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Old 09-05-2016, 05:47 AM
 
1,040 posts, read 484,865 times
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Quote:
Originally Posted by mathjak107 View Post
except if you read the threads that logic is flawed because delaying is only for those who have the assets and choice to delay . if it takes more than 25% -33% of your assets you can't afford to delay and it should be off the table .

.
Why do you say only delay if you only spend 33% of your assets before then?
It's also hard to predict what the % will be due to fluctuating market value no?
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Old 09-05-2016, 06:25 AM
 
Location: Central Massachusetts
4,800 posts, read 4,845,678 times
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Quote:
Originally Posted by NHartphotog View Post
Funny ....... for myself and others.
NHartphotog We have heard that tired argument enough. I am not calling you out. I just think that at the moment it is the system we have. It may not be perfect. It is like our country, full of flaws, but it is the best damned country in the world. Instead of seeing everything in conspiracy form lets try to make sense of it for people so that they can make an informed decision that fits them best. Until we get something else this is it.
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Old 09-05-2016, 06:39 AM
 
Location: Central Massachusetts
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Quote:
Originally Posted by DaveinMtAiry View Post
I wish we could stop with the "you could die" or "the Government will change the rules" what ifs and just discuss the math. And for most of us we don't have millions and we don't have 90 grand. So for those of us in between that can not afford to tap our retirement and delay until 70 we are evaluating the math of filing early vs tapping retirement and delaying a few years but not all the way to age 70.

The issues I see:

The 8% increase is not the figure to use here. As the link provided shows at 62 to 63 the increase is 5%. It goes up from there but does not reach 8% until FRA. So the thought that market returns have trouble matching the increase is a bit off until you reach FRA

There are tax ramifications as SS in most states is tax free so a larger check means a tax break as you will be withdrawing less from your taxable 401. But what about the tax ramifications of withdrawing so much from your retirement funds as you delay filing?

I still go back to the math that says it will take me over 13 years to break even just by delaying a single year, and again that does not even factor in the lost investment returns and tax bill that year represents.

I'm not trying to convince anyone that delaying is wrong. I'm just trying to figure out what the best way to go is for myself and others.


You are absolutely right. In the first years beginning at 62 and on up to FRA the increase is about 5%. It is after FRA that the increase does get longer. You are also absolutely right in your first tax ramifications with one exception. If you do not delay what ends up happening is you use less of your nest egg and the savings will continue to grow. I am talking about someone who has the means to make it past FRA and not draw. He/she will have a higher tax ramification once RMD (age 70 1/2) because then they will be needing to draw out more of taxable money out of accounts. If they are Roth no such burden but the point is you have to pay the tax as you draw. If you are getting less and use that income to live on you are only paying on that income stream.

The last point here and it applies as well the tax code is likely to shift some day. This current system is very cumbersome and is likely to be changed drastically in the future. So worrying about all the machinations of the tax code and how it might affect you. A good rule of thumb is to run the numbers on your own. Take a few years from the time you hit retirement age and move forward. Run them as if you are doing your taxes each year and keep a total for each on each scenario and you might see what mathjak is pointing out but you might see that your nest egg isn't sufficient to make it. Either way it is something only you can answer for yourself. You can get a fee only advisor to do that as well. Maybe a good friend who is an accountant can help?

We agree together you are not saying one is wrong. You are truly trying to find out which is better for you and in the process help others.
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Old 09-05-2016, 07:01 AM
 
Location: Mount Airy, Maryland
10,460 posts, read 5,924,770 times
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Quote:
Originally Posted by golfingduo View Post
You are absolutely right. In the first years beginning at 62 and on up to FRA the increase is about 5%. It is after FRA that the increase does get longer. You are also absolutely right in your first tax ramifications with one exception. If you do not delay what ends up happening is you use less of your nest egg and the savings will continue to grow. I am talking about someone who has the means to make it past FRA and not draw. He/she will have a higher tax ramification once RMD (age 70 1/2) because then they will be needing to draw out more of taxable money out of accounts. If they are Roth no such burden but the point is you have to pay the tax as you draw. If you are getting less and use that income to live on you are only paying on that income stream.

The last point here and it applies as well the tax code is likely to shift some day. This current system is very cumbersome and is likely to be changed drastically in the future. So worrying about all the machinations of the tax code and how it might affect you. A good rule of thumb is to run the numbers on your own. Take a few years from the time you hit retirement age and move forward. Run them as if you are doing your taxes each year and keep a total for each on each scenario and you might see what mathjak is pointing out but you might see that your nest egg isn't sufficient to make it. Either way it is something only you can answer for yourself. You can get a fee only advisor to do that as well. Maybe a good friend who is an accountant can help?

We agree together you are not saying one is wrong. You are truly trying to find out which is better for you and in the process help others.
Exactly. And I did run the numbers here, as I said 13.3 years is a long time. Problem is I didn't run the tax figures, you are right I may need an accountant for that. My point is the general feeling among a LOT of people is it's always best to wait if you can afford to. Well I can afford to, to a point. But the math tells me it's not the no-brainer many claim.
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Old 09-05-2016, 07:29 AM
 
71,517 posts, read 71,694,121 times
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Quote:
Originally Posted by FREE866 View Post
Why do you say only delay if you only spend 33% of your assets before then?
It's also hard to predict what the % will be due to fluctuating market value no?
because of the fact your portfolio can vary . if it goes up great , but if it drops the ramifications can be a lot worse while delaying . you need a nice healthy cushion for emergency's and unexpected large expenditures .

the big advantage to delaying is the fact you can spend more while younger and healthier from your assets while delaying . if you do not have that healthy cushion to spend more part of that benefit is lost out on .

delaying is really for those who can afford to have that choice .

kitces did a very interesting article on delaying


https://www.kitces.com/blog/how-dela...money-can-buy/
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Old 09-05-2016, 10:15 AM
 
Location: NC Piedmont
3,911 posts, read 2,877,558 times
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I am more willing than MJ to go lower to delay, but I would be likely to lock in the amount drawn down in an annuity of some sort, knowing full well that they are not great investments but I like the assurance that the numbers work. If I need to delay 6 years, I would buy a 5 year annuity that started paying in a year and withdraw funds for the first year (my DOB is within a week of New Year's which works out nicely for tax years and the FRA "boundary") and the remaining funds (could be less than half of prior balance if numbers work) I would actually get slightly less conservative with.

But...

A down market at the time I retire scuttles the whole deal.

With all due respect (which is an enormous amount) to MJ, I think I view it differently because I really might be faced with this. I would rather have a guaranteed adequate income stream (delaying takes me into "I could live simply but not impoverished on SS alone" territory) than the uncertainty of a SS stream that really isn't enough, and having to manage the funds to provide lifetime income. Note that there are some personal emotions in that decision. I really like having it nailed down and I am risk averse.

Also, using the annuity strategy you still have an opt out if you make sure the annuity has a good surrender value (or a not awful penalty if you want to look at it from the other perspective). But if you have to do that because of some emergency your remaining funds don't cover, you are in dire straights and neither strategy would bail you out.
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Old 09-05-2016, 12:24 PM
 
Location: Mount Airy, Maryland
10,460 posts, read 5,924,770 times
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Quote:
Originally Posted by ReachTheBeach View Post
I am more willing than MJ to go lower to delay, but I would be likely to lock in the amount drawn down in an annuity of some sort, knowing full well that they are not great investments but I like the assurance that the numbers work. If I need to delay 6 years, I would buy a 5 year annuity that started paying in a year and withdraw funds for the first year (my DOB is within a week of New Year's which works out nicely for tax years and the FRA "boundary") and the remaining funds (could be less than half of prior balance if numbers work) I would actually get slightly less conservative with.

But...

A down market at the time I retire scuttles the whole deal.

With all due respect (which is an enormous amount) to MJ, I think I view it differently because I really might be faced with this. I would rather have a guaranteed adequate income stream (delaying takes me into "I could live simply but not impoverished on SS alone" territory) than the uncertainty of a SS stream that really isn't enough, and having to manage the funds to provide lifetime income. Note that there are some personal emotions in that decision. I really like having it nailed down and I am risk averse.

Also, using the annuity strategy you still have an opt out if you make sure the annuity has a good surrender value (or a not awful penalty if you want to look at it from the other perspective). But if you have to do that because of some emergency your remaining funds don't cover, you are in dire straights and neither strategy would bail you out.

Are you planning to retain a certain amount to cover big unexpected expenses, new cars, a furnace etc? Or is the plan to surrender the annuity should something happen?
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Old 09-05-2016, 12:55 PM
 
71,517 posts, read 71,694,121 times
Reputation: 49089
Quote:
Originally Posted by ReachTheBeach View Post
I am more willing than MJ to go lower to delay, but I would be likely to lock in the amount drawn down in an annuity of some sort, knowing full well that they are not great investments but I like the assurance that the numbers work. If I need to delay 6 years, I would buy a 5 year annuity that started paying in a year and withdraw funds for the first year (my DOB is within a week of New Year's which works out nicely for tax years and the FRA "boundary") and the remaining funds (could be less than half of prior balance if numbers work) I would actually get slightly less conservative with.

But...

A down market at the time I retire scuttles the whole deal.

With all due respect (which is an enormous amount) to MJ, I think I view it differently because I really might be faced with this. I would rather have a guaranteed adequate income stream (delaying takes me into "I could live simply but not impoverished on SS alone" territory) than the uncertainty of a SS stream that really isn't enough, and having to manage the funds to provide lifetime income. Note that there are some personal emotions in that decision. I really like having it nailed down and I am risk averse.

Also, using the annuity strategy you still have an opt out if you make sure the annuity has a good surrender value (or a not awful penalty if you want to look at it from the other perspective). But if you have to do that because of some emergency your remaining funds don't cover, you are in dire straights and neither strategy would bail you out.
the short term bridge annuity's (mygaps) are only on par with cd rates for the most part . there are no mortality credits . you get a bit more and the tax situation is a bit different but the mygaps will not do to much over just cd's .

you would have to lock in to a regular spia for more cash flow which means the longevity risk that goes with them .. anything else with options to get money back are way to costly in comparison in my opinion . once you try to rule out the longevity risk of the annuity you basically kill off any cash flow advantage like an spia would have .
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Old 09-05-2016, 01:06 PM
 
6,877 posts, read 7,276,074 times
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I'm getting more confused, the more I read.

Is the issue which is best to allow one to live the lifestyle one would like -- OR -- which option means the person gets the most money whether one spends it or not, and "leaves no money on the table" so to speak, meaning does BETTER than break even?

If I can live the lifestyle off just my pension, and delay until 70 (still not touching my 401K or Roth), does it matter whether I delay or not?

If I claim at FRA, I'd get the money and bank/invest it….if I wait until 70 I have a bigger Soc Sec. check. And sure I could die at 71, and not "break even" -- so my heirs are out that money. But if I've lived as I wanted, that "lost money that I and my heirs never got" seems to be the only "downside."

So let me ask this question: IF a person can live off just their pension, not touching other accounts, and not needing the Soc Sec. -- is it best to delay until 70? -- if they're willing to accept they/their heirs could lose (never get) that money. OR, should they take the FRA amount and bank/invest it? Again I'm NOT talking about money that's needed to live -- NOR or we talking about tapping accounts or drawing down to delay…….
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Old 09-05-2016, 01:13 PM
 
71,517 posts, read 71,694,121 times
Reputation: 49089
depends . do you want market and interest rate risk or longevity risk?

no one can say for sure which way is better as far as balance . it is up to the whims of markets or your longevity . the entire outcome rides on the markets and rates .

as far as draw rate you can draw more day 1 delaying ss and refilling down the road . ss requires no dry powder

if you want return on a risk adjusted basis than delaying ss is king .
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