A new (to me) angle on when to take Social Security (years, married)
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i think they can be an excellent planning tool. it allows one to put a date on their own longevity . they can plan to 80-85 instead of 95 and not fear running out of money.
if you die, well dead is dead game over .
i predict more and more insurance products will be used to fund retirements more and more.
while markets can't be counted on anymore dead bodies are predictable.
it is another asset class in a way ,to diversify in to.
we insure all aspects of our lives but we rarely insure the one thing that paying all the other insuramces hinge on , insuring our income in retirement.
larry i agree 100% , more and more folks are going to want guarantees especially if shillers cape ratio is an accurate prediuctor of what retirees can expect down the road.
the perfect plan would be a guaranteed annuity for income and life insurance for heirs. everything locked in advance and guaranteed more or less.
throw in a bunch of non crucial investments for the wants and inflation protection and you may be looking at the retirement plan of the future.
nice work on the articles.
Last edited by mathjak107; 09-27-2014 at 02:59 AM..
which is exactly why any statistic about longevity is meaningless. unless you know who is going to die you still need to plan to a ripe old age regardless anyway.
Even sub group demographics are useless to the individual.
that is why this constant citing of statistics about life expectancy ,long term care odds or wealth really is useless info. we all have to still plan like we are the one things either apply to or don't apply to.
only one outcome can apply with nothing in the middle.
insurers can use these statistics as they know how many of us are going to die each year within reason.. but they can't tell us who so to us the info is meaningless and to base your decisions on it are foolish most of the time.
remember average life expectancy is only the point 1/2 of us are dead and half alive. there is just as great a chance you will live from that point as die.
you still need to plan like you will beat methuslas record regardless.
Last edited by mathjak107; 09-27-2014 at 07:20 AM..
Don't bet on it. There is absolutely no evidence in the mortality statistics of the trend you're describing. You need to budget to live to a very old age.
Larry, you're absolutely correct. I don't bet on anything anymore. I'm just going by general observations of what I've seen the last few years or so. My wife is on the front lines concerning payments from SS. She comes home and tells me of all the ways that govt. and insurers are cutting payouts. I don't expect that to get better. If anything, with the baby boom, it will almost certainly get worse. I'm also watching what I see with the birth rate, which is on a downward trend. Finally, there have been already reported some sections of the country, where the average lifespan is decreasing. Put it all together, and you've got a whole lot of people might end up not getting the healthcare that their parents got.
I do agree with you to an extent. I like the idea of longevity insurance and, in point of fact, I've discussed this with 3 different certified financial planners but I really need to find one that charges hourly rather than commission-based. All three are trying to dissuade me from it because age 85 is so far away for me. They want me to start a deferred annuity with payment beginning at age 65. I could do both, but with interest rates poised to rise (as we are being told, but not sure by how much they will rise) I keep thinking it isn't a great idea to buy any deferred annuity just yet. At age 70 I had planned to buy an immediate annuity.
Also, I've sat down with an Excel spreadsheet because I am OCD and I see that by paying for the deferred annuity at my age I do wind up with less spending money in my older years. Using the figures given to me, purchasing the deferred annuity with a guaranteed 5% minimum growth that pays $10,204 beginning when I turn 65 at a cost today of $110K leaves me negative $1134 per year by the time I am 95 vs had I not purchased it. On the positive side, it guarantees that I will always have that additional $10,204 annually in addition to social security assuming I outlive my assets. On the realistic side, what exactly is $10,204 going to purchase 40 plus years into my future?
So, which company is offering an income stream of $100K at age 85 for $150,000 today?
Those stats regarding increasing longevity for most folks doesn't mean that that everyone will live longer, so how much faith you put in such stats is an individual choice.
In the business section of the Sunday, June 15, 2014 Los Angeles Times, financial advice columnist Liz Weston, whom I have always found to be accurate, reliable, and well informed, made the following point in one of her responses. I quote the two relevant sentences:
"Starting benefits early locks you into lower payments for life and will result in significantly smaller lifetime benefits for most people.That's in part because Social Security hasn't adjusted its payment formulaseven as life expectancies have expanded, so most people will live beyond the "break-even" point where delayed benefits exceed the amounts they could have received had they started earlier." (Emphasis mine).
I had always thought, perhaps ignorantly, that it was a statistical wash for Social Security whether people took their benefits early or late - and apparently that was the case at one time. Now, if the L.A. Times columnist is correct, it seems we are better off in the aggregate waiting until full retirement age or beyond because "life expectancies have expanded".
As a pessimist who has never expected to reach my statistical life expectancy, I have long been aware of this aspect of Social Security - and thus I expect that drawing early will be the better choice for me.
Even so, getting on disability before reaching 62 would be even better, since that 'lower payment' does not lock in for SSDI recipients until they reach Full Retirement Age (FRA) - at which time that 'lower payment' has increased to the 'normal' level that would be received by someone claiming at FRA.
As for being single and having IRA/401k income it might be better to convert it quicker and then take SS at a later date say age 70 for the stated reasons of reaching that 85% marginal rate.
That's pretty close, the break even point is 12 years, not accounting for investing or cost of living increases.
Say you started collecting at age 62: When you'd actually reach FRA at age 66, you would already have received 4 years of payments. IF your payment was $2000 a month, that's $96,000 in your pocket at age 66. If you had waited until age 66 (when you'd get the higher payment, you would have an increase of roughly $666 a month) but, you obviously wouldn't have had that money ($96,000) in hand. It would take until age 78 for you to acquire that money ($96,000) with the higher payment. 12 years would be age 78. After you reached age 78 you would then be making $666 more a month than if you'd have retired at age 62.
So it's basically a bet as to how long you think you'll live.
If my wife would of waited to 66 to start SS she would of received nothing. Healthy all her life and family all lived to ripe old age. SS is only a small part of our retirement portfolio and $600 is pocket change for me to worry about. So 4 years of retirement is better than none. For me the break even point is 77, doubt I'll make that, but I live life to the fullest.
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