When to take social security given the current situation.

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ctillotson's picture
ctillotson
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When to take social security given the current situation.

I am 60 years old.  My spouse (57) and I both will qualify for SS.  I have far out-earned my spouse so my SS payment will be higher.  My spouse is younger, of a very healthy lifestyle and has great genetics for longevity.  The conventional wisdom is for me to defer SS until I am 70 since when I die, my spouse will assume my level of payment.  Given the current sorry state of financial affairs in the USA as chronicled by Peak Prosperity, are we better off with me taking SS at 62 in the hope that we will at least get something? As an aside,  I have been somewhat successful so that if SS becomes means-tested, I would probably not fare well. Thank you.

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SS Payout

ctillotson,

It all boils down to 3 general issues. First off, how long do you think you will live? Second, how long do you think SS will remain solvent? Third, since there are reductions in payouts the earlier you begin taking SS, will those expected amounts be sufficient for your lifestyle?

I wanted to have a rational basis for making the decision of when to begin taking SS. Although I wish it never were instituted in the first place, I was forced to contribute to it for my 42 years of gainful employment. It won't remain solvent if I decline payments; therefore, it isn't a moral issue for me to take it.

I wrote a simple spreadsheet with expected payouts VS age to see what was the most advantageous for my situation. Each year you delay taking SS, the payout increases; however, you collect for that many fewer years. This spreadsheet assumes no inflation and that you'd receive full benefits of $1,000 per year at age 66. (You can multiply the amounts by your specific benefit.) There are reductions for each year you retire earlier than age 66 and increases for each year you delay payments. The right half of the spreadsheet shows cumulative benefits. The green box shows the largest total payout for current age based on the year you began taking benefits. Since you are 60, if you and SS survive another 25 years, it would be best to wait until 70 to retire. If either you or SS terminate within the next 15 years, you'd be better off taking it as soon as you can.

Of course, there are many complicating factors in your situation. Can you work longer (emotionally, mentally, and physically?) Do you have better things to do? How much do you wish to leave for your wife should you die early? What if they change the rules of the game midstream? Only you can decide how to play it. I sincerely hope this helps in your decision making process.

Grover

ctillotson's picture
ctillotson
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Same

Many thanks Grover for your attention. Very helpful!  One thing I read recently was that even if SS is fazed out, it would be likely that those already on it or close to qualifying would be exempt.  

 

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Grover
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T4T

You are definitely welcome! Although the SS recipients may be exempt from cuts for a while, the whole federal debt issue is so large that it will eventually collapse the whole system. That's mathematics talking. When will it happen? I really don't know. Look at charts of projected outlays for SS and Medicare. Within a decade, those 2 entitlement programs will consume all the revenue currently being collected by the US government. Will we have enough "growth" or hidden inflation to keep kicking the can?

Politicians will do everything in their power to keep themselves in power. I suspect that SS and Medicare will turn into welfare programs. If you made the mistake of planning for retirement, you won't need (and won't get) government assistance. That will kick the can a bit further down the road. Eventually, that won't save their bacon.

So, ask yourself what happens after that? What will your world look like? What will you be able to do? Right now, there is still time to change your location so the future won't be so bleak when the inevitable arrives.

To me, the key is the basics. If there are limits on any of the basic necessities, there will be conflict. If you're in a small community that has enough water and food being grown in the local area to feed the local populace, there is a chance for cooperation. If either is in short supply, expect brutal competition until the population drops at least enough for the situation to be sustainable. The bigger the city and the poorer the natural resources surrounding that city, the worse it will be.

I'm a big fan of the Fourth Turning by Strauss and Howe. History shows that repititions occur about every 80-100 years. This one won't repeat exactly, but the underlying fundamentals will lead to similar outcomes. The self-centered Boomers will destroy the system. Then, they'll shift their outlook 180°. Instead of bragging about their homes, their cars, their vacations, etc. they'll start bragging about how little they need to survive. (Once the system is broken, there really won't be any other alternative.) Self-centered Boomers will continue to brag - just about other things. Other generations won't be able to understand our obsession, but it won't really matter to us. We won't do it for Gen-X. We'll do it for the Millennials - the generation that has been coddled throughout their lives and actually looks for guidance from elders.

That being said, your decision to take SS as soon as possible or to delay gratification a bit longer won't save the system. The inevitable will happen either way. Look at your finances, look at your prospects, decide what is important, make a decision, and let the chips fall where they may. That's what I did ... and I'm happy I did.

Grover

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newsbuoy
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History As Interpreted By Sociologists? LOL

Ditto, thanks to Grover for the chart and interpretation. However, I am NOT a fan of S&H and the "Fourth Turning" which I see as a wrong headed and somewhat bigoted way of looking at history and that's all I'll say about that. The linked video can help understand my distain for their THEORY in principle.

 

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History Repeats Or Rhymes?
newsbuoy wrote:

Ditto, thanks to Grover for the chart and interpretation. However, I am NOT a fan of S&H and the "Fourth Turning" which I see as a wrong headed and somewhat bigoted way of looking at history and that's all I'll say about that. The linked video can help understand my distain for their THEORY in principle.

newsbuoy,

I'm glad you found usefulness in the chart. I developed it a few years ago for myself. It made my decision really easy to make.

I watched your attached video twice. I didn't hear anything the first time that dispelled Strauss & Howe's Fourth Turning theory. I watched it again to see what I missed. Again, I was befuddled. About the only thing I got out of it is that we can change our lives if we want (and we pay some pschotherapist) to guide us along the way.

That may work on an individual basis, but most of society's members won't bother. As such, they're trapped in their lives of quiet desperation. The injustices of their childhood cause them to respond accordingly in adulthood. I'm not downplaying therapy. It just isn't the predominant force that molds a generation's mindset.

People argue against financial technical analysis the same way. There really isn't any hard science behind it, but those who are good at it make money more often than not. Why? Because the human responses to a given situation are predictable. When a pattern of buying/selling mimics what has happened before, it likely will resolve itself similarly more often than not. The fact that it doesn't work in every instance doesn't void the theory.

So, right now, we've got the Baby Boomers entering retirement. The vast majority are financially woefully unprepared. They are unprepared because they squandered their excess income on new cars or vacations or eating out or accumulating bling. They aren't the first generation to do so, but they are the largest to date. Had they been responsible and saved for retirement, we wouldn't have this issue. Of course, the economy (that required all the spending to grow) wouldn't be at the stage it is either.

The Boomers didn't vote social security into existence. Most of them were forced to contribute to these "trust" funds with the idea that they'd get benefits later. I, myself, was forced to contribute for 42 years of my working life. I recognized it as a Ponzi scheme while still in Junior High School. I also knew that all Ponzi schemes end in failure - eventually. This one is no different.

According to T4T theory, the Boomers (as a generation) will respond the same way other "Prophet" generations have responded in the past. They will linger in the last phase of life until it becomes worn out. Then, they'll jump into the next phase and embrace it. In this instance, the Boomers will drain the government SS obligations dry. LBJ formed the Unified Budget that allowed government to borrow those "trust" funds and replace that borrowed money with irredeemable IOUs. There isn't any money in the "trust" funds. That means that the government will have to increase taxes, cut benefits, or borrow more money. Eventually, the only option available will be "cut benefits."

Once the government renegs, most Boomers will end up destitute. Because personal austerity will be the only option, Boomers will embrace it and make it their own. The Values gained during the "find myself" Cultural Revolution will finally surface. Boomers will sacrifice themselves and their beloved Millennials to save the Country.

S&H looked through history and saw cycles occurring repeatedly once the Dark Ages ended. They saw the same reactions to events by the same age groups. They saw that these patterns repeated every 80-100 years. The USA was founded in 1776. Four score and seven (87) years later, we were at each others' throats to fight the civil war. About 80 years later, we were embroiled in WWII.

We're approaching the point where we're 80 years past the end of WWII. Coincidentally, SS and Medicare will have sucked the Nation dry by then. Think things could repeat - or at least rhyme? Hmmmmm.

Grover

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newsbuoy
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Short-cuts and Heuristics

Thank you Grover for your thoughtful response to my opinion about the "fourth churning". We are, of course, within the context of when to apply for the SS benefits, which we have paid into with our own blood, sweat and tears. NO OTHER MODERN GENERATION HAS FACED NEAR-TERM EXTINCTION WHILE UNDERSTANDING WHY. So, if one thinks we have 15 years as a species then wait 15 years to collect your SS for a few more bucks that may or may not matter in the economy of 15 years from now.

Yikes! whats a po' boy to do?! I am struggling with this reality-busting, emotionally potent question like a few others. How do we convince our loved one(s)? Most still think we can carry-on, stiff upper lip, mind the gap.

InitialIy I was also quite taken by S&H's novel theory in my quest for the holy grail. Like many novelties it wore off upon closer examination. In fact, I find that it's effect is to short-circuit peoples critical analysis. Prof. Guarneschelli makes a point about his transition from History (with a special interest in Napolionic military history) to talk therapy, where he believed the same skill set applied, adding a caution about theorys (like Freud) taken out of context of the period (scientificism) and applying them in contemporary times. Furthermore that we can't possible know all the details of historical events enough to draw the kinds of conclusions you believe S&H can suggest (as a theory based on their socialogic bias).

Ref: "As humans we tend to simplify decisions and to shorten our decision making process. To do this consumers often employ  some decision rules that allows them to reduce the information search about a product or brand, this takes the form of beliefs, experience or perception.

Take for example consumer X that makes the decision of buying product Y because he thinks it has the best features and its brand gives him confidence, and thus ignoring any information search about competitors or substitute products. This assumption served has a shortcut to more extended information processing. (Solomon, 2002).
Especially in limited problem solving decisions, where the consumer is not as motivated to search for information or to the evaluation of alternatives, they often use heuristics or this cognitive mental shortcuts to support their decision and make  it more efficient.
Word-of Mouth as the most proeminent and powerfull communication tool has a very important role in heuristic formation, if a friend or any other group of influence has a bad experience with a given product and communicates it to you, you tend in your mind to form an heuristic accordingly." - Thinking About Marketing Blog.
 
Can preditory capitalism avoid fascist (or other) totalitarianism?
Uncletommy's picture
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"Heurers" of wooden thinking

Interesting discussion on "Ponzi" socialized benefits. However, it has prompted me to consider the lessons learned from my 92 year-old great-grandfather, as I helped him dig potatoes in his little backyard back in the fifties. The fact that he was born two days after Lincoln was shot and had outlived two wives, raised two grandchildren when his profilgate son abandoned them for a new wife to replace the one he just lost to TB in the roaring twenties, and continued to live a modest life while using his "new SS entitlement" to invest in a trust fund for his grand kids; has given me pause to reflect on those lessons. 

Most social benefits are reliant on this wonderful thing called interest. As most PP followers know, that is nothing more than a claim on someone else's future labor. "Whose labor?" seems to be a logical question. In the past, traditional families worked together to contribute to the well being of all the members. It appears we have forgone that mode of life for something a little more cosmopolitian. As for me, the place is paid off, we don't travel much, live close enough to enjoy our kids and grandkids, eat mainly out of the garden and use any extra social benefits in charity work and a meager bank account. Yes, the RSP is sitting there doing what it does and won't be touched until the government mandates that I start to pull it out.

Perhaps I'm experiencing the fourth turning. Need any potatoes?

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Re:SS

ctillotson wrote

" The conventional wisdom is for me to defer SS until I am 70 since when I die, my spouse will assume my level of payment."

The issue is the long term financial situation of the federal gov't. Presuming no significant tax increases or a major recession, sometime between 2021 & 2023 entitlements outlays & interest payments will exceed all federal revenue. I don't think BAU will be able to continue much beyond this period. My guess major cuts or inflation will begin before you reach 70 (10 years from now).

Another thought if inflation kicks in, presumig labor shortages caused by retiring boomers, and money printing to "finance" gov't debt, it might make sense to start withdrawing at 62 and taking the money and investing in something that hedges inflation.

Or if you can get 6% return on your SS money, thus increasing your payments recieved more than if you delayed. My understanding that the SS pay increases by 5% for every year you defer collecting. I know this seems silly now considering the yield on 10-yr treasury is below 3%, but perhaps in future it might increase.

You can also continue to work while collecting SS (you'll just have to pay the income taxes on the additional income).

FWIW: My guess is that the gov't prints money to extend BAU rather than cut spending & entitlements. There are simply too many people that won't support entitlement cuts (thus insuring no politicans that promote spending cuts win elections). The dollar will probably weaken (but perhaps not against other nations EU/Asia that also suffer the same systemic problems) resulting in significant purchasing power losses.

Clearly there are huge challenges in the not so distant future. Ideally it would be smart (in my opinion) to avoid relying on gov't entitlements & currency (Dollars, Euros, Yuan, etc) for long term retirment savings, since both are on very shaky ground.

Perhaps consider other issues that will impact your financial needs. For instance do you live in a high tax or high crime area? This might be a good time to start looking for another location to retire. Preferrable an area with low crime, low taxes, but access to decent, local healhcare providers. if you're already located in appropriate area, then consider investing in any pending home maintenance\improvment. Boomers make up the bulk of tradesmen (carpenters, plumbers, roofers, etc) and the are near or already at retirement age. Its likely going to be much more difficult to find skilled tradesmen & more expensive. It may be wise to get your home set up for reduced future maintenance: New roof, exterior insulation & low maintenance siding, more efficient windows. If you have a two story home perhaps consider upgrading the ground floor bathroom into a full bath set up for a disable person (ie you or your spouse is unable to walk up\down the stairs). Currently its pretty expensive to have any work done do to labor shortages & high material costs (tariffs), but perhaps there will be a recessions soon that will make any changes more affordable. It might make sense to put together a list of changes now, so your ready to roll when it become more afforable.

If your planning to move after retirement, consider that a lot of boomer will likely be doing the same causing an excessive number of homes on the market with few buyers (Gen-X & Millennials who are already strugging with debt issues). You may want to consider getting your home on the market sooner than you plan. Alternatively you could sell your home and rent a condo or apartment where you currently work. You could buy your retirement home and either use it as a vacation home or rent it out until your retire. In any case, if your planning to sell, it might make sense to address any maintenance issues, or clean out your attic or garge little by little so its not a huge burden when you are ready to move.

FWIW: I am younger than you and I already started my long term planning. I purchased propery in a low cost region and started building a new home. I don't want to be stuck with a home in a high tax area since I concerned that I won't be able to sell it & property taxes are on the rise to to support unfunded\underfuned state & local pensions.

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Timing Is The Key

newsbuoy,

I appreciate the positive dialogue we're having. You are correct that the main topic is SS. Unfortunately, it all ties together. We can't just look at one thing by itself. We need to look at how that one thing fits with everything else. You noted that we simplify decisions. I agree. (Marketers make a good living off our propensity.) Can you imagine what the world would look like if we couldn't? Imagine what you'd have to consider just to get from point A to point B. Where do you put your foot? How much force do you apply to each muscle in your body to accomplish that? What happens if a small breeze affects your balance between here and there? There's no need to make those painstaking calculations. We have learned to adjust as the need arises.

It's the same with models of existence. We can't know everything ahead of time. We really can't know everything afterwards either. We know enough to muddle through ... and if we're wrong, we make course adjustments. As long as a model works, it helps us accomplish these goals. As soon as it doesn't, we modify it or abandon it all together. At least, that's what logical people do.

You may not agree with T4T, but I see benefit out of it. It explains to me why the Left and the Right are so divided right now. It helps me make sense of the turmoil for now ... and what to expect in the future. I expect widespread austerity being forced upon us. It doesn't much matter whether it comes via hyperinflation or deflation. Mathematics show that the expected SS outlays cannot be met. Wouldn't it be better to do as Uncletommy has done and live well below your means before it is forced upon you? I've done that since I read T4T (because it made sense to do so.) I find enjoyment in simple things that don't cost a lot of money. Time is much more important to me than money.

It's motivation that drives results. So a wind or rain changes the direction of a projectile. Are you just going to admit defeat, or are you going to compensate and try again? Dr. Guarneschelli's idea that we can't know it all leads to the idea that we only had one arrow in our quiver. Even if the battle were lost, the motivation to defeat the enemy would still be as strong. Perhaps next time, we'd show up with more arrows.

Getting back to SS. You have a difficult decision to make. Nobody can make it for you. If the system lasts for another 50 years, you'd be smarter to delay the benefits. If it dies within a dozen years, you'd be better taking it ASAP. That's what the math says. It gets complicated by your personal situation. Do you hate work enough to end it all? Are there other avenues open to you? What do you want to do in retirement? Why do you want those things? It is important to ask yourself how important your bucket list is to you. If it is important, then plan accordingly. If it isn't, then it doesn't really belong in your bucket. That's the bottom line, best advice I can give you. (BTW, my bucket is completely empty. Think about how freeing that is.)

newsbuoy wrote:

Can preditory capitalism avoid fascist (or other) totalitarianism?

I don't have an answer for that. It is a valid concern. Social programs such as social security weaken the individual and strengthen the government. If people didn't have social security to rely upon, they'd have to have been responsible for their own retirement. Profligacy would lead to a delayed or diminished retirement. As I stated in an earlier post, the vast majority are financially woefully unprepared. What are those folks going to do if TSHTF? Their options are limited. I can imagine that a sizeable number would vote their pocketbooks for more benefits. Who knows if they'd even consider the long term consequences? A charismatic despot could easily convince the masses that she/he is their best choice for a secure future.

It happened in Italy, Germany, China, and Viet Nam during the last 4th Turning. At the same time, we got FDR who ushered in SS along with lots of government alphabet agencies to combat the depression. (Did those programs solve the depression or just prolong it?) Although you think T4T basis is bunk, you should look at each of these country's histories to see how these totalitarians rose to power. The playbook has already been written. The times are right for a repeat. Why else would you be concerned about it now?

Grover

QQQBall's picture
QQQBall
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Tech guy

If you are coreect about SS, then there will be less retirees and no labor shortage. Your thoughts are contradictory

acesovereggs's picture
acesovereggs
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My 2 cents

For extremely in depth analysis of when to take SS I would suggest reading articles here:

http://www.danielamerman.com/

My personal opinion is benefits won't be cut (too politically unpalatable) but your check will be able to buy a cup of coffee and a loaf of bread. 

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Good Link

acesovereggs,

Thumbs Up from me! Thanks for posting that link to Daniel Amerman. While reading Amerman's piece, I kept wanting to copy and paste paragraphs for illustration purposes here. There were simply too many to include. I really enjoyed his entire write-up. Here's a link to his Social Security article http://www.danielamerman.com/va/BenefitAge.html

My simplistic spreadsheet only considered the total dollars expected to be received at each age of initial benefit acceptance. Amerman used a similar analysis for his initial condition. This is the scenario that main stream media solely reports. It hides a host of chicanery that makes analysis all the murkier. The more issues he incorporated into his analysis, the more advantageous early withdrawal became.

It is impossible to know all the changes that will come down the pike. All we can do is ascertain the conditions, project what changes should be required to overcome our predicted obstacles, and decide the best personal course of action to take. The murkier the crystal ball, the less likely the eventual reality can be predicted. Nonetheless, take your best shot and live with the unexpected consequences.

Grover

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acesovereggs
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Real inflation

Amerman uses 3% as the inflation rate.  So if a more realistic rate is used (shadowstats), it is even more advantageous to take it early than what he states.  

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DennisC
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Ditto from me

I "second" Grover's comments...thank you for that link as well.  I've read a bunch and this seems to be (at least to this dummy) one of the best analyses I've seen so far.  Now, if we could just know when the bus is coming as we step off the curb, estate planning would be much easier, right?

https://www.fool.com/retirement/general/2014/09/21/why-smart-people-take...

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