Be careful not to croak before 70. Based on your previous post, you would not feel awful but your wife may be disappointed.
I’m Planning to Claim SS @62… Well, Why Not? ►Updated w/Funded Ratio
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Re: I’m Planning to Claim SS @62… Well, Why Not?
Across government policies there are provisions where policy (tax, benefit, regulation, what have you) would change significantly past date X (either specified or estimated) unless action is taken to change or extend the provision over what's currently written down. But in some cases it's overwhelmingly likely the provisions will be extended or changed to keep the underlying policy basically the same. This is the case IMO with public old age pension payments to existing recipients: the provisions will change if the alternative is the automatic electoral political suicide of cutting benefits to existing pensioners, in rich world democracy X, Y or Z. Or it's anyway among the very last things that would be cut in an unprecedented meltdown, in which case the scenario and likelihood is of that meltdown, not whether provisions written down right now are the best predictor of future policy. And every opinion of the future is speculation, so hard to see why anyone would think 'that's speculation' is a good argument against one particular opinion of the future over another. Though again if your or anyone else's opinion on the likelihood of SS cuts to existing recipients differs from mine, that's fine.JoeRetire wrote: ↑Fri Sep 17, 2021 8:14 pmYou do admit that future cuts across the board are exactly what the current laws require, right?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.
And that anything else is just speculation?
Re: I’m Planning to Claim SS @62… Well, Why Not?
That's my plan!Cash is King wrote: ↑Fri Sep 17, 2021 8:30 pmBe careful not to croak before 70. Based on your previous post, you would not feel awful but your wife may be disappointed.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: I’m Planning to Claim SS @62… Well, Why Not?
Opinions and speculation are fun. If no action intervenes, the law is clear on what will happen to benefits once the trust fund is depleted. There are dozens of other possibilities if the government chooses to intervene. I wouldn't predict which changes might occur. And of course board rules prohibit discussion of pending/speculative legislation anyway.JackoC wrote: ↑Sat Sep 18, 2021 8:33 amAcross government policies there are provisions where policy (tax, benefit, regulation, what have you) would change significantly past date X (either specified or estimated) unless action is taken to change or extend the provision over what's currently written down. But in some cases it's overwhelmingly likely the provisions will be extended or changed to keep the underlying policy basically the same. This is the case IMO with public old age pension payments to existing recipients: the provisions will change if the alternative is the automatic electoral political suicide of cutting benefits to existing pensioners, in rich world democracy X, Y or Z. Or it's anyway among the very last things that would be cut in an unprecedented meltdown, in which case the scenario and likelihood is of that meltdown, not whether provisions written down right now are the best predictor of future policy. And every opinion of the future is speculation, so hard to see why anyone would think 'that's speculation' is a good argument against one particular opinion of the future over another. Though again if your or anyone else's opinion on the likelihood of SS cuts to existing recipients differs from mine, that's fine.JoeRetire wrote: ↑Fri Sep 17, 2021 8:14 pmYou do admit that future cuts across the board are exactly what the current laws require, right?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.
And that anything else is just speculation?
I, like you, speculate that changes will happen before then. But I always plan like they won't.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: I’m Planning to Claim SS @62… Well, Why Not?
I think we'll agree to disagree. You are predicting no matter what you assume, not a matter of 'fun' but basic reality. And I'd go back to the example which underlines this issue. A poster said a person might choose to take SS earlier, sacrificing some of its use as a long term lifespan risk hedge, because they had a lot of SPIA's. But favoring SPIA's over SS as longevity insurance (aside from the CPI adjustment aspect which is also important) must include a comparative risk assessment of SPIA's and SS. If you assume cuts to existing SS recipients are a significant probability, SPIA's might have the advantage of greater certainty of payment (again aside from inflation risk). But I would say that's simply the wrong estimate and it's the other way around, SPIA's have the greater risk of not paying what's promised (though an acceptable risk IMO for highly rated insurers and with adequate diversification). You can't determine the answer to that by referring to a web forum's policy. You must use your best judgement.JoeRetire wrote: ↑Sat Sep 18, 2021 10:00 amOpinions and speculation are fun. If no action intervenes, the law is clear on what will happen to benefits once the trust fund is depleted. There are dozens of other possibilities if the government chooses to intervene. I wouldn't predict which changes might occur. And of course board rules prohibit discussion of pending/speculative legislation anyway.JackoC wrote: ↑Sat Sep 18, 2021 8:33 amAcross government policies there are provisions where policy (tax, benefit, regulation, what have you) would change significantly past date X (either specified or estimated) unless action is taken to change or extend the provision over what's currently written down. But in some cases it's overwhelmingly likely the provisions will be extended or changed to keep the underlying policy basically the same. This is the case IMO with public old age pension payments to existing recipients: the provisions will change if the alternative is the automatic electoral political suicide of cutting benefits to existing pensioners, in rich world democracy X, Y or Z. Or it's anyway among the very last things that would be cut in an unprecedented meltdown, in which case the scenario and likelihood is of that meltdown, not whether provisions written down right now are the best predictor of future policy. And every opinion of the future is speculation, so hard to see why anyone would think 'that's speculation' is a good argument against one particular opinion of the future over another. Though again if your or anyone else's opinion on the likelihood of SS cuts to existing recipients differs from mine, that's fine.JoeRetire wrote: ↑Fri Sep 17, 2021 8:14 pmYou do admit that future cuts across the board are exactly what the current laws require, right?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.
And that anything else is just speculation?
I, like you, speculate that changes will happen before then. But I always plan like they won't.
Re: I’m Planning to Claim SS @62… Well, Why Not?
That's a pretty good idea.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.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: I’m Planning to Claim SS @62… Well, Why Not?
It's your moneysamsoes wrote: ↑Fri Sep 17, 2021 3:36 pmCouldn'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.
And as this thread demonstrates (and most of us already knew) for a single filer, the "when" decision on taking SS is less critical than when you have a couple.
But I still say that doing the math is a better approach than just wanting to get paid in money back. That's a sunk cost; your retirement future doesn't care what you paid into SS or why. I only care what is happening in the future. And SS is actually a pretty good deal; hard to find COLAed pensions. A steady income stream like SS works nicely with an investment portfolio. I'm glad to have both.
Re: I’m Planning to Claim SS @62… Well, Why Not?
Nestegg_User,Nestegg_User wrote: ↑Fri Sep 17, 2021 7:40 pm 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.]
Thank you very much for your helpful comments, and for this detailed account of your thought process. You've raised SS strategizing to a fine art!
I have lots of general reactions to your methodology, but one of the strongest is just how complicated things get when factoring in a whole additional life! And I'm impressed by your tenacity in gaming out so many variables. Also, I'm surprised that, despite our circumstances being so different, I recognize how your efforts to make your plan fail-safe are roughly similar in magnitude to my own. We've chosen different methods to build in a factor of safety, but the end results are probably comparable. (My method is far more crude and simplistic: I just unrealistically inflate my spending assumptions. Maybe I should work on that more...)
Agreed. On all counts. However, my current state does tax a portion of SS benefits, and 85% of SS will be taxed federally every year. There's no way around that with the pension. But I am glad to see someone else thoughtfully consider the interaction between SS claiming and the portfolio balance. That really gets to the heart of my dilemma.Nestegg_User wrote: ↑Fri Sep 17, 2021 7:40 pm 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).
Now see, here's where the biggest kink in my planning comes into play... (I keep debating whether I should just throw out the real-life round numbers, but I'm not ready yet.)Nestegg_User wrote: ↑Fri Sep 17, 2021 7:40 pm 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.
There's not really a huge risk of not being able to accommodate spending spikes. The portfolio is generally large enough, assuming a 4% WR, to independently generate a bit more than the annual pension amount. And I've been living off the pension alone for 4.5 years now. So just those two income sources add up to almost double my base level spending needs. That's the general order of magnitude of the portfolio.
[Actually, in an interesting quirk of the "aftcasting" analyses like cFIREsim is that my theoretical spending capacity works out to roughly the sum of the pension and the 4% portfolio WR, even though the scenarios I run include SS. In effect, the SS income basically just overcomes the loss to (historical) inflation of the pension income, assuming a fixed 2% COLA. And as I noted way up-thread, that theoretical spending capacity hardly changes no mater when I assume claiming SS. ]
My contortions here are largely borne from my own behavioral quirk, in that I'm having a difficult time coming to grips with the emotional reality of making portfolio withdrawals. It's irrational. And I realize it's only possible for me to remain so irrational because in real life — as opposed to in my conservative, fail-safe world — I can probably live a very comfortable existence without ever tapping the portfolio, except under extreme circumstances, like paying for LTC!
Given that additional data, I'm not sure your assessment of my claiming SS early would stay the same.
[OT comments removed by admin LadyGeek]
Your post has given me much to think about. Thanks again!
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
Yeah, I get it. It's actually a great way to build in the reevaluation of the plan on an ongoing basis.nigel_ht wrote: ↑Fri Sep 17, 2021 6:24 pmAt 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.iceport wrote: ↑Fri Sep 17, 2021 5:14 pmWell, 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.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.
Thank you very much for sharing!
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.
You know, reading through your post really drove home to me — and please don't take this as criticism, because we're all in the same boat whether we admit it or not — how much of this decision comes down to mental accounting, and finding a way to be comfortable, conceptually, with a plan that somehow works, even if it's sub-optimal. I feel like here in this exercise I'm exploring and favoring alternatives that either involve more risk, less overall wealth, or some combination of both, all in an effort to satisfy some behavioral quirks.
How much is peace of mind worth?
Apparently, in my case it's not nothing.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
Thanks. I still don't know what you're talking about, but don't need to, as long as it wasn't directed my way. I try to write coherently, but admittedly don't always succeed...wrongfunds wrote: ↑Fri Sep 17, 2021 7:44 pm 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.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
With regards to some earlier posts conjecturing on depletion of the trust fund, Social Security is authorized under US law (legislation). Speculation about future legislation (what "might" happen) is prohibited by forum policy, see: Unacceptable Topics
The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.
We do permit discussions which plan for reductions in Social Security, but not about the future of Social Security itself (political conjecture).
This forum is focused on investing that is directly actionable to personal investors. We don't hold debates on conjecture.Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
- Common religious expressions such as sending your prayers to an ailing member.
- Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
- Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
- Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.
We do permit discussions which plan for reductions in Social Security, but not about the future of Social Security itself (political conjecture).
Re: I’m Planning to Claim SS @62… Well, Why Not?
This is OT, but hopefully as the OP I've got some leeway.samsoes wrote: ↑Fri Sep 17, 2021 3:36 pm 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.
What always amazes me is how small the actual dollar values are. The total taxes paid are estimated on our SS statements. I don't think they are inflation-adjusted. (Does anyone know?) But even so, it seems like we generally get back our personal contributions in just a handful of years.
"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?
The best calculation would be to calculate the expected present value of the cash flows. Both of the referenced calculations estimate that. The expected value of the present value as a random variable would be computed by calculating for each N the present value if the annuitant dies at year N and the probability of death in year N, then computing a weighted average of the present values calculated.#Cruncher wrote: 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.
Last edited by Northern Flicker on Sat Sep 18, 2021 3:53 pm, edited 1 time in total.
Re: I’m Planning to Claim SS @62… Well, Why Not?
I removed some comments, a post, and a reply conjecturing on Social Security reform (proposed legislation). Please see my previous post.
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Re: I’m Planning to Claim SS @62… Well, Why Not?
SSA claims it is actuarially neutral. If so (though it probably isn't), this is across the pool of recipients. If you are likely to live longer than just to the age of expectancy, delaying increases expected present value of payout, but would decrease it if you are likely to live less long.iceport wrote: ↑Fri Sep 17, 2021 10:35 amNorthern 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.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?
Delaying SS is equivalent to purchasing a COLA'd SPIA with the funds used to replace the benefit payout during the years it is delayed. A single person with no heirs under consideration may not care much about estate size-- an asymmetry that strongly favors annuitization. The caveat might be say someone getting a terminal medical diagnosis may want to greatly accelerate spending during the remaining time, though leaving a bequest to a charitable organization might deliver more meaning to those final years than hedonistic consumption.
Re: I’m Planning to Claim SS @62… Well, Why Not?
Thanks for the explanation. It does come across as a bit more nuanced than the "no-brainer" described in your earlier post. I'll just say that, given my interest in portfolio preservation, as irrational as it might be, the choice sure as heck doesn't feel like a no-brainer to me. And even in terms of objective measures of the differences, it doesn't seem as though claiming at the two extreme options, age 62 or 70, produces results that are worlds apart.Northern Flicker wrote: ↑Sat Sep 18, 2021 3:44 pmSSA claims it is actuarially neutral. If so (though it probably isn't), this is across the pool of recipients. If you are likely to live longer than just to the age of expectancy, delaying increases expected present value of payout, but would decrease it if you are likely to live less long.iceport wrote: ↑Fri Sep 17, 2021 10:35 amNorthern 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.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?
Delaying SS is equivalent to purchasing a COLA'd SPIA with the funds used to replace the benefit payout during the years it is delayed. A single person with no heirs under consideration may not care much about estate size-- an asymmetry that strongly favors annuitization. The caveat might be say someone getting a terminal medical diagnosis may want to greatly accelerate spending during the remaining time, though leaving a bequest to a charitable organization might deliver more meaning to those final years than hedonistic consumption.
So far, at this point, I'm strongly inclined to claim sometime between ages 62 and 67, inclusive.
(If only #Cruncher didn't illustrate how valuable delaying one more year from 66 to 67 would be! )
"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?
I believe my posting suggested that you don't need to make a decision on your 62nd birthday on when you will take it. You are only making a decision for age 62. As I mentioned, the decision to delay is not cast in stone. In any given month, you can file. You can re-evaluate the decision twice a year.
I think we all have a tendency to see our retirement portfolio balance as a monument to a successful career. This can bias the analysis toward preserving that monument.
Lifespan is not the only variable-- investment returns are another.
I think we all have a tendency to see our retirement portfolio balance as a monument to a successful career. This can bias the analysis toward preserving that monument.
Lifespan is not the only variable-- investment returns are another.
Re: I’m Planning to Claim SS @62… Well, Why Not?
The SS formula may have been originally designed to be approximately actuarially neutral when it was created. But as life expectancies have increased, it is no longer actuarially neutral. Delaying by one year at full retirement age to get an 8% increase in benefits is actuarially neutral if your life expectancy at that age is 13.5 years; after 13.5 years, you get 12.5 years of $10,800 adjusted for inflation, rather than 13.5 years of $10,000 adjusted for inflation.Northern Flicker wrote: ↑Sat Sep 18, 2021 3:44 pm SSA claims it is actuarially neutral. If so (though it probably isn't), this is across the pool of recipients. If you are likely to live longer than just to the age of expectancy, delaying increases expected present value of payout, but would decrease it if you are likely to live less long.
Delaying SS is equivalent to purchasing a COLA'd SPIA with the funds used to replace the benefit payout during the years it is delayed. A single person with no heirs under consideration may not care much about estate size-- an asymmetry that strongly favors annuitization. The caveat might be say someone getting a terminal medical diagnosis may want to greatly accelerate spending during the remaining time, though leaving a bequest to a charitable organization might deliver more meaning to those final years than hedonistic consumption.
In addition, because the formula is simplified, it cannot be actuarially neutral over the full range. The break-even life expectancy for delaying one year from FRA is 13.5 years; for a second year is 14.5 (because the 8% increase is 8% of the FRA benefit, not the FRA+1 benefit); for a third year is 15.5; and for a fourth year is 16.5. For an actuarially neutral formula, the break-even life expectancy would have to decrease, not increase, for each year.
The net effect is that SS is currently close to actuarially neutral for a single man with average life expectancy delaying from 68 to 69, and actuarially negative from 69 to 70. (However, single men who are 69 and are considering delaying another year are likely to have an above-average life expectancy and come out ahead waiting until 70.) It is actuarially favorable for a single woman, or the higher earner in any couple, to wait until 70.
Re: I’m Planning to Claim SS @62… Well, Why Not?
It's interesting. I bet someone could start one of these "when to claim SS" threads every day, and each one would go on for 6+ pages.
At some point we all have to ask ourselves, "don't we have anything better to do?"
Check this out:
https://www.google.com/search?sitesearc ... l+security
At some point we all have to ask ourselves, "don't we have anything better to do?"
Check this out:
https://www.google.com/search?sitesearc ... l+security
Re: I’m Planning to Claim SS @62… Well, Why Not?
.....
Last edited by mary1492 on Thu Sep 29, 2022 8:09 am, edited 1 time in total.
Re: I’m Planning to Claim SS @62… Well, Why Not?
Now factor in the employers contribution (i.e. that is part of your compensation) and then for real fun think about 40 years of compounding does:) There is a reason why the SS more or less works (yes we will have a short fall for a bit due to demographics in a decade but then it goes back in balance. ) out. The people doing the math knew what they were doing.iceport wrote: ↑Sat Sep 18, 2021 2:33 pm This is OT, but hopefully as the OP I've got some leeway.
What always amazes me is how small the actual dollar values are. The total taxes paid are estimated on our SS statements. I don't think they are inflation-adjusted. (Does anyone know?) But even so, it seems like we generally get back our personal contributions in just a handful of years.
Re: I’m Planning to Claim SS @62… Well, Why Not?
It might be hard to believe, but I have honestly been practically 100% oblivious to all these other long threads on SS strategies! There are just so many active topics here, all I typically do is scan the subject lines and only click on the topics of immediate interest. This has not been a particularly interesting topic for me — until now. So I am sorry for all the repetition.namajones wrote: ↑Sat Sep 18, 2021 5:12 pm It's interesting. I bet someone could start one of these "when to claim SS" threads every day, and each one would go on for 6+ pages.
At some point we all have to ask ourselves, "don't we have anything better to do?"
Check this out:
https://www.google.com/search?sitesearc ... l+security
Funny thing is, in doing some brief surfing through the google search results, I came across a 2014 article by John F. Wasik in the NYT which included this little nugget:
So apparently my favored, um, "Let It Grow" strategy is a real thing!Yet another approach — if you don’t mind locking in a lower payment — is to take Social Security at age 62 and let your nest egg grow as long as possible before withdrawing funds. That’s assuming Social Security and other savings, if available, could cover your daily living expenses. To make that determination, you would need to prepare a cash-flow analysis showing how much you and your partner or spouse need to cover your weekly expenses, then run a calculation showing how your savings could grow under certain assumptions like rate of return, additional contributions and employer match.
And I don't even need a cash-flow analysis to know if it's feasible. I've been living it.
Let it grow, let it grow, greatly yield.
What shall we say, shall we call it by a name,
As well to count the angels dancing on a pin.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
I'm not sure what you're saying here, iceport. At a certain die age, the value of claiming at 62 or at 70 will be about the same, i.e., the breakeven age. [*] Since the difference is close to zero, it will naturally be much smaller than the effect on value of living one year more or less than that breakeven age. But this is obvious, so I doubt that's what you meant. Maybe you meant that the optimum age to claim (i.e., the age that produces the largest value) varies for small changes in life expectancy. This is correct. The following table illustrates this for the assumptions from my earlier post.iceport wrote: ↑Thu Sep 16, 2021 2:45 pm... the magnitude of the uncertainty, or risk, [of when we'll die] 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.
Code: Select all
Born 1962
NRA 67 (Normal Retirement Age)
PIA 2,500 (Primary Insurance Amount)
Rate -0.57%
Claim 62 63 64 65 66 67 68 69 70
% PIA 70.00% 75.00% 80.00% 86.67% 93.33% 100.00% 108.00% 116.00% 124.00%
Amt 21,000 22,500 24,000 26,000 28,000 30,000 32,400 34,800 37,200
Incr 1,500 1,500 2,000 2,000 2,000 2,400 2,400 2,400
--- Optimum ---
Die Claim Fut Val -----------==--------- Difference vs Optimum Future Value ----------------------
Code: Select all
71 62 184,748 - 8,298 19,593 30,954 46,335 65,770 88,101 115,346 147,548
72 62 204,695 - 6,751 16,482 25,777 39,070 56,395 76,198 100,889 130,507
73 62 224,528 - 5,212 13,388 20,630 31,848 47,073 64,364 86,513 113,563
74 62 244,248 - 3,682 10,311 15,513 24,666 37,805 52,597 72,220 96,715
75 62 263,856 - 2,162 7,253 10,424 17,526 28,590 40,897 58,009 79,964
76 62 283,352 - 649 4,211 5,365 10,426 19,427 29,264 43,878 63,308
77 63 303,591 855 - 2,042 1,189 4,221 11,170 18,552 30,682 47,602
78 65 326,679 4,667 2,318 2,848 - 1,015 5,925 10,864 20,525 34,949
79 66 351,808 10,632 6,796 5,823 991 - 2,882 5,393 12,600 24,540
80 [*] 66 377,802 17,571 12,257 9,790 2,986 - 866 963 5,728 15,201
81 68 407,092 27,914 21,130 17,177 8,411 3,443 2,303 - 2,338 9,357
82 69 437,247 39,230 30,985 25,554 14,839 7,899 4,766 75 - 4,579
83 69 469,554 52,807 43,108 36,209 23,554 14,654 9,539 2,475 - 2,153
84 70 501,937 66,565 55,422 47,062 32,479 21,630 14,544 5,120 260 -
85 70 536,276 82,386 69,806 59,993 43,494 30,706 21,661 9,891 2,658 -
86 70 570,420 98,116 84,108 72,851 54,446 39,731 28,737 14,635 5,043 -
87 70 604,368 113,757 98,329 85,636 65,336 48,705 35,774 19,351 7,414 -
88 70 638,123 129,309 112,468 98,348 76,164 57,627 42,770 24,041 9,772 -
89 70 671,686 144,772 126,527 110,988 86,930 66,499 49,726 28,704 12,116 -
90 70 705,057 160,146 140,506 123,555 97,634 75,320 56,642 33,340 14,447 -
* Example calculation for die age of 80 -- the approximate breakeven age for claiming at 62 or 70 -- using Excel FV function. (I'm here using future value instead of present value because it's simpler in this case and gives the same optimum claiming ages.)
Code: Select all
Claim Value Formula
----- ------- ---------------------------------
62: 360,231 = FV(-0.57%, 80 - 62, -21000, 0, 0) = 17,571 worse
66: 377,802 = FV(-0.57%, 80 - 66, -28000, 0, 0) = optimum
70: 362,602 = FV(-0.57%, 80 - 70, -37200, 0, 0) = 15,201 worse
Re: I’m Planning to Claim SS @62… Well, Why Not?
There's a good reason for that. I'm not sure I know where I was going with that line of reasoning, either. I picked up on your emphasis on what's expected. I was basically mentally taking the difference in PV of claiming at 62 vs. 70 with death at 82, and then comparing that number to the difference in PV between dying at 81 vs. 82 if claimed at 70. Not a particularly useful comparison, upon further reflection, but it seemed like it at the time.#Cruncher wrote: ↑Sat Sep 18, 2021 7:48 pmI'm not sure what you're saying here, iceport.iceport wrote: ↑Thu Sep 16, 2021 2:45 pm... the magnitude of the uncertainty, or risk, [of when we'll die] 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.
However, your amazing table has really helped me to wrap my head around the full scope of potential outcomes. I can't thank you enough, #Cruncher, for taking the trouble to help shed light on this problem. I find that table so useful that I revised it (by hand) using estimated *future* *present* values from the Open Social Security calculator and my numbers. With that visual aid, I see clearly what my preference is! (Hint: it's sub-optimal in theory, but it avoids the worst of the shortfalls in present values.)
First, a word on life expectancy.
The way I see it, life expectancy for me is a wild guess. I feel like a living, breathing bundle of conflicting mortality factors. I eat right, exercise and maintain a healthy weight, but don't sleep nearly enough. I have no known chronic or acute health conditions and need no meds, but had a major health scare last year and underwent major (elective) surgery. Surgeon gives me a clean bill of health, but monitoring continues. I don't envision any kind of typical distribution for my life expectancy probabilities, but something more like a uniform distribution. Anytime between 70 and 90 is probably as likely as any other! So trying to narrow down a realistic range for the likely age of death feels a little like trying to pick next year's market return. Sure, there might be an *expected* value, but good luck in real life getting actually anywhere close to it!
So it's with that perspective that I scan the table showing the distribution of various shortfalls in present value compared to the optimum, for a range of death ages and claiming ages. As I scan the table, the biggest numbers in the upper right and the lower left start concerning me. I'd like to avoid them all! But I'm assuming that I have no control over the age of death, and where I land vertically is a wild guess. So what can I control? The age I claim. So if I want to be sure to avoid leaving the largest sums on the table at death, the best way to do that is to avoid the right and left ends, and stay in the middle. So I think I should claim anywhere between 65 and 67, inclusive.
Confining the age of claiming to the years from 65 to 67 clearly avoids the very worst of the potential shortfalls. Some of the numbers in the center bottom start getting rather large approaching 90, but honestly that's beyond my expectations.
And the delay also addresses the longevity risk concern I had, to the extent I feel is necessary given the other income.
This feels like a major breakthrough. Age 66 looks like the sweet spot for me. Thank you!
Last edited by iceport on Mon Sep 20, 2021 1:02 pm, edited 1 time in total.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
Interesting analysis. I have to be honest, when the thread started I said to myself, "here we go again". But, the topic is very relevant to me, so I've kept up with it. (I'm 60, took a package in November of '20, and we are living on our portfolio and SS for the rest of our lives). I had made the determination that it made the most sense for my wife to claim at 62(she is essentially the same age as me) and for me to wait until 70 to give us some longevity insurance. But I'm not immune to some of the "take it now" arguments. I'd like to leave a legacy for my daughter, I know our health isn't going to get any better and money at 60 is more useful than money at 70+. And I know there are the issues that shall not be discussed. Anyway, I say all that to say thanks for starting the thread and thanks to all who have contributed their viewpoints. I can see myself reaching the conclusion made by the OP, perhaps the optimal spot is around FRA for me.iceport wrote: ↑Sun Sep 19, 2021 11:30 am
So it's with that perspective that I scan the table showing the distribution of various shortfalls in present value compared to the optimum, for a range of death ages and claiming ages. As I scan the table, the biggest numbers in the upper right and the lower left start concerning me. I'd like to avoid them all! But I'm assuming that I have no control over the age of death, and where I land vertically is a wild guess. So what can I control? The age I claim. So if I want to be sure to avoid leaving the largest sums on the table at death, the best way to do that is to avoid the right and left ends, and stay in the middle. So I think I should claim anywhere between 65 and 67, inclusive.
Confining the age of claiming to the years from 65 to 67 clearly avoids the very worst of the potential shortfalls. Some of the numbers in the center bottom start getting rather large approaching 90, but honestly that's beyond my expectations.
And the delay also addresses the longevity risk concern I had, to the extent I feel is necessary given the other income.
This feels like a major breakthrough. Age 66 looks like the sweet spot for me. Thank you!
"Confusion has its cost" - Crosby, Stills and Nash
Re: I’m Planning to Claim SS @62… Well, Why Not?
Wow! I'm impressed, iceport, with your determination to work this problem -- so determined that you collected all those numbers by hand! However, if I'd known you were going to do something like that, I would have shown how to create the Excel spreadsheet. While not as accurate as Open Social Security, it should be sufficiently so for this problem. (I'm including the steps in this post. See below.)iceport wrote: ↑Sun Sep 19, 2021 11:30 am... your ... table [in this post] has really helped me to wrap my head around the full scope of potential outcomes. ... #Cruncher ... I find that table so useful that I revised it (by hand) using estimated *future* values from the Open Social Security calculator and my numbers. With that visual aid, I see clearly what my preference is! (underline added)
I notice a slight inaccuracy in your table's row "% of PIA". For someone with a Normal Retirement Age of 67, here's what they should be as described on the SSA webpage, Effect of Early or Delayed Retirement on Retirement Benefits:
Code: Select all
62 63 64 65 66 67 68 69 70
70.00% 75.00% 80.00% 86.67% 93.33% 100.00% 108.00% 116.00% 124.00%
Code: Select all
Born 1962
NRA 67
PIA 2,926
Rate -0.55%
Mo rt -0.04595%
Claim 65 65.5 66 66.5 67 67.5 68 68.5 69
% PIA 86.67% 90.00% 93.33% 96.67% 100.00% 104.00% 108.00% 112.00% 116.00%
Amt 2,536 2,633 2,731 2,828 2,926 3,043 3,160 3,277 3,394
Incr 97.53 97.53 97.53 97.53 117.04 117.04 117.04 117.04
--- Optimum ---
Die Claim Fut Val -----------==--------- Difference vs Optimum Future Value ----------------------
Code: Select all
71 65 179,636 - 8,402 17,981 28,744 40,694 53,025 66,783 81,974 98,605
72 65 209,001 - 7,188 15,547 25,083 35,800 46,662 58,944 72,651 87,789
73 65 238,206 - 5,981 13,127 21,443 30,933 40,335 51,148 63,379 77,033
74 65 267,249 - 4,781 10,720 17,823 26,094 34,042 43,395 54,158 66,336
75 65 296,133 - 3,587 8,326 14,222 21,280 27,784 35,685 44,987 55,697
76 65 324,858 - 2,400 5,945 10,642 16,493 21,561 28,017 35,867 45,117
77 65 353,425 - 1,219 3,578 7,081 11,733 15,372 20,391 26,797 34,596
78 65 381,834 - 45 1,223 3,540 6,999 9,216 12,807 17,777 24,132
79 65.5 411,211 1,123 - 4 1,141 3,413 4,218 6,388 9,930 14,848
80 [2] 66.5 441,671 3,485 1,201 38 - 1,093 492 1,249 3,371 6,861
81 68 475,824 9,695 6,256 3,932 2,727 2,646 648 - 709 2,779
82 68.5 511,729 17,809 13,222 9,743 7,377 6,130 2,741 696 - 658
83 69 548,887 27,330 21,601 16,974 13,453 11,045 6,274 2,840 746 -
84 69 586,495 37,453 30,588 24,819 20,151 16,588 10,443 5,626 2,143 -
85 69 623,896 47,521 39,526 32,621 26,811 22,101 14,588 8,397 3,532 -
86 69 661,092 57,533 48,414 40,380 33,435 27,583 18,711 11,153 4,914 -
87 69 698,083 67,490 57,254 48,097 40,022 33,035 22,811 13,893 6,288 -
88 69 734,871 77,393 66,045 55,771 46,573 38,457 26,888 16,619 7,654 -
89 69 771,456 87,240 74,788 63,403 53,088 43,849 30,943 19,329 9,013 -
90 69 807,841 97,034 83,483 70,993 59,567 49,212 34,975 22,025 10,364 -
- Select All, copy and paste [3] the following at cell A1 of a blank Excel sheet.
Code: Select all
Born 1962 NRA =MIN(67,66+MAX(0,B1-1954)/6) PIA 2926 Rate -0.0055 Mo rt =(1+B4)^(1/12)-1 Claim 65 65.5 =2*E6-D6 =2*F6-E6 =2*G6-F6 =2*H6-G6 =2*I6-H6 =2*J6-I6 =2*K6-J6 % PIA =IF(D$6<$B$2,1-(5/900)*MIN(36,($B$2-D$6)*12)-(5/1200)*MAX(0,($B$2-D$6)*12-36),1+(8/1200)*(D$6-$B$2)*12) Amt =$B3*D7 Incr =E8-D8 Age 71 =IF($A11<=D$6,0,FV($B$5,12*($A11-D$6),-D$8,0,0)) 72 =2*A12-A11 =2*A13-A12 =2*A14-A13 =2*A15-A14 =2*A16-A15 =2*A17-A16 =2*A18-A17 =2*A19-A18 =2*A20-A19 =2*A21-A20 =2*A22-A21 =2*A23-A22 =2*A24-A23 =2*A25-A24 =2*A26-A25 =2*A27-A26 =2*A28-A27 =2*A29-A28 Age Claim FV =A11 =INDEX(D$6:L$6,1,MATCH(C33,D11:L11,0)) =MAX(D11:L11) =$C33-D11
- Copy cells D7:D8 right to column E.
- Copy cells E7:E9 right to column L.
- Copy cell D11 down to row 30 and right to column L.
- Copy cells A33:D33 down to row 52.
- Copy cells D33:D52 right to column L.
- Format for readability.
- Modify assumptions in cells B1, B3, & B4 as needed.
- Modify claim ages in cells D6:L6 as needed.
- Modify die ages as needed in cells A11:A30.
- The amount of the PIA doesn't affect the optimum claiming age. It is only affected by the discount rate and, to a lesser extent, the Normal Retirement Age.
- Example calculation for die age of 80:
Code: Select all
Claim Value Formula ----- ------- ----------------------------------------------- 65: 438,186 = FV(-0.04595%, 12 * (80 - 65), -2535.87, 0, 0) = 3,485 worse 66.5: 441,671 = FV(-0.04595%, 12 * (80 - 66.5), -2828.47, 0, 0) = optimum 69: 434,809 = FV(-0.04595%, 12 * (80 - 69), -3394.16, 0, 0) = 6,861 worse
- If you have trouble pasting, try "Paste Special" and "Text".
Re: I’m Planning to Claim SS @62… Well, Why Not?
#Cruncher wrote: ↑Sun Sep 19, 2021 5:10 pmWow! I'm impressed, iceport, with your determination to work this problem -- so determined that you collected all those numbers by hand! However, if I'd known you were going to do something like that, I would have shown how to create the Excel spreadsheet. While not as accurate as Open Social Security, it should be sufficiently so for this problem. (I'm including the steps in this post. See below.)iceport wrote: ↑Sun Sep 19, 2021 11:30 am... your ... table [in this post] has really helped me to wrap my head around the full scope of potential outcomes. ... #Cruncher ... I find that table so useful that I revised it (by hand) using estimated *future* values from the Open Social Security calculator and my numbers. With that visual aid, I see clearly what my preference is! (underline added)
Heh, heh... You'd be surprised how easy it actually was! The site was practically built for it: 1) Select year of death; 2) note optimum age and PV; 3) scroll down to the alternatives section and click on age 62+1mo. on the time bar, note change in PV; 4) click on age 63+1mo. (don't know why I kept that pattern going), note change in PV; etc. on down the line to quickly and easily fill out a whole row at a time. Then change the age of death and fill out the next row. I got into a rhythm, and probably whipped through it in 30 - 45 minutes. I thought about contacting you, but after experimenting with the first row, I figured it was just as easy to do it by hand, at least once.
Oh, and I did misrepresent the dollar values in the post. The numbers I used are present values, labeled correctly on the table, not future values. I always do a double-take when I see that the FV numbers are smaller than the PV numbers. And then I remember the negative discount rate.
Thanks very much for the "instant spreadsheet"! It worked like a charm, after I worked out the paste special requirement. I was wondering... is there any way you could provide a similar spreadsheet generator for the original version of the spreadsheet with the full range of claiming ages? I actually like to see the full range of options all in one place at a glance.
Thanks! Yes, I noticed the funky percentages (the only thing I used a spreadsheet to generate) and attribute it to some crude rounding at the SSA. I got the dollar values directly from my latest SS statement, converted from monthly to annual values. The values on my SS statement for ages 62, 67 and 70 all match the Social Security Calculator site values, but a few of the others are curiously different. I think the PIA is accurate (at least until the next inflation adjustment). It used to be that I had to be careful to use a calculator on the SSA site that allowed an assumed retirement year for a decent PIA estimate. But now that I've got a couple of official "zeros" showing up in the earnings history, it seems that the SSA assumes that zero income to continue going forward when they create the SS statement. So now no matter which calculator I use — including the one at the Social Security Calculator site — they all compute identical PIAs.#Cruncher wrote: ↑Sun Sep 19, 2021 5:10 pm I notice a slight inaccuracy in your table's row "% of PIA". For someone with a Normal Retirement Age of 67, here's what they should be as described on the SSA webpage, Effect of Early or Delayed Retirement on Retirement Benefits:Code: Select all
62 63 64 65 66 67 68 69 70 70.00% 75.00% 80.00% 86.67% 93.33% 100.00% 108.00% 116.00% 124.00%
Thanks for all your help, #Cruncher! Your table showing the differences in dollar values between the optimum claiming age and all other possible claiming ages is particularly illuminating. And it raises additional questions and points to the need for more information...
Just out of curiosity, assuming you've contributed to other SS claiming strategy threads, have others ever focused their attention on the table of shortfalls in values compared to optimum? It seems you developed it at least in part to show how sensitive the optimum age is to changes in life expectancy, but to me it does much, much more than that!
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
That was an obvious exaggeration. By definition, dying at 90 is not as likely as dying at the expected age of 82, for a 62 year old. But *how much* less likely is dying at 80, say, than dying at 82?iceport wrote: ↑Sun Sep 19, 2021 11:30 am I don't envision any kind of typical distribution for my life expectancy probabilities, but something more like a uniform distribution. Anytime between 70 and 90 is probably as likely as any other! So trying to narrow down a realistic range for the likely age of death feels a little like trying to pick next year's market return. Sure, there might be an *expected* value, but good luck in real life getting actually anywhere close to it!
This leads to an important question pertaining to life expectancy: Does anyone know where to find a graph, say, or bar chart showing the distribution of probabilities of death? Is there a sharp peak around the expected age of death, or an extended flat section over a broader range of ages.
We can look up the expected ages of death, but how much more likely is that age of death than, say, and age 2 years earlier? Are the probabilities significantly different or almost the same?
I believe the answer could have ramifications on the process of choosing an age to claim SS — at least as it relates to a PV analysis. (Of course, as noted throughout this thread, I don't think a PV analysis the only factor that should be considered, or even the most important one. Nor is longevity risk the only *other* factor to consider.)
It's easy to simply run with an expected value for planning purposes. But what if there's an extended range of ages for which death is almost equally likely? If there's a long flat spot in the distribution, it seems rather imprudent to ignore that information and just use a single, pinpointed age of death in considering potential claiming strategy outcomes.
Where can we find the age distribution of probabilities of death for a 62 year old?
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
Just modify the existing spreadsheet. Enter "62" into cell D6 and "63" into cell E6. The formulas in cells F6:L6 will take care of the rest.
I've contributed to a lot of threads on when to claim SS, but I don't know if I've ever prepared a table like this one before. The "SS" sheet in my Longevity Estimator Excel workbook, does a similar calculation (in cells J6:R8). But instead of doing it separately for each die age, it weights the benefits by survival probability for all ages into a single survival-weighted present value -- as Open Social Security does by default.iceport in same post wrote:Just out of curiosity, assuming you've contributed to other SS claiming strategy threads, have others ever focused their attention on the table of shortfalls in values compared to optimum?
It's not graphed, but you can get the probabilities from column P on the "Alive" sheet of my Longevity Estimator Excel workbook. (You may need to unhide column P. It is simply the one year difference in column F, the % alive each year.) Just change the age in cell I3 from "65" to "62".
Yes indeed. And a tool like Open Social Security takes that all into account when it weights all the benefits from claiming at every possible age 62 to 70 by the probability of survival at every age. I didn't intend my table showing outcomes for each die age 71 to 90, to replace such a tool.iceport in same post wrote:I believe the answer could have ramifications on the process of choosing an age to claim SS — at least as it relates to a PV analysis.
Re: I’m Planning to Claim SS @62… Well, Why Not?
But isn't that an argument for buying an annuity? You could even buy an 8 year annuity to stretch from 62 to 70. That way you only have the pain of reducing the portfolio once, although it's kind of a big reduction.HomerJ wrote: ↑Mon Sep 13, 2021 12:51 pm We will take SS as soon as we can, and spend the money as fast as it comes in on fun stuff while we are still young.
Yes, we could, mathematically, spend more of our portfolio from 62-70 instead, and then collect SS at 70, and be better off in the long run.
But that would entail watching our portfolio drop during those 8 years, and my wife won't be able to handle that.
Give her a check for $2000 a month, every month, and she'll be okay spending it. Pull an extra $2000 out of our accounts a month, every month to spend, and she'll resist.
That's just how it is.
Re: I’m Planning to Claim SS @62… Well, Why Not?
Wow! That is slick, #Cruncher! I must say, even this bumbling hack with a spreadsheet can appreciate the technical artistry of your work.
Thanks! Just what I was looking for:#Cruncher wrote: ↑Mon Sep 20, 2021 3:37 pmIt's not graphed, but you can get the probabilities from column P on the "Alive" sheet of my Longevity Estimator Excel workbook. (You may need to unhide column P. It is simply the one year difference in column F, the % alive each year.) Just change the age in cell I3 from "65" to "62".
Well that's a pretty morbid plot to ponder... I can see why it doesn't get plastered everywhere you look, on billboards and such...
The peak is rather sharper than I had expected. I guess I really don't know the first thing about what goes on in the computation of an optimum expected value. It represents the highest average value, when weighted by survival probabilities at every age?
So life expectancy is found at the median age of death? And the areas under the curve to the right and left of the median are equal?
Doesn't that curve also show that there is a quite sizeable probability of death five years, say, before the median age (and after)?
Very interesting. As I noted, the computations are a mystery to me.#Cruncher wrote: ↑Mon Sep 20, 2021 3:37 pmYes indeed. And a tool like Open Social Security takes that all into account when it weights all the benefits from claiming at every possible age 62 to 70 by the probability of survival at every age. I didn't intend my table showing outcomes for each die age 71 to 90, to replace such a tool.iceport in same post wrote:I believe the answer could have ramifications on the process of choosing an age to claim SS — at least as it relates to a PV analysis.
And I'm not at all proposing that the table I find so fascinating is any kind of substitute for the number-crunching that goes on in the effort to determine an optimum expected outcome. But I do believe it provides valuable supplemental information.
No matter at what age a person claims, or what age is the theoretically optimum time to claim, the odds of death will follow along a plot like this. That means there is a good likelihood that a large portion of the population will end up dying at a sub-optimum time — either well before or after the expected age. (Not that there's ever a good time to die... ) Folks claiming at 70 might want to take a peek at the right edge of the table, to see how much money they might be leaving on the table if they go early. Folks claiming at 62 might want to look at the left edge of the table, to see how much they could be giving up in the event of a much longer life.
For folks that don't need SS for longevity insurance, it might be a reasonable option to stay in the middle of the claiming range, as a hedge against the worst possible outcomes of either edge. Does any of that make sense?
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
Not if you look at this from a retirement spending perspective. Consider your retirement income streams as filling up one big bucket of money - IRAs, Roth IRAs, savings accounts, company pension. You tap into the bucket every month to cover expenses.
Does the bucket get dangerously close to empty at any time?*
If not, go for the maximum payout at age 70-1/2. Otherwise, claim when Social Security at 62 (or any time later where your income streams start drying up).
If you have a health condition where your life expectancy is considerably shorter than those tables, claim sooner rather than later. (My late husband claimed Social Security as soon as possible when this situation became a reality.)
* Your emergency fund is a separate bucket of money that's only tapped for unplanned expenses.
Does the bucket get dangerously close to empty at any time?*
If not, go for the maximum payout at age 70-1/2. Otherwise, claim when Social Security at 62 (or any time later where your income streams start drying up).
If you have a health condition where your life expectancy is considerably shorter than those tables, claim sooner rather than later. (My late husband claimed Social Security as soon as possible when this situation became a reality.)
* Your emergency fund is a separate bucket of money that's only tapped for unplanned expenses.
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Re: I’m Planning to Claim SS @62… Well, Why Not?
iceport wrote: ↑Mon Sep 20, 2021 1:01 pm Just out of curiosity, assuming you've contributed to other SS claiming strategy threads, have others ever focused their attention on the table of shortfalls in values compared to optimum? It seems you developed it at least in part to show how sensitive the optimum age is to changes in life expectancy, but to me it does much, much more than that!
If you think about that you'd see that that's equivalent to asking about the returns you would get in the future. Even valuation calcs using a (usually) static number would only give you an "expected value" {imagine the discount value for something today versus my earlier years in the early 70's ==> much different number} and the farther out the harder to get any estimates. Ideally, one would have to consider the range/value at each year and consider the difference between the results from starting that year (thus saving the depletion of the portfolio...and then estimate what it added to the portfolio) and repeat for each year.... in reality that's a WAG when far enough in the future, so might as well look at the nominal value for a representation (i.e., about how much does it matter?). That's why I didn't try to do any valuation in my modeling; the variation quickly gets outweighed by other factors like "are one or both still healthy? or disabled" , "are both alive? and which one (full or half pension)?, "are we still in the house, or in assisted living?" etc. The variation in those factors and the resultant portfolio variation can quickly swamp the variation in the SS outputs.
"Fortunately" for me I don't have to look at age 62 claiming (... or 63, or 64) since I'm already past that... but joint life expectancy/survivor expectancy for our ages still puts it out aways...but I stopped modeling because i'm "close enough" (not to mention that I'm running out of years to model )
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Re: I’m Planning to Claim SS @62… Well, Why Not?
When I was examining the curves, my first thought was why should a 62-year-old have a lower probability of dying at 70 than a 70-year-old?
But it is because the 62-year-old could die before turning 70, reducing the likelihood of dying specifically at age 70 a little. The point is that we have to exercise some care in interpreting the curves.
For instance, the 70-year-old male may have higher probability of dying at age 70, but has a higher probability of reaching his 71st birthday than a 62-year-old male does.
In technical terms, I believe that the curves are probability density functions, but what you want is the cumulative distribution function. This plots the probability of dying on or before a given point in time for a 62-year-old. The cumulative distribution value at a point in time is the area under the curve of the density function up to that point in time.
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Re: I’m Planning to Claim SS @62… Well, Why Not?
Even though I might be called stupid, I do NOT understand that graph. What is on y-axis? It goes from 1% to 4.5% What does life span has to do with that number?
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Re: I’m Planning to Claim SS @62… Well, Why Not?
I believe the y-axis represents the probability of dying at a given age expressed as a probability.
In technical terms, I described it as a probability density function, but that was not quite accurate. For each age A it provides the probability that the date of death occurs in the interval between birthday A and A+1, which actually would be a histogram for each discrete age, but it then is interpolated to form a continuous curve. This then would be an approximation to the probability density function (which also would have the time of death as a continuous random variable on the x-axis).
In technical terms, I described it as a probability density function, but that was not quite accurate. For each age A it provides the probability that the date of death occurs in the interval between birthday A and A+1, which actually would be a histogram for each discrete age, but it then is interpolated to form a continuous curve. This then would be an approximation to the probability density function (which also would have the time of death as a continuous random variable on the x-axis).
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Re: I’m Planning to Claim SS @62… Well, Why Not?
the y-axis = chance of dying at that age.wrongfunds wrote: ↑Tue Sep 21, 2021 4:43 pm Even though I might be called stupid, I do NOT understand that graph. What is on y-axis? It goes from 1% to 4.5% What does life span has to do with that number?
To die at 73 covers the 365 day window from your 73rd birthday to the day before your 74th
if you summed the dots (for each color) you would get 100% because no one lives forever
Re: I’m Planning to Claim SS @62… Well, Why Not?
She sounds like my wife.HomerJ wrote: ↑Mon Sep 13, 2021 12:51 pm We will take SS as soon as we can, and spend the money as fast as it comes in on fun stuff while we are still young.
Yes, we could, mathematically, spend more of our portfolio from 62-70 instead, and then collect SS at 70, and be better off in the long run.
But that would entail watching our portfolio drop during those 8 years, and my wife won't be able to handle that.
Give her a check for $2000 a month, every month, and she'll be okay spending it. Pull an extra $2000 out of our accounts a month, every month to spend, and she'll resist.
That's just how it is.
Re: I’m Planning to Claim SS @62… Well, Why Not?
I understand that for discussion in this forum, we have to assume current laws stay in place, and can not speculate on future changes.JoeRetire wrote: ↑Sat Sep 18, 2021 10:00 amOpinions and speculation are fun. If no action intervenes, the law is clear on what will happen to benefits once the trust fund is depleted. There are dozens of other possibilities if the government chooses to intervene. I wouldn't predict which changes might occur. And of course board rules prohibit discussion of pending/speculative legislation anyway.JackoC wrote: ↑Sat Sep 18, 2021 8:33 amAcross government policies there are provisions where policy (tax, benefit, regulation, what have you) would change significantly past date X (either specified or estimated) unless action is taken to change or extend the provision over what's currently written down. But in some cases it's overwhelmingly likely the provisions will be extended or changed to keep the underlying policy basically the same. This is the case IMO with public old age pension payments to existing recipients: the provisions will change if the alternative is the automatic electoral political suicide of cutting benefits to existing pensioners, in rich world democracy X, Y or Z. Or it's anyway among the very last things that would be cut in an unprecedented meltdown, in which case the scenario and likelihood is of that meltdown, not whether provisions written down right now are the best predictor of future policy. And every opinion of the future is speculation, so hard to see why anyone would think 'that's speculation' is a good argument against one particular opinion of the future over another. Though again if your or anyone else's opinion on the likelihood of SS cuts to existing recipients differs from mine, that's fine.JoeRetire wrote: ↑Fri Sep 17, 2021 8:14 pmYou do admit that future cuts across the board are exactly what the current laws require, right?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.
And that anything else is just speculation?
I, like you, speculate that changes will happen before then. But I always plan like they won't.
But, for making your own plans, wouldn't it be prudent to either plan for what you think is the most likely outcome, or at least hedge towards that rather than simply go with what the current law says when you believe that will change?
In the famous words of Rush:
If you choose not to decide, you still have made a choice
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: I’m Planning to Claim SS @62… Well, Why Not?
70-1/2?LadyGeek wrote: ↑Tue Sep 21, 2021 1:45 pm Not if you look at this from a retirement spending perspective. Consider your retirement income streams as filling up one big bucket of money - IRAs, Roth IRAs, savings accounts, company pension. You tap into the bucket every month to cover expenses.
Does the bucket get dangerously close to empty at any time?*
If not, go for the maximum payout at age 70-1/2. Otherwise, claim when Social Security at 62 (or any time later where your income streams start drying up).
If you have a health condition where your life expectancy is considerably shorter than those tables, claim sooner rather than later. (My late husband claimed Social Security as soon as possible when this situation became a reality.)
* Your emergency fund is a separate bucket of money that's only tapped for unplanned expenses.
Did they change the maximum age to which one can receive delayed credits?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: I’m Planning to Claim SS @62… Well, Why Not?
I definitely don't speculate on changes happening before "then." Maybe after "then", and after multiple midnight deadlines have passed and stopgap bailout measures employed.
Surprisingly, the calculators I've tried that let you select with or without the current projected adjustment for the trust fund running out of money, don't show much difference in my optimal claiming age either way.
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Re: I’m Planning to Claim SS @62… Well, Why Not?
I like the idea upstream where SS $ are considered 'not my money'. Go blow it and enjoy your 60s!
It's again the income stream thing. Just seems easier to spend $ when it's monthly 'income' rather than eating into a nest egg. All psychological.
It's again the income stream thing. Just seems easier to spend $ when it's monthly 'income' rather than eating into a nest egg. All psychological.
“At some point you are trading time you will never get back for money you will never spend.“ |
“How do you want to spend the best remaining year of your life?“
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Re: I’m Planning to Claim SS @62… Well, Why Not?
I believe it is still 70. 70.5 used to determine the year to start IRA RMDs but that was changed to 72marcopolo wrote: ↑Tue Sep 21, 2021 8:06 pm70-1/2?LadyGeek wrote: ↑Tue Sep 21, 2021 1:45 pm Not if you look at this from a retirement spending perspective. Consider your retirement income streams as filling up one big bucket of money - IRAs, Roth IRAs, savings accounts, company pension. You tap into the bucket every month to cover expenses.
Does the bucket get dangerously close to empty at any time?*
If not, go for the maximum payout at age 70-1/2. Otherwise, claim when Social Security at 62 (or any time later where your income streams start drying up).
If you have a health condition where your life expectancy is considerably shorter than those tables, claim sooner rather than later. (My late husband claimed Social Security as soon as possible when this situation became a reality.)
* Your emergency fund is a separate bucket of money that's only tapped for unplanned expenses.
Did they change the maximum age to which one can receive delayed credits?
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Re: I’m Planning to Claim SS @62… Well, Why Not?
This was my thinking as well. Then I got the bright idea to model this scenario in PV. I ran the model simulating the worst 5 years up front in retirement (SORR) and comparing the results taking it at 62 and 68. The results surprised me. Taking SS at 62, even with SORR, produced a lower success rate than taking it at 68.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.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci
Re: I’m Planning to Claim SS @62… Well, Why Not?
Assuming SS never changes. Which is what we assume here (bows to LadyGeek).sixtyforty wrote: ↑Wed Sep 22, 2021 8:18 am The results surprised me. Taking SS at 62, even with SORR, produced a lower success rate than taking it at 68.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: I’m Planning to Claim SS @62… Well, Why Not?
Yes, exactly. That's actually why I included the second plot for a 70 year old, to initiate that thought process. I had to reason it out, too. It got me thinking about what is being depicted.Northern Flicker wrote: ↑Tue Sep 21, 2021 2:33 pm When I was examining the curves, my first thought was why should a 62-year-old have a lower probability of dying at 70 than a 70-year-old?
But it is because the 62-year-old could die before turning 70, reducing the likelihood of dying specifically at age 70 a little. The point is that we have to exercise some care in interpreting the curves.
That's how I read it also. Unfortunately for all of us, the total area under the curves must be 100%. (Death is not only 90% certain.)bradpevans wrote: ↑Tue Sep 21, 2021 6:06 pmthe y-axis = chance of dying at that age.wrongfunds wrote: ↑Tue Sep 21, 2021 4:43 pm Even though I might be called stupid, I do NOT understand that graph. What is on y-axis? It goes from 1% to 4.5% What does life span has to do with that number?
To die at 73 covers the 365 day window from your 73rd birthday to the day before your 74th
if you summed the dots (for each color) you would get 100% because no one lives forever
So that means that the 70 year old has fewer years in which to reach the 100% probability.
And that means that the area *between* the two curves is the same as the area under the 62 yo curve *before* age 70. (It doesn't look like it, but it must be.)
The area under the curve between two ages represents the probability of dying within that age range. Even without knowing how to compute that area, just eyeballing the plot can give a decent idea of the order of magnitude of the probability. That's what I was looking for.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
For people wondering how I ended up looking at the distribution of the probability of dying over time, it's really not too complicated.
First, a calculator like Mike Piper's Open Social Security site figures out a person's life expectancy and computes the theoretically optimum time to claim SS — all based on some kind of optimization algorithm that weights the PV of total benefits possible by claiming at various ages, and weights those values by the probability of being alive at those ages. <Honestly, I don't know how that calculation is made, what goes into it. And that's probably part of the issue here.> Let's say that ends up at a round number, 70 years old.
The calculator recommends claiming at 70, and that supposedly provides the best chance of getting the most money, expressed as a present value out of SS. Okay, fine, but statistics break down at the individual level.
Doesn't anyone ever wonder how much less they'd end up with if they die at, say 71 instead of 82? Well, with the enormous help of #Cruncher, the table he produced shows us exactly how much less we'd have received by claiming at 70 and dying at 71, vs. claiming at the optimum age (62) for a death at 71.
It turns out, the number is pretty large.
In fact, it's easy to scan the far right column of table — the column in which SS is claimed at 70 — and see how much less you'd get than the optimum value possible if you die at various times earlier than expected.
I was ribbed at the start of this thread for being willing to leave $65k on the table by claiming early. Well, how do all the folks claiming at 70 feel about the possibility of leaving $183k on the table, instead, if they go early?
Still confused why nobody seems to care about that, I started wondering if it was because the chances of dying so much earlier than expected are too slim to worry about. But that didn't make intuitive sense. So I wanted to get some kind of handle on how likely it would be to die in the years from, say, 65 to 75. I still don't know how to compute the probability, but just eyeballing the area under the 62 YO curve leads me to estimate that it could be somewhere in the vicinity of 25%.
So you decide to claim at 70, reaching for the highest expected payout, but you could end up with something far, far less than optimum, maybe something like 25% of the time. That's a 1 in 4 chance of ending up with a very poor outcome.
Am I the only one that doesn't like those odds?
There's a similar risk for those claiming at 62 who end up living longer. And those chances are also pretty good.
Thus, my newfound way of looking at this problem is to consider hedging against the most extreme poor outcomes by not choosing one of the extreme ends of the claiming range.
(As a reminder, the longevity insurance aspect of SS is only a secondary consideration for me. If it were the major overriding objective, it could override the risk of a poor PV outcome, and a late claiming age could be the appropriate choice.)
First, a calculator like Mike Piper's Open Social Security site figures out a person's life expectancy and computes the theoretically optimum time to claim SS — all based on some kind of optimization algorithm that weights the PV of total benefits possible by claiming at various ages, and weights those values by the probability of being alive at those ages. <Honestly, I don't know how that calculation is made, what goes into it. And that's probably part of the issue here.> Let's say that ends up at a round number, 70 years old.
The calculator recommends claiming at 70, and that supposedly provides the best chance of getting the most money, expressed as a present value out of SS. Okay, fine, but statistics break down at the individual level.
Doesn't anyone ever wonder how much less they'd end up with if they die at, say 71 instead of 82? Well, with the enormous help of #Cruncher, the table he produced shows us exactly how much less we'd have received by claiming at 70 and dying at 71, vs. claiming at the optimum age (62) for a death at 71.
It turns out, the number is pretty large.
In fact, it's easy to scan the far right column of table — the column in which SS is claimed at 70 — and see how much less you'd get than the optimum value possible if you die at various times earlier than expected.
I was ribbed at the start of this thread for being willing to leave $65k on the table by claiming early. Well, how do all the folks claiming at 70 feel about the possibility of leaving $183k on the table, instead, if they go early?
Still confused why nobody seems to care about that, I started wondering if it was because the chances of dying so much earlier than expected are too slim to worry about. But that didn't make intuitive sense. So I wanted to get some kind of handle on how likely it would be to die in the years from, say, 65 to 75. I still don't know how to compute the probability, but just eyeballing the area under the 62 YO curve leads me to estimate that it could be somewhere in the vicinity of 25%.
So you decide to claim at 70, reaching for the highest expected payout, but you could end up with something far, far less than optimum, maybe something like 25% of the time. That's a 1 in 4 chance of ending up with a very poor outcome.
Am I the only one that doesn't like those odds?
There's a similar risk for those claiming at 62 who end up living longer. And those chances are also pretty good.
Thus, my newfound way of looking at this problem is to consider hedging against the most extreme poor outcomes by not choosing one of the extreme ends of the claiming range.
(As a reminder, the longevity insurance aspect of SS is only a secondary consideration for me. If it were the major overriding objective, it could override the risk of a poor PV outcome, and a late claiming age could be the appropriate choice.)
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: I’m Planning to Claim SS @62… Well, Why Not?
Here's the basic problem. If I focus just on Social Security and assume it goes down X% at Y date according to my SS statement that's conservative. What's wrong with being conservative? If it isn't cut, or even if it's extremely unlikely it would be, great.marcopolo wrote: ↑Tue Sep 21, 2021 8:01 pm I understand that for discussion in this forum, we have to assume current laws stay in place, and can not speculate on future changes.
But, for making your own plans, wouldn't it be prudent to either plan for what you think is the most likely outcome, or at least hedge towards that rather than simply go with what the current law says when you believe that will change?
In the famous words of Rush:
If you choose not to decide, you still have made a choice
However, investing is about the whole portfolio and choices. Assuming SS is going to be cut for existing recipients a known % at a known date tilts the analysis of alternatives among longevity hedging instruments toward SPIA's, or towards not hedging longevity as much at all (even if not dramatically, an assumption of fixed % cuts past a fixed date makes taking at 62 look relatively more attractive than 70). That's the opposite of conservative if the probability of cuts to existing recipients is actually very small. In that case SPIA's are riskier credit wise (the credit risk of ins cos/state gtee orgs v something very little more than the federal govt's overall *default* risk), and we know SPIA's have a big weakness for very long term longevity hedging in not being CPI adjusted. Same if we tilt away from longevity hedging in general towards just assuming a fixed pile of assets will last till death. The arbitrary assumption is now inducing us to take on more risk, it's not conservative.
It would nice if it didn't distort the discussion to say you must assume what the SS statement says is the best estimate of what will really happen. But it's not the best estimate, or even close, and assuming it artificially promotes actually riskier alternatives at the margin compared to waiting till 70 for SS, entire sentence *IMO* (not that taking SS at 70 is *the* right answer all things considered, to beat the dead horse one more time: it's not for everybody).
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Re: I’m Planning to Claim SS @62… Well, Why Not?
as a rough rule, the "breakeven" point is about 13-14 years after the start date.
if you delay to 70, you need to live to 83-84 to have made the right choice (cashflow, not considering gains/losses)
if you thinking you can invest and produce more wealth, then the 13-14 years needs to be longer yet.
Of course, if you start early and lose money, your breakeven would have been < 13-14 years.
At least 15% of SS is never taxed, so that helps a bit too for the "you should delay" crowd
if you delay to 70, you need to live to 83-84 to have made the right choice (cashflow, not considering gains/losses)
if you thinking you can invest and produce more wealth, then the 13-14 years needs to be longer yet.
Of course, if you start early and lose money, your breakeven would have been < 13-14 years.
At least 15% of SS is never taxed, so that helps a bit too for the "you should delay" crowd
Re: I’m Planning to Claim SS @62… Well, Why Not?
A lot of people here seem to believe they'll live well into their 80s or even 90s. Wishful thinking, I'd say.iceport wrote: ↑Wed Sep 22, 2021 10:55 am I was ribbed at the start of this thread for being willing to leave $65k on the table by claiming early. Well, how do all the folks claiming at 70 feel about the possibility of leaving $183k on the table, instead, if they go early?
Still confused why nobody seems to care about that
Most of the older people in my family and in my life died in their 50s, 60s, and 70s. Two made it into the early to mid 80s, albeit with a lot of pain and a low quality of life in the last years.
And by the way, going in your 70s isn't really considered dying "early." 60s, maybe. I've never heard anyone say at the funeral of a 70-something, "oh, she was so young!"
To me, the best reasons to wait until 70 are if you have a much younger spouse and you want that spouse to have a bigger benefit or if you're using SS as a kind of longevity insurance or long term health care policy AND taking the money earlier would mean next to nothing to you in terms of quality of life.