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A few points about SS and investing
1. SS is neutral, actuary-wise
2. There is no such thing as a free lunch with investing
3. SS is an income stream, not a lump sum, so you are not getting the 'full investment' of your SS 'annuity'.
4. Because SS is actuarily neutral, you should start taking SS based on your expected longevity.
5. Because we do not know when we will die, it is the best longevity insurance, so maximizing the baseline of that income stream is a good thing.
I took a strong look at when to retire, and did a real deep analysis. Then I found that items 1. and 4. for couples, may be incorrect because of spousal benefits. It benefited us greatly to wait. Delete 'Because SS is actuarily neutral...', I would agree with 4, too.
In our case, the extra income by waiting automatically qualified us for a construction loan on a new house. Waiting for FRA, then additional 7 months put us is the best possible position for retirement. Now four years later, I couldn't be happier for that decision.
We, and our financial needs, are all different.
Last edited by MichiganGreg; 12-22-2021 at 04:31 PM..
Reason: changed tone.
ok but doesn't it seem more balanced to just invest 100% in the S&P? Sure some times you will be in the red but overall, it seems more lucrative considering you do not need the RMD $ to exist. I know that is an opinion, you can skip if you want.
Many of us have long term money that is in equity funds , but it isn’t all our money so the equity funds are actually part of a comprehensive portfolio….
When I add money to the equity fund portion it is still considered part of the total portfolio of equities , bonds , gold , commodities and bitcoin .
I work one day a week and throw my pay in the s&p 500 fund in my 401k . But it is still all part of a diversified portfolio
Because your SS amount grows by about 8% -- guaranteed -- for every year that you wait between age 62 and your FRA, and investing in the stock market has no guarantees, especially by novice investors. That you have determined to invest all of the early SS money you'd get into stocks in a specific index suggests that you are not gauging the risk realistically.
I'll do more research but this isn't really a specific index if it involves 500 of the biggest companies. That seems very diversified to me but no doubt, I am sure there is a reason retirees don't only do this one stock. After age 70, I would like the portfolio to be less risky
The market has been going up for a number of years. Odds are that it will go down in the next few years.
Deferring SS increases your payments by about 8% per year. Over lets say the next 10 years I could see SS as being a safer investment than the market and maybe both earning about the same. I would not take the SS and invest.
The 8% is only after pass FRA - it is about 5% at 62. But also, it is not really a 8% gain, it is a delay to get a higher rate.
Odds are that market will go up an average of 6-8% - if market goes down, should recover. The idea for most is that keeps from drawing from current investments, not necessarily investing the payments.
The 8% is only after pass FRA - it is about 5% at 62. But also, it is not really a 8% gain, it is a delay to get a higher rate.
Odds are that market will go up an average of 6-8% - if market goes down, should recover. The idea for most is that keeps from drawing from current investments, not necessarily investing the payments.
People don’t understand the 8% increase is not a gain …you can’t compare it to early ss that is invested or not spent down ….
I can't take SS because I make too much money in retirement.
I think you are incorrect. You can take SS if you have 40 credits. If you are between 62 and FRA (full retirement age) and have earned income in retirement that will affect your SS in that they will take $1 for every $2 over $19k earned. If you are getting pension income and taking income from savings (401k and IRA tax deferred savings) those are not considered earned income. That all being said you if you are eligible for SS it will have up to 85% of the amount counted for income tax purposes. That means 15% is untaxed and you file your taxes with the 85% amount in your income. So I would look at what you are eligible for. Go to www.ssa.gov and create an account. Two reasons for this. 1 to see what you are eligible for and 2 so that someone else cannot claim your SS for their own.
That was my problem ..I work one day a week and I made to much to bother collecting early .
I finally cleared the earning cap under the special rules for the year you will be fra …I could earn up to 45k back then so I filed at 65 when my fra was 66
I retire in less than a year with a three legged type retirement. A small pension, SS and a 401K. I plan on collecting at 62. We are not going to be rich but I will be receiving a slightly higher monthly combined paycheck than I am receiving now with all three.
I love my job but some minor health issues and being that I am one of the few remaining of the group that founded (40 out 1500 employees) my place of employment tells me it is time to go.
We have other investments outside my 401k so we intend on letting them soak.
Life is short and if there is one thing I have learned is that health is your greatest asset. One thing they need to tell you in those early age retirement classes is that health and mobility are just as important as investing for retirement!
Merry Christmas everyone!
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