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the increase in ss is not an 8% return at all. the cost is the checks you are not getting , no spousal benefits if due and no hold harmless from medicare .
plus loss of compounding on the money you are spending down to live on delaying or if not pulling out money , then the ss that could be put in . .
you need to live to about 90 to equal the early ss when using a balanced portfolio , not counting the spousal not received while delaying.
delaying is zero return and depending on your personal situation break even can be more then two decades out along with your first penny of return
All that is only true if future stock market returns match recent returns or long-term historic returns.
If that assumption turns out to be true, and future stock market returns match the long-term average of the S&P 500, which is about 10%/year, then my wife and I will be sitting pretty no matter what we do with SS. Our IRA and 401(k) accounts will be appreciating faster than we spend them.
If, however, that assumption turns out NOT to be true, and we see something like a decade-long bear market. Then delaying SS for 8 years and taking the 40% higher lifetime annuity will have turned out to be the wise decision.
There area two great unknowns when it comes to retirement planning: (1) Your future investment returns, and (2) your longevity. We can game out the risks associated with all four potential combinations of those two unknowns:
1. Your investments tank and you die early: It doesn't really matter what you do with SS because you are gone. You didn't maximize your potential SS withdrawals but that's water under the bridge because you are gone.
2. Your investments do great and you die early: You accidentally leave more to your heirs than you planned and you didn't maximize your potential SS withdrawals but again, water under the bridge as you are gone anyway.
3. Your investments do great and you live a very long time. You won the lottery. You are going to be just fine no matter what sort of SS decision you make. At some point you will pass the break-even point and delaying SS will have been the better choice financially. Even if it is age 90, you'll get there if you live a long time.
4. Your investments do poorly and you live a long time. This is the scenario where delaying SS saves your bacon. The 40% higher SS payment that you get by delaying until age 70 stays with you and your spouse for the rest of your lives. And will always be there even if you live to 110.
Out of these for possible scenarios, #4 is the one that poses the greatest downside risk, as it is the only negative scenario that you are actually alive to witness. And it is the scenario that delaying SS does the most to address.
All that is only true if future stock market returns match recent returns or long-term historic returns.
If that assumption turns out to be true, and future stock market returns match the long-term average of the S&P 500, which is about 10%/year, then my wife and I will be sitting pretty no matter what we do with SS. Our IRA and 401(k) accounts will be appreciating faster than we spend them.
If, however, that assumption turns out NOT to be true, and we see something like a decade-long bear market. Then delaying SS for 8 years and taking the 40% higher lifetime annuity will have turned out to be the wise decision.
There area two great unknowns when it comes to retirement planning: (1) Your future investment returns, and (2) your longevity. We can game out the risks associated with all four potential combinations of those two unknowns:
1. Your investments tank and you die early: It doesn't really matter what you do with SS because you are gone. You didn't maximize your potential SS withdrawals but that's water under the bridge because you are gone.
2. Your investments do great and you die early: You accidentally leave more to your heirs than you planned and you didn't maximize your potential SS withdrawals but again, water under the bridge as you are gone anyway.
3. Your investments do great and you live a very long time. You won the lottery. You are going to be just fine no matter what sort of SS decision you make. At some point you will pass the break-even point and delaying SS will have been the better choice financially. Even if it is age 90, you'll get there if you live a long time.
4. Your investments do poorly and you live a long time. This is the scenario where delaying SS saves your bacon. The 40% higher SS payment that you get by delaying until age 70 stays with you and your spouse for the rest of your lives. And will always be there even if you live to 110.
Out of these for possible scenarios, #4 is the one that poses the greatest downside risk, as it is the only negative scenario that you are actually alive to witness. And it is the scenario that delaying SS does the most to address.
it boils down to do you want more market risk or more longevity risk .
either has the ability to do better then the other.
even under the worst outcome we ever had , a 4% draw inflation adjusted off a balanced portfolio has done just fine even with the raging double digit inflation we saw .
we have had 121 rolling 30 year retiree periods and none left a balanced portfolio in trouble .
the worst cases were those who retired in 1907,1929,1937 and 1965/1966 took an adjustment to 3.6% instead of 4% .
we have had nothing like those worst case outcomes since 1966.
90% of those 121 rolling periods left a retiree with more then they started 30 years earlier . so markets have never been the issue people make them to be as far as your income goes since the cash flow is already based on the worst of times . anything better then those worst days is a plus .
better markets just left bigger balances , but that is exactly what a safe withdrawal rate is designed to do
Last edited by mathjak107; 12-24-2021 at 11:18 AM..
Investing is not synonymous with gambling by any means. Unless you're speculating, history has told the story. I'm hardly the oldest here but I've gone through 3 pretty major downturns and have weathered it and am much ahead of where I would be with my money in my mattress, or even in a savings account or T-bills.
So many are hollering about the evils of inflation - yeah, that'll definitely be difficult to beat if a mattress is your plan.
it usually ends up being a catch 22 , as those who are anti investing tend to not have the same resources as those who do invest .
so they complain how they have little or nothing to invest , unless they had high paying jobs and socked away big amounts to make up for the most powerful force , compounding growth .
that is what takes the little bits we manage to save and multiplies them into meaningful amounts over the years .
it is also why draws can be limited too when not investing in retirement . fixed income only , has failed so many times at a mere 4% inflation adjusted that you really need to cut income down by a lot to make no equities work
Like others I can't tell or even suggest what others should do. I personally am taking my Soc. Sec. at 63.
I'm single, no kids. Any money I don't file for, no one in my family will get, no one can inherit.
I won't invest my age 63 Soc. Sec. benefit, per se.
But, I will invest any income I make from part time jobs worked after retiring from my full-time career at 62 and a half. I'd retire before then but have to work that long to qualify for retiree health insurance.
-- Retire at 62.5 (Feb 2022)
-- File for Soc. Sec. the second I turn 63 (June '22)
-- (live on last pay check with vacation and other payouts, and maybe nip off savings for 4/5 months until first Soc Sec.)
-- Work part-time seasonally OR remote -- for extra money. I'm already investigating and making contacts for seasonal work, and already researching remote jobs related to my field. (Staying under the 1-for-2 earnings cap.)
I think I could live off Soc Sec alone. But it would be very tight.
So,ooo I'll work part-time at some no responsibility, low stress job -- invest any of that that I don't need into my Roth (could be all of it)-- also planning on using ages 63-70 to convert tax deferred monies to the Roth.
No need to touch any of my 401ks or IRAs. They will stay invested as they are now at 75/25...or they'll grown to 80/20. I'd have to reallocate to get back to 60/40. Maybe I will. Maybe I won't.
Also, if I may.....
I don't think anyone here has tried to push or persuade anyone to do anything.
I think some posters just want to educate, so that IF someone makes a decision, and least it's an educated decision, and not based on faulty information or misperceptions that aren't true in the first place.
The OP's question wasn't about the debate concerning whether to take SS at 62, or not.
But rather how many people who took their Soc. Sec at 62 invested it?
I'm talking mine at 63. And while I won't invest the Soc. Sec., I will invest all or most of the money I make working part time.
The (albeit reduced) Soc. Sec. will allow me to work only part-time and still invest, and convert tax deferred accounts to my Roth.
Also, wasn't the ACA supposed to mean that people who wanted to leave their jobs, would be able to because that wouldn't be tied to a job for healthcare?
I'm sure many have left their jobs for others or retired and due to the ACA. But I'm guessing that it hasn't been a panacea for most.
The OP's question wasn't about the debate concerning whether to take SS at 62, or not.
But rather how many people who took their Soc. Sec at 62 invested it?
I'm talking mine at 63. And while I won't invest the Soc. Sec., I will invest all or most of the money I make working part time.
The (albeit reduced) Soc. Sec. will allow me to work only part-time and still invest, and convert tax deferred accounts to my Roth.
Also, wasn't the ACA supposed to mean that people who wanted to leave their jobs, would be able to because that wouldn't be tied to a job for healthcare?
I'm sure many have left their jobs for others or retired and due to the ACA. But I'm guessing that it hasn't been a panacea for most.
I don't think so.
I would never retire before I was eligible for Medicare. I am sure many do, but I don't know anyone that wants to retire that badly LOL.
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