It reduces the impact of the bad sequence of returns. If you were retired and living off your portfolio, claiming social security reduces the amount of money that you have to pull from equities while the market is down. However, I think this argument is flawed.JoeRetire wrote: ↑Wed Aug 07, 2019 6:04 amHow does taking SS at 63 reduce the bad sequence of returns on a portfolio? The sequence happens without regard to SS.sixtyforty wrote: ↑Thu Aug 01, 2019 10:08 am Seems like the absence or occurrence of a bear market early in retirement might affect the decision on taking SS. If one retires at 62, but plans on taking SS at 67 and a bear market hits at 63, taking SS at 63 may reduce the bad sequence of returns on a portfolio, which as we have all seen can significantly reduce that longevity of one's portfolio.
This is more of a sign that you have the wrong asset allocation. If you retire at 62 and have no bonds to sell one year later, then your asset allocation in retirement was 100/0, which is insane not a good idea for your average person. Even someone with an asset allocation of 80/20 (still probably too aggressive for a new retiree) has 5 years of living expenses in bonds, which will take them to age 67 with no equity sales.
Sequence of returns risk is actually reduced by waiting to claim, because it increases your social security payment, making you less exposed to market risk for income.