I don’t disagree. But I think you (and Hawkin) are missing my point.
Getting to the point where Social Security is basically irrelevant to retirement means one of two things (and maybe a bit of both): you are an above average investor, or you made a lot of money during your working career.
Your analysis assumes an average investor. I am assuming that by getting to this point you are an above average investor and are likely getting market beating returns. Hence my assumption that this person could continue to get above average returns.
I’d also note that I’m talking about a situation where Social Security is irrelevant to your retirement. If it’s irrelevant, you don’t need to worry about sequence of return risk or portfolio survival. You’re more likely to think about maximizing your estate. And getting more money in your pocket sooner helps do that.
LOL. I have no thoughts to maximizing my estate. Our kids will likely get some, but we’ve been giving them things now that will make it easier for them to succeed, like a debt free college experience and a fully funded Roth since they started working at 14. I have no doubt that they would prefer we manage to provide for ourselves and not have to move in with them.
I don’t think you need to make either of those assumptions. IMO, the biggest factor is what @inparadise suggested: Simply planning ahead. For example, if you were able to save 20% of your income (say, 15% 401(k) contribution plus 5% employer match. Insert you own assumptions, if you like), invest it in a low cost index funds for 20-30 years, you’d be able to replace 100% of your spending. That’s pretty much what I did, except I never got an employer match, but had high a higher savings rate. I was able to retire early this year at age 58.
I agree if you need to take it, then the decision is made for you. If you don’t need it, then it doesn’t mater. But it is the marginal cases where this is important. Here’s a hypothetical I whipped up just now on cFIREsim. A person retires at age 62, with a nest egg of $1.5 million. If they take SS right way (I’m assuming $1300/month benefit) the 95% survival rate gives an annual withdrawal of $76K. By delaying (assuming $2250 benefit), the annual withdrawal is $79K.
That’s not an earthshattering amount, but it is enough to make a difference on that level of income.
I think the percentage of households that view SS as “irrelevant” is small enough to not even consider. My household income is in the top 5% and SS is still likely to represent 25% of my annual income in retirement - and 100% of my guaranteed income.
This isn’t about the “average” investor. This is about the vast majority of Americans that will depend on SS to one extent or another.
Edit: SSA does not get granular enough but they have data supporting this position:
To paraphrase (and because I have yet learned how to recreate tables):
The majority of people in the first, second and third quartiles of income depend in SS for 50% of their total income in retirement. The 4th quartile has a 50% dependency rate of 25% (1 in 4 get 50% of their income from SS).
It is fair to assume that a sufficiently large enough percentage of the 5th and top quartile still maintains some dependency, even if it is below 50% (perhaps 25%).
I think the “irrelevant” context was different than simply monetarily. It was perhaps referring to those people, not in the top 1% or even top 5%, that have a habit of saving ingrained into their psyche. So even though they may have $9k/mo coming in from pensions/investments, and $3k coming in from Social Security (25% of their income), they’re still only spending $6k or $7k per month, so for them, the social security of $3k is “irrelevant”, and they may decide to take it later so their heirs will have more when they die. In fact, someone said that implicitly by saying, “calculate the terminal value both ways, with early SS and with late SS, and the one that has the highest terminal value ‘wins’ and should be chosen”. Terminal value for retirement savings is, well, terminal.
