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Old 03-15-2015, 02:11 AM
 
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correct . even if you weren't investing the ss money you still have to account for the fact at the same time you are waiting you are giving up the money you are not getting.

looking at the first chart which assumes no reinvesting you can see the difference is not as great as you think.


age 84 is only a 3.25% difference based on just the money you gave up without figuring reinvesting . certainly not the 8% folks talk in terms of that may be the yearly increase but it isnt the real difference once the checks you didn't get are subtracted out.

Last edited by mathjak107; 03-15-2015 at 02:39 AM..
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Old 03-15-2015, 02:16 AM
 
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Quote:
Originally Posted by Vision67 View Post
The maximum Social Security benefit at full retirement age (66) is now $2663 per month. However, if you choose to file and defer, that monthly benefit grows by 8% per year to a maximum of $3515 at age 70.

If you have not put in the maximum, the ratios are still the same.

The difference is $10,224 per year. Consider that a US 10 year treasury bond now pays just 2.112%, to get that much more per year you would have to save $484,090.

So one way to think about this is that if you can use savings to fund your retirement to age 70, you will have saved the equivalent of $484K.

That seems like a very cheap annuity. Also, it's an annuity that rises with inflation and it becomes the survivor's benefit for a married couple. What a Deal.

However, less than 2% of Social Security recipients wait until age 70 to take benefits.

yes , you failed to account for the 8 years of checks you gave up in your example.

you have to account for the 8 years of savings you spent down which got subtracted out while waiting . in fact if you had to pull that money out of equity funds to live on the opportunity cost can be very high.. while i hold two years of withdrawals in cash instruments anything more has to be refilled from higher returning investments.

that means 6 more years of spending down from those investments will be needed to go to 70.

what can be said for waiting to take ss is not the fact that you are really getting that 8% increase when lost checks are figured IN but as michael kitces said in his delaying ss study

" In the end, the true value of delaying Social Security is a triple-benefit of hedging longevity, poor returns, and high inflation, because of the asymmetrical way that delayed higher benefits compound in the later years."


in the first chart i posted you can see if you have longevity how your return picks up in the much later years. but even at 95 you still would never see an 8% return . it is only 6% .

but break even if you did no investing is not until almost 82.

of course not all of us will live long enough to even break even but as i say the bet in life should always be on what if i live.

that does not mean i am saying we should all take it at 70 if we have a choice , far from it as there are many other factors involved from investing to taxes and effects of rmd' s and that larger payment.

can you imagine taking it at 70 AND GETTING YOUR SS TAXED when it combines with your rmd's when none would have been taxed by taking the lower amount longer at 62 or fra.

that would be one bad plan. just throwing the extra checks in a growth and income fund in that case would have been a big plus for taking it early.


as we know any time someone gives a simple answer to a complex question the answer will usually be the wrong answer in many cases.

Last edited by mathjak107; 03-15-2015 at 03:40 AM..
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Old 03-17-2015, 04:33 AM
 
Location: Colorado Springs
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Quote:
Originally Posted by mathjak107 View Post
yes , you failed to account for the 8 years of checks you gave up in your example.


can you imagine taking it at 70 AND GETTING YOUR SS TAXED when it combines with your rmd's when none would have been taxed by taking the lower amount longer at 62 or fra.
Agreed. A person needs to consider the whole deal. It's important to understand your future tax situation.

However, between age 66 and 70, if you used income from your IRA to live on and deferred drawing from savings accounts outside your IRA, an annuitized SS income of approx $58K at age 70 is an attractive goal. At that time, you could use those savings and your taxable income would remain at a low level.
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Old 03-17-2015, 06:47 AM
 
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again , as you see on the chart I posted even not investing the difference makes the differences a lot less than that 8% number tossed around once you figure in the fact what you are spending down is no longer growing and the lost checks you didn't take early.

I wouldn't even say it is a very good deal as a general statement . it is going to be a better alternative for someone who can work longer and retire and collect at 70 who has a shortfall in savings then it is for someone retiring early and deciding to use their own assets up front or delay.

Last edited by mathjak107; 03-17-2015 at 07:14 AM..
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Old 03-17-2015, 05:11 PM
 
Location: Colorado Springs
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My biggest motivation is the survivor's benefit. That's $42,180 per year.

My wife's grandmother lived to 103. An annuity takes away a lot of worry.
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Old 03-17-2015, 05:28 PM
 
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It is all dependant on what age the survivor has to take those benefits.

There is a big reduction at age 60 which a widow can file at.
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Old 04-19-2015, 02:21 PM
 
Location: RVA
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The lower your income at 70+, the bigger the benefit of delaying. On a simple scale, if you (only) have enough tax deferred savings to live on by using it to postpone a later SS date, and the total after drawing down leaves you with say, only $10k/yr to add to your SS, then it is worth doing it, by a large margin, as your untaxed SS will be a far larger percentage of you total income, so you end up with a few thousand more in your pocket that you would instead be paying to the IRS. But you STILL HAVE to live to 77, then to break even, over investing the missed checks. If you are married, this, as mentioned, leaves a far larger INCOME to your survivor if you die, but of course, less inheritance. Once your taxable fixed income surpasses $44K (say pension and small RMD, not including SS) though, there is little advantage to delaying past FRA if you invest the early checks, as the break even is as stated by mathjak. Once your taxable fixed income surpasses $80K, (because of Pension and larger RMDs) it makes no difference at all, especially if you only WANT an income of $80K, as you are forced to pay more taxes sooner and take more income than you want. I thought waiting until 70 made the most sense, based on some simple calculations, but underestimated the RMD sizes, and after running a lot more simulations with RIP, it is really FRA that has the best balance for me, because I have enough Roth to reduce my income when needed to keep taxes at bay. Big thanks to mathjak and some +reps for his help on seeing this!!!

ON a side note, RIP takes a lot more playing with than you think at first to make it really understand what you have and are doing. My early mistake was always allowing it to use my ROTH in calculations, instead of taking it out, and reducing required income by the items that I would use the Roth for instead. So by knocking out planned expenditures say for buying a car, vacations, & home repairs, my required income drops a lot, and the Roth is saved for just those items. Suddenly, my required withdrawals are zero for many more years, as the RMDs more than cover the added income I need. The net positive at 90, is not as helpful as the IRA balance being significantly larger through, say 86 IMHO. I'd much rather have significantly more at an age when I can enjoy it, then more at my death!
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Old 04-19-2015, 02:28 PM
 
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RIP is pretty smart. i tried to get it to spend down my ira money first.

but it always went to the taxable account instead .

i realized it was smarter than me. because any income coming in to the taxable account is taxed it made little sense to sit on that and try to spend the ira money down getting taxed 2x in one year.
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Old 04-19-2015, 02:31 PM
 
71,534 posts, read 71,712,424 times
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Quote:
Originally Posted by Perryinva View Post
The lower your income at 70+, the bigger the benefit of delaying. On a simple scale, if you (only) have enough tax deferred savings to live on by using it to postpone a later SS date, and the total after drawing down leaves you with say, only $10k/yr to add to your SS, then it is worth doing it, by a large margin, as your untaxed SS will be a far larger percentage of you total income, so you end up with a few thousand more in your pocket that you would instead be paying to the IRS. But you STILL HAVE to live to 77, then to break even, over investing the missed checks. If you are married, this, as mentioned, leaves a far larger INCOME to your survivor if you die, but of course, less inheritance. Once your taxable fixed income surpasses $44K (say pension and small RMD, not including SS) though, there is little advantage to delaying past FRA if you invest the early checks, as the break even is as stated by mathjak. Once your taxable fixed income surpasses $80K, (because of Pension and larger RMDs) it makes no difference at all, especially if you only WANT an income of $80K, as you are forced to pay more taxes sooner and take more income than you want. I thought waiting until 70 made the most sense, based on some simple calculations, but underestimated the RMD sizes, and after running a lot more simulations with RIP, it is really FRA that has the best balance for me, because I have enough Roth to reduce my income when needed to keep taxes at bay. Big thanks to mathjak and some +reps for his help on seeing this!!!

ON a side note, RIP takes a lot more playing with than you think at first to make it really understand what you have and are doing. My early mistake was always allowing it to use my ROTH in calculations, instead of taking it out, and reducing required income by the items that I would use the Roth for instead. So by knocking out planned expenditures say for buying a car, vacations, & home repairs, my required income drops a lot, and the Roth is saved for just those items. Suddenly, my required withdrawals are zero for many more years, as the RMDs more than cover the added income I need. The net positive at 90, is not as helpful as the IRA balance being significantly larger through, say 86 IMHO. I'd much rather have significantly more at an age when I can enjoy it, then more at my death!
the problem becomes usually those with lower incomes tend to have lower account balances too. it is going to be a rare exception.

trying to spend down enough ira money to make a difference in rmd tax rates will likely spend down to dangerously low over 8 years leaving them possibly short for emergencies and unexpected expenses.

those lower income folks are not going to usually have other source of savings stashed away in taxable accounts.

usually income and assets are fairly matched .
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Old 04-19-2015, 03:16 PM
 
Location: NC Piedmont
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The average benefit of delaying is not that great. The problem is it is all about probabilities. Your break even date will likely be a range, not a specific date, unless you know exactly what your tax situation will be for every year involved. The true break even includes tax consequences. Anyway, the reason so many people push waiting is because it is true that you are likely to live past your break even date. That means more than 50% of people on average will live past break even. Way more than 50%? No. And less than 50% of people on average will live 5 years past the break even date. It was chosen because of life expectancy but because you have made it past 60, your life expectancy is a little higher than what was used in the calculation. But only a little. It's a roll of the dice with the odds slightly in your favor, not a slam dunk.
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