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

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

Post by randomguy »

Chuckles960 wrote: Wed Sep 15, 2021 9:21 pm it does not change the factual fact that the tax rate is regressive, it decreases as income increases.
The tax is regressive but the benefit is progressive. I will leave that up to you to decide if that is a net progressive or regressive system...

If I was a betting man, I would bet on a tax increase/income cap increase over means testing. It is just tough for means testing to move the needle much. You either have to affect relatively low income (think 75k) people to have much of an effect and that isn't popular with either party. Not sending 50k checks (of which they send back 30% in taxes) to people making 400k just isn't a big enough population to balance out the short falls. Not to mention on the left there has been traditionally a desire not to cut people out from SS in order to try and keep universal support (we all pay and get something) versus turning it more into a welfare program. But I sure wouldn't bet much:)
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

Chuckles960 wrote: Wed Sep 15, 2021 9:21 pm
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.
It doesn't decrease though. It simply disappears at one specific point of income. The OASDI tax is a simple flat tax on the first X dollars of earned income regardless of how much you earn. That is the factual fact. To consider earning above the cap as somehow being a discounted rate on the tax makes just as much sense as considering unearned income, that is, it makes no sense at all.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by smitcat »

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.
Except for a few of these:
- spousal benifits
- disabilty benifits
- self employed SS payments
- maxing SS payments
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#Cruncher
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by #Cruncher »

iceport wrote: Wed Sep 15, 2021 1:55 pmThank you, #Cruncher, for the table and spreadsheet formulas [in this post]. ... is this a look "under the hood" at the very same computations going on over at Mike Piper's Open Social Security?
It's similar. But Open Social Security calculates the probable present value more accurately. Instead of assuming benefits 100% until life expectancy and then nothing, it weights every year by the probability of each person (or both people or either person) being alive that year.
iceport in same post wrote: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.
It's actually slightly more, not less. The age 69 benefit is $34,800 and the present value of the additional $2,400 is $36,100. (See table below.)
iceport in same post wrote: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 large enough to be decisive, especially given the level of uncertainty involved.
The uncertainty works both ways. It doesn't favor either starting early or delaying. You seem to be assuming starting early is prima facie better, iceport, and a strong argument is required for delaying. I look at it differently. Granted we don't know when we'll die, we do know when we're likely to die. So, if you can weather the worst case of either option (and given your wealth, you can), it's best to take the option more likely to be better.

Say you had twenty chips bet in roulette and your fairy godmother offers to put down two more. Would you say "no thanks, given the uncertainty, increasing my odds 10% isn't enough"?

tj wrote: Wed Sep 15, 2021 2:10 pmI'm confused by this [the table in this post]. 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?
No, the table is just showing that the benefit of a one-year delay from 64 to 65 is better than from delaying one year from 65 to 66 or from 66 to 67. Likewise the benefit of delaying one year to 68 is better than from delaying one year to 69 or delaying one year to 70. In every case there is a benefit from delaying one year, but the size of the benefit varies. (This is partly because the SS rules cause the yearly increase from delaying to vary. E.g., for a person with a Normal Retirement Age of 67 and a $2,500 PIA, the increase from 62 to 63 and 63 to 64 is only $1,500; but then it jumps to $2,000 for the next one-year delay to 65.)

This can be better seen in the next-to-right-most column of the table below. The best improvement is $13,800 from age 64 to 65 and the least improvement is $1,300 from 69 to 70. I've also added a column showing the advantage / (disadvantage) when based on the expectancy of both members of a couple being alive. (This is relevant when deciding when it's best for the low earner to claim.) It shows three one-year delays (66 to 67, 68 to 69, and 69 to 70) when the increase in present value is less than the one year's benefit forsaken.

Code: Select all

      Annual  1 Year   --- PV Incr ---   - Vs Prior Yr -
Age  Benefit    Incr     Man     Both      Man     Both
---  -------   -----   ------   ------   ------   ------
 62   21,000
 63   22,500   1,500   30,800   24,200    9,800    3,200 
 64   24,000   1,500   29,500   23,100    7,000      600 
 65   26,000   2,000   37,800   29,400   13,800    5,400 
 66   28,000   2,000   36,200   28,100   10,200    2,100 
 67   30,000   2,000   34,600   26,700    6,600   (1,300)
 68   32,400   2,400   39,700   30,400    9,700      400 
 69   34,800   2,400   37,900   28,800    5,500   (3,600)
 70   37,200   2,400   36,100   27,300    1,300   (7,500)
For reference here is the table from my previous post expanded to show a fourth category for Both alive:

Code: Select all

Row  ColA     Col B   Col C   Col D   Col E   Col F     Col G   Col H   Col I   Col J   Col K
  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    Both  Either   Benefit    Man    Woman    Both  Either

Code: Select all

  6    62    70.00%   20.08   22.90   16.07   26.91    21,000
  7    63    75.00%   19.35   22.07   15.40   26.02    22,500  30,800  35,400  24,200  42,200
  8    64    80.00%   18.62   21.26   14.75   25.13    24,000  29,500  34,000  23,100  40,700
  9    65    86.67%   17.89   20.45   14.10   24.25    26,000  37,800  43,500  29,400  52,200
 10    66    93.33%   17.18   19.65   13.46   23.37    28,000  36,200  41,700  28,100  50,100

 11    67   100.00%   16.47   18.86   12.83   22.50    30,000  34,600  39,900  26,700  48,200
 12    68   108.00%   15.77   18.07   12.20   21.64    32,400  39,700  45,800  30,400  55,400
 13    69   116.00%   15.07   17.30   11.59   20.78    34,800  37,900  43,800  28,800  53,100
 14    70   124.00%   14.39   16.54   10.99   19.93    37,200  36,100  41,700  27,300  50,800
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Harry Livermore
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Harry Livermore »

JoeRetire wrote: Wed Sep 15, 2021 4:48 pm
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.
In before the lock.
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Harry Livermore
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Harry Livermore »

iceport wrote: Wed Sep 15, 2021 1:55 pm
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.
Survivor benefit is often an excellent reason to wait, especially if you are male, older than your spouse, and the higher earner.
In my case, I am all three, but my wife's "benefit" will be reduced by 2/3rds when I die, due to the GPO, so my current notion is to take it prior to FRA, in order to somewhat front-load it.
But as others have pointed out, it's a dice roll due to not knowing the date of one's (or one's survivors) death.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by goblue100 »

Harry Livermore wrote: Thu Sep 16, 2021 7:24 am
iceport wrote: Wed Sep 15, 2021 1:55 pm
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.
Survivor benefit is often an excellent reason to wait, especially if you are male, older than your spouse, and the higher earner.
In my case, I am all three, but my wife's "benefit" will be reduced by 2/3rds when I die, due to the GPO, so my current notion is to take it prior to FRA, in order to somewhat front-load it.
But as others have pointed out, it's a dice roll due to not knowing the date of one's (or one's survivors) death.
Cheers
This whole discussion is moot for those with so little money they have no choice but to claim early and those with so much money SS has little impact on their outcome. It matters most to those with just enough money to retire and SS is an important component to their plan. I understand the allure of money now vs. money later especially as our health goes downhill. I plan on taking it later to provide security for either my wife or myself living longer than average. I suppose I could buy an annuity, but I can't find one that pays as well as delaying SS.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by namajones »

goblue100 wrote: Thu Sep 16, 2021 8:04 am

This whole discussion is moot for those with so little money they have no choice but to claim early and those with so much money SS has little impact on their outcome. It matters most to those with just enough money to retire and SS is an important component to their plan. I understand the allure of money now vs. money later especially as our health goes downhill. I plan on taking it later to provide security for either my wife or myself living longer than average. I suppose I could buy an annuity, but I can't find one that pays as well as delaying SS.
Well said.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by namajones »

#Cruncher wrote: Thu Sep 16, 2021 6:39 am No, the table is just showing that the benefit of a one-year delay from 64 to 65 is better than from delaying one year from 65 to 66 or from 66 to 67. Likewise the benefit of delaying one year to 68 is better than from delaying one year to 69 or delaying one year to 70. In every case there is a benefit from delaying one year, but the size of the benefit varies. (This is partly because the SS rules cause the yearly increase from delaying to vary. E.g., for a person with a Normal Retirement Age of 67 and a $2,500 PIA, the increase from 62 to 63 and 63 to 64 is only $1,500; but then it jumps to $2,000 for the next one-year delay to 65.)
This is helpful. Thanks.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by protagonist »

HomerJ wrote: Wed Sep 15, 2021 2:35 pm
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...
I appreciate your thought process- you are aware that whatever one does is risky and you have come to your own conclusion regarding what risks you are most comfortable with. I don't agree with your conclusions but that is a personal thing. I think my own near-encounter with death at age 63 may have colored my thinking. I didn't need the money at 63. More money at 63 would not have done anything for me. And my money doesn't do me much good if I am dead. At 85, I have no clue.

Did you save for retirement, Homer, or did you have the same approach when you were 40 of thinking "Future HomerJ at 65 will just have to fend for himself. That guy has never done anything for me, anyway.."? I'm just curious.....I am not in any way passing judgement on that thought process. In fact I more or less thought that same way when I was 40.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by wrongfunds »

When Homer or WillThrill buck the usual BH groupthink, we all go "what the heck???" Mind you, I am not using the word groupthink in any derogatory way but to denote majority consensus opinion.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

#Cruncher wrote: Thu Sep 16, 2021 6:39 am
iceport wrote: Wed Sep 15, 2021 1:55 pmThank you, #Cruncher, for the table and spreadsheet formulas [in this post]. ... is this a look "under the hood" at the very same computations going on over at Mike Piper's Open Social Security?
It's similar. But Open Social Security calculates the probable present value more accurately. Instead of assuming benefits 100% until life expectancy and then nothing, it weights every year by the probability of each person (or both people or either person) being alive that year.
iceport in same post wrote: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.
It's actually slightly more, not less. The age 69 benefit is $34,800 and the present value of the additional $2,400 is $36,100. (See table below.)
Okay, thank you. I guess I was misreading the table, and need to compare each change in PV to the prior year's annual benefit, which is the cost of delaying. (But my guess in eye-balling the numbers is that if you refined your analysis to monthly increments instead of annual, your results would probably be fairly consistent with Open Social Security, and the theoretical optimal age for me, a single male, to claim would be a few months shy of 70.)

#Cruncher wrote: Thu Sep 16, 2021 6:39 am
iceport in same post wrote: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 large enough to be decisive, especially given the level of uncertainty involved.
The uncertainty works both ways. It doesn't favor either starting early or delaying.
Yes, certainly. :wink: My only point was that the magnitude of the uncertainty, or risk, dwarfs the overall difference in present values between claiming at 62 vs. 70.

With Mike Piper's calculator set to use a specified year of death, a 1 year change in the year of death, for example, changes the expected present value very nearly as much as the total estimated difference in present values for the entire lifespan. So it takes hardly any deviation at all from the expected age of death to wipe out the entire difference in present values of the two different scenarios. It starts to feel like splitting hairs. Yes, that means living a year longer would have a big impact in the other direction, but it's human nature to place more weight on the negative ramifications of risk.

#Cruncher wrote: Thu Sep 16, 2021 6:39 am You seem to be assuming starting early is prima facie better, iceport, and a strong argument is required for delaying. I look at it differently. Granted we don't know when we'll die, we do know when we're likely to die. So, if you can weather the worst case of either option (and given your wealth, you can), it's best to take the option more likely to be better.

Say you had twenty chips bet in roulette and your fairy godmother offers to put down two more. Would you say "no thanks, given the uncertainty, increasing my odds 10% isn't enough"?
Thanks for your perspective, clearly stated. I understand what you are saying. I freely admit to having a bias towards preserving my nest egg. One way to pursue that objective involves claiming early. But I'm running the numbers and studying the alternatives because I don't want that bias to result in a poor choice that leaves me in a substantially worse *expected* financial position.

I'm actually trying to balance two competing objectives: 1) maximizing the spending flexibility associated with having financial assets, and 2) addressing longevity risk.

[As an aside, though it is also germane to the discussion, I want to clarify that I don't have any noteworthy level of wealth in financial assets. My ability to maintain an assumed spending level while delaying SS is due, first and foremost, to an annuity that funds normal daily living expenses, not including big ticket expenses. In fact, the only reason I've shied away from explicitly stating the dollar values involved is because of a sense of inferiority among forum members.]

#Cruncher, you seem to be focusing almost exclusively on the present value of the two scenarios. But wouldn't you also agree that there might be other interests, other objectives that could justifiably factor into the decision?

I used a pension lump sum vs. annuity example up-thread that I do think is somewhat analogous to this question of when to claim SS, at least in my cicumstances. When present value analysis is used to compare taking a pension as a lump sum up-front to taking an annuity instead, the annuity almost always wins easily. However, even assuming that to be true, if an unmarried pension beneficiary has a very strong desire to leave as much as money possible to heirs, taking the lump sum might still be a rational choice for that person.

Would you agree that in some circumstances, depending upon one's objectives, choosing an alternative other than the one with the highest expected present value could be rational? Particularly if the expected shortfall is not very large, relatively speaking?

For planning purposes, I like to use cFIREsim and FIRECalc to estimate what level of spending my combination of savings and annuities could support. I understand those rely on past data, but I think they are vastly superior to any kind of deterministic analysis. In the claiming SS at 62 scenario, roughly 75% of the spending capacity would be covered by annuities, the balance by savings withdrawals. In the scenario that delays claiming SS until 70, my rough guess is that at that age, probably something closer to 90% of the spending capacity would be covered by annuities. But a key point here is that the theoretical spending level is *way* above anything I actually envision spending. That leaves me feeling a little annuity-rich, and asset-poor, relatively speaking, in the delayed SS scenario.

I would look at this completely differently if SS were going to be the only secure annuitized income stream, as is probably the case with most folks. In that case, longevity risk would be a much, much bigger concern. But with longevity risk more or less under control, preserving my savings and greater spending flexibility becomes more important. In my circumstances, it appears that the "cost" of favoring assets over income is not exorbitant.

I'm not trying to convince you or anyone else that any one choice is best. I'm just trying to explain my reasoning so that if it is seriously flawed — as is all too often the case — someone might help me understand why.

Again, thanks for your input.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by bobcat2 »

#Cruncher wrote: Thu Sep 16, 2021 6:39 am ...the table is just showing that the benefit of a one-year delay from 64 to 65 is better than from delaying one year from 65 to 66 or from 66 to 67. Likewise the benefit of delaying one year to 68 is better than from delaying one year to 69 or delaying one year to 70. In every case there is a benefit from delaying one year, but the size of the benefit varies. (This is partly because the SS rules cause the yearly increase from delaying to vary. E.g., for a person with a Normal Retirement Age of 67 and a $2,500 PIA, the increase from 62 to 63 and 63 to 64 is only $1,500; but then it jumps to $2,000 for the next one-year delay to 65.)

This can be better seen in the next-to-right-most column of the table below. The best improvement is $13,800 from age 64 to 65 and the least improvement is $1,300 from 69 to 70. I've also added a column showing the advantage / (disadvantage) when based on the expectancy of both members of a couple being alive. (This is relevant when deciding when it's best for the low earner to claim.) It shows three one-year delays (66 to 67, 68 to 69, and 69 to 70) when the increase in present value is less than the one year's benefit forsaken.

Code: Select all

      Annual  1 Year   --- PV Incr ---   - Vs Prior Yr -
Age  Benefit    Incr     Man     Both      Man     Both
---  -------   -----   ------   ------   ------   ------
 62   21,000
 63   22,500   1,500   30,800   24,200    9,800    3,200 
 64   24,000   1,500   29,500   23,100    7,000      600 
 65   26,000   2,000   37,800   29,400   13,800    5,400 
 66   28,000   2,000   36,200   28,100   10,200    2,100 
 67   30,000   2,000   34,600   26,700    6,600   (1,300)
 68   32,400   2,400   39,700   30,400    9,700      400 
 69   34,800   2,400   37,900   28,800    5,500   (3,600)
 70   37,200   2,400   36,100   27,300    1,300   (7,500)
Excellent work #Cruncher. :thumbsup :thumbsup
Although it took this dull bulb a few minutes to figure it out. :? :wink:

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

Post by bobcat2 »

Hi iceport,

Perhaps I am wrong about this, but to me you seem fixated on the binary choice of taking SS either at 62 or 70. From what I know about the situation, I think that if I were in your shoes I would take SS at either 66 or 67. #Cruncher's table reinforces my belief in that delay strategy. There's absolutely nothing wrong with starting SS at 66 & 6 months.

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by wrongfunds »

Not only it is NOT a binary decision but you can do that every single month starting at age 62! But once you decide to claim, you can NOT revoke it back. That alone in itself has inherent option value. Can it be quantified?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by cashboy »

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

I could use a better-informed second opinion on this topic. As noted, I am planning to claim Social Security at 62. Now that I’m only about 2½ years away, though, and in the face of nearly universal advice to the contrary
It really is a personal decision with so many variables and possible outcomes. One could only wish there was a 'one size fits all' age to use, but there is not. :(

me?

I have not taken SS yet, but am currently able to.

I started with the 'take it at age 70' - as some have suggested in previous posts and elsewhere.

Then, looking deeper, I thought about taking it at age 69 - since there was not a lot of 'cumulative' difference in taking it earlier (ex: 19 years of 'x' vs 20 years of 'y'). so, age 69 became my new target.

But, looking at it again recently from a tax perspective, I saw benefits to taking it at age 68 (one benefit: my state does not tax SS, so it is better 'for me' to take SS than draw down my tax-free portfolio). so, age 68 is my current target.

who knows; perhaps next year my plan will be to take it age 67. lol


if you are still 2.5 years away from age 62 you have plenty of time to further analyze this.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by TN_Boy »

bobcat2 wrote: Thu Sep 16, 2021 3:40 pm Hi iceport,

Perhaps I am wrong about this, but to me you seem fixated on the binary choice of taking SS either at 62 or 70. From what I know about the situation, I think that if I were in your shoes I would take SS at either 66 or 67. #Cruncher's table reinforces my belief in that delay strategy. There's absolutely nothing wrong with starting SS at 66 & 6 months.

BobK
I think that is a really good observation.
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iceport
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

bobcat2 wrote: Thu Sep 16, 2021 3:40 pm Hi iceport,

Perhaps I am wrong about this, but to me you seem fixated on the binary choice of taking SS either at 62 or 70. From what I know about the situation, I think that if I were in your shoes I would take SS at either 66 or 67. #Cruncher's table reinforces my belief in that delay strategy. There's absolutely nothing wrong with starting SS at 66 & 6 months.

BobK
BobK,

Thanks very much for taking the time to consider these circumstances and weigh in! Yes, I am very much open to a compromise solution. I've been focusing on the two extremes only to help get a measure of the full range of expected outcomes, not because I consider them to be the only viable options. As a matter of fact, there have been several points in this discussion when I have come to see the attraction of splitting the difference. But hearing your opinion on the matter is very reassuring.

One factor is that the annuities don't provide as much of a factor of safety as I'd like in terms of covering living expenses with the 30% reduction in SS at age 62. Another is the fact that there is probably more risk inherent in the pension income than I like to acknowledge. (Though as with SS, I'm not going to plan around any *catastrophic* cuts.) Both of those factors give me a fairly firm nudge toward the middle ground.

#Cruncher's year-by-year comparison helps fine-tune a middle ground choice, by seeing which years provide the biggest bang for the (delayed) buck. (This forum is amazing.)

Thanks again! I really appreciate your comment.
"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 iceport »

cashboy wrote: Thu Sep 16, 2021 4:08 pm
iceport wrote: Sun Sep 12, 2021 2:39 pm Hi all,

I could use a better-informed second opinion on this topic. As noted, I am planning to claim Social Security at 62. Now that I’m only about 2½ years away, though, and in the face of nearly universal advice to the contrary
It really is a personal decision with so many variables and possible outcomes. One could only wish there was a 'one size fits all' age to use, but there is not. :(

me?

I have not taken SS yet, but am currently able to.

I started with the 'take it at age 70' - as some have suggested in previous posts and elsewhere.

Then, looking deeper, I thought about taking it at age 69 - since there was not a lot of 'cumulative' difference in taking it earlier (ex: 19 years of 'x' vs 20 years of 'y'). so, age 69 became my new target.

But, looking at it again recently from a tax perspective, I saw benefits to taking it at age 68 (one benefit: my state does not tax SS, so it is better 'for me' to take SS than draw down my tax-free portfolio). so, age 68 is my current target.

who knows; perhaps next year my plan will be to take it age 67. lol


if you are still 2.5 years away from age 62 you have plenty of time to further analyze this.
:sharebeer
Thanks, cashboy. I appreciate your perspective. (But I sure hope this decision won't weigh on my mind *continuously* for the whole 2.5 years!!!)

And good luck with your own choice!

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

Post by iceport »

TN_Boy wrote: Thu Sep 16, 2021 6:25 pm
bobcat2 wrote: Thu Sep 16, 2021 3:40 pm Hi iceport,

Perhaps I am wrong about this, but to me you seem fixated on the binary choice of taking SS either at 62 or 70. From what I know about the situation, I think that if I were in your shoes I would take SS at either 66 or 67. #Cruncher's table reinforces my belief in that delay strategy. There's absolutely nothing wrong with starting SS at 66 & 6 months.

BobK
I think that is a really good observation.
:thumbsup :thumbsup
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

wrongfunds wrote: Thu Sep 16, 2021 3:50 pm Not only it is NOT a binary decision but you can do that every single month starting at age 62! But once you decide to claim, you can NOT revoke it back. That alone in itself has inherent option value. Can it be quantified?
Except for the "suspend at full retirement age" option! That seems to buy back at least some of what would be lost between 62 and FRA. It's not a properly functioning "undo" button, but it's better than nothing.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by fishandgolf »

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

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

I literally had an Uncle Fred.

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

All the woulda, coulda, shoulda amuse me.

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

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

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

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

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

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

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
+100.....IMHO.....you win the award for the best....well-reasoned answer..........congratulations!!

OP....take it at 62...we did and never looked back.....ENJOY life now while you're still on the green side of the sod!! :sharebeer
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Northern Flicker »

I didn't read the whole thread, so apologies if this is redundant. If your pension covers day-to-day essentials, then your additional need is for unpredictable expenses, not for additional monthly income stream. This makes delaying SS a no-brainer.

Note that you are not choosing between taking it when you turn 62 and at 69 and 7 months. You are just deciding whether to take it in your first month of availability. You can change your mind at any time snd start receiving it.

I would suggest proceeding conservatively, delay it when you turn 62, and then re-run the decision procedure say twice a year.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Godot »

iceport wrote: Thu Sep 16, 2021 7:00 pm
wrongfunds wrote: Thu Sep 16, 2021 3:50 pm Not only it is NOT a binary decision but you can do that every single month starting at age 62! But once you decide to claim, you can NOT revoke it back. That alone in itself has inherent option value. Can it be quantified?
Except for the "suspend at full retirement age" option! That seems to buy back at least some of what would be lost between 62 and FRA. It's not a properly functioning "undo" button, but it's better than nothing.
Note: If you change your mind about starting your benefits, you can also cancel your application for up to 12 months after you became entitled to retirement benefits, repaying all the money you and/or your family have received, without interest. This process is called a withdrawal. You can reapply later. You are limited to one withdrawal per lifetime: https://www.ssa.gov/benefits/retirement ... rawal.html
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by BogleHead1008 »

This is my take -- take it at 62$ and leave whatever is left to kids when both I and wife die, and use money from retirements accounts when needed.

Ofcourse, this could change when I get close to 62..
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Tom_T »

fishandgolf wrote: Thu Sep 16, 2021 10:55 pm
phxjcc wrote: Mon Sep 13, 2021 1:57 am If you have enough income to live on with with pension and SS at 62, then I say take it at 62.

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

I literally had an Uncle Fred.

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

All the woulda, coulda, shoulda amuse me.

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

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

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

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

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

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

May you live to regret that decision for at least a decade after you pass the break even age.. :beer
+100.....IMHO.....you win the award for the best....well-reasoned answer..........congratulations!!

OP....take it at 62...we did and never looked back.....ENJOY life now while you're still on the green side of the sod!! :sharebeer
Let's just say I couldn't disagree more with these opinions. But, to each his own.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JackoC »

Northern Flicker wrote: Thu Sep 16, 2021 11:05 pm I didn't read the whole thread, so apologies if this is redundant. If your pension covers day-to-day essentials, then your additional need is for unpredictable expenses, not for additional monthly income stream. This makes delaying SS a no-brainer.

Note that you are not choosing between taking it when you turn 62 and at 69 and 7 months. You are just deciding whether to take it in your first month of availability. You can change your mind at any time snd start receiving it.

I would suggest proceeding conservatively, delay it when you turn 62, and then re-run the decision procedure say twice a year.
Nor did I read every post, and it's kind of a broken record the whole topic. But when a person starts by saying 'I don't need the money now but...', delaying becomes the default choice. That default could be overcome if the person is in poor health or has other solid reasons (running it through personalized life expectancy calculators to see if they confirm it) to believe their life expectancy is lower than the Social Security Admin table for the general population; 62 v 70 should be around neutral in PV terms if that table applies to you. But for people who post here (typically higher income, more educated and with various other background factors with strong correlation to longer LE, lifespans of relatives has been shown a minor factor) that's unlikely. Although it's possible for any given person. And as you say you can periodically recheck the decision to wait against changes in your need for the money and your health.

It's good that there's been some exchange of ideas about future cuts to SS. I think it's counterproductive to squelch that because so many people say it's a significant factor in their choice. But I view that likelihood as pretty much zero if even close to 62. I don't think that's an opinion about US politics, but a general observation about how rich country representative democracy welfare states basically work. Existing public pensioners, their younger family members who would view the cuts as placing a greater burden on them, and younger people who view the precedent of pulling the rug out from under people at (or past) the last minute as threatening their own futures: just too many votes to ever do that, unless things totally collapse otherwise. It's not IMO a plausible standalone scenario, same system of govt, no massive economic collapse, but just fix a revenue v spending problem by cutting benefits to existing old age public pensioners. It will be fixed (or the can kicked past the lifetime of anyone already 62) otherwise. That could include higher taxes, some of which could hit retirees especially better off ones, but explicit current benefit cuts to existing public pensioners is not a realistic scenario IMO in countries like that under that basic political system. People already at or close to the age of eligibility I mean, now 62 in the US. For 35 year old's considering future benefits and eligibility age, different story.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by randomguy »

phxjcc wrote: Mon Sep 13, 2021 1:57 am

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

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

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

I came from scarcity and know how to operate in the environment.
Care to explain how the second group decides how much income they have? If you are 62, have a 50k pension, 1 million in a tIRA, and an option to take 30k of SS, what is that income I have to live on for the next 30 years? And how does living on that income differ from the first group who is also has to figure out how they are living on the income that they calculate they will have? I am not sure figuring out if one approach generates 5k/more year of income than another is really a cultural difference. It seems more like a test about who is good at math:)

Now if you want to go that a lot of people don't want to drill down to that level of detail and are happy approximating stuff, sure. You don't need a spreadsheet to go, the above guy is looking at about 120k/year of income per year. If you want to do that math to squeeze out say an extra 5k of spendable money (tax planning, "benefits" from delaying SS) is up to you. Now if the problem solveable enough so that 5% type differences can be calculated is a tough question.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

Northern Flicker wrote: Thu Sep 16, 2021 11:05 pm I didn't read the whole thread, so apologies if this is redundant. If your pension covers day-to-day essentials, then your additional need is for unpredictable expenses, not for additional monthly income stream. This makes delaying SS a no-brainer.
JackoC wrote: Fri Sep 17, 2021 9:36 am But when a person starts by saying 'I don't need the money now but...', delaying becomes the default choice.
I hear you guys... but the question I have is this: "Why?"

Is it to better address longevity risk? Or is it simply due to a higher expected present value of the total payout?

And what assumptions are you making about the beneficiaries' circumstances?

~~~~~~~~~~

Regarding longevity risk, in many ways, I see the choice of using SS to hedge against longevity risk through the lens of "ability, willingness and need to take risk." That framework was developed to help folks organize their thoughts to determine an appropriate level of market risk.

Within that framework, an investor with an enormous portfolio relative to their needs has enormous ability to withstand risk, and practically zero need to take risk.

So what's the best risk level for that person? They'll be fine no matter what. Would you fault that person for taking little risk? What about if they took on a huge amount of market risk? Doesn't it just come down to personal *willingness* to take risk?

Well, I see this as somewhat analogous to the question of maximizing SS benefits to address longevity risk for those with other annuities:

A retiree with a large annuity that easily covers all anticipated expenses over their lifetime — apart from SS — has the ability to easily delay claiming SS, but practically no need to (for the longevity insurance aspect). So in that circumstance, doesn't it just come down to personal *willingness* to delay benefits? Either way, they'll be fine.

Why would you fault someone for forgoing the additional longevity insurance of delaying SS if they clearly don't need it?

I'm not saying I'm in that circumstance exactly. But a halfway decent pension does help push me closer to that circumstance than if I didn't have one. Maybe I'm halfway there...
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Toons »

iceport wrote: Wed Sep 15, 2021 2:05 pm
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:
:thumbsup

Thanks, Toons. Very good to know, and congrats to you!
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by BogleHead1008 »

iceport wrote: Fri Sep 17, 2021 10:35 am
Northern Flicker wrote: Thu Sep 16, 2021 11:05 pm I didn't read the whole thread, so apologies if this is redundant. If your pension covers day-to-day essentials, then your additional need is for unpredictable expenses, not for additional monthly income stream. This makes delaying SS a no-brainer.
JackoC wrote: Fri Sep 17, 2021 9:36 am But when a person starts by saying 'I don't need the money now but...', delaying becomes the default choice.
I hear you guys... but the question I have is this: "Why?"

Is it to better address longevity risk? Or is it simply due to a higher expected present value of the total payout?

And what assumptions are you making about the beneficiaries' circumstances?

~~~~~~~~~~

Regarding longevity risk, in many ways, I see the choice of using SS to hedge against longevity risk through the lens of "ability, willingness and need to take risk." That framework was developed to help folks organize their thoughts to determine an appropriate level of market risk.

Within that framework, an investor with an enormous portfolio relative to their needs has enormous ability to withstand risk, and practically zero need to take risk.

So what's the best risk level for that person? They'll be fine no matter what. Would you fault that person for taking little risk? What about if they took on a huge amount of market risk? Doesn't it just come down to personal *willingness* to take risk?

Well, I see this as somewhat analogous to the question of maximizing SS benefits to address longevity risk for those with other annuities:

A retiree with a large annuity that easily covers all anticipated expenses over their lifetime — apart from SS — has the ability to easily delay claiming SS, but practically no need to (for the longevity insurance aspect). So in that circumstance, doesn't it just come down to personal *willingness* to delay benefits? Either way, they'll be fine.

Why would you fault someone for forgoing the additional longevity insurance of delaying SS if they clearly don't need it?

I'm not saying I'm in that circumstance exactly. But a halfway decent pension does help push me closer to that circumstance than if I didn't have one. Maybe I'm halfway there...

Why - personally I have medical issues and I am not foreseeing my life past 65 if at all. In that case, it might make sense for me to retired as early as possible and enjoy the years left.

Like some on this thread said - there is no clear cut rule - everyone case is different. You gotta do whats best for you and/your family.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JackoC »

iceport wrote: Fri Sep 17, 2021 10:35 am
Northern Flicker wrote: Thu Sep 16, 2021 11:05 pm I didn't read the whole thread, so apologies if this is redundant. If your pension covers day-to-day essentials, then your additional need is for unpredictable expenses, not for additional monthly income stream. This makes delaying SS a no-brainer.
JackoC wrote: Fri Sep 17, 2021 9:36 am But when a person starts by saying 'I don't need the money now but...', delaying becomes the default choice.
I hear you guys... but the question I have is this: "Why?"

Is it to better address longevity risk? Or is it simply due to a higher expected present value of the total payout?

And what assumptions are you making about the beneficiaries' circumstances?

~~~~~~~~~~
Regarding longevity risk, in many ways, I see the choice of using SS to hedge against longevity risk through the lens of "ability, willingness and need to take risk." That framework was developed to help folks organize their thoughts to determine an appropriate level of market risk.

Well, I see this as somewhat analogous to the question of maximizing SS benefits to address longevity risk for those with other annuities:

A retiree with a large annuity that easily covers all anticipated expenses over their lifetime — apart from SS — has the ability to easily delay claiming SS, but practically no need to (for the longevity insurance aspect). So in that circumstance, doesn't it just come down to personal *willingness* to delay benefits? Either way, they'll be fine.
I hope I explained I'm not making any assumptions beyond the statement 'I don't need the money, but...' which again all else equal makes the default to wait. Again if the person has good reason to believe their life expectancy is shorter than the Social Security Admin table that would be a reason to override that default. But that table includes, for the whole population, lots of negative socio-economic, sub cultural, and lifestyle factors which don't correlate with posting on a forum like this. But as I said, I believe it's a good idea feed one's info into several personalized LE calculators and see what comes out (and not base it on 'what age Uncle Harry died at' because studies have found relatives' lifespans alone are a minor factor in one's own life expectancy, and tend to be proxies for other things, eg. Uncle Harry and nephew Joe are both college educated white collar, which tends to run in families with as much or more effect than genetic early death illnesses).

On annuities, Social Security is superior because it's CPI adjusted and the credit risk is the lowest available. Hardly any SPIA's in the US are CPI adjusted and the credit of good insurance companies, bolstered by private state based guarantee associations (no taxpayers are legally on the hook to back those) are a good credit but not as good. So 'I have lots of annuities so should take SS now' presupposes the mistake of buying excess SPIA's instead of slating SS as the primary annuity. Don't make that mistake, I'd say. SPIA's can be a valid tool for people who need lifetime 'guaranteed' income *in addition to SS*, though practically one must accept relatively high uncertainty of nominal $ purchasing power in the same distant timeframe of a very long life when one relies on the SPIA most.

So yes longevity risk hedge, given that the PV of taking at 62 or 70 should be about equal if LE prospects are about those of the SSA table, and generalizing that people talking (and writing coherently) on this forum about the topic are generally from subsets of the population with better prospects than the SSA table, but it's subject to each person assessing their LE prospects themselves.

And again I believe the risk of SS benefit cuts for people already 62 is basically zero. It's fine if others disagree. I just reiterate that to show how it fits into my logic in saying 'SS is a better credit than SPIA', which wouldn't be practically true if there was a material chance of SS benefit cuts for people over 62, whereas the SPIA is a binding contract if the insurance co is solvent. But I don't think there is a material chance.
Last edited by JackoC on Fri Sep 17, 2021 3:08 pm, edited 1 time in total.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by wrongfunds »

(and writing coherently)
Mike Drop Moment :-)
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by BigJohn »

iceport wrote: Fri Sep 17, 2021 10:35 am I hear you guys... but the question I have is this: "Why?"
I can afford to defer and like the longevity insurance aspect so here’s my short answer on why….

There is no where else that I can earn an 8% return on my money with the safety inherent in the US government paying its obligations and then has a CPI linked COLA.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by tj »

BigJohn wrote: Fri Sep 17, 2021 3:25 pm
iceport wrote: Fri Sep 17, 2021 10:35 am I hear you guys... but the question I have is this: "Why?"
I can afford to defer and like the longevity insurance aspect so here’s my short answer on why….

There is no where else that I can earn an 8% return on my money with the safety inherent in the US government paying its obligations and then has a CPI linked COLA.
Delaying SS is not earning an 8% ROI.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by BigJohn »

tj wrote: Fri Sep 17, 2021 3:27 pm
BigJohn wrote: Fri Sep 17, 2021 3:25 pm
iceport wrote: Fri Sep 17, 2021 10:35 am I hear you guys... but the question I have is this: "Why?"
I can afford to defer and like the longevity insurance aspect so here’s my short answer on why….

There is no where else that I can earn an 8% return on my money with the safety inherent in the US government paying its obligations and then has a CPI linked COLA.
Delaying SS is not earning an 8% ROI.
The benefit goes up about 8%/year and then gets COLA adjusted for my lifetime. Maybe not exactly ROI but still far better than I could do by investing the payments at 62 in something of equal safety.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by samsoes »

TN_Boy wrote: Mon Sep 13, 2021 9:26 am
Claiming early so you will "get out of it what you paid in" is surely the worst reason to take it early. The money paid into SS over your working years is gone from your life forever.
Couldn't disagree more!

I was forced to contribute -- against my will -- my own money, and my employer matched that amount, to Social Security for my retirement. And guess what? In the event I croak early, none of it is inheritable! (I am single.)

It is my intention to get every dollar that was contributed by me and by my employers on my behalf out of Social Security. Just have to make sure I don't croak before I do so. So I plan to start at 62.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by nigel_ht »

I read the other threads.

I did my own analysis.

I read this thread.

My claim is SS is my hedge against SORR. If at any point between 62 and 70 the bottom falls out I’ll apply for SS. Currently I believe I get 12 months to change my mind so if it’s a rapid recovery a la 2020 I can cancel it if I pay everything back.

That would let me reduce our withdrawal rate in a deep downturn without cratering our spending in presumably our healthiest years…and allows me to peacefully rebalance into stocks even if things go all 2008 like or even 1929.

If the portfolio continues to rise (or at least keep pace with inflation) then drawing it down isn’t an issue for expenses.

We’re also keeping a cash budget for early retirement travel that isn’t EF or SORR shield but for YOLO experiences before we’re too old to want to bother. Things are going to have to be pretty dire to tap that for anything other than gleeful (but restrained) spending.

The reality is I punted and that simply sounds like a rational explanation to put into my IPS to make me sound smarter when I read it.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

JackoC wrote: Fri Sep 17, 2021 2:59 pm
iceport wrote: Fri Sep 17, 2021 10:35 am
Northern Flicker wrote: Thu Sep 16, 2021 11:05 pm I didn't read the whole thread, so apologies if this is redundant. If your pension covers day-to-day essentials, then your additional need is for unpredictable expenses, not for additional monthly income stream. This makes delaying SS a no-brainer.
JackoC wrote: Fri Sep 17, 2021 9:36 am But when a person starts by saying 'I don't need the money now but...', delaying becomes the default choice.
I hear you guys... but the question I have is this: "Why?"

Is it to better address longevity risk? Or is it simply due to a higher expected present value of the total payout?

And what assumptions are you making about the beneficiaries' circumstances?

~~~~~~~~~~
Regarding longevity risk, in many ways, I see the choice of using SS to hedge against longevity risk through the lens of "ability, willingness and need to take risk." That framework was developed to help folks organize their thoughts to determine an appropriate level of market risk.

Well, I see this as somewhat analogous to the question of maximizing SS benefits to address longevity risk for those with other annuities:

A retiree with a large annuity that easily covers all anticipated expenses over their lifetime — apart from SS — has the ability to easily delay claiming SS, but practically no need to (for the longevity insurance aspect). So in that circumstance, doesn't it just come down to personal *willingness* to delay benefits? Either way, they'll be fine.
I hope I explained I'm not making any assumptions beyond the statement 'I don't need the money, but...' which again all else equal makes the default to wait. Again if the person has good reason to believe their life expectancy is shorter than the Social Security Admin table that would be a reason to override that default. But that table includes, for the whole population, lots of negative socio-economic, sub cultural, and lifestyle factors which don't correlate with posting on a forum like this. But as I said, I believe it's a good idea feed one's info into several personalized LE calculators and see what comes out (and not base it on 'what age Uncle Harry died at' because studies have found relatives' lifespans alone are a minor factor in one's own life expectancy, and tend to be proxies for other things, eg. Uncle Harry and nephew Joe are both college educated white collar, which tends to run in families with as much or more effect than genetic early death illnesses).

On annuities, Social Security is superior because it's CPI adjusted and the credit risk is the lowest available. Hardly any SPIA's in the US are CPI adjusted and the credit of good insurance companies, bolstered by private state based guarantee associations (no taxpayers are legally on the hook to back those) are a good credit but not as good. So 'I have lots of annuities so should take SS now' presupposes the mistake of buying excess SPIA's instead of slating SS as the primary annuity. Don't make that mistake, I'd say. SPIA's can be a valid tool for people who need lifetime 'guaranteed' income *in addition to SS*, though practically one must accept relatively high uncertainty of nominal $ purchasing power in the same distant timeframe of a very long life when one relies on the SPIA most.

So yes longevity risk hedge, given that the PV of taking at 62 or 70 should be about equal if LE prospects are about those of the SSA table, and generalizing that people talking (and writing coherently) on this forum about the topic are generally from subsets of the population with better prospects than the SSA table, but it's subject to each person assessing their LE prospects themselves.

And again I believe the risk of SS benefit cuts for people already 62 is basically zero. It's fine if others disagree. I just reiterate that to show how it fits into my logic in saying 'SS is a better credit than SPIA', which wouldn't be practically true if there was a material chance of SS benefit cuts for people over 62, whereas the SPIA is a binding contract if the insurance co is solvent. But I don't think there is a material chance.
Thanks for the further explanation. The reasons are important, and that's exactly why I started this thread.

So if I follow your reasoning, it boils down to the two main arguments I noted in the OP: 1) expected present value of SS by claiming later is likely to be larger, and 2) SS provides an important hedge against longevity risk.

I agree with most of what you wrote. (And I don't fault you for not reading the whole thread.)

But I remain wholly unpersuaded by the present value analysis. The expected difference is just not very significant, compared to the variability and uncertainty of a lifespan.

The longevity risk aspect is a much stronger argument, in my opinion. And there, you've hit upon one of the major kinks in choosing to take SS early: there is probably no other annuity available anywhere as secure as SS. (And I do agree with you that significant cuts to SS, especially for those already receiving benefits, is fairly remote. I'm not planning for that.) My annuity is in the form of a state pension with a COLA. The COLA is not fully indexed to inflation, but it's got a 2% floor. So it's not exactly like a SPIA. But it's also got a pretty lousy funded ratio.

So that's a valid argument in favor of delaying. I am now leaning towards claiming later than 62, but well before 70.

Thanks again for clarifying your position.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

wrongfunds wrote: Fri Sep 17, 2021 3:07 pm
(and writing coherently)
Mike Drop Moment :-)
Are you trying to tell me something??? :shock: :?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

nigel_ht wrote: Fri Sep 17, 2021 5:00 pm I read the other threads.

I did my own analysis.

I read this thread.

My claim is SS is my hedge against SORR. If at any point between 62 and 70 the bottom falls out I’ll apply for SS. Currently I believe I get 12 months to change my mind so if it’s a rapid recovery a la 2020 I can cancel it if I pay everything back.

That would let me reduce our withdrawal rate in a deep downturn without cratering our spending in presumably our healthiest years…and allows me to peacefully rebalance into stocks even if things go all 2008 like or even 1929.

If the portfolio continues to rise (or at least keep pace with inflation) then drawing it down isn’t an issue for expenses.

We’re also keeping a cash budget for early retirement travel that isn’t EF or SORR shield but for YOLO experiences before we’re too old to want to bother. Things are going to have to be pretty dire to tap that for anything other than gleeful (but restrained) spending.

The reality is I punted and that simply sounds like a rational explanation to put into my IPS to make me sound smarter when I read it.
Well, maybe that's just a rationalization for punting, but it is a very interesting perspective on the decision! I don't think I've ever come across that line of reasoning before. But I like it.

Thank you very much for sharing!
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by BogleHead1008 »

Learned something new - we can withdraw the application and if withdrawal is approved, pay all the benefits received as lump sum...
Is there any waiting period if we decide to withdraw after 2 years pay all the benefits received as lump sum back?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by vanbogle59 »

nigel_ht wrote: Fri Sep 17, 2021 5:00 pm If at any point between 62 and 70 the bottom falls out I’ll apply for SS.
My thoughts exactly.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by iceport »

BogleHead1008 wrote: Fri Sep 17, 2021 5:21 pm Learned something new - we can withdraw the application and if withdrawal is approved, pay all the benefits received as lump sum...
Is there any waiting period if we decide to withdraw after 2 years pay all the benefits received as lump sum back?
If you're referring to the action Godot noted above, the option is only valid for 1 year after claiming, and you only get 1 chance to withdraw. You couldn't withdraw after 2 years.
Godot wrote: Thu Sep 16, 2021 11:18 pm Note: If you change your mind about starting your benefits, you can also cancel your application for up to 12 months after you became entitled to retirement benefits, repaying all the money you and/or your family have received, without interest. This process is called a withdrawal. You can reapply later. You are limited to one withdrawal per lifetime: https://www.ssa.gov/benefits/retirement ... rawal.html
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by nigel_ht »

iceport wrote: Fri Sep 17, 2021 5:14 pm
nigel_ht wrote: Fri Sep 17, 2021 5:00 pm I read the other threads.

I did my own analysis.

I read this thread.

My claim is SS is my hedge against SORR. If at any point between 62 and 70 the bottom falls out I’ll apply for SS. Currently I believe I get 12 months to change my mind so if it’s a rapid recovery a la 2020 I can cancel it if I pay everything back.

That would let me reduce our withdrawal rate in a deep downturn without cratering our spending in presumably our healthiest years…and allows me to peacefully rebalance into stocks even if things go all 2008 like or even 1929.

If the portfolio continues to rise (or at least keep pace with inflation) then drawing it down isn’t an issue for expenses.

We’re also keeping a cash budget for early retirement travel that isn’t EF or SORR shield but for YOLO experiences before we’re too old to want to bother. Things are going to have to be pretty dire to tap that for anything other than gleeful (but restrained) spending.

The reality is I punted and that simply sounds like a rational explanation to put into my IPS to make me sound smarter when I read it.
Well, maybe that's just a rationalization for punting, but it is a very interesting perspective on the decision! I don't think I've ever come across that line of reasoning before. But I like it.

Thank you very much for sharing!
At the end of the day I realized too many pieces were missing to make a truly informed decision today…so I looked from the perspective as to when would I take it even if I had already decided 70 and SORR was the reason.

Plus I had already been trying to figure out how to mitigate a 1929 scenario with 16 years until recovery…without having such a conservative stormy weather portfolio that would be hugely suboptimal for the most likely case.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by Nestegg_User »

Iceport

when I examined my possible SS starting point {for the record: married, older, with PIA a bit below spouse} I looked at a number of possible years for my demise (most likely me as M and ~7 yrs older) to get a basic path on which timeframes make most sense. I used ages from 72-92 (approx 5 yr increments) and then looked at various claim ages, like 62, 65, FRA, and 70, to get a good idea of plausible differences. I also looked at the magnitude of the differences (much as you alluded), but didn't try to PV it out, as I've got pension and we've got enough savings to supplement (we use 3.5% as max). I also looked at those same conditions assuming the cuts actually hit at the time noted and at 25% hit, to see what the changes might be on "desired" claim age. While I initially thought of age 70 for me, and 70 for spouse for max... the differences weren't all that much apart. Further, upon my demise the pension is reduced to 50%, so there could be a need to supplement with existing savings (not likely, but "could"), so that pushed it toward FRA in the non-reduced SS case; when the factor of reduced SS at time X is included, this fortifies the decision to start around FRA {in fact, I'm looking at the Nov/Dec of year of FRA such that any mortality credits start in the new year rather than having them applied a year further out (as confirmed by SScritic in one of his much earlier posts). This allows for a significant SS, half of pension, and a somewhat better portfolio to be able to be used by surviving spouse. In the event that she only makes it short of 70, there would only be a slight bump for me (assuming she immediately prior to passing is able to start SS and hence I'd get a slightly higher survivors SS). [ I'd already had it in my IPS that if a significant drop in the market occured that I would claim earlier.]

As for your case, I'd agree with others that SS is the preferred form of annuity, even over your state pension (which you've already said is somewhat shaky vis-a-vis funding level) in that it gives a better inflation protection ("full CPI", at least now) so that it provides better long term purchasing power. It also has less taxation in its benefits, often at both the state and federal level. This means that deferment of SS as long as practicable is usually optimal. BUT, just as the case with SPIA's and pensions, there's often a need for "lumpy" expenses at some time...hence, you are correct that depletion of portfolio is unwise below some level (decided by the individual).

So in your case, with what you describe as more limited funds, I can't see any reason to postpone to 70 to max SS but deplete your "reserves" and thus a claiming age between 62 and FRA seems appropriate.

I'm not as optimistic that there won't be some level of cuts (likely a CPI effect if nothing more), but as I've already gone well past 62 I'm not as worried that it will have as much effect ( I use two times std dev beyond the average as likely max LE, hence 92, with a more likely value of around 85). (I deferred so as to do some Roth conversions on earliest rollover... my last 401k is still to be rolled over but will not be Roth converted; rather, I'll use it to supplement pension/SS rather than use taxable so as to leave more available to surviving spouse and to reduce funds in future RMD's
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by wrongfunds »

iceport wrote: Fri Sep 17, 2021 5:05 pm
wrongfunds wrote: Fri Sep 17, 2021 3:07 pm
(and writing coherently)
Mike Drop Moment :-)
Are you trying to tell me something??? :shock: :?
I don't believe it has anything to do with you. The reference was from another person, Jack I believe. I found that nugget clever and subtle. I liked it. It was my way of saying Thums Up.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

JackoC wrote: Fri Sep 17, 2021 9:36 am It's good that there's been some exchange of ideas about future cuts to SS. I think it's counterproductive to squelch that because so many people say it's a significant factor in their choice. But I view that likelihood as pretty much zero if even close to 62.
You do admit that future cuts across the board are exactly what the current laws require, right?
And that anything else is just speculation?
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by JoeRetire »

samsoes wrote: Fri Sep 17, 2021 3:36 pm It is my intention to get every dollar that was contributed by me and by my employers on my behalf out of Social Security. Just have to make sure I don't croak before I do so. So I plan to start at 62.
Be careful not to croak before 62!
Because then you would feel awful.
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Re: I’m Planning to Claim SS @62… Well, Why Not?

Post by samsoes »

JoeRetire wrote: Fri Sep 17, 2021 8:18 pm
samsoes wrote: Fri Sep 17, 2021 3:36 pm It is my intention to get every dollar that was contributed by me and by my employers on my behalf out of Social Security. Just have to make sure I don't croak before I do so. So I plan to start at 62.
Be careful not to croak before 62!
Because then you would feel awful.
Never plan to leave money on the government's table. Never.
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