Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
My financial Investor told me to wait until I was seventy to collect Social Security. I had stopped working at age 61. Instead of collecting $1700 a month in early SS benefits at age 62-70, I pulled that money out of my investments to pay the bills.
Yesterday I did some analysis about how much money and investment earnings I had lost by taking the additional $1700 a month out of my 60/40 Mutual Funds for the last 8 years. It was shocking.
I had about One Million in my account and spent and lost $233,000. (A combination of extra withdrawals for not collecting SS at age 62-70 and investment losses by not investing the funds I withdrew. Based on an average 6% return on a blended 60/40 mutual fund in the last 8 years)
Because my SS at age 70 is about twice what I would have got at age 62, it will take me 137 months to come out ahead, if I live that long. ($233,000.00 divided by $1700 in additional SS payment due to waiting until I turned 70)
I feel terrible and don't think financially this is going to work out.
The past eight years did well enough that a 6% withdraw shouldnt have dented so much. Look at what you invest in and the fees on the mutual fund?
Then figure out if you want the advisor for not explaining the difference better, or if you agreed 8 years ago and forgot why/changed mind. Should review yearly?
137 months is 12 years? Seems reasonable to live to 82 and the increased ss can pay for healthcare
your calculations are flawed and your way of interpreting the scenario wrong .
if i said to you i will give you 20,400.00 a year now to live on (1700 a month ) from my money , or i will give 20,400.00 inflation adjusted in 8 years plus between 6-8% increases every year giving you a 70% bigger check plus the colas , in which case you lay out the money up front, you have a choice .
you can use your money now and get 70% more of my money in 8 years to live on . that will drastically reduce your own depletion in 8 years . or you can use my money now and pull 70% more of your own money from your investments to live on .
the ss check is 70% bigger plus colas at 70 than 62 so that is the difference in draw from your investments .
you are not losing a thing . you are just choosing between spending more of your money up front to spend much less of your money later by delaying or the reverse...
stop and think about this very carefully because it is here you messed up . you are going to be drawing 70% less from your investments for possibly as long as 3 decades by just laying out 8 years of money up front .
in fact going with my money later you actually can see a 5% real return after inflation if you or your wife ,are a couple and one of you lives to 90 which is about a coin toss chance .
that is on par with a balanced fund under the best outcomes but with zero risk and guaranteed results . .
this is the 2nd time this week someone here posted the same mistaken calculation .
in this case the op realized that this logic was wrong once it was pointed out to him
here is a chart figuring 6% growth on a balanced fund and spending it down for 8 years while delaying . break even is about 22 years and then roi multiplies very quickly for delaying
Last edited by mathjak107; 05-12-2017 at 08:13 AM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,059 posts, read 7,493,946 times
Reputation: 9787
OP, it is a option that needs to be carefully evaluated
We took SS early and at first opportunity at 62 and 64. We are now 67/70
I am a believer of securing a LMP (Liability Matching Portfolio) - FR (Funded Ratio) as early as possible.
Any funds after satisfying the LMP-FR becomes purely Discretionary or excess Reserves.
In late 2008-early 2009, to me, our economy would either collapse or recover. I bet on the recovery and my investment strategy reflected that belief.
Even my deferred GLWB VAs have exceeded the presumed 7.5% accrued SS increases.
YMMV
YES MATHJAK, I will come out ahead if I live to 82 and Uncle Sam does not cut Social Security. But:
I have less money in my investment accounts TODAY because of the extra $1700 a month in extra withdrawals to cover the money I could have got from SS at age 62 on. And the lost investment income during that period which was about 6% a year in my balanced mutual fund.
I think the risk that my social security check will be cut by Uncle Sam is high in the future to pay for a war with North Korea. By burning through my assets to get a bigger SS check at 70 I am now more dependent on getting money from the government vs using my own investments. It will be scarier needing more of my fixed expenses paid by the government vs my own assets which have now been depleted due to the extra withdrawals during the last 8 years.
if uncle same cuts checks you can be sure it will either be grand fathered if already of age or all checks will be cut regardless of collecting or not .
you have two choices , you can take on more market , interest rate and inflation risk , or diversify in to longevity risk more .
personally i am more comfortable with longevity risk as couple .
since most of us already have a fair amount of market risk in our investments , balancing it with longevity risk is another layer of diversification .
dying should not be much of a factor as dead is dead . the biggest question is what if i or my spouse live and the ramifications that go with living .
as i showed above , it is drain 8 years more of your investments now or drain 70% more of your own investments yearly later forever , but in the end you will be spending those investments ., the only difference is the order and survivor benefits .
plus delaying ss always allows a higher income draw day 1 of retiring since it has no sequence risk and needs no dry powder kept for poor outcomes .
basically you spend more up front day 1 of retirement and refill the excess spending with the 70% bigger check later .
your choice ! but to say you lost money is not the case at all , you only delay the money by laying it out yourself for much bigger payments a few years later .
you may not like watching your balance fall more now , but odds are you will not like watching it fall 70% greater each year down the road either . not just for 8 years but life .
Last edited by mathjak107; 05-12-2017 at 08:37 AM..
Did you actually HAVE to withdraw $1700/month? - just because that was the SS amount doesn't mean you needed to withdraw and spend that amount.
Yes I did HAVE TO withdraw an extra $1700 because I was not collecting SS at age 62-70. It was a choice of taking SS at age 62 and getting that money to help pay bills and a 4% annual withdrawal--- or not collecting and pulling out 8% a year. All based on my fixed budget.
that is what i said, you are laying the money out up front , but your scenario as you explained it as "losing money is wrong "
you not only are not losing money but depending on longevity you can potentially gain more money as well as get a higher income 100% of the time delaying .
if i said to you if you delay taking my money the deal is off the table and you get nothing , then yes , if you delayed taking my money you would be losing the money because you are spending the assets and getting nothing in return .
but delaying a bigger payment and taking it later is not losing it . it is just trading some market risk for longevity risk .
stating you are losing money is a bogus claim . you just prefer taking the market risk instead of longevity risk . you also prefer draining your investments at a higher rate later rather than up front . it is a choice of how you want to be paid , not one that has anything to do with losing money . ..
Last edited by mathjak107; 05-12-2017 at 08:53 AM..
^ If one delays till 70 can the spouse still collect 1/2 or do they have to wait till you file?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
at 62 and 64. We are now 67/70
. 
