Ispouse and I dollar cost averaged money into our tax sheltered accounts for nearly 40 years.
We retired about 3.5 years ago.
I just signed up for SS to start in August (FRA) instead of waiting toil I reach my 70th birthday. The plan is to dollar cost average my SS checks into equities (probably Vig, vug and brk) for the next few decades just like I did when I worked.
This will increase our dividend income on a monthly basis along with Ispouse’s annual pension and SS annual inflation adjustments while taking the thinking out of my retirement investing so I can spend my free time playing.
We are living on ispouse’s pension and SS plus 3 percent withdrawals from her sheltered account which will go up whenever rmd’s are mandated, plus my dividend and interest income.
So the question is how to maximize SS that we don’t need. Collecting and investing can grow our dividend income as an inflation hedge, and grow our corpus without too much effort.
Ispouse and I dollar cost averaged money into our tax sheltered accounts for nearly 40 years.
We retired about 3.5 years ago.
I just signed up for SS to start in August (FRA) instead of waiting toil I reach my 70th birthday. The plan is to dollar cost average my SS checks into equities (probably Vig, vug and brk) for the next few decades just like I did when I worked.
This will increase our dividend income on a monthly basis along with Ispouse’s annual pension and SS annual inflation adjustments while taking the thinking out of my retirement investing so I can spend my free time playing.
Thoughts?
Are you still planning to hold any fixed income securities after age 70?
The highest returning thing in a fixed income (bond) portfolio is delaying your SS to age 70 if you’re likely to meet or beat the break even age (which most higher income people are.)
I just signed up for SS to start in August (FRA) instead of waiting toil I reach my 70th birthday. The plan is to dollar cost average my SS checks into equities (probably Vig, vug and brk) for the next few decades just like I did when I worked.
This will increase our dividend income on a monthly basis along with Ispouse’s annual pension and SS annual inflation adjustments while taking the thinking out of my retirement investing so I can spend my free time playing.
Strictly speaking, dollar cost averaging is a strategy (a bad one) for investing a lump sum amount into the market. What you are doing is just making periodic investments. Your real question though seems to be when to take Social Security.
Generally, it is better to delay SS as long as you can. Somewhat paradoxically, in most cases this allows you to spend more money in early retirement.
Interestingly enough, in the case of couples with disparate earnings, the best scenario is for the low earning spouse to take SS at 62 and the high earning spouse at 70, unless both spouses live into their 90s.
<Strictly speaking, dollar cost averaging is a strategy (a bad one) for investing a lump sum amount into the market. >
What is your alternative less-bad strategy for investing a lump sum amount into the market? If you give the knee-jerk, “Markets always go up eventually,” what about the long stagflationary market of the 1970s that resembles the market we may be entering? Which may last longer than some elderly METARs may survive?
<Strictly speaking, dollar cost averaging is a strategy (a bad one) for investing a lump sum amount into the market. >
What is your alternative less-bad strategy for investing a lump sum amount into the market? If you give the knee-jerk, “Markets always go up eventually,” what about the long stagflationary market of the 1970s that resembles the market we may be entering? Which may last longer than some elderly METARs may survive?
It still depends on your investment horizon. Many elderly retirees are investing for their heirs or charitable beneficiaries, so their limited expect lifetime is irrelavant.
It’s actually not common for a retiree to have the financial planning “benefit” of a grave medical diagnosis that produces death on the promised schedule. With improvements in medicine, people are often “fooled” with a longer than expected life span.
Kitces originally persuaded us to follow the path of lower earner taking immediately upon retirement and higher earner at 70. That appears to be the best way to play SS as a fixed income instrument.
But what if you have more than enough inflation adjusted income to live on and have done so prior to the higher earner taking SS?
Equities have consistently better returns over the long haul than fixed income, even SS.
Is it reasonable for that person to buy equities with his/her SS rather than be overweight fixed income?
I think Intercst asked the best question. If any of my investments are in fixed income, it makes more sense to spend that money first because delaying SS would produce better returns than any fixed income investment that I can find. But if your pensions and one SS provide more than enough to live on, why not buy equities with the other SS payments?
What is your alternative less-bad strategy for investing a lump sum amount into the market? If you give the knee-jerk, “Markets always go up eventually,” what about the long stagflationary market of the 1970s that resembles the market we may be entering? Which may last longer than some elderly METARs may survive?
Two reasons why DCA is a bad strategy: First, once you DCA into the market you are…all in the market. So there is no protection vs. market downturns.
Second reason is that markets go up 2/3 of the time and down 1/3 of the time. So you are betting against yourself. And there is a third reason which is basically a component of the previous two, namely DCA is a form of market timing. Nobody can time the market.
To answer you question: You–and all of us–have, or should have, an investment strategy that includes some mix of stocks, fixed income, etc. that we believe and understand is a robust mix based on our investment goals and risk tolerances.
The best thing to do when dealing with a lump sum is to invest it in accordance with your existing investment strategy. If you have a big lump sum of cash your are DCA’ing in, you are actually acting outside your investing strategy that you understand and believe in.
But what if you have more than enough inflation adjusted income to live on and have done so prior to the higher earner taking SS?
When to take Social Security has been a hotly debated topic on the Retirement Investment board. There are two basic schools of thought:
It is optimal financially to delay. So if you don’t need the money right now, why not?
If you don’t need the money, then you might as well take it right away because you get the bird in the hand and you don’t need the extra money from delaying anyway.
My interpretation: If you don’t need the money it doesn’t matter what you do. You can either run up the score or take the bird in the hand. You can’t know which decision is right unless you know what age you will die. So, make what ever choice makes you the happiest and don’t look back.
I have participated in those debates at RE over the years, am familiar with Kitces, and agree that it is financially optimal from a fixed income standpoint for the higher earner to delay.
But if you are overweight fixed income because of pensions….
Then the only way to reallocate is to take early and invest because delaying just gives you more fixed income than you need and diminishes your long term returns.
Is that ‘running up the score’ or is it maximizing your returns in a risk adjusted way?
When to take Social Security has been a hotly debated topic on the Retirement Investment board. There are two basic schools of thought:
1) It is optimal financially to delay. So if you don’t need the money right now, why not?
2) If you don’t need the money, then you might as well take it right away because you get the bird in the hand and you don’t need the extra money from delaying anyway.
SS is insurance. You hope you won’t need it, but if you don’t need it now hold off taking it until later so you have a bigger monthly payout on your insurance. Use it as one way to protect yourself from yourself as you get older. Don’t be fooled into thinking you can go high risk all the time.
3) SS is insurance. You hope you won’t need it, but if you don’t need it now hold off taking it until later so you have a bigger monthly payout on your insurance. Use it as one way to protect yourself from yourself as you get older. Don’t be fooled into thinking you can go high risk all the time.
This is a REALLY good point! If you take SS now and it is $3000, but if you wait till 70, it is $4000. Then, if something catastrophic happens at age 69 3/4 … let’s say you lose all your money somehow (fraud, crypto, medical, timing the market, speculating, whatever), then when you draw SS, you will get $4000 a month that you can live on.
This is a REALLY good point! If you take SS now and it is $3000, but if you wait till 70, it is $4000. Then, if something catastrophic happens at age 69 3/4 … let’s say you lose all your money somehow (fraud, crypto, medical, timing the market, speculating, whatever), then when you draw SS, you will get $4000 a month that you can live on.
Maximizing security vs. maximizing income. If SS is a hedge then security should be the top option. Same with Dollar Cost Averaging.
Someone stinking rich can chose either
Someone less well off should choose security
Someone broke has to choose income