I think I definitely will need to take retirement benefit at 62 as I will need the money so I can take less out of stock funds. I’m hoping the stocks will grow faster than the amount of increase I would get if I waited till age 70 to take social security.
You made a huge mistake form the beginning. You said the average life expectancy I the US is 77.5 that's the most incorrect number to cite because it includes people who die as infants, in childhood and middle age this brings the average way down. You should only concern yourself with life expectancy at at age 62 which is 20 years (M) and 22.9 (F) at 62 your Life expecentacy is 82-85 (NOT 77.5). that's a completely different narrative you shouldn't even mention the 77.5 expectancy because that includes all the people who didn't make it to 62 in the first place.
The break even age is way higher than age 80. You need to take the time value of money and investment earnings into consideration. The break even is closer to 87 or 88.
The breakeven calculation assumes a 2% cost of living adjustment each year for the earlier age. Of course, it would change if you used a different percentage. Investment returns are not guaranteed so it wouldn't be appropriate to factor that in.
Of course you need to include investment returns. In fact if anything I would ignore the COLA which is less certain in my opinion and you get the COLA adjustment whether you claim or defer anyway so it doesn’t have a large impact. As far as investment returns they are not going to be zero if conservatively invested in CDs, T Bills etc. I used 4.5% which is what you can get on a ten or twenty year bond today but you can use a lower number if more comfortable.
There could be a reduction in benefits in the future, but I wouldn't worry about it going away completely - too many Americans rely on SS as their primary (or only) income in retirement. As for logic, we're talking about the federal government here! 😆
Not a very good analysis. You quoted the life expectancy table at birth. Also , with the payout amounts at different ages for Social Security, you failed to account for the effect of COLAS on the amounts. Another thing is that claiming early and letting your retirement accounts grow may expose your spouse to the widows tax trap. Your example of someone who’s benefit would be $700 at 62 but $850 at 67, well those figures aren’t even close to being right. If their benefit at 62 would be $700, then age 67 it would be $1,000 and that’s not counting 5 years worth of COLAS being added on. The only reason to collect early is if your health is bad and prospects of longevity are not in your family.
Life expectancy at 62 would be a better figure, I agree there. The breakeven charts did include a 2% COLA that I didn't mention. As for the widows tax trap, that would not be a "good reason" (title of the video) to claim early, but a valid concern nonetheless. The $700/$850 example was purely made up, but the point was that if the delayed benefit amount is nominal, it may not be worth it depending on how much you need the income.
Cumulative amounts mean absolutely nothing. You receive your check every month not all at one time. So that's a useless comparison. You can't pay your bills with something you will receive over the next 10-15 years. I wish advisors would quit using that comparison. I can't believe that financial advisors don't see the folly in that comparison.
I wouldn’t say it means “absolutely nothing”. When you pay into something for 40 years, some people naturally want to get the most out of it that they can. As I said in the video, it’s certainly not something to put a whole lot of weight on when making the decision.
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Are you planning on claiming Social Security benefits early? Why or why not?
I think I definitely will need to take retirement benefit at 62 as I will need the money so I can take less out of stock funds. I’m hoping the stocks will grow faster than the amount of increase I would get if I waited till age 70 to take social security.
An 8% increase every year is difficult to pass up. There will be many years that your investments will not grow at that rate. 😢
Unlikely to beat a guaranteed 8% return rate.
You made a huge mistake form the beginning. You said the average life expectancy I the US is 77.5 that's the most incorrect number to cite because it includes people who die as infants, in childhood and middle age this brings the average way down. You should only concern yourself with life expectancy at at age 62 which is 20 years (M) and 22.9 (F) at 62 your Life expecentacy is 82-85 (NOT 77.5). that's a completely different narrative you shouldn't even mention the 77.5 expectancy because that includes all the people who didn't make it to 62 in the first place.
Good point!
I was thinking the same thing.
Nice! I like the suggestion.
The break even age is way higher than age 80. You need to take the time value of money and investment earnings into consideration. The break even is closer to 87 or 88.
The breakeven calculation assumes a 2% cost of living adjustment each year for the earlier age. Of course, it would change if you used a different percentage. Investment returns are not guaranteed so it wouldn't be appropriate to factor that in.
Of course you need to include investment returns. In fact if anything I would ignore the COLA which is less certain in my opinion and you get the COLA adjustment whether you claim or defer anyway so it doesn’t have a large impact. As far as investment returns they are not going to be zero if conservatively invested in CDs, T Bills etc. I used 4.5% which is what you can get on a ten or twenty year bond today but you can use a lower number if more comfortable.
Id take it at 62, 16 years away but the boomers made sure we wont have any. Is it logical to work 40 years and get 20 year benefit form it?
There could be a reduction in benefits in the future, but I wouldn't worry about it going away completely - too many Americans rely on SS as their primary (or only) income in retirement. As for logic, we're talking about the federal government here! 😆
Cry more.
I enjoy your video's. Could you talk about withdrawal strategies, like Guyton Klinger Guardrails vs. 4% rule.
@@dlipp23 thank you! Yes I plan to do a video on this in the near future!
I'll be collecting in 5 years when I turn 62 and investing it all........well , if we still have a Country in 5 yrs!
Why not delay if you don’t need it?
@@SparkWealthAdvisors -Do we know how long we will live? Or how long SS will last?
Not a very good analysis. You quoted the life expectancy table at birth. Also , with the payout amounts at different ages for Social Security, you failed to account for the effect of COLAS on the amounts. Another thing is that claiming early and letting your retirement accounts grow may expose your spouse to the widows tax trap. Your example of someone who’s benefit would be $700 at 62 but $850 at 67, well those figures aren’t even close to being right. If their benefit at 62 would be $700, then age 67 it would be $1,000 and that’s not counting 5 years worth of COLAS being added on. The only reason to collect early is if your health is bad and prospects of longevity are not in your family.
Life expectancy at 62 would be a better figure, I agree there. The breakeven charts did include a 2% COLA that I didn't mention. As for the widows tax trap, that would not be a "good reason" (title of the video) to claim early, but a valid concern nonetheless. The $700/$850 example was purely made up, but the point was that if the delayed benefit amount is nominal, it may not be worth it depending on how much you need the income.
Cumulative amounts mean absolutely nothing. You receive your check every month not all at one time. So that's a useless comparison. You can't pay your bills with something you will receive over the next 10-15 years. I wish advisors would quit using that comparison. I can't believe that financial advisors don't see the folly in that comparison.
I wouldn’t say it means “absolutely nothing”. When you pay into something for 40 years, some people naturally want to get the most out of it that they can. As I said in the video, it’s certainly not something to put a whole lot of weight on when making the decision.