When is the Optimal Age to Start Collecting Social Security? (spouses, separate)
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yes it figured invested assets . it figured it in the reverse , if you delay you will be spending down a balanced portfolio over the 8 years .
you need money to live on if you delay so that money you are spending from other sources is effectively "invested money or could have been invested money that is being used .
whether you spend the incoming ss to live if you file early or bank the ss and spend other income is just switching pockets and still amounts to the above .
ss is not compounded .
i have never seen a retirement calculator show better results taking ss early unless it makes some pretty high assumptions about returns and income that can be pretty risky to count on .
try firecalc or the fidelity planner , both are top choices .
the long-term real return on equities has been “only” about 7%, which represents a 7% equity risk premium over an alternative risk-free rate. Which means for equities to generate a comparable risk premium over the value of delaying Social Security, equity real returns would need to be 8.3% after 20 years, 11% after 25 years, 12% after 30 years, and 13% after 34 years. Arguably, these are questionable real returns to expect in any environment, and even more questionable in the context of today’s above-average valuations.
Oh, I would never use a calculator by a company that is in the business of making money from investments, like Fidelity.
I used Marketwatch.com calculator.
I think the reason (and it's just a guess) that I do better claiming SS earlier is:
I get SS yr 1, let's say an even $20k.
I get to earn 5% on my own personal $80k. ($4,000)
Yr 2 - I get SS $20k (+COL)
Yr 2 - I now get personal investment of a little over 5% of what is now $84k in my personal acct. ($4,284)
yr 3 - I get ss $20k (+COL)
yr 3 - I now get personal investment of 5.2% of what is now $88,284 in my personal acct. ($4,590)
yr 4 - I get SS $20k (+COL)
yr 4 - I'd earn 5.3% of what is now $92,874 ($4,922) TOTAL $ REC'D AND REMAINING For/After 4 YRS: $80k SS + $17,796 interest = $97,796 + $80,000 principal remaining = $177,796.
If I delayed SS for 3 years, I'd get (I start with $80k principal):
Yr 1, I would spend $20k of my personal (earning 5% of $60k = $3,000)
Yr 2, I'd spend $20k of my own $ (earning 5.1% of $43,000 = $2,193)
Yr 3, I'd spend $20k of my own $ (earning 5.2% of $25,193 = $1,310)
Yr 4, I'd get fr SS approx. $25,220
Yr 4, I'd earn 5.3% of what is now $26,503 of my own ($1,404) TOTAL $ REC'D AND REMAINING AFTER 4 YRS: $25,220 SS + $7,907 interest = $33,127 + $27,907 (remaining principal) = $61,034.
Sheesh, this is complicated. I may have made a math calculation or missed something, too. But I assume that Marketwatch retirement calculator is reflecting that in circumstances like these, where the recipient is spending personal retirement funds while not receiving SS, it is difficult to make up for the loss of personal compounded interest in the beginning years by receiving larger SS payments later.
I just don't know. Of course, as you continue on with YR 5, YR 6, and so on, it should even out more. But the loss of the initial principal for compounding is gone, once that principal is spent.
Oh, I would never use a calculator by a company that is in the business of making money from investments, like Fidelity.
I used Marketwatch.com calculator.
I think the reason (and it's just a guess) that I do better claiming SS earlier is:
I get SS yr 1, let's say an even $20k.
I get to earn 5% on my own personal $80k. ($4,000)
Yr 2 - I get SS $20k (+COL)
Yr 2 - I now get personal investment of a little over 5% of what is now $84k in my personal acct. ($4,284)
yr 3 - I get ss $20k (+COL)
yr 3 - I now get personal investment of 5.2% of what is now $88,284 in my personal acct. ($4,590)
yr 4 - I get SS $20k (+COL)
yr 4 - I'd earn 5.3% of what is now $92,874 ($4,922) TOTAL $ REC'D AND REMAINING For/After 4 YRS: $80k SS + $17,796 interest = $97,796 + $80,000 principal remaining = $177,796.
If I delayed SS for 3 years, I'd get (I start with $80k principal):
Yr 1, I would spend $20k of my personal (earning 5% of $60k = $3,000)
Yr 2, I'd spend $20k of my own $ (earning 5.1% of $43,000 = $2,193)
Yr 3, I'd spend $20k of my own $ (earning 5.2% of $25,193 = $1,310)
Yr 4, I'd get fr SS approx. $25,220
Yr 4, I'd earn 5.3% of what is now $26,503 of my own ($1,404) TOTAL $ REC'D AND REMAINING AFTER 4 YRS: $25,220 SS + $7,907 interest = $33,127 + $27,907 (remaining principal) = $61,034.
Sheesh, this is complicated. But I assume that Marketwatch retirement calculator is reflecting that in circumstances like these, where the recipient is spending personal retirement funds while not receiving SS, it is difficult to make up for the loss of personal compounded interest in the beginning years by receiving larger SS payments later.
I just don't know. Of course, as you continue on with YR 5, YR 6, and so on, it should even out, I would think. But the loss of the initial principal for compounding is gone, once that principal is spent.
glad you wouldn't use the calculator by fidelity because they are in the business of making money but that has zero to do with it . the data is straight forward and fully explained and has nothing to do with their products
is there a rule of thumb about what % of your savings you should leave alone doing this? Or don't let it go below X amount (where X might be N years of expense or whatever)? Say you started with 600K and needed to withdraw 35k a year for 6 years ($210K). Would it make sense to do so? What if you started with 400?
@bpollen..good thing it's just a guess! Your "math" works as long as you've figured a way to make sure you spend all that "extra" total received right before you die at 77. Otherwise, all you're doing is betting on a short life OR a longer life with less income. And please let me know where you get 5% each and every year. I have a couple hundred thousand I'd like to put there.
Its not complicated at all. Do you have enough money to live with the same income amount whether you retire at 62 and collect at 70 or not? Your "income" does not know whether your funds come from SS OR IRA. If you do, and delay, income will will always come out ahead for you if you live to 80 and beyond. If you know for a fact you will die early, then don't delay. Really not the most positive way to plan retirement though, now, is it.
Breaking even is ONLY a useful construct if you spend all your money before you die young.....otherwise because of your lower income due to filing early, you WILL need a larger savings to draw from to equal what a larger income with little to no necessary savings will provide if you inconveniently live to 80 and beyond. The point of retirement is not to have the largest savings possible, it is to have the largest income possible, with the least volatility. The math was never the question, human nature was always the question.
is there a rule of thumb about what % of your savings you should leave alone doing this? Or don't let it go below X amount (where X might be N years of expense or whatever)? Say you started with 600K and needed to withdraw 35k a year for 6 years ($210K). Would it make sense to do so? What if you started with 400?
I don't see it as a percentage, but rather an absolute dollar amount of liquidity you need to feel comfortable. Like a lot of things, it comes down to personal circumstances and preferences.
is there a rule of thumb about what % of your savings you should leave alone doing this? Or don't let it go below X amount (where X might be N years of expense or whatever)? Say you started with 600K and needed to withdraw 35k a year for 6 years ($210K). Would it make sense to do so? What if you started with 400?
First off. If you only had 600k and needed to live on 35k per year you will be short. There are a few options left for you. You could take at 62 and use the 600k to make up the difference which would be 11k per year if you got a 24k ss. At a 1600 a month SS you would need 16k from your 600k. If you worked a little and collected you could even let that go even lower. It is as everyone here has been saying, it is an income problem not a savings problem.
First off. If you only had 600k and needed to live on 35k per year you will be short. There are a few options left for you. You could take at 62 and use the 600k to make up the difference which would be 11k per year if you got a 24k ss. At a 1600 a month SS you would need 16k from your 600k. If you worked a little and collected you could even let that go even lower. It is as everyone here has been saying, it is an income problem not a savings problem.
I was actually thinking of the years from 64-70 so taking SS earlier still might be FRA (66+8mo for me) or thereabouts. I should have more than 600 (all acounts totalled are close now plus enough equity to downsize free and clear), but just threw that out there; who knows what the next few years will bring?
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