What does a “quick google” tell you about the credit scores of people with $500,000 plus investible assets?
Really that doesn’t surprise me. Behavioral economists have been doing studies for years on how a sizeable majority of people make poor financial decisions even when presented with the arithmetic.
The financial services industry has been making trillions of dollars taking advantage of it.
intercst
Obviously, I’m indifferent to what people think of me. I’m just presenting the arithmetic, and then getting a chuckle out of watching people defend suboptimal choices.
Like I wrote above, the financial services industry is making trillions off this.
intercst
Yes, I highlighted that on the Retire Early Home Page back in 2008.
Kiplinger’s magazine ran an article on it, and the SS Administration shut it down a year later.
intercst
Nope, still wrong, still many other reasons including my own! It was time to retire! Pretty basic!
weco, still happily retired!
Why do you insist on conflating your decision to retire with when you turned on SS?
You are clearly aware that the two are [not] directly correlated.
That is the frustration that many in this thread are now experiencing - not the decisions you made to retire when you did but your current continued obfuscation of the fact that while you absolutely could retire at 62 - you also absolutely did not have to turn on SS at 62 upon retirement - yet every response you continue to make conflates the two decisions without ever once offering that rationale.
Hawkwin
Moving on.
As far as I am aware, when the result is “ending up with more money”, you ALWAYS die before [directly] benefiting from it. 
I wasn’t referring to the pension itself, I was referring to the excess medical/dental/etc coverage in addition to Medicare. I doubt the PBGC would cover any of those things in the event of the money drying up. The PBGC covers the money paid from a pension plan, up to a certain level.
Exactly! The other part of this is that you only have the information available at the time of the decision. Everything else is supposition or estimation or prognostication. That’s why it isn’t relevant for those who say they saw a bad market coming so they took SS early so they could leave their savings in the market longer without withdrawals. Or similarly those who say they saw a great market coming so they decided to take SS early so they could invest that monthly payment that they don’t need yet. If someone knows with high probability that the market will drop or will rise then there are FAR better ways (using market timing investments, etc) to improve your overall financial well being using that high probability!
Heck, the simplest thing someone could do if they “know” the market is going to be going up nicely is to switch from their traditional 60/40 allocation to 90/10 or even 100/0. In a rapidly rising market, that always proves to provide the best overall returns.
But nobody knows for sure. That’s why we use the data history to guide us in making prudent decisions. Like why we withdraw a maximum of 4% inflation adjusted from a 60/40 portfolio to make sure it’ll always last 30 years (unless we see something worse than the great depression or the great stagflation someday).
Go back to the early response by @intercst and you will see that that is one of the cases he mentioned. If you HAVE TO take it at 62, well, you have to do it!
Yes! That half HAS TO take social security as soon as they can after ceasing to work for a living.
So far I haven’t chosen to take social security. For at least 3 reasons:
The decision to take social security is completely independent from the decision to retire. You can take social security BEFORE you retire, you can take social security RIGHT AS you retire, and you can take social security AFTER you retire. But you have to begin taking social security sometime between age 62 and age 70 (and you get 8% added for each year you wait).
The studies appear not to account for people who don’t need the money, take it and invest it, and earn more than 8% per year on that money. You see ‘financially illiterate’. I see people knowingly betting on another historical fact - that over the long haul stocks outperform SS - and winning.
The pension makes a difference. My wife has an inflation adjusted state pension.
I fit this description and took my SSA at age FRA 66 and continued working. I invested the money. I then fully retired at age 68. You can continue to tell me I made bad decisions and I’m an idiot; but I’m happy, satisfied with my life and finances, and would make the same decision again. Sometimes think I have too much money. I’m planning on paying off my share of the national debt when I decompose!
This focus on maximizing every inch, every cent of existence is going to be the end of us!
JimA
That’s not true. Someone investing for retirement has a likely 50-60 year timeline to work with (i.e., 25 or 30 years saving for retirement and God-willing, 25-30 years spending the money in retirement.) Over that time frame you are much more likely to approach the 10% overall long-term return of the stock market. The lowest 60-year annualized return over the past 100 years is 8% to 8.5% with dividends reinvested.
With the decision to delay SS to from age 62 to 70, you only have an eight year time horizon.
Historically, over a rolling 8-year period, the overall stock market (measured by the S&P 500 with dividends reinvested) delivers an annualized return of less than 8% approximately 37.6% of the time on a nominal basis.)
So the chances that you’re going to make more in the stock market is little better than a coin flip, plus there are “sequence of return risk” advantages to having a larger inflation-adjusted benefit when you’re older if you happen to retire during a period of low returns.
If you are “financially literate” enough to retire during a period of good investment returns, you can do what you want. There’s a Stanford Physics PhD that retired about the same time I did (i.e., 1994) over on Quora who believes that a 10% withdrawal is “safe”. Good thing he didn’t retire in 2000.
intercst
I don’t understand your argument. Even if you earn less than 8% during those first 8 years, you still have all of that money, plus whatever you made on that money that you got early. You get the benefit of having that money starting 8 years early, growing that money over that 8 year period, and watching all of that that money continue to grow over the course of your retirement.
Plus, by your own admission, if you don’t need the money, and you have a 73% chance of beating the market over an 8 year period, why wouldn’t you go with the 73% odds instead of the 37% odds?
Sure if your 8 year, 62-70 window happens to coincide with a period of good returns. If not, you’re better off with a larger SS check and a smaller portfolio withdrawal when you’re older.
I posted this article in another thread.
A monthly withdrawal of $5,181 x 12 = $62,160 annually – a 4% withdrawal from a $1.55 MM account.
That’s the power of a larger inflation-adjusted monthly benefit. If we have the long expected “big stock market collapse” in the next decade, she’ll look like a genius.
Nobody is more pro stock investing than I am, but even I see the advantages of buying an inflation-adjusted life annuity when you’re buying it at a big discount to what a commercial insurer would charge for the same monthly benefit.
intercst
It’s 63% odds. But if you look at the advantages of having a larger inflation-adjusted pension if the market turns bad. It’s cheap insurance. And costs me less than having a larger allocation to lower returning bonds.
intercst
Ok. 63%. I have proven that I am financially illiterate.
But…by your numbers the person who takes 8 years early and invests wins the bet 63% of the time. If you are investing money you don’t need, is that an irrational bet?
Plus look at your case and mine. You planned to wait till 70 because that was the safest, best bet until your circumstances changed. And you made the very rational decision to take early. How many other people made that very same decision for the very same reason? A cancer diagnosis? Heart disease? I am guessing a lot of people took early for that very rational reason.
And what about a person who planned to wait till 70 but saw at the age of 66 and 4 months that the markets had already dropped by more than 20% and decided that would be a good time to take early and dollar cost average that money into the markets? That was my situation in August/September 2022 and I talked about it at the time. As I said earlier, many of my favorite posters criticized my decision and now, four years later say it was dumb luck. Maybe they and you are right. I concede that the outsized returns from then to now were a matter of luck, but by your own admission it was a bet that had a 63% chance of winning before you assess the additional fact that I made the bet only after the markets had dropped more than 20%.
I agree that many of us underestimate the value of taking advantage of the best (by far) annuity in the country. But millions of people who take early may have good reason to take early. Declaring all of them to be financially illiterate takes in a lot of territory. At the very least it adds you and me to the list.
At least those are some of my thoughts as I pass the time solving chess puzzles and playing on the internet after waking up at 4 a.m.
You keep saying this, but you get it backwards.
Hi. I’m a lurker on this board, but I thought I’d add something to this conversation that I don’t think has been addressed already. My apologies if it has.
I’m 63 and my husband is 66. I am retired; he will retire next year at 67. We will both take SS at that time. While we realize that the math on spreadsheets advises against this, we do realize that life doesn’t always follow the spreadsheets.
The widow/widower penalty is real, even though I don’t hear a lot about that. To us, “a bird in the hand, is worth two in the bush.” Once we receive our checks each month, that is money we will have received as part of our SS benefit that we will own. If we wait, many things could happen, not least of each would be one a terrible accident and passing even though our actuarial tables indicate that “all things being equal” we will be lucky to spend many more years in retirement. Is a terrible accident likely? I hope not, but the financial consequences would be striking.
Once one of us passes, whether it is next year or, more hopefully, 30 years from now, the surviving spouse will lose one of the SS checks. We can only keep one; of course, the surviving spouse will keep the higher amount. That means that for each month we don’t collect the SS check, we are gambling that we will both continue to live and we will continue to get both checks.
EX: I collect next year and forfeit the full benefit of SS if I waited until I turn 70, but I will receive checks each month for the smaller amount. I pass in 2028. My husband has at least received the benefit of that income from 2027 until 2028.
EX: I don’t collect next year and I pass in 2028. My husband will receive none of my SS benefit, as he can only keep one SS benefit and that would be his.
The greatest risk in retirement is not early death, but outliving your assets. Generally speaking, taking SS early increases your risk of outliving your assets.
Those birds in the bush can help you from facing that fate.
No, you are gambling that you won’t make it to 90 and have needed the higher income.
Again, you are focused on trying to maximize income due to an early death. That is the wrong “risk” to insure and the least likely to happen. The greater risk is that one or both live to 90 (45% chance one of you will get there) and that you would have needed the extra SS you otherwise would have received if you had waited.
Now, maybe you have a health issue you have not disclosed but all else being equal (and assuming your income was not substantially less than his - which would require a different determination), the average life expectancy for a woman your age is 83. But, roughly 30% of married women make it to 90. The greater risk in retirement is not that you only make it to 73, it is that you make it to 93.
Of course, all of this assumes you have other retirement savings/income you can use while you delay.
When dh and I were your ages (slightly bigger gap) we both made the decision to defer taking our social security because it seemed like the better financial bet … unaware at the time of the ticking time bombs in our respective chests. As most anyone with a track record of rude good health and good custodianship of their bodies would, right? If you’ve been lurking for any length of time you’ll know how that misplaced belief disappeared for both of us shortly before the age of 70. As mentioned, you haven’t shared medical histories…either stuff you’re aware of along with the stuff that you may be unaware of.
I don’t give much thought to the “rightness” of my decision one way or the other nowadays, but one thing I can’t help but notice. You’ll have read upstream that there’s a lot of blather about financial literacy (or otherwise) and trusting the math…but not so much about biomedical literacy. Longevity predictions for us two a decade ago hovered around the 90+ age for dropping dead. I absolutely do not accept that as a statistically likelihood for either one of us now…in spite of the fact that we are both receiving the reasurrances that “we’re good for another 20 years”. It’s my observation that this script is so prevalent…regardless of any underlying pathology, it seems… that I reckon it’s little more than a knee-jerk bit of flim-flam from any treating doctor. To the extent that when I read it repeated (as upstream in this thread) I too feel like sitting back and having a good chuckle at the idea that anyone would fall for that nonsense and factor it into long term decision making.
Not at all. A bad sequence of returns the first 10 years of retirement makes you run out of money earlier. Having a larger, inflation-adjusted pension income extends the life of the portfolio.
The highest quality retirement asset you can own is an inflation-adjusted pension. If the Gov’t is selling me one for 50%-off, I’m a buyer.
If you’re a max-FICA wage earner, the two smartest things you can do regarding Social Security is to retire before your AIME reaches the 2nd bend point, and wait until 70 to collect your benefit.
intercst
