Delay Social Security to age 70 and Spend more money at 62

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Delay Social Security to age 70 and Spend more money at 62

Post by Cut-Throat » Thu Sep 13, 2012 10:37 am

Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70.
You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any stupid 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.
Last edited by Cut-Throat on Fri Sep 14, 2012 9:26 am, edited 1 time in total.

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Re: Delay Social Security to age 70 and Spend more money at

Post by ObliviousInvestor » Thu Sep 13, 2012 10:54 am

Well, there's a bit of risk from the fact that the 8 x $34,092 in the savings might not keep up with inflation, so you could have to cut back on spending during those 8 years in order to stick with the 4% withdrawal rate.

That said, I still think, overall, the claim-at-70 strategy incurs less risk than the claim-at-62 strategy, because, in the event that the portfolio performs very poorly and doesn't sustain a 4% withdrawal rate, you're left with $34,092 of Social Security per year rather than $19,476.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Thu Sep 13, 2012 11:26 am

ObliviousInvestor wrote:Well, there's a bit of risk from the fact that the 8 x $34,092 in the savings might not keep up with inflation, so you could have to cut back on spending during those 8 years in order to stick with the 4% withdrawal rate.

That said, I still think, overall, the claim-at-70 strategy incurs less risk than the claim-at-62 strategy, because, in the event that the portfolio performs very poorly and doesn't sustain a 4% withdrawal rate, you're left with $34,092 of Social Security per year rather than $19,476.
Yes, inflation is possible. But even if inflation averaged 3% a year (And the Savings account paid 0%), every year the extra amount required to keep up with inflation would be $39,516. If you also withdrew that amount from your portfolio it would still leave $687,748. A 4% WR would be $27,510 plus the $34,092 SS amount would be a total of $61,602. This still would be an extra $2,126. And this assumes that the Savings Account would pay 3 percent less than inflation. Still a very safe Bet.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Professor Emeritus » Fri Sep 14, 2012 9:02 am

"The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.
No need for any stupid 'break even analysis'."

Unfortunately you have in no way eliminated the problems of longevity risk. If you die at age 72, delaying social security leaves your estate poorer.
You always need to to the "stupid break even analysis" unless you buy an annuity

What is nice about SS is that you can do it every month and change your decision and take SS if your longevity risk changes for the worst.

However, there is an interesting question in managing the extension depending on your state. DW and I are both close to the SS max . As a practical matter for us there is No spousal benefit.
We have put enough money in Vanguard Wellesley to replace 8 years of SS for each of us of us. (8 x 20k x 2)
However in our state SS benefits are not taxed at all, nor are our DB pensions but only up to a total of 26,000 each per year combining SS and the pension.
by postponing SS we can shelter 26,000 each of DB pension from age 65-70. that shelter is worth over $4000 a year. At age 70 we then get the shelter benefits for the full SS benefit.

in hte current climate unless you have health/longevity issues deferring SS is almost always a great deal, but you should check the tax situation.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Fri Sep 14, 2012 9:17 am

Professor Emeritus wrote: Unfortunately you have in no way eliminated the problems of longevity risk. If you die at age 72, delaying social security leaves your estate poorer.
Yes, you are correct....But, I was speaking to all of those that did not care about the size of their estate. IOW -- When your dead, you won't care.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Professor Emeritus » Fri Sep 14, 2012 9:35 am

Cut-Throat wrote:
Professor Emeritus wrote: Unfortunately you have in no way eliminated the problems of longevity risk. If you die at age 72, delaying social security leaves your estate poorer.
Yes, you are correct....But, I was speaking to all of those that did not care about the size of their estate. IOW -- When your dead, you won't care.

If you don't care about your estate, then annuitizing is the way to go if you can get actuarially fair rates. As an academic I was faced with the choice of a DB pension or a a Cref contribution from the Employer.
A DB pension is an annuity. So is SS.

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Re: Delay Social Security to age 70 and Spend more money at

Post by MathWizard » Fri Sep 14, 2012 9:39 am

Cut-Throat wrote:
Professor Emeritus wrote: Unfortunately you have in no way eliminated the problems of longevity risk. If you die at age 72, delaying social security leaves your estate poorer.
Yes, you are correct....But, I was speaking to all of those that did not care about the size of their estate. IOW -- When your dead, you won't care.
Also, for us whose SS will be larger than their spouses, the spouse
will get a larger survivor check. (At a time when total SS is reduced due
to no longer having the spousal SS.)

I agree with the OP, and that is my plan also.

Regarding estate, the discussion assumes that I make it past 62. By then,
my kids will (and should) be able to take care of themselves.

The only arguments I have heard for SS at 62 are either
1) "I don't have funds to do otherwise", which is valid, but unlikely for members of this board, or
2) some form of "The bird in the hand..." which while valid, normally skews into political discussions, which are not appropriate for this board.

#2 above does point out a possible risk, making it not a slam dunk, but all plans have risk.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Fri Sep 14, 2012 9:46 am

Professor Emeritus wrote: If you don't care about your estate, then annuitizing is the way to go if you can get actuarially fair rates. As an academic I was faced with the choice of a DB pension or a a Cref contribution from the Employer.
A DB pension is an annuity. So is SS.
Please show us a better deal on an annuity than delaying SS to age 70. That would be inflation adjusted, survivor benefits etc.

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Re: Delay Social Security to age 70 and Spend more money at

Post by BigFoot48 » Fri Sep 14, 2012 10:20 am

Cut-Throat wrote:Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70.
You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.
Under Scenario 70, wouldn't withdrawing $59,476, or 5.9%, to live on in the first eight years increase the risk of the portfolio not lasting 30 years?
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Re: Delay Social Security to age 70 and Spend more money at

Post by ObliviousInvestor » Fri Sep 14, 2012 10:25 am

BigFoot48 wrote:
Cut-Throat wrote:Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70.
You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.
Under Scenario 70, wouldn't withdrawing $59,476, or 5.9%, to live on in the first eight years increase the risk of the portfolio not lasting 30 years?
Only to the extent that the savings account (in which the additional withdrawals for the first 8 years are kept) does not keep up with inflation.

In each case, there's a part of the portfolio that's using a 4% withdrawal rate, starting at age 62. For this part of the portfolio, the risk of depletion is identical in each scenario. (In the claim at 62 scenario, this is the entire portfolio.)

In the claim at 70 scenario, there's an additional part of the portfolio that's kept in savings, which is intended to be depleted over 8 years. If the savings account keeps up with inflation, there's no problem. If the savings account doesn't keep up with inflation, you have to choose between cutting spending for those 8 years, or withdrawing some from the rest of the portfolio (which then would increase probability of total portfolio depletion).
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Re: Delay Social Security to age 70 and Spend more money at

Post by BigFoot48 » Fri Sep 14, 2012 10:31 am

I think I may be confused. The person needs $59,476 to live on during the first 8 years. That comes out of the portfolio. Is there another $34,092 coming out to fund the savings account?
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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic » Fri Sep 14, 2012 10:34 am

BigFoot48 wrote:I think I may be confused. The person needs $59,476 to live on during the first 8 years. That comes out of the portfolio. Is there another $34,092 coming out to fund the savings account?
The portfolio is split into two buckets. The long term bucket is the 4% bucket. The short term bucket is the 8 year bucket. It goes to zero in 8 years, so I guess it is the 12.5% bucket. When social security starts at 70, the extra social security you get replaces the short term bucket; the short term bucket is no longer needed. You are still taking 4% from the long-term (and smaller bucket), but the extra social security more than makes up for the smaller bucket.

The $34,092 is the short term bucket: 8 times $34,092 = starting short term bucket amount.

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Re: Delay Social Security to age 70 and Spend more money at

Post by BigFoot48 » Fri Sep 14, 2012 10:46 am

sscritic wrote:The $34,092 is the short term bucket: 8 times $34,092 = starting short term bucket amount.
But he needs $59,476 each year in the first eight years to make the post-70 income of $63,182 more attractive. So doesn't the short-term bucket need to have $59,476 x 8 = $475,808 to fund this, leaving $524,192 for the post-70 bucket?

(I'm having deja-vu of when I argued with my 7th grade teacher that is was impossible to have negative numbers. Bear with me, as I'm on the other end of the age spectrum now.)
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Fri Sep 14, 2012 10:51 am

BigFoot48 wrote: (I'm having deja-vu of when I argued with my 7th grade teacher that is was impossible to have negative numbers. Bear with me, as I'm on the other end of the age spectrum now.)
Read carefully.....Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic » Fri Sep 14, 2012 10:54 am

BigFoot48 wrote:
sscritic wrote:The $34,092 is the short term bucket: 8 times $34,092 = starting short term bucket amount.
But he needs $59,476 each year in the first eight years to make the post-70 income of $63,182 more attractive. So doesn't the short-term bucket need to have $59,476 x 8 = $475,808 to fund this, leaving $524,192 for the post-70 bucket?

(I'm having deja-vu of when I argued with my 7th grade teacher that is was impossible to have negative numbers. Bear with me, as I'm on the other end of the age spectrum now.)
You split your money at 62, not at 70. What do you do with the long term bucket starting at age 62? You take out 4% until death. The 4% is $29,090 per year. Add short term (34059) to long term (29090) during the 8 years that short term lasts. Add SS to long term after that (70+).

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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic » Fri Sep 14, 2012 10:56 am

Realize that if 4% is only going to get you 30 years, you have to die at 92 if you start your 4% at 62. Most 4% plans last much longer than 30 years, but the 30 years (or the 4%) is a sort of worst case.

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Re: Delay Social Security to age 70 and Spend more money at

Post by BigFoot48 » Fri Sep 14, 2012 10:59 am

Cut-Throat wrote:Read carefully.....Scenario age 70. You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264.
What did I live on from 62-70? I need $59,476/yr according to your example.
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Re: Delay Social Security to age 70 and Spend more money at

Post by ObliviousInvestor » Fri Sep 14, 2012 11:07 am

I think I'm saying the same things as cut-throat and sscritic above, but here goes with my attempt at an explanation. :)

Claim at 62 scenario
1) Take 4% of portfolio per year, adjusted upward for inflation.

Claim at 70 scenario
Divide portfolio up into:
1) $34,092 x 8 = $272,736. Put this in a savings account. Spend one eighth of it per year for 8 years, starting at age 62.
2) The rest of the portfolio (so, $1,000,000 minus $272,736 = $727,264). Invest this the same way as you would invest the entire portfolio in the claim-at-62 scenario. Use a 4% withdrawal rate from this part of the portfolio, just as you would in the claim-at-62 scenario.

In the claim-at-70 scenario, the probability of depletion for Part 1 of the portfolio is 100%, assuming you live to age 70. The probability of depletion for Part 2 of the portfolio is exactly the same as the probability of portfolio depletion in the claim-at-62 scenario, because in each case you're using a 4% inflation-adjusted withdrawal rate, starting at age 62. (Note, as mentioned above, this does not hold true if the savings account earns returns materially below inflation between ages 62 and 70.)
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Re: Delay Social Security to age 70 and Spend more money at

Post by Epsilon Delta » Fri Sep 14, 2012 11:15 am

BigFoot48 wrote:
sscritic wrote:The $34,092 is the short term bucket: 8 times $34,092 = starting short term bucket amount.
But he needs $59,476 each year in the first eight years to make the post-70 income of $63,182 more attractive. So doesn't the short-term bucket need to have $59,476 x 8 = $475,808 to fund this, leaving $524,192 for the post-70 bucket?

(I'm having deja-vu of when I argued with my 7th grade teacher that is was impossible to have negative numbers. Bear with me, as I'm on the other end of the age spectrum now.)
It depends how you look at it. sscritic is looking at it this way: During each of the first 8 years you take 12.5% of the short term bucket AND 4% of the long term bucket. That adds up to the $59,476 per year. After the 8 years you take SS and continue to take 4% from the long term bucket giving $59,476 per year.

If you look at it your way during the first 8 years you take $59,476 from the short term bucket and 0% from the long term bucket. So the long term bucket grows by an extra 4% a year. Thus after the 8 years the long term bucket is larger and it also only has to last 22 years (since 8 of the original 30 have already passed). This means you can safely take more than the 4% of the original amount. If you model this it comes out the same as the way sscritic modeled it but the calculations are harder.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Fri Sep 14, 2012 11:19 am

sscritic wrote:Realize that if 4% is only going to get you 30 years, you have to die at 92 if you start your 4% at 62. Most 4% plans last much longer than 30 years, but the 30 years (or the 4%) is a sort of worst case.
Right......But if you only take 3%, then the advantage of delaying SS to Age 70 increases even more!

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Re: Delay Social Security to age 70 and Spend more money at

Post by sscritic » Fri Sep 14, 2012 11:22 am

34 + 29 = 63

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Re: Delay Social Security to age 70 and Spend more money at

Post by BigFoot48 » Fri Sep 14, 2012 11:26 am

ObliviousInvestor wrote:Claim at 62 scenario
1) Take 4% of portfolio per year, adjusted upward for inflation.
Gives me income of $40,000 + $19,476 = $59,476 income for 30 years or longer.

Claim at 70 scenario
Divide portfolio up into:
1) $34,092 x 8 = $272,736. Put this in a savings account. Spend one eighth of it per year for 8 years, starting at age 62.
2) The rest of the portfolio (so, $1,000,000 minus $272,736 = $727,264). Invest this the same way as you would invest the entire portfolio in the claim-at-62 scenario. Use a 4% withdrawal rate from this part of the portfolio, just as you would in the claim-at-62 scenario.
Gives me $34,092 for eight years, then $29,090 ($727,264 x 4%) + $34,092 = $63,182 for remaining life.
If that's right, then I indeed have higher after-70 income, but the previous 8 years not so much.

Note: Just saw Epsilon's explanation and studying that.

Okay, I think I finally got it. Thanks for the help.

Age 70 Start: At 62, $34,092 + 29,090 = $63,182. At 70, the $34,092 gets replaced by SS. It's a duh thing - a negative number thing.

Good example, and answers my question about an over 4% WR, which in reality isn't there.
Last edited by BigFoot48 on Fri Sep 14, 2012 11:33 am, edited 1 time in total.
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Re: Delay Social Security to age 70 and Spend more money at

Post by midareff » Fri Sep 14, 2012 11:29 am

Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70.
You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

No need for any stupid 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.
Take your SS of $19,476 and apply a 3% nominal historic annual inflation adjustment (CPI) .... at the end of the eight years to 70 it is now $24,671. In this time period your portfolio has avoided depletion by $178,382.80 and is contributing 4% of that which is another $7,135.31 annually. Your portfolio previously depleted to $727,264. is now $905,646. 4% of $905,646 is $36,225.84 + SS of $24,671 = $60,896.84

Performing an analysis without some consideration of historical market returns (which I ignored for simplicity but the additional $178,382.80 would have had some return, at least 2% annually) and inflation rates certainly produces " No need for any stupid 'break even analysis'." doesn't it! :oops:

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Re: Delay Social Security to age 70 and Spend more money at

Post by ObliviousInvestor » Fri Sep 14, 2012 11:32 am

BigFoot48 wrote:
ObliviousInvestor wrote:Claim at 62 scenario
1) Take 4% of portfolio per year, adjusted upward for inflation.
Gives me income of $40,000 + $19,476 = $59,476 income for 30 years or longer.

Claim at 70 scenario
Divide portfolio up into:
1) $34,092 x 8 = $272,736. Put this in a savings account. Spend one eighth of it per year for 8 years, starting at age 62.
2) The rest of the portfolio (so, $1,000,000 minus $272,736 = $727,264). Invest this the same way as you would invest the entire portfolio in the claim-at-62 scenario. Use a 4% withdrawal rate from this part of the portfolio, just as you would in the claim-at-62 scenario.
Gives me $34,092 for eight years, then $29,090 ($727,264 x 4%) + $34,092 = $63,182 for remaining life.
If that's right, then I indeed have higher after-70 income, but the previous 8 years not so much.
In the claim-at-70 scenario, the income is $63,182 each year. In the first 8 years, it's $29,090 from Portfolio Part 2, plus $34,092 from the savings account. After that, it's $29,090 from Portfolio Part 2, plus $34,092 from Social Security.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Fri Sep 14, 2012 11:35 am

midareff wrote: Take your SS of $19,476 and apply a 3% nominal historic annual inflation adjustment (CPI) .... at the end of the eight years to 70 it is now $24,671. In this time period your portfolio has avoided depletion by $178,382.80 and is contributing 4% of that which is another $7,135.31 annually. Your portfolio previously depleted to $727,264. is now $905,646. 4% of $905,646 is $36,225.84 + SS of $24,671 = $60,896.84

Performing an analysis without some consideration of historical market returns (which I ignored for simplicity but the additional $178,382.80 would have had some return, at least 2% annually) and inflation rates certainly produces " No need for any stupid 'break even analysis'." doesn't it! :oops:
Yes, and this was discussed and here is an example of a 3% inflation for every year of the first 8 years......Now this gets a little more complicated, as Bigfoot still hasn't grasped the idea without inflation...And remember when we had raging inflation of the 1979-1982 period of 10-11%, I had a checking account that was getting 14% ...3% more than inflation, so it can go both ways.

Yes, inflation is possible. But even if inflation averaged 3% a year (And the Savings account paid 0%), every year the extra amount required to keep up with inflation would be $39,516. If you also withdrew that amount from your portfolio it would still leave $687,748. A 4% WR would be $27,510 plus the $34,092 SS amount would be a total of $61,602. This still would be an extra $2,126. And this assumes that the Savings Account would pay 3 percent less than inflation. Still a very safe Bet.
Last edited by Cut-Throat on Fri Sep 14, 2012 11:39 am, edited 2 times in total.

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Re: Delay Social Security to age 70 and Spend more money at

Post by BigFoot48 » Fri Sep 14, 2012 11:35 am

Okay, I finally got it. Thanks for the help. I knew three of the smartest guys on the forum could probably convince me of the errors of my thinking.

In fact, I'm liking this argument even more than the "leave an annuity for the spouse" advantage for those who aren't burdened with leaving an inheritance. If I had seen this before I turned 62 (and back then I think I would not have needed help to understand it), I may have deferred my taking of it at 62. Don't know for sure, but maybe.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Professor Emeritus » Fri Sep 14, 2012 11:48 am

Cut-Throat wrote:
Professor Emeritus wrote: If you don't care about your estate, then annuitizing is the way to go if you can get actuarially fair rates. As an academic I was faced with the choice of a DB pension or a a Cref contribution from the Employer.
A DB pension is an annuity. So is SS.
Please show us a better deal on an annuity than delaying SS to age 70. That would be inflation adjusted, survivor benefits etc.

There is no current better annuity deal than delaying SS. but its a limited sum of money at a specific age.

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Re: Delay Social Security to age 70 and Spend more money at

Post by dickenjb » Fri Sep 14, 2012 1:44 pm

I agree with cut-throat's analysis, and would add that it also offers you the chance to do Roth conversions from age 62 to age 70, definitely reducing RMD's and perhaps resulting in less taxation of SS benefits once RMD's start.

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Re: Delay Social Security to age 70 and Spend more money at

Post by archbish99 » Fri Sep 14, 2012 1:54 pm

A variant of this that I've suggested before: calculate your age 70 benefit in present dollars and buy a TIPS ladder which pays that amount for the number of years until 70. The balance is handled per whatever SWR strategy you prefer, as above.

Not tied to age 62, either. Buy your TIPS ladder at age 59, so long as your long term portfolio can sustain its withdrawals.
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Re: Delay Social Security to age 70 and Spend more money at

Post by etarini » Fri Sep 14, 2012 4:06 pm

Professor Emeritus wrote:DW and I are both close to the SS max . As a practical matter for us there is No spousal benefit.
I don't get this. I presume that you're pointing out that neither of you will have a PIA that is less than one-half of the other's.

But why couldn't you:

1) wait until the younger of the two of you turns 66,
2) have one of you file and suspend while the other collects a spousal benefit (and refuses his/her own retirement benefit), and
3) as you each turn 70, take the maximum retirement benefit?

Eric

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Re: Delay Social Security to age 70 and Spend more money at

Post by midareff » Fri Sep 14, 2012 5:04 pm

Cut-Throat wrote:Here is a pretty simple calculation for those that wish to spend more money in retirement and do not care about leaving an estate. For those that have a Big enough Portfolio and can afford to wait until 70 to take SS, you'll have more to spend every year of retirement.

Let's Say you retire this year at age 62 with the $1 Million Portfolio and decide to take a 4% SWR. You get Social Security of $19,476 per year at age 62 and delaying to age 70 would get you $34,092 per year. Let's assume no inflation for ease of calculations.

Scenario age 62. Your SWR is $40K per year and Social Security of $19,476 gets you a Spending total of $59,476 for each year of your retirement period.

Scenario age 70.
You stash 8 years of $34,092 from your portfolio into a savings account for a total of $272,736. Your portfolio is now down to $727,264. Your 4% SWR is now $29,090 per year and you remove $34,092 from your savings account giving you a total of $63,182 to spend each year for the rest of your 30 year retirement period.

The Delay to age 70 gives you $3,706 more every year starting at age 62 with no more increased risk.

Cut Throat... with all due respect to your post ....... and we could argue the financials with interest rates, market appreciation rates and other factors back and forth but there is a factor being entirely overlooked here ... and that is the human caipital.. What price to the soul, the body and the longevity of life do you place working another 8 years?

No need for any stupid 'break even analysis'.

If your WR is more conservative, such as a majority of the people here and myself, the results are even more compelling. At a 3% WR plus SS at age 62 scenario is a total of $49,476 and the age 70 scenario is $55,910. The delay of SS to age 70 now increases your annual spending by $6,434.

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Re: Delay Social Security to age 70 and Spend more money at

Post by ObliviousInvestor » Fri Sep 14, 2012 5:27 pm

midareff wrote:Cut Throat... with all due respect to your post ....... and we could argue the financials with interest rates, market appreciation rates and other factors back and forth but there is a factor being entirely overlooked here ... and that is the human caipital.. What price to the soul, the body and the longevity of life do you place working another 8 years?
My understanding is that we're assuming that the actual point at which the person retires is unchanged from one scenario to the other.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Fri Sep 14, 2012 5:46 pm

midareff wrote: Cut Throat... with all due respect to your post ....... and we could argue the financials with interest rates, market appreciation rates and other factors back and forth but there is a factor being entirely overlooked here ... and that is the human caipital.. What price to the soul, the body and the longevity of life do you place working another 8 years?
No one works more in either scenario. In fact you could have quit working at age 55.

This thread was merely deciding when to take Social Security. And it was making the Case to delay to age 70.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Professor Emeritus » Fri Sep 14, 2012 5:54 pm

etarini wrote:
Professor Emeritus wrote:DW and I are both close to the SS max . As a practical matter for us there is No spousal benefit.
I don't get this. I presume that you're pointing out that neither of you will have a PIA that is less than one-half of the other's.

But why couldn't you:

1) wait until the younger of the two of you turns 66,
2) have one of you file and suspend while the other collects a spousal benefit (and refuses his/her own retirement benefit), and
3) as you each turn 70, take the maximum retirement benefit?

Eric
Of course . I was referring to a spousal survivor benefit

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Re: Delay Social Security to age 70 and Spend more money at

Post by lindisfarne » Mon Oct 14, 2013 4:36 pm

This is an excellent thread. It changed my mind, although doing as suggested by OP requires having put away enough $ for years 62-70 (or else working for those years).

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Re: Delay Social Security to age 70 and Spend more money at

Post by Sidney » Mon Oct 14, 2013 4:39 pm

ObliviousInvestor wrote:
midareff wrote:Cut Throat... with all due respect to your post ....... and we could argue the financials with interest rates, market appreciation rates and other factors back and forth but there is a factor being entirely overlooked here ... and that is the human caipital.. What price to the soul, the body and the longevity of life do you place working another 8 years?
My understanding is that we're assuming that the actual point at which the person retires is unchanged from one scenario to the other.
Yes, if you need the money to eat from 62 (or 6x) to 70, it is a different case altogether.
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Re: Delay Social Security to age 70 and Spend more money at

Post by rixer » Tue Oct 15, 2013 8:54 am

This is interesting. Now if a person can claim Restricted Application along with this method, they might not have to draw so much from their portfolio each year while they delay as they might be eligible for spousal benefits.

I was only thinking of my own situation though as I'm married, nearing 66 and haven't taken SS yet. This wouldn't for anyone under 66 or for a single person.
Last edited by rixer on Tue Oct 15, 2013 9:23 am, edited 1 time in total.

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Re: Delay Social Security to age 70 and Spend more money at

Post by YDNAL » Tue Oct 15, 2013 9:11 am

lindisfarne wrote:This is an excellent thread. It changed my mind, although doing as suggested by OP requires having put away enough $ for years 62-70 (or else working for those years).
This thread is 1 year old in case you didn't notice, lindisfarne. Since you bumped, I will put my $0.02.

SS benefits can be seen (are seen by all?) as deferred compensation - whether we thought about this or not... put __% of gross wages, employer puts __% of gross wages, and SS administration pays you back in the future.
  • Meantime, FICA is a tax, after all. Our tax (and employer's contribution) is used to pay current retirees' benefits.
  • There is NO added funding, and there is NO legal commitment from SS administration to pay us a dime.
    http://www.ssa.gov/history/nestor.html
    www.socialsecurity.gov wrote:There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor. ← this is a Supreme Court case (one can look it up)
First, we have collected - historically - SS benefits without interruption or change, and there is no reason to think otherwise other than by speculation. I'm not going to speculate.

Second, we are human beings that expect to die at some unknown future day. Some die young, others match some average, others live beyond averages. Each person is his/her own individual with personal DNA, habits, savings, needs/wants/wishes, etc. etc. ← THAT is what matters. All other generalizations and assumptions can be treated as such; and may turn-out to be dangerous in the end.
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Re: Delay Social Security to age 70 and Spend more money at

Post by less » Tue Oct 15, 2013 9:52 am

The important issue I don't see addressed above is mortality --- which is what explains the difference being talked about. Consider the remaining wealth at age 70 if you die then. Assume no inflation. Assume portfolio returns exactly equal the 4% withdrawn.

Take SS at 62 --- Wealth equal the original $1 Million.
Take SS at 70 --- Wealth equals the original $1 Million less the $272,264 spent-down in the first 8 years = $727,264.

Second point:
It is my understanding that the delay in claiming US SS benefits has the same effect as the delay in Canada. This issue impacts those people who are not working during the delay - which most people seem to assume is the model. The base amount for which you qualify is based on a sort of average over your working life. Some years can be ignored to account for babies and injuries, but if you have used up those throw-away year, the delay years (with zero contributions to the plan) will lower your base eligibility.

So while the proportion rises during the delay, the base amount on which the proportion is calculated drops.

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Re: Delay Social Security to age 70 and Spend more money at

Post by ObliviousInvestor » Tue Oct 15, 2013 9:59 am

less wrote:It is my understanding that the delay in claiming US SS benefits has the same effect as the delay in Canada. This issue impacts those people who are not working during the delay - which most people seem to assume is the model. The base amount for which you qualify is based on a sort of average over your working life. Some years can be ignored to account for babies and injuries, but if you have used up those throw-away year, the delay years (with zero contributions to the plan) will lower your base eligibility.

So while the proportion rises during the delay, the base amount on which the proportion is calculated drops.
Your Social Security retirement benefit is a function of your 35 highest years of (wage-inflation-adjusted) earnings.

What is being talked about above is: Assuming a person retires at a given date, when should he/she claim his/her retirement benefit? This decision does not have an impact on the person's work history for the sake of calculating his/her retirement benefit. Or said differently, waiting to claim one's benefit will never reduce one's Average Indexed Monthly Earnings, upon which one's retirement benefit is based.
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Re: Delay Social Security to age 70 and Spend more money at

Post by YDNAL » Tue Oct 15, 2013 10:42 am

less wrote:The important issue I don't see addressed above is mortality --- which is what explains the difference being talked about. Consider the remaining wealth at age 70 if you die then. Assume no inflation. Assume portfolio returns exactly equal the 4% withdrawn.

Take SS at 62 --- Wealth equal the original $1 Million.
Take SS at 70 --- Wealth equals the original $1 Million less the $272,264 spent-down in the first 8 years = $727,264.
Yes, great minds thing alike, but not exactly. More to follow on the 4% real return assumption on the portfolio side. :wink:

Here are my numbers.

Code: Select all

	                 62	     70		
Portfolio	    1,000,000	707,389		
Savings Acct.	        0	292,611		
Burn Rate	      343,319	242,860	 (4% of portfolio)	
Social Security	167,162	      0		
Income Stream	  510,481	535,471
(detailed math below)

1. The difference at 2% Inflation is $25,000.
  • a) The higher actual Inflation, the higher savings needed, the lower the difference in #1.
    b) At 5% Inflation, the numbers are IDENTICAL. (one risk in delaying)
2. A $1 million portfolio, returning 4% real over 8 years, provides for the "burn rate" from 62-70.
3. A $707K portfolio mitigates this only partially. (another risk in delaying)
4. Here's the detailed math for the "code table" above.

Code: Select all

Inflation:	2%			
DATA:	Burn: 62	SS: 62	Burn: 70	Savings
Year 1	40,000	 19,476	 28,296	 34,092
Year 2	40,800	 19,866	 28,861	 34,774
Year 3	41,616	 20,263	 29,439	 35,469
Year 4	42,448	 20,668	 30,027	 36,179
Year 5	43,297	 21,081	 30,628	 36,902
Year 6	44,163	 21,503	 31,241	 37,640
Year 7	45,046	 21,933	 31,865	 38,393
Year 8	45,947	 22,372	 32,503	 39,161
Total	343,319	167,162	242,860	292,611
I would like to emphasize, for the second time, that generalizations can be dangerous.
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Re: Delay Social Security to age 70 and Spend more money at

Post by less » Tue Oct 15, 2013 10:58 am

ObliviousInvestor wrote: Waiting to claim one's benefit will never reduce one's Average Indexed Monthly Earnings, upon which one's retirement benefit is based.
I stand corrected. I have never seen this explicitly stated before, but I accept your statement. The US and Canadian treatments are different.

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Re: Delay Social Security to age 70 and Spend more money at

Post by Epsilon Delta » Tue Oct 15, 2013 11:35 am

less wrote:The important issue I don't see addressed above is mortality --- which is what explains the difference being talked about. Consider the remaining wealth at age 70 if you die then.
Why? Why not consider the remaining wealth at age 62, or 80 or 90? Mortality is at best a distribution, you don't know when you'll die so you'll want to look at the various possibilities and weight them appropriately. And if your goal is to leave a larger estate you should consider the scenario of delaying SS and not increasing your spending.

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Re: Delay Social Security to age 70 and Spend more money at

Post by rob » Tue Oct 15, 2013 11:41 am

This is way in the future to me but it's a great discussion anyway.

One thing I wanted to throw in - didn't I see somewhere that you can claim at 62 and then payback the dollars paid out from SS and effectively reset the clock to get an increased benefit at 70.... kinda of like having your cake and eating it too because if you die early - before 70 - then you don't do the payback I guess :? . Am I making that part up?????
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Re: Delay Social Security to age 70 and Spend more money at

Post by YDNAL » Tue Oct 15, 2013 11:58 am

rob wrote:This is way in the future to me but it's a great discussion anyway.

One thing I wanted to throw in - didn't I see somewhere that you can claim at 62 and then payback the dollars paid out from SS and effectively reset the clock to get an increased benefit at 70.... kinda of like having your cake and eating it too because if you die early - before 70 - then you don't do the payback I guess :? . Am I making that part up?????
That door has been [largely] shut for about 3 years.
http://www.socialsecurity.gov/pressoffi ... [quote]The Social Security Administration today published final rules, effective immediately, that limit the time period for beneficiaries to withdraw an application for retirement benefits to within 12 months of the first month of entitlement and to one withdrawal per lifetime.[/quote]
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Re: Delay Social Security to age 70 and Spend more money at

Post by packer16 » Sat Jan 11, 2014 3:17 pm

Wouldn't another way to look at this as SS is an incremental amount of cash flow you receive per year and there is a rate of return when taking the payment early makes sense? So If I take SS at 62 I get $18,756/yr versus $32,436 at 67. If my LE is 81 under the 62 scenario I receive $356.4 k in payments versus $454.1k in 67 scenario. At what rate of return am I indifferent to these 2 income streams? If you make less than this rate of return wait if greater take the early payment. Here is an article on break-even rates at various rates of return:

http://www.aaii.com/journal/article/soc ... -runact-ii

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Re: Delay Social Security to age 70 and Spend more money at

Post by archbish99 » Sat Jan 11, 2014 4:09 pm

You can look at it that way, but delaying Social Security is basically an annuity -- you're reducing your present capital (and thus your possible return on it), but buying an income stream that's guaranteed for life. Even if the life-expectancy doesn't work in your favor, there's still inherent value in the insurance aspect of it.
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Re: Delay Social Security to age 70 and Spend more money at

Post by Midwest Dave » Thu May 01, 2014 2:51 pm

My wife and I are planning on retiring at 66. I ran the numbers using Cut-Throat's method, and liked the idea of having a higher percentage of income guaranteed, but the investment portfolio takes quite a hit. If you don't care about what is left, I see no problem.

I then priced an immediate annuity through Vanguard to fund the difference between our combined SS at 66 and 70, annual benefit/.058537. This seems to be the best of both. With a 4% withdrawal on the remainder, it produces a higher income and less of a hit to the portfolio. I priced it as life income (over both our lives) with cash refund of unpaid premium if we both die prior to receiving 100% of the purchase back in income. Other benefits - it is for the life of the longer living spouse and, if purchased with after tax money, is not fully taxable. Down side - still hits the portfolio and inflation benefit only on the age 66 benefit.

Comments???
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Re: Delay Social Security to age 70 and Spend more money at

Post by Cut-Throat » Thu May 01, 2014 7:10 pm

Midwest Dave wrote:My wife and I are planning on retiring at 66. I ran the numbers using Cut-Throat's method, and liked the idea of having a higher percentage of income guaranteed, but the investment portfolio takes quite a hit. If you don't care about what is left, I see no problem.

I then priced an immediate annuity through Vanguard to fund the difference between our combined SS at 66 and 70, annual benefit/.058537. This seems to be the best of both. With a 4% withdrawal on the remainder, it produces a higher income and less of a hit to the portfolio. I priced it as life income (over both our lives) with cash refund of unpaid premium if we both die prior to receiving 100% of the purchase back in income. Other benefits - it is for the life of the longer living spouse and, if purchased with after tax money, is not fully taxable. Down side - still hits the portfolio and inflation benefit only on the age 66 benefit.

Comments???
Not sure that I completely follow you here. Could you give me the actual numbers of what you are proposing to do? It may very well be better, as I was just comparing the delay to age 70 of SS vs. taking it at 62.

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Re: Delay Social Security to age 70 and Spend more money at

Post by basspond » Fri May 02, 2014 6:10 am

Thanks for proving my point. If social security is going to make up a majority of your retirement income, it is best to delay and have the guarantee of higher payouts. If not, the earlier the better.

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