William Reichenstein , CFA, holds the Pat and Thomas R. Powers Chair in Investment Management at Baylor University and is head of research at Social Security Solutions, Inc .
William Meyer is founder and CEO of Social Security Solutions Inc., a service that provides personalized recommendations as to when to claim Social Security benefits.


Discussion

John Logger from CA posted about 1 year ago:

It was unusual not to have included comments regarding arbitrage. most retirees will have other assets that they can/will deploy to defray retiree costs and arbitrage would normally be a consideration on how to defray those costs. What was the reason this was omitted?


Stephen Levine from CA posted about 1 year ago:

Since no one knows the date of his/her death, how is this helpful? I saw where you brought up the question, but I couldn't find your answer. To me a better question is how much will Social Security affect the quality of your life? If you can retire and collect a pension and Social Security at 62, why not do so and enjoy the money while you can? If you have no pension, then put off collecting as long as you can. Social Security recipients, of which I am one, spend the income as it is received. They don't usually use it to feed some investment portfolio, so the lifetime amount they receive is only an accounting exercise speaking simplistically. The important figure, speaking again as a retiree, is the monthly or annual amount of money that a person is likely to get from Social Security. That will determine whether the older person lives in poverty (no other source of income) or in comfort (some form of additional retirement income).


E M Easterly from OR posted about 1 year ago:

As a retiree I found this analysis interesting. My decision to collect Social Security was partially deferred in anticipation of a higher monthly amount. The break point between age 62 and full retirement in the past was roughly age 78. This analysis moves the value to age 80.
My actual retirement decision at age 67 was more a function of interest and enthusiasm as an employee. When I lost interest I retired at age 67. This article simple confirms in economic terms that my decision was a fiscally reasonable one.


R Carnwath from AL posted about 1 year ago:

The authors should place more importance on the value of an annuity adjusted for inflation! IN THE CURRENT ENVIRONMENT, ASSUMING A 3% REAL RETURN AFTER TAX WITH THE FULL FAITH AND CREDIT OF THE US IS A HEROIC ASSUMPTION. I THINK THE BEST ANSWER FOR MANY IS TO WAIT AS LONG AS YOU COMFORTABLY CAN BEFORE TAKING SOCIAL SECURITY AS IT IS THE CHEAPEST INFLATION PROTECTED SOURCE OF INCOME YOU HAVE. 401K's don't care about longevity risk, or inflation risk.Your Social Security grows at 3% per year plus inflation until age 70, then grows at inflation. If you wait until age 70 to take it, you'll "lose out" if you die before age 80 but you will be protected against earning less than 3% real until age 70 and you will have the highest inflation protected annuity you can buy thereafter which will go on for ever until you die. Less Worry! That's worth a lot!


D Brown from TN posted about 1 year ago:

I'm a widower. My late wife would have turned 62 in 2013, and I did turn 62 this year. I've started to collect her SURVIVOR benefits this year, and I expect to start collecting my own benefits when I turn 70 and drop her's. This appears to maximize my SSA income under virtually every scenario.
In effect, it's as if she was alive and started collecting at 62, and then dies at age 70.


John Duff from MA posted about 1 year ago:

I wonder if the authors could redo the break even points with discount rates of 2%, 4% and 6%. A discount rate of 0% is fairly accurate today, but perhaps not over a 30 year period. As I understand it, a higher discount rate would push out the break even points.

Excellent treatment of a complex subject.


Ted Schott from NC posted about 1 year ago:

Although the article is an interesting exercise in arithmetic it seems to me to ignore two elephants in the room:

1. Social security is very underfunded and conventional wisdom says that the federal government WILL reduce benefits to those that can afford it via a "means test". It is not a matter of if, but when. Conclusion based on that fact is: if you defer taking the money you will probably get less later.

2. Medical/ Biotechnology is moving forward rapidly. Conclusion based on that fact: Life expectancy will increase significantly over the next 20 years.....Plan on IT !


S S from Pa posted about 1 year ago:

Will work until it's no longer enjoyable.
Am not relying on soc. Sec.


S S from Pa posted about 1 year ago:

Will work until it's no longer enjoyable.
Am not relying on soc. Sec.


Paul Hopler from VA posted about 1 year ago:

Are we missing the point of money time value? If a person needs the money at age 62 then there is no point in waiting. If not the funds will go into an over all investment fund. Using your example of 2000/month at 67 or $1500 at 62. If the market moves at the typical 10% and we only assume 7-8%, compounding $1500 /month for 4 years and you have a nice pot of over $80000. Continuing the same growth will yield a return of well over the 500/month (6000/year) shortfall plus you have the money so why wait.


Jim Caldie from WI posted about 1 year ago:

Great article. I've always wondered why almost all of the articles I've read before make it sound like you're loosing money if you take it early at age 62, when the truth is you get the same amount of money up to about age 80, you're just not letting the government hang on to it longer. However if you live longer than age 80, you'll benefit from higher payments if you've waited. I like Table 2 Cumulative Lifetime Benefits, and Table 3 Breakeven points. I think it would be great if you could follow up with updates to these tables assuming you took the money at age 62 and invested it a reasonable percentage, instead of leaving it with the government and taking it out later. For instance, what percentage would I need to earn if I took the payments at age 62 in order to have the same income at age 80 that I would have if I had waited to take payments until age 66?


Edwin Perkins from CA posted about 1 year ago:

I agree with Paul Hopler. Take the money as early as possible. If not needed for current income, invest the money in an adjustable interest rate mutual fund. At discount rate of 5 percent, money today is worth far more than inflows beginning five years or more down the road. Plus is the retiree needs increased savings for long-term care at 66 or above, he/she will have ready resources available.


Anthony Crocker from CA posted about 1 year ago:

A variant of Paul Hopper's comments:

Suppose you have a significant amount of IRA/401K money. If you take Social Security at age 62, maybe you leave the IRA/401K to grow tax deferred until age 70 vs. having to draw upon some of those $ for 8 years if you wait until age 70.

Furthermore RMD's starting at age 70 will push your taxable income higher. You want to start Social Security at 70, further pushing up taxable income? Anyone else think income tax rates might be higher than now in 8 years?


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