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Arizona Bay
12-12-2016, 10:39 PM
I can get full SS in 4 years, but it doesn't amount to much, so I'm considering taking it a couple years early and continuing to work for 5 years or so and ease out of the habit.

What is the best thing to do with say 1k a month coming in and being saved?
And keep it simple, please :D

johnwill
12-13-2016, 12:57 AM
Remember if you take early SS and earn more than $15720 (for 2016) your SS benefit is reduced by $1 for every $2 you earn over the limit. That is in addition to a reduced benefit for early SS. But the reductions for earning more than the limit are returned to you after you reach the full retirement age.
What to do with the money? Invest it in A or higher corporate bonds and make about 6%. Or perhaps invest it in your favorite adult beverage.

I visited Jerome in 1969 while camping along Oak Creek.

skuthorp
12-13-2016, 05:32 AM
I am having fun with our SS system. Owing to developments I think I am not entitled to a part pension any longer. So along I go to enquire and lo telling them I am likely no longer eligible is not enough. They want bank statements, tax documents, property titles all to be copied and kept. "Not on your nelly" I say and at present there's an impasse. Did find out one thing though, the local manager of the SS system actually is just a chair minder, has no authority to do anything much at all. I laughed at her as I went out the door having taken a pic of me giving the written documentation relevant. Just in case there's a blow back.

Too Little Time
12-13-2016, 08:34 AM
What is the best thing to do with say 1k a month coming in and being saved?
It depends on what your financial experience and your time frame is.

I put my Social Security in with the same investments I had at the time. I would suggest you put your Social Security in the same investments you currently have.

Norman Bernstein
12-13-2016, 08:50 AM
I can get full SS in 4 years, but it doesn't amount to much, so I'm considering taking it a couple years early and continuing to work for 5 years or so and ease out of the habit.

What is the best thing to do with say 1k a month coming in and being saved?
And keep it simple, please :D

I think most financial advisers would recommend NOT taking early retirement, for reasons stated: you'll be taxed on your earnings until you reach age 66, and the amount you'll get will be substantially less, than if you wait.

In fact, many people (for example, my brother-in-law, who is still working at age 68) has decided not to take SS until age 70; the amount you'll receive grows by 8% per year, for every year over age 66 that you don't take it.

At some point, it becomes an actuarial gamble, since nobody knows when their number is up.... for some people, waiting until age 70 can turn out to be a good thing, for others, maybe not.

As for myself: I'll take it at age 66.

john welsford
12-13-2016, 09:56 AM
At 65 everyone resident in New Zealand gets "Universal Superannuation". Its not a contributory scheme. No means test, no documentation other than Tax number and proof of identity, those who have worked all their lives get the same as those who've never worked. I can work and earn, or have other income from savings, investment or whatever, no change in my payments no matter how much I earn. I can be out of the country for up to 6 months in any given year and still get paid, and its just about enough to live on if I'm careful. Any other income I generate just makes it easier and gives me more choices.
It makes it really easy.

John Welsford

Norman Bernstein
12-13-2016, 09:59 AM
At 65 everyone resident in New Zealand gets "Universal Superannuation". Its not a contributory scheme.

Well, to be fair, we CAN, I think, presume that it's a tax-supported program, so it IS 'contributory', is it not?

I'm NOT criticizing... I think it's what an enlightened country does, for its citizens, and I congratulate NZ for it.

john welsford
12-13-2016, 10:10 AM
Well, to be fair, we CAN, I think, presume that it's a tax-supported program, so it IS 'contributory', is it not?

I'm NOT criticizing... I think it's what an enlightened country does, for its citizens, and I congratulate NZ for it.


The Superannuation fund is partly tax funded, but it "owns" a huge pile of money invested worldwide, ( with the exception of companies who produce arms, certain types of non conservation chemicals ( monsanto for example)) and the income from this helps considerably to fund the payments. The idea is that in good economical times the government tips a few more wheelbarrow loads of money in there and the system will eventually become self funding.

John Welsford

Lew Barrett
12-13-2016, 11:00 AM
Retiring early is fine. Taking SS before you're 66 is a bad bet unless you are convinced you're not going to live past your breakeven point for early adoption, the more so if you plan to continue to work anyway. It's not that hard to do the math, so do it. If you absolutely must tap your SS in order to make an early retirement feasible, reconsider your motives for early retirement. Nobody can assess your personal circumstances for you, but any reasonably informed person can do the math. Sure, there's more to life than money, but the longer I live, the more I view such patience as a virtue. By being prudent now, you may be able to afford a good balance between a more comfortable retirement with a new found abundance of personal free time versus a few years of perceived (but probably not actual) higher income. With few other of your details to hand, the only safe advice is to suggest you delay taking SS for as long as you can prior to reaching 66.

Any fiduciary or accountant will give you the same advice.

For a healthy person, the math involved in drawing on SS early almost never works out.

Arizona Bay
12-13-2016, 11:03 AM
Putting the well-being of its citizens above immense profits for a few, imagine that :)

I'm not educated on markets and financial investment, I've invested in experience instead. But now it's time to save a little.

Norm, yes, I see it's a trade off. I'm used to living with a low income, so the transition won't too hard. Waiting until I'm 70 would change little. 66 would be workable, except for dealing with the unexpected. Which was just demonstrated to me this week, when we learned our kindly landlady died and we need to move before the end of Jan! Not so easy in a small town. So I'm looking at shifting the situation, but I need to save something to do it with. Taking it at 64 and working for 3-5 years, might just do it. I've got a year to decide how to go about it... with the blessing ;)

Arizona Bay
12-13-2016, 11:14 AM
Retiring early is fine. Taking SS before you're 66 is a bad bet unless you are convinced you're not going to live past your breakeven point for early adoption, the more so if you plan to continue to work anyway. It's not that hard to do the math, so do it. If you absolutely must tap your SS in order to make an early retirement feasible, reconsider your motives for early retirement. Nobody can assess your personal circumstances for you, but any reasonably informed person can do the math. Sure, there's more to life than money, but the longer I live, the more I view such patience as a virtue. By being prudent now, you may be able to afford a good balance between a more comfortable retirement with a new found abundance of personal free time versus a few years of perceived (but probably not actual) higher income. With few other of your details to hand, the only safe advice is to suggest you delay taking SS for as long as you can prior to reaching 66.

Any fiduciary or accountant will give you the same advice.

For a healthy person, the math involved in drawing on SS early almost never works out.

Prudence, right now, is paying off the debts but doesn't allow for any savings. Not owning a piece of ground is both a blessing and a curse, and who knows how long I'll live? :D

Would like to find a way to live mostly off grid, near sailing water, build a few more boats and grow some veggies... I see a possibility.

Lew Barrett
12-13-2016, 11:15 AM
Hold out as long as you can Mr. Bay. That is the best advice you're going to get on this thread, but you gotta do what you gotta do, and that's not financial advice. It's moral support.. Know that if you are forced to enroll early it WILL come at a cost later on. Only you can make the absolute determination.

Ah...just saw your reply. As I said, only you can weigh it all and come up with the answer that's right for you. The fiduciary has spoken! :D In the end, no doubt quality counts for more than quantity, but it's nice to have a little extra of both..

Arizona Bay
12-13-2016, 11:30 AM
Hold out as long as you can Mr. Bay. That is the best advice you're going to get on this thread, but you gotta do what you gotta do, and that's not financial advice. It's moral support.. Know that if you are forced to enroll early it WILL come at a cost later on. Only you can make the absolute determination.

Ah...just saw your reply. As I said, only you can weigh it all and come up with the answer that's right for you. The fiduciary has spoken! :D In the end, no doubt quality counts for more than quantity, but it's nice to have a little extra of both..

Thanks Lew... a little extra of both would be nice, then I can spread it around.

I"m gathering clues, and at some point, I'll know what to do because I'll just find myself doing it, to whatever end ;)

Norman Bernstein
12-13-2016, 11:35 AM
Well, it certainly helps if you can live comfortably and very cheaply, at the same time. I've thought about this, myself, and within the next few months, I'm going to do something I frankly have NOT done yet: analyze my expenses and see just what it's actually costing us to live. At the moment, I'm still earning quite well, but as a contractor/consultant, I never know when I might have 'dry' periods without income.

There are really TWO challenges to deal with. The first is what can be reasonably expected, as income versus expenses, in the short and medium term... the second is what events will conspire to cost a great deal more than anticipated, such as an illness or infirmity.

The first challenge isn't so difficult; you can estimate your living expenses, and figure out what the income from SS, pensions, investments will be... although investment income can be fickle. Based on the past 9 years, my income I can derive from investments, without depleting the capital, would be surprisingly good... EXCEPT that the past 9 years have been bull years for investments, and it's unlikely to continue indefinitely. I have always felt that I could probably live comfortably on less income than I currently enjoy... but who knows.

The second challenge is a lot harder. Consider an illness that puts you or your wife (if you have one) into some sort of extended care facility. These are FRIGHTFULLY expensive, so if, at one moment, retirement looks reasonable secure and comfortable, the next moment could bring disaster. For me, it's actually worse, since my wife has Parkinson's, and although we are (I hope) a long way from that grim reality, it will nonetheless become an eventuality.

One last thing: for some people, it's not an issue of affordability. My Dad passed very suddenly, at age 78. He had essentially retired at age 58, but spent a few more years working for a friend of his, just to keep busy... which I found rather amazing, since he had run his own business for all his adult life, and I was amazed that he was able to cope working for someone else. Eventually, he gave that up... and confessed, to me, that he wished he hadn't retired so young. Apparently, there are only so many newspapers to read, so many rounds of golf to play, so many walks to take in the mornings.

As for me, I'll take the SS at age 66, even if I'm not retired... it's a bit of a toss-up, on an actuarial basis, but if I'm still working, I can still invest. I don't feel nearly old enough to NOT work, except that my 'scope' has narrowed over the years, and contract gigs are getting harder to find. Whatever happens, I need something to keep me busy... it's better for my psychological condition.

Todd D
12-13-2016, 12:45 PM
I think the biggest factor in deciding to take social security early is your health. A year ago, since my health was fine, I was planning to take social security no sooner than 66 and likely would wait until 70. Then on my 64th birthday I was diagnosed with cancer. That changed the equation rather a lot since I might not make it to 70. That caused me to start social security.

Medicare is also a consideration in delaying your start of social security. If you don't start social security at 65 when you start medicare, you will get the full annual increase in Medicare premiums. If you start social security at 65 when you start medicare, your premium increases will be limited to no more than your cost of living increase in social security. This year, if you receive social security of $1,000 a month your maximum medicare premium increase is $3 instead of the $12 increase those not receiving social security get. Although $9 a month may not seem like much, is is $108 a year for the rest of your life. That adds up. You have to balance against the increased social security you get for taking it later. It really depends on how much social security you expect to receive and how big ost of living increases are.

It is also worth calculating your break even date for taking social security early compared to waiting. For example if your SS is $1,000 at age 65 and $1,400 at age 70, the break even age is 82.5 (ignoring COLA). You then need to factor in your expected longevity. A male age 65 today has a life expectancy of 83. Similarly a male aged 62 today has a life expectancy of 82. If a male aged 62 would receive a $1000 SS pension at age 65, the pension would be $793 at age 62. The break even age for taking SS at 62 rather than 70 is then 80.5. In either case unless you live longer than the typical life expectancy there is little real benefit to waiting to take social security. So look at familial age expectancy. Did both your parents die in their 70s or are they still doing fine at 90?

So if you are figuring on having a relatively low income in retirement with a not particularly large social security payment, I would argue that you should consider starting Social Security during the year you turn 65. Also factor your health into the calculation.

Too Little Time
12-13-2016, 12:55 PM
I"m gathering clues, and at some point, I'll know what to do because I'll just find myself doing it, to whatever end ;)
Some individuals think the term fiduciary is magic. It is not. There are people who have a fiduciary duty toward their clients. They have no fiduciary duty to others. In particular, they have no fiduciary duty towards you.

I took my Social Security as soon as I could. When I am 70, I will have the $80K plus whatever my investments appreciated by to use.

Ted Hoppe
12-13-2016, 01:01 PM
Or you can take the early SS at 62. Consider most men do not live over 78. Moreover - you have no idea what the government will take away in the next years from those not taking the benefit. Frankly - you might win by taking the SS at 62 and investing it while working. Moreover you will have ability to make choices about the quality and free time you have left when you have the energy to do those great things still in your bucket list.

There are many sage folks here - many have other streams of incomes and access to great healthcare and are in good shape. Just remember - no one ever said, i was glad to work up to my death and missed those wonderful chances to have time to enjoy being with people and things that make up a good life.

Norman Bernstein
12-13-2016, 01:26 PM
Just remember - no one ever said, i was glad to work up to my death and missed those wonderful chances to have time to enjoy being with people and things that make up a good life.

Actually, you'd be wrong... there are MANY people who have their OWN version of a 'purpose-driven life' who WANT to work until they expire. Working does NOT automatically mean that someone is passing up the opportunity to "enjoy being with people and things that make up a good life." We all define what the 'good life' is, for ourselves... and for some, being of service, in some fashion, including continuing to work, is what keeps them alive. I'm only echoing the sentiments of my own father, who admitted to me, a few years before he died, that he made a big mistake in retiring early.

Norman Bernstein
12-13-2016, 01:27 PM
So if you are figuring on having a relatively low income in retirement with a not particularly large social security payment, I would argue that you should consider starting Social Security during the year you turn 65. Also factor your health into the calculation.

Full retirement age is 66, Todd, not 65.

Lew Barrett
12-13-2016, 01:39 PM
I think the biggest factor in deciding to take social security early is your health. A year ago, since my health was fine, I was planning to take social security no sooner than 66 and likely would wait until 70. Then on my 64th birthday I was diagnosed with cancer. That changed the equation rather a lot since I might not make it to 70. That caused me to start social security.

This is the key to any decision of this nature. Most people can't predict what their future will be and who wants to?
I hate reading this. You're one of my heroes on this board and when I read you, I always think you're thirty nine. Please keep it that way, huh pal? Life is a crap shoot that turns on a dime. That's why all our advice is worth less than the screen we read it on.

Todd D
12-13-2016, 01:40 PM
I know that Norman but used 65 because of my medicare consideration. It doesn't matter what age I used for the reference retirement, since I was illustrating the calculation not the specific age of starting SS.

Also life choices can change. I retired quite early and have never regretted it. That is particularly true now that my life expectancy has decreased significantly. Had I waited to retire at 65 I might not have made t, particularly since my job would have required working until I was 4 months past 65. Also I would have enjoyment of life in the years since I took early retirement.

Todd D
12-13-2016, 01:44 PM
This is the key to any decision of this nature. Most people can't predict what their future will be and who wants to? I hate reading this. You're one of my heroes on this board and when I read you, I always think you're thirty nine. Please keep it that way, huh pal? Life is a crap shoot that turns on a dime. That's why all our advice is worth less than the screen we read it on.

I am trying Lew, but my body may not cooperate. The biggest change is that I will be putting the classic yacht up for sale this summer. That likely won't change much for a while since I don't expect it to sell quickly, but I am starting to think about clearing my plate for the next phase of my life - think moving back to the PNW.

Ted Hoppe
12-13-2016, 01:48 PM
Actually, you'd be wrong... there are MANY people who have their OWN version of a 'purpose-driven life' who WANT to work until they expire. Working does NOT automatically mean that someone is passing up the opportunity to "enjoy being with people and things that make up a good life." We all define what the 'good life' is, for ourselves... and for some, being of service, in some fashion, including continuing to work, is what keeps them alive. I'm only echoing the sentiments of my own father, who admitted to me, a few years before he died, that he made a big mistake in retiring early.

Norm - You maybe wrong here as much as i am. Being retired doesn't mean stopping work but a new interpretation of work/life balance.

I also believe that life is preciously short. Spending time stressing about others expectations, quarterly spreadsheets, mashing out computer computer screen time, meeting deadlines, going to meaningless trade shows and working holidays away from family and freinds is too a terrible waste of the other side of life's short candle. Since i never met your father I would not know his motivations. But i do know the good simple life is where there is time to be there for your spouse and children, creating meaningful ends in ones community and having time to develop ones greater interests. To me it is far better than making money for someone else and getting a cheap company going away lunch from Olive Garden once you burned most of your wick.

John of Phoenix
12-13-2016, 01:57 PM
I can't think of anything quite as complicated as the variables of Social Security benefits. When I was diagnosed with cancer at 62, I called and described the situation.

Should I start even though I'm still working?

Should I wait?

If I die, what does my wife get?

The recommendation was "File and Suspend", something that hadn't even occurred to me.

Call them and have an expert walk you through the various permutations. (800) 772-1213

leikec
12-13-2016, 02:13 PM
I'm taking my (late wife's) survivor benefits when I turn 60 in October. I'll keep working as long as possible.

Jeff C

Norman Bernstein
12-13-2016, 02:18 PM
Norm - You maybe wrong here as much as i am. Being retired doesn't mean stopping work but a new interpretation of work/life balance.

That is up to the individual. We can wonder why some truly ancient codger like Sheldon Adelson continues to run his empire.... but I think we can reasonably assume that he does it because he WANTS to, not because he has to.


I also believe that life is preciously short. Spending time stressing about others expectations, quarterly spreadsheets, mashing out computer computer screen time, meeting deadlines, going to meaningless trade shows and working holidays away from family and freinds is too a terrible waste of the other side of life's short candle.

Maybe you're describing YOUR work... not necessarily someone else's. If that's how you describe work, then I feel sorry that YOUR work can be characterized like that.

When my work is most satisfying, it's NOT even remotely stressful, but is driven by curiosity, augmented by creativity, resulting in a great deal of satisfaction. When I can take someone's really bad circuit, and demonstrate, to a client, how it can be ingeniously revised to eliminate error sources and become far more accurate and reliable, there's the possibility of enormous satisfaction.....

....and none of it has to take away from time spent, for example, with my wife or daughters or granddaughters. In fact, TOO much closeness with family isn't a good thing, either.

Granted, not ALL of the work I do is describable like that... but the parts which are, are VERY rewarding, personally.

Norman Bernstein
12-13-2016, 03:51 PM
We had good luck along with everything else. At 55 I knew that we had more than enough. And I also had something that I never counted on, benefits that actually came through: a company age 55 early retirement plan, a pension, and essentially free health care insurance from 55 until medicare at age 65, plus eligibility for social security at 62 or later, and medicare at 65.

It's a good story, Dave.... and glad for you. Admittedly, the benefits you describe (pension, health care from 55 to 65) are increasingly rare in this day and age... few people have those options.


I took social security at age 62, so did my wife. We didn't need the money, but why pass up "free" money, and I never counted on social security anyway. How can you count on something over which you really have no absolute control?

Well, despite Trump, I still believe that Social Security will continue to pay its promised benefits... at least, for people presently 55 or older.... it's the people under 55 who have to worry, because Republicans have hated SS since 1935, when it was instituted, and have ALWAYS wanted to kill it. The trick they're going to use is the '55 or younger' ploy, in which they 'defuse' opposition from the segment of the population over 55, and hope that those under 55 don't mind that they may have been paying into a system for the past 30 years that the Republicans are going to kill, without compensation.


Maybe Vanguard Wellesley fund which is around one third stocks and two thirds bonds. But people will tell you bonds are going to take a hit, and hot shots will tell you that fund isn't worth a damn, with only a 9.92% annual return since 1970.

The 'worth' of any security has to be measured in terms of the risk/reward ratio: 9.92% annually is a fairly good return, and the only thing I'd mention in comparison is the return of the S&P 500 since 1/1/09 (14.9% average annually). What the difference represents is the relative risk and reward of bonds vs. equities. Of course, the equities are more volatile, and more risky... and there can be, and is likely to be, a bear market which will hurt guys like me, more heavily invested in equities... but I'm more comfortable with the more aggressive approach... others may not be.


(Note, the hot shots are still working.:d)

It is dangerous to assume that we don't want to work... not everyone feels the same about work, as you do.

My biggest concern has more to do with the unknown risks of old age. Medicare will not pay for the kind of intensive nursing care that someone with a debilitating chronic condition requires, and ANYONE is susceptible to potentially falling into that hole.... so what may seem 'more than enough to live on' right now, may end up being woefully inadequate, down the road. Of course, even the indigent end up with at least some level of care... but having seen what that care is like, for other people, I'm pretty sure I wouldn't want myself, or my wife, to end up like that. It's pretty hard for anyone to financially prepare for that; some people have long term care insurance (we don't), but the policies I've seen don't pay enough for good quality care, anyhow.

Ideally, we all live to a 'sufficient' age, and die peacefully in our sleep... too bad that isn't always the case.

Chip-skiff
12-13-2016, 03:57 PM
Taking SS before you're 66 is a bad bet. . .For a healthy person, the math involved in drawing on SS early almost never works out.

If your estimated payment is not large, but your spouse will get paid much more at the full retirement age (66 or so) you will be eligible for a payment equal to half of the spouse's. In that case, you might be better off filing early, investing the cash in a Roth IRA, and waiting for the spousal increase.

For instance, if your present payment would be $900 per month vs. $1100 at full retirement age, and your spouse has four years to full retirement at $2200 per month, then filing now would get you about $43,200 in cash to invest, up to his/her retirement date, when your monthly payment will increase to $1100, the same as if you'd waited. By filing now, you gain $43,200.

That's just one scenario, but in some cases (as above) waiting does not make sense.

Too Little Time
12-13-2016, 05:31 PM
but the odds are against you having to spend more than a few months in a care facility.
Several people here use examples that are far out on the probability distribution to make their points.

Almost everyone does well even regardless of their decision. Because the decision is either obvious or unimportant.

Chris Coose
12-13-2016, 06:07 PM
I'm back to tune into this thread. It contains a lot of valuable information
Browsing through I'm glad to see I've probably made the right decisions.
I have a few close friends who are a bit older than me and both of them took in at 62.
I learned just a couple of simple things that helped me to decide to wait till 66.
The most important thing was basically that signing in is a gamble between me and the government on how long I'd live. I'm in good to excellent health for my age so I chose the middle (66) option to throw my cards at.
I'll be 66 in September and I am in line for a decent check. I have worked over the past decade to really reduce expenses. Our mortgages are paid by renters and we don't buy new cars. The boat costs about $500.00 per year as long as I can work on it. I own a few small businesses that I like to work at and one of them may produce some income as I back out. The other two are larks which may make for some summer enjoyment in the coming years. I have no other traditional investments.
BUT I have bought a couple of decent properties, one of which has shot off like a rocket in value because of the neighborhood it is in, in the past 5 years.

I know that is not cash in the pocket but there is a certain psychological comfort that comes with it and that may be worth more than green.

I'm now returning to my self imposed exile from here. I do check in on occasion and most of the time I want to hurl. Some of this trump crew would drink his bathwater, if given the chance.

Chip-skiff
12-13-2016, 07:36 PM
https://staticseekingalpha.a.ssl.fastly.net/uploads/2015/2/25/saupload_f640dc913861c35291e8ecfe28fab1aa.png

I just moved our position in SPY (State Street S & P 500 ETF Trust) to a new State Street fund that lacks the coal, oil, gas, and other fossil fuel stocks, called SPYX. If you're worried that might hurt your investments, here's a graph of the two funds:

https://lh3.googleusercontent.com/gtWtiSNqeEX7qSlW2UbVkVYJsqRsNyjJOXU8M7_xZY2BoFo9N1 6MkkBfqoBsUb5HEqQnhUqgFSkScy96h6WLof7J9QoRmZvg8lc9 KDgWfsWqYY067NvjbPADovG5elzLMk9bdz3yNOH950y_iViEMl-qlR4Z9aQLXpYYzODf__I3JvPTCKyU-vIlMCF4eizrN6a2EE5hYn22NrrvmMk7su4Ln7kUs6M7JOQkKk3 OLlb7UetrVfFiUQY4OltssZMoNVl4iz_RVlLs9qTQ96THc-Gw46MISwi-uzokADrGIlrJ2GbDz7D0_xnyHkUca-RrMdbtXZDP0smH-zZOkqJ7Q0l71ElpNXmRQ2n0flGHW4eXoXnEE_LRMo_Cm95TKCz yI2A_I_HnZzgKWJZi7L2QHTGw-GNRogpr2QVE_VYPARRO0hMYeUZQuLqbksjKH6usgi9J6YSENUT fgHMF7zZ0NRBef9zDgRgmvDncLDnQQzl3n0iPcciIjiAou5bTj SlVSF6pNCyOYRGcDx7sNnt2wLpSv9COPaXZOGQskzXC8EifEu_ xoKO0aV6L9OBBgtqrGlBFjjHDLPpYEg82xWEABSp2sTnaoYAST 4qOoBssWCcLwltd=w905-h537-no

Some enormous move in the fossil stocks might force the lines to diverge, but at this point it doesn't seem the fossil stuff has much practical effect.

Arizona Bay
12-13-2016, 10:27 PM
There's a lot of info here to go over think about :D

Chip-Skiff, your second chart isn't visible.

Lew Barrett
12-14-2016, 02:17 PM
I am trying Lew, but my body may not cooperate. The biggest change is that I will be putting the classic yacht up for sale this summer. That likely won't change much for a while since I don't expect it to sell quickly, but I am starting to think about clearing my plate for the next phase of my life - think moving back to the PNW.

I think about moving back to the Puget sound area routinely. I do have to admit I'm starting to settle in here though. Selling a wooden boat is an exercise in patience.

Lew Barrett
12-14-2016, 02:23 PM
I know that is not cash in the pocket but there is a certain psychological comfort that comes with it and that may be worth more than green.

I'm now returning to my self imposed exile from here. I do check in on occasion and most of the time I want to hurl. Some of this trump crew would drink his bathwater, if given the chance.

Income property has turned out to be the glue that holds my retirement together although I've been invested in the markets since I was 35. We're very, very lucky but I did work every day of my life from the time I graduated college until I hit 64, most of that time working for myself. I retired at 64 but didn't take SS until 66. Looking back, I could have retired earlier but equally would probably have been just as happy working a couple of extra years, but I had my options. The best part about retirement is that I just don't have to give a sh!t about other people's opinions if they run counter to mine. That was always a problem when I was in business; having to tolerate and accommodate idiots!

Not everybody has the good fortune or health prospects so each decision is individual but all things being equal, the system is set up to make 66 look like the good number. It's all a crap shot, but I bet I'd make it the 7 or 8 years (if I recall at the time I did the math) that were the breakeven crossover point for me. Now I've lived long enough to have had that decision pan out.

I really like retirement. Turns out I'm lazy by nature and just didn't know it.

Arizona Bay
12-14-2016, 02:31 PM
A math challenged question...How do you determine the breakeven point?

gilberj
12-14-2016, 02:33 PM
I think about early retirement a lot.....won't happen......freedom 70 for me

Lew Barrett
12-14-2016, 03:02 PM
A math challenged question...How do you determine the breakeven point?

OK, so they send you (or you can ask by calling them) a projection of your payments at 66 versus what you'll get if you draw at an earlier date. But it doesn't even need to be that hard to reckon, because what you really need to know is that deferring to take the payment is worth an additional 8% for every year you wait. . Your caculation can also include other advantages/disadvantages (it has brutal tax consequences if you draw and continue to work) but to keep it simple for our purposes I'll do it this way. Example for illustrative purposes only, and it's all in pre tax dollars. The equation starts getting more favorable (for most folks) for delaying when you include tax consequences, but I can't do that for you so it has to be raw numbers.

You were going to draw (a number pulled out of thin air) $1500/month if you retire at 62. That's 18,000 a year. But if you wait until 66, your basic draw will be 36% more per year (8% compounded over 4 years), so your basic draw would be $24480, a difference of $6480 per year. For the four (early) years you drew the money, you earned a total of $72000. You start making that back at the rate of $6480 per year once you hit 66. That's not taking into account the compounding benefits of any additional increases *(cost of living adjustments). Simply as I can explain it with no other variables (that do in fact exist) that means your break even point would be in eleven years.

But do remember, if you continue to work, you will pay a 50 cent per dollar tax on the social security income. That really hammers the benefits of early enrollment. Anyway, 8% per year....that's the starting point. If you live to 73 in my simplified scenario, you beat their odds. If you really need the money, then you do what you gotta do. That's a personal calculation that nobody else can make for you.

Norman Bernstein
12-14-2016, 03:23 PM
Considering the heavy taxation of early benefits, I should think that it is never worthwhile to take SS at age 62, if you're still earning any money... unless personal financial circumstances force you to.

As for waiting until age 70: there's clearly a benefit, but it's partially an actuarial game, and partially, like before, an issue of whether you need to take the money before then. My guess: if you're very comfortable, and don't need the money, and feel OK with drawing down investment assets for living expenses between ages 66 and 70, then it makes sense to wait. If none of those things are true, and/or the notion of leaving an estate behind is important to you, then it doesn't make sense to wait.

Of course, nobody can predict the future, so no one is assured that they made the right decision. My own choice: since I may be facing very steep expenses in the future (wife with Parkinson's), my decision is to take it at age 66, so as to limit the draw-down of invested assets as much as possible. I want those assets to grow for as long as possible, before the big expenses set in....

...but that applies to MY situation, not everyone elses.

Norman Bernstein
12-14-2016, 03:24 PM
NOTE: the SSA does have a downloadable calculator for this stuff... but it is VERY complex, almost incomprehensible, to use, and it requires a boatload of assumptions which may or may not prove to be true.... I didn't find it helpful, at all.

Todd D
12-14-2016, 03:30 PM
A math challenged question...How do you determine the breakeven point?

Determine the two ages for the calculation. Estimate the amount of your SS check at each age. The Social Security web site has a handy program you can down load to to that or you can just use your annual social security statement. Then multiply the monthly benefit at the younger age by the number of months before the older age. Divide that amount by the difference in the two pensions.

The equation is T2 = P1 x T1/(P2 - P1)

where P1 is the monthly pension at the earlier retirement age, P2 is the monthly pension at the older retirement age, T1 is the number of months between the two retirement ages and T2 is the number of months from the older retirement age to the break even point. This is derived from the two simple equations for the amount of pension received at the break even point for the two retirement ages:

For the earlier retirement age $ = P1 x (T1 + T2)
For the later retirement age $ = P2 x T2

Equate the two equations and solve for T2



Example: You want to calculate the break even point for drawing SS at 62 rather than 66 or 70.

Data - benefit at full retirement age of 66 years 2 months (for someone 62 now) - $1,000
Benefit at age 62 = $742
Benefit at age 70 = $1,307

Example 1 - Retirement at age 62 compared to age 66 2 mo = $742*50 = $37,100 benefit received to age 66 and 2 months
Age 66 2 mo benefit - age 62 benefit = $1,000 - $742 = $258
Months to break even from age 66 2 mo = 37,100/258 = 143.8 months = 12 years. Break even age is 78 years 2 months

Example 2 - Retirement at age 62 compared to age 70 = $742*96 = $71,232 benefit received to age 70
Age 70 benefit - age 62 benefit = $1,307 - $742 = $565
Months to break even from age 66 2 mo = 71232/565 = 126 months = 10 years 6 months. Break even age is 80 years 6 months

Example 3 - Retirement at age 66 2 mo compared to age 70 = $1000*46 = $46,000 benefit received to age 70
Age70 benefit - age 66 2 mo benefit = $1,307 - $1,000 = $307
Months to break even from age 66 2 mo = 46,000/307 = 150 months = 12 years 6 months. Break even age is 82 years 6 months

If you are 62 now your life expectancy (based on the social security actuarial life table) is 82 if you are male and 85 and 9 months if you are female. If you have a normal life expectancy as defined by the actuarial life table, the amounts of SS you can expect to collect for different retirement ages are (assuming you are male):

Age 62 - $178,080
Age 66 - $202,000
Age 70 - $201,600

Note that these examples ignore cost of living adjustments. The arithmetic becomes more complicated if you include annual cost of living adjustments, but it still isn't hard.

Edited to add: Note that I used the actual social security pension adjustment rules to calculate the pensions above based on my assumed $1000 monthly benefit at your full retirement age of 66 years 2 months. Since those amounts ate simple percentages of the base pension, you can increase or decrease them proportionally to adjust to your expected pension.

Arizona Bay
12-14-2016, 03:37 PM
Thanks, Lew, (and Todd, Norm) that makes it clear enough.

The 50% tax you refer to, is that the same as the reduction of benefits of $1 upon $2, when you make over the income limit during a pre-full retirement year?

Or is it actually taxable income?

Todd D
12-14-2016, 03:40 PM
OK, so they send you (or you can ask by calling them) a projection of your payments at 66 versus what you'll get if you draw at an earlier date. But it doesn't even need to be that hard to reckon, because what you really need to know is that deferring to take the payment is worth an additional 8% for every year you wait. . Your caculation can also include other advantages/disadvantages (it has brutal tax consequences if you draw and continue to work) but to keep it simple for our purposes I'll do it this way. Example for illustrative purposes only, and it's all in pre tax dollars. The equation starts getting more favorable (for most folks) for delaying when you include tax consequences, but I can't do that for you so it has to be raw numbers.

You were going to draw (a number pulled out of thin air) $1500/month if you retire at 62. That's 18,000 a year. But if you wait until 66, your basic draw will be 36% more per year (8% compounded over 4 years), so your basic draw would be $24480, a difference of $6480 per year. For the four (early) years you drew the money, you earned a total of $72000. You start making that back at the rate of $6480 per year once you hit 66. That's not taking into account the compounding benefits of any additional increases *(cost of living adjustments). Simply as I can explain it with no other variables (that do in fact exist) that means your break even point would be in eleven years.

But do remember, if you continue to work, you will pay a 50 cent per dollar tax on the social security income. That really hammers the benefits of early enrollment. Anyway, 8% per year....that's the starting point. If you live to 73 in my simplified scenario, you beat their odds. If you really need the money, then you do what you gotta do. That's a personal calculation that nobody else can make for you.

Only two small errors.

1. The change in benefit is not 8% per year from 62 to full retirement age and it is not compounded. The actual reduction from the nominal full pension at 66 is given on the social security web site as:

In the case of early retirement, a benefit is reduced 5/9 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month

The pension increases 8% per year after the full retirement age to age 70 the benefit increases 8% per year and it is not compounded.

2. The 11 years you calculated is from the full retirement age, NOT the early retirement age. So the actual break even age in your example is 77 years.

Norman Bernstein
12-14-2016, 03:41 PM
There should be a caution on this concept of a 'break-even' age. The notion itself is of little or no value, per se, since what matters is whether, in retirement, one has enough money to live on. You could defer SS until age 62, and die at age 64, before you collect a penny.... or defer SS until age 70, to get the maximum monthly benefit, and then die at age 72, long before 'break-even' is achieved. The reaching of a 'break-even' threshold could be a Pyrrhic victory, if you had to struggle and go without, to get there.... and even if you didn't, what would it matter? Nobody is going to award you a prize for having maximized the return.

My own familiarization with the elderly gives me room to doubt the value of all of this. My 93 year old mother couldn't care less about the amount of her SS check, since her macular degeneration makes it very difficult for her to read (and she enjoys reading), and her hearing loss makes it nearly impossible to be part of a conversation in a crowd of people.... to say nothing of the difficulty she has walking, even with a walker. Fortunately, my father left her quite well 'fixed', financially.... but if she didn't have a penny, and was living on Medicaid, the pleasure she has in life wouldn't be any worse or better... getting THAT old, can really suck.

Todd D
12-14-2016, 04:20 PM
Thanks, Lew, (and Todd, Norm) that makes it clear enough.

The 50% tax you refer to, is that the same as the reduction of benefits of $1 upon $2, when you make over the income limit during a pre-full retirement year?

Or is it actually taxable income?

It is a $1 reduction in benefits for every two dollars over the income limit. The income limit only applies to wages and self-employment income, not pensions (such as SS), interest or investment income. In the first year of receiving SS it only applies to income after you start SS. Finally the rule changes to a $1 reduction per $3 over the limit in the year you reach full retirement age (66y 2 mo in your case and only for income in the part of that year before your full benefit date (2 months after your 66th birthday).

The benefit reduction is recouped by decreasing your benefits the next year until the reduction is recovered.

Todd D
12-14-2016, 04:32 PM
Norman, the entire point of delaying benefits past age 62 is betting that you will live past the break even age. Some people win, some lose. However, if you are married, you are betting that ONE of you will make it past your break even age because of survivor's benefits. Basically you are ahead by retiring early until the break even age. The reason to wait is that you come from a particularly long lived family and are in good health. Then waiting makes sense since the higher benefit may help in old age. Even then it is still a bet.

Of course if you need the money to live, then all calculations are moot. Similarly if you are wealthy and SS is only spare cash to you, then you might decide to wait.

In my case, I started SS at 64 when I was diagnosed with an incurable cancer since it is likely that I won't make the break even age and my wife is 8 years older than I am and also likely won't live to or past the year I would get to the break even age of ~77 for me.

Too Little Time
12-14-2016, 06:12 PM
It's been my experience that people often don't understand number crunching unless they are carefully walked through the process.
I liked everyone's calculation. But money has a "time value."

The breakeven point as far as I am concerned is 8%. At 8% rate of return if you take your Social Security benefits early and invest them until you are 70, the appreciation each year when added to your social security benefit will equal your age 70 retirement benefit. (More or less.) Any you have money in your pocket.

If you have to incur debts with interest rates above 8%, it might be wise to take Social Security early.

Todd D
12-14-2016, 06:58 PM
I liked everyone's calculation. But money has a "time value."

The breakeven point as far as I am concerned is 8%. At 8% rate of return if you take your Social Security benefits early and invest them until you are 70, the appreciation each year when added to your social security benefit will equal your age 70 retirement benefit. (More or less.) Any you have money in your pocket.

If you have to incur debts with interest rates above 8%, it might be wise to take Social Security early.

Actually no. If you did that it would give you a total equivalent to about the age 62 benefit plus 56% of the difference between the age 62 and age 70 benefits. You would still have the age 62 benefit for the rest of your life. It would push the break even age out by about 2 years though. Of course you can only do what you suggest if you do not need the social security benefit for living expenses. Thus it is not an option for most people.

Note - I assumed monthly compounding. Daily compounding would make a small difference.

Also pleaselet me know where you can get a guaranteed return of 8% with zero risk.

Lew Barrett
12-14-2016, 07:22 PM
Hey AB! The SS Quick Calculator is

HERE (https://www.ssa.gov/OACT/quickcalc/index.html)

We are the Federalis. You know. The Social Security Administration. Math? Math? We don't need no math. I don't have to show you no math. We don't need no stinking math!

Too Little Time
12-14-2016, 07:33 PM
Actually no. If you did that it would give you a total equivalent to about the age 62 benefit plus 56% of the difference between the age 62 and age 70 benefits. You would still have the age 62 benefit for the rest of your life. It would push the break even age out by about 2 years though. Of course you can only do what you suggest if you do not need the social security benefit for living expenses. Thus it is not an option for most people.

Note - I assumed monthly compounding. Daily compounding would make a small difference.

Also please let me know where you can get a guaranteed return of 8% with zero risk.
I may not have been clear. One needs to save and invest all of the Social Security benefits. Not just the first year of benefits. I checked my math and it appears my math was correct.

Using $10K as the annual benefit: $10K for 8 years (age 62-29) and 8% ROI produces $106K. That produces $8,500 in annual appreciation to add to the $10K age 62 benefit. That matches the age 70 benefit of $18,500. (math was rounded and simplified somewhat.)

As far as I am concerned the S&P500 returns well over 8% annualized. But then I am a long term investor and look at returns over 20 and 30 years.

Todd D
12-14-2016, 08:46 PM
What I did was calculate the total return on benefits received from age 62 to 70 using the following assumptions.

1. All benefits were saved each month for 96 months as they came in.

2. The accumulated benefits earned 8% interest compounded monthly.

The results were as I said.

For the specific benefit amount I used $742/mo, the accumulation at age 70 was just under $100,000. Over 96 months that works out to an equivalent benefit of 100,000/96 = $1,042/mo (rounded to the nearest dollar). If the benefit at age 62 is $742, the benefit at age 70 would be $1,307 (calculated using data from the SS web site). $1,307 for 96 months is ~$125,500. You have to some pretty significant rounding to say $100K is the same as $125K.

You need to work on your analytical skills.

Too Little Time
12-15-2016, 02:35 PM
For the specific benefit amount I used $742/mo, the accumulation at age 70 was just under $100,000. Over 96 months that works out to an equivalent benefit of 100,000/96 = $1,042/mo (rounded to the nearest dollar). If the benefit at age 62 is $742, the benefit at age 70 would be $1,307 (calculated using data from the SS web site). $1,307 for 96 months is ~$125,500. You have to some pretty significant rounding to say $100K is the same as $125K.

You need to work on your analytical skills.
My objection was to this comment.

It would push the break even age out by about 2 years though.
After age 70 one still gets the age 62 benefit. The $8K of income on the $100K is used to cover the difference between the $742 (age 62 benefit) and the $1,307 (age 70 benefit). And the individual has $100K in his investments at his death.

Ted Hoppe
12-15-2016, 03:28 PM
And the individual has $100K in his investments at his death.

if one that invests the cash then goes into perminate assisted living - that 100k lasts about 7 months before other ways to pay are made or you get moved to a different facility that fits ones cash reserves. A secondary problem with the 100k has to do with investments after one dies. What difference does 100,000 dollarrs do for a dead person? It might help a surviving spouse or buy your clidren a few used cars and a trip to Cabo but for the deceased personally it does nothing.

Norman Bernstein
12-15-2016, 03:56 PM
if one that invests the cash then goes into perminate assisted living - that 100k lasts about 7 months before other ways to pay are made or you get moved to a different facility that fits ones cash reserves. A secondary problem with the 100k has to do with investments after one dies. What difference does 100,000 dollarrs do for a dead person? It might help a surviving spouse or buy your clidren a few used cars and a trip to Cabo but for the deceased personally it does nothing.

There are some people who wish to leave a legacy of some sort to heirs... and others who don't believe in doing so. Both have their perspectives, but I think the first obligation of a parent is to try to arrange their affairs such that they don't become a burden, to their children.

To me, the challenge is to accumulate enough assets to withstand any eventuality between retirement and death, still manage to leave something behind, and not be a burden to my children. My Dad did this, quite well, for his widow... and during his years, also provided for his grandchildren's education, quite handsomely. I don't think he expected to die, quickly and suddenly, at age 78, like he did.

No one has a crystal ball. My mother has had various health problems throughout her life, and STILL does... but she's also 92 years old, and despite the aches and pains, poor vision and hearing, etc., she's still alive and able to live a life as comfortable as possible. At any time in the past three decades, she might have died... from a very serious case of pneumonia in 1986, or from colon cancer in 2004... but she managed to survive. I don't know how many years she has left, and the best I can hope for is that she passes away peacefully, in her sleep... but no amount of money can guarantee THAT outcome.

So, to me, family obligations come first, and my own satisfaction with retirement is secondary. I wish I was wealthy enough for any of that to not be a concern, but I'm not, so it is. I don't believe my retirement will be nearly as much 'fun' as the retirements of many of my friends, who are living remarkably healthy and active lives in their retirements... but I'm not going to complain about it. I'm not sure about fate or free will, but I have to play the cards I'm dealt.

Too Little Time
12-15-2016, 06:51 PM
if one that invests the cash then goes into perminate assisted living - that 100k lasts about 7 months before other ways to pay are made or you get moved to a different facility that fits ones cash reserves. A secondary problem with the 100k has to do with investments after one dies. What difference does 100,000 dollarrs do for a dead person? It might help a surviving spouse or buy your children a few used cars and a trip to Cabo but for the deceased personally it does nothing.
I was pointing out the economic difference between taking Social Security early and investing the money versus taking Social Security late. I don't know what is important to you or anyone else. One of my first comments in this thread was that taking Social Security benefits early or late was driven more by need.


Almost everyone does well regardless of their decision. Because the decision is either obvious or unimportant.

Ted Hoppe
12-15-2016, 07:08 PM
I was pointing out the economic difference between taking Social Security early and investing the money versus taking Social Security late. I don't know what is important to you or anyone else. One of my first comments in this thread was that taking Social Security benefits early or late was driven more by need.

We can agree on this.

as for me, I am not gonna stop working as I love the things and some of work that i do. If I can find ways to spend time and travel with my wonderful wife more I'd gladly work less, own less and have a simpler life to make happen.