Delay Social Security?

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DKD
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Delay Social Security?

Post by DKD »

When might it not make sense to delay social security? Many articles say one should delay because you get a greater annual amount each year you delay. However, few talk about the other half of the equation - the social security income you lose as you delay. If I get $26k at age 62 and I delay that until age 70. I'll get more at age 70, but I would need to give up $200k+ over the 8 years I delay. That's money I could be investing or using to reduce my withdrawals from higher taxed 401k savings. Some articles i've read suggest taking the money as soon as possible, at age 62, if you have no reason to need the additional income you get while you delay. Others say it doesn't make any difference, since the additional amount and the payback period is calculated based on the average life expectancy, so it's a wash. I appreciate all insights on this! Thanks
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Re: Delay Social Security?

Post by The Wizard »

Don't delay if you have a serious illness.
And don't delay if you have very modest savings...
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Re: Delay Social Security?

Post by z3r0c00l »

It should be possible to calculate this given your life expectancy and other parameters but for most people, holding off until at least their full retirement age, if not later, is advantageous. That goes in tandem with working longer. It also matters if you may start working again and many people mean to retire, only to go back to work soon after.
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MP123
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Re: Delay Social Security?

Post by MP123 »

DKD wrote: Fri May 31, 2019 6:51 pm That's money I could be investing or using to reduce my withdrawals from higher taxed 401k savings.
Don't forget you'll be required to take RMDs from the 401k. So one often recommended plan is to spend down your 401k a bit (if needed) while delaying SS and prior to beginning RMDs.
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Re: Delay Social Security?

Post by The Wizard »

MP123 wrote: Fri May 31, 2019 7:02 pm
DKD wrote: Fri May 31, 2019 6:51 pm That's money I could be investing or using to reduce my withdrawals from higher taxed 401k savings.
Don't forget you'll be required to take RMDs from the 401k. So one often recommended plan is to spend down your 401k a bit (if needed) while delaying SS and prior to beginning RMDs.
Actually, a combo approach of spend down + Roth conversion is even more fun...
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Flobes
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Re: Delay Social Security?

Post by Flobes »

The Wizard wrote: Fri May 31, 2019 6:54 pm Don't delay if you have a serious illness.
Having a serious illness might be the very best reason to delay SS. In order to garner the best ACA subsidies and cost-sharing benefits, from age 62 until Medicare, you need to hit the ACA MAGI bullseye and SS counts as income. If you have a serious illness, you likely need high-quality -- and perhaps high cost -- health care more than you need anything else.
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pezblanco
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Re: Delay Social Security?

Post by pezblanco »

Use the search feature but there are tens of threads discussing this in general. You don't give enough data for your particular case to give specific advice.

In general, SS is the best annuity that you'll get a chance at. If you are married and your spouse will receive your survivor benefit then in general you should tend to delay. If you are in good shape financially and can fund the early years of your retirement, you should tend to delay.
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Re: Delay Social Security?

Post by bradpevans »

At most 85% of SS is taxed, so in some sense ever 1000 of SS is worth more than 1000 in tax deferred. Some stares don’t tax SS if I recalll correctly.

And, for married couples the larger benefit stays till both are gone

I have no interest in drawing SS early to invest it

If I need the money at 62 (rare on this board) then I probably need to just keep working (assuming that is an option

I expect we will start the smaller at 62-66, larger at 70. Reason to delay smaller would be to give more Roth conversion space
pezblanco wrote: Fri May 31, 2019 7:14 pm Use the search feature but there are tens of threads discussing this in general. You don't give enough data for your particular case to give specific advice.

In general, SS is the best annuity that you'll get a chance at. If you are married and your spouse will receive your survivor benefit then in general you should tend to delay. If you are in good shape financially and can fund the early years of your retirement, you should tend to delay.
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Re: Delay Social Security?

Post by mhalley »

The main reason to delay is longevity risk. If yo die at the “normal” age it doesn’t matter when you claim, but if you live a long life you end up with more.
Use the open social security calculator on advanced to check different claiming ages.
https://opensocialsecurity.com/
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Re: Delay Social Security?

Post by The Wizard »

People are not reading/answering the OP's question.
The question is: When does it NOT make sense to delay SS?
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Re: Delay Social Security?

Post by Wiggums »

The Wizard wrote: Fri May 31, 2019 6:54 pm Don't delay if you have a serious illness.
And don't delay if you have very modest savings...
+1

There is no one right answer. It really does depending on your retirement portfolio.

Good luck to you...
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pezblanco
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Re: Delay Social Security?

Post by pezblanco »

mhalley wrote: Fri May 31, 2019 7:57 pm The main reason to delay is longevity risk. If yo die at the “normal” age it doesn’t matter when you claim, but if you live a long life you end up with more.
Use the open social security calculator on advanced to check different claiming ages.
https://opensocialsecurity.com/
I think that I read once that the SS tables are slightly antecuated ... i.e. that even for a single person they are not actuarily neutral. They are biased towards waiting. I agree with your statement for a single person. For a married couple, again the SS tables are not adjusted for a couple (unlike commercial annuities) thus giving a huge benefit for married couples with a single wage earner to wait ...
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pezblanco
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Re: Delay Social Security?

Post by pezblanco »

The Wizard wrote: Fri May 31, 2019 8:01 pm People are not reading/answering the OP's question.
The question is: When does it NOT make sense to delay SS?
If you answer why "Not A" completely, then you have also logically answered why "A" completely.
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Re: Delay Social Security?

Post by Big Dog »

single guy with health issues should consider taking early.

And/or, you need to $ to eat.
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Re: Delay Social Security?

Post by dwickenh »

Flobes wrote: Fri May 31, 2019 7:14 pm
The Wizard wrote: Fri May 31, 2019 6:54 pm Don't delay if you have a serious illness.
Having a serious illness might be the very best reason to delay SS. In order to garner the best ACA subsidies and cost-sharing benefits, from age 62 until Medicare, you need to hit the ACA MAGI bullseye and SS counts as income. If you have a serious illness, you likely need high-quality -- and perhaps high cost -- health care more than you need anything else.
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JoeRetire
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Re: Delay Social Security?

Post by JoeRetire »

DKD wrote: Fri May 31, 2019 6:51 pm When might it not make sense to delay social security?
If you need the money now, it might not make sense to delay social security.
If you expect to die in the next few years, it might not make sense to delay social security.
If you are already 70 years old, it might not make sense to delay social security.
If opensocialsecurity.com tells you that you should file now, it might not make sense to delay social security.
If you have a guaranteed, inflation-protected investment vehicle that could return more than 8%, it might not make sense to delay social security.
If the thought of not collecting social security now keeps you awake at night, it might not make sense to delay social security.
If you don't think it's better to have more social security benefit income later, it might not make sense to delay social security.
If you are convinced that the government is going to stop paying any benefits soon, it might not make sense to delay social security.
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Tdubs
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Re: Delay Social Security?

Post by Tdubs »

Wade Pfau and others have laid out the case pretty well for the value of SS and reasons for maximizing it. So the answer is, there aren't many good reasons to take it early, and those have already been covered by others.

http://longevity.stanford.edu/2017/11/2 ... decisions/

"Social Security benefits represent the most effective and efficient way to deliver retirement income to middle-income retirees. It’s critical that workers understand how to optimize their value, often by delaying the start of benefits as long as possible."
ROIGuy
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Re: Delay Social Security?

Post by ROIGuy »

The average SS increase is 8% a year. Do you think you can do better than that investing on your own?
Eventually all come down to how long you live.
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peetsperk
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Re: Delay Social Security?

Post by peetsperk »

DKD: Two things. First, I think the lost revenue from delaying Social Security is among the most often cited reasons why people take Social Security early. If you want to research your specific situation, Mike Piper has developed a great tool that will answer your question. It's called Open Social Security and here is the link: https://opensocialsecurity.com/ Best of luck!
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Flobes
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Re: Delay Social Security?

Post by Flobes »

JoeRetire wrote: Sat Jun 01, 2019 6:47 pm
DKD wrote: Fri May 31, 2019 6:51 pm When might it not make sense to delay social security?
If you need the money now, it might not make sense to delay social security.
If you expect to die in the next few years, it might not make sense to delay social security.
If you are already 70 years old, it might not make sense to delay social security.
If opensocialsecurity.com tells you that you should file now, it might not make sense to delay social security.
If you have a guaranteed, inflation-protected investment vehicle that could return more than 8%, it might not make sense to delay social security.
If the thought of not collecting social security now keeps you awake at night, it might not make sense to delay social security.
If you don't think it's better to have more social security benefit income later, it might not make sense to delay social security.
If you are convinced that the government is going to stop paying any benefits soon, it might not make sense to delay social security.
One more:
If your Social Security benefits are subject to the WEP, it might might not make sense to delay. It might indeed be very advantageous to take SS early while delaying the pension.
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Re: Delay Social Security?

Post by heyyou »

Reasons to not delay:
Poor health or disability-- Prior to SS, those former workers would starve when they could no longer work.

No savings and no prospects of getting a job i.e. needing to drive from an inexpensive remote area to work at a low wage job that will not support living closer to work, nor support owning a reliable vehicle.
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Re: Delay Social Security?

Post by infotrader »

Flobes wrote: Sat Jun 01, 2019 8:51 pm
JoeRetire wrote: Sat Jun 01, 2019 6:47 pm
DKD wrote: Fri May 31, 2019 6:51 pm When might it not make sense to delay social security?
If you need the money now, it might not make sense to delay social security.
If you expect to die in the next few years, it might not make sense to delay social security.
If you are already 70 years old, it might not make sense to delay social security.
If opensocialsecurity.com tells you that you should file now, it might not make sense to delay social security.
If you have a guaranteed, inflation-protected investment vehicle that could return more than 8%, it might not make sense to delay social security.
If the thought of not collecting social security now keeps you awake at night, it might not make sense to delay social security.
If you don't think it's better to have more social security benefit income later, it might not make sense to delay social security.
If you are convinced that the government is going to stop paying any benefits soon, it might not make sense to delay social security.
One more:
If your Social Security benefits are subject to the WEP, it might might not make sense to delay. It might indeed be very advantageous to take SS early while delaying the pension.
Would you please elaborate? I am thinking the opposite.
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Re: Delay Social Security?

Post by Retired2013 »

If you have kids younger than 18.
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Re: Delay Social Security?

Post by Sandtrap »

DKD wrote: Fri May 31, 2019 6:51 pm When might it not make sense to delay social security? Many articles say one should delay because you get a greater annual amount each year you delay. However, few talk about the other half of the equation - the social security income you lose as you delay. If I get $26k at age 62 and I delay that until age 70. I'll get more at age 70, but I would need to give up $200k+ over the 8 years I delay. That's money I could be investing or using to reduce my withdrawals from higher taxed 401k savings. Some articles i've read suggest taking the money as soon as possible, at age 62, if you have no reason to need the additional income you get while you delay. Others say it doesn't make any difference, since the additional amount and the payback period is calculated based on the average life expectancy, so it's a wash. I appreciate all insights on this! Thanks
Supposedly, the longer you delay, the higher the benefits to the surviving spouse.

Is this true?

If it is, then a spouse would be in favor of maximum delay. :shock:
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Re: Delay Social Security?

Post by Flobes »

infotrader wrote: Sun Jun 02, 2019 6:28 am
Flobes wrote: Sat Jun 01, 2019 8:51 pm If your Social Security benefits are subject to the WEP, it might might not make sense to delay. It might indeed be very advantageous to take SS early while delaying the pension.
Would you please elaborate? I am thinking the opposite.
The WEP does not impact Social Security benefits until you actually start the pension. Once you start the pension, SS benefits are reduced. You can receive 8 years of unWEPed SS (62-70), if you start SS early while delaying the pension. This can be especially advantageous if your pension continues to grow.

If you're subject to the WEP, you're likely subject to the GPO, which reduces or eliminates SS spousal benefits. So collecting spousal benefits before starting the pension can be very favorable.

These are seesaw evaluations, different for different people, dependent on the relative size of the pension vs Social Security and individual WEP burden.
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Re: Delay Social Security?

Post by infotrader »

Flobes wrote: Sun Jun 02, 2019 11:19 am
infotrader wrote: Sun Jun 02, 2019 6:28 am
Flobes wrote: Sat Jun 01, 2019 8:51 pm If your Social Security benefits are subject to the WEP, it might might not make sense to delay. It might indeed be very advantageous to take SS early while delaying the pension.
Would you please elaborate? I am thinking the opposite.
The WEP does not impact Social Security benefits until you actually start the pension. Once you start the pension, SS benefits are reduced. You can receive 8 years of unWEPed SS (62-70), if you start SS early while delaying the pension. This can be especially advantageous if your pension continues to grow.

If you're subject to the WEP, you're likely subject to the GPO, which reduces or eliminates SS spousal benefits. So collecting spousal benefits before starting the pension can be very favorable.

These are seesaw evaluations, different for different people, dependent on the relative size of the pension vs Social Security and individual WEP burden.
Thanks, that makes perfect sense.
Is that true that the reduction will be eliminated if you contribute to SS for over 30 years?
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Re: Delay Social Security?

Post by Flobes »

infotrader wrote: Sun Jun 02, 2019 11:33 am Is that true that the reduction will be eliminated if you contribute to SS for over 30 years?
Not quite. WEP is eliminated if you have 30 years of "substantial" SS contributions. "Substantial" amount is defined for each year; for 2019 it's $24,720.
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Re: Delay Social Security?

Post by catpatrick »

Hi -- I am an aspiring Boglehead, and this is an interesting topic -- so I figured I would finally register and join the discussion.

Thank you for the reference to opensocialsecurity.com. Very useful! Unfortunately, and not unsurprisingly, the timing of when to apply for SS benefits hinges upon whether I click "Assume that Social Security benefits will be cut in the future?" (defaults to 23% reduction starting in 2034). If "no", I should delay to age 70. If "yes", I should file at age 62. That's quite a difference!

I realize it's impossible to know what will happen to SS benefits 15 years from now, but I wonder if there are reasonable assumptions that might better refine the results if I am trying to maximize total social security payout?

My assumptions: Decent pension and sufficient savings to cover anticipated living and end-of-life expenses. Married, but spouse does not have enough years of substantial income to qualify for her own SS benefits. Spouse and I live into our mid-80's or beyond.
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Miriam2
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Re: Delay Social Security?

Post by Miriam2 »

Another thread on reasons others did not delay social security:

viewtopic.php?f=2&t=169740- "Why did you take SS at FRA instead of delaying until 70?"
SGM
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Re: Delay Social Security?

Post by SGM »

The reasons to not delay SS are that you need the money now or you are in poor health. I was listening to the "financial quarterback" for the first time while on a long distant drive. He reminded me of the reasons I delayed SS while doing Roth conversions after I retired. He was giving away a book by James Lange, a Pittsburgh attorney and advisor. I didn't need the money and I wanted longevity insurance that delayed SS helps provide. I also wanted a little lower income while doing Roth conversions.

I have since started my own SS at 70. This is optimum for my purposes, but obviously not for many others. If you can get a copy of James Lange's books I think you would find it helpful in clarifying decisions about delaying SS and about Roth conversions.
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JoeRetire
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Re: Delay Social Security?

Post by JoeRetire »

Sandtrap wrote: Sun Jun 02, 2019 7:22 am Supposedly, the longer you delay, the higher the benefits to the surviving spouse.

Is this true?

If it is, then a spouse would be in favor of maximum delay. :shock:
In general, if the higher earner delays until 70 and is the first to die, then the surviving spouse gets their highest possible survivor's benefit.

Nothing shocking about that.
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catpatrick
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Re: Delay Social Security?

Post by catpatrick »

Thanks, Miriam2, for the link to viewtopic.php?f=2&t=169740- "Why did you take SS at FRA instead of delaying until 70?"
SGM makes good points about delaying SS if you don't need the money and/or want to keep income lower while doing Roth conversions. I have a few years until I turn 62, so I will continue to think about this....
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Re: Delay Social Security?

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DKD wrote: Fri May 31, 2019 6:51 pmHowever, few talk about the other half of the equation - the social security income you lose as you delay. If I get $26k at age 62 and I delay that until age 70. I'll get more at age 70, but I would need to give up $200k+ over the 8 years I delay. That's money I could be investing ...
With a high enough return from investing the SS taken early, you might indeed end up with more money. It depends on the rate of return and when you (or possibly your spouse) die. The "IRR" column of the following table shows what the return would need to be for starting at 62 to equal starting at age 70. It assumes the benefit at age 70 is 76% more than the benefit at age 62. [1] For example, a real return of 2% would be needed if benefits only lasted until age 83. But if they lasted until age 87, a return of 4% would be needed.

Code: Select all

Row  Col A          Col B     Col C
  1                 Early      Late
  2  Start age         62        70
  3  Benefit       10,000    17,600
  4  Age        Cash Flow       IRR

Code: Select all

  5   62                0 
  6   63          (10,000)
  7   64          (10,000)
  8   65          (10,000)
  9   66          (10,000)
 10   67          (10,000)
 11   68          (10,000)
 12   69          (10,000)
 13   70          (10,000)
 14   71            7,600 
 15   72            7,600
 16   73            7,600   (22.44%)
 17   74            7,600   (15.70%)
 18   75            7,600   (11.13%)
  19   76            7,600    (7.82%)
 20   77            7,600    (5.32%)
 21   78            7,600    (3.37%)
 22   79            7,600    (1.82%)
 23   80            7,600    (0.57%)
 24   81            7,600     0.46% 
 25   82            7,600     1.32% 
 26   83            7,600     2.05%  <--
 27   84            7,600     2.66% 
 28   85            7,600     3.19% 
 29   86            7,600     3.64% 
 30   87            7,600     4.03%  <--
 31   88            7,600     4.37% 
 32   89            7,600     4.67% 
 33   90            7,600     4.93% 
 34   91            7,600     5.16% 
 35   92            7,600     5.37% 
 36   93            7,600     5.55% 
 37   94            7,600     5.71% 
 38   95            7,600     5.86% 
 39   96            7,600     5.99% 
 40   97            7,600     6.11% 
 41   98            7,600     6.21% 
 42   99            7,600     6.31% 
 43  100            7,600     6.39%
Be aware that if one simply invests the SS benefits taken early into equities, one is taking on additional risk. See this post where I take this into account. it shows, when allocation risk is kept the same, that even with a 7% real return on stocks, by age 83 [2] it's better to have delayed to age 70 than started at age 62.

To produce this table with other starting assumptions, follow these steps:
  • Select All, Copy, and Paste [3] the following at cell A1 of a blank Excel sheet.

    Code: Select all

    	Early	Late
    Start age	62	70
    Benefit	10000	17600
    Age	Cash Flow	IRR
    62	=IF(A5>C$2,C$3-B$3,IF(A5>B$2,-B$3,0))	
    =A5+1	=IF(A6>C$2,C$3-B$3,IF(A6>B$2,-B$3,0))	=IRR(B$5:B6)
  • Format for readability.
  • Copy cells A6:C6 down to row 43.
  • Revise the assumptions in cells B2:C3 as needed.
  1. For example, a person with a Normal Retirement Age (NRA) of 66 gets 75% of the Primary Insurance Amount (PIA) if he starts at age 62, but 132% if he waits until age 70. (See Effect of Early or Delayed Retirement on Retirement Benefits).) 132 is 76% more than 75. The Internal Rate of Return (IRR) is determined only by the ratio of the late to early benefits, not their absolute amount.
  2. In that post I say "age 82". But that's equivalent to age 83 in this post. (i.e., one's 83rd birthday.)
  3. If you have trouble pasting, try "Paste Special" and "Text".
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catpatrick
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Re: Delay Social Security?

Post by catpatrick »

Wow -- nice number-crunching! I wonder how the numbers would change if we were in the midst of a recession around the time that SS benefits were claimed. If that extra income was used to meet expenses, rather than investing it in equities, wouldn't it reduce the "sequence-of-returns" risk to the investment portfolio?
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Re: Delay Social Security?

Post by bradpevans »

catpatrick wrote: Sun Jun 02, 2019 9:44 pm Wow -- nice number-crunching! I wonder how the numbers would change if we were in the midst of a recession around the time that SS benefits were claimed. If that extra income was used to meet expenses, rather than investing it in equities, wouldn't it reduce the "sequence-of-returns" risk to the investment portfolio?
it would reduce both the downside and the upside risk. If it is spent, then it just more of a cash flow "cross-over" calculation.

If one is spending it, that puts less burden on tax deferred now ... but more later
If one is NOT concerned about leaving a legacy, i'd suggest delaying .. because you know the % increase each year.
True, you can't take it with you, but that's where the legacy / no legacy fork comes in to play
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catpatrick
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Re: Delay Social Security?

Post by catpatrick »

> If one is NOT concerned about leaving a legacy, i'd suggest delaying... that's where the legacy / no legacy fork comes in to play

Thanks -- That adds a very useful dimension to the decision process!
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Re: Delay Social Security?

Post by wrongfunds »

Since the classic thread which shows how delaying till 70 gives you more money to spend at 62 has been locked, I would like to pose the question here.

I was trying to explain the above principle to my friend on paper and I was getting lost. So I created a very simple spreadsheet which allowed me to tweak Total Assets, assumed safe withdrawal rate, social security benefit amount at 62, 67 and 70 and it spit out the total spendable dollars. I then started to play with the numbers trying to "break" it. It turns out that with any realistic and reasonable numbers (at least looking at my own situation) and tweaking them by factor of 2 would still NOT "break" it. I was very surprised. Is the hidden reason for that the % social security benefit increase is always more than your assumed safe withdrawal rate? The spreadsheet broke at 8% withdrawal rate but did not break even at 6% withdrawal rate.

I do not know how to include the the spreadsheet but it is trivial to create one yourself.

If after playing with the spreadsheet if you are still not convinced, then there is not much that can be done.
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Re: Delay Social Security?

Post by #Cruncher »

wrongfunds wrote: Sat Feb 13, 2021 10:25 amSince the classic thread which shows how delaying till 70 gives you more money to spend at 62 has been locked, I would like to pose the question here.
I assume you're referring to the September 2012 thread, Delay Social Security to age 70 and Spend more money at 62 by Cut-Throat.
wrongfunds in same post wrote:... I created a very simple spreadsheet which allowed me to tweak Total Assets, assumed safe withdrawal rate, social security benefit amount at 62, 67 and 70 and it spit out the total spendable dollars. I then started to play with the numbers trying to "break" it. ... The spreadsheet broke at 8% withdrawal rate but did not break even at 6% withdrawal rate.
What do you mean by breaking the spreadsheet, wrongfunds? Do you mean "making the additional spending negative"? I.e., with what withdrawal rate would delaying result in having less money to spend? The following shows how we can solve for the withdrawal rate such that the spending would be the same. Any higher withdrawal rate and delaying would result in spending less.

Code: Select all

Withdrawal rate to spend the same by delaying as by claiming early
  wr = (1 - s1 / s2) / y
Where
  wr = withdrawal rate
  s1 = SS if claim early
  s2 = SS if claim late
  y  = years delay to claim late
For example
  5.357% = (1 - 20000 / 35000) / 8
Here is a spreadsheet extract that shows how much more could be spent by claiming at age 70 versus age 62 for 4% and 5.357% withdrawal rates assuming SS is $20,000 if claimed at 62 and $35,000 if claimed at 70.

Code: Select all

Row                         Column A    Column B  Column C
  1                  Early claim age          62
  2                SS if claim at 62      20,000
  3                  Portfolio at 62   1,000,000
  4                   Late claim age          70
  5                SS if claim at 70      35,000
  6        Set aside to fund 8 years     280,000
  7                Reduced portfolio     720,000
  8                  Withdrawal rate      4.000%    5.357%
  9          Spending if claim at 62      60,000    73,570
 10  Withdraw from reduced portfolio      28,800    38,570
 11          Spending if claim at 70      63,800    73,570
 12  Spend more if claim at 70 vs 62       3,800         0
To use this little spreadsheet, follow these steps:
  • Select All, Copy, and Paste [ * ] the following at cell A1 of a blank Excel sheet:

    Code: Select all

    Early claim age	62
    ="SS if claim at "&B1	20000
    ="Portfolio at "&B1	1000000
    Late claim age	70
    ="SS if claim at "&B4	35000
    ="Set aside to fund "&B4-B1&" years"	=B5*($B4-$B1)
    Reduced portfolio	=$B3-B6
    Withdrawal rate	0.04
    ="Spending if claim at "&B1	=$B3*B8+$B2
    Withdraw from reduced portfolio	=$B7*B8
    ="Spending if claim at "&B4	=$B5+B10
    ="Spend more if claim at "&B4&" vs "&B1	=B11-B9
  • Format for readability.
  • If desired, add other withdrawal rates in row 8; and then copy formulas in cells B9:B12 to the right.
* If you have trouble pasting, try "Paste Special" and "Text".
wrongfunds
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Re: Delay Social Security?

Post by wrongfunds »

Yes, I mean the "extra" became negative.

I used following social security benefits assumption in my spreadsheet (my real numbers are "close enough" but not exact)
@62 24000 @67 36000 @70 48000
And then tried with $1M, $2M and SWR of 4%, below and above; @6% the extra was still positive but at 7% it was negative aka "broke" the spreadsheet.

Is there something fundamental about that rate or is it tied with my assumption of $12K increases in the benefit amounts? Yes, your formula does show that. When I entered my real number, (from SS website) sure enough it was your magic 5.37% rate for me too. Now I am even more curious as to where that exact number is coming from? Is it like PI or E or Avogadro Constant or Cruncher Constant?


The Paste Special Text worked! Thank you.

Next time somebody asks this question, just need to point to this spreadsheet and ask them to enter their own numbers so they can convince themselves and cut down on the discussion?
Last edited by wrongfunds on Sat Feb 13, 2021 4:47 pm, edited 1 time in total.
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MJS
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Re: Delay Social Security?

Post by MJS »

JoeRetire wrote: Sat Jun 01, 2019 6:47 pm
DKD wrote: Fri May 31, 2019 6:51 pm When might it not make sense to delay social security?
If you need the money now, it might not make sense to delay social security.
If you expect to die in the next few years, it might not make sense to delay social security.
If you are already 70 years old, it might not make sense to delay social security.
If opensocialsecurity.com tells you that you should file now, it might not make sense to delay social security.
If you have a guaranteed, inflation-protected investment vehicle that could return more than 8%, it might not make sense to delay social security.
If the thought of not collecting social security now keeps you awake at night, it might not make sense to delay social security.
If you don't think it's better to have more social security benefit income later, it might not make sense to delay social security.
If you are convinced that the government is going to stop paying any benefits soon, it might not make sense to delay social security.
Not every American was the high earner in a marriage: in fact, there's an equal number of people who were the lower-earners. Often, lower earners are better off starting Social Security earlier.
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JoeRetire
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Re: Delay Social Security?

Post by JoeRetire »

MJS wrote: Sat Feb 13, 2021 4:46 pm
JoeRetire wrote: Sat Jun 01, 2019 6:47 pm
DKD wrote: Fri May 31, 2019 6:51 pm When might it not make sense to delay social security?
If you need the money now, it might not make sense to delay social security.
If you expect to die in the next few years, it might not make sense to delay social security.
If you are already 70 years old, it might not make sense to delay social security.
If opensocialsecurity.com tells you that you should file now, it might not make sense to delay social security.
If you have a guaranteed, inflation-protected investment vehicle that could return more than 8%, it might not make sense to delay social security.
If the thought of not collecting social security now keeps you awake at night, it might not make sense to delay social security.
If you don't think it's better to have more social security benefit income later, it might not make sense to delay social security.
If you are convinced that the government is going to stop paying any benefits soon, it might not make sense to delay social security.
Not every American was the high earner in a marriage: in fact, there's an equal number of people who were the lower-earners.
I don't think I wrote anything that wouldn't apply to the lower-earning spouse.
Often, lower earners are better off starting Social Security earlier.
Sometimes. opensocialsecurity.com can help you determine if you fall into that category or not.
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AndrewXnn
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Re: Delay Social Security?

Post by AndrewXnn »

Nobody really knows how long they are going to live.
If you live long enough though, then it makes more sense to delay collecting.
So, first consideration is your health.

Secondly, if delaying social security means that you would be withdrawing from funds that are invested, then it depends on the rate of return on those funds. Of course nobody really knows their future rate of returns, but it doesn't need to be very much for the math to work out that collecting SS is the better choice than drawing down ones investments.

Of course, if you really don't have much in the way of investments, but do have great health then continuing to work makes the most sense.
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wrongfunds
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Re: Delay Social Security?

Post by wrongfunds »

AndrewXnn wrote: Sat Feb 13, 2021 6:18 pm Nobody really knows how long they are going to live.
If you live long enough though, then it makes more sense to delay collecting.
So, first consideration is your health.

Secondly, if delaying social security means that you would be withdrawing from funds that are invested, then it depends on the rate of return on those funds. Of course nobody really knows their future rate of returns, but it doesn't need to be very much for the math to work out that collecting SS is the better choice than drawing down ones investments.

Of course, if you really don't have much in the way of investments, but do have great health then continuing to work makes the most sense.
Serious question on the colored part; Does it make more sense to collect SS if the investment are giving lousy returns or if they are giving great returns? Can you provide your justification or the mathematics for your choice? You can make the necessary assumptions as appropriate. An an engineer to another engineer, this will be an interesting give and take!
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Re: Delay Social Security?

Post by smitcat »

wrongfunds wrote: Sat Feb 13, 2021 9:57 pm
AndrewXnn wrote: Sat Feb 13, 2021 6:18 pm Nobody really knows how long they are going to live.
If you live long enough though, then it makes more sense to delay collecting.
So, first consideration is your health.

Secondly, if delaying social security means that you would be withdrawing from funds that are invested, then it depends on the rate of return on those funds. Of course nobody really knows their future rate of returns, but it doesn't need to be very much for the math to work out that collecting SS is the better choice than drawing down ones investments.

Of course, if you really don't have much in the way of investments, but do have great health then continuing to work makes the most sense.
Serious question on the colored part; Does it make more sense to collect SS if the investment are giving lousy returns or if they are giving great returns? Can you provide your justification or the mathematics for your choice? You can make the necessary assumptions as appropriate. An an engineer to another engineer, this will be an interesting give and take!
If you have enough funds to live on then the choice between agressive investing vs taking SS has no influence unless you are always at an AA of 100% stocks.
You can always delay SS and increase your investments AA during your delay knowing that you have a higher 'fixed' payment coming in later on with SS.
With enough funds available at 62 the choice to delay SS and increasing the % of funds in equities is not tied together at all.
wrongfunds
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Re: Delay Social Security?

Post by wrongfunds »

My take on what Andrew wrote is that he believes it is better to take social security earlier, at least for the case that he believes is important to him. I want to understand what analytics makes him feel that way. I did not understand if he believes that taking it earlier it will protect him from market downturn or he thinks he will have more money in the market upturn by taking it early. Can both of these thoughts be correct at the same time?

I just want to understand the assumptions and the mathematics behind it.
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grabiner
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Re: Delay Social Security?

Post by grabiner »

AndrewXnn wrote: Sat Feb 13, 2021 6:18 pm Nobody really knows how long they are going to live.
If you live long enough though, then it makes more sense to delay collecting.
So, first consideration is your health.

Secondly, if delaying social security means that you would be withdrawing from funds that are invested, then it depends on the rate of return on those funds. Of course nobody really knows their future rate of returns, but it doesn't need to be very much for the math to work out that collecting SS is the better choice than drawing down ones investments.
Actually, you can know the future returns on those investments. You have the option of delaying SS or selling either stocks or bonds from your portfolio. If you choose to sell bonds, you know what they will return, so you aren't changing your risk level. You could either take SS at age 66, or sell enough TIPS to cover your age-66 SS and then take SS at age 67; you would get a lower inflation-linked guaranteed return from the TIPS you sold, but a higher inflation-linked guaranteed income from your larger SS benefit.

At current TIPS yields, a single man with an average life expectancy should claim SS at 68 for a maximal expected return at the same risk level; selling TIPS to cover the year from 68 to 69 results in a slight loss. A single woman should wait until 70, as should a single man with an above-average life expectancy (and most men who are making this decision know that they have above-average life expectancies). The higher earner in a married couple should wait until 70 because the increased benefit lasts as long as either spouse is alive.

In practice, because of longevity risk, it makes sense for most retirees to delay until 70, even for a slightly lower expected value. Claiming later gives you more money if you have a long lifespan and thus more need to spend that money.
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JoeRetire
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Re: Delay Social Security?

Post by JoeRetire »

grabiner wrote: Sun Feb 14, 2021 10:14 am At current TIPS yields, a single man with an average life expectancy should claim SS at 68 for a maximal expected return at the same risk level; selling TIPS to cover the year from 68 to 69 results in a slight loss.
How do I know if I have an average life expectancy?
A single woman should wait until 70, as should a single man with an above-average life expectancy (and most men who are making this decision know that they have above-average life expectancies).
How do these men know?
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Re: Delay Social Security?

Post by grabiner »

JoeRetire wrote: Sun Feb 14, 2021 10:22 am
grabiner wrote: Sun Feb 14, 2021 10:14 am At current TIPS yields, a single man with an average life expectancy should claim SS at 68 for a maximal expected return at the same risk level; selling TIPS to cover the year from 68 to 69 results in a slight loss.
How do I know if I have an average life expectancy?
A single woman should wait until 70, as should a single man with an above-average life expectancy (and most men who are making this decision know that they have above-average life expectancies).
How do these men know?
You know your health situation. If you have cancer, or emphysema, or heart failure, your life expectancy is shorter than average. If you are in good health and have access to good medical care, it is longer. Retirees who have the opportunity to decide whether they will delay SS to 70 are likely to have high enough incomes that they have access to good medical care.

Note that this is still an expectancy; you could be in good health and be run over by a truck tomorrow.
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AndrewXnn
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Re: Delay Social Security?

Post by AndrewXnn »

wrongfunds wrote: Sat Feb 13, 2021 9:57 pm Serious question on the colored part; Does it make more sense to collect SS if the investment are giving lousy returns or if they are giving great returns? Can you provide your justification or the mathematics for your choice? You can make the necessary assumptions as appropriate. An an engineer to another engineer, this will be an interesting give and take!

wrongfunds;

I wrote a monthly spreadsheet for figure this out.

If one were to start collecting SS right now, then I allowed an investment to grow at an assumed rate of return.
Used 5% for a base case. Starting amount doesn't really matter how much, but if it were $100,000 then it an annual rate and compounded monthly that investment would be $105,783 a year after starting to collect.

If one were not collecting SS, then the SS amount would need to be withdrawn from that $100,000 investment.
It would still grow at the same monthly rate.
So, I assumed $2363 SS monthly right now and $2521 a year from now.
That $100,000 investment would be drawn down to $72,138 until the $2521 was started.
At that month (2521-2363)=$158 could be added to the investment.

Carrying that ahead, the investment will continue to be larger up to about age 105 (good enough).

With a lousy investment; say 2% that cross over is somewhere between 80 and 85.

It would be great if somebody could make their own sheet to see if I'm off some where.

Thanks
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wrongfunds
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Re: Delay Social Security?

Post by wrongfunds »

Have you loaded Cruncher's spreadsheet he posted to my reply? Try that with your data to see if it makes sense for you. I believe that social security delay has built-in rate of about guaranteed 5.4% increase per year of delay. So if you assume your investments will do better than that, you do not delay. But if you think your investments returns would be under that number, you should be able to mathematically prove that it will be better to delay.

I too had hard time really believing it until I was able to see it in the spreadsheet. But you need to feed in the real benefit amounts; don't guess that part.
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