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I realize I am on the outside looking in, out of sync, ignoring “expert” advice and rehashing the subject, but I can’t help it. I need help here.
I simply cannot understand why anyone living off their investments would use those investments to live on in favor of delaying social security until age 70.
It seems to me that unless there is a gigantic pool of money they’ll never need, they are taking an unnecessary risk using more of their investments sooner rather than later. I think they call it opportunity cost. I used three AI apps and they all had the usual arguments for and against delaying to age 70. They were consistent about taking benefits when you need the money to live on and cautioned about using other assets just to delay.
Yes, I get some of it. A higher monthly SS benefit and with it a possible higher spousal survivor benefit. But part of the value there is the age difference between spouses. Assume age 70 is achieved, the life expectancy for males: is approximately 14 to 15 years. for females: approximately 16 to 17 years. Unless there is a significant younger age difference for a surviving spouse, there is not much time for the higher benefit to be needed – statistically. And you can provide for survivors in other ways.
Is a retirement plan going to succeed or fail based on the higher monthly Social Security benefit starting at age 70? Is that more important than accumulated assets and sustaining, if not growing them, for an extra three years or so? What if the person wants to retire earlier than FRA, is the extended period using more investments before age 70 still valid?
I read these words on Open Social Security “The strategy that maximizes the total dollars you can be expected to receive over your lifetimes is as follows:” Sometimes it is age 70, sometimes not, but I say “so what?”
Why would that be my goal? Besides, that advice does not even consider a persons total financial picture – investments, annuities, a pension.
I’m ready for the 🔻 just show me the real value of the trade off using unsecured money now for the possibility of higher monthly income several years in the future.
I’m fairly new to this site and have really enjoyed the difference of opinions. It helps me see things from different perspectives.
We have been considering this issue for a while now. I’m 68 and my wife is 65. This issue is a little more challenging for us, since we have a 13 year old adopted child who is entitled to benefits on both our work records.
We decided my wife (with the lower benefits) and our daughter would collect on my wife’s work record and I would defer my benefits for some period of time. Now that I have deferred for 19 months, we have decided it’s time for me and my daughter to collect based on my work record. Obviously, this deferral will result in significant increase in benefits.
Most people seem to insist (usually very strongly) that either collecting right at FRA or deferring until 70 is optimal. As in many issues, sometimes the best option for a person/family might be somewhere in between the extremes. For us, deferring for about 1 1/2 years appears optimal.
Another thing to consider is that if you choose to defer after FRA, you can alter that decision by applying at some later time (before 70) and receive up to 6 months in retroactive benefits. As a result, a person can defer beneifts and see how that works. If circumstances change, they can file and get up to 6 months of retroactive benefits.
Oh no, not again. Where’s the downvote button for forum posts when you need it?
I like guaranteed income. I really like guaranteed income with a true COLA (not a fixed increase with a lower starting payment if you get one with an annuity). To my knowledge it is kind of unique and an opportunity not to missed. I like taking advantage of opportunities. I like the idea of maximizing that guaranteed income with true COLA. I like the idea of getting more of income from guaranteed income of which not all of it (in our case 85%) is taxable. These are some of our reasons. Others include it is part of a coordinated financial plan in which we convert tax deferred retirement accounts to tax free funds while delaying SS in lower income years. Those are some of my reasons. Everyone is different and YMMV.
What does YMMV mean?
Your Mileage May Vary
👍
leave RQ alone all he is trying to do is make us think and make up our own mind…….mine and mt wife was to tale at 62 because we already had a cash flow so the extra has paid for rounds pf golf and dinners out for me it has been 18 years of joy…….too each there own
I wish I could get back all the time I spent deciding when I should take my SS. (62, 63, 64,…68, 69, 70) I plugged in data into numerous spreadsheets, ran optimization calculators, listened to useless 35 year old experts on YouTube, etc.. – hours and hours, and it all just made my head spin. Nothing shouted out to me that one was the way. Yes, everyone’s situation is different. And what is optimal to one, may not be optimal to someone else. My solution: I decided to cut right down the middle and took it at my FRA. I have never looked back on that decision, but only once when I told myself why the hell I wasted all that time when I could have been spending it on a beautiful creek throwing my fly line.
Good point
We are still debating this. Or rather, I am. My husband is pretty set on both of us waiting until 70 for the obvious reason (8% payoff for each year beyond 67, our full retirement age, that we wait).
I see the benefit of one of us waiting until 70. After all, one of us will have to get by on one SS benefit after enjoying two for however long we’re both around. So it makes sense to maximize that one benefit if you can.
We’re the same age, and even though he makes (way) more money than I did, our projected benefits are the same because of the earnings cap each year. I did the Mike Piper calculator, which said that I should start claiming immediately while he should wait until 70. I didn’t understand this result, specifically why have me (and not him) claim early?
I don’t care about trying to “break even,” but I don’t like the idea of claiming earlier than 67. I also don’t really like the idea of dipping into savings or withdrawing from my IRA (and paying taxes) to make up the difference. So I think it will come down to where our income and expenses are as we approach age 67. Right now he’s still working, so we’re very comfortable even with me having retired. But I’m not sure what two years from now might look like.
You have a longer life expectancy than your husband – so that would maximize the calculated overall value if you claimed early vs your husband. You are predicted to get the lower benefit for longer than your husband is predicted to get it.
That said Piper’s website provides a graph of the results of alternative strategies – I’ll bet you waiting until 70 and your husband claiming early gives an only slightly lower result. My wife and I have a situation similar to yours, and Piper’s calculator made the same suggestion, (wife claims at 62, I claim at 70). However, turning it around (I claim at 62, wife claims at 70) only reduces the value by 0.5%.
Down thread Mr. Quinn says “I don’t think delaying SS payments to gain a few hundred dollars a month more years in the future is the best way to do it.” It being managing longevity. What if it’s more than “a few hundred”?
According to Kiplinger the maximum SS monthly payment this year is $2,831 at 62, $4,018 at FRA, and $5,108 at 70. So waiting three years gets you an additional $1,090 a month, or $13,080 a year, a difference that will continually increase with cost of living adjustments.
I also wonder whether the longevity decision is different for women than men. The SS Administration pays the same amount to women as men for the same earnings record, but women tend to live longer. If I (female) were making the claiming decision taking into account the “break even” date (which I did not), my expectation of living beyond that date would be higher than if I were male.
There is a big difference between the maximum at any age and the reality of the average benefit-about $2,000 a month. The best I could find was less than 5% receive the maximum benefit. Using a more realistic average benefit, the difference is about $480 – all relative to total income of course.
At the risk of another 🔻does the actual difference between two numbers increase if both numbers increase at the same rate?
The fact that you don’t understand that the difference in the benefit one receives from claiming at an older age (e.g., 70 versus 67) increases every time there is a COLA raises questions about your ability to make knowledgeable recommendations about when one should claim.
If you are getting the average amount you are more likely to be in the group that needs the money. No one is disputing that those who need the money should take it.
Further to the longevity issue, I see from the SS table that women aged 62 can expect to live almost three years longer than men of the same age: the advantage declines to two years at age 72.
I’m not sure if this is what you meant by the last question, but here is the monthly benefit at FRA, or 67, 70, and the difference for a few examples. I used a factor of 1.24 for a 3 year delay to 70. The difference in monthly benefit grows directly with the growth in FRA benefit. Doubling the benefit at 67 from $2,000 to $4,000 also doubles the difference, from $480 to $960.
Monthly Benefit
Age 67 Age 70 Diff
$2,000 $2,480 $480
$3,000 $3,720 $720
$4,000 $4,960 $960
$5,000 $6,200 $1,200
I’m clearly missing something. If I take $2,000 and add 8% three times, I get $2,519, not $2,480….
1PF is correct. Deferred retirement credits do not compound. See the example below to see how inflation (which does compound) and deferred credits interact.
I think the delayed retirement credit is calculated as 8% of the full retirement age (FRA) amount for each year delayed (or 8/12% for each month delayed), and not a compounded increase.
Ah, thanks!
The calculation above is for 0.0% inflation. If you assume 3.0% inflation, the monthly difference increases, for the same reason. The FRA benefit ($2,000) would grow to $2,185 by age 70. The delayed benefit at 70 would then be $2,185 * 1.24 =$2,710. The difference is $525, not $480 as above. After 10 years the difference grows to $626. After 20 years the difference is $842. The constant you seem to be looking for is that the delayed benefit is always 1.24 times the non-delayed benefit.
As a point of reference, starting in 2026 the Full Retirement Age, or FRA, for new retirees will hit the limit of 67. Per the SSA Life Expectancy Table , a 67 year old female has an average life expectancy of 18.56 years, or 85.56 years old. A 70 year old female has an average life expectancy of 16.27 years, or 86.27. These are averages, not guarantees.
For a different look, I like the Society of Actuaries Longevity Illustrator tool. It gives the probability of living for a certain number of years for one, two, either, or both people. This is useful for a couple to consider for their planning horizon. For my wife and me, there is about a 50% probability that one of will live past 90.
What you don’t get is that some people think differently and value things differently than you which leads to different decisions. There are many arguments for 62 vs 70 and many different motivations and goals. Couple that with the uncertainty of the timing of ones demise, it should not be a surprise that there is some variety it what people choose.
Exactly, did I ever say otherwise? I said there are alternatives to reach the same goals which must be balanced with risk throughout retirement and that deferring to age 70 should not be assumed to be the only or best answer.
I think of SS as insurance. I am fortunate,I can afford to support myself until 70. I know a lot of healthy 90+ year old women.
This we know. You can decide to take smaller payments for a longer period of time, or larger payments for a shorter period of time. Of course, if we knew the date of our demise, the decision when to start in order to maximize our benefit would be easy. For myself, and I suspect for most HD readers, the decision either way is not going to dramatically alter their lives. I chose to start at 62. I enjoy seeing that payment go into my account each month. It makes feel good. Sure, I might live longer than my so called “break-even” point, thus making my decision appear as not being maximized. I can handle that easier than the alternative. But if that’s the downside of living longer, I’ll take it. Also, my state does not tax SS, but they do tax IRA distributions. I’ll take my chances that my money will grow and pass that on to my kids. I can’t do that with SS.
I recently re-married at age 66 to someone who is 44 years old so for me delaying filing to age 70 for Social Security seems like a no-brainer due to her longevity. My RMD’s on my IRA will also be substantially reduced. For me its the marriage bonus!
James, congratulations on your recent nuptials. Best to you and the bride.
Thanks Rick. Married for non-financial reasons indeed but glad the tax system now rewards me.
Oh boy, guys. Reading all these comments has greatly delayed the short nap I was hoping to take. Everyone sure did “tell Dickie”!
I retired at age 66 at the end of 2010. The breakeven point for me was age 81, so I began taking SS immediately. There are 4 generations of my Dad’s family in a church cemetery back home. The oldest was age 73. So taking at retirement seemed to be the logical thing to do. I turn 81 next month, but I have no regrets.
I have always thought the advice of waiting until 70 was oversold and still do. However, it is an individual decision each retiree should make based on their circumstances.
Good topic Dick!
Every financial decision we make has tradeoffs. We are all wired a bit differently, and tend to weight the impact of those tradeoffs differently. (“Sell down to your sleeping point” is a timeless quote. I’ll bet everyone has a different sleeping point and it may vary over time.) When you combine this with the differences in financial acumen, size of portfolios, and health status, its hardly surprising that there are many different strategies favored when filing for Social Security benefits. Furthermore, I could cite many financial decisions I have made in the past which might raise eyebrows, but they worked out satisfactorily for our household. Maybe because of luck. My anecdotal evidence does not mean that I made the best choices, but rather choices which worked out satisfactorily.
Maybe if you look at this from a different perspective, it will help you understand why you sometimes get down arrows on posts like this one.
Let’s say I own dogs. And I’ve been surrounded by dogs my entire life. That’s 58 years of experience I have with dogs. I’ve trained and been around thousands of dogs. I have helped countless people deal with their dogs’ behavioral problems. Let’s assume I consider myself an expert when it comes to dogs.
And let’s say I join an online dog forum. Let’s call it “Humble Canine”. And when I join, I mention there are just three rules I live by: 1) 100% of a dog owner’s disposable income needs to be dedicated to their dogs. 2) The only way to know anything about dogs is to travel the world and train dogs in numerous different countries. 3) The only dogs anyone should own are herding breeds.
On this forum, I mention these three rules frequently. I start to label my posts as ‘rants’ and continually post about my rules to live by.
People reply to my posts and say things like, “But I don’t want a herding dog. They have too much energy. I just want a nice small dog to sit on my lap at night when I watch TV.”
And rather than saying, “That makes sense–you have clearly thought about the reason why you might not want a herding dog and your point of view is valid”, I say, “But herding dogs are the best. They are the best because I have herding dogs. And if I have herding dogs and think they are the best, they must be the best.”.
I am careful to never say someone is outright wrong, but rather I insist they defend their point of view. And when they try, I just reiterate my own rules.
Did you ever see me write “only” in an explanation of my point of view, ever? Did I ever say that the way I do things is what everyone else should do or the only way to do something?
Did I ever say, no you or someone is wrong?
Some people seem to draw those conclusions but I don’t say it
Rather, I question some of their assumptions. I ask questions about how they arrived at their plan or goal. I ask to be sure all the relevant information is available and I may disagree.
Let’s look at the infamous income replacement notion. I said replacement of 100% of base salary or pay is a good idea, a desirable goal and at the same time I have acknowledged that many people in fact live on a lot less.
Immediately the base salary was turned into 100% of income by commenters. The suggested replacement was turned into an absolute necessary.
Or, take the age 70 issue. In this post I asked for help better understanding that goal. I challenge the relevance of worrying about break even or maximizing lifetime accumulated benefits. I still do.
Did I ever say it was wrong, but I did suggest there are other ways to deal with longevity.
Am I not entitled to my opinions and ways of doing things and to defend them or at least explain them? I don’t have anymore power here than anyone else, I know a lot less in many areas than others. But a lifetime of experience dealing with people has taught me to be sure and learn all the facts and circumstances of a situation.
When a person says they live comfortably on 40% of pre retirement income and they feel secure for the future, I’d like to know more about doing that? For starters how is “comfortable” defined. I’d never say I don’t believe you or that’s impossible.
Do you ever concede a point to anybody Dick? You like to poke the bear and get reactions from people.
Exactly – the downvotes and pushbacks he gets are because of the “never back down” persona he presents. Plus a sense that he’s not really interested in understanding the answers he gets from people because they don’t align with his immovable worldview. With a soupcon of his “it doesn’t matter anyway – look how well I’ve done anyway” attitude rather than ever acknowledging merit in any other approach.
He reminds me of my first husband (not a compliment). Arguing with him was like beating your head against a brick wall. He claimed that he appreciated being convinced he was wrong, because he learned something, but it hardly ever happened and was seldom worth the effort.
That’s so funny. I was going to say he reminded me of my first husband too! He was never wrong. Except when he was. And even then he’d still argue he wasn’t. It was such an exhausting personality to be around.
Plus the frequent “Did I ever say…” deflections, picking on a commenter’s particular word choice instead of acknowledging the comment’s main idea — that’s how it comes across, anyway, which is a big part of the problem.
“Did I ever say, no you or someone is wrong?
Some people seem to draw those conclusions but I don’t say it”
Exactly! That’s why (in my analogy above), I say (in the last paragraph), “I am careful to never say someone is outright wrong…”
You never directly say anyone is wrong but your words sometimes seem to imply it.
Let’s say someone on Humble Canine said, “I don’t need to spend 100% of my disposable income on my dogs to be happy. I can spend just 50% of my income on them and still be happy.”
If my response is, “Then you need to define what ‘happy’ means”, it comes off sounding like maybe I doubt that they can truly be happy.
Way to miss the point. And if you’re referring to me with the 40% reference, I wrote an entire HD article about how my retirement was working out.
Wasn’t thinking of you. I do that when the topic mentions pension COLAs or CCRCs.
Beautiful analogy! (I also prefer cats, and avoid dogs, having had some bad experiences with them when a child.)
Brilliant! (And I like cats.)
That makes sense–you have clearly thought about the reason why you might not want a dog and your point of view is valid.
No one who prefers cats is right 😉
It’s called self insurance, risk management. I’m not sure why this concept eludes you.
You’re argument really boils down to, I know my level of risk tolerance, I know how much self insurance I can tolerate, I don’t understand how other people have different risk tolerance, different levels of self insurance.
Thinking that way, that people have these different tolerances, can you understand why someone might prefer managing longevity risk because that’s where their emotion lies?
If not, you’re kind of asserting, that your flavor preferences ought to be universal.
I absolutely understand the desire and need to manage longevity risk and the concept using SS which appears attractive.
Managing longevity can be approached differently.
I don’t think delaying SS payments to gain a few hundred dollars a month more years in the future is the best way to do it.
Doing so has its own risk, that is, reaching age 70 and for how long. In addition, I see added risk for those drawing from savings to reach the age 70 goal. A lot can happen in the markets in three or more years.
My approach, which I am not rehashing, worked in our somewhat unique situation with minimal risk.
I’d say a lot of the risk variable depends on the size of the investment pool that will be tapped and for how long, for the income needed to be withdrawn in lieu of SS payments.
Markets go down as well as up. Say RDQ draws his SS early and leaves the equivalent in the market and the market tanks 50%. How does he feel then vs the person who took the money out of the market for their short term income and gets a higher SS income?
You can’t evaluate risk in hindsight based on muddling your way through it.
You use the word “risk” but only in terms of your own biases and not in the accepted way around taking on or offloading market risk.
If you delay SS and the market tanks after a year, and you don’t really want to liquidate assets, you can take SS then, 8% higher.
So I’m not sure where the extra risk is. It’s not like a parlay where you’d have to get 3 good years to win.
You’re saying you don’t understand how people don’t share your risk assessment. You’re not providing evidence that there’s any less risk (overall) in what you’ve prescribed.
It’s just how you feel about it
I think the requestioning of this topic is great. As a 62 year-old I read everything I can about when to take Social Security and review my situation and decision each time, like a lot of other topics. I’m glad Dick keeps bringing it up. It’s a big, non reversible decision. Why the criticism of discussing such an important topic? Should we just not talk about anything else that’s apparently “settled”? 4% “rule”, index funds vs individual stocks, having insurance, home ownership? I think it’s healthy to constantly question what we think is “settled”. If I’m not up for a post on this site then I move to the next one without reading it, which I often do. This site would be a lesser place without Dick’s point of view, even if he hammers “settled” topics.
Why is Quinn or RQ or now Dear Dickie’s name featured in this headline and so many others? Is that him doing it for attention, or Jonathan warning us that it’s him so we can usually avoid reading it? I’ve been laying off commenting for a long-time cause he’s an older guy who knows the HR and benefits business, but he just doesn’t seem to take criticism even when well-reasoned time and again and his arguments flounder. Even Jonathan appears to be getting exasperated on this thread.
I try to read everything possible, from many sources, especially points of view opposite my own. That’s how I learn and challenge my ideas. Sometimes I change, sometimes not, but at least I better understand both sides.
Older guys have the advantage of experience and in my case working with thousands of people dealing with many of the issues discussed on HD.
Please feel free to criticize, but with more than just 🔻
About a year ago, Jonathan requested that regular HD contributors put their name in the titles of their forum posts. His reasoning was that it would draw attention to articles written by long-term contributors.
I have no idea why I’m so offended by the “Dear Dickie” moniker Mr. Quinn now uses. It just sounds…creepy.
I deleted my original comment after I read Quinn’s comment below. There was a very nice boy on my block growing up who was also called Dickie.
I did indeed ask contributors to include their name in the headline. But since then, HD’s web developer added bylines to Forum posts, so adding the author’s name to the title is unnecessary.
The first time I used it was July 21st as a bit of humor. This was the first time (and most assuredly the last) time using it in a post heading. It was my nickname when I was a young child. 😢
Okay, I admit I’m curious. I’d never thought or even heard about the concept of delaying social security until I started browsing this site. I’ve done a little looking around and haven’t found anything of substance relating to research in the UK, but I’ve discovered the principle also applies in the UK at a lower rate of 5.8% for every year you delay claiming after age 67. Does anyone have thoughts on if it would be worthwhile at that rate of increase? I’m guessing the break-even point would make it less clear-cut than in the US. I’m sure some maths whiz among us can figure it out, just to be nice to the Irish bloke across the pond.
Personally, I have no interest in the “break even” point. I am interested in the largest possible payment while I am alive. I won’t care when I’m dead. Also, doesn’t the UK pension have a COLA? Again, I want the largest possible base for future COLAs.
Take a simplified state pension of £10k pa. If you defer a year then you get £580 each year thereafter. In simple terms if we assume a discount rate equal to the inflationary increases in annual pension there is a payback period of 10/0.58 = 17 years 3 months before you “win”.
So covers longevity past age 85.
Defer 2 years – you get £1193 pa increased pension but your payback goes out to 16.76 years – so you are nearly 86 before you start “winning”.
Possibly a less important decision than in the US because of the relatively low value of the state pension
Obviously that’s one person – spousal benefits would need to be factored in.
EDIT corrected compounding maths in 2 year case.
BB, In the US the actuarial factor does not compound. The deferred credit factor is 2/3 % per month (8% per year) and it is simply multiplied by the number of months of deferral. I tried to look to see how it was applied in the UK. It was hard to find but it seems like it also a simple (not compound) increase. If that is correct (and I’m not certain) then the 2 year increase would be 1160 pounds. Not much different. I did a similar calculation for the US (8% per year) and it makes a larger difference than I would have guessed. The US breakeven point is approximately 5 years less than the UK point. So the 1 year deferral case is 12 years, 6 months in the US. The US full retirement age has been increasing but stops at 67 starting next year. So a 1 year deferral gets you to 80.5 The SSA life expectancy table for a 67 year old male is 16.1 years, or 83.6. The larger US actuarial factor makes a big difference. I ran it for 1,2, & 3 year deferrals and there was a positive difference between break even point and longevity. One big caveat – I didn’t factor in inflation or taxes.
I wasn’t sure on the compounding so thanks. I favour an approach that assumes that COLA on the SS equals discount rate for PV purposes so you can compare everything in today £/$
So, in essence, the UK actuarial adjustment is slightly negative, and the U.S. adjustment is slightly positive.
Hard to say I don’t have UK state pension life expectancy tables. I saw a few references that say the UK’s life expectancy is 2.7 years more than the US. If I apply that across the board, then 1 year delay is about break even, and 2 and 3 years are 2 and 3 years negative.
Thanks BB
I know nothing about the UK system, so this may be way off. I thought Mark was comparing the UK’s incresae of 5.8% with the US SS acturial adjustment of 8%. There is, usually, a yearly inflation adjustment applied separately. Theoretically, SS payments are actuarially equivalent, assuming average longevity. There are many factors which make individual choices and experiences more complex – spousal benefits being a big one.
Yes that’s correct, the actuarial adjustment for delayed claiming. BB’s calculations would suggest it’s not really worth thinking about from a UK perspective. Curiosity satisfied!
There were two factors that impacted my thinking.
One was that I simply didn’t need the money, I was not spending any other of my assets while waiting until 70.
Two is because of the spousal death benefit. Upon the death of the first spouse, the survivor spouse will receive the higher of the two benefits. If one spouse receives $4k per month, and the other gets $2k, the last to die will receive the $4k. The $2k benefit goes away.
Too late, made my choice… no going back. So why even think about it. People get it, the math is simple – anyone can understand. People make their choice for multiple reasons.
My question is why is your title so long.
Brother, I think it’s as simple as a guaranteed 8% return. I’m not aware of a better deal than that. I’d love to believe my portfolio will do better than 8% each year, but I have my doubts. I’m certain, however, that it’s not guaranteed to do so.
As noted below, if someone needs or wants the money earlier, then they’ll take it (which as you noted happens 80-90% of the time).
Everyone talks about the 8% annual increase in Social Security benefits if you wait until 70 but what about the opportunity cost of the payments you forgo in the meantime? That’s potentially eight years of income left on the table. Sure, the checks are smaller if you start earlier, but they’re real, consistent, and can be invested, spent, or used to reduce financial stress.
Factor that in, and the so-called “8% guarantee” starts to look less compelling. Especially when you consider the very real possibility of passing away in your early 70s at which point the higher benefit never pays off.
I still haven’t seen a convincing argument that waiting until 70 is universally the best move. It only makes sense if you need to delay retirement and rely on the larger checks to make ends meet. Otherwise, the math and the life risk tell a different story.
Gee Mike. Be careful, you are sounding a bit like me. 😉
I could do worse….
It was an easy decision to take SS at 62 eighteen years ago. My cross over point assuming I spent the money was 85.
At the time SS was in the news not in a good way. I figured if there were changes, people in the system were unlikely to be affected.
If I’m here after 85, I made a poor decision, but not a terrible one.
I do not regret starting at 62. My wife did the same thing.
I sold our business when I was 54 with sufficient income without SS. I feared changes. It really wasn’t a financial decision.
If you took social security 18 years ago you would have had the option for either you or your spouse to start collecting a spousal benefit and still preserve the right to collect at 70 including the 8%/yr increases. This would have lowered your break even point much below 85. The option I refer to is no longer available.
I thought we had already settled this.
If you need the money to live on, take it early.
If you are in poor health, take it early.
Otherwise, wait, earning 8%/year and the biggest basis for future COLAs.
The last few years before I reached 70, I was spending more than my pension and spousal SS, but I was taking the extra from cash reserves. I don’t remember how much interest the reserves were earning, but it was well short of 8%. After I switched to my own SS it didn’t take long to replenish the reserves.
I’m not sure it’s that simple as less then 10% of retirees delay to age 70. Although there is limited data, less than 20% of higher income delay.
Given you keep telling us that the average person isn’t financially savvy, I don’t know why you consider those figures significant.
Each year you delay you not only receive an 8% boost, but also that year’s COLA as well. With recent inflation that should equal a return greater than 10% per annum.
Everyone gets the same % COLA regardless of the age the claimed so delaying from 67 to 70, for example, will always result in 24% more SS income. However, thanks to the miracle of compound interest, the increase in the dollar amount of benefits you receive from delaying will grow every year there is a COLA.
This was another financial decision that my husband and I got lucky with. He delayed taking his SS until 70. I’m 13 years younger and he had a much higher income than I did. His full retirement age was 66, so for four years he not only earned the 8% bonus but also a couple of COLA’s that were 5.9% and 8.7%.
And of course the COLA received on an age 70 claim is more dollars than on a benefit claimed earlier.
My ability to work at a job I enjoyed was the asset I employed to wait until age 70, and when I croak, my wife will be in better financial shape as a result.
Spending your own money to delay may or may not make sense. The guarantee of one’s SS benefit rising by 8% per year would be one compelling reason to delay.
In his comment below, David lays out a well planned strategy to delay that probably required the use of a spreadsheet.
Thanks for the compliment Dan, but I am a spreadsheet ignoramus. My plan noted below comes from reading copious amounts of financial information from reputable websites, and deep contemplation utilizing the analytical side of my brain, not a spreadsheet. I had to have my daughter to design the spreadsheet to calculate my quarterly portfolio balance and net worth. I do this make sure I stay above the targeted minimum portfolio value so to determine if I need to trigger my wife’s SS before 70. After claiming SS will probably only calculate our net worth semiannually as we won’t be relying on it much, if any.
LOL David. I really only threw in the word spreadsheet to push Dick’s button. All in good fun.
Our SS decision follows our life and investing approach
Is collecting SS at 62 a good idea? Maybe, maybe not. Is collecting SS at 70 a good thing? Maybe, maybe not. Questions like how long I’ll live, how the stock market will do, and how long will SS be around are all things people can question, wonder, and worry about.
We have always tried to not overthink about things. We gather information both for and against, then decide what to do, and move forward.
We don’t overthink investments so we use widely divirsified low cost index funds. For those reasons we took SS at full retirement age and invest it every month.
I don’t know what the future holds but I am thankful that God has given me today, don’t overthink. Come to a decision and be Thankful
Have you ever worried that you’ll become a bore by stirring up the same issues again and again? Or is this another case when you’re going to disclaim responsibility by saying, “It’s a joke”?
For goodness sake, Dick, find something new to quibble about.
I just thought this discussion was quite important – rising above the quibble level. Clearly there is no consensus. But no more from me on this, I’m happy with my decision and I hope everyone else is with theirs.
I have never understood trolling behavior. It seems like it’s just a desperate attempt to get attention–be it positive or negative.
Do you seriously think after writing 250 articles plus forum posts over seven years for HD and who knows how many comments, I would do anything to disrupt or undermine this site or even have a need to do so?
I find it disrespecful that RQ has repeatedly ignored your requests to quit recyling the same isssues.
You won’t get it because you don’t use the same numerical logic others do and have your own ideas of what is safe and desirable and indeed a perverse King Tut like attitude to “risking” your savings in various forms.
Think of someone who only has retirement accounts. No “income” per se. What’s the best form of secure income they can access? SS. So what is the best way of maximising that?- Deferring. That gives them the best protection against longevity risk should they end up running down their other accounts.
Your argument that you took SS “early” and invested it is just your own form of risk shifting. You took something that was guaranteed and made it smaller to participate in market risk. In your case that probably made sense because your gold plated pension covers most risk. Others are not in the same position.
This isn’t about me or what I did. I’m not comparing my self to anyone.
the question is, how do we justify the quest to maximize income in the future – if it comes and for how long- by using assets that may be needed more in the future and are subject to various forms of risk along the way?
that’s it, simple. Is the additional potential monthly income gain worth the risk?
What risk? You draw some retirement account to live off for a few years but you gain protection against longevity risk.
This is absolute personal finance basics when it comes to retirement.
Essentially draw SS early addresses mortality risk – if you die (relatively) young you’ll still have had some benefit, draw late it addresses longevity risk.
Many would argue that mortality risk (and “value” from SS) isn’t something to prioritise unless it’s all or almost all you have to live on.
Social Security benefits, if considered an “annuity”, is a much better deal than purchasing the same from an insurance company.
Indeed Mr Quinn keeps telling us how pensions and annuities which he advocates for don’t usually have COLAs but seems against the very idea of maximising the most secured form of income which does have a COLA.
Don’t know whether this is just perverse or deliberate trolling.
Here’s a simple explanation. We have been utilizing our portfolio to live off for 5 and 6 years once we each turned 62. We have travelled extensively including international and bought two new vehicles totaling just under 100K. Yet our million plus portfolio has grown slightly. Meanwhile when we claim at 70 our Social Security benefits will exceed our annual expenses with a built in inflation adjustment. At that point we will be spending little if any of our assets for the rest of our lives. If I die at the same age as my parents our assets will have grown for 15 years with RMDs being reinvested. My wife will continue to get my larger benefit with inflation adjustments. If she then lives to 103+ like her mother and great aunt and is able to continue with the same financial plan (admittedly not a given) then the portfolio will have grown for 33 years. Her assets (about 1/3 of mine) will have been in a Roth (100% Vanguard Total International -VT) with 35 years of tax free compounding.
Our children will inherit a bundle when we both are gone. Do they need more? Unlikely as they are making nearly twice what my wife and I made in our highest earning years.
What holes can you punch in this plan which I devised on my own?
Oh yeah, and we own our house outright. Built for just over 300K which has more than doubled in value over the nine years.
Seems logical, highly unusual situation, but logical.
Just too many variables and what ifs for my comfort, but I understand.
How do you know your age 70 benefits will exceed your annual expenses at that point?
Are you comfortable that a bear market could not derail your plan in the next several years or change your lifestyle before age 70?
1) Why unusual? Seems very logical to me
2) Why too many variables? At 70 we will both have guaranteed (if the government doesn’t mess with the expected benefits) income exceeding our expenses with inflation adjustments. We also get a guaranteed (risk free per your comment in another post above) 8% return on our Social Security with inflation adjustments to boot while we delay.
3) If we claimed today our benefits would exceed our expenses and again the payments are guaranteed to increase 8% per year until we claim plus the inflation adjustments.
4) As I have written before if our portfolio were to drop to a certain predetermined level (would require a 17% drop on a portfolio of 45% stocks, 45% bonds, 10% cash) which is unlikely but not impossible we would have my wife (the lower earner) claim. Her benefit would cover 50% of our expenses the rest would be covered by withdrawing cash first then short term bonds from our portfolio if necessary which Im fine with. We would only have to tap our portfolio for two years until I am 70.
Unusual only because of the high level of assets you seem to describe and the longevity experience. Most people have neither.
I have a gut feeling that my asset level is not even in the top half of Humble Dollar readers. No second home here, just a state average primary residence, and a portfolio the result of copious savings and good financial decisions with an annual combined income of less than 100 K except for the last few working years.
Oh goody, another one of your social security posts. I love reading the comments and debates they start. It keeps me amused all day, especially since I live in a different country and none of it applies to me. I’ve given you an upvote because I reckon you could do with a head start😂