There are 3 categories of people here. 1) Those who are so poor that they need to take SS as soon as they retire. 2) Those who have enough assets (including pensions) that they will do well enough without taking SS. 3) Those in the middle.
It’s only those in the middle who even need to even think about their optimum filing strategy.
But since you have to make a decision, you might as well make the optimum one, right?
I’ve only run the numbers for my own situation, but I assume my results apply in most cases. In my case, delaying SS increases portfolio survivability, which effectively increases the SWR. The reason is sequence of returns risk. Because SS is inflation adjusted and increases predictably each year you delay, it backstops your portfolio in the event of high inflation and poor market returns early in the withdrawal period.
So even if you are in in Group 2) you are almost certainly financially better off by delaying. The only downside is you die unexpectedly young. But on the flip side, what if you live to be unexpectedly old? Then the risk is outliving your money. Delaying SS helps with that too.
No, I believe the biggest downside is that you have lots of money when you are very old and can’t use it, either because of you become physically infirm or mentally unable. In both of those cases all that “extra” money is almost meaningless, assuming you have at least enough to keep you out of the gutter in your last years.
I cannot understand the theory that says “I should have more money when I am 90, can’t travel, can’t work outside, can’t do much other than watch TV or read” rather than having more when you are in your 60’s when you horizons are so much more unlimited.
I agree that if you are so close to the line that you think you will end up nearly broke, without other significant assets or means of sustenance that you may do better waiting. Otherwise use more money sooner and enjoy it as best you are able. That’s what money + retirement is for.
So even if you are in in Group 2) you are almost certainly financially better off by delaying. The only downside is you die unexpectedly young.
The purpose of money is to buy things. More, the utility that spending the money gets you. The simplistic break-even point of delaying is age 81. (The break-even age is even older is you invest some of the early SS instead of spending it all.)
Now list the things you can do and can enjoy doing between 62 and 81, and compare that with the list of things that you can do and enjoy doing when you are in your 80’s.
For example, we traveled and hiked, etc. all over the world in our 60’s. But starting in 2019, it was impossible to travel the world. Instead of having memories and photos, we would be looking at travel brochures and sighing and wishing we could see & do in person.
And I guarantee that you have much more physical stamina in your 60’s than in your 80’s.
---- Maybe that’s why this is a neverending discussion. Some people look at the size of the money as the goal, and some people look at the utility of the money as the goal.
No, I believe the biggest downside is that you have lots of money when you are very old and can’t use it, either because of you become physically infirm or mentally unable. In both of those cases all that “extra” money is almost meaningless, assuming you have at least enough to keep you out of the gutter in your last years.
I very much hope that the extra money in our SS checks remains meaningless. I never want to have to collect on insurance, but I also never want to be without it.
Otherwise use more money sooner and enjoy it as best you are able. That’s what money + retirement is for.
LOL. Spending money for the sake of spending money is not something that interests me. While we are waiting until 70 for SS, we are in no way depriving ourselves, or not doing something because we can’t afford to do so. More money in the bank would not change our behavior. Better insurance down the road, (SS,) does make me sleep a little bit better.
Why insist on a one size fits all rather than consider all your options?
No, I believe the biggest downside is that you have lots of money when you are very old and can’t use it, either because of you become physically infirm or mentally unable. In both of those cases all that “extra” money is almost meaningless, assuming you have at least enough to keep you out of the gutter in your last years.
I cannot understand the theory that says “I should have more money when I am 90, can’t travel, can’t work outside, can’t do much other than watch TV or read” rather than having more when you are in your 60’s when you horizons are so much more unlimited.
That’s the thing. Somewhat counterintuitively, by delaying SS you will have more money to spend when you are younger. The reason is sequence of returns risk. You are essentially exchanging volatile stock market returns now for guaranteed, inflation adjusted returns later. That’s a good bet, and if the market does poorly and there is a period of high inflation in the early years it becomes a great bet.
No, I believe the biggest downside is that you have lots of money when you are very old and can’t use it, either because of you become physically infirm or mentally unable. In both of those cases all that “extra” money is almost meaningless, assuming you have at least enough to keep you out of the gutter in your last years.
What leads you to believe you can’t use it?
My wife’s grandmother was able to use her excess savings to pay for private in-home 24 hr care for years which kept her in her lifetime home with all of her known comforts and without having to move to an assisted living facility. I am quite positive that such living conditions allowed her to live many years longer and certainly more comfortably. I am also quite sure if you were to ask her if she had preferred to spend that money on a bunch of European vacations while she was younger - with the opportunity cost of having to move in her 80s to a facility, she would not have to think long that she made the correct decision.
A $2 million in investment assets at 4% gets you $80,000/yr An above average SS benefit of $2500/mo at FRA is $1,875 at 62 and $3,300 at 70. The total comes to $102,500 for 62 filers at 62 and $119,600 for 70 filers. There’s not a whole lot you can do at $119K that you can’t at $103K. Keep in mind that the age 70 filer takes until they are 81 before they pull ahead.
I think the break-even point is a red herring. What matters is not running out of money, the safe withdrawal rate. Delaying SS lets you spend more starting at age 62. There’s no need to wait until age 70 to spend. You withdraw more from your portfolio from 62-70 to cover the “missing” SS, and then less from your portfolio after 70.
cfiresim.com does the calculation for you. Using your numbers, a 95% SWR gives constant (inflation adjusted) spending of $103,515 if you take SS at 62, and $108,497 if you take SS at age 70. Waiting to take SS increases your spending by $4982, 4.8%, each and every year.
Certainly there is appeal to staying in your home. On the other hand, when you’re at that stage of life what else do you have other than memories? Maybe photos you can sort through?
Hawkin, I agree with you. My mother will be 101 yo in a few weeks and still lives in the house she and dad built in the 1970’s. She is in good shape financially with my late dads pension, social security survivors benefits, and benefits from dads 100% VA disability secondary to horrible wounds sustained in WWII. Up until age 96 she was still doing her own income tax returns and managing a number of rental properties.
So far we haven’t had to hire in-home care. One of us three surviving siblings eat dinner with her most nights and now do most of the cleaning and maintenance on the home.
The point being that although she could afford a first class assisted living place she is very happy to still be in the home she designed, surrounded by her “stuff”, and enjoying visits by her kids, grandkids, great-grandkids and long term neighbors. Her biggest regret is that there are no longer any friends her age to talk with about the good old days. Her thrift and planning for “old age” has afforded her many comforts.
when you’re at that stage of life what else do you have other than memories?
Your kitchen, your living room, your garden/flowers, your bedroom, your library, your neighbors, your holiday decorations, your basement (with all of your self-canned veggies), etc. etc.
Moving from a 2000 sq ft house to a 800 sq ft assisted living facility means that you must give up a lot of your personal items and luxuries. Keep in mind that assisted living is not just for those that are completely incapacitated. It is often for those that just mind need some occasional help readily available.
Moving from a 2000 sq ft house to a 800 sq ft assisted living facility means that you must give up a lot of your personal items and luxuries.
Oh, I know it. Had to move 1poormom a few years ago. She wasn’t safe to drive anymore, wasn’t cooking for herself properly (her fridge was mostly empty, except for a horrific thing she “cooked”…still not sure what it was), had notes all over the place, stacks of junk mail, etc.
She wouldn’t have tolerated a caregiver in the home for too long. Someone else at TMF had the experience that their mother fired the caregiver, and didn’t tell anyone. It was a month or so before they figured it out. Meanwhile the stubborn mother thought she was just fine.
1poormom would have preferred to remain in her home, but it really wasn’t feasible. I doubt she could have afforded 24-hr care for more than a few years, and wouldn’t have tolerated it for very long. Her dementia is progressing, and soon she may have to go to memory care. Maybe a year or two. Hard to predict.
And that is an important difference. Gmother did not have dementia but would occasionally have dizzy spells if she stood up too quick, was at risk of falling (fell twice before) and needed someone to make sure that she kept on schedule (took her meds, got out of bed, ate regularly, etc). While she certainly was not too excited about a rotation of 3 strangers every 8 hours, she grew to eventually care so much for at least one of her care-givers that she wrote her into her Will for a small portion (less than 5% IIRC).
A family member lived next door so any attempt to secretly fire one of the care-givers would quickly be discovered - and of course there should always be a POA involved that should have been immediately notified of such a termination so it is weird that the agency would have gone a month without telling anyone.
I’ve only run the numbers for my own situation, but I assume my results apply in most cases. In my case, delaying SS increases portfolio survivability, which effectively increases the SWR. The reason is sequence of returns risk. Because SS is inflation adjusted and increases predictably each year you delay, it backstops your portfolio in the event of high inflation and poor market returns early in the withdrawal period.
Exactly!
I’ll also note that delaying SS to age 70 is currently the highest returning asset in my portfolio. (10.5% inflation-adjustment plus 8% per year to delay.)
Based on Consumer Price Index data for urban wage earners and clerical workers through June (data released today by the Bureau of Labor Statistics), it appears the COLA for 2023 will be 10.5%, the highest since 1981, when it was 11.2%, according to Mary Johnson, a Social Security policy analyst at the Senior Citizens League who spoke with Financial Advisor magazine. The increase is 1.9 percentage points more than the 8.6% estimate in May as inflation continues to accelerate and outpace the expectations of both economists and the public at large.
<<I cannot understand the theory that says “I should have more money when I am 90, can’t travel, can’t work outside, can’t do much other than watch TV or read” rather than having more when you are in your 60’s when you horizons are so much more unlimited.>>
That’s the thing. Somewhat counterintuitively, by delaying SS you will have more money to spend when you are younger. The reason is sequence of returns risk. You are essentially exchanging volatile stock market returns now for guaranteed, inflation adjusted returns later. That’s a good bet, and if the market does poorly and there is a period of high inflation in the early years it becomes a great bet.
That seems to be the mental block that a lot of people have around Social Security planning.
If delaying SS to age 70 gives a married couple an extra $200,000 over their lifetime, they can take that $200,000 luxury world cruise today, as long as they understand they can’t take a second one when they’re age 90.
I think the story was related on the Caring for a Parent board. I forget who it was. They didn’t know the caregiver was fired until they visited the mother and wondered where the caregiver was. “Oh, I fired her”.
Since it was her home, I don’t know that you can force her to accept anyone in her private residence. Pretty sure 1poormom would not have tolerated anyone there for more than a few weeks. If it wasn’t for her doctor saying “you can’t drive anymore” I don’t think we ever could have gotten her out of that house. Not without having her declared incompetent (which at least one family friend was saying I should do).
She has good days and bad days. Apparently she likes to dance with the caregivers (there’s a video one of the residents took of her doing it). She remembers my name, and 1poorlady’s. She doesn’t usually remember our daughter’s name, nor my MiL’s name. And she often thinks people are taking stuff or vandalizing stuff when she’s not there.
Privacy and independence. I have zero desire to go to a retirement home.
I hear you. The universe has no interest in what you or I desire. It may be necessary. Hopefully you’ve set up a trust, and given someone (kids?) power to oversee it if/when you are unable to do so.
1poormom is the first in the family with dementia. So now I have a family history. Maybe she was just an outlier, but now I have to pay attention and be prepared in case it passed down to me.
Moving from a 2000 sq ft house to a 800 sq ft assisted living facility means that you must give up a lot of your personal items and luxuries. Keep in mind that assisted living is not just for those that are completely incapacitated. It is often for those that just mind need some occasional help readily available.
Last November we moved from a 2400 sf house to a 1100 sf 2 bedroom apartment in a CCRC - Continuing Care Retirement Community. At this point neither of us require an extra care, but it’s reassuring to know it’s available if (when) needed.
The move was interesting. We obviously realized that we had to lose a lot of furniture, and that part of the move was a snap. What we had not considered was that the new digs had far less wall space, so we are awash in doo-dads - the kinds of things gurls like to hang on walls.
Did the Countess’ Dia de los Muertos collection survive the move?
That was cold. Yes, she squeezed it down to fit on a table and a corner of the living room. Actually it is a bit of a conversation starter if someone comes to visit.