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Brian Nystrom
Joined: 26 Jan 2004
Posts: 4626
Location: Nashua, NH

5/2/20 6:26 PM

How old are you, Dan? The feds have been pushing people to start taking Social Security as soon as they're eligible, but it reduces your benefit substantially compared to waiting until you're 70 (30%). They actually called Linda and talked her into taking a lump sum payment without explaining the lower benefit she'd get if she did so. They made the change in a heartbeat, but when she changed her mind after realizing that they were screwing her, it took several months to get it straightened out.

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dan emery
Joined: 11 Jan 2004
Posts: 6375
Location: Maine

5/2/20 6:46 PM

Age

Iíll be 70 in September, which is when Iím starting benefits. They sent the letter 4 months before, which is the period in which you can apply. The letter just said thereís no point waiting past 70, which I knew anyway. Iíve not heard of anything like you describe for Linda, and I have no idea how a lump sum would come into it, almost sounds like someone pretending to be the agency or trying to package the claim or something. There are websites like ssa.com which want you to think they are ssa.gov. I deal with Social Security for a living, though not retirement benefits.

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lrzipris
Joined: 04 Mar 2004
Posts: 494
Location: Doylestown, PA

5/3/20 5:56 AM

If not for the SECURE Act, Dan, you would have to start thinking about your Required Minimum Distribution. "Do I buy a new bike or other 'toy' with the money, or do I re-invest it?"

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Brian Nystrom
Joined: 26 Jan 2004
Posts: 4626
Location: Nashua, NH

5/3/20 9:33 AM

Dan, they offered her an option to take "retroactive benefits" as a lump sum, but they didn't tell her that it would reduce her monthly benefit back to what it would be if she had started collecting at 67. It's a real rip-off, unless you're in financial straights - or don't expect to live long - and need the cash. She had been working through the regular application process and had it settled, then they they called her back with this offer. We were both pretty pissed that our own government would screw her over like that by promoting taking the lump sum without explaining the downside.

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dan emery
Joined: 11 Jan 2004
Posts: 6375
Location: Maine

5/3/20 12:29 PM

I see

As I thought it over I thought it might be something like that. I donít think it was really an ďoffer,Ē it was an option she had. I think it would be legitimate for them to call and explain the options, but obviously they didnít explain them fully enough.

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Sparky
Joined: 08 Dec 2003
Posts: 17730
Location: Portland, OR

5/3/20 12:42 PM

Well, I took @ 62 and googled the crap outta the ramifications, called my tax guy, etc etc. What effect the joint SS revenue would be when Elaine retires etc etc.

Decided in favor of early mainly to turn the mort into a 1/4 orig term plan. Being we started with a new one in 2012 when we relocated to PDX.

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lrzipris
Joined: 04 Mar 2004
Posts: 494
Location: Doylestown, PA

5/3/20 1:15 PM

Taking SS at 62 enabled me to retire from a profession that was grinding me down; in addition, I don't know how long I'll live. To paraphrase Samuel Johnson, turning 70 concentrates the mind most wonderfully.

There are several choices I regret over the past decade (like selling my house), but, after almost nine years, I don't regret my SS decision in the least.


Last edited by lrzipris on 5/6/20 7:43 PM; edited 2 times in total

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Sparky
Joined: 08 Dec 2003
Posts: 17730
Location: Portland, OR

5/3/20 1:32 PM

For me, I did not have another business start up in me.

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dan emery
Joined: 11 Jan 2004
Posts: 6375
Location: Maine

5/3/20 1:54 PM

Timing

Itís different for everyone, depending on your position, desires and assumptions. I wouldnít try to tell anyone else what to do. I have been told that the benefit for waiting is generous with SS (better than youíd get in the private market with an annuity for example).

As to RMDs, in a recent ZOOM meeting a fellow remarked ďlím sitting around watching my 401(k) turn into a 101(k).Ē

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Sparky
Joined: 08 Dec 2003
Posts: 17730
Location: Portland, OR

5/3/20 2:16 PM

Timing as far as 'economy' state is interesting and importan dynamic.

For example some friends in their mid 60s poised to retire in 2009-10 got screwed in royal fashion.

While Elaine has probably 7-9 years if no surprises occur. We don't even look at the retirement accounts. It is not going to matter for quite some time. We are at a point of triggering higher risk percents, waiting for a real market adjustment to do that.

Usually at our ages the trend would be toward less and less higher yield/risk percents/portfolio. This is something of a different climate. And I have high confidence this will all get more extreme before less.

I will say regarding our backup fluid moneys go, we started looking into putting a portion of it into the markets. After all, who needs two years of bills fluid, at least that was our thought process about 90 days ago..

My chicken little side is thinking how fluid your moneys are if there is no food to buy is moot.

Thus there is a little irony in that having moneys in market on a comeback netting better VS a time when you want a bigger fluid buffer....

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lrzipris
Joined: 04 Mar 2004
Posts: 494
Location: Doylestown, PA

5/3/20 2:36 PM

"Itís different for everyone, depending on your position, desires and assumptions."

I agree. When you look at on-line articles headlines something like, "Experts say to wait," the message ultimately is there is no single best answer. The penalty for taking early is steep (I think 25%, for me), but there is a breakeven point (for me, 77, I think), but non-monetary intangibles must also be factored in (like my quality-of-life issue).

As for RMD, that was recently changed from 70.5 to 72. I was all set to make my first withdrawal when the new rule took effect.

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KerryIrons
Joined: 12 Jan 2004
Posts: 3057
Location: Midland, MI

5/4/20 9:51 AM

Timing

While the situation is different for everyone, the math is pretty straightforward. With some reasonable assumptions about the discount rate, you will come out ahead if you delay your SS payments (earning 8% per year) IF you live past 83. If you plan to die before age 83, then you would be ahead to take your benefit as early as possible. When you plot the net present value of the payments, the lines cross at age 83. Of course this is what the actuarial tables say is the life expectancy of a 62 year old. YMMV

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lrzipris
Joined: 04 Mar 2004
Posts: 494
Location: Doylestown, PA

5/4/20 12:22 PM

77, 83....

I think the difference in break-even ages may depend on one's DOB and when one reached/reaches full retirement age, but I could be wrong.

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PLee
Joined: 08 Dec 2003
Posts: 3671
Location: Brooklyn, NY

5/5/20 6:18 PM

Neither one of my parents made it to 80. While I'm generally healthier and in better shape than they were, I'm not going to bet on making it much past 80.

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Jesus Saves
Joined: 16 Jun 2005
Posts: 1149
Location: South of Heaven

5/6/20 4:48 PM

The 8% return, more or less, is used by Actuaries in their calculation for the entire pension fund. For SSI, the assumed internal rate of return used by its Actuaries for specifically benedit payout is much more modest. For instance, see here:
https://www.ssa.gov/OACT/NOTES/ran5/an2012-5.html#wp176324

For your own personal break even calculation, I would recommend using a much lower value, too. An 8% assumed yearly return of invested funds is way too optimisitc for the risk profile of a retiree or near retiree. Think current Treasury note/bond yields.

As others noted, you need to correctly rub this up against what you expect your life expectancy to be.

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dan emery
Joined: 11 Jan 2004
Posts: 6375
Location: Maine

5/6/20 5:50 PM

Clarifications

The 8% is the increase in benefit amount for every year of delay between full retirement age and 70.

SSI is Supplemental Security Income, an entirely different program.

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lrzipris
Joined: 04 Mar 2004
Posts: 494
Location: Doylestown, PA

5/6/20 6:50 PM

Yes, I realized my error in using the wrong term. I should have edited my post. I'll do that now!

Last edited by lrzipris on 5/8/20 6:00 AM; edited 1 time in total

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Jesus Saves
Joined: 16 Jun 2005
Posts: 1149
Location: South of Heaven

5/6/20 7:38 PM

My bad with SSI. Just SS, for short. Thanks. Likewise, I was unaware that the benefit (principal) payment goes up 8% per year for each year you defer the payout start.

I have not payed much attention to SS details since I know the rules will change by the time I am ready to retire as in not soon.

The 8% value I was commenting on is in a different context, as in fhe value used to discount/calculate the present value. The poster I responded to commented about calculating the present value. That was my focus.

The little I do know about SS benefit selection is the math. I used to be a pension actuary. I believe the math actuaries use to calculate the benefits if elected at the earliest or latest retirement age or somewhere in between is a matter of indifference. In more technical terms the present value of expected benefits paid to the pensioner will be the same for any retirement year election. That is for the average pensioner. You are likely not to be average.

The caveat, a personal one is what you the individual think will be your expected benefit payout.

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Sparky
Joined: 08 Dec 2003
Posts: 17730
Location: Portland, OR

5/7/20 5:07 PM

Decided to recon/ride the south section of the MUT that runs to downtown. I have been riding hilly back country treks near my house. It was nice to ride semi flat after some steeps and zig zags of late. But cars don't like these steeps either so I get them to myself. Nothing you 'have to' stand to get up, but close to it in a spot or two.

I knew I would not go to the river 'esplanade' section thru downtown. But anyway, I went off to adjacent roads a few times, too many folks on the MUT.

I had a sewn mask with me, I popped on when I stopped to talk with my retired friend. We sat 8' apart and masked, but nice to spend some time with him. Especially since only a few months ago his wife has had to go to a memory care home. She had got so deeply into that realm unfortunately.

On the way back I stayed on the MUT, and wore the mask the entire trip back. I have a stye in my right eye, so contacts out of the question. I was surprised my glasses did not get steamed up. It was kind of breezy and right at 70^. Well quite breezy, which I could have done without. ;)

I wish it occurred to me to wear it the entire time really. But is was not bad at all to breath thru.

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lrzipris
Joined: 04 Mar 2004
Posts: 494
Location: Doylestown, PA

5/8/20 7:23 AM

The mask I was given at the hospital when I gave blood is so thick, I have trouble breathing just walking around the market, shopping. I can't imagine cycling with it.

On rides, I have a lightweight neck gaiter that I can slip over my mouth and nose when passing other people or if I go into a store. It's probably more a gesture that actually preventative.

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dan emery
Joined: 11 Jan 2004
Posts: 6375
Location: Maine

5/8/20 8:38 AM

Masks

I have a mask made by one of my assistants who is a crafter, and I just ordered some Rene Herse tires so I added one of those masks. Donít expect to need them cycling, but I think I could breathe if I did, glass fog might be an issue. Also have a neck gaiter and balaclavas.

Here is a virtual cycling fundraiser from Bicycle Coalition of Maine (including shameless self-promotion):

https://www.facebook.com/bicyclecoalitionmaine/videos/570557750239165/

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KerryIrons
Joined: 12 Jan 2004
Posts: 3057
Location: Midland, MI

5/8/20 9:44 AM

Math


quote:
The 8% value I was commenting on is in a different context, as in fhe value used to discount/calculate the present value. The poster I responded to commented about calculating the present value. That was my focus.



While I could have been more specific, my post was correct. SS increase your payment 8% per year for every year you delay enrolment from age 62 to age 80. A discount rate that you apply (e.g. rate of inflation) discounts the different cash flows to the present date to give you a net present value of different alternatives. And the math says (I repeat) that if you live past 83 then the NPV of your SS payment stream will be larger if you delay to age 70 than if you start at age 62. Straightforward.

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Brian Nystrom
Joined: 26 Jan 2004
Posts: 4626
Location: Nashua, NH

5/9/20 2:51 PM

I think you mean age 70, not 80, in your second sentence. SS benefits do not increase if you wait past age 70 to start collecting.

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Jesus Saves
Joined: 16 Jun 2005
Posts: 1149
Location: South of Heaven

5/9/20 4:31 PM

Whose math yields age 83? Yours? Or a professional? Please show us the "pretty straightforward" calculation. Thank you.

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KerryIrons
Joined: 12 Jan 2004
Posts: 3057
Location: Midland, MI

5/10/20 9:27 AM

Math

Yes, I meant 70.

As to the math, it doesn't take a professional to use well known equations, but I guess if I got paid for decades as an engineer doing project costs and cash flows, then maybe that qualifies me as a professional. At any rate, here is the equation, which you will find in any textbook:

(P/A,i,n) = ((1+i)^n-1)/(i*(1+i)^n)

Where P is the present value of an annuity at interest rate "i" (discount rate) for "n" periods (years, months, days, however you want to structure your calculation). You do the NPV for the higher payout taken at age 70, and the NPV for the lower payout taken at age 62 and you see what "n" makes them equal. Rocket science this is not.

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