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Old 01-05-2017, 06:49 AM
 
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Whether to delay or not really takes in the entire picture and taxes as well as rmd's , any medical subsidy's pre medicare , zero % tax brackets for capital gains being utilized , etc ..

Don't forget spending down potential rmd money by delaying can be a good thing if it effects taxes .

Ss is only taxed up to 85% as opposed to rmd's later being taxed on 100% and at potentially a higher rate once ss kicks in . . Many states like ours do not tax ss money so a higher ss vs higher rmd's makes the delaying ss a better deal .

we can pull up to 40k in retirement money at less than a 5% effective tax rate while delaying . we can get 20k out tax free if delaying just through the standard deductions and exemptions .

taking ss now would eat up that chance of getting rmd money out at a nice low tax rate .

there are so many things linked to retirement income that it is not an easy answer as to which is really better for you once you get away from the what if i die scenario .

we had used fidelity's in house tool which is called the social security optimizer . it is only run by them , not something on line . that gave us our biggest bang for the buck .

unless my wife and i died early , delaying allowed a slightly higher draw rate all the time because of reduced sequence risk and at times a bigger balance remaining depending on longevity

Last edited by mathjak107; 01-05-2017 at 07:01 AM..
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Old 01-05-2017, 07:33 AM
 
2,678 posts, read 1,543,054 times
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Quote:
Originally Posted by Larry Siegel View Post
Dear Fellow Booth Graduate, in this case IRR and DCF give the same answer. Mathjak's analysis is correct.
And as a Booth alum, you should know that IRR and DCF/NPV only lead to the same answer in simplistic cases where one makes some simplifying assumptions, as has been done here. I won't boor you with the details, since you, of all folks should know them, as well as more sophisticated models than plain DCF.

To others, you can see from MJ's answers how complex the delay decision can be in real life. You can't generalize. And let us not forget political risk, which is much greater now than it was a few months ago.
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Old 01-05-2017, 07:59 AM
 
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remember too , those survivor benefits can be important . losing a spouse means not only the loss of an ss check but it also means filing single at the worst possible time if it is when rmd's kicks in .

if the sale of a primary residence is eventually going to be part of the plan more than 2 years down the road they lose 1/2 the exclusion on the house .

so you really have to think about the ramifications of survivor benefits .

80% of all married men die married , 80% of all married women die alone
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Old 01-05-2017, 11:45 AM
 
Location: RVA
2,167 posts, read 1,266,787 times
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I don't see where any generalizations were made, beyond the reference to a married couple. The decision to delay is strictly based on things like todays rules, todays view of inflation, todays economy, expected longevity, whether married or not, amount saved, amount that must be left to heirs, risk aversion, date of retirement from earned income, amount of unearned income and its sources and amounts of SS per spouse and state taxes. Those things are most of the main factors, in an apples to apples comparison.

Everything could be identical, except that both in a marriage have the same high SS, or both have low SS. Or one is high and the other low. Each of those is enough to sway the delay file decision one way or another.

Some are closer to absolutes. If there is a huge desire to leave the maximum to heirs, then filing early is almost always the better move. Low chance of longevity. File early.

Speculation on future law changes or economic conditions is absolutely useless. No one can predict with any consistency, the correct situation.

In Matts case, with todays rates and others, married, significant difference in SS, good life expectancy, good source of unearned income, good savings, taxable state income, then retirement early, and delaying filing, and living off a higher income from the beginning is practically a no brainer. Its not how much you collect from SS at the moment, but how much income you allow tourself to spend from day one that counts. Delaying allows younto spend more and not worry about investment issues that may crop up in your past 85 years, simply because you are less market dependent.

A blanket statement like "its all the same in the end so it makes no matter when you file" is patently false, unless one has SO much wealth, that SS amounts are a non factor in ones living arrangements. In which case it is a moot argument by default.

Since one that delays, can always change their mind and file, and collect 6 months retro as a lump sum, it is rarely ever a bad decision to delay, if you can at all.

Last edited by Perryinva; 01-05-2017 at 12:05 PM..
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Old 01-05-2017, 11:57 AM
 
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according to the comprehensive work up fidelity did , delaying left a bigger balance more often under a wider range of outcomes . that is because you are drawing so much less potentially for what could be decades

filing early was very market and investment dependent while delaying was more longevity dependent . if a couple longevity generally stands the better chance
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Old 01-05-2017, 01:05 PM
 
Location: Copenhagen, Denmark
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Make the calculations of cash flows in present value terms, using real interest rates to discount the annual cash flows in the future.
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Old 01-05-2017, 02:40 PM
 
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Quote:
Originally Posted by mathjak107 View Post
read what i wrote , i said the odds of one in a couple hitting 90 is 47% .

how does it effect a benefit ? the survivor benefit of the higher earning spouse gets paid out for more years . i may crap out , but my 70 benefit goes to my wife . she statistically can collect that higher benefit for years longer even if i die . if i live than i am the one collecting my 70 benefit longer .

google how couple life expectancy calculates out . you don't add them together .

there is statistically an amount that gets added to the female life expectancy because you have one bet and two horses and the husband can and does outlive the wife .




Exactly. I don't think a lot of people get this. Which is a big argument to wait if you are married, and especially if your wife is younger. Good explanation.
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Old 01-05-2017, 02:49 PM
 
1,980 posts, read 1,307,560 times
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Quote:
Originally Posted by DaveinMtAiry View Post
Assuming they both retired at 62 one enjoys 10 years of checks, the other got 2. Or let's say the guy who delayed to 70 continued to work. Well then you have one guy who enjoyed a 10 year retirement, the other only 2.


Either way it's not hard to determine a winner and loser.
If both retired at 62 and both were able to live the same- I wouldn't lose sleep about the 10 vs 2 years of checks at all. Dead is dead.


My argument isn't working to 70. I have no intention of doing that (knock on wood). The argument was if you could basically live the same with either condition.


The flip side would be to outlive 72 by a lot and have thousands more as a monthly annuity.
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Old 01-06-2017, 06:22 PM
 
Location: Grove City, Ohio
10,134 posts, read 12,387,762 times
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Quote:
Originally Posted by mathjak107 View Post
remember too , those survivor benefits can be important . losing a spouse means not only the loss of an ss check but it also means filing single at the worst possible time if it is when rmd's kicks in .

if the sale of a primary residence is eventually going to be part of the plan more than 2 years down the road they lose 1/2 the exclusion on the house .

so you really have to think about the ramifications of survivor benefits .

80% of all married men die married , 80% of all married women die alone
And that is what has driven me all along to put off benefits to age 70 so if something happens to me first, which given the statistics it will, my spouse will get the most I could possibly get for her.

I've worked it up and if I can make my goal of 70, less than two years away now, my benefit alone would enable her to live comfortably on that social security benefit alone.

If I never see a dime of "my benefit" I really don't care, that benefit really isn't for me it's an insurance policy that I have to insure my wife is never destitute or living in poverty. Maybe not living high on the hog taking international vacations but certainly not poverty either.

Look at it this way, it's my insurance policy that I will sleep well at night.
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Old 01-06-2017, 06:44 PM
 
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Circling back to the article:

It says the Social Security trust fund is going to be exhausted in 16 years. The reality is that it's already cash flow negative and that continues to grow every year. The average recipient gets a pension that barely keeps them above the poverty level. You can't cut that. Taxes are going up in some way to fund it properly.

I also question the whole model for Social Security. Other than the most affluent, life expectancy is going down, not up. The model assumes very low real wage growth. I think that the top 1/3 of wage earners who pay the lions share of Social Security payroll taxes will continue to have wage growth that out-paces inflation. Only 6% max out Social Security. I think the 70th thru 90th percentile are going to get closer to that max contribution even if the program isn't reformed to eliminate the $118,500 income cap.

I also think that incentives to delay collecting won't work. The bottom 75% don't have the wealth to defer past the day they have their life event where they can't work. They start collecting at age 62 because they have to. It doesn't matter what incentive you provide, you can't change that.
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