or the role that life expectancy plays. Or am I giving "people" too much credit?
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Re: SS Strategy Metric

Post by archbish99 » Wed Apr 16, 2014 2:45 pm

You're asking, essentially, what scale should be used to judge various strategies? That's a good question. There are several metrics to consider, and it's unlikely that any plan comes out ahead on all of them, so deciding which metric matters to you the most will determine which strategy you ultimately pick.
  • Size of terminal portfolio. If you care about leaving something to heirs, you care about taking the least out of your portfolio while still funding your living expenses, regardless of when you die.
  • Total amount received from Social Security. By the time you retire, unless you work a little bit part-time in retirement, the amount you've paid in is fixed. Getting the most back that you can is just a good return on your investment.
  • Highest guaranteed "floor" of income in retirement. Social Security is an inflation-adjusted annuity that's not subject to the insurance company going out of business. (Well, if the government collapses, you'll have bigger fish to fry.) Whatever your SS income might be, that's the lowest your income could ever go in retirement.
Personally, I weight the last the highest, and so I plan on delaying as long as possible if the rules look something like the current ones when I reach that stage of life. However, the second one is why I would suggest my wife claim as early as possible. Other people find their priorities different, and since they don't know they'll live long enough for delay to make sense on the second basis, they claim early to improve their odds of getting "enough" back from the government.
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Re: SS Strategy Metric

Post by Tadpole » Wed Apr 16, 2014 3:03 pm

I minimized the impact of my death on my husband's income.

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Re: SS Strategy Metric

Post by lawman3966 » Wed Apr 16, 2014 3:28 pm

neurosphere wrote: Yes, people claim an 8% "return" for waiting. But how can one calculate "total return" in the first place, because the return is dependent on your age of death? I think people are just being imprecise with their words as a shorthand. A better way to phrase this might be "waiting one year entitles you to monthly payments 8% greater than not waiting". What's the return on this?
]

One can't calculate total actual return, since this depends on actual lifespan. However, one can calculate the resulting value of the social security benefit based on the year in which benefits are accessed. Calculations of this sort are done all the time for lifetime annuities even though there, as here, no one knows how long the annuitant will live.
neurosphere wrote: These are important points you bring up, but do you think people at the cusp of collecting a benefit are using these imprecise phrases/metrics to make a decision? I.e. if one is 67 years old today thinking about whether to collect benefits now vs waiting a year, do you think he is thinking, "hmm, I could collect now, but if I wait I'll get an 8% return vs the 3% I might make in bonds"? I can't imagine that anyone is forgetting the year of lost benefits, or the role that life expectancy plays. Or am I giving "people" too much credit?
I fear you may be giving people too much credit. If anything I thought it sounded as though I was giving people too little credit. However, I have found, when discussing finance and math, that doing that is hardly possible. Most financial authors seem not to understand either the lack of an 8% year over year increase in the value of the social security benefit (i.e. the effective annuity value), or the life expectancy aspect. Most non-financial people understand even less. About a year ago, at a dinner party, I asked whether it was clear that the value 132 was not 8% higher than 124. Only two of six people understood this point, and most of the other four were college graduates.

Am I giving people too little credit? I doubt it. H.L. Mencken answered that for us some time back.
We are speaking here of an industry (the wealth management industry that financial journalists usually write about) that was built on, and thrives on, the ignorance and innumeracy of its clients. Inevitably, the financial media draft their articles with this audience in mind, and end up dumbing things down accordingly.

If you were asking whether some people make their social security claiming decision without understanding all the facts, my answer is an unequivocal yes.

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Re: SS Strategy Metric

Post by DFrank » Wed Apr 16, 2014 4:25 pm

I consider two criteria:

- The total expected SS benefits. I looked at average life expectancy scenarios, and also at some other more extreme scenarios for both of our life expectancies.
- Maximizing a floor of fixed (inflation protected) income.

We are 59/49, and the age difference is a factor in my thinking. Obviously, there is a high probability my wife will outlive me by a good margin, so our plans try to take that into account. That makes it more likely that one or both of us will be drawing my higher benefit for long enough to make waiting the right decision.

Thinking about her SS withdrawal date, our age difference also leads to the possibility that if we wait to have her start her SS benefit at 70, she may have a relatively short time drawing that benefit before transitioning to mine in the event I die earlier than expected.

So the current plan is to start drawing my SS at 70, and probably draw my wife's when she is 62. We'll continue to evaluate that as we get closer to retirement (we plan to retire when I am 62).

Dave
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springnr
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Re: SS Strategy Metric

Post by springnr » Wed Apr 16, 2014 5:52 pm

At 70 for me, unless the market is unkind.
Around $200K is the most I will lag behind by waiting verses taking SS early.
The higher SS benefit will be nicer later in life, and if I check out early.... I won't care about the $200K so much

earlyout
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Re: SS Strategy Metric

Post by earlyout » Wed Apr 16, 2014 8:04 pm

I considered two factors, both mentioned elsewhere in this thread. First was the income floor while we are both alive as well as the income floor for the surviving spouse. The second value was the size of the investment portfolio at age 75. By delaying SS until 70 we were able to convert a substantial amount of our tIRAs to a Roth which will significantly lower our RMDs and income taxes each year thus increasing the portfolio balance. A point that I think is important if you go through this exercise is to discount the value of the tIRA for the taxes due on the IRA. I used our effective tax rate for this purpose rather than our marginal rate and still came out way ahead by waiting until 70 and converting to Roth while I was waiting.

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Re: SS Strategy Metric

Post by Ron » Wed Apr 16, 2014 9:38 pm

lawman3966 wrote:I have reproduced below a prior post that I believe addresses this subject in detail.

I wanted to take a moment to address a pet peeve of mine. The commonly touted 8% annual return for delaying SS benefits is misleading. The number is off based on at least two factors. The first error is one of basic arithmetic. (I will use the data for people born between 1948 and 1954 for simplicity. For this crowd, the percentages of FRA paid per month at ages 66, 67, 68, 69, and 70 are 100%, 108%, 116%, 124%, and 132% respectively. Thus, we are dealing with 8% simple interest increases using the FRA as the denominator. 108% is indeed 8% more than 100%. But the other increases are not 8% year over year increases. For example, 132% is only 6.45% more than 124%. That addressed factor one. The second factor arises from the tendency to ignore life expectancy at different ages.

For males at age 69, most of the 6.45% increase in monthly benefits that arises by waiting until age 70 to take benefits is a mortality credit, not an increase in the expected total value of this person's SS benefit. It should be remembered that the 6.45% year over year increase from the age-69 benefit to the age-70 benefit is the increase in monthly benefits, but the 70 year old will collect benefits for fewer months than the 69 year old.
SS has never stated that each year delayed (from FRA until age 70) represents a cumulative return year over year. The SS site ( http://www.ssa.gov/retire2/delayret.htm ) simply states the difference in payments if you start at age 67, 68, 69, and 70. You get to claim at one age; not to claim after age 66 and then claim again - which is what you are trying to show. There are no year over year increases, but rather a total increase as compared to your PIA (Primary Insurance Amount) which is what you will get if your FRA is age 66.

If I claim at age 70, I will receive 132% of the age 66 benefit - not compared to the age 69 benefit since that is not my FRA base amount.

BTW, the bulk of the increase is indeed attributed to a mortality credit. It's no difference than comparing claiming at age 62 vs. age 66 vs. age 70. A good portion of each increase is attributed to the fact that SS will have less of a period of time to pay you the later you claim. It's no different than an SPIA which will pay you more at age 80 than age 59 (which was the age I purchased my first SPIA) which means that I'll receive monthly annuity payments for a (hopefully) longer time, but at a reduced dollar amount.

I know you are disappointed that SS does not pay increases based upon a cumulative basis (as disappointed as I was when I first researched the subject) but I do understand why they are stating it in this manner. If you wish, don't even talk about the 8% but rather that you get an increase over your FRA/PIA amount of 2/3 of 1% each month from age 66 until you claim. However, I'm sure most would have more problems understanding that simple math :mrgreen: ...

- Ron

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Re: SS Strategy Metric

Post by Bill M » Wed Apr 16, 2014 10:26 pm

The metric I use is final net worth. Maximizing SS benefits is useless if you go broke waiting to start receiving them.

To evaluate a SS claiming strategy, I first project total worth as a function of age. I expect it to decrease between now and the age I start collecting SS benefits. I look first at the minimum value of this curve; the minimum must be sufficient to have a safety margin, otherwise it is a non-solution. I then check the shape of the curve, and make sure it isn't plunging anywhere, otherwise it is a non-solution. I then look at total net worth at a worst-case age (I use 105). That's the measure.

Projecting net worth as a function of age uses a rather complex spreadsheet; I have to project all the other income, IRA RMDs, expenses (with inflation), and taxes. For years when taxes are low, I calculate the potential Roth conversion from filling the low tax brackets; this has the effect of reducing the RMDs later. I also include a maximum I-Bond purchase each year, and a maximum HSA contribution (using the HSA as a retirement account, not a reimbursement account).

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rkhusky
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Re: SS Strategy Metric

Post by rkhusky » Thu Apr 17, 2014 6:34 am

springnr wrote:At 70 for me, unless the market is unkind.
Around $200K is the most I will lag behind by waiting verses taking SS early.
The higher SS benefit will be nicer later in life, and if I check out early.... I won't care about the $200K so much
Does the $200K include investment return?

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rkhusky
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Re: SS Strategy Metric

Post by rkhusky » Thu Apr 17, 2014 6:37 am

Bill M wrote:The metric I use is final net worth. Maximizing SS benefits is useless if you go broke waiting to start receiving them.

To evaluate a SS claiming strategy, I first project total worth as a function of age. I expect it to decrease between now and the age I start collecting SS benefits. I look first at the minimum value of this curve; the minimum must be sufficient to have a safety margin, otherwise it is a non-solution. I then check the shape of the curve, and make sure it isn't plunging anywhere, otherwise it is a non-solution. I then look at total net worth at a worst-case age (I use 105). That's the measure.

Projecting net worth as a function of age uses a rather complex spreadsheet; I have to project all the other income, IRA RMDs, expenses (with inflation), and taxes. For years when taxes are low, I calculate the potential Roth conversion from filling the low tax brackets; this has the effect of reducing the RMDs later. I also include a maximum I-Bond purchase each year, and a maximum HSA contribution (using the HSA as a retirement account, not a reimbursement account).
I may try to do something similar in order to see the effect of RMD's, Roth conversions, and taxes. I have also downloaded BigFoot48's spreadsheet for further insights.

Income floor was also mentioned by a number of people, which I also need to look at.

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Re: SS Strategy Metric

Post by springnr » Thu Apr 17, 2014 11:28 am

rkhusky wrote:
springnr wrote:At 70 for me, unless the market is unkind.
Around $200K is the most I will lag behind by waiting verses taking SS early.
The higher SS benefit will be nicer later in life, and if I check out early.... I won't care about the $200K so much
Does the $200K include investment return?
Yes, SS taken at 62 would reduce the annual draw from tIRA account, allowing growth on those funds.
Drawing from the tIRA and converting some to Roth every year until SS at 70, is the present course.

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Re: SS Strategy Metric

Post by desertbandit442 » Thu Apr 17, 2014 5:36 pm

My metric is my wife. As long as we are married and she is alive, I will wait until 70. I will start collecting right away if she should pass before me.

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Re: SS Strategy Metric

Post by sscritic » Thu Apr 17, 2014 5:41 pm

desertbandit442 wrote:My metric is my wife. As long as we are married and she is alive, I will wait until 70. I will start collecting right away if she should pass before me.
Why? Didn't she ever work? When she dies, you can collect as her widower and delay your own to age 70, and get the best(?) of both worlds.

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Re: SS Strategy Metric

Post by desertbandit442 » Fri Apr 18, 2014 9:44 am

sscritic wrote:
desertbandit442 wrote:My metric is my wife. As long as we are married and she is alive, I will wait until 70. I will start collecting right away if she should pass before me.
Why? Didn't she ever work? When she dies, you can collect as her widower and delay your own to age 70, and get the best(?) of both worlds.
Her benefits are between 1/4 to 1/3 of mine.

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Re: SS Strategy Metric

Post by sscritic » Fri Apr 18, 2014 10:14 am

desertbandit442 wrote:
sscritic wrote:
desertbandit442 wrote:My metric is my wife. As long as we are married and she is alive, I will wait until 70. I will start collecting right away if she should pass before me.
Why? Didn't she ever work? When she dies, you can collect as her widower and delay your own to age 70, and get the best(?) of both worlds.
Her benefits are between 1/4 to 1/3 of mine.
And if she dies before you, you can collect them while waiting until age 70 to claim your own. You are waiting while she is alive; why would you stop waiting when she dies? I can think of some reasons, but waiting might be of value to you, especially as a widower. Single people wait, but as a widower you would get the same benefit of waiting, however small, plus the widower benefits. Why do you want to throw away free money?

Of course, I don't know if she is already collecting her own benefit or collecting as your wife or whether you are full retirement age yet or any other relevant facts. The point is that there are relevant facts that should be taken into consideration. The decision whether to collect as a widower should be made when the time comes.

Here are some of what were my facts: my first wife died; I remarried; I got divorced. Based on those facts, I could have collected widower benefits on my first wife's record until age 70. I didn't because there were other facts that I took into consideration at that time.

I don't know your circumstances, so I can only encourage you to consider all your choices and not close the door on some too early.

P.S. Trying to read between the lines, I think you thought I was suggesting being a widower for life, but I wrote "delay your own to age 70." Say she dies when you are 64; you can be a widower from 64 to 70 and then become yourself with all your delayed credits at 70.
Last edited by sscritic on Fri Apr 18, 2014 10:25 am, edited 1 time in total.

Rich in Michigan
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Re: SS Strategy Metric

Post by Rich in Michigan » Fri Apr 18, 2014 10:15 am

archbish99 wrote:
  • Size of terminal portfolio. If you care about leaving something to heirs, you care about taking the least out of your portfolio while still funding your living expenses, regardless of when you die.
  • Total amount received from Social Security. By the time you retire, unless you work a little bit part-time in retirement, the amount you've paid in is fixed. Getting the most back that you can is just a good return on your investment.
  • Highest guaranteed "floor" of income in retirement. Social Security is an inflation-adjusted annuity that's not subject to the insurance company going out of business. (Well, if the government collapses, you'll have bigger fish to fry.) Whatever your SS income might be, that's the lowest your income could ever go in retirement.
These are roughly the same ones I considered. When I ran my models, and keeping the same level of annual expenditure across the models, my final estate would be the greatest by claiming at 62. There have been papers published that are in agreement with that. Truthfully, that is important to me.

However, having turned 63 yesterday and having been retired a little over two years, I am planning on waiting until 70 to initiate SS. Your greatest risk is not in leaving too little, but rather running out of $$$ while still alive. Delaying is generally...not always...but generally your best hedge against that. Also, the greatest risk to my children is not that I will leave too little to them; rather it that I will have to move in with them when I'm 90 :) I will go from having my Dad tell me to turn down my guitar in 1966 to my kids telling me to turn down my TV reruns of the Rockford Files in 2034.

I am fortunate in that we have three pensions between us that actually cover all necessary expenses. SS and/or dipping into the nest egg is for the goodies that allow us to have a fun retirement. So to a degree we could go either way. In fact, I ran it by the Vanguard financial advisor as a second set of eyeballs on my own calculations and she agreed with that conclusion. I have an action plan now although I reserve the right to change between tomorrow and age 70.

But yes, those were the three high level considerations that I most took into account.

heyyou
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Re: SS Strategy Metric

Post by heyyou » Fri Apr 18, 2014 12:05 pm

With ancestral longevity, a no-COLA pension, and a wife 9.5 years younger who did not earn near as much, I will start at age 70. Not a difficult decision with my history of benefiting from delayed gratification.

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Re: SS Strategy Metric

Post by Dandy » Fri Apr 18, 2014 4:40 pm

I want to maximize my retirement income. My goal is to take SS at age 70. The beauty is that if circumstances change I can take it earlier if I want. If the market didn't recover from the crash of 2008-9 maybe I would have taken it early. I think people spend too much time trying to do SS math e.g. what is the breakeven point taking it at 62 vs 66 or 70.

Having much higher income for me and my spouse from age 70 on that is inflation adjusted is the key for me. I am fortunate that I can have a nice standard of living from age 62 to age 70 ( I hope). If one of us lives to age 90 that is 20 years of more inflation adjusted income by waiting 8 years. Not everyone can afford to wait or is healthy. But if you can - it is a very good deal.

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Re: SS Strategy Metric

Post by dpc » Fri Apr 18, 2014 4:57 pm

My metric is to reduce my risk of outliving my money. Based on that, I plan to defer taking SS until 70, unless circumstances change significantly. I think using a metric of trying to maximize your total payout is not the best approach. If I die before I break even it won't really bother me, because I'll be dead. I fear being destitute more than dying.
"Worrying is like paying interest on a debt that you might never owe" -- Will Rogers

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Re: SS Strategy Metric

Post by Johm221122 » Fri Apr 18, 2014 6:26 pm

dpc wrote:My metric is to reduce my risk of outliving my money. Based on that, I plan to defer taking SS until 70, unless circumstances change significantly. I think using a metric of trying to maximize your total payout is not the best approach. If I die before I break even it won't really bother me, because I'll be dead. I fear being destitute more than dying.
+1 great response to question

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Cut-Throat
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Re: SS Strategy Metric

Post by Cut-Throat » Fri Apr 18, 2014 6:36 pm

Johm221122 wrote:
dpc wrote:My metric is to reduce my risk of outliving my money. Based on that, I plan to defer taking SS until 70, unless circumstances change significantly. I think using a metric of trying to maximize your total payout is not the best approach. If I die before I break even it won't really bother me, because I'll be dead. I fear being destitute more than dying.
+1 great response to question
Exactly... We all plan here to live to 100 and conservatively take a withdrawal rate to make our money last. Social Security should be no different.

The ones that take it early, basically need it now to survive, or they just don't understand retirement planning.

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Re: SS Strategy Metric

Post by SGM » Fri Apr 18, 2014 7:00 pm

SS is only cola annuity. Extreme longevity in wife's family. Definitely will wait until 70 and file and suspend when wife reaches FRA then she will take spousal at FRA and her own at 70. This maximizes inflation adjusted income. Also late claiming will allow nest egg to last longer. Lowering income from 66 to 70 was a consideration also for a variety of reasons.

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rkhusky
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Re: SS Strategy Metric

Post by rkhusky » Fri Apr 18, 2014 8:39 pm

Cut-Throat wrote:
Exactly... We all plan here to live to 100 and conservatively take a withdrawal rate to make our money last. Social Security should be no different.

The ones that take it early, basically need it now to survive, or they just don't understand retirement planning.
Or are in poor health. Or have a family history of dying before 80.

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Re: SS Strategy Metric

Post by orlandoman » Fri Apr 18, 2014 9:39 pm

Interesting that so many people on this forum say they are or suggest waiting until age 70 to collect social security ... while the statistics say that only 2% of the people wait until age 70 ... agreed that people on this forum are generally more financially interested/educated than the general public. Are the 2% all bogleheads?
"Don't Believe Everything You Think"

Ron
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Re: SS Strategy Metric

Post by Ron » Fri Apr 18, 2014 10:18 pm

orlandoman wrote:Are the 2% all bogleheads?
Not necessarily. I/wife are both waiting until age 70 (however, she has already filed for 50% spousal benefits, starting in June) but I would not call us BH's. Each has a greater portfolio balance with FIDO :mrgreen: ...

- Ron

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Re: SS Strategy Metric

Post by VictoriaF » Fri Apr 18, 2014 10:32 pm

orlandoman wrote:Interesting that so many people on this forum say they are or suggest waiting until age 70 to collect social security ... while the statistics say that only 2% of the people wait until age 70 ... agreed that people on this forum are generally more financially interested/educated than the general public. Are the 2% all bogleheads?
Some ideas are very simple, but if no one points them out to you, you would never know. Delaying Social Security is one of such ideas. Many people are poor and they need to collect Social Security as soon as they can. They don't have a choice. But there are also many people who could have easily afforded to wait until the age of 70 and they did not. There are several reasons for that:

1. When the majority of the population collects early (because they can't afford to wait), it becomes a norm, a default. People usually choose defaults even if the defaults are wrong for their specific situations.

2. The concepts of "retirement" and "collecting Social Security" are mentally linked. It is not immediately obvious that one can retire and not collect Social Security right away.

3. Using the assets for income while delaying Social Security is scary. The money one has been acquiring over many years start rapidly diminishing, while the increased Social Security is a vague remote reward.

4. Financial Advisers are not interested in steering their clients towards delaying Social Security, because while the clients were waiting they would be using their assets and thus reducing the advisers' fees that are based on the assets under management (AUM).

5. People focus on the taxation of Social Security while they are getting employment income. And so as soon as they stop working and this taxation becomes a non-issue, they take it as a signal to start collecting.

6. People focus on the "break-even" point of delaying Social Security without realizing that maximizing income at the last years of their lives should be their highest priority.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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rkhusky
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Re: SS Strategy Metric

Post by rkhusky » Sat Apr 19, 2014 8:11 am

rkhusky wrote: I intend to look at a range of time periods (death at 75 - 100 years) and a variety of investment return rates (1% - 8%) to see if I can eliminate some of the 11 strategies as never being optimal (and also see if there are any other strategies that may be better).
I've made the first stab at this and found that only 3 strategies survived for a situation close to ours: 1) both take at 62, 2) younger and lower earner takes at 62 & other takes at 70, or 3) both wait until 70 (with appropriate taking of spouse benefits when available). Roughly speaking, 1 is best when both expect to die before 80 or when one expects a 7%+ return, 3 is best when one expects a return of 1%- or both will live to 100, 2 is best in the intermediate cases.

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Re: SS Strategy Metric

Post by midareff » Sat Apr 19, 2014 8:33 am

rk... my metrics were real world. I has a 3% cola'd pension for life (well funded state), had xyz invested (2009-2010) with no expectations, and worked the math that I could get out at 64 (take SS then) and have a nice life.... at least nice as I know it which is probably a B+ or A- - lifestyle, only as a reference point.

Since then I've re-married, managed a your year return (EOY 10-13) of near 11% after WR's, and repaid SS (their demand) for 2012, with a 2013 (age 65) restart.

I don't know what the future will bring.... have no idea. What I do know is that I'm well satisfied if I can afford a lifestyle I'm comfortable with and that was my exit criteria. If $150 a month makes a big difference to your budget you need to stay. If it's not more than a HQ dinner and a bottle of wine, once a month or more, it's time to go.

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Re: SS Strategy Metric

Post by gerrym51 » Sat Apr 19, 2014 8:36 am

If you can afford to wait-then you can afford to take at 62.

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Re: SS Strategy Metric

Post by Johm221122 » Sat Apr 19, 2014 8:53 am

gerrym51 wrote:If you can afford to wait-then you can afford to take at 62.
Not if I live to 125 :wink:
John

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Re: SS Strategy Metric

Post by gerrym51 » Sat Apr 19, 2014 10:59 am

Johm221122 wrote:
gerrym51 wrote:If you can afford to wait-then you can afford to take at 62.
Not if I live to 125 :wink:
John

Ok-plan on 125

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Re: SS Strategy Metric

Post by VictoriaF » Sat Apr 19, 2014 11:06 am

gerrym51 wrote:
Johm221122 wrote:
gerrym51 wrote:If you can afford to wait-then you can afford to take at 62.
Not if I live to 125 :wink:
John

Ok-plan on 125
Ray Kurzweil claims that if you survive until the year 2043, and your body is still OK, the medicine of that time will propel you into perpetuity. Longevity related medical advances are accelerating. A week ago, the news came out that scientists have successfully regenerated a living organ in a mouse.
ScienceDaily wrote:Scientists have succeeded in regenerating a living organ for the first time. Researchers rebuilt the thymus -- an organ in the body located next to the heart that produces important immune cells. The advance could pave the way for new therapies for people with damaged immune systems and genetic conditions that affect thymus development. The team reactivated a natural mechanism that shuts down with age to rejuvenate the thymus in very old mice. After treatment, the regenerated organ had a similar structure to that found in a young mouse.
I am developing mouse envy.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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Re: SS Strategy Metric

Post by gerrym51 » Sat Apr 19, 2014 11:24 am

VictoriaF wrote:
gerrym51 wrote:
Johm221122 wrote:
gerrym51 wrote:If you can afford to wait-then you can afford to take at 62.
Not if I live to 125 :wink:
John

Ok-plan on 125
Ray Kurzweil claims that if you survive until the year 2043, and your body is still OK, the medicine of that time will propel you into perpetuity. Longevity related medical advances are accelerating. A week ago, the news came out that scientists have successfully regenerated a living organ in a mouse.
ScienceDaily wrote:Scientists have succeeded in regenerating a living organ for the first time. Researchers rebuilt the thymus -- an organ in the body located next to the heart that produces important immune cells. The advance could pave the way for new therapies for people with damaged immune systems and genetic conditions that affect thymus development. The team reactivated a natural mechanism that shuts down with age to rejuvenate the thymus in very old mice. After treatment, the regenerated organ had a similar structure to that found in a young mouse.
I am developing mouse envy.

Victoria

although they say the mortality rate is improving what actually is happening is that modern medicine is improving the survival rate of younger people. consequently more are surviving to older ages because more are survivng at oler ages. :mrgreen:

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Re: SS Strategy Metric

Post by Ron » Sat Apr 19, 2014 1:51 pm

While my wife/me don't expect to live until age 100, we planned our retirement as if we would.

Part of that plan also included claiming our respective SS benefits at age 70. The simple fact is we don't worry about getting our SS tax/contribution back. Money is for the living, not the dead and I'm sure we won't be pondering our decision in the afterlife saying that we should have taken SS earlier.

The second point (for us) is that we would rather die with money than live without it. Delaying SS adds to that assurance over the long time.

As to those that say "I won't live that long because (some family member) died at "x" age, and I'm close to that now". I don't subscribe to that notion. I had a brother that died (natural causes) at age 2, and an aunt that lived to age 100. Same blood (or a good deal of it), but different results. You just never know.

We're of the age that we read the obits every day (we want to see if we're listed :oops: ). Anyway, in our area (about 500k folks), we have a couple/few folks that break the century mark each month. It isn't that uncommon. Of course, most are women (but one guy made it to 103 last month :sharebeer ).

It just seems that it is much more common to see proof of longivity these days, on an ongoing basis. We hope/plan for the best, but prepare for the worst; in this case, living longer than expected.

- Ron

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Cut-Throat
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Re: SS Strategy Metric

Post by Cut-Throat » Sat Apr 19, 2014 4:08 pm

Ron wrote:While my wife/me don't expect to live until age 100, we planned our retirement as if we would.

Part of that plan also included claiming our respective SS benefits at age 70. The simple fact is we don't worry about getting our SS tax/contribution back. Money is for the living, not the dead and I'm sure we won't be pondering our decision in the afterlife saying that we should have taken SS earlier.

- Ron
Ron,

I am a big proponent of the delay to age 70 for S.S. ..... I have heard that the 'Smart Money' Delays the Larger earning person in the marriage to age 70 and the other takes theirs at age 62. Part of the reason being that you can only collect 1 SS, if one person dies. Did you consider this? What was your reasoning for delaying both to age 70?
Last edited by Cut-Throat on Sat Apr 19, 2014 4:47 pm, edited 1 time in total.

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Re: SS Strategy Metric

Post by musbane » Sat Apr 19, 2014 4:18 pm

Cut-throat

Is 72 a typo for 62?

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Cut-Throat
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Re: SS Strategy Metric

Post by Cut-Throat » Sat Apr 19, 2014 4:48 pm

musbane wrote:Cut-throat

Is 72 a typo for 62?
Yes, fixed it thanks!

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