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Old 09-03-2016, 01:26 PM
 
639 posts, read 1,744,986 times
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[quote=golfingduo;43680190]FWIW the $1400 dollar vacuum I got was a Rainbow. They go for 2100 brand new now. When my wife told me the salesman coming to sell us that vacuum I told her that he had better knock my socks off with it. After about 15 minutes I was sold. /QUOTE]

I have a Rainbow I haven't used in 20 years setting in a closet....hate that thing!
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Old 09-03-2016, 01:35 PM
 
Location: Mount Airy, Maryland
10,460 posts, read 5,924,770 times
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Quote:
Originally Posted by Perryinva View Post
Partially correct. The increases stay approximately the same depending on WHEN your 35 years (if at max deduct for the last 35) end. If I retire at 62 with 40 years of max SS deduct or work until 65 for 43 years of max deduct, my FRA goes unchanged either way.

For DIMA: you originally posted you saw only a $13/mo increase for a years delay. It is an $11 or $13/mo increase for a months delay, bot a year. That is the basis for my comment. Also, as I've said, all SSA number are in TODAYs dollars, not what you will get shen you are 62 or 65, which increases by a COL increase every year. Again, even taking your more pessimistic estimate, if you think you can get a lifetime $1850/yr COLA compensated annuity, with survivor benefits for one year time based payments of $24612, (you keep your $24612, only drawing down and making the "annuity payments" per month, unlike a real annuity where you give them the full lum sum up front.) you are sadly mistaken. Someone here was looking to fund their delaying of SS with an annuity. Made no sense for the same reason.

If you are looking to maximize COLA income for some savings, there is NO better annuity available. If you can't afford an annuity, then the discussion is mute.

Here was my first post, the one I was referencing.


Quote:
Originally Posted by DaveinMtAiry View Post
So anyway this subject has been discussed at length and I came away believing I am better off living off of my 401 and delaying my SS. But here are the numbers.


I looked at my benefit at 65 (my FRA is 66/6) and learned that they increase approximately $13 for every month I wait
from that point on or $156 a year increase. However I will need to supplement that lost income of approximately $2,000 a month so now I am withdrawing $24,000 additional from my 401. At $156/year it would take me 100 years (edit should have said 100 months)to recover the $20,000.


OK I'm at the beach and may not have all my cylinders firing but what am I missing here?
The problem is I later said "13 per year" and that's the one you probably saw. Hey as I said I was at the beach and not firing on all cylinders, sorry about that.

With that cleared up, and assuming I stop work at 65 and will have 35 years of earnings that won't effect my benefits much should I file at 66, can you guys see my point about the problem with delaying even a year? It will take me 13.3 years to break even and that does not even count the lost investment returns. $24,612 earning a conservative 4% comes to $41,465 that I am giving up. Just think of the vacum I could get with $41,000!

Last edited by DaveinMtAiry; 09-03-2016 at 01:45 PM..
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Old 09-03-2016, 04:13 PM
 
Location: S.W. Florida
2,206 posts, read 931,277 times
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For me it's a no brainier. At almost 62 years of age I have already lived longer than all but one of the males in my family. Obviously, I do not expect to live to be 100. I plan to draw my benefits at 62 and earn up to the allowable additional income from some sort of employment. With my investments and SS I will have no concerns going forward for however many years I have remaining. Like others have said, it's different for everybody.
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Old 09-03-2016, 06:24 PM
 
Location: RVA
2,164 posts, read 1,265,616 times
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There you go! Perfectly good reason to collect early and NOT worry about outliving your money. Hopefully (?) you won't inconveniently be the first male to live to 90 in your family....

Yes Dave, that is exactly what I Was referencing, and do not apologize!! You asked "What am I missing ?" And all I was doing was explaining it. It's not a criticism or judgement, just explaining there was no way you were math correct.

Personally, I don't see the dilemma in your question at all. "Break even" means absolutely nothing at all, if you live live until at least 80 years of age. (66 + 14). Especially if you have a surviving spouse that would have a smaller SS than yours.

You have only 2 Yoda choices "Do or do not". Either you will spend your money at a rate that will last until you are 80 or less, or you will spend assuming you will live longer. No one CHOOSES to out spend their life. But it happens all the time because of underestimating inflationary costs and over estimating earnings on investments. Trying not be elitist or sound smug, but typically if you HAVE a large enough savings to be able to easily afford to delay filing to 70 (while retiring at 62) then you have always been in at least the 25% tax bracket your main earning years. And you likely want to maintain that level of income, which means taxes are a significant part of the equation. It is certainly possible that one may have been living way way below their means, and want to live that way in retirement. That's fine, of course, to each their own.

But in your SS case, which sounds similar to mine, you are totally negating the importance of COLA and tax advantages, and figuring in year received dollars and not 2016 dollars. If you have a SS annual of $24k a year, and collect at 62, your actual checks 8 years later will be $29k assuming 1.5% COLA. If you delay until 70, your checks on that same date will total $51k, not the $40k that is shown on your SS, which is in non COLA 2016 dollars. So The difference is not at all what it appears to be. I used the extreme example because the difference is the largest and most dramatic. If I withdraw from savings the equivalent of what I would have gotten by filing at 62, each year, when I get to 70, I would have taken out $29k that previous year, to be rewarded with $22k more GROSS the next year. But of that $51k over $7500 is tax free, vs the under $4500 that would be tax free if I were getting $29k. To get an additional $3k after tax, in just the 25% federal bracket requires $4k from pretax IRA. plus the entire $22k is tax free from state, which is an additional $1100 in my state. So right there, the equivalent of $2100 is added to the gross of $51k to be $53.1k, comparing apples to apples. My RMDs would have also been reduced for the last 8 years, so my taxes on them are much less. (Plus during those years I will be rolling over some tIRA to Roth) So the point is the amount needed from tIRA savings is much less or even negative, meaning you have to invest after tax what you are forced to take out and pay tax on, because your total required expenses exceed your total net income. The gap between the compounding grows exponentially from age 70 on. Using intelligent retirement income calculators, by age 77, I will have met where my savings would have been, (IN NET SPENDABLE INCOME) with a higher income the whole time from 70 on, the difference being that if I collect at 62, my balance in tax deferred grows in larger proportion to my already taxed or low taxed savings. In reality, I will spend/use somewhere between the $29k and $51k in age 70 dollars during the years from age 62 to 70. I want a HIGHER income from 62 through 70, and knowing that if I live past 70 I have that guaranteed $51k, increasing and compounding effortlessly each year, then I will never worry about running out of money.

You THINK your $24612 has grown $15400, but it has really only grown $12k spendable. Assuming you make a compounded 4% every year, etc, etc. All this hinges on a lot of assumptions: 25% or higher tax bracket in retirement, more than enough savings to weather the typical set backs that may occur, the bulk of your savings is in tax deferred tIRA or equal, and that the SS rules will not change. If the rules change, I find out I have terminal cancer, or there is a zombie apocalypse, then I can STILL change my mind, and file retroactive 6 months.

I have been saving my working career to USE the savings to make my retirement more comfortable, stress free with more choices. God may laugh and strike me dead but then it really doesn't matter. All I can do is plan to my best ability. It was always meant to be a supplement for emergencies and to improve my choices. Having even $200k less in my savings will not change at all how I will live from 62 to 70. Not one bit. So if I can exchange that $200k for a $22k COLAed compounded annuity for life, it really is a no brainer. I want MORE security take home pay income wise as I get older, not a lower income and higher dependence on savings. One monster correction in the market and a hypothetical one million becomes $800k, and the income reduced accordingly. If that same event happens and there is only $800k but NONE of it is required to generate income, then it is a non event, except my RMDs are also lower now. If the major part of you savings is REQUIRED as income to just live, likely the savings is inadequate to live off of AND delay filing.

If you plan to live at the zero federal tax level (under $42k), and all your savings are in Roths or low/not tax munis or LTCG dividends, then it probably makes no sense to delay filing at all. To have planned so well that far in advance means you already understood retirement income and planned accordingly.

I'd like to say that I was smart enough to have though of all this myself, but even though I consider myself a smart, degreed engineer, all of this was researched to death and has been published by financial minds far sharper than mine. And proven. Over and over again. I'm just smart enough to recognize that I am a prime candidate to take advantage of that particular situation.

Last edited by Perryinva; 09-03-2016 at 06:43 PM..
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Old 09-03-2016, 09:52 PM
 
Location: Miami, FL / Raleigh, NC
980 posts, read 1,927,827 times
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Quote:
Originally Posted by Ellwood View Post
As you implied, it is up to each personal situation when to collect SS. My father started collecting at age 62 and said the 10 years following were the best years. He and my mother traveled and were on the go constantly. At 72 my mom was limited with rheumatoid arthritis. She and dad moved to an independent living facility, where she passed away at 82. Dad lived until 94. We retired at 62 and have enjoyed every minute, traveling, kayaking, dancing, etc. My spouse was recently diagnosed with RA, so our lives will change. IMO take the money and GO! I know too many people who never lived until 70 nor once they were 70 were physically able to do the things they wanted. Why work your entire life to save for retirement when you'll spend it in a chair?
Excellent post!
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Old 09-04-2016, 01:49 AM
 
71,515 posts, read 71,694,121 times
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actually the reverse is true . delaying ss lets you spend more early on vs taking ss earlier .

when you have choices , the math of it all says retire early , delay ss and you can spend even more early on delaying than you can taking ss early . that allows you to do even more trips and buying of things . as long as you have the money to have choices , and only those with the resources have choices , how much you spend early on has nothing to do with when you take ss to refill savings .

the bigger checks down the road with zero sequence risk give you bigger draw rates day 1 .

the point is ,spending more early on because you filed early is not really a factor for most of those who delay and they can actually have a bigger budget early on by delaying and refilling later with up to a 69% bigger check ..

next to what if i die that is likely the 2nd biggest reason you hear as far as why to take ss early , but it isn't always true .

Last edited by mathjak107; 09-04-2016 at 02:56 AM..
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Old 09-04-2016, 03:45 AM
 
Location: Mount Airy, Maryland
10,460 posts, read 5,924,770 times
Reputation: 16151
Quote:
Originally Posted by Perryinva View Post
There you go! Perfectly good reason to collect early and NOT worry about outliving your money. Hopefully (?) you won't inconveniently be the first male to live to 90 in your family....

Yes Dave, that is exactly what I Was referencing, and do not apologize!! You asked "What am I missing ?" And all I was doing was explaining it. It's not a criticism or judgement, just explaining there was no way you were math correct.

Personally, I don't see the dilemma in your question at all. "Break even" means absolutely nothing at all, if you live live until at least 80 years of age. (66 + 14). Especially if you have a surviving spouse that would have a smaller SS than yours.

You have only 2 Yoda choices "Do or do not". Either you will spend your money at a rate that will last until you are 80 or less, or you will spend assuming you will live longer. No one CHOOSES to out spend their life. But it happens all the time because of underestimating inflationary costs and over estimating earnings on investments. Trying not be elitist or sound smug, but typically if you HAVE a large enough savings to be able to easily afford to delay filing to 70 (while retiring at 62) then you have always been in at least the 25% tax bracket your main earning years. And you likely want to maintain that level of income, which means taxes are a significant part of the equation. It is certainly possible that one may have been living way way below their means, and want to live that way in retirement. That's fine, of course, to each their own.

But in your SS case, which sounds similar to mine, you are totally negating the importance of COLA and tax advantages, and figuring in year received dollars and not 2016 dollars. If you have a SS annual of $24k a year, and collect at 62, your actual checks 8 years later will be $29k assuming 1.5% COLA. If you delay until 70, your checks on that same date will total $51k, not the $40k that is shown on your SS, which is in non COLA 2016 dollars. So The difference is not at all what it appears to be. I used the extreme example because the difference is the largest and most dramatic. If I withdraw from savings the equivalent of what I would have gotten by filing at 62, each year, when I get to 70, I would have taken out $29k that previous year, to be rewarded with $22k more GROSS the next year. But of that $51k over $7500 is tax free, vs the under $4500 that would be tax free if I were getting $29k. To get an additional $3k after tax, in just the 25% federal bracket requires $4k from pretax IRA. plus the entire $22k is tax free from state, which is an additional $1100 in my state. So right there, the equivalent of $2100 is added to the gross of $51k to be $53.1k, comparing apples to apples. My RMDs would have also been reduced for the last 8 years, so my taxes on them are much less. (Plus during those years I will be rolling over some tIRA to Roth) So the point is the amount needed from tIRA savings is much less or even negative, meaning you have to invest after tax what you are forced to take out and pay tax on, because your total required expenses exceed your total net income. The gap between the compounding grows exponentially from age 70 on. Using intelligent retirement income calculators, by age 77, I will have met where my savings would have been, (IN NET SPENDABLE INCOME) with a higher income the whole time from 70 on, the difference being that if I collect at 62, my balance in tax deferred grows in larger proportion to my already taxed or low taxed savings. In reality, I will spend/use somewhere between the $29k and $51k in age 70 dollars during the years from age 62 to 70. I want a HIGHER income from 62 through 70, and knowing that if I live past 70 I have that guaranteed $51k, increasing and compounding effortlessly each year, then I will never worry about running out of money.

You THINK your $24612 has grown $15400, but it has really only grown $12k spendable. Assuming you make a compounded 4% every year, etc, etc. All this hinges on a lot of assumptions: 25% or higher tax bracket in retirement, more than enough savings to weather the typical set backs that may occur, the bulk of your savings is in tax deferred tIRA or equal, and that the SS rules will not change. If the rules change, I find out I have terminal cancer, or there is a zombie apocalypse, then I can STILL change my mind, and file retroactive 6 months.

I have been saving my working career to USE the savings to make my retirement more comfortable, stress free with more choices. God may laugh and strike me dead but then it really doesn't matter. All I can do is plan to my best ability. It was always meant to be a supplement for emergencies and to improve my choices. Having even $200k less in my savings will not change at all how I will live from 62 to 70. Not one bit. So if I can exchange that $200k for a $22k COLAed compounded annuity for life, it really is a no brainer. I want MORE security take home pay income wise as I get older, not a lower income and higher dependence on savings. One monster correction in the market and a hypothetical one million becomes $800k, and the income reduced accordingly. If that same event happens and there is only $800k but NONE of it is required to generate income, then it is a non event, except my RMDs are also lower now. If the major part of you savings is REQUIRED as income to just live, likely the savings is inadequate to live off of AND delay filing.

If you plan to live at the zero federal tax level (under $42k), and all your savings are in Roths or low/not tax munis or LTCG dividends, then it probably makes no sense to delay filing at all. To have planned so well that far in advance means you already understood retirement income and planned accordingly.

I'd like to say that I was smart enough to have though of all this myself, but even though I consider myself a smart, degreed engineer, all of this was researched to death and has been published by financial minds far sharper than mine. And proven. Over and over again. I'm just smart enough to recognize that I am a prime candidate to take advantage of that particular situation.
Thanks Perry for this very well thought out post. I did consider COLA, taxes and market corrections. However we won't be in the 25% bracket at retirement, a growing portion of my 401 is in a roth. In addition we will more than likely move to TN with no state income tax. The other factor is I won't have a million in my 401, more like half of that. Half our wealth will be in the form of a brokerage account and proceds from the house we sell, both tax free withdraws. So the tax ramifications for us may he a lot different than for you and the amount in my 401 is small enough that withdrawing double the amount per year makes me a bit uncomfortable.

So for me it may not be the no-brainer it may be for others and I doubt I can wait all the way to 70. Still you make great points and obviously a higher guaranted tax free check with COLA is appealing. I'd like to hear other opinions.
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Old 09-04-2016, 06:09 AM
 
Location: RVA
2,164 posts, read 1,265,616 times
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I may not have $1M either, but enough that it still makes sense. If you are uncomfortable with reducing your savings, will have no real federal tax, and no state tax, then why agonize over it? If you are already planning to work until 65, and collect then, even though it is pre FRA, then you are still way ahead of the vast majority. See what the climate is like in 7 years and decide then. I mean, it is perfectly possible I could lose most of my savings due to some mishap and be diagnosed with something terminal. I would collect at 62 in a heartbeat and downsize. If I Had to I would. However, if my spouse were to still be in great health, that would be the bigger reason to economize, for her. Have or have not, makes little difference to me if I have no choice. If I Had my druthers though, I'd choose have.

Also, while I may sound adamant about this stuff, I'm not. I'm not a crusader to force what I see as smart choices. I really don't care what anyone else does, if it doesn't impact me, or society as a whole. I Just have an annoying personality trait (and yes, I have been told more than once, it is annoying. I'm working on it) of always explaining to people, whether they want the info or not, how stuff works. What you saw as a thoughtful post (thank you) others see as a diatribe by a bragging self righteous know it all. Whatever!

Also, though not actually germain to the decision to delay, I also will have a rather generous, IMHO, pension that I will collect at retirement. It is not COLA adjusted, so its real value diminishes each year, while using it to prop me up from 62 to 70 is significant. But without my pension, I would still delay filing as long as I could (actually I would be more determined) so I, again, would never worry about my fixed income, later in life, when it would be way to late to do anything anout it.

What "observer" sees as an excellent post, I agree exactly with Matt, and see as a sad one. In one case, if they needed the money from SS to live and could not afford to delay filing, but still do what they wanted for 8 years then they didn't save enough, which means by 82, the father had 12 more years to regret and worry if he was going to outlive his income as his costs escalated faster than his income did, worrying about maybe being a burden to his family. His income level was set in stone at that point, and all he could do was hope. In the other case, if he did have enough to delay, and just withdrew more savings to really outspend his later planned budget for those years, using the SS as "found money", then again, at 82, he would have realized he could have done the exact same things, but drawn from savings, instead of filing, and not worry about the savings level because those SS checks would have just kept getting bigger and bigger, and the savings that was left was growing because it was untouched for so many years.

Likely, though, he never went back and calculated what his SS WOULD have been at 92, if he bad delayed until 70. My FIL, passed away at 87, and stated he was so sure he would be dead before 70 (based on family history on both sides) he planned EVERYTHING around that. He was a bright man, but realistic. Heart disease was rampant in his family. His airline pension was reduced to 2/3s so that his wife would have the same pension when he died. He collected SS at 62, and sold his home at 68 and rented, because he felt he would be ahead in the long run investing the money, and budgeted for death by 75 at the latest. From 82 until his death, you had to be very careful to not mention money because he used to do just that...calculate what his pension and SS would have been, and what his house he sold was worth now,mand how he had wasted hundreds of thousands on rent, etc, had he just known he was going to live. My MIL passed away a month after he did, so thank goodness he never knew he took a reduced pension for nothing. His lifestyle was not bad, but he was forced to rent and live in less desireable places and cried poverty about every expense. He got to the point of wishing he would hurry up and die the last few years because he really was worried about running out of money.
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Old 09-04-2016, 06:19 AM
 
1,137 posts, read 569,749 times
Reputation: 4370
Quote:
Originally Posted by mathjak107 View Post
actually the reverse is true . delaying ss lets you spend more early on vs taking ss earlier .

when you have choices , the math of it all says retire early , delay ss and you can spend even more early on delaying than you can taking ss early . that allows you to do even more trips and buying of things . as long as you have the money to have choices , and only those with the resources have choices , how much you spend early on has nothing to do with when you take ss to refill savings .

the bigger checks down the road with zero sequence risk give you bigger draw rates day 1 .

the point is ,spending more early on because you filed early is not really a factor for most of those who delay and they can actually have a bigger budget early on by delaying and refilling later with up to a 69% bigger check ..

next to what if i die that is likely the 2nd biggest reason you hear as far as why to take ss early , but it isn't always true .
Actually, depending on how many options you have, that may not be the case. Case in point: At start of retirement, (and we may be better off than many), we will have few thousand in cash, and $90K in a 401K. After running the numbers up, down, and sideways, this is our future.

Each bar represents unspent income (compounded), year by year from 66-85, fixed at a given SSA file for that year. That means no-spending of any disposable income (which is not what will actually happen, but hey ). On top of that, I can't predict emergencies, so didn't include them. They will have to come out of any accumulated cash.
With limited funds at our disposal and delaying until 70 to file (even though we can meet all bills), the first 3 1/2 years would be miserable, <$430 month after bills. For us, a bit too close to the edge for what I would consider a comfortable retirement. No doubt, final years are better if we wait- and if we live past 85. No male in my family has yet. When I compare what our income would be at age 70 if we filed at 67 vs filing at age 70, (without a healthy nest egg to bridge the delay), the early years look MUCH better with an earlier file. (look at the first four bars, and compare the next three in both cases). For that matter, the later ones don't look that bad either.

The funny thing about this all, is that the pages of all the good C-D advice here just drop to the back of the pile, and in four months, someone will ask 'What is the best year to file?'
...And we're off and running!!! Grab the calculators!!!

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Old 09-04-2016, 07:28 AM
 
71,515 posts, read 71,694,121 times
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Quote:
Originally Posted by MichiganGreg View Post
Actually, depending on how many options you have, that may not be the case. Case in point: At start of retirement, (and we may be better off than many), we will have few thousand in cash, and $90K in a 401K. After running the numbers up, down, and sideways, this is our future.

Each bar represents unspent income (compounded), year by year from 66-85, fixed at a given SSA file for that year. That means no-spending of any disposable income (which is not what will actually happen, but hey ). On top of that, I can't predict emergencies, so didn't include them. They will have to come out of any accumulated cash.
With limited funds at our disposal and delaying until 70 to file (even though we can meet all bills), the first 3 1/2 years would be miserable, <$430 month after bills. For us, a bit too close to the edge for what I would consider a comfortable retirement. No doubt, final years are better if we wait- and if we live past 85. No male in my family has yet. When I compare what our income would be at age 70 if we filed at 67 vs filing at age 70, (without a healthy nest egg to bridge the delay), the early years look MUCH better with an earlier file. (look at the first four bars, and compare the next three in both cases). For that matter, the later ones don't look that bad either.

The funny thing about this all, is that the pages of all the good C-D advice here just drop to the back of the pile, and in four months, someone will ask 'What is the best year to file?'
...And we're off and running!!! Grab the calculators!!!
my opinion is if you have to commit more than 1/3 of your funds to living on while delaying than you do not really have the option to delay . delaying and depleting assets to far down is to dangerous and not a good idea .

only those with the resources or other income to live on really have that option .

delaying can be a good option but it is reserved for those who can safely delay . it is kind of a catch 22 . most retirees can not afford to retire and delay and because they can't delay they miss out on the larger checks , reduced dependency on markets and rates and survivor benefits that would help them the most.

don't forget when every thing is a need and poor markets hit you there is nothing to cut back on on .

Last edited by mathjak107; 09-04-2016 at 07:40 AM..
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