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The trigger point for me is that, the moment I feel I need to draw from principal (not cash or dividend income alone) that is when I need to apply for Social Security.
My 90 year old Father (Seven children) still regrets he took social security at the age of 62 to go along with his pension. I always tell tell him relax Dad, everyone has to make their own decision about when to start taking social security. My 88 year old Mother has no regrets as she waited until age 67 to start taking social security. Both parents are in great health (I've seen their medical lab results) and are still walking and driving their car daily.
Everyone has a different finacial situation and a story to tell, totally understand that. My decision to wait until FRA or 70 is based on my glass being half full and not focused on my forecasted death. Social Security is one of a few retirement income sources I'll have available. It's all about one's lifestyle -- needs, wants and desires. Trust me -- Social Security isnt going anywhere.
That's why the bucket strategy works. When you have a cash bucket to bridge you to 70 you could care less what the market does. I did it in two 4 year stages. I first wanted to get to 66 then reassess my situation, health wise and financially. Then I went to 70. Because my benefit has more than doubled in those 8 years I can live on my SS check alone. My IRA took a hit this last year but that meant I could move more assets into my Roth IRA. Enjoy watching the market downturn and putting those assets in a Roth IRA. Any money you need in 5 to 8 years should not be in the market. Great video Devin.
@@PatriotSteve You can make that point any time about the market. What is encouraging to me is that fools like you are concerned about the market dropping 40%. Leads me to believe the carnage is over.
Great video. Very few people account for market down years. SS provides a steady monthly income even in down years. And you can pass your savings to your children, SS stops the day you die
I’m taking SS as soon as I can! I paid in, I’m getting it out! But I’m lucky. I’ll have a pension, military retirement and 401 assets to help out. Plus, I’ve set my “exit strategy “ up about 10 yrs prior to retirement. You’ve thrown out some good ideas to ponder for retirement. Thanks for the info.
Devon ,thank you for all your vids regarding Social Security info. I claimed at 62 and your advice was very helpful .I have a minor child and certainly did need the money. I was receiving my pension as of age 55,from my work as an RN. The monthly pension is a blessing ,and enabled me to meet my obligations,but not save much.I was in a great deal of debt at the time,due to life circumstances . Claiming at 62,became a game changer. The combo of my pension and my own Social Security benefit enabled me to become virtually debt free within 9-10 months and am able to save significantly.The dependent benefit was paid directly to my ex in my child’s behalf.
@T Raybern to make such a definitive statement like that is stupid..if here life expectancy is 71 would you say that? Sometimes single parents max their social security only to spend all of their savings and then die, and have now left ZERO to a child... But hey, you know it all T Raybern
@T Raybern With a minor child the math is different. My daughter will be 14 when my husband is 62, so for four years he would get 1.5x his benefit. I haven’t done the math yet, but the break even age becomes later - and with his prostate cancer might be a better choice. Then we would wait until 70 for mine to hedge our bets.
@T Raybern Who cares what you think Dummy? I was being forced out of my job,you jerk off! You’re not me or know my life circumstances. I got out of debt within 9-10 months doing what I did .Say this to my face on the street.Thank you for showing me your stupidity.
@@sheilaa1333 thank you for the support . This is how claiming Social Security at 62 worked out for me . The net amount of my own Social Security benefit, plus dependent benefit for my daughter, comes out to 1.13 times the full pre-tax amount at my full retirement age. So I came out ahead claiming at 62 . Who cares that stupid clod commented to me..
I really enjoy your content, Devin! I suddenly became a widow in 2020 and plan to retire in 2026. Retirement planning for "one" on my own has been daunting, to say the least.
The whole system is designed so that the AVERAGE Social Security recipient receives about the same amount in total benefits regardless of whether he/she takes it at 62 or 70. Less for longer, or more for shorter. Most people will get about the same total amount regardless.
This is a huge question I am working through right now. I will be retiring in 3 months, at 62 1/2. I am working through whether to take SS early, or wait until FRA, which was always the plan. However, with the markets down as they are, and probably going down more, taking SS and leaving the money in the market, for a HUGE return as soon as the market recovers, looks appealing.
Can’t agree more with this video. I’m 2years into retirement and have not had to touch my savings because I claimed SS at 62. My benefit combined with a p/t job allows me to weather-the-storm is this down market.
One item not discussed in this very good analysis is the impact of COLA increases on delaying taking social security. If inflation stays high, Cost of Living Adjustments will reduce the break even duration for the delay in taking social security later up to age 70. However, I believe Mr. Carroll is right. The timing decision comes down to what you and your specific situation can withstand and live with over time. Peace of mind pays infinite dividends.
I am amazed by what I just saw. I have never seen the SS analysis presented in this way. Even my newfangled retirement software which is professional grade does not have the capability of this kind of real world analysis. Kudos to you for this work. Instant new subscriber!
Waiting until 70 instead of taking SS at 62 you have to live until 80 & 4 months for the gamble to pay off. Waiting until 70 instead of taking SS at 67 (FRA) you have to live until 82 & 5 months for the gamble to pay off. If you expire before than you would have been better off (received more SS) if you just started SS earlier. There are 31 months between 82&5 and 85. So delaying SS from FRA to 70 you would only receive that extra 24% (8%x3) 31 times. Say your lucky and you get $3000 a month at FRA, and live to 85. Waiting to 70 (that extra 3 years) will only pay an additional $22300. So this whole "waiting to 70" thing really depends on when you will expire. With a spouse, the bet might be safer, but still a bet that one of you makes it to 85 to see that "jackpot". If you can, work till you reach FRA and take SS at FRA. After that, work if you have to. While focusing on that 8% a year to increase your payments, people seem to forget the money they didn't get because of waiting. Do the math and find those break-even points.
@@RR-jl9si and when you factor in the 20% decrease to social security payments that is likely in 2035 - it really makes postponing SS a bad bet. Get it while you can - for me that looks like starting SS at FRA.
And regardless of COLA's, the current and constant inflation is almost never taken into account. Doing that now with spousal benefit. Wait 18 months from now to get 50% of working spouses SS = LOSE $33,000+inflation loses. 6% more in 18 months goes backwards even more with 8% to 15% inflation. Creating a small spreadsheet to check breakeven points for each month's difference in waiting(each month wait = 0.3% to 0.4% increase of spousal multiplier).
@@stewartmillen7708 Absolutely if you're gonna live past 82&5 months. But if your genetics or health cause you to expire before then, max (total SS received) is achieved by starting SS earlier. Starting at FRA strikes a balance between the bet that you will live past 82&5 vs getting the most SS before you expire. If your FRA benefit is $3000, and If you knew you were going to live to 100 - waiting to 70 would pay an additional $151,920. Even waiting to 90 pays an extra $65,520. For each month before 82&5 that you expire you would collect $-720 (less) compared to just starting SS at FRA. Of course this all assumes no inflation and SS benefits are not reduced in the future.
I was going to wait until 66 to take my SS but jumped on it at 63 1/2. I had plenty of money so I wanted it early. I actually cashed in my 401k over 5 years from 55, I retired at 53. Took 200k of that and moved it to Ecuador, bought a condo, and placed 70k in high yield CDs at 9% which I still have. Still have 100k plus here and pensions and investment income of 75k a year. And I bought a brand new house last year. Can't overthink anything, if you do, you will never retire. I will never run out of money and if things get tough here, I will just go back to Ecuador full time.
Devin you are spot on, in this show. Burning through savings rather than tapping a little more (SS) to get over the humps, can be devastating to one's nest egg.
I delayed receiving Social Security until age 70. I used my $117K Trad IRA up from age 64 1/2 to age 69 1/2. I only have two months left in that IRA. I will start getting my first S.S. check in Jan, 2024. It will be about $4,100/month. If I had taken it at age 62 it would have been only in the mid 2000s. I can live on $4100 plus my $675 FERS. So that took the pressure off of me to excel in the stock market. For me waiting has been a stress reducer.
@prairiemark4084 I am currently doing the same thing as you did. I quit working at 65 and I am using my IRA of very close to the same amount as you had. Having only $120,000 in retirement funds is not nearly enough to generate a monthly dividend check to supplement the SS payment every month that I could have gotten at 65. Buy using up the IRA money in order to delay taking SS until 69 1/2 or 70 will ultimately give you a significantly higher SS monthly income (for the rest of your life) than you were drawing out of your IRA for those 5 years. And at that point with SS being your only income, you will be paying zero - as in absolutely nothing - in Federal or State taxes. That in itself is very nice. That simply means that your gross SS income is also your net income.
Retiring in 20 years? Due to inflation, you may need upward of $3.6million to maintain your existing lifestyle, with the ongoing effect of high inflation, lower forecasted stock market returns or value, and stagnant wages. Achieving a secure early retirement could be more challenging than ever before.
An obvious way to invest for a recession is to buy shares in businesses that are likely to experience steady demand even in a downturn. Typically, those are consumers staple, utilities and healthcare companies. But of course, such decisions can’t be made by an average joe, a financial advisor is highly recommended in making this decisions..
The sequence of return is where a lot of TH-cam channels that deal with money get wrong. You have to define where success is and don't think you have to gamble to get the most money. With gain always comes risk. You want to have enough with as much certainty as possible.
Couples also have to consider that extra $330/month for Medicare Part B premiums that start at 65 if they plan on delaying taking SS until age 70. That's a significant extra bill each month for many folks and that needs to be considered in any plan to delay SS benefits.
it doesn't matter when you start SS, that monthlyh bill will either be there for you to pay each month, or it will deducted from SS - no difference in net income
@@MrALBOBALBOB Delaying SS benefits until 70 means you'll be drawing down on your personal savings all the faster to cover this monthly expense starting at age 65 to age 70... and as pointed out in this video... doing so at a time when markets and returns are low... like 2022 means it takes all the longer to recover.... if at all. Folks need to take this monthly bill into account if they retire prior to age 65 and are living on retirement savings and waiting to collect SS at age 70. An additional $330/month is a substantial monthly budget hit for many people.
@@kbbkbbkbbkbbkbb I'm in fine shape too... but for many folks that don't have pensions or were forced out of the job market earlier then planned and are trying to ride it out until 70 for those bigger SS checks the added expense of Part B premiums need to be part of the calculation of their budget. I have a couple of good friends in that situation right now and the additional added expense of Medicare premiums and a down market (and smaller 401k nestegg) is making them seriously reconsider their plans to wait until 70. Unfortunately any plan (or budget) that involves variables such as investment return and, as we're dealing with right now, serious inflation is difficult to project accurately. And, as this video pointed out, the need for additional drawdown on savings to cover Medicare premiums or higher living expenses due to inflation when your nesting is down can have a very serious impact on your longterm budget and potential retirement income and corresponding lifestyle.
Figuring $3-400 per person per month for medical costs is necessary whether you are taking SS or not. If you are retired that is what most will pay. ACA plans are about the same cost. If working then you may have employer sponsored insurance which might be a bit cheaper. We budget $1000 a month for healthcare premiums and costs for the two of us. I’m still on ACA and my wife is on MC. Whether you delay or not it is a budget item. Whether it comes out of you check or your bank account it’s the same. For many, a good strategy is to delay the high earner check as long as reasonable. My wife started at 63, I’m targeting 70. That strategy will allow SS to cover more than all of our needs. We are drawing down the fixed income assets in a down market, not stocks. You won’t need fixed income after getting all your SS in place That minimizes sequence risk
@@randolphh8005 Good plan. Unfortunately there are many folks out there that aren't in the same shape financially that are taking a big hit with inflation and investment returns right now and don't have a sizable nest egg to ride it out. I'm fortunate to have a defined benefit plan and enough of a nest egg in savings, investments, and other deferred retirement accounts that it isn't an issue for me currently.... but there are many people that aren't as well situated that need to carefully consider the cost and possible impact the economy will have on them between the age of 65 and 70 if they choose to try to delay SS benefits. The low inflation environment of the last decade pales in comparison to what we're seeing now and has been a huge wake up for many folks! Ultimately it's a very individual choice based on a lot of personal factors (health and family longevity) as well economic variables (investment return and inflation) that may or may not be within your control. One last issue is the idea of drawing down on your own assets rather then taking your SS benefit between 62 (or 65) and 70. The larger SS payments might be nice at 70... but you can't pass them on to your kids or grandkids. Living on your SS benefits (that you've worked for and earned) as soon as you're eligible and saving your nest egg has its good points as well. But once again it's a personal choice based on many factors.
My mom paid into social security for years and died at 62 after collecting two checks! So she didn't come anywhere near getting what she paid in! Its clear that this is a highly personal situation and all factors including health and family genetics need to be included in your calculations!! You just need to be aware that unexpected death is a possibility!!
Can’t really predict health though. You could be in excellent health today and have great family genetics today and die of a heart attack or in a car accident tomorrow. You’re gambling and the government is the casino. The house always wins.
Sorry for your loss, my Mom passed at 59 and never collected a cent. The way I deal with that is Social Security is for those who are fortunate enough to live a long life and don't have to live in poverty. There are no guarantees in life.
Sequence of return risk only impacts you if you withdraw from assets that have declined, primarily stock. If you don’t sell and have enough other assets to let them recover there is no sequence of return risk.
For me it was better to start drawing at 64. I got 14,400 a year which totals 86,400 over 6 years. If I waited till 70 I would've lost $86,400 just to get about $300 a month extra. I'm glad I chose to draw SS early.
Agree. I used the same rationale and also began taking at 64.5. If I am fortunate to live to 96, the cumulative sum from 64 to 96 compared to 70 to 96 is the same. 70 would be a higher monthly income, but no better with respect to the cumulative outcome. Additionally I preserve my investments. Why draw down on investments and pay taxes at the state and federal level for a higher monthly SS benefit? Taking SS now allows my investment portfolios to hopefully rebound and grow another 9 years and defers taxes until I have to take the RMD at 73.
Another consideration when you move the income from 410k withdrawals to SS, there can be a big tax saving since not all of SS is taxed and often avoids State taxes entirely. .
Very good points Devin. I am NOT filling for SS until I stop working or when I can draw without penalty while I still continuing to work. Thanks for all you do posting these helpful videos. I watch when I can but cannot watch all.
After 40 years of full time employment not including working on the family farm during childhood I was exhausted by 60 but kept working til 65. I still had too much debt at 62 but by 65 everything was paid off and I’m finally able to save.
I can relate to your first sentence (farm raised), but fortunately I was able to retire at 55. No debt and fully vested pension. Sure, my payments are lower than if I waited, but I had enough of work. I'm not lazy. I'd rather focus on my priorities, not that of an employer. No one seems to mention that your physical agility and strength decrease with age, limiting your ability to enjoy an active lifestyle, regardless of genetics or how well you've kept in shape. These things cannot be measured or plugged into a spreadsheet. Your body is your vehicle through life. What do you want to drive? I will be taking SS as soon as I can, saving my investments for later.
@@timsilva1944 I advise everyone to start out with the intention of getting a home you can pay off in 15 years, drive autos until you no longer trust them to get you home safe. That way if and when a crisis hits you’ll at least have reliable wheels and a roof over your head. Always question yourself “Do I need this or do I want this”? Debt is a big no-no. I’ve learned that what you think is a secure job just might not be the case anymore and you’re told due to budget crisis you’ve got 3 months but your bills keep coming. Stressful situation that destroys the quality of your life. I’ve never felt more peaceful than the day I made my last house payment with no other bills beyond $500 living expenses. My pension and SS is allowing me to save as well as travel and catch up on home maintenance that I couldn’t afford before retirement. You don’t have to be wealthy to retire if you have no bills and realistic expectations for your retirement plans. I moved back to the farm in the 90s and have 500 shared acres to wander around on with extended family. Life is good! Retire as early as you can and earn money doing what you enjoy.
Outstanding information 👏 Mr. Carroll concerning about this issues which are very important 😀 ...., God bless you 🙏 and your TH-cam channel ..., I hope you can help me with my situation ...,
If you’re facing large RMD’s and do not need them due to other future sources of income, perhaps a pension, SS, or annuity… and for whatever reason cannot easily do Roth conversions (perhaps you’re using the ACA credits for healthcare and or have kids getting financial aid in school), drawing down your 401K/IRA a bit might be the smart thing to do. Everyone’s situation is different.
I am so glad to hear someone talk about risk in this way. We hear nothing but how the stock market is a long term investment and if you wait long enough it will always pay out, I have found that to never be true. If you happen to need it during a high year, you win, if not, you lose and you lose big. To hear honest talk about how things can actually be so bad that you may never be able to recover. This is honest and I appreciate someone saying it.
Sequence of returns can be avoided with a decent cash position to get you through those couple of down years. If you have the cash, no need to touch the portfolio as it recovers.
A lot of us simply can't afford to delay taking SS. It is all the same amount anyway, with it just a matter of how many years the money is distributed. The "experts" don't take into account many of us need to take it, plus they don't account for rampant age discrimination in the labor force, which can hinder working longer. A lot of us took it at 62 and are still working at around age 70, with no end in sight.
There is no one size fits all solution. Unfortunately, financial planners typically rely on retirement software that doesn't take into account variability in returns of a portfolio. Lifestyle determines a lot when it comes to making this type of decision.
My husband and I both work F/T. My husband, turning 61 in a few week, plans on going to part-time at 63 yrs of age and has saved enough cash to fund the difference in his pay for those 2 yrs + health insurance costs until 65; then he plans on taking full retirement at 65. I was going to retire at the end of 2024 when I'm 65 but now not so sure. I might work another year until 66 yrs and 3 months. My FRA is 66 yrs, 10 months. As I get closer to my retirement goal age, I'm finding it difficult to make the final move. We aren't wealthy but we should be okay being retired at 65, but I'm nervous now about ending those regular paychecks.
Whether it’s a good idea to delay collecting SS depends on your life expectancy, among other things. The example of retiring early, a bad market, and delaying SS by burning through investments is an extreme example of why to pull the trigger early on SS. It’s an individual decision that is different for everyone
Let me tell you this as a mathematician. Simply, taking SS at 62 and losing 30% of the total compared to taking the full amount at 67 will surprise you. It will take the person who waited until 67, 18 years to catch up to the earlier SS taker. Can you be sure you will be alive at 85?
@Acrobizer 123 Are you kidding? Many Seniors (over 60 million in the US) are already broke at 65. With my background in statistics, I'll tell you that maybe 1/2 of 1 percent might still be financially viable by the age of 75! One reason is that unless you have put the maximum into an IRA even that won't last over 7 years!
If the market is down big right after you turn 62, then you can change your plan and apply for SS. Just because you plan on waiting to take SS, doesn't mean you have to stick with it.
Great Video (another one actually)! Of course you already know there are options for one filer to file early (i.e. age 62) and the other file later (i.e. age 70) or any chosen ages in between. Also Taxation wasn't considered which makes a difference if you are drawing from a Traditional IRA or a ROTH IRA. Things are never simple and it would be a challenge to show very many permutations in a short video (And we all appreciate your short videos). I retired 10 years ago at age 56 and I plan to Draw SS at age 70. I'm currently drawing SS survivor's benefits on my late wife's SS disability survivor benefit (since I turned age 60). I'm living on that, a small corporate pension. I draw the remainder of my living expenses from my IRA. My annual IRA withdrawals amounts to about 3% of my current IRA balance so I won't run out of money before I turn 70. I'm in a 24% tax bracket because of my current (new) wife's working salary. BUT since 2022's hit on my IRA balance (about a 20% drop), I've been questioning if I should draw my Full SS benefit now (I'm at my FRA now).? So this video was very timely! Thank You Devin.
What difference is it to die with $1million remaining vs $250k, they both = a win! Also, have a cash acount large enough (5 years is our plan) to cover down market years so as not to make those invesment withdrawals if your life depends on it later on. We plan to burn down our tax defered accounts prior to taking SS at 70 and reduce RMD's as much as possible and eliminate or minimize taxable SS income later.
Hanging it up 58. Focusing on getting into even better physical shape. Drawing down 401k to the Standard Deduction yearly to bridge to age 62 filing. Since wife never contributed, she will get half of my reduced amount. Will continue to draw down 401k at that point using Provisional Income calculation in order not to take a tax risk. The key is making physical fitness the main "retirement hobby"...maintain lean muscle, eat well, get plenty of sleep. Live strong and go out the same way.
What if I set up a bond ladder for those 8 "gap years" years from 62 to 70. Fully market invested the rest. Each year that the market is up (or on track), I add to the bond ladder the deficiency of my spend rate and Social Security. If the market is down, I don't. Good video by the way!
My spreadsheet seems to say that taking SS early is the best thing to do if you have significant savings -- and working until age 70 is the best thing to do if you don't have significant savings.
My official retirement age is 67. I'm considering filing for Medicare and SS at the same time, which would be at age 65 (unless they change the rules to balance the budget). I don't want to wait until 70, because I may not even live that long. I guess I will have to see how my health is when I get near to being able to collect.
Also you may take SS the year you reach full retirement age. With the earnings allowance of of $56,520 2023. It may be to your advantage depending on your birthday and earnings. It pays to do the research.
Always insightful. Thanks Devin. 1) illustrates that you should have a multi-year emergency fund sufficient to spend down during down years. 2) Does not account for the tax benefits of lower social security taxes vs. ordinary income. 3) Social security delay allows for better return since it is based on life expectancy from the 1980's. So, today's life expectancy is longer resulting in more money from delaying. 4) The number one reason to delay is to increase survivor benefits after death of a spouse.
By far, the best video on retirement-distribution strategies for applying to real world situations. It would be great if you could create and publish a calculator that would take inputs and run a simulation based on past market returns. You could charge a subscription fee, get rich, and retire early!
Geez this topic irritates me for some reason. Sooooo, social security was and is a TAX (FICA TAX). You pay it when and while you work (regardless of your age). When you are eligible you can get a benefit from the social security SYSTEM. While the calculation is based on the tax you paid, it is not YOUR MONEY you are getting back. It does not work like, nor is it like, your personal 401k (or equivalent) retirement plan. The amount of tax you paid is not housed in some special place for you to access and it's only YOUR money. Far too many people think of it that way and unfortunately what that leads to is the 'it's mine and I want it and will take it as soon as I can get it' mentality. Personally, I have looked at what I need for income based on my expenses, determined that later in retirement (age 75 and later), my taxable retirement account balances are too large and I will end up paying a higher income tax amount than I would prefer to, plus pay a higher Medicare insurance premium because of that higher income. Therefore, I will spend down the taxable retirement account balances now, convert as much to Roth IRA's as I can (so that later in life I can withdraw that income tax free and use as much as I need to without it impacting my income taxes or Medicare premiums), and also simplify my financial life by basically having social security income (which won't be taxed due to my overall taxable income level), simplifying my income tax prep, and not compromising or limiting my life until I get to that phase (because I have sufficient taxable retirement monies to live on between now and when I take SS at age 70). Long story short is have a plan, understand why you are taking SS and how it fits in the plan and take it when it makes sense for your plan. Not on some idea that it is your money and you need to get it back before you die, or worse some arbitrary breakeven analysis that tells you if you don't get XXX amount back in your lifetime you LOST the game. It's not a GAME.
Here's what I did. I retired at 62 (last year). I took out about 3 years of money from my portfolio and put it into a cash fund. I plan to claim social security at 65 and also will start receiving a small pension from my previous employer. So, for some people it might make sense to take SS somewhere in that window between 62 and 70.
That's what I want to do but at 65 ... Take out 2 years or save 2 years of cash and live off it till FRA (67) ... May covert some IRA to Roth during those low tax years .. or I die tomorrow!
I arrived at this conclusion in an intuitive review of the options. The file early solution seems safer all around. I appreciate the in depth analysis regarding experiencing down markets on the first couple of years. I've seldom seen this vital level of detail in the decision process. I actually just started social security last month at age 63 and I'm satisfied with the decision. The early file results in a portfolio drawdown rate of 2%.
Consider several friends of mine who took SSI at 62. They are in their 70s now and must work because the social security funding was not large enough to afford their minimum needs. That’s the thing to avoid. Other than that, there is no mathematical difference when you take it.
The idea that people get an "8% guaranteed return" if you delay SS until 70 is absolutely false. First, if you delay SS, you have zero return until the age of 70. Second, just because the SS payout is 8% higher for each year you delay, doesn't imply an "8% return". Two totally different things.
I took my social security at 62. Between inflation and the amount I would have gotten, it ain't that much difference. But it's really starting to change is my health. Stuff I could do it in my twenties I don't even think about now. Each day each week each month my health slowly is declining. You can't get that time back. I'm able to do things now because I don't work that I couldn't have even thought about.
I am going to hold off on SS as long as I am only taking gains from my portfolio. If there is a bad year I will either go back to work or turn on SS to keep from drawing down to anpoint that is unrecoverable.
Works if your income is in retirement assets. If you also have income outside of retirement assets there is a significant potential of an income tax hit up until you hit full retirement age.
For me, I don't have enough retirement savings to last very long. My father lived to 90. I might also. So my only choice seems to be using what retirement funds I have to get me to 70, then start claiming. Assuming social security exists and keeps paying, that should give me enough for however long I live. Retiring at 62 wouldn't.
We have sorta done both. My wife and I had close to the same income. I am 2.5 years older and filed at 62. With my pension and SS we have not withdrawn much from our investments. We are letting my wife's SS go till FRA or 70 depending on the market and expenses.
I intend to file for the first day eligible. Reason being most of my investments will only be reaching critical mass and really need those last few years to compound. Add that we have a shorter life expectancy in our family, and there is no mathematical benefit to waiting it out.
I will retire in August at 65, and I only have to cover 1 year and 10 months with money from my IRA to get to full retirement age, plus I have a pension and an annuity.
Good insights. One thing to consider is if you think of SS as an annuity how much is tht annuity growing each year of delay? So, if your portfolio drops by $200k waiting to 70 but your SS annuity goes up by $500k you really gained not lost in total
I am taking disability at age 63 from private insurance, and then the state of California. When should I switch to federal social insurance disability?
Everyone's situation is different, and there are a lot of variables that need to be considered when attempting to determine the best time to start taking SS benefits. Further, some things just can't be accurately predicted short of peering into a crystal ball (assumptions can/will change) meaning there will not be a 100% perfect answer. My commonsense advice is to take whatever time is needed to educate yourself on this subject (there's endless amounts of info available on the Internet) so you can make a more informed decision taking into account the unique circumstances of your situation.
I wish you could run a plan of retiring at 65. between 62 and 65 is only 3 years. almost 500 more per month for me. i wonder if the results would be similar to the one you showed.
I retired early at 62 and moved to Thailand where I can live very well on my SS and savings. No way would I wait , I’m from Hawaii and felt the longer I stayed, the deeper and deeper hole I was digging, plus the insane cost of healthcare insurance and healthcare. Also, my constant stress and anxiety is gone. The best decision I ever made.
@T Raybern WHY would that be? My own retirement continues to accrue to age 70, at which time I take that or continue taking my late husband's, if higher. A win win!
It’s all about opportunity cost. I have a 7 figure 401k plus a pension. My pension and social security cover my cost of living plus I have enough left over to invest.
Ok i have a question i haven't been able to find the answer anywhere i hope you can help me if someone is collecting ssdi and say for example they have two children born out of wedlock who is the one that gets hit with the income at the end of the year when it's time to file taxes what are the rules and laws regarding this
If you have a pension, taking SS early is much more attractive. I am planning to start SS at 63 1/2. That way, my pension and my SS will be above the minimum.
Unless you have no choice, never kill the goose laying those golden eggs for you. Savings are not the same as invested funds in a portfolio. If you are coming up short, realignment of your investments are in order to get better yields. There are some great ETF's that pay monthly dividends over 10%.
One option would be to set aside the money from 62 to FRA in a money market account so that money isn't affected by the market and leave the rest in the market to go up or down. But you would need to factor in the cost of healthcare and that is big variable, so you would need to set aside even more into your money market on the front end. I'm not saying this is a good idea, but is another option.
@@ws775 You withdraw the cash from the money market to live on while your stock portfolio goes up or down. That is you would need to move money out of stocks into the money markets to an amount needed to cover all expenses until FRA before you retire. Then market declines have no impact.
Thanks, food for thought, I'm going to rework my numbers in consideration that my ss will only be 85% taxed vs withdrawals from ira is 100% taxed. Unfortunately most of my savings are in an ira that is 100% taxed as regular earnings
I retired 2 months before my 63rd birthday, and took SS in the new year, January. Just so I don’t have to pay taxes on my Ss income. I say take your Ss before the government changes payment amount. They will probably lower the payment as more and more people retire.
In a panic I purchased an annuity along with other retirement options. I never drew upon it and it matures this year. I can reinvest it without penalty or taxation. Pretty much I lost money and sure enough the “company” made money with mine. 😡
I'm 67 now.... my FRA was at 66 1/2... last year. My goal is to live on SS alone.... Im not there yet. Inflation keeps beating me up, and COLAs cant keep up with that inflation... I seem to keep falling behind each year. It's becoming more and more obvious that I'll have to delay starting SS at least another year. Doing the math... with an annual average COLA of 2.5%.... if you add that COLA percentage to the average 8% percent "SS delay" increase each year..... By waiting, that's about a 10% increase total each year, for the next two to three years until I hit 70. So that may put me ahead, of that inflation curve! I can understand why people wait until age 70 to file for SS. The only things really unknown seem to be.... How long are you going to live? How much do you need to live normally every year? How much will typical Health insurance costs go up each year? And how much is it going to cost you to STAY healthy? (and STAY alive, too!) Those are things that you'll probably never be able to plan for. So if you can be successful to plan and prepare for all that.... then I think you're closer to a happy retirement life.
A simple but effective bucket strategy would have the 8years of bridge money in a cash account(bucket#1) 8years of income at 84k annually would be 672k in a safe cash bucket And the remainder of 328k(bucket#2) will be invested in equitys. If you have the two consecutive down years of -21%and -16% your equity bucket will be reduced to 218k and your cash bucket will have 505k for a total portfolio balance of 722k( after the 2 consecutive down years). By following this strategy you would have survived the consecutive down years with an ending balance of 722k vs the ending balance of 500k in this video.
Best financial advice I've seen recently! In addition, incorporating home equity into a retirement withdrawal plan can help smooth out some bumps. Establishing a reverse mortgage line of credit gives flexibility during the sequence of returns risk event. Immediately following a down year, don't pull from the nest egg, let it recover. Draw from the reverse line of credit instead, it's flexible. When the market returns to positive territory, then stop the reverse draw and go back to the nest egg. The returns on your portfolio will outweigh the interest expense on the reverse, there are published studies on this. You can also make periodic payments on the reverse to pay down the interest as many people do. Never thought I would see a SORR video made incorporating social security, hopefully this will challenge the conventional wisdom thought process. Well done Mr. Carroll!
Taking SS at 62 not only takes pressure off your IRA, you receive money that you otherwise would not by delaying until a later age. In my case, I decided to retire at 62. I receive $800/month less than I would by waiting until 67. However, I will have received $114,000 in that five years whereas I 'lost' $48,000 in the monthly difference. I have a substantial IRA so between that and SS we could afford to pay the bills and live the lifestyle we have been living. I also took into account that as we age, we will most likely slow down and will require less funds for activities, thus living with the lower SS is no problem. I've seen too many people try to maximize their later years of income only to die or become incapacitated before that came to fruition. What good is it to wait to retire and end up in a wheelchair before you can fully enjoy those later years together?
Hello Devin I am currently collecting my SS a year now I will be my full retirement age in April of next year 2024 I am single can I collect my X wife SS next year she is collecting disability SS and is remarried I meet all the requirements having been married 10 years and divorced for two or more I have never remarried can I stop mine and take hers when I am at full retirement age next year please advise thank u
Is it accurate to say that social security funds sent to/for minor children who have a living parent who is receiving social security do not have to return unspent social security money not spent on them when they turn 18 and are allowed to keep the funds if the funds were invested for them in an account such as a brokerage account if the account is under their names alone and no one else’s name?
Be careful waiting, and look out year to year for the "Hold Harmless Provision". You could end up paying more for Medicare while waiting to collect SS.
In that retirement scenario, You forgot to factor in the couple would be losing $446,400 of SS income, which will take them 6 years to recoup that if they wait until 70 to retire.
What are your thoughts about rolling retirement funds into high dividend yield stocks (like O, MO, etc 6% yield) and ETF's (like JEPI /JEPQ 8-9% yield) and living on the dividend payments? Maybe have 15-20% of portfolio in a basket of individual high quality stocks to sell out of the money covered calls on to generate income during high market volatility periods? Aiming to retire in my late 50's off of investments then pull SS at 67.
My girlfriend is 74yo and has not applied for her ss. She said she is using like a savings account thinking she will get all that backpay from when she turned 70. Is that true?
Oh No... please tell us you Got her to Contact Ssa.. like others Said... She lost years...of $$$ by Not starting @70... her Savings Would have been money in Her Bank acct... I Believe you Can request a 6 month retro pay but That's It... So approx $3000/mo × 4yrs =..... 😮.
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The trigger point for me is that, the moment I feel I need to draw from principal (not cash or dividend income alone) that is when I need to apply for Social Security.
EXACTLY!!! Nice point!! I know this is the best for me: Even if it goes to my 70. thanks for your post.
My 90 year old Father (Seven children) still regrets he took social security at the age of 62 to go along with his pension. I always tell tell him relax Dad, everyone has to make their own decision about when to start taking social security. My 88 year old Mother has no regrets as she waited until age 67 to start taking social security. Both parents are in great health (I've seen their medical lab results) and are still walking and driving their car daily.
@vistahawk1688 Does he also regret that he didn't buy MSFT or BRK or AAPL or GOOG?
Everyone has a different finacial situation and a story to tell, totally understand that. My decision to wait until FRA or 70 is based on my glass being half full and not focused on my forecasted death. Social Security is one of a few retirement income sources I'll have available. It's all about one's lifestyle -- needs, wants and desires. Trust me -- Social Security isnt going anywhere.
I am seriously considering waiting until 70 also.Doing that,will give ma maximum social security,and also put more money in my 401k.
That's why the bucket strategy works. When you have a cash bucket to bridge you to 70 you could care less what the market does. I did it in two 4 year stages. I first wanted to get to 66 then reassess my situation, health wise and financially. Then I went to 70. Because my benefit has more than doubled in those 8 years I can live on my SS check alone. My IRA took a hit this last year but that meant I could move more assets into my Roth IRA. Enjoy watching the market downturn and putting those assets in a Roth IRA. Any money you need in 5 to 8 years should not be in the market. Great video Devin.
you putting money into the Roth doesn’t mean the market won’t drop another 40 percent.
@@PatriotSteve You can make that point any time about the market. What is encouraging to me is that fools like you are concerned about the market dropping 40%. Leads me to believe the carnage is over.
After working 40 or more years, determining when to take SS shouldn't be so complicated. Ugh. This video is helpful. Many things to consider
Great video. Very few people account for market down years. SS provides a steady monthly income even in down years. And you can pass your savings to your children, SS stops the day you die
I’m taking SS as soon as I can! I paid in, I’m getting it out! But I’m lucky. I’ll have a pension, military retirement and 401 assets to help out. Plus, I’ve set my “exit strategy “ up about 10 yrs prior to retirement. You’ve thrown out some good ideas to ponder for retirement. Thanks for the info.
Devon ,thank you for all your vids regarding Social Security info. I claimed at 62 and your advice was very helpful .I have a minor child and certainly did need the money. I was receiving my pension as of age 55,from my work as an RN. The monthly pension is a blessing ,and enabled me to meet my obligations,but not save much.I was in a great deal of debt at the time,due to life circumstances .
Claiming at 62,became a game changer. The combo of my pension and my own Social Security benefit enabled me to become virtually debt free within 9-10 months and am able to save significantly.The dependent benefit was paid directly to my ex in my child’s behalf.
@T Raybern to make such a definitive statement like that is stupid..if here life expectancy is 71 would you say that? Sometimes single parents max their social security only to spend all of their savings and then die, and have now left ZERO to a child... But hey, you know it all T Raybern
@T Raybern With a minor child the math is different. My daughter will be 14 when my husband is 62, so for four years he would get 1.5x his benefit. I haven’t done the math yet, but the break even age becomes later - and with his prostate cancer might be a better choice. Then we would wait until 70 for mine to hedge our bets.
@T Raybern Who cares what you think Dummy? I was being forced out of my job,you jerk off! You’re not me or know my life circumstances. I got out of debt within 9-10 months doing what I did .Say this to my face on the street.Thank you for showing me your stupidity.
@T Raybern You’re just a troll .I guess you were never very good at math.
@@sheilaa1333 thank you for the support . This is how claiming Social Security at 62 worked out for me . The net amount of my own Social Security benefit, plus dependent benefit for my daughter, comes out to 1.13 times the full pre-tax amount at my full retirement age. So I came out ahead claiming at 62 . Who cares that stupid clod commented to me..
I really enjoy your content, Devin! I suddenly became a widow in 2020 and plan to retire in 2026. Retirement planning for "one" on my own has been daunting, to say the least.
Please do a video on longevity risk. This is the one risk that most everyone seems to ignore. There are almost a million Americans in their nineties.
The whole system is designed so that the AVERAGE Social Security recipient receives about the same amount in total benefits regardless of whether he/she takes it at 62 or 70. Less for longer, or more for shorter. Most people will get about the same total amount regardless.
So true. A SS employee informed me of this information as you stated.
I wish my ex wife couldn't get a dime of my SS but she will. She should not get a dime of what I worked for.
This is a huge question I am working through right now. I will be retiring in 3 months, at 62 1/2. I am working through whether to take SS early, or wait until FRA, which was always the plan. However, with the markets down as they are, and probably going down more, taking SS and leaving the money in the market, for a HUGE return as soon as the market recovers, looks appealing.
Can’t agree more with this video. I’m 2years into retirement and have not had to touch my savings because I claimed SS at 62. My benefit combined with a p/t job allows me to weather-the-storm is this down market.
Thanks for the great video Devin. Five Stars & it's a Must watch video.
One item not discussed in this very good analysis is the impact of COLA increases on delaying taking social security. If inflation stays high, Cost of Living Adjustments will reduce the break even duration for the delay in taking social security later up to age 70.
However, I believe Mr. Carroll is right. The timing decision comes down to what you and your specific situation can withstand and live with over time. Peace of mind pays infinite dividends.
I am amazed by what I just saw. I have never seen the SS analysis presented in this way. Even my newfangled retirement software which is professional grade does not have the capability of this kind of real world analysis. Kudos to you for this work. Instant new subscriber!
Waiting until 70 instead of taking SS at 62 you have to live until 80 & 4 months for the gamble to pay off. Waiting until 70 instead of taking SS at 67 (FRA) you have to live until 82 & 5 months for the gamble to pay off. If you expire before than you would have been better off (received more SS) if you just started SS earlier. There are 31 months between 82&5 and 85. So delaying SS from FRA to 70 you would only receive that extra 24% (8%x3) 31 times. Say your lucky and you get $3000 a month at FRA, and live to 85. Waiting to 70 (that extra 3 years) will only pay an additional $22300. So this whole "waiting to 70" thing really depends on when you will expire. With a spouse, the bet might be safer, but still a bet that one of you makes it to 85 to see that "jackpot". If you can, work till you reach FRA and take SS at FRA. After that, work if you have to. While focusing on that 8% a year to increase your payments, people seem to forget the money they didn't get because of waiting. Do the math and find those break-even points.
Also, you may leave your Retirement account as an inheritance but not Social Security.
@@RR-jl9si and when you factor in the 20% decrease to social security payments that is likely in 2035 - it really makes postponing SS a bad bet. Get it while you can - for me that looks like starting SS at FRA.
And regardless of COLA's, the current and constant inflation is almost never taken into account. Doing that now with spousal benefit. Wait 18 months from now to get 50% of working spouses SS = LOSE $33,000+inflation loses. 6% more in 18 months goes backwards even more with 8% to 15% inflation. Creating a small spreadsheet to check breakeven points for each month's difference in waiting(each month wait = 0.3% to 0.4% increase of spousal multiplier).
Better to have maximum SS and max out that income in case you do live longer. Dying early doesn't really matter.
@@stewartmillen7708 Absolutely if you're gonna live past 82&5 months. But if your genetics or health cause you to expire before then, max (total SS received) is achieved by starting SS earlier. Starting at FRA strikes a balance between the bet that you will live past 82&5 vs getting the most SS before you expire. If your FRA benefit is $3000, and If you knew you were going to live to 100 - waiting to 70 would pay an additional $151,920. Even waiting to 90 pays an extra $65,520. For each month before 82&5 that you expire you would collect $-720 (less) compared to just starting SS at FRA. Of course this all assumes no inflation and SS benefits are not reduced in the future.
I was going to wait until 66 to take my SS but jumped on it at 63 1/2. I had plenty of money so I wanted it early. I actually cashed in my 401k over 5 years from 55, I retired at 53. Took 200k of that and moved it to Ecuador, bought a condo, and placed 70k in high yield CDs at 9% which I still have. Still have 100k plus here and pensions and investment income of 75k a year. And I bought a brand new house last year. Can't overthink anything, if you do, you will never retire. I will never run out of money and if things get tough here, I will just go back to Ecuador full time.
I wish all everibody getting close to retirement would watch this. Thanks!!!!
Devin you are spot on, in this show. Burning through savings rather than tapping a little more (SS) to get over the humps, can be devastating to one's nest egg.
I delayed receiving Social Security until age 70. I used my $117K Trad IRA up from age 64 1/2 to age 69 1/2. I only have two months left in that IRA. I will start getting my first S.S. check in Jan, 2024. It will be about $4,100/month. If I had taken it at age 62 it would have been only in the mid 2000s. I can live on $4100 plus my $675 FERS. So that took the pressure off of me to excel in the stock market. For me waiting has been a stress reducer.
@prairiemark4084 I am currently doing the same thing as you did. I quit working at 65 and I am using my IRA of very close to the same amount as you had. Having only $120,000 in retirement funds is not nearly enough to generate a monthly dividend check to supplement the SS payment every month that I could have gotten at 65. Buy using up the IRA money in order to delay taking SS until 69 1/2 or 70 will ultimately give you a significantly higher SS monthly income (for the rest of your life) than you were drawing out of your IRA for those 5 years. And at that point with SS being your only income, you will be paying zero - as in absolutely nothing - in Federal or State taxes. That in itself is very nice. That simply means that your gross SS income is also your net income.
Retiring in 20 years? Due to inflation, you may need upward of $3.6million to maintain your existing lifestyle, with the ongoing effect of high inflation, lower forecasted stock market returns or value, and stagnant wages. Achieving a secure early retirement could be more challenging than ever before.
An obvious way to invest for a recession is to buy shares in businesses that are likely to experience steady demand even in a downturn. Typically, those are consumers staple, utilities and healthcare companies. But of course, such decisions can’t be made by an average joe, a financial advisor is highly recommended in making this decisions..
Great video, well presented. Great helpful comments to read too.
The sequence of return is where a lot of TH-cam channels that deal with money get wrong. You have to define where success is and don't think you have to gamble to get the most money. With gain always comes risk. You want to have enough with as much certainty as possible.
Couples also have to consider that extra $330/month for Medicare Part B premiums that start at 65 if they plan on delaying taking SS until age 70. That's a significant extra bill each month for many folks and that needs to be considered in any plan to delay SS benefits.
it doesn't matter when you start SS, that monthlyh bill will either be there for you to pay each month, or it will deducted from SS - no difference in net income
@@MrALBOBALBOB Delaying SS benefits until 70 means you'll be drawing down on your personal savings all the faster to cover this monthly expense starting at age 65 to age 70... and as pointed out in this video... doing so at a time when markets and returns are low... like 2022 means it takes all the longer to recover.... if at all.
Folks need to take this monthly bill into account if they retire prior to age 65 and are living on retirement savings and waiting to collect SS at age 70. An additional $330/month is a substantial monthly budget hit for many people.
@@kbbkbbkbbkbbkbb I'm in fine shape too... but for many folks that don't have pensions or were forced out of the job market earlier then planned and are trying to ride it out until 70 for those bigger SS checks the added expense of Part B premiums need to be part of the calculation of their budget.
I have a couple of good friends in that situation right now and the additional added expense of Medicare premiums and a down market (and smaller 401k nestegg) is making them seriously reconsider their plans to wait until 70.
Unfortunately any plan (or budget) that involves variables such as investment return and, as we're dealing with right now, serious inflation is difficult to project accurately. And, as this video pointed out, the need for additional drawdown on savings to cover Medicare premiums or higher living expenses due to inflation when your nesting is down can have a very serious impact on your longterm budget and potential retirement income and corresponding lifestyle.
Figuring $3-400 per person per month for medical costs is necessary whether you are taking SS or not. If you are retired that is what most will pay. ACA plans are about the same cost. If working then you may have employer sponsored insurance which might be a bit cheaper. We budget $1000 a month for healthcare premiums and costs for the two of us. I’m still on ACA and my wife is on MC.
Whether you delay or not it is a budget item. Whether it comes out of you check or your bank account it’s the same.
For many, a good strategy is to delay the high earner check as long as reasonable. My wife started at 63, I’m targeting 70. That strategy will allow SS to cover more than all of our needs.
We are drawing down the fixed income assets in a down market, not stocks. You won’t need fixed income after getting all your SS in place That minimizes sequence risk
@@randolphh8005 Good plan. Unfortunately there are many folks out there that aren't in the same shape financially that are taking a big hit with inflation and investment returns right now and don't have a sizable nest egg to ride it out.
I'm fortunate to have a defined benefit plan and enough of a nest egg in savings, investments, and other deferred retirement accounts that it isn't an issue for me currently.... but there are many people that aren't as well situated that need to carefully consider the cost and possible impact the economy will have on them between the age of 65 and 70 if they choose to try to delay SS benefits. The low inflation environment of the last decade pales in comparison to what we're seeing now and has been a huge wake up for many folks!
Ultimately it's a very individual choice based on a lot of personal factors (health and family longevity) as well economic variables (investment return and inflation) that may or may not be within your control.
One last issue is the idea of drawing down on your own assets rather then taking your SS benefit between 62 (or 65) and 70. The larger SS payments might be nice at 70... but you can't pass them on to your kids or grandkids. Living on your SS benefits (that you've worked for and earned) as soon as you're eligible and saving your nest egg has its good points as well. But once again it's a personal choice based on many factors.
My mom paid into social security for years and died at 62 after collecting two checks! So she didn't come anywhere near getting what she paid in! Its clear that this is a highly personal situation and all factors including health and family genetics need to be included in your calculations!! You just need to be aware that unexpected death is a possibility!!
Can’t really predict health though. You could be in excellent health today and have great family genetics today and die of a heart attack or in a car accident tomorrow. You’re gambling and the government is the casino. The house always wins.
Sorry for your loss, my Mom passed at 59 and never collected a cent. The way I deal with that is Social Security is for those who are fortunate enough to live a long life and don't have to live in poverty. There are no guarantees in life.
@traybern Thank you Captain Oblivious.
Sequence of return risk only impacts you if you withdraw from assets that have declined, primarily stock. If you don’t sell and have enough other assets to let them recover there is no sequence of return risk.
For me it was better to start drawing at 64. I got 14,400 a year which totals 86,400 over 6 years. If I waited till 70 I would've lost $86,400 just to get about $300 a month extra. I'm glad I chose to draw SS early.
I'm waiting till 70. You also have to factor in the increased annual COLA, for a higher entitlement.
@@puravida5683COLA is a break even game.
I get 1100 at 62 and 3050 at 70.
@@puravida5683
They do not know math.
Agree. I used the same rationale and also began taking at 64.5. If I am fortunate to live to 96, the cumulative sum from 64 to 96 compared to 70 to 96 is the same. 70 would be a higher monthly income, but no better with respect to the cumulative outcome. Additionally I preserve my investments. Why draw down on investments and pay taxes at the state and federal level for a higher monthly SS benefit? Taking SS now allows my investment portfolios to hopefully rebound and grow another 9 years and defers taxes until I have to take the RMD at 73.
Another consideration when you move the income from 410k withdrawals to SS, there can be a big tax saving since not all of SS is taxed and often avoids State taxes entirely. .
That is my plan where my tax after 70 goes to zero since my income comes from non-taxed pension and SS.
Very good points Devin. I am NOT filling for SS until I stop working or when I can draw without penalty while I still continuing to work. Thanks for all you do posting these helpful videos. I watch when I can but cannot watch all.
After 40 years of full time employment not including working on the family farm during childhood I was exhausted by 60 but kept working til 65. I still had too much debt at 62 but by 65 everything was paid off and I’m finally able to save.
I can relate to your first sentence (farm raised), but fortunately I was able to retire at 55. No debt and fully vested pension. Sure, my payments are lower than if I waited, but I had enough of work.
I'm not lazy. I'd rather focus on my priorities, not that of an employer.
No one seems to mention that your physical agility and strength decrease with age, limiting your ability to enjoy an active lifestyle, regardless of genetics or how well you've kept in shape. These things cannot be measured or plugged into a spreadsheet.
Your body is your vehicle through life. What do you want to drive?
I will be taking SS as soon as I can, saving my investments for later.
@@timsilva1944 I advise everyone to start out with the intention of getting a home you can pay off in 15 years, drive autos until you no longer trust them to get you home safe. That way if and when a crisis hits you’ll at least have reliable wheels and a roof over your head. Always question yourself “Do I need this or do I want this”? Debt is a big no-no. I’ve learned that what you think is a secure job just might not be the case anymore and you’re told due to budget crisis you’ve got 3 months but your bills keep coming. Stressful situation that destroys the quality of your life. I’ve never felt more peaceful than the day I made my last house payment with no other bills beyond $500 living expenses. My pension and SS is allowing me to save as well as travel and catch up on home maintenance that I couldn’t afford before retirement. You don’t have to be wealthy to retire if you have no bills and realistic expectations for your retirement plans. I moved back to the farm in the 90s and have 500 shared acres to wander around on with extended family. Life is good! Retire as early as you can and earn money doing what you enjoy.
Outstanding information 👏 Mr. Carroll concerning about this issues which are very important 😀 ...., God bless you 🙏 and your TH-cam channel ..., I hope you can help me with my situation ...,
If you’re facing large RMD’s and do not need them due to other future sources of income, perhaps a pension, SS, or annuity… and for whatever reason cannot easily do Roth conversions (perhaps you’re using the ACA credits for healthcare and or have kids getting financial aid in school), drawing down your 401K/IRA a bit might be the smart thing to do. Everyone’s situation is different.
Learn so much from your videos! Thank you 😊
This is a priceless goldmine filled explanation, Thanks Devin!
I'm doing FRA 67
I am so glad to hear someone talk about risk in this way. We hear nothing but how the stock market is a long term investment and if you wait long enough it will always pay out, I have found that to never be true. If you happen to need it during a high year, you win, if not, you lose and you lose big. To hear honest talk about how things can actually be so bad that you may never be able to recover. This is honest and I appreciate someone saying it.
@kbbkbbkbbkbbkbb Yes, and FA AUM fees go down if investor spends down funds by taking SS later than FRA. (I'm DIY.)
Sequence of returns can be avoided with a decent cash position to get you through those couple of down years. If you have the cash, no need to touch the portfolio as it recovers.
Also, bond investments should be the buying of individual bonds and holding them to maturity, rather than a bond fund.
A lot of us simply can't afford to delay taking SS. It is all the same amount anyway, with it just a matter of how many years the money is distributed. The "experts" don't take into account many of us need to take it, plus they don't account for rampant age discrimination in the labor force, which can hinder working longer. A lot of us took it at 62 and are still working at around age 70, with no end in sight.
There is no one size fits all solution. Unfortunately, financial planners typically rely on retirement software that doesn't take into account variability in returns of a portfolio. Lifestyle determines a lot when it comes to making this type of decision.
Lifestyle and overall health of the person (and their spouse if married) are big factors.
My husband and I both work F/T. My husband, turning 61 in a few week, plans on going to part-time at 63 yrs of age and has saved enough cash to fund the difference in his pay for those 2 yrs + health insurance costs until 65; then he plans on taking full retirement at 65.
I was going to retire at the end of 2024 when I'm 65 but now not so sure. I might work another year until 66 yrs and 3 months. My FRA is 66 yrs, 10 months. As I get closer to my retirement goal age, I'm finding it difficult to make the final move. We aren't wealthy but we should be okay being retired at 65, but I'm nervous now about ending those regular paychecks.
Whether it’s a good idea to delay collecting SS depends on your life expectancy, among other things. The example of retiring early, a bad market, and delaying SS by burning through investments is an extreme example of why to pull the trigger early on SS. It’s an individual decision that is different for everyone
Let me tell you this as a mathematician. Simply, taking SS at 62 and losing 30% of the total compared to taking the full amount at 67 will surprise you. It will take the person who waited until 67, 18 years to catch up to the earlier SS taker. Can you be sure you will be alive at 85?
Nobody knows how long we’ll make it, so the question is if one does make it to 85, do want to be broke and dependent on others?
@Acrobizer 123 Are you kidding? Many Seniors (over 60 million in the US) are already broke at 65. With my background in statistics, I'll tell you that maybe 1/2 of 1 percent might still be financially viable by the age of 75! One reason is that unless you have put the maximum into an IRA even that won't last over 7 years!
If the market is down big right after you turn 62, then you can change your plan and apply for SS. Just because you plan on waiting to take SS, doesn't mean you have to stick with it.
Great Video (another one actually)! Of course you already know there are options for one filer to file early (i.e. age 62) and the other file later (i.e. age 70) or any chosen ages in between. Also Taxation wasn't considered which makes a difference if you are drawing from a Traditional IRA or a ROTH IRA. Things are never simple and it would be a challenge to show very many permutations in a short video (And we all appreciate your short videos). I retired 10 years ago at age 56 and I plan to Draw SS at age 70. I'm currently drawing SS survivor's benefits on my late wife's SS disability survivor benefit (since I turned age 60). I'm living on that, a small corporate pension. I draw the remainder of my living expenses from my IRA. My annual IRA withdrawals amounts to about 3% of my current IRA balance so I won't run out of money before I turn 70. I'm in a 24% tax bracket because of my current (new) wife's working salary. BUT since 2022's hit on my IRA balance (about a 20% drop), I've been questioning if I should draw my Full SS benefit now (I'm at my FRA now).? So this video was very timely! Thank You Devin.
this was my plan but thanks to your video will need to look at this more.
What difference is it to die with $1million remaining vs $250k, they both = a win! Also, have a cash acount large enough (5 years is our plan) to cover down market years so as not to make those invesment withdrawals if your life depends on it later on. We plan to burn down our tax defered accounts prior to taking SS at 70 and reduce RMD's as much as possible and eliminate or minimize taxable SS income later.
Hanging it up 58. Focusing on getting into even better physical shape. Drawing down 401k to the Standard Deduction yearly to bridge to age 62 filing. Since wife never contributed, she will get half of my reduced amount. Will continue to draw down 401k at that point using Provisional Income calculation in order not to take a tax risk. The key is making physical fitness the main "retirement hobby"...maintain lean muscle, eat well, get plenty of sleep. Live strong and go out the same way.
if you have a good fed pension this changes things
What if I set up a bond ladder for those 8 "gap years" years from 62 to 70. Fully market invested the rest. Each year that the market is up (or on track), I add to the bond ladder the deficiency of my spend rate and Social Security. If the market is down, I don't. Good video by the way!
My spreadsheet seems to say that taking SS early is the best thing to do if you have significant savings -- and working until age 70 is the best thing to do if you don't have significant savings.
Fair point.
My official retirement age is 67. I'm considering filing for Medicare and SS at the same time, which would be at age 65 (unless they change the rules to balance the budget). I don't want to wait until 70, because I may not even live that long. I guess I will have to see how my health is when I get near to being able to collect.
Also you may take SS the year you reach full retirement age. With the earnings allowance of of $56,520 2023. It may be to your advantage depending on your birthday and earnings. It pays to do the research.
Don't say that load.. dr. Mingalla AKA Fartchee listening. They don't like people to start receiving SS and not working
You only file for Medicare 3 months before your 65th birthday....doesn't matter about SS.
Always insightful. Thanks Devin. 1) illustrates that you should have a multi-year emergency fund sufficient to spend down during down years. 2) Does not account for the tax benefits of lower social security taxes vs. ordinary income. 3) Social security delay allows for better return since it is based on life expectancy from the 1980's. So, today's life expectancy is longer resulting in more money from delaying. 4) The number one reason to delay is to increase survivor benefits after death of a spouse.
that depends on what you did for a living, many people dont live past age 64
By far, the best video on retirement-distribution strategies for applying to real world situations. It would be great if you could create and publish a calculator that would take inputs and run a simulation based on past market returns. You could charge a subscription fee, get rich, and retire early!
Geez this topic irritates me for some reason. Sooooo, social security was and is a TAX (FICA TAX). You pay it when and while you work (regardless of your age). When you are eligible you can get a benefit from the social security SYSTEM. While the calculation is based on the tax you paid, it is not YOUR MONEY you are getting back. It does not work like, nor is it like, your personal 401k (or equivalent) retirement plan. The amount of tax you paid is not housed in some special place for you to access and it's only YOUR money.
Far too many people think of it that way and unfortunately what that leads to is the 'it's mine and I want it and will take it as soon as I can get it' mentality.
Personally, I have looked at what I need for income based on my expenses, determined that later in retirement (age 75 and later), my taxable retirement account balances are too large and I will end up paying a higher income tax amount than I would prefer to, plus pay a higher Medicare insurance premium because of that higher income. Therefore, I will spend down the taxable retirement account balances now, convert as much to Roth IRA's as I can (so that later in life I can withdraw that income tax free and use as much as I need to without it impacting my income taxes or Medicare premiums), and also simplify my financial life by basically having social security income (which won't be taxed due to my overall taxable income level), simplifying my income tax prep, and not compromising or limiting my life until I get to that phase (because I have sufficient taxable retirement monies to live on between now and when I take SS at age 70).
Long story short is have a plan, understand why you are taking SS and how it fits in the plan and take it when it makes sense for your plan. Not on some idea that it is your money and you need to get it back before you die, or worse some arbitrary breakeven analysis that tells you if you don't get XXX amount back in your lifetime you LOST the game. It's not a GAME.
Here's what I did. I retired at 62 (last year). I took out about 3 years of money from my portfolio and put it into a cash fund. I plan to claim social security at 65 and also will start receiving a small pension from my previous employer. So, for some people it might make sense to take SS somewhere in that window between 62 and 70.
That's what I want to do but at 65 ... Take out 2 years or save 2 years of cash and live off it till FRA (67) ... May covert some IRA to Roth during those low tax years .. or I die tomorrow!
That is my thought as well. I have a 4 year cash bucket that is not affected by market fluctuations.
I arrived at this conclusion in an intuitive review of the options. The file early solution seems safer all around. I appreciate the in depth analysis regarding experiencing down markets on the first couple of years. I've seldom seen this vital level of detail in the decision process. I actually just started social security last month at age 63 and I'm satisfied with the decision. The early file results in a portfolio drawdown rate of 2%.
Consider several friends of mine who took SSI at 62. They are in their 70s now and must work because the social security funding was not large enough to afford their minimum needs. That’s the thing to avoid. Other than that, there is no mathematical difference when you take it.
The idea that people get an
"8% guaranteed return" if you delay SS until 70 is absolutely false. First, if you delay SS, you have zero return until the age of 70.
Second, just because the SS payout is 8% higher for each year you delay, doesn't imply an "8% return". Two totally different things.
I took my social security at 62. Between inflation and the amount I would have gotten, it ain't that much difference. But it's really starting to change is my health. Stuff I could do it in my twenties I don't even think about now. Each day each week each month my health slowly is declining. You can't get that time back. I'm able to do things now because I don't work that I couldn't have even thought about.
I am going to hold off on SS as long as I am only taking gains from my portfolio. If there is a bad year I will either go back to work or turn on SS to keep from drawing down to anpoint that is unrecoverable.
Works if your income is in retirement assets. If you also have income outside of retirement assets there is a significant potential of an income tax hit up until you hit full retirement age.
For me, I don't have enough retirement savings to last very long. My father lived to 90. I might also. So my only choice seems to be using what retirement funds I have to get me to 70, then start claiming. Assuming social security exists and keeps paying, that should give me enough for however long I live. Retiring at 62 wouldn't.
We have sorta done both. My wife and I had close to the same income. I am 2.5 years older and filed at 62. With my pension and SS we have not withdrawn much from our investments. We are letting my wife's SS go till FRA or 70 depending on the market and expenses.
I intend to file for the first day eligible. Reason being most of my investments will only be reaching critical mass and really need those last few years to compound. Add that we have a shorter life expectancy in our family, and there is no mathematical benefit to waiting it out.
I will retire in August at 65, and I only have to cover 1 year and 10 months with money from my IRA to get to full retirement age, plus I have a pension and an annuity.
Good insights. One thing to consider is if you think of SS as an annuity how much is tht annuity growing each year of delay? So, if your portfolio drops by $200k waiting to 70 but your SS annuity goes up by $500k you really gained not lost in total
I am taking disability at age 63 from private insurance, and then the state of California. When should I switch to federal social insurance disability?
Everyone's situation is different, and there are a lot of variables that need to be considered when attempting to determine the best time to start taking SS benefits. Further, some things just can't be accurately predicted short of peering into a crystal ball (assumptions can/will change) meaning there will not be a 100% perfect answer. My commonsense advice is to take whatever time is needed to educate yourself on this subject (there's endless amounts of info available on the Internet) so you can make a more informed decision taking into account the unique circumstances of your situation.
I wish you could run a plan of retiring at 65. between 62 and 65 is only 3 years. almost 500 more per month for me. i wonder if the results would be similar to the one you showed.
I'm a widow & going to be filing @ 60 not 1 day later.
I did the same. it's been such a blessing
LOL... You can't file until age 62 NOT age 60.......so good luck with that!
@@kbbkbbkbbkbbkbb survivor benefits are not the same as your own retirement benefits. They are available to everyone at age 60
I retired early at 62 and moved to Thailand where I can live very well on my SS and savings. No way would I wait , I’m from Hawaii and felt the longer I stayed, the deeper and deeper hole I was digging, plus the insane cost of healthcare insurance and healthcare. Also, my constant stress and anxiety is gone. The best decision I ever made.
@T Raybern WHY would that be? My own retirement continues to accrue to age 70, at which time I take that or continue taking my late husband's, if higher. A win win!
If you are in a position to live cheaply and NOT use all your social security...time to clock out of the workforce!
Thanks Devin, good stuff!
It’s all about opportunity cost. I have a 7 figure 401k plus a pension. My pension and social security cover my cost of living plus I have enough left over to invest.
Also, could you do some planning figures based on perhaps a $500,000 'nest egg'?
Thanks for the informative video! How do you feel about annuities?
Ok i have a question i haven't been able to find the answer anywhere i hope you can help me if someone is collecting ssdi and say for example they have two children born out of wedlock who is the one that gets hit with the income at the end of the year when it's time to file taxes what are the rules and laws regarding this
If you have a pension, taking SS early is much more attractive. I am planning to start SS at 63 1/2. That way, my pension and my SS will be above the minimum.
Unless you have no choice, never kill the goose laying those golden eggs for you. Savings are not the same as invested funds in a portfolio. If you are coming up short, realignment of your investments are in order to get better yields. There are some great ETF's that pay monthly dividends over 10%.
One option would be to set aside the money from 62 to FRA in a money market account so that money isn't affected by the market and leave the rest in the market to go up or down. But you would need to factor in the cost of healthcare and that is big variable, so you would need to set aside even more into your money market on the front end. I'm not saying this is a good idea, but is another option.
What do you live on then?
@@ws775 You withdraw the cash from the money market to live on while your stock portfolio goes up or down. That is you would need to move money out of stocks into the money markets to an amount needed to cover all expenses until FRA before you retire. Then market declines have no impact.
Thanks, food for thought, I'm going to rework my numbers in consideration that my ss will only be 85% taxed vs withdrawals from ira is 100% taxed. Unfortunately most of my savings are in an ira that is 100% taxed as regular earnings
Thank you, keep up the good work.
I retired 2 months before my 63rd birthday, and took SS in the new year, January. Just so I don’t have to pay taxes on my Ss income. I say take your Ss before the government changes payment amount. They will probably lower the payment as more and more people retire.
I see so many take Early and Delay until 70? Im thinking Split the difference and take it at 65 w Medicare?
In a panic I purchased an annuity along with other retirement options. I never drew upon it and it matures this year. I can reinvest it without penalty or taxation. Pretty much I lost money and sure enough the “company” made money with mine. 😡
Put your money in CDs. Some are paying over 5%. Not great, but a guaranteed income.
I'm 67 now.... my FRA was at 66 1/2... last year.
My goal is to live on SS alone.... Im not there yet. Inflation keeps beating me up, and COLAs cant keep up with that inflation... I seem to keep falling behind each year.
It's becoming more and more obvious that I'll have to delay starting SS at least another year.
Doing the math... with an annual average COLA of 2.5%.... if you add that COLA percentage to the average 8% percent "SS delay" increase each year.....
By waiting, that's about a 10% increase total each year, for the next two to three years until I hit 70.
So that may put me ahead, of that inflation curve!
I can understand why people wait until age 70 to file for SS.
The only things really unknown seem to be....
How long are you going to live?
How much do you need to live normally every year?
How much will typical Health insurance costs go up each year?
And how much is it going to cost you to STAY healthy? (and STAY alive, too!)
Those are things that you'll probably never be able to plan for.
So if you can be successful to plan and prepare for all that.... then I think you're closer to a happy retirement life.
A simple but effective bucket strategy would have the 8years of bridge money in a cash account(bucket#1)
8years of income at 84k annually would be 672k in a safe cash bucket
And the remainder of 328k(bucket#2) will be invested in equitys.
If you have the two consecutive down years of -21%and -16% your equity bucket will be reduced to 218k and your cash bucket will have 505k for a total portfolio balance of 722k( after the 2 consecutive down years).
By following this strategy you would have survived the consecutive down years with an ending balance of 722k vs the ending balance of 500k in this video.
Early or Delay? Im thinking Split the difference at 65 w Medicare
Noooooo! I waited until I turned 70! I start collecting on the fourth Wednesday of this month! Now what? I'm sunk!
Best financial advice I've seen recently! In addition, incorporating home equity into a retirement withdrawal plan can help smooth out some bumps. Establishing a reverse mortgage line of credit gives flexibility during the sequence of returns risk event. Immediately following a down year, don't pull from the nest egg, let it recover. Draw from the reverse line of credit instead, it's flexible. When the market returns to positive territory, then stop the reverse draw and go back to the nest egg. The returns on your portfolio will outweigh the interest expense on the reverse, there are published studies on this. You can also make periodic payments on the reverse to pay down the interest as many people do. Never thought I would see a SORR video made incorporating social security, hopefully this will challenge the conventional wisdom thought process. Well done Mr. Carroll!
Taking SS at 62 not only takes pressure off your IRA, you receive money that you otherwise would not by delaying until a later age. In my case, I decided to retire at 62. I receive $800/month less than I would by waiting until 67. However, I will have received $114,000 in that five years whereas I 'lost' $48,000 in the monthly difference. I have a substantial IRA so between that and SS we could afford to pay the bills and live the lifestyle we have been living. I also took into account that as we age, we will most likely slow down and will require less funds for activities, thus living with the lower SS is no problem. I've seen too many people try to maximize their later years of income only to die or become incapacitated before that came to fruition. What good is it to wait to retire and end up in a wheelchair before you can fully enjoy those later years together?
Hello Devin I am currently collecting my SS a year now I will be my full retirement age in April of next year 2024 I am single can I collect my X wife SS next year she is collecting disability SS and is remarried I meet all the requirements having been married 10 years and divorced for two or more I have never remarried can I stop mine and take hers when I am at full retirement age next year please advise thank u
Is it accurate to say that social security funds sent to/for minor children who have a living parent who is receiving social security do not have to return unspent social security money not spent on them when they turn 18 and are allowed to keep the funds if the funds were invested for them in an account such as a brokerage account if the account is under their names alone and no one else’s name?
Be careful waiting, and look out year to year for the "Hold Harmless Provision". You could end up paying more for Medicare while waiting to collect SS.
WHAT IF UPU DONT HAVE A PORTFOLIO?
In that retirement scenario, You forgot to factor in the couple would be losing $446,400 of SS income, which will take them 6 years to recoup that if they wait until 70 to retire.
What are your thoughts about rolling retirement funds into high dividend yield stocks (like O, MO, etc 6% yield) and ETF's (like JEPI /JEPQ 8-9% yield) and living on the dividend payments? Maybe have 15-20% of portfolio in a basket of individual high quality stocks to sell out of the money covered calls on to generate income during high market volatility periods?
Aiming to retire in my late 50's off of investments then pull SS at 67.
My girlfriend is 74yo and has not applied for her ss. She said she is using like a savings account thinking she will get all that backpay from when she turned 70. Is that true?
No
You absolutely will not gain anything by not taking it past age 70 ……Tell her to file immediately….
She has lost 4 years of SS payments that she will not get paid for. She is losing her money each month she does not apply.
Oh No... please tell us you Got her to Contact Ssa.. like others Said... She lost years...of $$$ by Not starting @70... her Savings Would have been money in Her Bank acct... I Believe you Can request a 6 month retro pay but That's It...
So approx $3000/mo × 4yrs =..... 😮.
Ok. At least I now know your argument. You’re right. That’s why I have cash (sold equities at profits) until I start collecting SS.