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No, it's not a matter of working longer. The only question is when to start taking the SS check. One is stopping work at the same age in either case.
We can argue that there (at least) two categories of people here. The first group is wealthy enough that it does not need SS at all pay the bills during retirement. SS benefits are just found money that they can invest, give to their children or charity, etc. I can imagine these people taking the money early and investing it in some long-term assets that can get a good return, even if the assets are volatile.
The second group are people who have some significant assets, but SS is still an important part of their retirement income. These people are better off delaying SS as long as assets will reasonably allow, unless perhaps they have good reason to expect a shorter than typical lifespan.
For the case of living off assets, you cannot use a simple calculator that assumes the same return each and every year unless there is some safe and guaranteed investment with that characteristic. Today there is no such vehicle that will give 5% each and every year with certainty, so making this assumption in your calculation will give a result that is too optimistic.
Well, yes...you can get a reliable 5%, if that's your intent. You have to give up growth, of course. PIMIX, a mutual fund, pays more than that. The downside is that it doesn't grow its dividend reliably like, say, a blue chip stock does.
I didn't use a simple calculator. I used the Marketwatch retirement calculator, so it calculated the returns of the principal over time. I'm not saying it was a huge difference, but over and over it said my money would last longer if I took SS early. I assume it's because I'd have to spend down my principal in my retirement accounts otherwise.
The LEAST amt of money for my senior years comes from delaying SS until the age of 70.
it isn't 5% nominal , it is 5% real return after subtracting out inflation because the ss has cola's . .
don't use that marketwatch calculator , the market watch calculator is a reverse amortization calculator ,it can be off in projecting how long your money will last and the balance by as much as 15 years . it assumes you will never ever spend down in a down year . every year it calculates has the same positive return . it is useless for anything . you can see the constant percentage used in the investment section of the software .
you need a real calculator with sequence risk and worst case scenario's . use FIRECALC or the fidelity planner . dollars to donuts delaying ss will always have the higher balance once the actual real world sequences take hold ..
spending down money in down years makes all the difference in the world . in fact your actual return means very little .
the results i got in marketwatch are totally unrealistic and have zero link to what is known as a SAFE WITHDRAWAL RATE which has very specific criteria that has to be met .
did you know , 1987 to 2003 were the greatest 17 years in history averaging 14% returns cagr .
if we took a 100k portfolio , left the rate of inflation with the house to grow the balance and spent everything else , just changing the order of the gains and losses that make up the 14% average the results are mind blowing .
just changing the sequence of the gains and losses so they are not constant every year left you anywhere from plus 76k at the end of the 17 years to minus 186k .
same exact 14% return in all cases . that is scarey how important the sequence of those average returns becomes once you are spending down .
you can never use anything seriously like the market watch calculator . you would need the exact same return every year and same exact inflation rate with never a down year or negative return year . but the main issue is it has no benchmark to what are called safe withdrawal rates , meaning actually surviving the worst 30 year time frames in history , 1929,1937, 1965/1966 without the income failing lower then a 90% success rate .
firecalc and fidelity do use worst case scenario's . firecalc uses actual worst case data while fidelity using monte carlo simulation attempts to find even worse sequences then existed to date , and the actual ones were pretty nasty as is .
try firecalc and your results will be far more accurate.
in fact kitces did the work already on the delaying ss , all the numbers are there .
Bada bing. If the "Investment Cos" only aim was to keep more money invested, then based on bpollen logic, taking SS early so you don't have to touch your savings, and if you are wealthy enough to not touch it, so you can can "add" to it with your SS to grow, means MORE money for them, doesn't it, not less, right? Yet, they NEVER recommend that. They recommend delaying collecting and USING gour savings for what it was saved for. To live a better retirement. Again, nothing personal, but the reasons you are citing make no sense.
Of course you have to have enough saved to delay. That's by definition. If you don't have enough saved that you absolutely need your SS to live between 62 and 70 (or whenever), then you probably ARE in a situation where collecting early is right for you, simply because you are forced to accept a lower COLA income level for life.
If one is to collect the average SS check at 62 of about $1200, and has the average $100k saved, then delaying is not an option. You just have too little to afford to delay, and still have a safety net. The modest gain in income by delaying, is not enough in actual dollars to risk reduction of the modest emergency fund. If $1200/mo income and $100k saved seems "adequate or more than enough" to retire on, then this thread is moot to you. Financial Advisors have no interest in you at all, because that level is considered basically poverty and requires government support, and subsidies, etc, etc. Why even bother using a financial calculator? Anyone that believes they can live on that for possibly 30 years needs to really examine if thats the risk they want to take. That is totally personal.
This discussion is at a totally different income level.
Perry is on point about the audience for a thread like this. I have been a high earner several years and will be somewhat near max on SS payout and hope to have a retirement account in the high hundred thousands (it barely is now) and equity of around 200k. I am planning to retire at 63.5 or maybe 64. If I were looking at 62, I might not have enough to safely delay until 70, depending in what income level I wanted.
I have another perspective from my line of work to throw out there. I develop software for a client who puts out an updated version every year. Whe we start the next release, we are "feature boxed" - we plan the new featues that they want/need and prioritize them and begin implementing them. Later in the cycle we are "time boxed" - there is an immovable deadline and if some things have proved more difficult than we expected we may have to lower expectations and adapt. I think you know where I am headed. At some point in the retirement planning process, you need to decide if all the things you planned to be able to afford are still in play and what you can take off the table if you are coming up short. Sometimes moving the deadline is an option, sometimes not. Anyway, it isn't just about deciding which option is best but also deciding if any of them will work (with an acceptable amount of risk). I think you have to be careful about not going with higher risk because it might hit your numbers, but that is a personal decision.
It has EVERYTHING to do with it. It's those investment cos. that have people afraid they can't retire if they don't have a million dollars in their accounts. (Gee, I wonder why investment cos. want people to have more money to invest than they need?) People do not need $1M to retire, unless they plan on living a high-end life. Most seniors do not, and could not, and never did.
So unless I have a ton of $$$, Fidelity is going to say "You can't retire yet!!! Not enough money!!And for goodness sake, don't take SS NOW! It might enable you to retire!"
Fidelity also has higher fees than norm for most of its funds.
If I used a site for calculator, it'd be Vanguard. But Marketwatch is the most thorough one I've ever used, and I've used a lot.
bpollen please you should take SS at the point in time you feel you need. The tools and advice here are just that. Free advice and free tools. Only someone in your shoes can make the decision on your future.
Quote:
Originally Posted by bpollen
Well, yes...you can get a reliable 5%, if that's your intent. You have to give up growth, of course. PIMIX, a mutual fund, pays more than that. The downside is that it doesn't grow its dividend reliably like, say, a blue chip stock does.
I didn't use a simple calculator. I used the Marketwatch retirement calculator, so it calculated the returns of the principal over time. I'm not saying it was a huge difference, but over and over it said my money would last longer if I took SS early. I assume it's because I'd have to spend down my principal in my retirement accounts otherwise.
The LEAST amt of money for my senior years comes from delaying SS until the age of 70.
I think the Marketwatch calculator is right. If you take SS now or early if you are not collecting yet, your money will be able to grow while you leave it in the funds. One point I will make though. The investment companies make more money when you make withdrawals over leaving it in. This is especially true if you are not making a lot of deposits. They make their fee money on transactions. Deposits and withdrawals are transactions. Therefore they can charge a fee.
Quote:
Originally Posted by Perryinva
Bada bing. If the "Investment Cos" only aim was to keep more money invested, then based on bpollen logic, taking SS early so you don't have to touch your savings, and if you are wealthy enough to not touch it, so you can can "add" to it with your SS to grow, means MORE money for them, doesn't it, not less, right? Yet, they NEVER recommend that. They recommend delaying collecting and USING gour savings for what it was saved for. To live a better retirement. Again, nothing personal, but the reasons you are citing make no sense.
Of course you have to have enough saved to delay. That's by definition. If you don't have enough saved that you absolutely need your SS to live between 62 and 70 (or whenever), then you probably ARE in a situation where collecting early is right for you, simply because you are forced to accept a lower COLA income level for life.
If one is to collect the average SS check at 62 of about $1200, and has the average $100k saved, then delaying is not an option. You just have too little to afford to delay, and still have a safety net. The modest gain in income by delaying, is not enough in actual dollars to risk reduction of the modest emergency fund. If $1200/mo income and $100k saved seems "adequate or more than enough" to retire on, then this thread is moot to you. Financial Advisors have no interest in you at all, because that level is considered basically poverty and requires government support, and subsidies, etc, etc. Why even bother using a financial calculator? Anyone that believes they can live on that for possibly 30 years needs to really examine if thats the risk they want to take. That is totally personal.
This discussion is at a totally different income level.
Perryinva you have the right of it. If there is a small portfolio of savings then collecting early is the best and only options if working longer isn't an option. The trouble is once a person reaches the 50s and enters the 60s keeping a job is harder and getting one is even harder. Oh yeah I know there are a lot of low paying wage jobs out there. The jobs I am saying that are the kind that can keep a senior feeling as though he is no longer retired. Those jobs that offer benefits don't want old experienced workers. They want new blood with new ideas. They are looking at this all the time in spite of it being illegal to discriminate for age.
But I digress. The point of the thread is when is the optimal age to take SS. I can tell you this that I have learned. Your optimal time to take it is when you want and or need to. Only you can make that decision. You and or your spouse might regret that decision later taking it early or waiting. No one here has a crystal ball that can tell you a decision made now will have these consequences or those. One only needs to make the decision that feels right for them. Those decisions can be delayed up to at least 62 since that is the earliest to take it. Once that age is met circumstances will dictate delaying or taking is made then.
100% correct! I honesty believe the hardest part of understanding retirement income evaluation (and I have no idea, nor really care if bpollen falls in to this category) is for someone that has worked hard but lived a relatively low income all their life (say around max of $40k/yr today) coming to grips with the fact that it will take a lot higher percentage of their past pre retirement salary to live just the same way if they live to 90. Its a plain fact that the lower your income the harder it is to save. It is a very steep curve of lifestyle improvement when going from an income of say $30k to $40k because at that income, $10k can drastically alter your life style. At that income, tou will not see a huge reduction in costs of living upon retirement, but suffer all the same increased costs of healthcare, etc. If you make $120k, going to $130k probably means you can save a bit more, or take nicer vacation, and required retirement income does drop dramatically because the reductions in SS and tax payments, and payoff of a home (or equity in a home) are all far greater. Its just plain easier to retire to a reasonable life the more you made over your lifespan.
while it certainly is true with the right market outcomes taking ss early and leaving the money invested will do better the wild card is will it ?
the other issue is when steep drops happen in the accumulation stage it is a lot easier to ride it out mentally then in the retirement stage while spending down . older folks have a tendency to bail and protect what is left rather then ride things out for who knows how long .
so really it boils down to more market risk or longevity risk , which do you prefer ?
our portfolio already has enough market and rate risk , so i prefer to balance that out with some longevity risk .
Last edited by mathjak107; 04-17-2016 at 10:45 AM..
I was going to take mine at 62, in 4 years. I got a recent SS Printout and under the estimated benefits it states: "Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time, The law governing benefit amounts may change because by 2034, the payroll taxes collected will be enough to pay about only 79% of scheduled benefits".
This does not inspire confidence in the system.
No doubt my SS income will be taxed to the max because of required minimum distributions from 401K, IRAs and investment earnings at full retirement age and beyond.
I was going to take mine at 62, in 4 years. I got a recent SS Printout and under the estimated benefits it states: "Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time, The law governing benefit amounts may change because by 2034, the payroll taxes collected will be enough to pay about only 79% of scheduled benefits".
This does not inspire confidence in the system.
No doubt my SS income will be taxed to the max because of required minimum distributions from 401K, IRAs and investment earnings at full retirement age and beyond.
Not necessarily. Only 85% of your SS will be subject to tax at the max and that will be taxed at your nominal rate. It will factor in your other incomes. Also chances are your SS will not be subject to state income tax at all. Only 1 or 2 tax SS I forget which.
Yup, plus whats the alternative? You have to pay your SS anyway. If you can afford to delay, then you can change your mind at any time and start collecting that larger amount in a months time. No down side. It has always been indexed on income, where someone with average life time earnings of $20k/yr gets 56% of that income in SS benefits for life, with COLA, that is likely 0% taxed vs someone that barely stayed ahead of the max SS taxable income collecting 26% of the max, taxed on 85% of that amount, at FRA.
SS is not a savings plan, which many seem to view it as, it's old age insurance. If I hit a 3 million lottery tomorrow, and the requirement was to sacrifice any future SS income, I'd take the deal in a heartbeat. It's not like I'm expecting a cash return on the $20k plus federal taxes I pay every year! But I accept that as part of the price of being able to become successful financially and living in the USA.
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