Author Topic: How do you factor social security into your withdrawal stategy  (Read 6528 times)

Monkey Uncle

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Re: How do you factor social security into your withdrawal stategy
« Reply #50 on: January 22, 2018, 12:17:49 PM »
The best you can do is model your personal situation using a tool like cFiresim to see which strategy would have optimized your metric of interest in the worst-case market return scenarios of the past.

Actually, the best thing you can do is wait until you're eligible.  Then, take one of the unknowns out of the equation. IOW, am I at high risk for a sequence issues based on real world market conditions from 62-70?  Then decide when to take SS.  If sequence issues are not a problem you have free longevity insurance, taking the other unknown out of the equation.

It's like having a lifeline against one or the other (sequence of returns nightmare or super-long life).  You get to choose when to take the lifeline based on risk factors at the time.

Well, yes, I assumed that it went without saying that the decision hasn't actually been made until you are eligible to take SS.  Of course you should assess the situation when you reach eligibility and act accordingly.  But once you hit 62, you may or may not know if you are at high risk for sequence issues.  Just because you aren't running low on money yet doesn't mean you aren't going to.  If you FIREd at 30 and your portfolio has grown in the intervening 32 years, you may be safe assuming that you aren't going to have sequence issues, at least not any issues that can be mitigated by the paltry SS benefit that you'll get for your 10 or so years that you spent in the work force.  But still, I would model both SS claiming scenarios at that time using whatever the current portfolio value is, just to be sure.  After all, you still have around 20-some years to go before you reach the average life expectancy of a 62 year old.

Where claiming early is likely to have greater value is for those who are FIREing comparatively late (50ish).  Those folks will have a higher SS benefit than early FIREees due to having worked longer.  If you retire at 50 and you've got half your portfolio left when you reach 62, taking SS early could be a lifeline that saves you from retirement failure.  But of course, you should model both claiming scenarios at that time to see if you are likely to benefit from taking the payment early.
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smoghat

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Re: How do you factor social security into your withdrawal stategy
« Reply #51 on: June 22, 2018, 07:34:38 AM »

  Others can try this, it is basically, what if I stop paying SS taxes now but don't collect for years down the road.


I downloaded the social security Windows benefit calculator in which you manually enter each year of 30-some years of earnings and specify the retirement year.

I'm 57. I put in that I worked through 2017 and would retire at 62. The amount was $1,825/mo. If I cleared 2017 to $0 income, it said my monthly benefit would be $1804.

Thought It worth adding to this, I FIRE’d two years ago at age 48. Had a surprise firm Social Security, since I have zero taxes now (clever accountant), my monthly benefit has dropped from $2900 to $2100. Worth noting!

jim555

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Re: How do you factor social security into your withdrawal stategy
« Reply #52 on: June 22, 2018, 10:16:29 AM »

  Others can try this, it is basically, what if I stop paying SS taxes now but don't collect for years down the road.


I downloaded the social security Windows benefit calculator in which you manually enter each year of 30-some years of earnings and specify the retirement year.

I'm 57. I put in that I worked through 2017 and would retire at 62. The amount was $1,825/mo. If I cleared 2017 to $0 income, it said my monthly benefit would be $1804.

Thought It worth adding to this, I FIRE’d two years ago at age 48. Had a surprise firm Social Security, since I have zero taxes now (clever accountant), my monthly benefit has dropped from $2900 to $2100. Worth noting!
Your initial estimate must have included an assumption you would work to a certain age.

I have a spreadsheet will all the years worked and the calculations for the benefit.  Every year the index factors change and the benefit increases slightly.  I haven't added new years since I stopped working.

TheWifeHalf

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Re: How do you factor social security into your withdrawal stategy
« Reply #53 on: June 22, 2018, 12:03:51 PM »
We are not going to get Railroad Retirement (SS) until FRA, 66 and some months, maybe 70, for 2 reasons.

1.That gives us 8 years to convert our tIRA to Roth, and pay the income tax.

2.We can do #1 without paying income tax on the RR. We will keep the conversion amount under the limit that Medicare costs more.

Looks like we will always pay income tax on our RR, which we just consider evidence of doing well.
We will be paying the taxes those years with the thought that one of us is going to have to file as a single, so paying the tax those 8 years, since we can do it, seems prudent.
« Last Edit: June 22, 2018, 12:12:48 PM by TheWifeHalf »

kpd905

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Re: How do you factor social security into your withdrawal stategy
« Reply #54 on: June 23, 2018, 10:12:59 AM »

Thought It worth adding to this, I FIRE’d two years ago at age 48. Had a surprise firm Social Security, since I have zero taxes now (clever accountant), my monthly benefit has dropped from $2900 to $2100. Worth noting!

This just means the benefit was not calculated correctly in the first place.  Your benefit will never decrease if income stops, it will only stay the same.
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SwordGuy

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Re: How do you factor social security into your withdrawal stategy
« Reply #55 on: June 23, 2018, 10:58:56 AM »
When I did my planning, I only planned for SS for one of us.

My wife is 10 years older than I am but longevity for women in her family is pretty common.   I'm on the A+++ list to get cancer based on family history.

If we both live long lives then the "extra" SS income will be a bonus.   And we'll spend it instead of our stock/bond portfolio.

If we don't, then the remaining spouse will have enough money.





TheWifeHalf

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Re: How do you factor social security into your withdrawal stategy
« Reply #56 on: June 23, 2018, 11:35:14 AM »
I forgot to add to my above post THH is retiring Jan, 2019.
We are going to take my 1/2 share of THH's RR (SS) and use it to convert tIRA once he starts taking his RMD.

Also, the reason we are dond things as I described in my above post is because I have one paternal Grandfather, and one maetrnal grandmother (and 2 of her sisters) who lived to 95 or above. I have a good chance of doing the same.

We are planning on one of us needing the money a long time.

secondcor521

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Re: How do you factor social security into your withdrawal stategy
« Reply #57 on: June 23, 2018, 01:38:40 PM »

Thought It worth adding to this, I FIRE’d two years ago at age 48. Had a surprise firm Social Security, since I have zero taxes now (clever accountant), my monthly benefit has dropped from $2900 to $2100. Worth noting!

This just means the benefit was not calculated correctly in the first place.  Your benefit will never decrease if income stops, it will only stay the same.

Generally true.  I suspect the original poster was getting SS estimates that assumed many more years of working to get to the higher figure.  Then when you start reporting zeros to SS, they assume many more years of zeros, and their estimates will adjust and could drop to the lower figure.

If you go into the more detailed SS calculators and provide those zeros ahead of time, you can see what your benefit is more likely to be.  But if you use the basic one, it just simplistically assumes you'll continue working to full retirement age making whatever the IRS last reported to them.
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DreamFIRE

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Re: How do you factor social security into your withdrawal stategy
« Reply #58 on: June 23, 2018, 01:45:05 PM »
The online calculators are limited.  If you have a mix of earnings and 0 income years head before taking benefits, you can download the offline calculator or use a "trick" I mentioned here with one of the online calculators:

https://forum.mrmoneymustache.com/welcome-to-the-forum/what-age-to-take-social-secuirty/msg1929309/#msg1929309