Argument for taking social security before 70. Comments?

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ObliviousInvestor
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Re: Argument for taking social security before 70. Comments?

Post by ObliviousInvestor » Thu Sep 13, 2018 3:42 pm

galeno wrote:
Thu Sep 13, 2018 3:13 pm
I played around with this: https://opensocialsecurity.com/

1. Wife and I are 61. Assumed $2000 PIA for me and $1000 PIA for spouse. PIA for both is 66 years 6 months.

Advice: I take SS at 70 years 0 months. Wife takes SS at 62 years 1 month.

NPV of SS for both is $609,934.


2. Wife and I are 61. Assumed $2000 PIA for me and $0 PIA for spouse. PIA for me is 66 years 6 months.

Advice: I take SS at 68 years 6 months. Wife takes SS at 68 years 10 months.

NPV of SS for both is $570,272.
Yep, there's a big difference when the lower earner has no retirement benefit at all, because the cost of waiting is much higher for the higher earner.

About the only time I've seen it make sense for the high earner to claim ASAP at 62 is when the lower earner a) has no retirement benefit and b) is several years older. (For example if higher earner is 8 years younger, waiting until 70 would mean the lower earner can't claim spousal until 78, which is 11-12 years of full spousal benefits completely missed.)
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Re: Argument for taking social security before 70. Comments?

Post by f35phixer » Thu Sep 13, 2018 4:07 pm

lots of + and - on the taking of when and then :oops:

Here's my plan, take TSP monthly's until FRA 66/7 months. My FIDO rollover continues to grow and grow! We both have great pensions to live off. Really can live off them.... DW will take when SHE decides :D I married a sugar mama!

Here's the question, Ok you had parents that lived to 122 and if you took SS at 62 you'd lose SO much money.

So all you retired (70-90 yr old) people, honest answers, How much are your traveling, entertaining, going out to the theaters etc etc that you REALLY REALLY need that 3400 vise 2600 monthly check? Once you get old you start to slow down i get it, I plan to travel the world and see as much as i can, then age will take over and then its time to see the USofA.

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Re: Argument for taking social security before 70. Comments?

Post by #Cruncher » Thu Sep 13, 2018 4:36 pm

grabiner wrote:
Wed Sep 12, 2018 8:43 pm
Here's how I estimate the break-even. It's easiest to do one year at a time. Suppose that you have enough money to cover this year's Social Security. You can ... take Social Security now and buy a TIPS ladder which will cover the future years' payments. The break-even is the point where the TIPS ladder runs out.

If you are 66 and your benefit is $20,000, waiting one year will increase your benefit to $21,600 (all numbers growing with inflation). If you spend $20,000 to buy TIPS, ... Current yields on a TIPS portfolio with a 7-year duration are 0.85%, which is enough to make the ladder last 13.3 years, ... That is to age 80.
We can get David's result with the Excel NPER function:
13.3 = NPER(0.85%, 1600, -20000, 0, 0)

The following table uses this function to show the breakeven age for each of eight one year delays from 62 to 63, 63 to 64, …, & 69 to 70.

Code: Select all

Row   Col A        Col B     Col C
  1    Born         1952
  2     NRA       66.000
  3    Rate       0.850%    1 Year
  4  Spouse       0.000%     Delay
  5   Start      Pct PIA    BE Age
  6      62      75.000%
  7      63      80.000%      79.1
  8      64      86.667%      76.7
  9      65      93.333%      78.8
 10      66     100.000%      81.0
 11      67     108.000%      80.3 = 67 + 13.3
 12      68     116.000%      82.4
 13      69     124.000%      84.5
 14      70     132.000%      86.7 = 70 + 16.7
The table shows the results for a single person with a Normal Retirement Age (NRA) of 66 and a 0.85% discount rate. Do the following to see the results for a different NRA or discount rate or for a couple like the one in the original post with a fixed spousal benefit.
  • Select All, Copy, and Paste [ * ] the following at cell A1 of a blank Excel sheet.

    Code: Select all

    Born	1952
    NRA	=MIN(67,66+MAX(0,B1-1954)/6)
    Rate	0.0085
    Spouse	0
    Start	Pct PIA	BE Age
    62	=IF($A6<B$2,1-(5/900)*MIN(36,(B$2-$A6)*12)-(5/1200)*MAX(0,(B$2-$A6)*12-36),1+(8/1200)*($A6-B$2)*12)+B$4
    63	=IF($A7<B$2,1-(5/900)*MIN(36,(B$2-$A7)*12)-(5/1200)*MAX(0,(B$2-$A7)*12-36),1+(8/1200)*($A7-B$2)*12)+B$4	=NPER((1+B$3)^(A7-A6)-1,B7-B6,-B6,0,0)*(A7-A6)+A7
    =2*A7-A6	=IF($A8<B$2,1-(5/900)*MIN(36,(B$2-$A8)*12)-(5/1200)*MAX(0,(B$2-$A8)*12-36),1+(8/1200)*($A8-B$2)*12)+B$4	=NPER((1+B$3)^(A8-A7)-1,B8-B7,-B7,0,0)*(A8-A7)+A8
  • Format for readability.
  • Copy row 8 down to row 14.
  • Enter birth year in cell B1 and discount rate in cell B3.
  • If the spouse will receive a fixed percent of the worker's PIA whenever the worker starts benefits (as in the original post), enter the percent in cell B4.

BigoteGato wrote:
Thu Sep 13, 2018 2:29 pm
Grabiner - I find your reasoning clear and compelling. Let's see how it may apply to the OP's situation of a high and a low wage earner. Assume the low wage earner would get $0 SS, the high would get $20K as in your example. If high earner files, then low earner can get $10K (spousal benefit). So your examples are modified to include buying $30K in TIPS, not $20K. Now your 66 yrs old's break-even age becomes 50% higher - 20.25 yrs, or 86.5. The 69 yr old's break-even age is pushed to 95.25.
That's not how the math works, BigoteGato. Apparently you're using Grabiner's case with a 0% rate of return. This simplifies the calculation considerably.

Code: Select all

BE Years = Forsaken amt / extra amt
   12.5  = 20000        / 1600       single 66 to 67
   15.5  = 24800        / 1600       single 69 to 70

   18.75 = 30000        / 1600       with spouse 66 to 67
   21.75 = 34800        / 1600       with spouse 69 to 70
This can also be seen in a modification of the table above:

Code: Select all

Row   Col A        Col B      Col C
  1    Born         1952
  2     NRA       66.000
  3    Rate       0.000%     1 Year
  4  Spouse      50.000%      Delay
  5   Start      Pct PIA     BE Age
  6      62     125.000%
  7      63     130.000%      88.00
  8      64     136.667%      83.50
  9      65     143.333%      85.50
 10      66     150.000%      87.50
 11      67     158.000%      85.75 = 18.75 + 67
 12      68     166.000%      87.75
 13      69     174.000%      89.75
 14      70     182.000%      91.75 = 21.75 + 70
* If you have problems pasting, try "Paste Special" and "Text".

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Re: Argument for taking social security before 70. Comments?

Post by ObliviousInvestor » Fri Sep 14, 2018 9:39 am

Somebody asked via email if I could try again to explain what I'm saying about life expectancy assumptions. So here's one more attempt. Apologies to anybody who's getting sick of this topic.

There is no problem with doing analyses that assume you (and your spouse, if married) die at a specific age.

The problem is with the following plan of action (which I see often -- you can even see it in this thread):
1) A married person looks up their life expectancy and their spouse's life expectancy from a credible source,
2) The person then performs an analysis (whether in an online calculator or a DIY spreadsheet) assuming that each person dies at their life expectancy,
3) The person thinks that they have modeled the "expected outcome."

Steps 1 and 2 are fine. Step 3 is the problem, because what the person has modeled is significantly different from the expected outcome, even though they used accurate individual life expectancies. And, in many cases, that difference will be large enough to sway the recommended strategy quite a bit.

If you want to model the expected outcome, you must use joint life expectancies.* There's no other way. (But again, this doesn't mean that other analyses shouldn't be done. It is informative to also do the analysis using an assortment of death age assumptions.)

*And as stated up-thread, the first-to-die joint life expectancy is shorter than the shorter of the two individual life expectancies. And the second-to-die joint life expectancy is longer than the longer of the two individual life expectancies.

Edited to correct a spelling typo.
Last edited by ObliviousInvestor on Mon Nov 05, 2018 6:46 am, edited 1 time in total.
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Re: Argument for taking social security before 70. Comments?

Post by #Cruncher » Fri Sep 14, 2018 11:35 am

ObliviousInvestor wrote:
Fri Sep 14, 2018 9:39 am
The problem is with the following plan of action (which I see often -- you can even see it in this thread):
  1. A married person looks up their life expectancy and their spouse's life expectancy from a credible source,
  2. The person then performs an analysis (whether in an online calculator or a DIY spreadsheet) assuming that each person dies at their lie expectancy,
  3. The person thinks that they have modeled the "expected outcome."
Steps 1 and 2 are fine. Step 3 is the problem, because what the person has modeled is significantly different from the expected outcome, even though they used accurate individual life expectancies
This can be illustrated with an example.
  • Man and woman both exactly age 66 with mortality probabilities given by the SSA 2015 Period Life Table [1]. According to the table the man's life expectancy is 17.09 years and the woman's is 19.55.
  • Begin collecting SS at age 66, their Normal Retirement Age (NRA): $1,000 / mo for the man and $500 /mo spousal for the woman. So while both are alive, they'll collect $1,500; and while only one of them is alive, the survivor will collect $1,000.
  • For simplicity, assume a 0% discount rate.
If the man were single, we'd get the same estimated total value of the SS benefits whether we use his life expectancy or compute the survival weighted benefit (using my longevity estimator [2] [3]).
Single $1,000 / mo while alive

Code: Select all

$205,080 = 1000 * 12 * 17.09
$205,074 = actual survival weighted [2]
But for the married couple the survival weighted benefit is significantly more.
Married $1,500 / mo while both alive; $1,000 / mo while only one alive

Code: Select all

$307,620 = 1500 * 12 *  17.09
  29,520 = 1000 * 12 * (19.55 - 17.09)
--------
$337,140 = total
$359,515 = actual survival weighted [2]

  1. This is the default mortality table both for my longevity estimator and for ObliviousInvestor's Open Social Security Calculator.
  2. To see how the survival weighted benefit is calculated, download and open my longevity estimator; and then
    • Enter 66 in cells I3 & I4
    • Unhide row 8 to see life expectancies (male & female will be same as SSA table)
    • Unhide columns N:S to see present value section and enter following

      Code: Select all

      Row       Col N      Col O
        1      $1,000     $1,000   Single/Joint monthly - only Pers 1 alive
        2                 $1,000   Joint monthly - only Pers 2 alive
        3                 $1,500   Joint monthly - Both alive
        4           0%        0%   Discount rate
    • Read present values in cells N5 & O5:

      Code: Select all

        5     $205,074  $359,515    Present Value
  3. The Single values are the same only for a 0% discount rate. As shown in the table below higher discount rates depress the survival weighted present values more than they do the values based on life expectancy (for married as well as single).

    Code: Select all

    Both amount        1,500 
    Either amount      1,000 
    Man   Life Exp     17.09
    Woman Life Exp     19.55
    Discount            0%        1%        2%        3%
                     -------   -------   -------   -------
    Single  - LE     205,080   187,654   172,265   158,636 
    Single  - Wtd    205,074   185,032   167,967   153,341 
    Single  - Diff        (6)   (2,622)   (4,298)   (5,295)
    
    Married - LE     337,140   305,960   278,736   254,882 
    Married - Wtd    359,515   320,870   288,370   260,843 
    Married - Diff    22,375    14,910     9,634     5,961
    Example calculation based on life expectancy for 1% discount rate using Excel PV function:

    Code: Select all

    187,654 = -PV(1%, 17.09, 12 * 1000, 0, 0)
    305,960 = -PV(1%, 17.09, 12 * 1500, -PV(1%, 19.55 - 17.09, 12 * 1000, 0, 0), 0)
Edited 3:50 PM to add footnote 3
Edited 7:00 PM to simplify formula in footnote 3
Edited 11:20 AM 9/15/2018 to add the following:
ObliviousInvestor in same post wrote:If you want to model the expected outcome, you must use joint life expectancies.
From cells H8 and I8 on the Alive sheet of my longevity estimator for the couple age 66 I get the expectancy of both being alive as 13.369 years and either being alive as 23.275. Using these we do get the same present value as the survival weighted present value from the spreadsheet (at least for a 0% discount rate):

Code: Select all

Both amount        1,500 
Either amount      1,000 
Both Life Exp     13.369
Either Life Exp   23.275
Discount rate       0%        1%        2%        3%
                 -------   -------   -------   -------
Married - LE     359,514   322,813   291,352   264,251 
Married - Wtd    359,515   320,870   288,370   260,843 
Married - Diff         1    (1,943)   (2,982)   (3,408)
Example calculation with 0% and 1% discount rate:

Code: Select all

359,514 =  12 * 1500 * 13.369 + 12 * 1000 * (23.275 - 13.369)
322,813 = -PV(1%, 13.369, 12 * 1500, -PV(1%, 23.275 - 13.369, 12 * 1000, 0, 0), 0)
Last edited by #Cruncher on Sat Sep 15, 2018 10:20 am, edited 4 times in total.

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Re: Argument for taking social security before 70. Comments?

Post by letsgobobby » Fri Sep 14, 2018 1:21 pm

We're less interested in squeezing every dollar out of the SSA, and more interested in using the longevity insurance feature of the program. Thus it makes sense for me as the much higher earner to delay my benefit as long as I am in average or better health, and for my spouse to take hers somewhere between 62 and 67. This approach might also maximize our total dollars from SS, but that would be a byproduct, not the goal of the strategy.

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Re: Argument for taking social security before 70. Comments?

Post by willthrill81 » Fri Sep 14, 2018 3:23 pm

letsgobobby wrote:
Fri Sep 14, 2018 1:21 pm
We're less interested in squeezing every dollar out of the SSA, and more interested in using the longevity insurance feature of the program. Thus it makes sense for me as the much higher earner to delay my benefit as long as I am in average or better health, and for my spouse to take hers somewhere between 62 and 67. This approach might also maximize our total dollars from SS, but that would be a byproduct, not the goal of the strategy.
That's our approach as well (i.e. SS as longevity insurance), which seems even more important for us than most since I plan on retiring no later than age 55. If we encounter a really poor SoR, we may be very thankful that SS benefits, even if reduced by the projected 25%, at age 70 for me and 69 for my DW would likely cover our essential spending needs, apart from some unforeseen major expense like LTC.
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Re: Argument for taking social security before 70. Comments?

Post by BigoteGato » Mon Sep 17, 2018 4:46 pm

#Cruncher wrote:
Thu Sep 13, 2018 4:36 pm
BigoteGato wrote:
Thu Sep 13, 2018 2:29 pm
Grabiner - I find your reasoning clear and compelling. Let's see how it may apply to the OP's situation of a high and a low wage earner. Assume the low wage earner would get $0 SS, the high would get $20K as in your example. If high earner files, then low earner can get $10K (spousal benefit). So your examples are modified to include buying $30K in TIPS, not $20K. Now your 66 yrs old's break-even age becomes 50% higher - 20.25 yrs, or 86.5. The 69 yr old's break-even age is pushed to 95.25.
That's not how the math works, BigoteGato. Apparently you're using Grabiner's case with a 0% rate of return. This simplifies the calculation considerably.
Cruncher - I wasn't using a spreadsheet, just simply pointing out that in Grabiner's example, if instead of investing $20K in TIPS one invested 50% more, the break even would extend out by 50% as well. But I will look at your code to understand your point.
BG

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Re: Argument for taking social security before 70. Comments?

Post by randomguy » Mon Sep 17, 2018 7:09 pm

willthrill81 wrote:
Fri Sep 14, 2018 3:23 pm
letsgobobby wrote:
Fri Sep 14, 2018 1:21 pm
We're less interested in squeezing every dollar out of the SSA, and more interested in using the longevity insurance feature of the program. Thus it makes sense for me as the much higher earner to delay my benefit as long as I am in average or better health, and for my spouse to take hers somewhere between 62 and 67. This approach might also maximize our total dollars from SS, but that would be a byproduct, not the goal of the strategy.
That's our approach as well (i.e. SS as longevity insurance), which seems even more important for us than most since I plan on retiring no later than age 55. If we encounter a really poor SoR, we may be very thankful that SS benefits, even if reduced by the projected 25%, at age 70 for me and 69 for my DW would likely cover our essential spending needs, apart from some unforeseen major expense like LTC.
You could make the reverse arguement. Taking SS lowers your SWR and reduces your SOR since you need less money from the portfolio over those critical first years.

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Re: Argument for taking social security before 70. Comments?

Post by willthrill81 » Mon Sep 17, 2018 8:41 pm

randomguy wrote:
Mon Sep 17, 2018 7:09 pm
willthrill81 wrote:
Fri Sep 14, 2018 3:23 pm
letsgobobby wrote:
Fri Sep 14, 2018 1:21 pm
We're less interested in squeezing every dollar out of the SSA, and more interested in using the longevity insurance feature of the program. Thus it makes sense for me as the much higher earner to delay my benefit as long as I am in average or better health, and for my spouse to take hers somewhere between 62 and 67. This approach might also maximize our total dollars from SS, but that would be a byproduct, not the goal of the strategy.
That's our approach as well (i.e. SS as longevity insurance), which seems even more important for us than most since I plan on retiring no later than age 55. If we encounter a really poor SoR, we may be very thankful that SS benefits, even if reduced by the projected 25%, at age 70 for me and 69 for my DW would likely cover our essential spending needs, apart from some unforeseen major expense like LTC.
You could make the reverse arguement. Taking SS lowers your SWR and reduces your SOR since you need less money from the portfolio over those critical first years.
True, but being able to cover all of our essential spending from SS at age 70 pretty much makes SoR a nonissue for us.
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Re: Argument for taking social security before 70. Comments?

Post by smitcat » Tue Sep 18, 2018 8:31 am

randomguy wrote:
Mon Sep 17, 2018 7:09 pm
willthrill81 wrote:
Fri Sep 14, 2018 3:23 pm
letsgobobby wrote:
Fri Sep 14, 2018 1:21 pm
We're less interested in squeezing every dollar out of the SSA, and more interested in using the longevity insurance feature of the program. Thus it makes sense for me as the much higher earner to delay my benefit as long as I am in average or better health, and for my spouse to take hers somewhere between 62 and 67. This approach might also maximize our total dollars from SS, but that would be a byproduct, not the goal of the strategy.
That's our approach as well (i.e. SS as longevity insurance), which seems even more important for us than most since I plan on retiring no later than age 55. If we encounter a really poor SoR, we may be very thankful that SS benefits, even if reduced by the projected 25%, at age 70 for me and 69 for my DW would likely cover our essential spending needs, apart from some unforeseen major expense like LTC.
You could make the reverse arguement. Taking SS lowers your SWR and reduces your SOR since you need less money from the portfolio over those critical first years.
Taking SS early causes a number of issiues not directly related to the funds recieved when you take them early:
- limiting Roth conversions
- limiting survivor benifits (especially valuable with age differences)
- Ability to lower taxes after 70
- Ability to lower taxes as a single filer later on
- value of estate (if any) for heirs

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Re: Argument for taking social security before 70. Comments?

Post by JW-Retired » Tue Sep 18, 2018 10:42 am

smitcat wrote:
Tue Sep 18, 2018 8:31 am
Taking SS early causes a number of issues not directly related to the funds received when you take them early:
- limiting Roth conversions
- limiting survivor benifits (especially valuable with age differences)
- Ability to lower taxes after 70
- Ability to lower taxes as a single filer later on
- value of estate (if any) for heirs
I would add one more issue to this. SS is a monthly stipend that you can't burn up to nothing by foolish spending.
Some folks who retire on a large nest egg just can't limit their spending to something that will last. Now they or the survivor are trying to get by on minimal early SS.

Even with the long bull market this seems to be pretty common.
JW
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Re: Argument for taking social security before 70. Comments?

Post by MathMann » Tue Oct 09, 2018 10:04 am

I look it at the opposite way. If you need the income sometime in the age 62-70 time period where will you get it? From your portfolio? If it's a down market you shouldn't be selling stocks so you'll be getting it from the cash and fixed portions. If you don't have sufficient funds in those allocations you'll be scrimping. I'd rather have the income while I'm younger instead of older. The probability of living much past your mid-80s is low in spite of what media and other pundits say.

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Re: Argument for taking social security before 70. Comments?

Post by JoeRetire » Tue Oct 09, 2018 10:08 am

MathMann wrote:
Tue Oct 09, 2018 10:04 am
The probability of living much past your mid-80s is low in spite of what media and other pundits say.
What do you believe is the probability of living past your mid-80s?
What do you feel the media and other pundits say?

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Re: Argument for taking social security before 70. Comments?

Post by David Jay » Tue Oct 09, 2018 12:35 pm

MathMann wrote:
Tue Oct 09, 2018 10:04 am
I look it at the opposite way. If you need the income sometime in the age 62-70 time period where will you get it? From your portfolio? If it's a down market you shouldn't be selling stocks so you'll be getting it from the cash and fixed portions. If you don't have sufficient funds in those allocations you'll be scrimping.
That is a pretty weak argument. Why would one adopt this strategy and NOT plan to have sufficient funds in fixed income?

I will be retiring in a few months at age 62. I have transferred enough assets into bonds to cover us to age 68. At age 68 all of our monthly expenses are covered by SS (at that point I may delay to 70 depending on conditions).
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Re: Argument for taking social security before 70. Comments?

Post by JackoC » Tue Oct 09, 2018 3:08 pm

JoeRetire wrote:
Tue Oct 09, 2018 10:08 am
MathMann wrote:
Tue Oct 09, 2018 10:04 am
The probability of living much past your mid-80s is low in spite of what media and other pundits say.
What do you believe is the probability of living past your mid-80s?
What do you feel the media and other pundits say?
Interesting questions, but it was stated it's 'low', and the actual probability for people with good health habits and history is not by any definition low. If anything IME typical personal financial writers, 'pundits and media', stick to the US average which is pulled down substantially, and increasingly, by a large number of people with negative factors (general unhealthy habits, seriously overweight, diabetes, smoking, 'habits of despair' like substance abuse, etc.). Even the SSA calculator gives my (male, 61) LE as 83.5 so past mid 80's is below 50% though whether 'low' is partly semantic. But I wouldn't use a world LE table to estimate mine, there are too many people in the world with situations too different than mine, and that's also true of the US as a whole. The two linked calculators with personalized questions give my LE as 95 and 93 respectively, an outright high probability of lasting past mid 80's. This creation of sub-categories is not perfectly cut and dried, but it represents very real differences in sub-groups that an individual can't ignore in making a rational plan.
https://www.blueprintincome.com/tools/l ... ll-i-live/
https://www.livingto100.com/
https://www.ssa.gov/cgi-bin/longevity.cgi

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Re: Argument for taking social security before 70. Comments?

Post by smitcat » Tue Oct 09, 2018 3:17 pm

MathMann wrote:
Tue Oct 09, 2018 10:04 am
I look it at the opposite way. If you need the income sometime in the age 62-70 time period where will you get it? From your portfolio? If it's a down market you shouldn't be selling stocks so you'll be getting it from the cash and fixed portions. If you don't have sufficient funds in those allocations you'll be scrimping. I'd rather have the income while I'm younger instead of older. The probability of living much past your mid-80s is low in spite of what media and other pundits say.
I gather that none of these apply to your situation.....
Taking SS early causes a number of issiues not directly related to the funds recieved when you take them early:
- limiting Roth conversions
- limiting survivor benifits (especially valuable with age differences)
- Ability to lower taxes after 70
- Ability to lower taxes as a single filer later on
- value of estate (if any) for heirs

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Re: Argument for taking social security before 70. Comments?

Post by WanderingDoc » Tue Oct 09, 2018 4:27 pm

Money now is always better than money later. That's precisely why I am a huge proponent of real estate investing - income now and wealth later, as opposed to just wealth (much) later.

No brainier. I'd take them at age 40 if I could.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

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Re: Argument for taking social security before 70. Comments?

Post by mhalley » Tue Oct 09, 2018 5:17 pm

Other considerations may also apply, such as Roth conversions before starting SS. All the calculators used to recommend we take at 70, but Mike Piper rec 68 &7 mos..

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Re: Argument for taking social security before 70. Comments?

Post by JoeRetire » Tue Oct 09, 2018 5:23 pm

WanderingDoc wrote:
Tue Oct 09, 2018 4:27 pm
Money now is always better than money later.
Of course, as long as the amounts are the same. But the relevant question is how much less money now is better than how much more money later?
No brainier. I'd take them at age 40 if I could.
Interesting.

What percentage of a lifetime cut would you be willing to trade for the ability to start your benefits at 40? Would a 90% cut work for you?
Of course you'd also likely have some $0 for some of the 35 years used to calculate your benefits.
And presumably if you were still working, your benefits would be reduced by $1 for every $2 you earned. Would that change your answer?

MathMann
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Re: Argument for taking social security before 70. Comments?

Post by MathMann » Tue Oct 09, 2018 5:47 pm

JackoC wrote:
Tue Oct 09, 2018 3:08 pm
JoeRetire wrote:
Tue Oct 09, 2018 10:08 am
MathMann wrote:
Tue Oct 09, 2018 10:04 am
The probability of living much past your mid-80s is low in spite of what media and other pundits say.
What do you believe is the probability of living past your mid-80s?
What do you feel the media and other pundits say?
Interesting questions, but it was stated it's 'low', and the actual probability for people with good health habits and history is not by any definition low. If anything IME typical personal financial writers, 'pundits and media', stick to the US average which is pulled down substantially, and increasingly, by a large number of people with negative factors (general unhealthy habits, seriously overweight, diabetes, smoking, 'habits of despair' like substance abuse, etc.). Even the SSA calculator gives my (male, 61) LE as 83.5 so past mid 80's is below 50% though whether 'low' is partly semantic. But I wouldn't use a world LE table to estimate mine, there are too many people in the world with situations too different than mine, and that's also true of the US as a whole. The two linked calculators with personalized questions give my LE as 95 and 93 respectively, an outright high probability of lasting past mid 80's. This creation of sub-categories is not perfectly cut and dried, but it represents very real differences in sub-groups that an individual can't ignore in making a rational plan.
https://www.blueprintincome.com/tools/l ... ll-i-live/
https://www.livingto100.com/
https://www.ssa.gov/cgi-bin/longevity.cgi
For me for the probability go living past 85 is low (<45%). I read a lot of financial planning articles that state that you need to plan to age 90 or 95. The chance of living that long and being lucid is very low.

MathMann
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Re: Argument for taking social security before 70. Comments?

Post by MathMann » Tue Oct 09, 2018 5:49 pm

smitcat wrote:
Tue Oct 09, 2018 3:17 pm
MathMann wrote:
Tue Oct 09, 2018 10:04 am
I look it at the opposite way. If you need the income sometime in the age 62-70 time period where will you get it? From your portfolio? If it's a down market you shouldn't be selling stocks so you'll be getting it from the cash and fixed portions. If you don't have sufficient funds in those allocations you'll be scrimping. I'd rather have the income while I'm younger instead of older. The probability of living much past your mid-80s is low in spite of what media and other pundits say.
I gather that none of these apply to your situation.....
Taking SS early causes a number of issiues not directly related to the funds recieved when you take them early:
- limiting Roth conversions
- limiting survivor benifits (especially valuable with age differences)
- Ability to lower taxes after 70
- Ability to lower taxes as a single filer later on
- value of estate (if any) for heirs
There is always a tradeoff between taking SS early or waiting. There are costs (Including taxes and loss of future investment returns) associated w/ withdrawing funds from your portfolio as well.

JoeRetire
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Re: Argument for taking social security before 70. Comments?

Post by JoeRetire » Tue Oct 09, 2018 6:17 pm

MathMann wrote:
Tue Oct 09, 2018 5:47 pm
For me for the probability go living past 85 is low (<45%).
You consider around 45% low?
Wow.

WanderingDoc
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Re: Argument for taking social security before 70. Comments?

Post by WanderingDoc » Tue Oct 09, 2018 6:39 pm

JoeRetire wrote:
Tue Oct 09, 2018 5:23 pm
WanderingDoc wrote:
Tue Oct 09, 2018 4:27 pm
Money now is always better than money later.
Of course, as long as the amounts are the same. But the relevant question is how much less money now is better than how much more money later?
No brainier. I'd take them at age 40 if I could.
Interesting.

What percentage of a lifetime cut would you be willing to trade for the ability to start your benefits at 40? Would a 90% cut work for you?
Of course you'd also likely have some $0 for some of the 35 years used to calculate your benefits.
And presumably if you were still working, your benefits would be reduced by $1 for every $2 you earned. Would that change your answer?
A 75% cut would be acceptable if I could take them at 50 vs. 70. A 50% cut would be fine to take them at 60.

I would gladly pay the 10% penality to withdraw my entire TSP at age 40 (and I plan to). Digits on a screen that I can't do anything with for decades doesn't sound that appealing. I don't see a tangible benefit. I have to be able to use that money now for the investment to be just that, and not a hope that I will be mobile or healthy (or alive) enough to use it when I'm 65 or 70.

Almost anyone will have a lot of money when they are old (just wait long enough), the challenge (and most of the benefit) is to be wealthy when you are young too. Age 0-60 is important. Statistically it's 3/4 of one's life or more!
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

Big Dog
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Re: Argument for taking social security before 70. Comments?

Post by Big Dog » Tue Oct 09, 2018 6:42 pm

here's another longevity calculator, the type used by insurance companies. Run the basic first, and then run the 'more precise' estimate based on height, weight, bp, and the like. For me, it was a yuuuuge difference.

P.S. Don't forget that the SSA calculator is unisex.

https://rslic.metlife.com/lic/corpLongevity.do

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Nestegg_User
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Re: Argument for taking social security before 70. Comments?

Post by Nestegg_User » Tue Oct 09, 2018 9:45 pm

{many longevity calculators don’t consider your prior type of employment.... it really should... insurance companies consider it when possibly issuing policies. If your prior work didn’t allow you to be in a super preferred insurance ranking, as mine didn’t, there’s likely a lower likelihood of reaching the age given as outputs of those calculators. It doesn’t even have to be areas like fire fighters ( more likely to have COPD issues with shortened life expectancy) or long haul truckers/taxi drivers ( likely to have higher rates of obesity and other risk factors). }

...for us: roughly same PIA (younger is ever so slightly higher), age difference is seven years

in IPS, earliest is : older taking at (66, n months) FRA + ( to either december of year of FRA ( to maximize DRC’s and when they are actually paid out) and younger delaying to 70. If older passes before younger gets to 70, take surviving spouse SS and delay theirs until 70 for maximum $$ and income until then. Before first SS, do Roth conversions up to top of lower bracket (haven’t investigated whether it really makes sense to prepay taxes in same bracket... even with surviving spouse needing to file single; can’t really convert it all anyway). Spouse would get half of pension as survivor and stay on HI.

we look at SS as longevity income... don’t really maximize it (otherwise couldn’t do Roth conversions) {...and yes the elimination of the “file and suspend” had been planned in the years prior to retirement ...but we know what happens if you try to plan too far ahead...and now .. poof...}. Fortunately, at WR under 1.5%... we’re not exactly hurting...and when we start the first SS we likely won’t need any withdrawals.

We’ve already set up CD ladder to account for expected SS at FRA and then set up portfolio for the rest at 45/50/5 until SS ( then up to 50/50 or even 60/40).

smitcat
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Re: Argument for taking social security before 70. Comments?

Post by smitcat » Wed Oct 10, 2018 6:42 am

MathMann wrote:
Tue Oct 09, 2018 5:49 pm
smitcat wrote:
Tue Oct 09, 2018 3:17 pm
MathMann wrote:
Tue Oct 09, 2018 10:04 am
I look it at the opposite way. If you need the income sometime in the age 62-70 time period where will you get it? From your portfolio? If it's a down market you shouldn't be selling stocks so you'll be getting it from the cash and fixed portions. If you don't have sufficient funds in those allocations you'll be scrimping. I'd rather have the income while I'm younger instead of older. The probability of living much past your mid-80s is low in spite of what media and other pundits say.
I gather that none of these apply to your situation.....
Taking SS early causes a number of issiues not directly related to the funds recieved when you take them early:
- limiting Roth conversions
- limiting survivor benifits (especially valuable with age differences)
- Ability to lower taxes after 70
- Ability to lower taxes as a single filer later on
- value of estate (if any) for heirs
There is always a tradeoff between taking SS early or waiting. There are costs (Including taxes and loss of future investment returns) associated w/ withdrawing funds from your portfolio as well.
Exactly - and that is why I lad out the most likely possibilities on the RPM calculator spreadsheet to give me a detailed answer for my specific information and goals. So the tradeoff for us clearly favors taking SS later with a positive advantage in spendable dollars in the hundreds of thousands of dollars. I would urge anyone to actually calculate their most likely scenarios with their own numbers.

bberris
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Re: Argument for taking social security before 70. Comments?

Post by bberris » Wed Oct 10, 2018 7:08 am

No matter how you refine mortality statistics, they are of little use in predicting when you will die. The average, or median is just that. The range of mortalities is broad and disperse around the median or mean. To me, it is more important to have a plan that will allow you to live the life you want no matter how long you live within reason.

Unfortunately, mortality statistics are very good for large populations, leading people to extrapolate their implication to the smallest population of one.

nick evets
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Re: Argument for taking social security before 70. Comments?

Post by nick evets » Wed Oct 10, 2018 7:59 am

Something I don't understand: if I use a retirement calculator such as "Firecalc" it seems advantageous to take SS earlier.

For example, the usual hypothetical: 1M portfolio, 60k spend, 30 year retirement. Without any SS, the odds are ~50/50. Taking 24k in SS at age 62 changes the odds to 96.6%. But waiting 8 years to receive a 41k from SS increases the depletion risk, and the odds are now 89%.

JackoC
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Re: Argument for taking social security before 70. Comments?

Post by JackoC » Wed Oct 10, 2018 10:06 am

MathMann wrote:
Tue Oct 09, 2018 5:47 pm
JackoC wrote:
Tue Oct 09, 2018 3:08 pm
JoeRetire wrote:
Tue Oct 09, 2018 10:08 am
MathMann wrote:
Tue Oct 09, 2018 10:04 am
The probability of living much past your mid-80s is low in spite of what media and other pundits say.
What do you believe is the probability of living past your mid-80s?
What do you feel the media and other pundits say?
Interesting questions, but it was stated it's 'low', and the actual probability for people with good health habits and history is not by any definition low.
For me for the probability go living past 85 is low (<45%). I read a lot of financial planning articles that state that you need to plan to age 90 or 95. The chance of living that long and being lucid is very low.
1. Your original statement said nothing about it being personal to you, but rather suggested a general overstatement of LE's by 'media and other pundits'.
2. Being non-lucid might or might not reduce one's spending needs. If one needs paid help or care, it might raise them.

I also wonder how you calculated your LE, and why you class 45% as low.

aristotelian
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Re: Argument for taking social security before 70. Comments?

Post by aristotelian » Wed Oct 10, 2018 10:10 am

Ged wrote:
Wed Sep 12, 2018 8:10 am
The thing that pushed me to delaying benefits was that I could use some additional space in a lower tax bracket for ROTH conversions, thereby reducing future RMDs.
+1. The break-even on SS dollars is only one factor if claiming early loses more of your investment portfolio to tax.

JackoC
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Re: Argument for taking social security before 70. Comments?

Post by JackoC » Wed Oct 10, 2018 10:19 am

bberris wrote:
Wed Oct 10, 2018 7:08 am
No matter how you refine mortality statistics, they are of little use in predicting when you will die. The average, or median is just that. The range of mortalities is broad and disperse around the median or mean. To me, it is more important to have a plan that will allow you to live the life you want no matter how long you live within reason.

Unfortunately, mortality statistics are very good for large populations, leading people to extrapolate their implication to the smallest population of one.
I don't really agree with this. It's a dispersion around a mean, but it's important to accurately estimate that mean. As I mentioned before would you estimate your LE (which *is* the mean) from an LE table for all people worldwide if you also had an all US table?

I would think not. The world one is clearly less representative of the smaller but still statistically gigantic sample of which you are a member. Likewise the US mean is not as representative as the mean of a smaller, but still large, sample of Americans like you. This further step would be superfluous if we had a very uniform society in respect of people's health/LE related situations and habits, but we manifestly do not. The sample of upper middle class white, college+ educated, non-smoker, non-diabetic, healthy BMI, high exercise, etc males is a still a huge sample. The mean of that sample is more representative of my mean than the mean of all people worldwide or all people in the US. Again it's not absolutely cut and dried how to define those sub samples with further questions. That's why the 'personalized' calculators do not all exactly agree. But they are *not* telling you 'how long you will live'. They are placing you in a more appropriate statistical sample to estimate your *mean*.

And since these differences are potentially on the order of 10 yrs *mean* (not 10 yrs difference in outlying realized outcomes) this point cannot be ignored in rational financial planning IMO.

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galeno
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Re: Argument for taking social security before 70. Comments?

Post by galeno » Wed Oct 10, 2018 2:57 pm

95% SWR = 4.46% taking SS at age 62. 95% SWR = 4.57% taking SS at age 66.5. 95% SWR = 4.56% taking SS at age 70.

I believe the explanation can be had by playing with "age at death" using https://opensocialsecurity.com/. Check the "advanced" box.

For me it advises me taking SS at age 70 if I die at age 88 or above. Once I put age 87 the recommended age to take SS is now 69 and 8 months. As I walk down the "age at death" the recommendation keeps going down. At death at 80 it advises 65 and 1 month.
nick evets wrote:
Wed Oct 10, 2018 7:59 am
Something I don't understand: if I use a retirement calculator such as "Firecalc" it seems advantageous to take SS earlier.

For example, the usual hypothetical: 1M portfolio, 60k spend, 30 year retirement. Without any SS, the odds are ~50/50. Taking 24k in SS at age 62 changes the odds to 96.6%. But waiting 8 years to receive a 41k from SS increases the depletion risk, and the odds are now 89%.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

MathMann
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Re: Argument for taking social security before 70. Comments?

Post by MathMann » Wed Oct 10, 2018 3:35 pm

JackoC wrote:
Wed Oct 10, 2018 10:06 am
MathMann wrote:
Tue Oct 09, 2018 5:47 pm
JackoC wrote:
Tue Oct 09, 2018 3:08 pm
JoeRetire wrote:
Tue Oct 09, 2018 10:08 am
MathMann wrote:
Tue Oct 09, 2018 10:04 am
The probability of living much past your mid-80s is low in spite of what media and other pundits say.
What do you believe is the probability of living past your mid-80s?
What do you feel the media and other pundits say?
Interesting questions, but it was stated it's 'low', and the actual probability for people with good health habits and history is not by any definition low.
For me for the probability go living past 85 is low (<45%). I read a lot of financial planning articles that state that you need to plan to age 90 or 95. The chance of living that long and being lucid is very low.
1. Your original statement said nothing about it being personal to you, but rather suggested a general overstatement of LE's by 'media and other pundits'.
2. Being non-lucid might or might not reduce one's spending needs. If one needs paid help or care, it might raise them.

I also wonder how you calculated your LE, and why you class 45% as low.
I'm not going to get into a tit-for-tat. Plan on whatever you want. I'm offering up my opinion, not yours, to the original post.

JackoC
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Re: Argument for taking social security before 70. Comments?

Post by JackoC » Wed Oct 10, 2018 4:12 pm

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