What percent of your retirement assets would you go through so you could delay Social Security? (pension plan, states)

[oldsoldier1976]

Originally Posted by jane_sm1th73

MJ, I respectfully disagree. There's a corner case: in mine, it boils down to raw cash in hand.

Personally, I am holding off because that extra $1K per month realized by delaying from FRA to 70 represents the dough that fills the gap between what I've got coming in, and LTC costs. What I've got coming in at that point are pension; taxable dividends; RMDs; and net rental income (in no particular order). Assuming LTC is ??120K??/yr at that point, I need the extra SS dough to avoid decimating my Roths, cash acct, and tax-deferred accounts. The extra dough fills the gap. I sure as h*ll hope I have a good CPA by then should that come to pass.

I am a sissy, simply don't LIKE the idea of decumulation (SP?). Thinking about such leads my (linear) thinking down a logical road. Today: INCOME=OUTGO. Tomorrow: INCOME > OUTGO, Me eat cat food in spectacularly deteriorated RV, parked in the Wal-Mart lot closest to the LTC facility waiting for my next RMD/SS/dividend/pension/rent checks, so they'll let me back in.

(Making fun of myself here somewhat, but not by a whole lot, lol!)

Jane that is the point MJ is making. You have income that fits your current needs up to the point of reaching age 70. His point is you are using current assets like pension and taxable dividends as well as your rental income to make ends meet. LTC is not even in the picture but it is good that you are thinking on it. Since you are not yet 70 RMD's are not in play as of yet.

My argument with MJ is that although many people feel the need to replenish the savings they have used to go from 62 to 70, I contend that it is more a knee jerk reaction to the feeling of overdrawing retirement savings in order to maximize government payout of SS. I can understand that in the long run many of us are like little squirrels and like to horde our nuts. Most times though that squirrel's cache of nuts goes unused and unspent. Okay the poor thing got run over but the point and the analogy is still there. I say you have scrimped and saved and squirreled away all those nuts. You have decided that you want to retire and you are not quite at FRA or even if you are really ambitious age 70. But you have these assets that you have worked to prepare and receive. They are enough to carry you over until you decide that SS is now needed. Why not put those assets to use. Enjoy the fruits of your labor and spend it down. That does not mean overspend. It means use them as you would your paycheck. But since you are not working and have all that free time find something to do. Even if it is free you need to keep active but your income is coming in. When you get to 70 you now have crossed about 8 years of your retirement which should in all likelihood be near 30 years.

[mathjak107]

the problem is the range your balance will be in based on whether you are the poster child for worst outcomes or best outcomes the first 8 years while drawing as much as 8% out inflation adjusted while delaying ss . .

in this case sending down assets from a million delaying ss and drawing 80k a year inflation adjusted from a 50/50 mix would leave you with anywhere from 103.327 under worst case outcomes to 1,753,000 under best case , 8 years later . which one will you be ?????
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8 years of 80k from a 1 million dollar portfolio 50/50 inflation adjusted ..

FIRECalc looked at the 138 possible 8 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 138 cycles. The lowest and highest portfolio balance at the end of your retirement was $103,337 to $1,753,323, with an average at the end of $669,961. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 8 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

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so what happens to your balance the first 8 years determines how much you can draw the next 22 years if you figure a standard 30 year retirement . if you are the 1966 retiree you actually went broke trying to delay and have a mere 103k left to last 22 years .. on the other hand if you were the 1987 retiree or 1982 retiree you may have 1,753.00 left as a starting balance when ss cuts in at 70 .

when delaying , your range of possible balances based on markets ,rates ,inflation and sequence risk is very very broad and the outcome the first 8 years plays a huge roll ..

if we figure the average balance 8 years later which is 670k and assume 68k in ss at 70 instead of 40k as an early benefit , you will need about 15,000 from your remaining 670k portfolio on inflation adjusted basis over the remaining 22 years .
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FIRECalc looked at the 124 possible 22 year periods in the available data, starting with a portfolio of $670,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 124 cycles. The lowest and highest portfolio balance at the end of your retirement was $377,749 to $2,818,345, with an average at the end of $1,233,646. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 22 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%
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so the total picture would be a balance left that ranged from 378k to 2,818,000 based on worst to best outcomes . but that balance is only based on the fact you had 670k left at the end of the 8 years you delayed . below average outcomes will reduce that final balance .

that is a huge spread and odds are you will be somewhere in between . in actual practice you need to not draw like a robot , but change up based on whether you are worst case or better .

as michael kitces calculated , a 10% raise plus inflation adjusting every 3 years that your balance is more than 50% above the starting number is a good way to keep from dying with to much unspent that you could have enjoyed if you wanted .

on the other hand if you are more towards worst case perhaps you want to cut your draw and try to rebuild if legacy money is important .

so you see nothing is an exact science . we can only talk in terms of worst-average or best outcomes . all planning is based on worse so anything better is an upside surprise . you can then adjust to take more .as things progress .

this is also why you can't say by delaying you will have more money . it is all about how those 8 years you are delaying and drawing so much more out unfold .

once you spent to much even the best of times later can't save you or improve you much

[oldsoldier1976]

so you proved my point. Thank you.

[Return2FL]

God willing I will work until 70, albeit at a slower pace, and continue contributing to my retirement while delaying SS. The benefits of loving what you do are innumerable. Should my health have different ideas for me, my plan would be customized to whatever the diagnosis might me.

[Perryinva]

There is a reason that Firecalc itself does not require a 100% success rate. To plan for an absolute success is foolish when the future is so variable and unknown. When one sees numbers that range from like $150k to $2.8million, then the conclusion would logically be "throw a dart...the analysis is useless"

But thats not the case. As pointed out by other researchers, all the history modeled predictive calculators assume blind mindless adherence to what the market did. Pretty much no one does that in reality. As MJ mentioned, there are others that advocate a variable income based on a moving average of balance success. One can most assuredly toss out the top and bottom 5% for planning purposes. The extremes are academic curiosities. The chances of hitting those extremes are minuscule. When one does that, and it becomes 90% success that one will have 2/3s of what they started with, THEN it makes much more sense. I'll take a 90% actively managed success rate all day and every day.

It seems like MJ has talked him self out of acknowledging there is more spendable income from day one if one delays (or can afford to delay).

If I had to draw $80k from a million in my savings for 8 years starting at 62, in order to delay to 70, I simply wouldn't. It is too much for too long. 1-5 to 2 million, sure. But that's a big difference. When one gets to large percentage withdrawals like that, it pretty much has to be handled on a shorter term horizon, with a minimum of yearly assessment. Planning around that is way too risky. Even though the difference between a 5% yearly draw vs 8% sounds small, compounded over a few years it is enormous.

There has to ba an age and situation dependent minimum that one requires to have saved, coilled directly with their guaranteed income. It is extremely different for everyone. For example, I may not want to have less than $700k at the start of retirement, debt free, with an guaranteed income of less than $100k, for instance. Others laugh at that amount, as way too low, or impossibly high. Many would say no savings is needed if there is a $100k guaranteed income for life. But someone that has made $250k plus a major part of their career, is certainly not going to think $100k/yr with $700k banked is workable.

Personally, I have no idea what a person with a huge retirement income is doing with that money, unless they have multiple homes and like building an empire. Sounds too exhausting to me...;-)

[mathjak107]

80k with 40k in ss and 1 million in your portfolio is spot on as far as a do if you take ss early. 4% plus whatever your ss is would be just fine and it should be a do as well if you delay . in the case of the 80k you are only drawing 4% and advancing your self the 40k from ss you are not getting .

to be honest if you can't do that , then delaying may not be a good option because you are cutting your income potential vs taking it earlier . nothing wrong drawing 40k from a million and having 40k in early benefits . why take less ?

but there are variables that can cause delaying not to provide a higher income .

delaying ONLY delivers more under two conditions , you live to average life expectancy and the first 8 years are not at or close to worst case outcomes .

nothing guarantees you delaying will give you more money . it is all based on the outcomes of the alternatives or how you do while delaying and laying out almost 2x as much .

the reason the industry feels you don't need 100% success is because of life expectancy statistics . statistically you are not likely to live 30 years in retirement .

that fact boost a 90% success rate up to 97% or so .

but the problem is just like we don't know who will experience worst case out comes we also don't know which one of us will last 30 years in retirement so we typically require a more flexible adjustable way of spending that reflects just what we are all seeing .

spending is never in an even glide path either . there are years you are forced to over spend and years you may be under budget and the order these happen in can have a big effect in your outcome too .



.

[mathjak107]

Originally Posted by oldsoldier1976

so you proved my point. Thank you.

it is my point too. if you have to far below average outcomes the first 8 years you may have to cut draw and rebuild just to support the draw you need when ss kicks in . you can clearly see above worst case outcomes would have you failing trying to match what you get as a draw with early ss and 4% of the portfolio day 1 despite a higher ss check down the road . . ..

all retirement outcomes are decided 100% in the first 15 years of a 30 year retirement . much of that is decided within the first 5 years so a poor outcome for 8 years is not good

[Perryinva]

That's true only if your savings/investments are decimated as well. No one is going to delay collecting if they have a portfolio that took a 40+% hit AND have to draw aginst it to delay. However, if you have adequate fixed income (pensions and spouse SS, for instance) and you can live on that while delaying to allow your portfolio to recover, then the downturn at start of retirement has not defined you income for life.

Another reason there is no definite right or wrong.

[mathjak107]

no, it is true regardless, if they are pulling 4% and the first 8 years are poor outcomes .

like i said 40k in ss as an early benefit for a couple and 40k from a portfolio is already stress tested to provide 40k with a high success rate for 30 years .

drawing 80k in advance for 8 years can cause failure down the road even with the bigger ss check if those first 8 years are poor so i disagree with your premise that delaying ss always will provide a higher income .

if the first 8 years are below average you could have trouble even pulling the same amount . the first 8 years pulling so much more sure does determine the final outcome ,firecalc confirmed it does . that worst case left 103k left to support you for 22 years .

that is merely duplicating what early ss allowed you and your portfolio to produce .

you are either taking the same income draw day one delaying or your not .

[Ellwood]

With the life expectancy statistics, we took SS at 62 and haven't touched our savings. Our RMD's go into a brokerage account and we have enjoyed retirement immensely.
https://www.usatoday.com/story/news/...high/16874039/