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Personally, I had not ever heard of the idea of using a partial lump sum as an incentive for people to delay taking their Social Security. It's an interesting concept. Don't know if I'm in favor - I'd have to think about it more.
I guess I'm already convinced of the value of waiting - getting that much increased "annuity" with COLA. A lump sum is not attractive to me since I have many times that amount in my 401(k) and Roth accounts.
Maybe it's good for those with less saved... but I don't know that it's the best to offer a lump sum that one would be tempted to buy a couple new cars with rather than to have it as steady income for those later years.
Delaying is not what it's craced up to be. It's revenue neutral, since you get more when you delay but for a much shorter time. This means you don't get an 8% return when you delay past FRA. You get more because you will draw for a shorter time.
ss is not neutral anymore due to increased life expectancy . in fact a couple has far better longevity odds than a single does making the 50% point of survival around 90 today.
you can collect more delaying then you give up from 62-70 .
in fact you can see a 5% real return after inflation by delaying if one person in a couple sees 90 which is just about a 50% chance . . that rivals the best of times with a balanced portfolio from what amounts to a gov't bond with no sequence risk allowing higher spending . .
when ss was started life expectancy was age 65 . even for singles it is no longer neutral. since 2000 we have been adding 1 more year of life to the average every 4 years .
Last edited by mathjak107; 01-04-2017 at 07:42 AM..
Odd way to aproach this, and would it really help SS solvency? Basically, most people would delay if they could afford to retire when they wanted, not work and not collect, especially if married. By stipulating that the person is single, that changes a lot, as the extended benefit to a surviving spouse is a major factor. Was the article saying "Give you $60k at 62, to not file until FRA, OR you get the same amount at FRA that you would get at 62, plus $60k cash bonus? " I think the later. In my case, the increased COLA annuity is the main reason I favor delaying. So the lump sum would simply have to be an amount equal to purchase a similar paying annuity with survivor benefits, including the preferential tax treatment, then I would go for it. I would actually "prefer" that, as it eliminates the governmental control of possible further means testing etc.
I'm convinced that if I wait as long as possible to 70- it's very lucrative. I'm 51 but have looked closely at the future numbers. My required income estimate (70% of current in future dollars) at the time I hit 70 would pretty much be covered by SS. It's better for my wife too who is 7 years younger. It guarantees the money never runs out.
To put it in perspective, the difference between us collecting at 65 vs 70 is almost $2000 per month.
The question is, and the thing I struggle with, if I want to retire at 65 (or whenever) but wait till 70 for SS, how much would I be comfortable with pulling out of my 401K? Without going into dollar details, what if it is HALF or even more in the 5 years, could you do that? It's putting much more faith in SS.......
Delaying is not what it's craced up to be. It's revenue neutral, since you get more when you delay but for a much shorter time. This means you don't get an 8% return when you delay past FRA. You get more because you will draw for a shorter time.
I don't think this is true if you are conservative and think you are your wife might live to your 90s. If you do, you win.
There is always that argument people stupidly make that if you die at 72, you lose. But who cares- you are dead. As long as you didn't have to eat dog food to get to 70.
For peace of mind, I'd rather say that if for some fluky reason I live to 100, I'm good.
ss is not neutral anymore due to increased life expectancy . in fact a couple has far better longevity odds than a single does making the 50% point of survival around 90 today.
you can collect more delaying then you give up from 62-70 .
in fact you can see a 5% real return after inflation by delaying if one person in a couple sees 90 which is just about a 50% chance . . that rivals the best of times with a balanced portfolio from what amounts to a gov't bond with no sequence risk allowing higher spending . .
when ss was started life expectancy was age 65 . even for singles it is no longer neutral. since 2000 we have been adding 1 more year of life to the average every 4 years .
Good summary.
I like delaying SS because you do not know what the future will hold in financial terms. Thus if you can afford to delay collecting you are increasing your future monthly income and relying less on your investments performance.
What's with this couple business? This is not an annuity for two people. SS stops when you die. Your spouse does not matter unless they can claim a higher spousal benefit.
Mathjack, Internal Rate of Return??? Do you know that IRR went out of fashion about 30 years ago, when I was an MBA student in finance at U. Chicago? Do you know discounted cash flow analysis?
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