Taking SS at 70, liability matching and FRA.

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TheTimeLord
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Taking SS at 70, liability matching and FRA.

Post by TheTimeLord »

I am currently building my liability matching from now until 70 when I plan to take SS. I know I want to liability match 100% of expenses from now until FRA, but even though I am planning to take SS at 70 I am considering dropping the liability match amount to what I would need if I took SS at FRA for the months between FRA and 70. My logic is if things in the market have been bad I can take SS and with the liability matching I will be fine. And if things in the market have been good I am likely to have done better than if I had liability matched to 100% of monthly expenses until 70. So to be clear here is what I am asking about:

Planning to take SS at 70
From now until FRA: Liability 100% of planned expenses
From FRA until 70: Liability 100% of planned expenses - SS benefit at FRA.

Thoughts?
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Tom_T
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Re: Taking SS at 70, liability matching and FRA.

Post by Tom_T »

You are saying that if the market is good, then you don't need to contribute to your SS bridge as much?

You've set up two scenarios: market is good and market is bad. What if market is so-so? Or market is good one year and bad the next? Are you going to reevaluate your SS plans every year based on the market?

How many years are we talking about until 70?
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JoeRetire
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Re: Taking SS at 70, liability matching and FRA.

Post by JoeRetire »

TheTimeLord wrote: Wed Jun 29, 2022 2:18 pm I am currently building my liability matching from now until 70 when I plan to take SS. I know I want to liability match 100% of expenses from now until FRA, but even though I am planning to take SS at 70 I am considering dropping the liability match amount to what I would need if I took SS at FRA for the months between FRA and 70. My logic is if things in the market have been bad I can take SS and with the liability matching I will be fine. And if things in the market have been good I am likely to have done better than if I had liability matched to 100% of monthly expenses until 70. So to be clear here is what I am asking about:

Planning to take SS at 70
From now until FRA: Liability 100% of planned expenses
From FRA until 70: Liability 100% of planned expenses - SS benefit at FRA.

Thoughts?
I don't understand the point.
Nor do I understand why you need to decide that strategy now.
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TheTimeLord
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Re: Taking SS at 70, liability matching and FRA.

Post by TheTimeLord »

Tom_T wrote: Wed Jun 29, 2022 2:39 pm You are saying that if the market is good, then you don't need to contribute to your SS bridge as much?

You've set up two scenarios: market is good and market is bad. What if market is so-so? Or market is good one year and bad the next? Are you going to reevaluate your SS plans every year based on the market?

How many years are we talking about until 70?
I would re-evaluating my plan to take SS at 70 based on how the money I put in the market instead of using for a liability match performed between now and FRA. But either way I have the money I need from now until 70. Also, since I am using my benefit amount at FRA for the calculation there is a bit of a safety net with each passing month.
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FactualFran
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Re: Taking SS at 70, liability matching and FRA.

Post by FactualFran »

TheTimeLord wrote: Wed Jun 29, 2022 2:54 pm I would re-evaluating my plan to take SS at 70 based on how the money I put in the market instead of using for a liability match performed between now and FRA. But either way I have the money I need from now until 70. Also, since I am using my benefit amount at FRA for the calculation there is a bit of a safety net with each passing month.
That seems like a market timing question: whether now is a good time to put money in the market rather than in a liability match.

Starting Social Security benefits at FRA rather than at age 70 reduces the monthly Social Security benefit for the rest of your life. You may or may not plan to make up for that reduced monthly benefit.
jebmke
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Re: Taking SS at 70, liability matching and FRA.

Post by jebmke »

I'm not a tweaker so anything other than setting out general plan and letting it rip is not something I would do. I've only changed my plan once for reasons un-related to market conditions or expectations.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
smitcat
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Re: Taking SS at 70, liability matching and FRA.

Post by smitcat »

Not sure what you are asking but each year that we delay SS election we need less in fixed income. As each year goes by, we then have less in fixed and more in equities.
We feel that is the easy part - the harder part is the distribution challenge between pretax, Roth, and after-tax funds.
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jeffyscott
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Re: Taking SS at 70, liability matching and FRA.

Post by jeffyscott »

So you will put a bit more in stocks and a bit less in TIPS than you would were you doing the LMP all the way to 70. And if stock market returns are poor (less than TIPS :?: ), you will just start SS at FRA, instead of 70, if I understand correctly.

But then if you start SS early won't you need more from your portfolio at 70+? And wouldn't that mean you need more in the LMP portfolio, to supplement SS, for those years than you would have had you delayed? So isn't the reduced LMP for FRA to 70 offset by a potential larger LMP needed at 70+?
smitcat
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Re: Taking SS at 70, liability matching and FRA.

Post by smitcat »

jeffyscott wrote: Wed Jun 29, 2022 3:17 pm So you will put a bit more in stocks and a bit less in TIPS than you would were you doing the LMP all the way to 70. And if stock market returns are poor (less than TIPS :?: ), you will just start SS at FRA, instead of 70, if I understand correctly.

But then if you start SS early won't you need more from your portfolio at 70+? And wouldn't that mean you need more in the LMP portfolio, to supplement SS, for those years than you would have had you delayed? So isn't the reduced LMP for FRA to 70 offset by a potential larger LMP needed at 70+?
Exactly this plus you need to adjust for the changes in taxes.
curmudgeon
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Re: Taking SS at 70, liability matching and FRA.

Post by curmudgeon »

Yeah, something like that :D

I'm actually a little less conservative on this specific point. I roughly liability match some approximation of our projected SS benefits for the time between now and when we expect to claim (70). Claiming earlier (FRA or so) is a fallback, but not part of actual planning.

The age 70 SS benefit (and a paid-off house) give a reasonably comfortable baseline lifestyle for us. I'm comfortable treating everything else (in terms of both savings and expenses) as discretionary and drawing from it with whatever WR I choose (it doesn't have to be "safe"). It's pretty much all equities. The house serves as the deep reserve for long-term care or other more extreme need.
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David Jay
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Re: Taking SS at 70, liability matching and FRA.

Post by David Jay »

I am age 65, I have 100% of living expenses to age 69 (my tentative SS filing age, depending on some deferred income) in bonds. I have 2 years in short term and 2 years in intermediate term.
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TheTimeLord
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Re: Taking SS at 70, liability matching and FRA.

Post by TheTimeLord »

jeffyscott wrote: Wed Jun 29, 2022 3:17 pm So you will put a bit more in stocks and a bit less in TIPS than you would were you doing the LMP all the way to 70. And if stock market returns are poor (less than TIPS :?: ), you will just start SS at FRA, instead of 70, if I understand correctly.

But then if you start SS early won't you need more from your portfolio at 70+? And wouldn't that mean you need more in the LMP portfolio, to supplement SS, for those years than you would have had you delayed? So isn't the reduced LMP for FRA to 70 offset by a potential larger LMP needed at 70+?
Not exactly, I assume even if returns in the market are poor over that period they should get at some period past FRA before needing to take SS. It would mean my Post-SS portfolio would need to contribute more but I manage it separately. In essence I am trying to make sure I am not becoming overly conservative because I am liability matching.
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BigJohn
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Re: Taking SS at 70, liability matching and FRA.

Post by BigJohn »

Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
smitcat
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Re: Taking SS at 70, liability matching and FRA.

Post by smitcat »

BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
SGM
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Re: Taking SS at 70, liability matching and FRA.

Post by SGM »

I look at delaying SS until 70 as longevity insurance and would decrease what I needed to pull out of investments for expenses over many years of retirement. The real danger regarding running out of money is living too long. There are no better annuities available than delaying SS to 70. I also like that I get larger adjustments upwards than if I took SS at my FRA.

I retired at 66 and delayed SS for 4 years until 70. The expectation is that at least one of us will live past 90 and the parents of DW both lived beyond 100. We also used the time after I retired and before taking SS to do Roth conversions.
BigJohn
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Re: Taking SS at 70, liability matching and FRA.

Post by BigJohn »

smitcat wrote: Thu Jun 30, 2022 7:30 am
BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
I agree. I’ve used it and get essentially the same result claiming anytime between 69.5 to 70.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
heyyou
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Re: Taking SS at 70, liability matching and FRA.

Post by heyyou »

Does delayed, larger SS transfer to the surviving spouse?
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TheTimeLord
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Re: Taking SS at 70, liability matching and FRA.

Post by TheTimeLord »

heyyou wrote: Thu Jun 30, 2022 10:18 am Does delayed, larger SS transfer to the surviving spouse?
No, we are very close in age and benefit. Delaying is mainly a function of not needing to take the benefit earlier and wanting to spend down Tax Deferred accounts efficiently to avoid taxation of SS benefits as much as possible, as well as taxation issues for a surviving spouse.
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smitcat
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Re: Taking SS at 70, liability matching and FRA.

Post by smitcat »

BigJohn wrote: Thu Jun 30, 2022 9:22 am
smitcat wrote: Thu Jun 30, 2022 7:30 am
BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
I agree. I’ve used it and get essentially the same result claiming anytime between 69.5 to 70.
And that is exactly why I have said the more challenging part is the tax issues with balancing differing accounts between pretax, Roth, and after tax.
More significant by a larger margin that when to elect SS
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TheTimeLord
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Re: Taking SS at 70, liability matching and FRA.

Post by TheTimeLord »

smitcat wrote: Thu Jun 30, 2022 1:59 pm
BigJohn wrote: Thu Jun 30, 2022 9:22 am
smitcat wrote: Thu Jun 30, 2022 7:30 am
BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
I agree. I’ve used it and get essentially the same result claiming anytime between 69.5 to 70.
And that is exactly why I have said the more challenging part is the tax issues with balancing differing accounts between pretax, Roth, and after tax.
More significant by a larger margin that when to elect SS
Spending down tax deferred accounts (and Roth conversions) is a large part of my motivation for delaying SS.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
smitcat
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Re: Taking SS at 70, liability matching and FRA.

Post by smitcat »

TheTimeLord wrote: Thu Jun 30, 2022 2:07 pm
smitcat wrote: Thu Jun 30, 2022 1:59 pm
BigJohn wrote: Thu Jun 30, 2022 9:22 am
smitcat wrote: Thu Jun 30, 2022 7:30 am
BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
I agree. I’ve used it and get essentially the same result claiming anytime between 69.5 to 70.
And that is exactly why I have said the more challenging part is the tax issues with balancing differing accounts between pretax, Roth, and after tax.
More significant by a larger margin that when to elect SS
Spending down tax deferred accounts (and Roth conversions) is a large part of my motivation for delaying SS.
Same with us....
BigJohn
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Re: Taking SS at 70, liability matching and FRA.

Post by BigJohn »

smitcat wrote: Thu Jun 30, 2022 1:59 pm
BigJohn wrote: Thu Jun 30, 2022 9:22 am
smitcat wrote: Thu Jun 30, 2022 7:30 am
BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
I agree. I’ve used it and get essentially the same result claiming anytime between 69.5 to 70.
And that is exactly why I have said the more challenging part is the tax issues with balancing differing accounts between pretax, Roth, and after tax.
More significant by a larger margin that when to elect SS
In my case they are linked in that claiming SS early is inconsistent with my desire to move from the 100/0 tIRA/Roth position I was in at retirement. Fortunately, that's perfectly aligned with my desire for maximum longevity insurance via max deferral. Never had to think about what I'd do in other circumstances.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
jbinpa59
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Re: Taking SS at 70, liability matching and FRA.

Post by jbinpa59 »

heyyou wrote: Thu Jun 30, 2022 10:18 am Does delayed, larger SS transfer to the surviving spouse?
iirc surviving spouse gets the larger of the two PIAs if both have already filed

It does make a difference in a couples recomended claiming stratagy if one spouse( esp the female) has a much lower FRA PIA benifit on their own earnings record

open Social Security com does explore that nicely
heyyou
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Re: Taking SS at 70, liability matching and FRA.

Post by heyyou »

A singular data point: Having delayed SS to 70, I'm pleased with the results of having those interim years to make Roth conversions from my tIRA, reducing my future taxes on RMDs. Current stock fund values now, are a good opportunity for doing Roth conversions.

I wonder about loss harvesting in taxable accounts these days, to help offset the increased income of Roth conversions.
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Monster99
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Re: Taking SS at 70, liability matching and FRA.

Post by Monster99 »

heyyou wrote: Fri Jul 01, 2022 12:08 am A singular data point: Having delayed SS to 70, I'm pleased with the results of having those interim years to make Roth conversions from my tIRA, reducing my future taxes on RMDs. Current stock fund values now, are a good opportunity for doing Roth conversions.

I wonder about loss harvesting in taxable accounts these days, to help offset the increased income of Roth conversions.
This what I am doing - trying to put as much as possible into the Roth before I claim SS. I have both pension and and 401K accounts, so SS will be taxed at the max when I claim.
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Wiggums
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Re: Taking SS at 70, liability matching and FRA.

Post by Wiggums »

Same strategy here. We have same SS and pension benefit with 2/3rds in traditional IRAs. Our priority is larger Roth conversions before the tax rates revert and delaying SS.
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TheTimeLord
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Re: Taking SS at 70, liability matching and FRA.

Post by TheTimeLord »

Monster99 wrote: Fri Jul 01, 2022 6:52 am
heyyou wrote: Fri Jul 01, 2022 12:08 am A singular data point: Having delayed SS to 70, I'm pleased with the results of having those interim years to make Roth conversions from my tIRA, reducing my future taxes on RMDs. Current stock fund values now, are a good opportunity for doing Roth conversions.

I wonder about loss harvesting in taxable accounts these days, to help offset the increased income of Roth conversions.
This what I am doing - trying to put as much as possible into the Roth before I claim SS. I have both pension and and 401K accounts, so SS will be taxed at the max when I claim.
I find it somewhat ironic that people are always touting delaying SS as longevity insurance, which it will be, yet so many of us here seem to be delaying it for tax and portfolio optimization reasons with longevity insurance being a nice benefit. Maybe that is the definition of winning the game.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
smitcat
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Re: Taking SS at 70, liability matching and FRA.

Post by smitcat »

BigJohn wrote: Thu Jun 30, 2022 4:59 pm
smitcat wrote: Thu Jun 30, 2022 1:59 pm
BigJohn wrote: Thu Jun 30, 2022 9:22 am
smitcat wrote: Thu Jun 30, 2022 7:30 am
BigJohn wrote: Wed Jun 29, 2022 5:51 pm Waiting to take SS until age 70 is longevity insurance which you might need even more if there is a prolonged bear or even sideways market in early retirement. Personally, I wouldn’t do anything where the outcome might be I was pushed to take SS early. Either you want the longevity insurance or you don’t. Pick a choice and stick with it, don’t try to outguess or time the market.
FWIW - by utilizing the excellent opensocialsecurity calculator you get the 'optimum' claiming strategy. After you input your data and let the calculator run the results are listed and at the bottom is a color chart.
That color chart is interactive and can be used to quickly see the results of other alternate claiming strategies (in % of 'best').
Playing with that chart became a big eye opener for us, perhaps it will for you as well.
I agree. I’ve used it and get essentially the same result claiming anytime between 69.5 to 70.
And that is exactly why I have said the more challenging part is the tax issues with balancing differing accounts between pretax, Roth, and after tax.
More significant by a larger margin that when to elect SS
In my case they are linked in that claiming SS early is inconsistent with my desire to move from the 100/0 tIRA/Roth position I was in at retirement. Fortunately, that's perfectly aligned with my desire for maximum longevity insurance via max deferral. Never had to think about what I'd do in other circumstances.
Yes exactly - ours are linked as well although not the same ratios.
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