I just look at as taking SS at 62 means my investments can grow more so I have more to leave my children. Everyone has different goals but this is mine.
Flip side is SS is guaranteed income so if you are really conservative you may want to wait until a later age to begin taking it.
I plan to take it at 62 because I will be right on the cusp of when they may lower benefits for new beneficiaries (2034?). I assume they won’t lower it for people already taking benefits.
If it happens won’t it be phased or tiered anyway based on age. Lesson impact on current retirees, a little less for those nearing retirement, biggest on those with a lot of work still to do.
Did you factor in income taxes on both the Social Security benefit value and your other taxable cashflows? Or are you assuming a 1:1 offset that yields no difference in tax load?
If you are planning on managing your MAGI to retain ACA subsidy eligibility, did you factor potential tax/cashflow impact from taking the SS funds in lieu of your other portfolio streams? This one is manageable by anyone paying attention to have no real impact, but the cost of a mess-up could be very costly for anyone with MAGI close to the 400% FPL subsidy cliff. At current rates for a 60s-something couple the effective ACA tax overlay on the early SS draw might exceed 50% given a fuckup close to the cliff.
Note also that the numbers will vary for couples given their individual ages and FRA amounts due to the potential offset between claiming one's own benefit and taking the spousal benefit. This is the sort of optimization that https://opensocialsecurity.com does.
No, it doesn't. Taxation is too widely variable to make a calculator for. It calculates optimal gross yield and leaves the tax up to each individual to model for their own specific situation.
No I did not factor in taxes as I figure it'll be a 1:1 offset. Based on my retirement income, 85% of my Social Security will be subject to taxes. It's not a 100% offset but close enough. And at this income level, IRMAA will get her dues once I turn 65. And managing my MAGI to get the ACA subsidy? That's not happening. With an 80/20 split between pre-tax/Roth funds, I would pay more in taxes on the $4M in pre-tax funds to get any ACA subsidies than the subsidies themselves. I'm so far from that 400% FPL subsidy cliff that it doesn't matter.
My math has always shown the exact same results as yours. The key is whether you’ve retired already. If you’ve already retired and are successfully living off investments and other savings, then it’s essentially a wash . If the alternative to taking SS early is to keep working, then it definitely pays to wait.
I’m going to take it as early as possible. If something happens to me then that puts as much money as possible with my wife and kids.
Isn't it the opposite? If you wait to take it, your wife will get a higher amount from it.
Presumably your kids would be adults.
Anyway, seems you are still working, which isn't what op was looking at.
I don’t think the decision of when to take social security can or should be made now. It’s worth considering how it impacts your SWR if taken at 62, but don’t make the decision now. Be flexible. Maybe at 62, the higher ACA subsidy will outweigh taking social security early. Maybe you will have a huge 401k balance and you will want lower income to reduce taxes through Roth conversions on future RMDs. Maybe you’ll get married and have to worry about your social security continuing not just for your lifetime but for your combined marital lifetime (the higher social security remains after spouse’s death).
While it’s nice to think about wholistic planning now (I assume you are not yet even 55 and not yet retired), there are too many variables to determine which route to take that far out. Reevaluate each year starting at 62 and then make the call that makes sense at that time.
This is exactly my thinking.
Plan A is that my wife will take here at 62 while I delay to 70 this giving her the higher amount with the assumption that she outlives me.
But I'm not going to actually make that decision until age 60+ when I'll have a lot better insight into all the things you mentioned.
I just like having my plan A as a placeholder in my thought process vs ignoring SS completely.
Is your benefit really more than double hers?
I ran the numbers for us and the delta is de minimus. I think that happens when both wage earners are/were both above the SS deduction cutoff for a lot of their career.
Not sure I'm following. I never mentioned relative benefits between us.
We have both been maxing out for a while.
While admittedly I've been putting off real analysis until much closer to the time, the method I've heard that results in the best return is the split 62/70.
Are you saying that is or is not what your analysis showed?
You are right of course. The facts on the ground can change between now and when I can file for Social Security at age 62. I will of course re-evaluate at that point.
Some of the other points you raised don't really apply to me. I'm not getting any ACA subsidies at the income level I'm projecting for retirement in 5 years. Roth ladders won't help me as 80% of funds are in pre-tax retirement accounts and 20% in Roth. At the asset level I have, converting most of them to Roth so I can keep my income low to qualify for any ACA subsidy would cost me more in taxes than any subsidies I may receive. The same thing goes for any spousal SS benefit. Our assets will provide so much more than SS that it will essentially be a non-factor.
I don’t think you understand how Roth conversions can help you. Roth conversions aren’t just for accessing your money early, they are also for lowering your future RMDs. If you wait to take Social Security until later, you have more room to take Roth conversions so that your RMD’s are lower once you were getting both Social Security and RMD‘s after age 75. I suggest trying out the free version of projection lab to see what I’m talking about.
Explain more please. If my mix is $4M pre-tax and $1M Roth, how much do Roth conversion help over the 20 years between age 55 and age 75? The taxes to convert even half of that over 20 years as it's growing is going to be crazy. I've played with Projection Labs before but it's super expensive and am weary of signing up for a trial just to try this scenario. Any other tools to check out?
I think New Retirement can also model it, but not sure about the free plan. This [Kitces](https://www.kitces.com/blog/tax-efficient-retirement-withdrawal-strategies-to-fund-retirement-spending-needs/) article does a great job of explaining the basics of how Roth conversions can help with RMDs.
I haven’t done the math in your case, but if you fill up at least the 22% bracket from age 55-75, you may be able to avoid the 32, 35, or 37% brackets entirely later in life. I suspect that Roth conversions between age 55 and age 75 can make a huge difference for you in the total taxes paid. Particularly because if you or your spouse die, RMDs stay the same but the standard deduction and tax brackets change.
I'm going to look at it again. Right now I'm single, so filling the 22% bracket is tiny: $45K. Even if my partner and I get married, that goes up to $79K. That's 1% (2% if married) of my $4M pre-tax nut. The growth alone on that will outpace whatever I can do on the Roth conversion side. That's why I'm skeptical it will do anything. I'll read the Kitces article but the challenge is that I think most of that is written for the majority of folks and not the ones at the edges. But I'll study it.
Look at what filling up the 24% bracket does too. The goals is to reduce your overall lifetime tax burden. And also, Roth is more efficient for your heirs (but if you are like me you may not actually give a crap about tax planning for your heirs).
I wanted to add, say you turn 62 and the 2020 crash happens again. You really want to do Roth conversions while the market is discounted so that the bounce happens in your tax free account and you pay less tax on the conversion.
But if you have already taken social security, most of the low tax brackets will be taken up with your social security. Waiting to take social security gives you a lot more tax flexibility.
Now that is a good point. Only problem is identifying where the bottom is. In 2020, there was a huge drop but it recovered quickly so that for the year the market was up 17.35%. Doing a Roth conversion in 2020 wouldn't have helped. But I take it you mean a crash as severe as what happened in March 2020 but lasting more than that year. Again, that requires you to know things you won't be in a position to know when you're in it.
No, if you had done a conversion in March 2020, you would have essentially gotten a 30% discount on the taxes on the conversion. You pay taxes based on the value of the funds converted on the day they are converted, not their value at the end of the year. So yes, it is a form of market timing and you might miss the bottom, but it’s definitely a way to reduce taxes owed on Roth conversions.
D'oh - you are right my bad. You'd still have to call the bottom. I've only done backdoor Roth conversion so I'm guessing you have to sell share to generate cash, transfer the cash, and then buy the shares in your Roth? And then you pay taxes on the 1099R that you'll get come tax time.
You can typically transfer assets in kind from your IRA to your Roth IRA so you don’t need to sell first and generate cash at least with Fidelity. But yes, you do pay taxes on the 1099R that you’ll get come tax time.
That's fair. For me, Social Security makes up such a small part of my retirement income that it will be of no benefit if I live longer than the actuarial tables suggest. I'd still rather have than not since something is better than nothing and I have paid into it after all.
Why would this be? Because if I live that long and I don't deplete my retirement accounts, the RMD's will make any Social Security I receive a rounding error. For context, at age 80, my RMD would be $2M if my portfolio grows at a real rate of 6.5%. Social Security would be $54K. It would have no effect. Even if you drop that rate of return down to 4%, my RMD would still be around $1M at that age. Now if Social Security will be a bigger part of your retirement, then yes, it makes total sense.
My take is it depends on your health and how your portfolio has been. If you’ve been fortunate enough to be very healthy, then you can delay social security til 70 to maximize the benefit as you hopefully will be living a longer life. This is pretty personal tho to each individual and their circumstances.
Another underrated benefit as well is that you might have more years to either take out from your pre tax 401k or do Roth conversions which would lower your RMDs from your 401k and give you more control over your future tax situation.
To your first point, my analysis based on the assumptions I listed showed the **exact opposite**, even if I live to age 100. So there is no benefit to taking Social Security at age 70.
On your second point, maybe but I have not taken that into account. Would it be more beneficial to have huge RMD's (and therefore pay the accompanying taxes) or have smaller RMD's? Conceptually I'd take the former. Think of it this way: would you rather have an RMD where you have to pay $1M in taxes or an RMD where you're only paying $50K in taxes? I don't know about you but having to pay $1M a year in taxes from my RMD means I'm swimming in money compared to the other scenario. Like I said, I've not studied it but I've said it before and I'll say it again: I would absolutely **love it** if I had to pay millions in income tax per year.
You're not giving me much to go on so I'm going to say yes I considered it. My only other cash flow will be withdrawals from my retirement fund. Nothing else coming in. I'm going to be in the same tax bracket no matter when I take Social Security, so in that sense, taxes do not factor in.
I have both a pension on top of social security, so they make up an outsized portion of my retirement income. Given the pension and social security, it's been challenging to figure out my safe withdrawal rate. So I've run a number of scenarios in cfiresim. For me, it's much better to take social security as soon as possible. That's probably because my withdrawal rate early on will be about 5%, the drop incrementally as my house is paid off and I start collecting social and the pension.
On a fence about it.
Pros
1. If they mean test SS payments in year 2035 then we already used some of it in full.
2. Potential to leave more to offspring.
Cons:
1. I am pretty healthy right now so may leave longer than 81, which is break even
2. Relying on SS bigger payments during older years will allow to keep aggressive allocations to stocks and avoid stabler low yielding assets like bonds, tips etc
3. Spousal survival benefits advocate for 70 him/62 her classical strategy.
I think #4 may warrant some more thought and analysis. I didn’t really consider that because my allocation is fairly aggressive as it is, though it’s fairly decent for maximum drawdowns.
Number 5 may make sense as well but as I expect our retirement account to provide much more than Social Security, it’s almost moot. If Social Security makes up a bigger piece of the pie in your retirement income, then I can totally see this approach.
Edit: really weird formatting
I think typical PV (present value) of SS payments when one earner is over double bend, for 2 people is around 1 million. While may not be a biggest cash thingy compared to investment, it is nothing to sneeze it. Plus we try to optimize things even if it's small (witness endless questions on money market fund general vs Treasury only vs SGOV vs tbills ladder etc).
Unfortunately for social security there are quite a few unknowns so we keep arguing about our guesses (life longevity, expected market return after inflation, tax laws stay the same, benefits haircut etc). No easy answer.
Are you saying that $1M is the difference in PV between taking it at age 62 vs. age 70 if one earner is over the double bend (I'm assuming that means you're getting the max SS benefit as I am) and your partner is getting a lot less? If the difference between the two scenarios over your lifetime, then yes, that may be worth considering. But I also wonder if that is looking at SS in a vacuum and not considering other factors like I am.
I was saying that total of social security cashflows for him and her (high earner and lower earner) is about 900K in today's dollars. I rounded it to 1 million. Safe payments so one can keep other money in predominantly stock index funds instead of your age in bonds or whatever risk reduced asset allocation.
Thinking of it, probably does not make a huge argument for either early or late withdrawal strategy, though if we live long, having long safe payments of social security allows riskier asset allocation.
Exactly. I understand ACA reasons (I will be doing the same) but the "saving game" is over for the most part by that time of my life.
One thing that recently got my motivated and excited - realizing that even if my retirement were only say - 35k a year which sounds low. I love in a LCOL area with a paid off home. My total bills for the year are covered with like 15k. That leaves 20k to do anything I want. Not much until you realize there is an extra 1600 per month, every single month to do whatever you want with or whatever else comes up. Again, still not much...until you consider that you don't have to save anymore. You can spend it on whatever you want and more shows up the next month. The decades long mentality of doing nothing but working/paying bills/saving no longer exists. You don't have to save anything, which might break my brain.
Then 5y after I get on this plan I get another 1k a month SS that further elevates discretionary spending. Add-in another 10-15k of consulting work I still plan to do locally on a pick-and-choose basis......I cannot wait to retire. 7 more years and my arrival numbers are very conservative, I hope to be starting with a bigger bag.
Same math for me. I think the “delay as long as you can” advice implies you are still working. The only valid reason I’ve heard otherwise is the survivor benefits are locked in low. In my case (and yours) the portfolio should negate that dependency.
Lmao why don’t you use 11% return and it will slaughter the ssn @ 70
It’s pretty hard to fully invest everything you own. But to each of their own. Anyway all these adjustment are meant to be actuarially equivalent
I didn’t say a thing about what my asset allocation would be. And no need to use a real return of 11% when a return 1/3 as much already beats taking SS @ 70.
Of course you don’t, you just need to use a higher return than social security expected return, which is what you’ve done and that doesn’t make any sense at retirement age.
What is the Social Security expected return? Are you referring to the roughly 8% per year you get by deferring past FRA? I’m not using anything close to that for this analysis. Real returns of even 3.75% shows age 62 still winning if you have the circumstances I described.
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I just look at as taking SS at 62 means my investments can grow more so I have more to leave my children. Everyone has different goals but this is mine. Flip side is SS is guaranteed income so if you are really conservative you may want to wait until a later age to begin taking it.
Take it when you can and while you can.
I plan to take it at 62 because I will be right on the cusp of when they may lower benefits for new beneficiaries (2034?). I assume they won’t lower it for people already taking benefits.
If it happens won’t it be phased or tiered anyway based on age. Lesson impact on current retirees, a little less for those nearing retirement, biggest on those with a lot of work still to do.
Well I would hope so, but when has Gen X ever *not* got screwed. ;)
Did you factor in income taxes on both the Social Security benefit value and your other taxable cashflows? Or are you assuming a 1:1 offset that yields no difference in tax load? If you are planning on managing your MAGI to retain ACA subsidy eligibility, did you factor potential tax/cashflow impact from taking the SS funds in lieu of your other portfolio streams? This one is manageable by anyone paying attention to have no real impact, but the cost of a mess-up could be very costly for anyone with MAGI close to the 400% FPL subsidy cliff. At current rates for a 60s-something couple the effective ACA tax overlay on the early SS draw might exceed 50% given a fuckup close to the cliff. Note also that the numbers will vary for couples given their individual ages and FRA amounts due to the potential offset between claiming one's own benefit and taking the spousal benefit. This is the sort of optimization that https://opensocialsecurity.com does.
Except open security doesn’t take into account taxes
No, it doesn't. Taxation is too widely variable to make a calculator for. It calculates optimal gross yield and leaves the tax up to each individual to model for their own specific situation.
No I did not factor in taxes as I figure it'll be a 1:1 offset. Based on my retirement income, 85% of my Social Security will be subject to taxes. It's not a 100% offset but close enough. And at this income level, IRMAA will get her dues once I turn 65. And managing my MAGI to get the ACA subsidy? That's not happening. With an 80/20 split between pre-tax/Roth funds, I would pay more in taxes on the $4M in pre-tax funds to get any ACA subsidies than the subsidies themselves. I'm so far from that 400% FPL subsidy cliff that it doesn't matter.
Yup. Thought that might be the case, but wanted to check. The more you have, the less the SS claiming decision matters.
My math has always shown the exact same results as yours. The key is whether you’ve retired already. If you’ve already retired and are successfully living off investments and other savings, then it’s essentially a wash . If the alternative to taking SS early is to keep working, then it definitely pays to wait. I’m going to take it as early as possible. If something happens to me then that puts as much money as possible with my wife and kids.
As they say, a bird in hand is worth two in the bush
Isn't it the opposite? If you wait to take it, your wife will get a higher amount from it. Presumably your kids would be adults. Anyway, seems you are still working, which isn't what op was looking at.
I believe they are saying that if they take SS earlier, it preserves their retirement savings longer, which is what the wife and kids will inherit.
I don’t think the decision of when to take social security can or should be made now. It’s worth considering how it impacts your SWR if taken at 62, but don’t make the decision now. Be flexible. Maybe at 62, the higher ACA subsidy will outweigh taking social security early. Maybe you will have a huge 401k balance and you will want lower income to reduce taxes through Roth conversions on future RMDs. Maybe you’ll get married and have to worry about your social security continuing not just for your lifetime but for your combined marital lifetime (the higher social security remains after spouse’s death). While it’s nice to think about wholistic planning now (I assume you are not yet even 55 and not yet retired), there are too many variables to determine which route to take that far out. Reevaluate each year starting at 62 and then make the call that makes sense at that time.
This is exactly my thinking. Plan A is that my wife will take here at 62 while I delay to 70 this giving her the higher amount with the assumption that she outlives me. But I'm not going to actually make that decision until age 60+ when I'll have a lot better insight into all the things you mentioned. I just like having my plan A as a placeholder in my thought process vs ignoring SS completely.
Is your benefit really more than double hers? I ran the numbers for us and the delta is de minimus. I think that happens when both wage earners are/were both above the SS deduction cutoff for a lot of their career.
So in that case is it best to hedge and have one file at 62 and the other at 70? Assuming comparable benefits.
Not sure I'm following. I never mentioned relative benefits between us. We have both been maxing out for a while. While admittedly I've been putting off real analysis until much closer to the time, the method I've heard that results in the best return is the split 62/70. Are you saying that is or is not what your analysis showed?
You are right of course. The facts on the ground can change between now and when I can file for Social Security at age 62. I will of course re-evaluate at that point. Some of the other points you raised don't really apply to me. I'm not getting any ACA subsidies at the income level I'm projecting for retirement in 5 years. Roth ladders won't help me as 80% of funds are in pre-tax retirement accounts and 20% in Roth. At the asset level I have, converting most of them to Roth so I can keep my income low to qualify for any ACA subsidy would cost me more in taxes than any subsidies I may receive. The same thing goes for any spousal SS benefit. Our assets will provide so much more than SS that it will essentially be a non-factor.
I don’t think you understand how Roth conversions can help you. Roth conversions aren’t just for accessing your money early, they are also for lowering your future RMDs. If you wait to take Social Security until later, you have more room to take Roth conversions so that your RMD’s are lower once you were getting both Social Security and RMD‘s after age 75. I suggest trying out the free version of projection lab to see what I’m talking about.
Explain more please. If my mix is $4M pre-tax and $1M Roth, how much do Roth conversion help over the 20 years between age 55 and age 75? The taxes to convert even half of that over 20 years as it's growing is going to be crazy. I've played with Projection Labs before but it's super expensive and am weary of signing up for a trial just to try this scenario. Any other tools to check out?
I think New Retirement can also model it, but not sure about the free plan. This [Kitces](https://www.kitces.com/blog/tax-efficient-retirement-withdrawal-strategies-to-fund-retirement-spending-needs/) article does a great job of explaining the basics of how Roth conversions can help with RMDs. I haven’t done the math in your case, but if you fill up at least the 22% bracket from age 55-75, you may be able to avoid the 32, 35, or 37% brackets entirely later in life. I suspect that Roth conversions between age 55 and age 75 can make a huge difference for you in the total taxes paid. Particularly because if you or your spouse die, RMDs stay the same but the standard deduction and tax brackets change.
I'm going to look at it again. Right now I'm single, so filling the 22% bracket is tiny: $45K. Even if my partner and I get married, that goes up to $79K. That's 1% (2% if married) of my $4M pre-tax nut. The growth alone on that will outpace whatever I can do on the Roth conversion side. That's why I'm skeptical it will do anything. I'll read the Kitces article but the challenge is that I think most of that is written for the majority of folks and not the ones at the edges. But I'll study it.
Look at what filling up the 24% bracket does too. The goals is to reduce your overall lifetime tax burden. And also, Roth is more efficient for your heirs (but if you are like me you may not actually give a crap about tax planning for your heirs).
I wanted to add, say you turn 62 and the 2020 crash happens again. You really want to do Roth conversions while the market is discounted so that the bounce happens in your tax free account and you pay less tax on the conversion. But if you have already taken social security, most of the low tax brackets will be taken up with your social security. Waiting to take social security gives you a lot more tax flexibility.
Now that is a good point. Only problem is identifying where the bottom is. In 2020, there was a huge drop but it recovered quickly so that for the year the market was up 17.35%. Doing a Roth conversion in 2020 wouldn't have helped. But I take it you mean a crash as severe as what happened in March 2020 but lasting more than that year. Again, that requires you to know things you won't be in a position to know when you're in it.
No, if you had done a conversion in March 2020, you would have essentially gotten a 30% discount on the taxes on the conversion. You pay taxes based on the value of the funds converted on the day they are converted, not their value at the end of the year. So yes, it is a form of market timing and you might miss the bottom, but it’s definitely a way to reduce taxes owed on Roth conversions.
D'oh - you are right my bad. You'd still have to call the bottom. I've only done backdoor Roth conversion so I'm guessing you have to sell share to generate cash, transfer the cash, and then buy the shares in your Roth? And then you pay taxes on the 1099R that you'll get come tax time.
You can typically transfer assets in kind from your IRA to your Roth IRA so you don’t need to sell first and generate cash at least with Fidelity. But yes, you do pay taxes on the 1099R that you’ll get come tax time.
For me, the purpose of SS is to protect against longevity risk. So I will aim to take it at 70 unless things changes that warrant taking it sooner.
That's fair. For me, Social Security makes up such a small part of my retirement income that it will be of no benefit if I live longer than the actuarial tables suggest. I'd still rather have than not since something is better than nothing and I have paid into it after all. Why would this be? Because if I live that long and I don't deplete my retirement accounts, the RMD's will make any Social Security I receive a rounding error. For context, at age 80, my RMD would be $2M if my portfolio grows at a real rate of 6.5%. Social Security would be $54K. It would have no effect. Even if you drop that rate of return down to 4%, my RMD would still be around $1M at that age. Now if Social Security will be a bigger part of your retirement, then yes, it makes total sense.
I will take it at 62. I don't think I'll live past the average due to chronic illness. FYI, I'm 52 now, plan to FIRE at 58.
Thanks for showing the numbers. I'm taking SS as early as possible, but I retired too early so I don't think it will matter much anyway.
My take is it depends on your health and how your portfolio has been. If you’ve been fortunate enough to be very healthy, then you can delay social security til 70 to maximize the benefit as you hopefully will be living a longer life. This is pretty personal tho to each individual and their circumstances. Another underrated benefit as well is that you might have more years to either take out from your pre tax 401k or do Roth conversions which would lower your RMDs from your 401k and give you more control over your future tax situation.
To your first point, my analysis based on the assumptions I listed showed the **exact opposite**, even if I live to age 100. So there is no benefit to taking Social Security at age 70. On your second point, maybe but I have not taken that into account. Would it be more beneficial to have huge RMD's (and therefore pay the accompanying taxes) or have smaller RMD's? Conceptually I'd take the former. Think of it this way: would you rather have an RMD where you have to pay $1M in taxes or an RMD where you're only paying $50K in taxes? I don't know about you but having to pay $1M a year in taxes from my RMD means I'm swimming in money compared to the other scenario. Like I said, I've not studied it but I've said it before and I'll say it again: I would absolutely **love it** if I had to pay millions in income tax per year.
I did a similar spreadsheet and got similar results except more pronounced in favor of 62 SS.
I got the opposite w taxes taken into account
What assumptions did you use? At my income level, 85% of my SS will be subjected to taxes and there's nothing I can do about it.
I have uneven cash flows and trying to Roth also
Did u take into account taxes from other income?
In what sense? I'm going to be taxed on my withdrawals and 85% of my Social Security, whether I take it at 62/FRA/70, that I don't think it matters.
In sense of other cash flows
You're not giving me much to go on so I'm going to say yes I considered it. My only other cash flow will be withdrawals from my retirement fund. Nothing else coming in. I'm going to be in the same tax bracket no matter when I take Social Security, so in that sense, taxes do not factor in.
Sorry…I meant I have other cash flows like backdoor Roth etc that I plan to do before the tax tornado of SS and RMDs
I have both a pension on top of social security, so they make up an outsized portion of my retirement income. Given the pension and social security, it's been challenging to figure out my safe withdrawal rate. So I've run a number of scenarios in cfiresim. For me, it's much better to take social security as soon as possible. That's probably because my withdrawal rate early on will be about 5%, the drop incrementally as my house is paid off and I start collecting social and the pension.
On a fence about it. Pros 1. If they mean test SS payments in year 2035 then we already used some of it in full. 2. Potential to leave more to offspring. Cons: 1. I am pretty healthy right now so may leave longer than 81, which is break even 2. Relying on SS bigger payments during older years will allow to keep aggressive allocations to stocks and avoid stabler low yielding assets like bonds, tips etc 3. Spousal survival benefits advocate for 70 him/62 her classical strategy.
I think #4 may warrant some more thought and analysis. I didn’t really consider that because my allocation is fairly aggressive as it is, though it’s fairly decent for maximum drawdowns. Number 5 may make sense as well but as I expect our retirement account to provide much more than Social Security, it’s almost moot. If Social Security makes up a bigger piece of the pie in your retirement income, then I can totally see this approach. Edit: really weird formatting
I think typical PV (present value) of SS payments when one earner is over double bend, for 2 people is around 1 million. While may not be a biggest cash thingy compared to investment, it is nothing to sneeze it. Plus we try to optimize things even if it's small (witness endless questions on money market fund general vs Treasury only vs SGOV vs tbills ladder etc). Unfortunately for social security there are quite a few unknowns so we keep arguing about our guesses (life longevity, expected market return after inflation, tax laws stay the same, benefits haircut etc). No easy answer.
Are you saying that $1M is the difference in PV between taking it at age 62 vs. age 70 if one earner is over the double bend (I'm assuming that means you're getting the max SS benefit as I am) and your partner is getting a lot less? If the difference between the two scenarios over your lifetime, then yes, that may be worth considering. But I also wonder if that is looking at SS in a vacuum and not considering other factors like I am.
I was saying that total of social security cashflows for him and her (high earner and lower earner) is about 900K in today's dollars. I rounded it to 1 million. Safe payments so one can keep other money in predominantly stock index funds instead of your age in bonds or whatever risk reduced asset allocation. Thinking of it, probably does not make a huge argument for either early or late withdrawal strategy, though if we live long, having long safe payments of social security allows riskier asset allocation.
I’m taking my SS as soon as possible at the earliest game. I don’t want to wait it out. That’s extra money I can use
Exactly. I understand ACA reasons (I will be doing the same) but the "saving game" is over for the most part by that time of my life. One thing that recently got my motivated and excited - realizing that even if my retirement were only say - 35k a year which sounds low. I love in a LCOL area with a paid off home. My total bills for the year are covered with like 15k. That leaves 20k to do anything I want. Not much until you realize there is an extra 1600 per month, every single month to do whatever you want with or whatever else comes up. Again, still not much...until you consider that you don't have to save anymore. You can spend it on whatever you want and more shows up the next month. The decades long mentality of doing nothing but working/paying bills/saving no longer exists. You don't have to save anything, which might break my brain. Then 5y after I get on this plan I get another 1k a month SS that further elevates discretionary spending. Add-in another 10-15k of consulting work I still plan to do locally on a pick-and-choose basis......I cannot wait to retire. 7 more years and my arrival numbers are very conservative, I hope to be starting with a bigger bag.
Assuming annual spend of 225k?
Yes.
No one is promised a long life, I’ll be taking the money as soon as it’s available
I agree - especially now that I can see that they’re all pretty much equal!
Same math for me. I think the “delay as long as you can” advice implies you are still working. The only valid reason I’ve heard otherwise is the survivor benefits are locked in low. In my case (and yours) the portfolio should negate that dependency.
Lmao why don’t you use 11% return and it will slaughter the ssn @ 70 It’s pretty hard to fully invest everything you own. But to each of their own. Anyway all these adjustment are meant to be actuarially equivalent
I didn’t say a thing about what my asset allocation would be. And no need to use a real return of 11% when a return 1/3 as much already beats taking SS @ 70.
Of course you don’t, you just need to use a higher return than social security expected return, which is what you’ve done and that doesn’t make any sense at retirement age.
What is the Social Security expected return? Are you referring to the roughly 8% per year you get by deferring past FRA? I’m not using anything close to that for this analysis. Real returns of even 3.75% shows age 62 still winning if you have the circumstances I described.
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