Do you know anyone of retirement age that has no retirement? (engage, benefit)
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Close to retirement age, made many bad choices in life. Three husbands. She didn't work full time when she could when she was younger. Constantly in debt. Had a second kid when she was 40. That last kid has been in special classes and has mental problems (slow not dangerous) and is now graduating high school and will probably live with her until she dies. Both she and husband have several health issues (in and out of hospital) and he does physical labor. She now appears to be suffering memory loss in addition to physical conditions. Lives hand to mouth in an expensive state in a crappy neighborhood.
Close to retirement age, made many bad choices in life. Three husbands. She didn't work full time when she could when she was younger. Constantly in debt. Had a second kid when she was 40. That last kid has been in special classes and has mental problems (slow not dangerous) and is now graduating high school and will probably live with her until she dies. Both she and husband have several health issues (in and out of hospital) and he does physical labor. She now appears to be suffering memory loss in addition to physical conditions. Lives hand to mouth in an expensive state in a crappy neighborhood.
What is "retirement age", in your opinion? Some decades ago it was generally agreed to be 65, the Social Security full retirement age at the time (now 66 for most of us posting here and will be 67 for the somewhat younger folk). Lots of people seem to consider it to be 62. I really don't know what it is. Do you?
Close to retirement age, made many bad choices in life. Three husbands. She didn't work full time when she could when she was younger. Constantly in debt. Had a second kid when she was 40. That last kid has been in special classes and has mental problems (slow not dangerous) and is now graduating high school and will probably live with her until she dies. Both she and husband have several health issues (in and out of hospital) and he does physical labor. She now appears to be suffering memory loss in addition to physical conditions. Lives hand to mouth in an expensive state in a crappy neighborhood.
Maybe I am being dense here, but who exactly is "she"?
Clearly neither "she" nor her DH can be seriously accused of being the sharpest tool in the shed, whoever they are.
Same numbers for me (also maxed out) since we are both the same age. Remember to point out that those values are in 2016 dollars. Use a SS calculator and determine, based on a guess at inflation, what the actual checks would be in say 2028, for age 70. More like $54k, assuming 2%. This is important because when one calculates what your withdrawals from IRA, etc, or income from investments, it will be IN 2028 dollars. One just hopes to have more of them to draw on then; ie what the growth is exceeds inflation for a net gain. If you have $500k saved now, and expect to have $750k due to growth and contributions at 70, you mentally think "I'm all set, I will have 50% more available to spend at 70". But you won't. With just 2% inflation that 500k has to grow to be $634k just to break even. So you really only will have 116/750= 15.5% more. Oops!
So the real value of delaying is not only the DRC increased amounts but the compounded COLAs for years.
Percents never really paint a great picture, especially if you don't account for inflation. 72% more, (70 vs 62) while sounding impressive, isn't as impressive when using the SSA numbers without taking inflation in to account, and say the age 62 amount is more like the average of $13k. So when one looks at the "logic" of delaying it becomes a "$13k a year now and for 8 more years vs $22.4k at 70" decision. So pass up $104k now, for $9.4k a year more later???
But make it $24k and the real inflation number of $54k, and WHOA, while you may pass up on $192k (24K x 8 years), it's for an inflation increased $30k a year, (54-24k) and suddenly its an easier decision to make IF you can afford it. $9.4 k more to pass on $104k VS $30k more to pass on $192k. Big difference. $30k more is more than double what you would have gotten, and $30 is just plain a lot more extra money a year than $9k is!
Sorry for the side track.
So are you saying that the 8% annual benefit from waiting to collect SS is real (that is, before adding say 2% for inflation) or nominal (just 8%)?
So are you saying that the 8% annual benefit from waiting to collect SS is real (that is, before adding say 2% for inflation) or nominal (just 8%)?
It's "real" in the sense that the entire benefit schedule from age 62 to 70 adjusts upwards every year for a COLA adjustment. If we have 10% inflation, you'd get the 8% for deferring the year plus the 10% across the board COLA adjustment.
Deferring to age 70 a great inflation hedge. In 2016 where we just saw a 0% COLA, most people aren't thinking that way. In 1980, we had double digit inflation and the stock market and bond market weren't tracking the inflation rate. Social Security was the only thing not going backwards.
All I can do is assume my portfolio will track inflation and no better. If I do better than that, great. If I do worse, I've structured things so my Social Security check at age 70 will pay my bills.
Exactly!! The 8% is fixed (as of now), per year from FRA TO 70. It is NOT an 8% ROI, just an increase based on, thankfully (for those that will collect) an outdated life expectancy. That is why as it stands now, I feel so strongly about delaying if you can afford it, especially with returns as low as they are for the average investor. And if inflation (and rates) rise, you are STILL protected by the additional COLAs, or if you feel you can do better, you can always start collecting.
Its a tougher call from 62 to FRA, but FRA to 70, an easy one. Between the tax benefits, reduced RMDs, and COLA compounding, the increase in the take home spendable dollar amount for delaying to 70, especially if you are maxed out is impressive. Just run a SS calculator like SSAnalyze, and the numbers can astound you.
Who, very late in life, (that doesn't have trustworthy financially smart children to handle their finances, which I don't), wouldn't rather have the highest COLA adjusted income, taxed at zero, or even 85% of ones tax rate, instead of having to track investments, and plan withdrawals, etc, etc.? I know I am already tired of constantly working my portfolio for the last 30 years and have at least 12 more to go. Once my SS and pension easily cover all my expenses and then some, I can just put 60% in easy Index Funds, and the rest in bonds, if I want, and not really care. I don't care to obsess and maximize my savings for my heirs! I just obsess and maximize until I am sure my wife and I will be set, while having as much fun as we can along the way!!
So are you saying that the 8% annual benefit from waiting to collect SS is real (that is, before adding say 2% for inflation) or nominal (just 8%)?
here is a real return chart based on roi depending how long you live . at age 90 you can see a 5% real return and 6% at 95 .
considering that for a couple seeing age 90 for one of them is 47% , almost a coin toss so that is pretty high odds . those returns rival a balanced fund with no risks like the funds .
I worked with a man who was with the company for 30+ years and he NEVER participated in the 401K. He said that he could not afford to. I had to shut up and leave that conversation alone. He was single, lived with his Mom until she passed on....and he loved socializing with friends. Huh? Can't afford to ? Company downsized him out of his job. Mom dies and left the house to the children. He was under the impression that Mom was,leaving the house to him but she never put the paperwork in place. Siblings wanted their share so the house was sold. I don't understand not participating in any savings and company match 401s. I won't be rich in retirement but I should be "ok". Just wish that I had saved in my 20's. Youth!
Saving while young (say through 30ish) and learning the ins and outs of living below your means CAN make a huge difference, but I honesty can not beat myself or anyone else up about not actually saving much. I clearly recall being tired of school and work and not "enjoying life while I was still young" and finally making good money and wanting to enjoy it with the clear thought that I had plenty of time to save later. Of course I always took arvantage of a 401k and worked for a company that had a pension, usually.
I know maybe 4 or 5 people that actually became savers and investors from college on. And as expected they are very well off, certainly better than I, even with a lower salary than I have. Why? All either married to working spouses and stayed married. Or were single and stayed single. Never lost more than half in a divorce. None ever did anything "extravagant", but to me, their version of extravagant was too severe. Never to scuba dive in the Carribean? Visit Europe? I understand that my desires are not valid for everyone else, but too many of those 4 or 5 literally did little except work and save. Some of them were just plain smarter tham me, better educated on investing and real estate, but you can't force smart or intuition. It's there, or its not. I may have been broke at 36, with a whopping $12k left in my 401k after my second divorce, but I sure was living a wild ride compared to most of them and had few regrets. (After snapping out of the all too typical "woe is me self pity party") The difference was I was able to reel back and save more, invest, and find that balance of living and saving. Sure, some luck was involved, but mostly it was taking advantages of circumstances, hard work and opportunities, while drawing a line between delayed gratification and learning to work smart and save smart, vs all in or nothing. Worked well for me.
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