Average Monthly SS Income (friends, housing, dates, single)
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Part of the problem with discussing delaying and whether it makes sense is no one gets to see true inflow/outflow, taxes paid, net after tax income, per year for their particular situation. Math scares a lot of people, or you have garbage in garbage out calculations. An experienced retirement financial advisor (not an investment advisor) can intelligently decipher the correct ways to use such tools. Even mathjack, whom we all mostly agree is on top of his finances, went to see Fidelity and have an independent evaluation plotted. People do more research buying a new car or planning a vacation than they do their retirement finances. One can not know what they are not aware of...because they are not aware of it to even look for it. Until I had multiple iterations of the scenarios with actual after tax cash flows by filing at different ages, did I realize how much I was foregoing by filing too early. In my particular case it was very significant.
yes ,there where way to many parameters and scenario's for me to run on my own . once ss meshes with your own assets and portfolio it takes very specialized software
The questions asked by some, that seemed as if it was news to them that for a married couple, with no taxable income, that the first 22k is tax free, because the only other INCOME was all SS, prompted me to reiterate. So if you can delay filing for your SS , by drawing down savings, such that your RMDs plus your higher SS is all tax free, you have hit the sweet spot trifecta.
For instance, use the very simple Retirement Readiness Calculator on money.usnews.com/money/personal-finance . Lets say you have $600k saved in tIRA, and you file at 62 and get $24k/yr (near max) in SS. If we assume your 600k increases by 4% but you are also drawing 4%, you will have a gross income of $48k a year. Not shabby, and sounds ok. Plug in age to retire at 62, with savings of 600k, cost of living 48000, and SS of 24000. Prediction is savings last until age 82, and you will only have SS after that.
Now assume the same person uses their savings to live off for 62-70, and files at 70. In that case use the net present value of $42500 for the SS number at 70, but of course savings has been reduced by the $213k that you would have gotten from SS at 62, plus earnings lost of roughly $12k. But lets also say, to make it worth your while, instead of an income of $48k, let's use 4k more and say $52k, which reduces the savings a further $32k. So now the savings at age 70 is 600-213-12-32 or $343k.
Now remember. This calculator makes some assumptions, about taxes and savings earnings, etc, but may or may not reflect ones relevant you.
So for living a larger life with an extra $4000 a year income (tax free at this level) from day one of age 62 retirement, you find your savings now lasts until age 91. 9 years more, for using your savings to delay SS, so that you can have over 8% more spendable income. AND ON TOP OF ALL THAT, if you file and collect at age 62, when you reach 82, and only have SS left, the amount will be $34,500 per year. If you file at age 70, your SS at age 82 will be $59,000 a year, with 9 years worth of savings left. If you DO happen to make it until 91, your SS will be $69,500.
$48k income, filed at 62, will require $72k at age 82, assuming 2% real average inflation. So at 82, when you've run out of savings, your income of only SS forces you to take an over 50% reduction to meet what it was costing you. You filed at 70, your SS alone at 82 meets 82% of that reduced to $48k level. Plus you still have savings.
Just one example. If in either scenario the person were to die at 75, who would have had the better life? Who's spouse has a higher income from SS?
I'm going to start mine when I hit 62...better to get something before they start preventing those in a higher/income wealth group from receiving benefits. I predict we see this when the money gets too tight. The sweet deal I believe are for people already eligible to game the system with the rules that they are now starting to change....good for you guys, I'm likely going to be screwed.
i see changes for those my age but not in reneging on benefits due us . not with 80 million voting baby boomers .
I would like to believe that but I have doubts....that 80 million number is going to be, well there are too many of you, we have to reduce payments somewhere and I can predict who will be reduced....things were hunky dorry when the 80 million were paying in but if you are the younger half of they Baby Boomer generation, they will be looking for ways to not pay....think Greece.
I am NOT advocating that everyone file later. I really don't care what you all do. I am only presenting food for thought. It has been stated many, many times that ACTUARIALLY it makes no difference at all to the SSA when you file. So why would there be any change to a system that would have no monetary effect? At almost 59 I have zero worries that a change of that magnitude will happen by the time I am eligible. And if by some truely bizarre chance it does, then I just go ahead and file and I am STILL ahead. My life in retirement plans don't change one bit, except now I have to monitor my investments more and pay more taxes, but if thems the rules, then thems the rules. I'd prefer to have a better chance for more money when I am older, but I have a ton off leeway to adjust my living to accommodate my income. One HAS to have leeway because no one can predict the future. I will never agonize or worry at all about what MIGHT happen. What is the point??
The questions asked by some, that seemed as if it was news to them that for a married couple, with no taxable income, that the first 22k is tax free, because the only other INCOME was all SS, prompted me to reiterate. So if you can delay filing for your SS , by drawing down savings, such that your RMDs plus your higher SS is all tax free, you have hit the sweet spot trifecta.
For instance, use the very simple Retirement Readiness Calculator on money.usnews.com/money/personal-finance . Lets say you have $600k saved in tIRA, and you file at 62 and get $24k/yr (near max) in SS. If we assume your 600k increases by 4% but you are also drawing 4%, you will have a gross income of $48k a year. Not shabby, and sounds ok. Plug in age to retire at 62, with savings of 600k, cost of living 48000, and SS of 24000. Prediction is savings last until age 82, and you will only have SS after that.
Now assume the same person uses their savings to live off for 62-70, and files at 70. In that case use the net present value of $42500 for the SS number at 70, but of course savings has been reduced by the $213k that you would have gotten from SS at 62, plus earnings lost of roughly $12k. But lets also say, to make it worth your while, instead of an income of $48k, let's use 4k more and say $52k, which reduces the savings a further $32k. So now the savings at age 70 is 600-213-12-32 or $343k.
Now remember. This calculator makes some assumptions, about taxes and savings earnings, etc, but may or may not reflect ones relevant you.
So for living a larger life with an extra $4000 a year income (tax free at this level) from day one of age 62 retirement, you find your savings now lasts until age 91. 9 years more, for using your savings to delay SS, so that you can have over 8% more spendable income. AND ON TOP OF ALL THAT, if you file and collect at age 62, when you reach 82, and only have SS left, the amount will be $34,500 per year. If you file at age 70, your SS at age 82 will be $59,000 a year, with 9 years worth of savings left. If you DO happen to make it until 91, your SS will be $69,500.
$48k income, filed at 62, will require $72k at age 82, assuming 2% real average inflation. So at 82, when you've run out of savings, your income of only SS forces you to take an over 50% reduction to meet what it was costing you. You filed at 70, your SS alone at 82 meets 82% of that reduced to $48k level. Plus you still have savings.
Just one example. If in either scenario the person were to die at 75, who would have had the better life? Who's spouse has a higher income from SS?
Break even means nothing.
On a previous thread regarding this topic I went in to some detail about our situation. We're fortunate to both have pensions, both be eligible for social security and to have a significant amount in the 401k. You posted a lot of information similar to what you posted here and it really made me take a good look at my plans which was to collect at 62 simply because I could.
I have read 5 books on the topic now and they're all of course in the delay as long as you can camp. And now? I am too.
As some others have mentioned it isn't just about the breakeven age, it's about providing monthly income independent of your investments. It isn't just about how long I live after breaking even. It's about how long my wife lives if I check out first and ensuring she's cared for.
The other part that I've picked up and as you've pointed out above and Mathjak has frequently pointed out - the tax benefits. It isn't just about getting more from Social Security, it's about keeping literally thousands of dollars more in our own pocket each year. Add to that the tax benefit even in a state like New York. We're staying in NY for many reasons but cost of living isn't one of them. However even here SS is exempt from income taxes, my wife's pension is exempt and the 1st $20k in retirement withdrawals is excluded. As a max earner that would put us in a high 5 figure annual income before we owe any NY income tax.
The last point I want to make is in regard to the spending down of savings in order to increase SS benefits and breaking even. In Dana Anspach's book on SS she mentions that once you start collecting the higher amount, you should be able to reduce your annual withdrawals by an amount comparable to your increase. That decreased withdrawal dependency also has a breakeven span where your savings catches back up to the original amount including gains. So at some point we catch up to the money we will have laid out AND our savings will have recouped to what it would have been anyway.
I am NOT advocating that everyone file later. I really don't care what you all do. I am only presenting food for thought. It has been stated many, many times that ACTUARIALLY it makes no difference at all to the SSA when you file. So why would there be any change to a system that would have no monetary effect? At almost 59 I have zero worries that a change of that magnitude will happen by the time I am eligible. And if by some truely bizarre chance it does, then I just go ahead and file and I am STILL ahead. My life in retirement plans don't change one bit, except now I have to monitor my investments more and pay more taxes, but if thems the rules, then thems the rules. I'd prefer to have a better chance for more money when I am older, but I have a ton off leeway to adjust my living to accommodate my income. One HAS to have leeway because no one can predict the future. I will never agonize or worry at all about what MIGHT happen. What is the point??
One of your better posts. The point is that you have your opinion, I have mine, you're going to act based on your assumptions, I'm acting on mine... which is based on what I predict will happen politically and economically looking into the next 25-30 years....admittedly hard to do but if I do say so myself, I have a scary good track record.
As a 56-year-old tail-end boomer, I'm praying everyday, no changes affect me.
IF there are changes I don't like -- given that they always give a heads-up (like when they up the FRA, or just recently change the file-and-suspend rules) -- I can always file and get in under the grandfathering.
That might put a "rush" or increased demand on the system sooner, given that people might file who were going to wait -- but I don't make the rules. I just learn them and play them the best I can.
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