I’m Planning to Claim SS @62… Well, Why Not?

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iceport
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I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

Hi all,

I could use a better-informed second opinion on this topic. As noted, I am planning to claim Social Security at 62. Now that I’m only about 2½ years away, though, and in the face of nearly universal advice to the contrary, I wonder if I’m looking at the question wrong. Is there something I haven’t considered?

I’ve gone to the Social Security Calculator to accurately compute the PIA. Then I’ve gone to Open Social Security, Mike Piper’s free, open-source Social Security strategy calculator.

From the net present value analysis using the program defaults, the recommended age to claim SS is 69 years, 7 months, based on expected longevity. That’s for a single male my age.

However, when I test the age 62 alternative, the present value of the benefit — again, based on expected longevity — is only about $65k less. (A few years ago it was only ~$22k, so I’m assuming the discrepancy is from a lowering of the discount rate since 2018.) While that’s nothing to sneeze at, in the big picture, given the inherent uncertainties, it seems more or less negligible. So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. Being single really simplifies the SS questions!

The only other factor I’ve considered is longevity risk. I believe that’s why most people advocate waiting: to address the risk of living longer — and possibly much longer — than expected.

My answer to that is a modest but meaningful government pension that supplies enough income for daily living. I’ve been living on only that pension for 4½ years now. It won’t cover large foreseen and unforeseen expenses all by itself, but it’s a lifeline. It’s got a fixed-rate 2% COLA (actually, it’s a 2% floor, but the potential to exceed that is fairly limited, so I ignore it), so it won’t completely keep up with inflation, but it won’t lose ground too rapidly, I hope. It does virtually guarantee that 85% of all my SS income will be taxed, always. But it also makes it relatively easy to delay claiming SS.

Now if I claim SS early, it will boost my annuitized income stream by 50%. The total, I believe, is plenty to fund all the expenses I ever envision having. And that’s before ever considering tapping the portfolio, which after this strong market surge is theoretically capable of sustaining an income stream in the same ballpark as the pension alone.

The bottom line is that I think I have enough guaranteed income for life, even if I live longer than expected. So I don’t see a huge downside in claiming at the earliest possible date, favoring growth in the portfolio, and the flexibility it provides. (I might have an irrational aversion to spending down the portfolio if I don't need to...)

Is this situation one in which it would be reasonable to claim SS at 62, 70, or anything in between?

Or am I missing something?

(Long term care considerations, maybe? I don't know how to factor this in.)

Thanks for any insight you could offer.
"Discipline matters more than allocation.” ─William Bernstein
tibbitts
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tibbitts »

I might claim earlier myself but need all the time I can get for Roth conversions, so I'm going to claim later unless other factors (health, tax law) intervene. I'd be even more inclined to claim earlier due to the funding shortfall, if not for perceiving that my excessive deferred balance might turn out to be a slightly bigger problem. But it's close.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

iceport wrote: Sun Sep 12, 2021 2:39 pmI am planning to claim Social Security at 62.

From the net present value analysis using the program defaults, the recommended age to claim SS is 69 years, 7 months, based on expected longevity. That’s for a single male my age.

However, when I test the age 62 alternative, the present value of the benefit — again, based on expected longevity — is only about $65k less.

I don’t see a huge downside in claiming at the earliest possible date
So if you are single, and you don't care about the $65k downside, then take it at 62.

For many, and in particular singles, the choice is between good and better. You are the only one affected by your choice and are unlikely to have any real regrets.
Just remember: it's not a lie if you believe it.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

tibbitts wrote: Sun Sep 12, 2021 2:48 pm I might claim earlier myself but need all the time I can get for Roth conversions, so I'm going to claim later unless other factors (health, tax law) intervene. I'd be even more inclined to claim earlier due to the funding shortfall, if not for perceiving that my excessive deferred balance might turn out to be a slightly bigger problem. But it's close.
Oh yeah, Roth conversions. I forgot to mention those — good catch.

I'm an odd-ball in that respect, because I have <28% of the portfolio in before-tax accounts at this point. (It's a long story.) I plan 2 more years of conversions, at which time the pre-tax balance will be invested in a stable value fund. So I envision not much additional pre-tax growth, and very minor RMDs.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by antiqueman »

I am past full retirement age. Two reasons I am deferring is that I am married and am considering my wife. And, we are doing Roth conversions. If not for those two things I would have taken it at 66.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Chuckles960 »

There are eleventeen hundred other threads on this topic. Early vs. late is a personal (subjective) decision, but it does appear that you have considered most of the rational factors.

One comment I have is that if the inflation rate goes high, as in the seventies, a 2% annual increase could result in the pension being worth very little in 20-30 years. But maybe that won't happen, no one can say.

The people who defer SS do so because (a) they worry about the very long term, but also they can indulge that worry because (b) they don't need the SS money in the short term. But there is no reason everyone should think the same, indeed only a small percentage of people defer to 70.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by MJS »

The three that matter to me:

1. Would you benefit from Roth conversions? For us single people, having >$1million in T-IRAs & 401/403s at age 72 can mean an onerous & increasing tax+IRMAA rate.

2. If you have beloved & high-earning heirs, Roth conversion can make their legacy substantially more valuable... at a cost to you.

3. What are your plans for long-term care? Higher Social Security can smooth out LTC costs. However, selling home/property or using [T-IRAs & 401/403s plus medical tax deductions] lessens the value of high SS for LTC.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

Chuckles960 wrote: Sun Sep 12, 2021 3:02 pm There are eleventeen hundred other threads on this topic. Early vs. late is a personal (subjective) decision, but it does appear that you have considered most of the rational factors.

One comment I have is that if the inflation rate goes high, as in the seventies, a 2% annual increase could result in the pension being worth very little in 20-30 years. But maybe that won't happen, no one can say.

The people who defer SS do so because (a) they worry about the very long term, but also they can indulge that worry because (b) they don't need the SS money in the short term. But there is no reason everyone should think the same, indeed only a small percentage of people defer to 70.
Thanks for this. (Yes, I figured this topic must have been covered to death, but everyone's circumstances are unique.)

On the COLA, as near as I can tell it looks like this, for me:
The COLA will range from a minimum 2.0% to a maximum of 7.5% based on a formula which takes into account a portion of the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the 12 months immediately preceding your COLA anniversary date.

Specifically, the COLA will be determined in accordance with the following formula:

60% of the annual increase in the CPI-W up to 7.5% PLUS 75% of the annual increase in the CPI-W above 7.5%
As far as I know, after 10 years we still don't have a revised summary plan description after a big concessions package in 2011. And the COLA is probably one of the easier post-employment benefits to cut. So it's still a gamble on keeping up with inflation.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

MJS wrote: Sun Sep 12, 2021 3:12 pm 3. What are your plans for long-term care? Higher Social Security can smooth out LTC costs. However, selling home/property or using [T-IRAs & 401/403s plus medical tax deductions] lessens the value of high SS for LTC.
Yes, I started thinking about this. Back in 2012-2013 my mom was in a place that was no frills (but with excellent care and lots of familiar faces) and it cost ~$9k/mo. That's kind of scary. The plan so far, and tentative as it is, would be to have enough of the portfolio left over to cover the costs that exceed the income.
Last edited by iceport on Sun Sep 12, 2021 3:27 pm, edited 1 time in total.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by samsoes »

Are you getting health insurance coverage with ACA subsides? If so, SS income will increase your MAGI and reduce your ACA subsidies and increase your deductible and co-payments. For that reason I will probably wait until 65 (single, same age as OP).
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by reln »

iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,

I could use a better-informed second opinion on this topic. As noted, I am planning to claim Social Security at 62. Now that I’m only about 2½ years away, though, and in the face of nearly universal advice to the contrary, I wonder if I’m looking at the question wrong. Is there something I haven’t considered?

I’ve gone to the Social Security Calculator to accurately compute the PIA. Then I’ve gone to Open Social Security, Mike Piper’s free, open-source Social Security strategy calculator.

From the net present value analysis using the program defaults, the recommended age to claim SS is 69 years, 7 months, based on expected longevity. That’s for a single male my age.

However, when I test the age 62 alternative, the present value of the benefit — again, based on expected longevity — is only about $65k less. (A few years ago it was only ~$22k, so I’m assuming the discrepancy is from a lowering of the discount rate since 2018.) While that’s nothing to sneeze at, in the big picture, given the inherent uncertainties, it seems more or less negligible. So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. Being single really simplifies the SS questions!

The only other factor I’ve considered is longevity risk. I believe that’s why most people advocate waiting: to address the risk of living longer — and possibly much longer — than expected.

My answer to that is a modest but meaningful government pension that supplies enough income for daily living. I’ve been living on only that pension for 4½ years now. It won’t cover large foreseen and unforeseen expenses all by itself, but it’s a lifeline. It’s got a fixed-rate 2% COLA (actually, it’s a 2% floor, but the potential to exceed that is fairly limited, so I ignore it), so it won’t completely keep up with inflation, but it won’t lose ground too rapidly, I hope. It does virtually guarantee that 85% of all my SS income will be taxed, always. But it also makes it relatively easy to delay claiming SS.

Now if I claim SS early, it will boost my annuitized income stream by 50%. The total, I believe, is plenty to fund all the expenses I ever envision having. And that’s before ever considering tapping the portfolio, which after this strong market surge is theoretically capable of sustaining an income stream in the same ballpark as the pension alone.

The bottom line is that I think I have enough guaranteed income for life, even if I live longer than expected. So I don’t see a huge downside in claiming at the earliest possible date, favoring growth in the portfolio, and the flexibility it provides. (I might have an irrational aversion to spending down the portfolio if I don't need to...)

Is this situation one in which it would be reasonable to claim SS at 62, 70, or anything in between?

Or am I missing something?

(Long term care considerations, maybe? I don't know how to factor this in.)

Thanks for any insight you could offer.
Of course the PV of SS benefits increases when delaying because the interest and mortality used are both higher than reality.

But, given you have untapped financial assets, you're single so your expected lifetime is shorter than the average married man, and your current fixed income is high, I'd endorse claiming SS early.

Note that this is leaving you wide open to risks of very long lifetime, very high inflation, and low financial asset returns. If all 3 simultaneously occur, you'll take a bigger hit than if you delayed (and it won't be an PV of 65k realized loss, it can end up being much higher than that).

The upside is if you die earlier than average, inflation is low or negative, and financial assets returns are high.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

samsoes wrote: Sun Sep 12, 2021 3:26 pm Are you getting health insurance coverage with ACA subsides?
Primary health care is covered by the former employer, and it becomes supplemental at age 65.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoMoney »

Are you trying to maximize the money you leave to beneficiaries after you're gone, or what you can spend/give away while alive?
For myself, it's the latter, and while I do think there's some chance taking SS earlier might result in a larger aggregate payout, the higher guaranteed lifetime income for waiting and spending down portfolio assets earlier seems preferable. I expect at some point purchasing SPIA(s) might be in my future, and delaying social security appears to beat a SPIA dollar for dollar every time I've looked at it.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

JoMoney wrote: Sun Sep 12, 2021 3:31 pm Are you trying to maximize the money you leave to beneficiaries after you're gone, or what you can spend/give away while alive?
For myself, it's the latter, and while I do think there's some chance taking SS earlier might result in a larger aggregate payout, the higher guaranteed lifetime income for waiting and spending down portfolio assets earlier seems preferable. I expect at some point purchasing SPIA(s) might be in my future, and delaying social security appears to beat a SPIA dollar for dollar every time I've looked at it.
It's the latter for me also. But does it matter from a financial standpoint?

Yes, I would certainly expect delaying SS to be far superior than purchasing the equivalent SPIA.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoMoney »

iceport wrote: Sun Sep 12, 2021 3:41 pm
JoMoney wrote: Sun Sep 12, 2021 3:31 pm Are you trying to maximize the money you leave to beneficiaries after you're gone, or what you can spend/give away while alive?
For myself, it's the latter, and while I do think there's some chance taking SS earlier might result in a larger aggregate payout, the higher guaranteed lifetime income for waiting and spending down portfolio assets earlier seems preferable. I expect at some point purchasing SPIA(s) might be in my future, and delaying social security appears to beat a SPIA dollar for dollar every time I've looked at it.
It's the latter for me also. But does it matter from a financial standpoint?

Yes, I would certainly expect delaying SS to be far superior than purchasing the equivalent SPIA.
There are lots of uncertainties, so trying to calculate what would would offer superior ability to spend would also have a margin of uncertainty. I don't know how long I will live, and I don't know if stocks will beat bonds (or if stocks will have a positive return at all) over some future time period. If I knew how long I would live and what my risky assets would return, perhaps what is best could be calculated, but I don't, so I could make a scenario that goes either way.

Whenever I've looked at a bond ladder at some current interest rate amortized over expected lifespan (from a mortality table), a SPIA resulted in a higher payout.
Last edited by JoMoney on Sun Sep 12, 2021 4:01 pm, edited 1 time in total.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by bsteiner »

The comparison depends on the assumptions as to how long you'll live (you know your sex, health, smoking history) and the interest rate that you use to compare the choices. If you don't have any significant health issues, you're health is above average. You could argue for a low interest rate because it's safe, or a high interest rate because it's not marketable.

There's also some chance that even if you don't have a spouse now, you might have one at the time of your death.

If the cost of the protection is minus $65,000, it's worth considering.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tibbitts »

MJS wrote: Sun Sep 12, 2021 3:12 pm 1. Would you benefit from Roth conversions? For us single people, having >$1million in T-IRAs & 401/403s at age 72 can mean an onerous & increasing tax+IRMAA rate.
I'm not sure what the justification is for someone with $165k in taxable income paying almost as much IRMAA as someone with billions of dollars in taxable income, but for whatever reason that seems to be the case. However, while that does seem onerous relative to the more graduated income tax, it does put somewhat of a cap on the IRMAA aspect of the problem.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Monsterflockster »

iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,

I could use a better-informed second opinion on this topic. As noted, I am planning to claim Social Security at 62. Now that I’m only about 2½ years away, though, and in the face of nearly universal advice to the contrary, I wonder if I’m looking at the question wrong. Is there something I haven’t considered?

I’ve gone to the Social Security Calculator to accurately compute the PIA. Then I’ve gone to Open Social Security, Mike Piper’s free, open-source Social Security strategy calculator.

From the net present value analysis using the program defaults, the recommended age to claim SS is 69 years, 7 months, based on expected longevity. That’s for a single male my age.

However, when I test the age 62 alternative, the present value of the benefit — again, based on expected longevity — is only about $65k less. (A few years ago it was only ~$22k, so I’m assuming the discrepancy is from a lowering of the discount rate since 2018.) While that’s nothing to sneeze at, in the big picture, given the inherent uncertainties, it seems more or less negligible. So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. Being single really simplifies the SS questions!

The only other factor I’ve considered is longevity risk. I believe that’s why most people advocate waiting: to address the risk of living longer — and possibly much longer — than expected.

My answer to that is a modest but meaningful government pension that supplies enough income for daily living. I’ve been living on only that pension for 4½ years now. It won’t cover large foreseen and unforeseen expenses all by itself, but it’s a lifeline. It’s got a fixed-rate 2% COLA (actually, it’s a 2% floor, but the potential to exceed that is fairly limited, so I ignore it), so it won’t completely keep up with inflation, but it won’t lose ground too rapidly, I hope. It does virtually guarantee that 85% of all my SS income will be taxed, always. But it also makes it relatively easy to delay claiming SS.

Now if I claim SS early, it will boost my annuitized income stream by 50%. The total, I believe, is plenty to fund all the expenses I ever envision having. And that’s before ever considering tapping the portfolio, which after this strong market surge is theoretically capable of sustaining an income stream in the same ballpark as the pension alone.

The bottom line is that I think I have enough guaranteed income for life, even if I live longer than expected. So I don’t see a huge downside in claiming at the earliest possible date, favoring growth in the portfolio, and the flexibility it provides. (I might have an irrational aversion to spending down the portfolio if I don't need to...)

Is this situation one in which it would be reasonable to claim SS at 62, 70, or anything in between?

Or am I missing something?

(Long term care considerations, maybe? I don't know how to factor this in.)

Thanks for any insight you could offer.
It’s morbid but they want you to claim later in hopes you die sooner than later and pay out less.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Svensk Anga »

iceport wrote: Sun Sep 12, 2021 3:24 pm
MJS wrote: Sun Sep 12, 2021 3:12 pm 3. What are your plans for long-term care? Higher Social Security can smooth out LTC costs. However, selling home/property or using [T-IRAs & 401/403s plus medical tax deductions] lessens the value of high SS for LTC.
Yes, I started thinking about this. Back in 2012-2013 my mom was in a place that was no frills (but with excellent care and lots of familiar faces) and it cost ~$9k/mo. That's kind of scary. The plan so far, and tentative as it is, would be to have enough of the portfolio left over to cover the costs that exceed the income.
Your facility of choice may favor SS income over a higher level of assets when they decide if they will take you. You could dissipate the assets tomorrow, but SS will go on as long as you live.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

Monsterflockster wrote: Sun Sep 12, 2021 5:58 pm It’s morbid but they want you to claim later in hopes you die sooner than later and pay out less.
Interesting conspiracy theory.

Except that "they" don't care when you begin your benefits.
And except that on average, folks who claim later collect more in lifetime benefits.

Other than that...
Just remember: it's not a lie if you believe it.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by cowdogman »

Well, you're single, and being both married and the high earner is the most important reason to delay taking SS.

A secondary reason is that SS is insurance. It is "old age" insurance. The federal Old-Age, Survivors, and Disability Insurance (OASDI) program is the official name for Social Security. It will be there when your pension may have disappeared and your savings may be depleted. It's your insurance policy for your other benefits and savings falling away. For that reason I would consider delaying.

But I don't think there is a wrong decision here.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by celia »

iceport wrote: Sun Sep 12, 2021 3:24 pm Back in 2012-2013 my mom was in a place that was no frills (but with excellent care and lots of familiar faces) and it cost ~$9k/mo. That's kind of scary.
That amount *is*, indeed, scary. I have two elderly relatives in California that together pay less than that in assisted living each month. (They are sharing one bedroom, if that matters.)
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by bobcat2 »

iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,
So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. ...it seems more or less negligible.
Hi iceport,
Can you do me a small favor? Could you send me a check for a negligible $65,000. You won't miss it, but I'd appreciate it. :D We can start the ball rolling by you Private Messaging me.

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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by bobcat2 »

JoeRetire wrote: Sun Sep 12, 2021 6:52 pm
Monsterflockster wrote: Sun Sep 12, 2021 5:58 pm It’s morbid but they want you to claim later in hopes you die sooner than later and pay out less.
Interesting conspiracy theory. :thumbsup :thumbsup

Except that "they" don't care when you begin your benefits.
And except that on average, folks who claim later collect more in lifetime benefits.

Other than that...
It is a fascinating conspiracy theory, although I'm very unclear on who "they" are.

BobK
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Cash is King »

bobcat2 wrote: Sun Sep 12, 2021 7:28 pm
iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,
So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. ...it seems more or less negligible.
Hi iceport,
Can you do me a small favor? Could you send me a check for a negligible $65,000. You won't miss it, but I'd appreciate it. :D We can start the ball rolling by you Private Messaging me.

BobK
Really? I'm surprised you need the money. I would have thought you saved enough money so you could wait until you're 70 to maximize your longevity insurance. :mrgreen:
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by bobcat2 »

Cash is King wrote: Sun Sep 12, 2021 7:40 pm
bobcat2 wrote: Sun Sep 12, 2021 7:28 pm
iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,
So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. ...it seems more or less negligible.
Hi iceport,
Can you do me a small favor? Could you send me a check for a negligible $65,000. You won't miss it, but I'd appreciate it. :D We can start the ball rolling by you Private Messaging me.

BobK
Really? I'm surprised you need the money. I would have thought you saved enough money so you could wait until you're 70 to maximize your longevity insurance. :mrgreen:
No. I waited to only 69 years, 8 months. I'd just appreciate the loose change from iceport.
BobK
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

bobcat2 wrote: Sun Sep 12, 2021 7:35 pm
JoeRetire wrote: Sun Sep 12, 2021 6:52 pm
Monsterflockster wrote: Sun Sep 12, 2021 5:58 pm It’s morbid but they want you to claim later in hopes you die sooner than later and pay out less.
Interesting conspiracy theory. :thumbsup :thumbsup

Except that "they" don't care when you begin your benefits.
And except that on average, folks who claim later collect more in lifetime benefits.

Other than that...
It is a fascinating conspiracy theory, although I'm very unclear on who "they" are.
They don't want you to know... :shock:
Just remember: it's not a lie if you believe it.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Watty »

iceport wrote: Sun Sep 12, 2021 2:39 pm Or am I missing something?
A couple of things may not have been mentioned yet.

1) Delaying Social Security my allow years with low enough income that you can take long term capital gains in the 0% federal long term capital gains tax bracket.

2) Unlike annuities Social Security is gender neutral and will pay a woman the same as a man. You can look up the statistics but a 62 year old woman is statistically likely to live longer than a 62 year old man. This makes delaying the start of social security a lot better deal for woman. For a man with a shorter life expectancy in effect the penalty for starting Social Security early is less.

If you are female then it would be very good to be very cautious about starting Social Security early because it statistically it is a better deal for females.

If you are male delaying starting Social Security is still likely a good deal, but maybe not as good a deal.
iceport wrote: Sun Sep 12, 2021 2:39 pm (A few years ago it was only ~$22k, so I’m assuming the discrepancy is from a lowering of the discount rate since 2018.)
Unlike annuities with Social Security the payoff for delaying starting Social Security, is not adjusted as interest rates change. When interest rates are low that makes delaying starting Social Security more favorable.
Last edited by Watty on Sun Sep 12, 2021 8:33 pm, edited 1 time in total.
Cash is King
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Cash is King »

bobcat2 wrote: Sun Sep 12, 2021 8:16 pm
Cash is King wrote: Sun Sep 12, 2021 7:40 pm
bobcat2 wrote: Sun Sep 12, 2021 7:28 pm
iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,
So I’m not really concerned at all with leaving an estimated $65k on the table by claiming early. ...it seems more or less negligible.
Hi iceport,
Can you do me a small favor? Could you send me a check for a negligible $65,000. You won't miss it, but I'd appreciate it. :D We can start the ball rolling by you Private Messaging me.

BobK
Really? I'm surprised you need the money. I would have thought you saved enough money so you could wait until you're 70 to maximize your longevity insurance. :mrgreen:
No. I waited to only 69 years, 8 months. I'd just appreciate the loose change from iceport.
BobK
I got that. :) There's definitely not a shortage of opinions on this topic. I suggest everyone do what's best based on their circumstances and don't look for external validation. :sharebeer
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by fourwheelcycle »

I think the answer is longevity risk. The NPV payout difference between 62 and 70 may be minimal if you die on schedule, but if you live longer you may be thankful for the extra years of higher payout if you defer to age 70. You have told us you can afford to defer until 70, and that you will not "lose" any NPV payout if you defer until 70. So why not defer?

An economically motivated individual recognizes "more is better". You are focusing on "more between 62 and 70", even though you say you don't need it. I think you should focus on "more during the years after my actuarial age at death", since you cannot know what you may encounter doing those years.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by bobcat2 »

Watty wrote: Sun Sep 12, 2021 8:29 pmUnlike annuities with Social Security the payoff for delaying starting Social Security, is not adjusted as interest rates change. When [real] interest rates are [extremely] low that makes delaying starting Social Security [much] more favorable.
For the last decade real interest rates have been extremely low.

BobK
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by phxjcc »

If you have enough income to live on with with pension and SS at 62, then I say take it at 62.

You will always hear about Uncle Earl who waited until he was 70--and at 95 he is happy he did.
You will not hear from Uncle Fred, that waited until he was 70--and died at 71 and said about Social Security "you never get out of it what you paid in".

I literally had an Uncle Fred.

I don't know any Uncle Earl's.
Aunt Eileen took her's at 62, lived on it until she was 82.
Never regretted it.

All the woulda, coulda, shoulda amuse me.

There is also a very strange trend that I see developing here, namely: " I need $D in income, I am going to get $S from social security, $P from pension and $W from my safe withdrawal rate." Then a bunch of hand waving and spreadsheeting to get to the best combination of those three numbers.

The alternative is to just say (like, arguably, the rest of the world): I have $D income; how am I going to live on that?

This is a "culture of abundance" versus a " culture of scarcity" contrast--and very interesting to observe.

I came from scarcity and know how to operate in the environment.

I cannot fathom the former, even though--some would say--I have an abundance of resources.

Sorry, enough blathering...take it at 62.

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Harry Livermore »

OP, as someone stated, there seems to be 1,000 threads on this already. But I always enjoy reading what others on this site think about the topic!
I am actually leaning towards taking it earlier, mostly because my wife is a teacher whose district (like many) does not participate in Social Security. When I die, her "survivor benefit" will be drastically reduced by the GPO, or Government Pension Offset. Therefore, unless I outlive her (unlikely as women tend to live longer AND she's 4 years younger than me) it may be best to "front load" as many years of collecting SS as possible. This also gives us another income stream, allowing us to defer portfolio withdrawals (and possibly do a bit of Roth conversions) and in a perfect world, leave a little something to our children too.
I'm 55, so while it's never to late to start learning and planning, it's not a near-term decision for us.
Cheers
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by mary1492 »

I will take it at 62 as will my spouse. No concerns, no decisions, we've known all along this would be what we do and it is the best choice for us.

We are not into gambling, especially on the amount of time we have to live or how the SS system may change in the future. Give us what we have coming ASAP. A bird in hand...
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by goblue100 »

phxjcc wrote: Mon Sep 13, 2021 1:57 am If you have enough income to live on with with pension and SS at 62, then I say take it at 62.

You will always hear about Uncle Earl who waited until he was 70--and at 95 he is happy he did.
You will not hear from Uncle Fred, that waited until he was 70--and died at 71 and said about Social Security "you never get out of it what you paid in".

I literally had an Uncle Fred.

I don't know any Uncle Earl's.

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
Just because you don't know any Uncle Earls doesn't mean they don't exist. And more will exist in the future, as longevity increases, unless Covid has something to say about that.
"Because of increases in life expectancy at older ages, people 90 and older now comprise 4.7 percent of the older population (age 65 and older), as compared with only 2.8 percent in 1980. By 2050, this share is likely to reach 10 percent"

I would say the OP, with no spouse, could certainly take SS at 62 and be fine.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by TN_Boy »

goblue100 wrote: Mon Sep 13, 2021 8:57 am
phxjcc wrote: Mon Sep 13, 2021 1:57 am If you have enough income to live on with with pension and SS at 62, then I say take it at 62.

You will always hear about Uncle Earl who waited until he was 70--and at 95 he is happy he did.
You will not hear from Uncle Fred, that waited until he was 70--and died at 71 and said about Social Security "you never get out of it what you paid in".

I literally had an Uncle Fred.

I don't know any Uncle Earl's.

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
Just because you don't know any Uncle Earls doesn't mean they don't exist. And more will exist in the future, as longevity increases, unless Covid has something to say about that.
"Because of increases in life expectancy at older ages, people 90 and older now comprise 4.7 percent of the older population (age 65 and older), as compared with only 2.8 percent in 1980. By 2050, this share is likely to reach 10 percent"

I would say the OP, with no spouse, could certainly take SS at 62 and be fine.
Uncle Fred did not have any regrets about not taking SS early, because Uncle Fred was ... dead.

Claiming early so you will "get out of it what you paid in" is surely the worst reason to take it early. The money paid into SS over your working years is gone from your life forever. Look forward, not back. When to take is mostly a math question, with some "feelings" thrown in.

The OP has done the math and the difference is small enough that "how do you feel about it" seems like a reasonable decision maker.

But if you can easily afford not to, then deferring SS for some small number of years does provide you a larger inflation-indexed stream of income that would be nice to have later in life, especially if the stock markets are not kind.

For LTC, what yearly LTC cost would your portfolio and income streams support? For how long?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by FRANK2009 »

I'm 62 and just applied. If I thought i'd live to 90, I'd probably have waited till FRA or later. My pension and portfolio more than take care of my expenses currently. It wasn't an easy decision.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by billthecat »

What about the view that if you don’t need the money, then you’re better off taking it early and investing it?

See, for example, this video here.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Angst »

mary1492 wrote: Mon Sep 13, 2021 4:32 am I will take it at 62 as will my spouse. No concerns, no decisions, we've known all along this would be what we do and it is the best choice for us.

We are not into gambling, especially on the amount of time we have to live or how the SS system may change in the future. Give us what we have coming ASAP. A bird in hand...

I genuinely find this fascinating:
While some of us consider delaying Social Security to be "buying insurance" (that's me), others consider it "gambling".

Imagine the arguments we'd be having if the actuaries at Social Security set things up so we could claim as early as 52 or delay as late as 80!
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by cowdogman »

Angst wrote: Mon Sep 13, 2021 9:47 am
mary1492 wrote: Mon Sep 13, 2021 4:32 am I will take it at 62 as will my spouse. No concerns, no decisions, we've known all along this would be what we do and it is the best choice for us.

We are not into gambling, especially on the amount of time we have to live or how the SS system may change in the future. Give us what we have coming ASAP. A bird in hand...

I genuinely find this fascinating:
While some of us consider delaying Social Security to be "buying insurance" (that's me), others consider it "gambling".

Imagine the arguments we'd be having if the actuaries at Social Security set things up so we could claim as early as 52 or delay as late as 80!
It's "gambling" no matter when you you decide to take SS. Ditto doing (or not) Roth conversions. Ditto investing (or not) in the stock market. Ditto buying (or not) life insurance. Ditto choosing (or not) to exercise regularly. But if every consequential decision is gambling, "gambling" loses it meaning.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by vested1 »

Angst wrote: Mon Sep 13, 2021 9:47 am
mary1492 wrote: Mon Sep 13, 2021 4:32 am I will take it at 62 as will my spouse. No concerns, no decisions, we've known all along this would be what we do and it is the best choice for us.

We are not into gambling, especially on the amount of time we have to live or how the SS system may change in the future. Give us what we have coming ASAP. A bird in hand...

I genuinely find this fascinating:
While some of us consider delaying Social Security to be "buying insurance" (that's me), others consider it "gambling".

Imagine the arguments we'd be having if the actuaries at Social Security set things up so we could claim as early as 52 or delay as late as 80!
Yes. I don't know how anyone could say that either way isn't gambling based on reference to breakeven arguments, which in my opinion are meaningless. Guessing about longevity is more accurate I suppose.

As far as the OP is concerned, he/she is likely making the right decision for themself. As to "a bird in the hand", birds tend to get nervous when you grab them, and can deposit something unwanted in your palm.

I told my wife this morning that in 10 more months when I turn 70, my maximum COLA protected SS benefit will be over $500 more a month than we are currently receiving for her age 65 benefit and my restricted application for 1/2 of her PIA (amount at age 66 FRA) combined. Since we're able to exceed the amount needed to meet expenses right now with fixed income, without tapping the portfolio, I suspect delaying was a good idea for us.

I'll sleep better in 10 months than I do right now, 6.6% better in fact. When I die my rest will be undisturbed and dreamless, free from speculation as to what could have been had I taken a different path.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

phxjcc wrote: Mon Sep 13, 2021 1:57 am You will always hear about Uncle Earl who waited until he was 70--and at 95 he is happy he did.
You will not hear from Uncle Fred, that waited until he was 70--and died at 71 and said about Social Security "you never get out of it what you paid in".
It's hard to hear from Fred, because he's dead. (Yeah, yeah, Ah, ha, Freddies dead, That's what I said)

What about Aunt Agatha and Aunt Mabel, who were married to Earl and Fred, respectively?
Do you imagine they are happy with their survivor benefits?
Last edited by JoeRetire on Mon Sep 13, 2021 11:50 am, edited 1 time in total.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by goblue100 »

vested1 wrote: Mon Sep 13, 2021 10:14 am
Yes. I don't know how anyone could say that either way isn't gambling based on reference to breakeven arguments, which in my opinion are meaningless. Guessing about longevity is more accurate I suppose.

I didn't have an Uncle Fred, but I had a brother Dave. My brother was one of the smartest men I've ever known, but he ate too much and drank more Jack Daniels than is good for anyone. He was diagnosed with cardio myopathy in his early 50's and passed at 65. He "knew" as much as anyone ever could that he was not going to live to his 80's. So he retired at 52, lived on savings and claimed at 62.

If you know you aren't healthy, claim early. If you have no other resources and need the money to live on, claim early. If you are healthy and have been to the doctor and screened for cancers and heart disease with none found, and don't need it and are married with a healthy spouse and you are the higher earner you should consider deferring, maybe until 70.
The only people that are losing the "gamble" are those that are seemingly healthy and die unexpectedly while in good health. I don't know many of those, either.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by chw »

IMO, claiming before or after FRA is not as much an issue (though I would still lean towards claiming at FRA) for folks that are single. Claiming later than FRA is buying longevity insurance should you live a relatively long life. You would also get inflation adjustments based on the higher benefit as well. There are other factors to consider such as your health- if you have a chronic disease that may impact lifespan, claiming earlier could be wise.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

MJS wrote: Sun Sep 12, 2021 3:12 pm 3. What are your plans for long-term care? Higher Social Security can smooth out LTC costs. However, selling home/property or using [T-IRAs & 401/403s plus medical tax deductions] lessens the value of high SS for LTC.
Svensk Anga wrote: Sun Sep 12, 2021 6:41 pm Your facility of choice may favor SS income over a higher level of assets when they decide if they will take you. You could dissipate the assets tomorrow, but SS will go on as long as you live.
Long term care is one of the bigger considerations. I'm in that "in-between" place, with too much wealth to ever go the Medicaid route, but not nearly enough to feel sure that I can cover an extended stay on my own. I didn't know that some places could value income over wealth, but it makes perfect sense now that it's been noted.

bsteiner wrote: Sun Sep 12, 2021 4:00 pm There's also some chance that even if you don't have a spouse now, you might have one at the time of your death.

If the cost of the protection is minus $65,000, it's worth considering.
Now there's a pleasant thought! I never considered not being single, but it certainly is a welcome possibility. Thanks for that!

reln wrote: Sun Sep 12, 2021 3:27 pm But, given you have untapped financial assets, you're single so your expected lifetime is shorter than the average married man, and your current fixed income is high, I'd endorse claiming SS early.
JoeRetire wrote: Sun Sep 12, 2021 2:56 pm So if you are single, and you don't care about the $65k downside, then take it at 62.

For many, and in particular singles, the choice is between good and better. You are the only one affected by your choice and are unlikely to have any real regrets.
phxjcc wrote: Mon Sep 13, 2021 1:57 am If you have enough income to live on with with pension and SS at 62, then I say take it at 62.
<...>
Sorry, enough blathering...take it at 62.

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
Thanks for your thoughts. These comments were music to my ears!

cowdogman wrote: Sun Sep 12, 2021 6:58 pm Well, you're single, and being both married and the high earner is the most important reason to delay taking SS.

A secondary reason is that SS is insurance. It is "old age" insurance. The federal Old-Age, Survivors, and Disability Insurance (OASDI) program is the official name for Social Security. It will be there when your pension may have disappeared and your savings may be depleted. It's your insurance policy for your other benefits and savings falling away. For that reason I would consider delaying.

But I don't think there is a wrong decision here.
I don't know why, cowdogman, but this comment of yours resonated particularly strongly with me. Lots of similar sentiments along those lines, too:
TN_Boy wrote: Mon Sep 13, 2021 9:26 am The OP has done the math and the difference is small enough that "how do you feel about it" seems like a reasonable decision maker.

But if you can easily afford not to, then deferring SS for some small number of years does provide you a larger inflation-indexed stream of income that would be nice to have later in life, especially if the stock markets are not kind.

For LTC, what yearly LTC cost would your portfolio and income streams support? For how long?
FRANK2009 wrote: Mon Sep 13, 2021 9:29 am I'm 62 and just applied. If I thought i'd live to 90, I'd probably have waited till FRA or later. My pension and portfolio more than take care of my expenses currently. It wasn't an easy decision.
Not easy at all...

bobcat2 wrote: Sun Sep 12, 2021 7:28 pm Hi iceport,
Can you do me a small favor? Could you send me a check for a negligible $65,000. You won't miss it, but I'd appreciate it. :D We can start the ball rolling by you Private Messaging me.

BobK
BobK, I'll take that as a serious comment couched in a joke. So I owe you. But because it's such a fuzzy estimate of my potential pocket change, can you wait until the final audit? :shock: :beer
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

These are all excellent comments and fascinating perspectives. Thanks to each and every one of you for taking the time to respond, whether I managed to address your comments individually or not!

Many of the factors you highlighted are sobering, but very valuable. *NOW* I'm starting to feel the full weight of the decision!

I think I was hoping for permission. Not really for external validation so much as a way to be sure I wasn't overlooking something big. I got some of that, but wound up with a whole lot of additional perspectives — ways of looking at the question that I hadn't considered fully, or that I was trying to avoid.

I do still see a trade-off here. Favoring the preservation/growth of personal savings rather than maximizing income could increase flexibility to respond to an opportunity — or need — to do some good with it. That could involve loved ones and extended family, personal circumstances, or charities I find particularly meaningful. Whether by minimizing portfolio withdrawals, or allowing for an extended accumulation phase, claiming early in my circumstance seems to shift the balance, however tentatively, toward the growth of assets and away from a larger guaranteed annuitized income stream.

That was alluded to by JoMoney, and billthecat:
JoMoney wrote: Sun Sep 12, 2021 3:31 pm Are you trying to maximize the money you leave to beneficiaries after you're gone, or what you can spend/give away while alive?
billthecat wrote: Mon Sep 13, 2021 9:35 am What about the view that if you don’t need the money, then you’re better off taking it early and investing it?

See, for example, this video here.
^^^ The video focuses on taking early SS as a way to grow wealth vs. income.


fourwheelcycle wrote: Sun Sep 12, 2021 8:35 pm You have told us you can afford to defer until 70, and that you will not "lose" any NPV payout if you defer until 70. So why not defer?

An economically motivated individual recognizes "more is better". You are focusing on "more between 62 and 70", even though you say you don't need it. I think you should focus on "more during the years after my actuarial age at death", since you cannot know what you may encounter doing those years.
Well, I think the way I was looking at it was more along the lines of preserving assets and the flexibility they offer vs. growing income beyond what is required. But the numbers are all very blurry.

And the decision is not all-or-nothing, so I could now comfortably and seriously entertain the idea of at least splitting the difference. One way would be to actually delay claiming for a few years. Another, which I don't think has come up here, would be to claim at 62, and then depending on how the next 5 years go, suspend from 67 to 70, to get an additional 3 years' worth of delayed credits.

This really has been an enormous help in bringing important considerations into clearer focus. It's all too easy to brush aside better judgement when it gets in the way of how we want things to be... :wink:
"Discipline matters more than allocation.” ─William Bernstein
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Chuckles960 »

Angst wrote: Mon Sep 13, 2021 9:47 am I genuinely find this fascinating:
While some of us consider delaying Social Security to be "buying insurance" (that's me), others consider it "gambling".
Buying insurance IS gambling. Not buying insurance is also gambling. Getting SS at 62 vs 70 is also gambling. You are just betting on different outcomes.

Of course, when you buy (say) life insurance or home insurance, the desired outcome is to lose money by paying premiums but not having a claim. If Uncle Fred gambles that he'll live a long time, but dies before optimizing his SS, well, he probably doesn't care since nothing is very important when you're dead. That's different from gambling in Vegas, where the desired outcome is to win money. So there are some differences in details...but it's all gambling.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by HomerJ »

iceport wrote: Sun Sep 12, 2021 3:24 pm
MJS wrote: Sun Sep 12, 2021 3:12 pm 3. What are your plans for long-term care? Higher Social Security can smooth out LTC costs. However, selling home/property or using [T-IRAs & 401/403s plus medical tax deductions] lessens the value of high SS for LTC.
Yes, I started thinking about this. Back in 2012-2013 my mom was in a place that was no frills (but with excellent care and lots of familiar faces) and it cost ~$9k/mo. That's kind of scary. The plan so far, and tentative as it is, would be to have enough of the portfolio left over to cover the costs that exceed the income.
Do you have a paid off house? As a single person, you can always sell the house if you have to go to an assisted living place.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

HomerJ wrote: Mon Sep 13, 2021 12:42 pm
iceport wrote: Sun Sep 12, 2021 3:24 pm
MJS wrote: Sun Sep 12, 2021 3:12 pm 3. What are your plans for long-term care? Higher Social Security can smooth out LTC costs. However, selling home/property or using [T-IRAs & 401/403s plus medical tax deductions] lessens the value of high SS for LTC.
Yes, I started thinking about this. Back in 2012-2013 my mom was in a place that was no frills (but with excellent care and lots of familiar faces) and it cost ~$9k/mo. That's kind of scary. The plan so far, and tentative as it is, would be to have enough of the portfolio left over to cover the costs that exceed the income.
Do you have a paid off house? As a single person, you can always sell the house if you have to go to an assisted living place.
Yes, it's paid off, but I never "bought into" a McMansion just because I could possibly afford one. So it's a very modest place, representing a relatively minor portion of my net worth. This is a very valid point, and one which accomplishes a very necessary step should I find myself needing LTC, but I would probably need to reserve more than the house's value in retirement savings to cover LTC expenses.
"Discipline matters more than allocation.” ─William Bernstein
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by HomerJ »

We will take SS as soon as we can, and spend the money as fast as it comes in on fun stuff while we are still young.

Yes, we could, mathematically, spend more of our portfolio from 62-70 instead, and then collect SS at 70, and be better off in the long run.

But that would entail watching our portfolio drop during those 8 years, and my wife won't be able to handle that.

Give her a check for $2000 a month, every month, and she'll be okay spending it. Pull an extra $2000 out of our accounts a month, every month to spend, and she'll resist.

That's just how it is.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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