Unexpected surge in people claiming Social Security

Investment Analysis Clubs Macro Economic Trends and Risks
21

None of us know for certainty the sun will not explode tomorrow, but we have a good deal certainty that SS is less likely to change for those of us close to using it than the potential to changes in tax rates on income, dividends, or gains.

So, while you may be correct that such an analysis doesn’t take into account every possibility, that also includes the possibility that stock investing is far less favorable in the future as well (for various reasons).

Additionally, your position doesn’t consider the possibility that if changes are made to SS, it could also be detrimental to those that took it early.

I think it exceedingly less likely that those of means (the audience of this post) will face a smaller SS benefit than those of means (the audience of this post) may face a future tax increase on various forms of income - or simply worse overall stock market performance in the future.

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22

None of us know with certainty that we will not get at least 10% out of the stock market each year for the rest of our lives either. That is the problem with trying to see into the future. It is why I refuse to quibble over this because for all those that think it is smart to wait, there are those that think it is smart to take it now. I especially like the ones who want to wait and then live on a meager amount of funds so that they can get a windfall at 70 years old. But in the end I am agnostic and think that people should do what they think is best for them and their loved ones.

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Social Security & Medicare Unfunded Future Liability
23

Well, not exactly. You get a much much smaller check for the first 8 or 9 or 10 years. In fact, you get zero.

And I’m just using “drooling stage” to be comical. But there is little doubt - at least for me - that the best utility of your money is during your 60’s and 70’s. Yes, there are some who continue to climb the Adirondacks in their 80’s, or who take up paragliding on exotic Hawaiian vacations, but those number are pretty small and in the 90’s almost non-existent.

In fact by the 80’s and 90’s I‘d guess most people are not buying fancy new cars, moving to ever larger houses, or buying new yachts. So OK, I’m exaggerating with the “drooling” shtick. Sue me. I’m saying there is a reasonable chance your best use of money is when you are younger, not when you are enfeebled.

But I happily admit that if you live to be 98 you will have stacked up more Benjamins in a bank account which you can will to someone else or pay the nursing home for care. Or, as I like to say, Die the Richest Man in the Cemetary.

Two things: If the “declining portfolio” risk is real (it is) then why isn’t it also real for the decade when you are drawing from the portfolio to live without the monthly government check? Quite obviously, it’s real then too, but that gets glossed over.

Second: I am always amused when people present the “bad case” scenario without a corresponding “good case” counterpoint. Remember the “If you miss the ten best days in the market…” posts? “And therefore you shouldn’t try to time the market”.

There’s never a “suppose you miss the ten worst days of the market” paragraph in those missives. Similarly, this one is “Oh oh oh! Suppose the market is down when you retire” without noting that “on average” it’s just as likely to be up. Or even better, “the same as usual.”

Again, how about “the possibility that stock investing is far MORE favorable in the future.” Isn’t that as likely?

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24

Even that assumption - spending your late years unable to do much of anything - is not something I’m willing to take as a given.

I’d suggest you need to take a sober look at your family history and your own health.

Sure, some people can reasonably come to the conclusion that they are unlikely to have healthy years later in life, but some are more likely to have those healthy years.

As an example, I’ll look at my own family.

My father is one of 5 siblings, my mother is the younger of 2. Of those 7, 5 lived to 90 or more. One who didn’t make it to 90 died in a car accident in his 20s, the other succumbed to cancer in her 50s. My parents are both doing well living on their own. They both exercised regularly, and continue to do so - at a slower pace - at 90. Their 3 siblings who made it to 90 were all pretty active until their final year or so.

I’m not as good about exercise as my parents, but I’m trying to walk more and do heavy weight lifting daily taking care of my son.

For that, and some other financial reasons, I have decided to delay Social Security to 70. I feel i have a good chance of living well into my 80s, and will be able to put that income to good use late into life.

—Peter

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25

My father lived to 93 and my mother to 94.

However both became quite inactive in their 80’s, my mother mostly reading in the living room and sleeping, and my father gardening in the back yard.

It’s a similar story with Mrs. Goofy’s parents, although the details are a bit different. Again, it’s not about “age”, it’s about “what you can/want to do at that age” and how much money it takes to do it.

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26

I really don’t think you understand how this works. You still take income, you just take it from the investments. The lower sequence of return risk later in life allows you to take more income from the investments from 62 to 70 and then reduce those withdrawals at 70.

It absolutely is - and that money likely should be invested differently during that window to reduce the risk of loss. Again, that is all part of the calculations.

Of course, but do you skip out on home insurance because you are likely to have a more favorable experience than others?

If you think you are likely to have better than average performance, feel free. The math and the data is based on the range of possibilities and that has to allow for both Goofyhoofy historical performance and those that are much less so.

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27

I love these Social Security discussions.

Collectively, retirees making poor Social Security claiming decisions have left $3.2 Trillion on the table according to a 2019 study. No doubt that number is higher today since the behavior hasn’t changed.

That $3.2 Trillion stays in the Social Security Trust Fund, improving the longevity of the program for folks like me who are waiting until age 70.

intercst

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28

I love all these quotes by people that assume everyone is going to live to 70. Geez can we all just agree that everyone is not on the same path.

You have cancer at 62 and have 7 years to live. Sure you will wait till 70. Because someone on the internet told you it was the smart thing to do.

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29

Not because “you are likely to have a more favorable experience than others”, but because you have the financial capacity to cover the complete loss of the home with other assets.

If my home is 2% of my net worth, why am I paying a high skim rate to an insurer to cover a risk I can easily pay myself?

intercst

30

No. If you have a confirmed medical diagnosis that predicts a shorter life span, you use that the inform your Social Security decision and take it at age 62.

I believe Wendy did that since she had a history of breast cancer and it was an informed choice at the time. Now her doctors are telling her she should live to age 90 plus after successful heart surgery. Medical science is advancing at a rapid rate and even a confirmed medical diagnosis doesn’t guaranty a shorter life span.

Again it just arithmetic, not what someone on the internet is telling you.

The SS administration has publicly available data that tells you when the average beneficiary started SS and their date of death. It’s easy enough to calculate if taking it early was the decision that resulted in the highest benefit for them. As it turns out, only 4% of beneficiaries are getting the arithmetic right. People tend to be poor at estimating their own longevity. They actually live a longer they they think they will.

intercst

31

Exactly and if social security is only .0001 percent of your net worth it doesn’t even matter when you take it. It is little more than a rounding error.

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32

The arithmetic is the same no matter what your net worth.

Nobody is more pro stock market than I am, but over an 8-year investment horizon (i.e., age 62 to 70), the S&P 500 falls short of the 8% per year increase in your SS benefit about 25% of the time. The arithmetic says to wait until age 70, rather than take it at 62 and invest it in the stock market.

intercst

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33

No it’s not. I am sure Bezos does not even care what happens with Social Security. I bet it doesn’t even cross his mind. When you don’t have money it makes you obsess over every little dime.

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34

I don’t know that people are saying “invest it in the stock market”. I’m saying if you have to withdraw your investments for 8 years to wait, then you are depleting your nest egg for the hopeful promise of a bigger payday later.

Let’s pretend you spend $50k per year and you are retired so, no other income. For those 8 years of waiting you will reduce your investment account by $400,000, while getting no paycheck from the government.

Your SS monthly checks would have been around $2,000 each, or $48,000 combined and you would have your investment account intact. If you were earning 10% per year (I know, I know, not guaranteed) you would have 8 years worth of investment income (or stock gains) to look at.

Meanwhile, at age 70 (8 years later) you are going to get $4,000 monthly each, or ~$100,000 per year. You will certainly make up the difference, eventually, and “get ahead”, the question is “will the excess be of use to you by the time you do?”

You are now making an additional $50k per year from SS, but you are making around $40k less from your investment stash, all figures plus or minus.

Again, I can’t be bothered to spreadsheet this. The numbers above, for instance, are a fiction, because there’s no “inflation” calculation built in - but that would be true for the investment pot or the SS check, so I’ve ignored it.

All of this is to say I’m not arguing the point strenuously, just saying that it’s not as dire as some intimate, and I enjoy pointing out that those who are most vociferous on the point always - and I mean always - ignore the fact that you’re spending down other assets and that once you finally do get ahead it may be late in your life. For some that’s kind of a drag because the extra money isn’t a big deal when you’re (here it comes) drooling in the corner of the solarium.

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35

No, if you don’t need the money, sequence risk is not a factor. You are investing for 30 years if you take early, and according to your past posts, the markets always wins over 30 years.

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This guy looks like he is worried about Social Security.

37

Truth from a 77 year old.

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38

I guess his first Harsh Truth is most recent for me.
In the last 6 months, I’ve had 4 friends or close acquaintances die.
And two more in the pipeline.
People in my age cohort. I’ve partied, traveled, spent leisure time with em.

It’s really made me realize that by the time I hit 77 yo, 50% of my cohort will actually, not just actuarially, be dead.
And I might well be in the “he’s gone” category at the class reunion.

Before Jan 2025, statistical life expectancy was “distant” … a variable for “when do I start SS?” …
But now, it’s more immediate, in a gut punch kinda way.

:infinity:
ralph relates to Robert’s other 9 Harsh Truths, too.

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39

I hear you Ralph, it gets harder the older you get. I think the best thing he said is don’t be that angry old man. A friend of mine just turned 78 and I can see a definite slow down in how he is getting around. But at least he is staying active.

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40

This hits home for me. I have two friends in the neighborhood who were just cruising along, and suddenly … they’re older. Noticeably, physically, just like that: older. One is still moving along, now in his mid-80’s. The other died about two months ago.

I can see and feel a noticeable decline in myself from just three years ago when I was 75. I don’t like it one bit, but I don’t really seem to be able to do much about it.

I recall seeing my Dad slow down, but since I only saw them once a year or so it seemed to happen “quickly”. I’m starting to think it does happen quickly. Working on my various projects, I get tired after just a couple hours; just a few years ago I would go all day.

Back to the topic: that’s why “more money later” doesn’t always seem to be the right answer, even if it is “more money” eventually.

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