I’m Planning to Claim SS @62… Well, Why Not? ►Updated w/Funded Ratio

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

Post by Tom_T »

59Gibson wrote: Wed Sep 15, 2021 10:07 am
Tom_T wrote: Wed Sep 15, 2021 6:30 am
59Gibson wrote: Wed Sep 15, 2021 5:46 am
JoeRetire wrote: Wed Sep 15, 2021 5:33 am
SGM wrote: Mon Sep 13, 2021 9:06 pm The majority of the men I talk to have waited until age 70 to collect SS.
That's surprising. According to the SSA, only 5% of men delay until 70.

Sounds like your majority represents a small minority.
Indeed surprising! The vast vast majority I know or heard of, 62-65 seems to be the chosen age.
The "lots of people I know" argument is always misleading. Everyone's in a bubble and it's hard to look outside it. If you and your friends are very successful financially, then you can all wait until 70 and it's strictly a mathematical decision because you don't need the money. That is a small minority of Americans, unfortunately. If you and your friends are like average Americans, then not only can't you wait until 70, you don't even have enough money to retire. And there are millions of people in between those extremes. My point is that let's stop using "the people I know" argument.
Why take such offense, I'm a faceless poster sharing my experience. I'm not making an "argument " for anything. Btw you missed the part where I mentioned people I've heard of, not just "know". The fact is simple the vast majority don't wait til 70.
I'm not offended. My comment should have been directed to the earlier post about the majority of men he knows are waiting until 70. That is clearly a narrow subset that doesn't represent most people. Most Americans don't have enough savings to even think about waiting until 70. And then there's the guy I know who said he's claiming at 62 because he drinks too much and has a bad liver. :wink:
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

loghound wrote: Tue Sep 14, 2021 3:22 pm
iceport wrote: Mon Sep 13, 2021 1:50 pm
loghound wrote: Mon Sep 13, 2021 1:39 pm It sounds like the OP doesn't think the timing of SS it will much affect his life outcomes so in that case, it seems sort of impossible to give him good input.. He should do what he wants.
Actually, loghound, I've found a great deal of value in the thoughtful comments I've received. And I am now considering delaying for a few years.
I re-read my post and that first sentence came out overly harsh -- I'm glad you interpreted it correctly (literally, I was trying to say "It sounds like you have options so it's OK to do what you want and not worry about if it's a 'perfect' answer or not).

I do 100% agree that there is a lot of wisdom and thoughtful dialog on this forum... It's one of my happy places on the internet (in part because the moderators do a good job keeping nonsense off of it)
Oh, no worries!

For my part, I realized after posting how the subject line could come off as flippant or as a brash declarative statement rather than the earnest question I meant it to be, more or less challenging others to fill in my blind spots. Sometimes serious questions I pose get little attention, so I resorted to what could be considered sensationalism...

So thanks for sharing your own rationale.
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billthecat
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by billthecat »

I got curious about how this models, so I went back to I-Orp, put in my inputs, and just switched between SS at 62 (with lower benefit) and 70 (with higher benefit). Everything else was the same. I-Orp forecasts that taking SS at 70 yields a higher disposable income.
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smitcat
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by smitcat »

billthecat wrote: Wed Sep 15, 2021 12:45 pm I got curious about how this models, so I went back to I-Orp, put in my inputs, and just switched between SS at 62 (with lower benefit) and 70 (with higher benefit). Everything else was the same. I-Orp forecasts that taking SS at 70 yields a higher disposable income.
"I-Orp forecasts that taking SS at 70 yields a higher disposable income."
That would vary greatly dependent upon what you put in for age of demise(s), market perfprmance, and the rest of your specific numbers
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Godot
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Godot »

Tom_T wrote: Wed Sep 15, 2021 11:30 am
59Gibson wrote: Wed Sep 15, 2021 10:07 am
Tom_T wrote: Wed Sep 15, 2021 6:30 am
59Gibson wrote: Wed Sep 15, 2021 5:46 am
JoeRetire wrote: Wed Sep 15, 2021 5:33 am

That's surprising. According to the SSA, only 5% of men delay until 70.

Sounds like your majority represents a small minority.
Indeed surprising! The vast vast majority I know or heard of, 62-65 seems to be the chosen age.
The "lots of people I know" argument is always misleading. Everyone's in a bubble and it's hard to look outside it. If you and your friends are very successful financially, then you can all wait until 70 and it's strictly a mathematical decision because you don't need the money. That is a small minority of Americans, unfortunately. If you and your friends are like average Americans, then not only can't you wait until 70, you don't even have enough money to retire. And there are millions of people in between those extremes. My point is that let's stop using "the people I know" argument.
Why take such offense, I'm a faceless poster sharing my experience. I'm not making an "argument " for anything. Btw you missed the part where I mentioned people I've heard of, not just "know". The fact is simple the vast majority don't wait til 70.
I'm not offended. My comment should have been directed to the earlier post about the majority of men he knows are waiting until 70. That is clearly a narrow subset that doesn't represent most people. Most Americans don't have enough savings to even think about waiting until 70. And then there's the guy I know who said he's claiming at 62 because he drinks too much and has a bad liver. :wink:
I know that guy!
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protagonist
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by protagonist »

OP, I assume you have plenty of money to live off between ages 62-70 anyway. Will you actually spend that extra money you get from SS between ages 62 and 70?
Because if not, what is the point of not deferring? Will it make your retirement any happier? What will happen to your nest egg if the US experiences hyperinflation or if the stock/bond market crashes?
A re-post of a prior post of mine re: the wisdom of deferring:


Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. (Rich is like you but you are richer than him). Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $35K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. On the other hand, if he lives a long time and if he runs out of money before he dies, he can still live much more comfortably on $35K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math. "Worry" is not simply quantifiable.

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

He who dies with the most toys does not always win. He who dies happily and in peace does.
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

randomguy wrote: Tue Sep 14, 2021 3:32 pm
iceport wrote: Tue Sep 14, 2021 12:52 pm Yes, your comment and running these numbers through what Otar describes as "aft-casting" really hones in on exactly the trade-off I am grappling with!

Seeing some of the numbers generated through this imperfect but still vary valuable analysis illustrates exactly what I've been thinking about. The thing is, my numbers don't show nearly the stark differences in ending portfolio balances as what you are describing. I suspect a big part of that is that so much more of my spending is covered by the pension and SS, so the effect on the portfolio balance is more muted than if it were *mostly* portfolio withdrawals supplemented by SS alone.
. Return assumptions and portfolio spend down matter but the big one in the example is spending 4k more per year for 30 years. it is the old 4k invested instead of spent will be worth 20k in 30 years. The main point is that just looking at income ignores a good chunk of what most people care about.
I completely agree. And it's not just a question of emotional involvement. A lump sum offers more flexibility in the timing of the spending than an annuity does. Full stop. Depending on objectives or circumstances, that can flexibility can be important. Highest *expected* value of the strategy is not the only metric of interest to everyone.

randomguy wrote: Tue Sep 14, 2021 3:32 pm i think you are (feel feee to correct me) doing more of I am spending 100k/year either way and which one results in more money when I die. In that case the choice matters a lot less.
Okay, I'll gently push back on this, but that's a reasonable assumption from what I've posted.

Lot's of folks play mental tricks in the interest of caution, and I'm no different. Some assume ridiculously low withdrawal rates. Some think spending only dividends provides some kind of guarantee. Me? My method is to adhere to the conventional wisdom on those choices, but instead inflate my spending estimates to provide a reassuring "factor of safety."

So while my plan involves approximating a maximum spending amount, in real life I know I will never spend that much on an ongoing basis, if ever. The end result is that in practice, the choice will matter more than the numbers indicate, based on the assumed (and inflated) spending rate.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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HomerJ
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by HomerJ »

protagonist wrote: Wed Sep 15, 2021 1:02 pm OP, I assume you have plenty of money to live off between ages 62-70 anyway. Will you actually spend that extra money you get from SS between ages 62 and 70?
Because if not, what is the point of not deferring? Will it make your retirement any happier? What will happen to your nest egg if the US experiences hyperinflation or if the stock/bond market crashes?
A re-post of a prior post of mine re: the wisdom of deferring:


Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. (Rich is like you but you are richer than him). Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $35K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. On the other hand, if he lives a long time and if he runs out of money before he dies, he can still live much more comfortably on $35K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math. "Worry" is not simply quantifiable.

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

He who dies with the most toys does not always win. He who dies happily and in peace does.
It's a good thought process, and I agree with it, but I have one quibble.

I'm not sure that spending heavily from my portfolio from 62-70 will reduce my worry.

Social Security can be changed. If I spend down my portfolio for 8 years, planning on getting a much bigger lifetime payment at 70 to make up for it (which I agree, SHOULD reduce my worry about living too long), there will still be a worry in the back of my mind about what if Social Security gets changed, and I DON'T get the much bigger payment, and now I'm stuck with a smaller payment, AND a good chunk of my savings gone?
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namajones
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by namajones »

HomerJ wrote: Wed Sep 15, 2021 1:28 pm

It's a good thought process, and I agree with it, but I have one quibble.

I'm not sure that spending heavily from my portfolio from 62-70 will reduce my worry.

Social Security can be changed. If I spend down my portfolio for 8 years, planning on getting a much bigger lifetime payment at 70 to make up for it (which I agree, SHOULD reduce my worry about living too long), there will still be a worry in the back of my mind about what if Social Security gets changed, and I DON'T get the much bigger payment, and now I'm stuck with a smaller payment, AND a good chunk of my savings gone?
This. +1. I agree. Etc.
Chuckles960
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Chuckles960 »

HomerJ wrote: Wed Sep 15, 2021 1:28 pm It's a good thought process, and I agree with it, but I have one quibble.

I'm not sure that spending heavily from my portfolio from 62-70 will reduce my worry.

Social Security can be changed. If I spend down my portfolio for 8 years, planning on getting a much bigger lifetime payment at 70 to make up for it (which I agree, SHOULD reduce my worry about living too long), there will still be a worry in the back of my mind about what if Social Security gets changed, and I DON'T get the much bigger payment, and now I'm stuck with a smaller payment, AND a good chunk of my savings gone?
Perhaps you missed the greater point of the post you quoted. You should do whatever causes you the least worry.
protagonist
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by protagonist »

HomerJ wrote: Wed Sep 15, 2021 1:28 pm
protagonist wrote: Wed Sep 15, 2021 1:02 pm OP, I assume you have plenty of money to live off between ages 62-70 anyway. Will you actually spend that extra money you get from SS between ages 62 and 70?
Because if not, what is the point of not deferring? Will it make your retirement any happier? What will happen to your nest egg if the US experiences hyperinflation or if the stock/bond market crashes?
A re-post of a prior post of mine re: the wisdom of deferring:


Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. (Rich is like you but you are richer than him). Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $35K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. On the other hand, if he lives a long time and if he runs out of money before he dies, he can still live much more comfortably on $35K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math. "Worry" is not simply quantifiable.

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

He who dies with the most toys does not always win. He who dies happily and in peace does.
It's a good thought process, and I agree with it, but I have one quibble.

I'm not sure that spending heavily from my portfolio from 62-70 will reduce my worry.

Social Security can be changed. If I spend down my portfolio for 8 years, planning on getting a much bigger lifetime payment at 70 to make up for it (which I agree, SHOULD reduce my worry about living too long), there will still be a worry in the back of my mind about what if Social Security gets changed, and I DON'T get the much bigger payment, and now I'm stuck with a smaller payment, AND a good chunk of my savings gone?
Whatever we do we run risks, because life, and the future, is inherently risky.
Of course, if SS gets changed, it will likely impact your future payments regardless of whether you started at 70 or 62- let's say it changes at age 71 (or before) and your payments get cut 50%- the impact if you live long enough may be greater if you didn't defer than if you did, because if you deplete your savings you would be forced to live on half as much income. Or if you invested your money age 62-70 and the market crashed....
The point being there are so many potential unknown scenarios no matter what you do, and you have to do something.
(Another thing to consider is that radically decreasing SS payouts to seniors, given how much the entire working population of the USA have invested in it, would be fraught with huge risks for any politician- though I also acknowledge that anything is possible)
namajones
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by namajones »

protagonist wrote: Wed Sep 15, 2021 1:38 pm Of course, if SS gets changed, it will likely impact your future payments regardless of whether you started at 70 or 62
This is not an "of course" because you don't know that. "Likely" says as much. We don't know how, or whether, SS will make itself solvent.

Those making the decision now or soon will be guaranteed the current age-62-or-whatever payment until until SS decides to reduce payments. For those who care about the break-even point, that extra money between now and an anticipated reduction of benefits stretches out the break-even point. Read an interesting article about that recently but can't find it at the moment.
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

#Cruncher wrote: Tue Sep 14, 2021 11:41 pm
iceport wrote: Sun Sep 12, 2021 2:39 pm(I might have an irrational aversion to spending down the portfolio if I don't need to...)
HomerJ wrote: Mon Sep 13, 2021 1:25 pmHeck, I'm mostly the same way to be honest. I won't like spending down savings either. I anchor to our portfolio value, and only want it to go up.
iceport wrote: Mon Sep 13, 2021 1:59 pmKind of like what HomerJ has been talking about, I really have an aversion to spending down the portfolio.
This is the only reason I could see that you give, iceport, for wanting to start SS early.
Well, there was the comment below, but I don't fault you in the least for not sifting through every single post in a long and winding thread:
iceport wrote: Mon Sep 13, 2021 12:17 pm I do still see a trade-off here. Favoring the preservation/growth of personal savings rather than maximizing income could increase flexibility to respond to an opportunity — or need — to do some good with it. That could involve loved ones and extended family, personal circumstances, or charities I find particularly meaningful. Whether by minimizing portfolio withdrawals, or allowing for an extended accumulation phase, claiming early in my circumstance seems to shift the balance, however tentatively, toward the growth of assets and away from a larger guaranteed annuitized income stream.
~~~~~~~~~~
#Cruncher wrote: Tue Sep 14, 2021 11:41 pm You are correct, of course, that if one delays, the forsaken SS benefit must be taken out of the portfolio -- or at least it prevents the portfolio from growing as much. But you should also look at the other side of the coin. By delaying, one increases the probable value of the future SS benefits. This can be more than the amount the portfolio is reduced.

To illustrate: For someone born in 1960 or later with a Primary Insurance Amount (PIA) of $2,500, the annual benefit is $21,000 if SS starts at age 62 and $22,500 if it starts at age 63. The 2017 SSA Period Life Table [1] shows a man's life expectancy at age 63 is 19.35 years. Therefore, a one-year delay to age 63 will produce, for a man, a probable increase in SS benefits of $29,000 (19.35 X 1500) for a man, in exchange for giving up $21,000.

The following table show the increase in present value of likely future SS benefits for each one year delay all the way up to age 70. It also shows the likely increase using the life expectancy for a woman and for a man/woman couple of the same age. [2] Instead of simply multiplying the increase in benefits by the life expectancy, it uses the Excel PV function to calculate the present value using a discount rate of -0.57% [3]. For example, the higher earner delaying from age 69 to 70 increases the probable present value (PV) of future benefits to the couple by $50,800; in exchange for giving up the $34,800 age 69 benefit.

Code: Select all

Row  ColA     Col B   Col C   Col D   Col E     Col F   Col G   Col H   Col I
  1  Born      1962
  2   NRA        67
  3   PIA     2,500
  4  Rate    -0.57%
                      -- Life Expectancy --    Annual  ---- Change in PV ----
  5   Age     % PIA    Man    Woman  Either   Benefit    Man    Woman  Either

Code: Select all

  6    62    70.00%   20.08   22.90   26.91    21,000
  7    63    75.00%   19.35   22.07   26.02    22,500  30,800  35,400  42,200
  8    64    80.00%   18.62   21.26   25.13    24,000  29,500  34,000  40,700
  9    65    86.67%   17.89   20.45   24.25    26,000  37,800  43,500  52,200
 10    66    93.33%   17.18   19.65   23.37    28,000  36,200  41,700  50,100

 11    67   100.00%   16.47   18.86   22.50    30,000  34,600  39,900  48,200
 12    68   108.00%   15.77   18.07   21.64    32,400  39,700  45,800  55,400
 13    69   116.00%   15.07   17.30   20.78    34,800  37,900  43,800  53,100
 14    70   124.00%   14.39   16.54   19.93    37,200  36,100  41,700  50,800
Here are key formulas used above:

Code: Select all

B2:    67  = MIN(67,66+MAX(0,B1-1954)/6)
B6:    70% = IF($A7<$B$2,1-(5/900)*MIN(36,($B$2-$A7)*12)-(5/1200)*MAX(0,($B$2-$A7)*12-36),1+(8/1200)*($A7-$B$2)*12)
G7: 30,800 =-ROUND(PV($B$4,C8,$F8-$F7,0,0),-2)
  1. This is the default mortality table used by Open Social Security.
  2. The life expectancy for a man/woman couple are taken from cell I8 on the Alive sheet of my Longevity Estimator Excel workbook.
  3. This is the current discount rate used by OSS. It is the 20-year TIPS yield on 9/13/2021 as shown here.
Thank you, #Cruncher, for the table and spreadsheet formulas. I'm honored by your input!

Correct me if I'm wrong, but is this a look "under the hood" at the very same computations going on over at Mike Piper's Open Social Security? I recognize the changeover on the age 70 line for a single male going from delaying being worth more than claiming earlier to being worth very slightly less. That must be why the site recommends claiming at what I presume is the neutral age of 69 years, 7 months.

I have been running these same numbers, but I've found that for a single male like me, the expected value of the delayed scenario is not larger enough to be decisive, especially given the level of uncertainty involved.

Clearly, there are some behavioral (emotional) issues at work here. I'd be fooling myself to think otherwise. But objectively, a lump sum does offer more flexibility in the timing of the spending than an annuity does. I'm struggling with the trade-off. But I'm also finding that the choice only makes a marginal difference, either way.

Does that make sense?
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

namajones wrote: Wed Sep 15, 2021 6:29 am
phxjcc wrote: Mon Sep 13, 2021 1:57 am take it at 62.

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
Well said.

Way too many variables in this decision to make a standard call for everyone. Someone up thread put "feelings" in quotation marks, as though those don't count. Oh, but they do. They do.

I'm in the camp of "there is no wrong answer to this question."

If you end up with less money down the road, so what? People learn to live with what they earn. If they don't, well, they don't. There's always booze.
Thanks! I agree completely — except for the last line. I gave it up long ago, but I'll raise a glass of something! :beer

I never tire of indulging my confirmation bias!
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by namajones »

iceport wrote: Wed Sep 15, 2021 2:01 pm

Thanks! I agree completely — except for the last line. I gave it up long ago, but I'll raise a glass of something! :beer

I never tire of indulging my confirmation bias!
Yeah, I was kidding about the booze. Don't touch it. It's poison.

https://www.npr.org/2018/08/24/64161893 ... udy-claims
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

Toons wrote: Wed Sep 15, 2021 8:22 am I just checked my bank
SS monies deposited,
Third Wed every month
Since I turned 62
Age 70 now.
Have enjoyed every penny
one way or another,(investing) :wink:
I never considered
"waiting"

:wink:
Thanks, Toons. Very good to know, and congrats to you!
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
wrongfunds
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by wrongfunds »

If you end up with less money down the road, so what?
Sorry, but my attitude is different. I say "If you end up with too much money down the road and pay too much taxes, so what?"
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

#Cruncher wrote: Tue Sep 14, 2021 11:41 pm
iceport wrote: Sun Sep 12, 2021 2:39 pm(I might have an irrational aversion to spending down the portfolio if I don't need to...)
HomerJ wrote: Mon Sep 13, 2021 1:25 pmHeck, I'm mostly the same way to be honest. I won't like spending down savings either. I anchor to our portfolio value, and only want it to go up.
iceport wrote: Mon Sep 13, 2021 1:59 pmKind of like what HomerJ has been talking about, I really have an aversion to spending down the portfolio.
This is the only reason I could see that you give, iceport, for wanting to start SS early. You are correct, of course, that if one delays, the forsaken SS benefit must be taken out of the portfolio -- or at least it prevents the portfolio from growing as much. But you should also look at the other side of the coin. By delaying, one increases the probable value of the future SS benefits. This can be more than the amount the portfolio is reduced.

To illustrate: For someone born in 1960 or later with a Primary Insurance Amount (PIA) of $2,500, the annual benefit is $21,000 if SS starts at age 62 and $22,500 if it starts at age 63. The 2017 SSA Period Life Table [1] shows a man's life expectancy at age 63 is 19.35 years. Therefore, a one-year delay to age 63 will produce, for a man, a probable increase in SS benefits of $29,000 (19.35 X 1500) for a man, in exchange for giving up $21,000.

The following table show the increase in present value of likely future SS benefits for each one year delay all the way up to age 70. It also shows the likely increase using the life expectancy for a woman and for a man/woman couple of the same age. [2] Instead of simply multiplying the increase in benefits by the life expectancy, it uses the Excel PV function to calculate the present value using a discount rate of -0.57% [3]. For example, the higher earner delaying from age 69 to 70 increases the probable present value (PV) of future benefits to the couple by $50,800; in exchange for giving up the $34,800 age 69 benefit.

Code: Select all

Row  ColA     Col B   Col C   Col D   Col E     Col F   Col G   Col H   Col I
  1  Born      1962
  2   NRA        67
  3   PIA     2,500
  4  Rate    -0.57%
                      -- Life Expectancy --    Annual  ---- Change in PV ----
  5   Age     % PIA    Man    Woman  Either   Benefit    Man    Woman  Either

Code: Select all

  6    62    70.00%   20.08   22.90   26.91    21,000
  7    63    75.00%   19.35   22.07   26.02    22,500  30,800  35,400  42,200
  8    64    80.00%   18.62   21.26   25.13    24,000  29,500  34,000  40,700
  9    65    86.67%   17.89   20.45   24.25    26,000  37,800  43,500  52,200
 10    66    93.33%   17.18   19.65   23.37    28,000  36,200  41,700  50,100

 11    67   100.00%   16.47   18.86   22.50    30,000  34,600  39,900  48,200
 12    68   108.00%   15.77   18.07   21.64    32,400  39,700  45,800  55,400
 13    69   116.00%   15.07   17.30   20.78    34,800  37,900  43,800  53,100
 14    70   124.00%   14.39   16.54   19.93    37,200  36,100  41,700  50,800
Here are key formulas used above:

Code: Select all

B2:    67  = MIN(67,66+MAX(0,B1-1954)/6)
B6:    70% = IF($A7<$B$2,1-(5/900)*MIN(36,($B$2-$A7)*12)-(5/1200)*MAX(0,($B$2-$A7)*12-36),1+(8/1200)*($A7-$B$2)*12)
G7: 30,800 =-ROUND(PV($B$4,C8,$F8-$F7,0,0),-2)
  1. This is the default mortality table used by Open Social Security.
  2. The life expectancy for a man/woman couple are taken from cell I8 on the Alive sheet of my Longevity Estimator Excel workbook.
  3. This is the current discount rate used by OSS. It is the 20-year TIPS yield on 9/13/2021 as shown here.

I'm confused by this. If I understand this correctly, for a single man it's mathematically superior to claim at 65 than to choose 66 or 67. And 68 is better than to choose 69 or 70?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by protagonist »

Chuckles960 wrote: Wed Sep 15, 2021 1:34 pm
HomerJ wrote: Wed Sep 15, 2021 1:28 pm It's a good thought process, and I agree with it, but I have one quibble.

I'm not sure that spending heavily from my portfolio from 62-70 will reduce my worry.

Social Security can be changed. If I spend down my portfolio for 8 years, planning on getting a much bigger lifetime payment at 70 to make up for it (which I agree, SHOULD reduce my worry about living too long), there will still be a worry in the back of my mind about what if Social Security gets changed, and I DON'T get the much bigger payment, and now I'm stuck with a smaller payment, AND a good chunk of my savings gone?
Perhaps you missed the greater point of the post you quoted. You should do whatever causes you the least worry.
Yes, that was my point, thank you for stating it clearer than I did.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by namajones »

wrongfunds wrote: Wed Sep 15, 2021 2:07 pm
If you end up with less money down the road, so what?
Sorry, but my attitude is different. I say "If you end up with too much money down the road and pay too much taxes, so what?"
There you go. That's why threads about when to take SS are good for forum participation but not much else: There's no one answer.

My point is this: in 50 years, we'll both be dead and gone. So enjoy the ride. ;)

I have a friend who took SS at 62 even though he didn't need the money. Reason: It made him feel better--having an "income," not spending down his nest egg, etc. He's been traveling the world for the past few years, having a ball, on SS's dime. Says he wouldn't have done it if he'd been spending his own dough while being a good boy and waiting for the larger SS check at 67.

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

Post by HomerJ »

protagonist wrote: Wed Sep 15, 2021 1:38 pm
HomerJ wrote: Wed Sep 15, 2021 1:28 pm
protagonist wrote: Wed Sep 15, 2021 1:02 pm OP, I assume you have plenty of money to live off between ages 62-70 anyway. Will you actually spend that extra money you get from SS between ages 62 and 70?
Because if not, what is the point of not deferring? Will it make your retirement any happier? What will happen to your nest egg if the US experiences hyperinflation or if the stock/bond market crashes?
A re-post of a prior post of mine re: the wisdom of deferring:


Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. (Rich is like you but you are richer than him). Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $35K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. On the other hand, if he lives a long time and if he runs out of money before he dies, he can still live much more comfortably on $35K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math. "Worry" is not simply quantifiable.

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

He who dies with the most toys does not always win. He who dies happily and in peace does.
It's a good thought process, and I agree with it, but I have one quibble.

I'm not sure that spending heavily from my portfolio from 62-70 will reduce my worry.

Social Security can be changed. If I spend down my portfolio for 8 years, planning on getting a much bigger lifetime payment at 70 to make up for it (which I agree, SHOULD reduce my worry about living too long), there will still be a worry in the back of my mind about what if Social Security gets changed, and I DON'T get the much bigger payment, and now I'm stuck with a smaller payment, AND a good chunk of my savings gone?
Whatever we do we run risks, because life, and the future, is inherently risky.
Of course, if SS gets changed, it will likely impact your future payments regardless of whether you started at 70 or 62- let's say it changes at age 71 (or before) and your payments get cut 50%- the impact if you live long enough may be greater if you didn't defer than if you did, because if you deplete your savings you would be forced to live on half as much income. Or if you invested your money age 62-70 and the market crashed....
The point being there are so many potential unknown scenarios no matter what you do, and you have to do something.
(Another thing to consider is that radically decreasing SS payouts to seniors, given how much the entire working population of the USA have invested in it, would be fraught with huge risks for any politician- though I also acknowledge that anything is possible)
Right... I agree with the bolded statement.

Above you had said Rich's decision was simple and that he DEFINITELY should wait until 70 because then he would have more peace of mind.

Well, except maybe he wouldn't have more peace of mind. Because of the risk of SS changing.

Heck, I'll even play devil's advocate to my OWN statement about worrying about SS changing.

If Social Security did get changed, it would probably be a means-testing kind of thing, so maybe spending down my portfolio from 62-70 would end up being the RIGHT thing to do, because maybe I'd get the full payment at 70 if my portfolio wasn't so big.

Hard to get rid of all worry, because you can't eliminate all risks.

Which leads me back to throwing up my hands about the whole matter, and just taking it at 62, and spending it on fun stuff from 62-70. :)

Future HomerJ at 85 will just have to fend for himself. That guy has never done anything for me, anyway...
Last edited by HomerJ on Wed Sep 15, 2021 2:42 pm, edited 2 times in total.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

protagonist wrote: Wed Sep 15, 2021 1:02 pm OP, I assume you have plenty of money to live off between ages 62-70 anyway. Will you actually spend that extra money you get from SS between ages 62 and 70?
Because if not, what is the point of not deferring? Will it make your retirement any happier? What will happen to your nest egg if the US experiences hyperinflation or if the stock/bond market crashes?
A re-post of a prior post of mine re: the wisdom of deferring:


Consider the fate of two retirees, Rich and Delores. Both retire at age 62....let's say they were both laid off and cannot find additional work.

At time of retirement, Rich has $1,000,000 in financial assets. (Rich is like you but you are richer than him). Delores has $10,000. Both would receive $20K/year from SS if they started benefits at age 62 and $35K/yr if they wait to age 70.

Delores' decision is simple. She needs to start benefits at 62 for survival.

Rich's decision is also simple. He should definitely wait until 70. Rich has plenty of savings to fund his early retirement. His concern is whether, due to unexpected financial reversal or whatever, he will still have enough money to live comfortably when and if he makes it to 85 or 90 or 95. If Rich dies suddenly at 71, he loses out big time on "overall benefits" by waiting until 70, but he dies happily with a happy retirement and peace of mind. On the other hand, if he lives a long time and if he runs out of money before he dies, he can still live much more comfortably on $35K/year than on $20K/year. So no matter when he dies or what the "break even point" is, he has way more peace of mind by deferring and a happier retirement.

If you have enough money to fund your early retirement, defer SS as long as possible. If not, start taking it whenever you feel you really need it to avoid significant immediate lifestyle compromise. It's that simple. Forget about break even ages, maximizing benefits in an unknown world, etc. What you should care about is minimizing lifestyle compromise and worry. This is a point that I think is crucial in much financial decision-making and is lost on many people who simply rely on the math. "Worry" is not simply quantifiable.

A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

He who dies with the most toys does not always win. He who dies happily and in peace does.
Thanks, protagonist, for your thoughts and your detailed illustration. I agree with the vast majority of your thoughts on this. Ironically, in focusing on "minimizing lifestyle compromise and worry," it leads me in the other direction! Given a pension a little more than twice the size of my age 62 SS payout, I'm fairly comfortable with that level of longevity insurance. What worries me more, apparently, now that I'm thinking about it, is the portfolio draw-down with the delayed claiming alternative!

I often think in terms of preserving options, or flexibility. And the simple fact is that having a lump sum preserves spending options that an annuity doesn't, even if the net present value of the two are identical. As I mentioned up-thread, there are some circumstances in which a lump sum pension payout is objectively more attractive than the annuity, even if the total expected payout is much less. It all depends on personal goals. (And emotional factors.)

(Oh, and I'm not as much richer than Rich as you must assume I am...)
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

namajones wrote: Wed Sep 15, 2021 2:15 pm
wrongfunds wrote: Wed Sep 15, 2021 2:07 pm
If you end up with less money down the road, so what?
Sorry, but my attitude is different. I say "If you end up with too much money down the road and pay too much taxes, so what?"
There you go. That's why threads about when to take SS are good for forum participation but not much else: There's no one answer.

My point is this: in 50 years, we'll both be dead and gone. So enjoy the ride. ;)

I have a friend who took SS at 62 even though he didn't need the money. Reason: It made him feel better--having an "income," not spending down his nest egg, etc. He's been traveling the world for the past few years, having a ball, on SS's dime. Says he wouldn't have done it if he'd been spending his own dough while being a good boy and waiting for the larger SS check at 67.

There you go.
I want to be that guy!
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by willthrill81 »

OP, if you could live reasonably well on SS benefits at age 62, along with any other guaranteed income, then I think that claiming at age 62 is plausible.

To the extent that you would need more income than would be provided by SS benefits and any other guaranteed income, I think that delaying SS benefits would be wise.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

billthecat wrote: Wed Sep 15, 2021 12:45 pm I got curious about how this models, so I went back to I-Orp, put in my inputs, and just switched between SS at 62 (with lower benefit) and 70 (with higher benefit). Everything else was the same. I-Orp forecasts that taking SS at 70 yields a higher disposable income.
I did the same over at cFIREsim, and found the same result. But the theoretical spending rate in the delayed SS scenario was only 1.81% larger. It doesn't move the needle very much...
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

protagonist wrote: Wed Sep 15, 2021 1:38 pm Of course, if SS gets changed, it will likely impact your future payments regardless of whether you started at 70 or 62
Of course, it could be changed in ways that don't have any impact on payments at all.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

willthrill81 wrote: Wed Sep 15, 2021 2:47 pm OP, if you could live reasonably well on SS benefits at age 62, along with any other guaranteed income, then I think that claiming at age 62 is plausible.

To the extent that you would need more income than would be provided by SS benefits and any other guaranteed income, I think that delaying SS benefits would be wise.
Thanks, willthrill81. I greatly appreciate your input. The last line helps a lot. And it's a nudge in the direction of splitting the difference.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

HomerJ wrote: Wed Sep 15, 2021 2:35 pm If Social Security did get changed, it would probably be a means-testing kind of thing
There's no "probably" when it comes to unknown, future, potential changes to the social security things.
There are lots of possibilities. But saying that means-testing is "probable" has no actual basis in fact to back it up.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by willthrill81 »

JoeRetire wrote: Wed Sep 15, 2021 2:55 pm
HomerJ wrote: Wed Sep 15, 2021 2:35 pm If Social Security did get changed, it would probably be a means-testing kind of thing
There's no "probably" when it comes to unknown, future, potential changes to the social security things.
There are lots of possibilities. But saying that means-testing is "probable" has no actual basis in fact to back it up.
I agree that there would be a lot of possibilities with regard to how SS benefits could be changed, but it does seem that means testing is the change that is most commonly cited as being likely. This could easily turn into a self-fulfilling prophecy. However, forum rules don't permit much conjecture about this.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

willthrill81 wrote: Wed Sep 15, 2021 2:57 pm I agree that there would be a lot of possibilities with regard to how SS benefits could be changed, but it does seem that means testing is the change that is most commonly cited as being likely.
There are plenty of articles discussing the universe of possible changes.
None can knowledgeably conclude that means testing will be part of it. If any of these articles actually use the term "likely" they have pulled it out of their @$$.

I'd be interested to see some links that cite means testing as "likely". I can add them to my personal list of "writers that don't know what they are talking about". Thanks.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by HomerJ »

JoeRetire wrote: Wed Sep 15, 2021 2:55 pm
HomerJ wrote: Wed Sep 15, 2021 2:35 pm If Social Security did get changed, it would probably be a means-testing kind of thing
There's no "probably" when it comes to unknown, future, potential changes to the social security things.
There are lots of possibilities. But saying that means-testing is "probable" has no actual basis in fact to back it up.
Meh, you are technically correct (the best kind of correct!)

Whatever.

Someone pointed out that reducing payments for multiple millions of poor seniors who depend on their check would be difficult. I agree with that (but, as you would point out, I don't KNOW if it's difficult, just a (un?)educated guess based on my extremely limited knowledge of history and politics)

But I was thinking about that statement, when I realized one way around that is to just reduce payments for the "rich", which might be less difficult.

Might be super easy even to sell that.

"Might be". As you say, I have no idea one way or the other. Completely clueless here, that's me! :)
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Chuckles960 »

HomerJ wrote: Wed Sep 15, 2021 3:23 pm...But I was thinking about that statement, when I realized one way around that is to just reduce payments for the "rich", which might be less difficult.

Might be super easy even to sell that.
That's much more difficult, given the state of US politics.

SS tax is regressive, the rate decreases as income increases. It's a perk for the rich.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

Chuckles960 wrote: Wed Sep 15, 2021 4:01 pm
HomerJ wrote: Wed Sep 15, 2021 3:23 pm...But I was thinking about that statement, when I realized one way around that is to just reduce payments for the "rich", which might be less difficult.

Might be super easy even to sell that.
That's much more difficult, given the state of US politics.

SS tax is regressive, the rate decreases as income increases. It's a perk for the rich.
The tax rate does not decrease - it simply cuts off after the income cap is met - but the rate of income replacement does decrease, substantially, rather quick.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by smitcat »

JoeRetire wrote: Wed Sep 15, 2021 2:55 pm
HomerJ wrote: Wed Sep 15, 2021 2:35 pm If Social Security did get changed, it would probably be a means-testing kind of thing
There's no "probably" when it comes to unknown, future, potential changes to the social security things.
There are lots of possibilities. But saying that means-testing is "probable" has no actual basis in fact to back it up.
"If Social Security did get changed, it would probably be a means-testing kind of thing"
Maybe like how the ACA is actually applied now, as one recent similar example.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Chuckles960 »

tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met ...
So if the rate drops to zero, is that not mathematically (and realistically) a decrease?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

Chuckles960 wrote: Wed Sep 15, 2021 4:26 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met - but the rate of income replacement does decrease, substantially, rather quick.
So zero is not a decrease? Is it an increase?
It's a non-event.

The more social security tax you pay, the more income replacement you get. The lawmakers decided to institute cut-offs to not tax people above the amount that is considered for income replacement by SS. Presumably they had reasons for doing so.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

HomerJ wrote: Wed Sep 15, 2021 3:23 pm
JoeRetire wrote: Wed Sep 15, 2021 2:55 pm
HomerJ wrote: Wed Sep 15, 2021 2:35 pm If Social Security did get changed, it would probably be a means-testing kind of thing
There's no "probably" when it comes to unknown, future, potential changes to the social security things.
There are lots of possibilities. But saying that means-testing is "probable" has no actual basis in fact to back it up.
Meh, you are technically correct (the best kind of correct!)

Whatever.

Someone pointed out that reducing payments for multiple millions of poor seniors who depend on their check would be difficult. I agree with that (but, as you would point out, I don't KNOW if it's difficult, just a (un?)educated guess based on my extremely limited knowledge of history and politics)

But I was thinking about that statement, when I realized one way around that is to just reduce payments for the "rich", which might be less difficult.

Might be super easy even to sell that.

"Might be". As you say, I have no idea one way or the other. Completely clueless here, that's me! :)
There are dozens of possibilities, including some form of increased means testing. Some of those possibilities may have political consequences that make their implementation "difficult".

We'll all just have to wait and see what actually happens - just like the last times the social security laws have been changed.

I know what I'd want to see done, but we aren't allowed to discuss that here.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met
It decreases to zero once the income cap is met.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by smitcat »

tj wrote: Wed Sep 15, 2021 4:29 pm
Chuckles960 wrote: Wed Sep 15, 2021 4:26 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met - but the rate of income replacement does decrease, substantially, rather quick.
So zero is not a decrease? Is it an increase?
It's a non-event.

The more social security tax you pay, the more income replacement you get. The lawmakers decided to institute cut-offs to not tax people above the amount that is considered for income replacement by SS. Presumably they had reasons for doing so.
"The more social security tax you pay, the more income replacement you get."
That is not the way it works in total but maybe for the most part it is close.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

JoeRetire wrote: Wed Sep 15, 2021 4:49 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met
It decreases to zero once the income cap is met.
That seems like a silly way to look at current FICA taxation.


It goes to zero....because you get no further benefit of increasing your AIME.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

smitcat wrote: Wed Sep 15, 2021 4:53 pm
tj wrote: Wed Sep 15, 2021 4:29 pm
Chuckles960 wrote: Wed Sep 15, 2021 4:26 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met - but the rate of income replacement does decrease, substantially, rather quick.
So zero is not a decrease? Is it an increase?
It's a non-event.

The more social security tax you pay, the more income replacement you get. The lawmakers decided to institute cut-offs to not tax people above the amount that is considered for income replacement by SS. Presumably they had reasons for doing so.
"The more social security tax you pay, the more income replacement you get."
That is not the way it works in total but maybe for the most part it is close.
Unless you happen to have 35 year of capped out earnings, that's how it works.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by wrongfunds »

In before the lock!!

You guys need to stop making prediction about the future of the SS.

I have only one thing to say. This is NOT the first time SS program have faced "problems". We do have precedent on how it was overcome in the past. For intelligent reader, nothing more needs to be said. Besides, we can NOT discuss it here. We could meet for a beer or two and then have that conversation instead :sharebeer
MathWizard
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by MathWizard »

The benefit is longevity insurance.

For a single male, the averages might slightly favor
taking it early, but the the averages would say the same thing
about any insurance, yet I still insure for anything for which
I cannot afford the risk.
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willthrill81
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by willthrill81 »

tj wrote: Wed Sep 15, 2021 5:03 pm
smitcat wrote: Wed Sep 15, 2021 4:53 pm
tj wrote: Wed Sep 15, 2021 4:29 pm
Chuckles960 wrote: Wed Sep 15, 2021 4:26 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met - but the rate of income replacement does decrease, substantially, rather quick.
So zero is not a decrease? Is it an increase?
It's a non-event.

The more social security tax you pay, the more income replacement you get. The lawmakers decided to institute cut-offs to not tax people above the amount that is considered for income replacement by SS. Presumably they had reasons for doing so.
"The more social security tax you pay, the more income replacement you get."
That is not the way it works in total but maybe for the most part it is close.
Unless you happen to have 35 year of capped out earnings, that's how it works.
Once you pass the second bend point, additional years of even maxed out earnings have little impact on your benefit.
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tj
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

willthrill81 wrote: Wed Sep 15, 2021 6:53 pm
tj wrote: Wed Sep 15, 2021 5:03 pm
smitcat wrote: Wed Sep 15, 2021 4:53 pm
tj wrote: Wed Sep 15, 2021 4:29 pm
Chuckles960 wrote: Wed Sep 15, 2021 4:26 pm So zero is not a decrease? Is it an increase?
It's a non-event.

The more social security tax you pay, the more income replacement you get. The lawmakers decided to institute cut-offs to not tax people above the amount that is considered for income replacement by SS. Presumably they had reasons for doing so.
"The more social security tax you pay, the more income replacement you get."
That is not the way it works in total but maybe for the most part it is close.
Unless you happen to have 35 year of capped out earnings, that's how it works.
Once you pass the second bend point, additional years of even maxed out earnings have little impact on your benefit.
It still has a positive impact above the second bend point, though it's not much. I'd be shocked if I ever hit the second bend point.

Once above the second bend point, an additional year of maxed out earnings would increase your PIA by about $50/mo.
Last edited by tj on Wed Sep 15, 2021 7:10 pm, edited 1 time in total.
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JoeRetire
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

tj wrote: Wed Sep 15, 2021 5:02 pm
JoeRetire wrote: Wed Sep 15, 2021 4:49 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met
It decreases to zero once the income cap is met.
That seems like a silly way to look at current FICA taxation.


It goes to zero....because you get no further benefit of increasing your AIME.
I wasn't discussing the "because" part, just that it does in fact "decrease".
It is indeed silly.
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

The Social Security Calculator, developed by forum member gregable, is really very helpful.

Direct link: https://ssa.tools/

About the Social Security Calculator

This site provides individuals with an estimate of their future Social Security retirement benefits. The benefits are based on the earnings record provided by the Social Security Administration. A detailed report is created from this data.
What If?

This site provides clear interactive visuals that let the user investigate how different choices might affect their overall benefit. Scenarios include:

What happens to my benefit if I earn additional wages for several more years?
How does my benefit change as my total earnings grow during my lifetime?
What happens if I choose to take my benefits early? What if I delay and take them late?
How are my benefits affected by my spouse's earnings records, and vice versa.
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Raycpact
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Raycpact »

Here is my rationale for delaying until 70:

I needed a simplier math example calculating net present values.

So I determined that if in my 69th year if I took my SS of about 30k per year and aggressively invested and received 10% on average or 1.5k during my 69th year my investment would grow to 31.5k. Using a withdrawal rate of 4%, I could count on getting 1,260 per year.

If I defer my 68th year and earn 1.5k for first year and 3k for second year, I would have 34.5k saved. Using 4% withdrawal rate I would count on getting an additional 1,380.

Etc.

If I delayed my SS my benefit will increase 8% or 2,400 per year each year I delay past full retirement age.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Chuckles960 »

tj wrote: Wed Sep 15, 2021 5:02 pm
JoeRetire wrote: Wed Sep 15, 2021 4:49 pm
tj wrote: Wed Sep 15, 2021 4:13 pm The tax rate does not decrease - it simply cuts off after the income cap is met
It decreases to zero once the income cap is met.
That seems like a silly way to look at current FICA taxation.


It goes to zero....because you get no further benefit of increasing your AIME.
That the tax rate decreases (to zero) is a fact. It is not an opinion, it's not a matter of how you look at it.

As others have pointed out, many people get no benefit from paying non-zero SS tax, so it is not true that "no tax because no further benefit". But even if that were true, it does not change the factual fact that the tax rate is regressive, it decreases as income increases.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by randomguy »

Raycpact wrote: Wed Sep 15, 2021 8:16 pm Here is my rationale for delaying until 70:

I needed a simplier math example calculating net present values.

So I determined that if in my 69th year if I took my SS of about 30k per year and aggressively invested and received 10% on average or 1.5k during my 69th year my investment would grow to 31.5k. Using a withdrawal rate of 4%, I could count on getting 1,260 per year.

If I defer my 68th year and earn 1.5k for first year and 3k for second year, I would have 34.5k saved. Using 4% withdrawal rate I would count on getting an additional 1,380.

Etc.

If I delayed my SS my benefit will increase 8% or 2,400 per year each year I delay past full retirement age.
I would rather die with 60k than have 1k/year of income for 20 years. YMMV:) Seriously this is where the disagreement tends to come in. If you ignore that residual value, then delaying SS looks great. If you put value on it, then delaying becomes pretty borderline. My take away has been that either choice is pretty justifiable. Neither one is a clear win and which one to pick will depend on what you care about. So we will keep having these discussions for ever.

And there are often interactions outside the value of SS. in the end I am probably delaying SS til 70 not because on its own it is a good move. It just gives me 8 years to get a bunch of money out of the tIRA and my math suggests that will pay off more than the benefits of taking SS early. The risk reduction by delaying SS is just a bonus. Unless of course the tax laws chance over the next decade in which case I will reconsider.
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