### Author Topic: Need help with logical thinking.  (Read 3427 times)

#### BTDretire

• Magnum Stache
• Posts: 3074
##### Need help with logical thinking.
« on: September 17, 2017, 08:50:46 AM »
I'm trying to run my own calculations to decide the best time to collect SS, 62 or 70.
It can get extremely complicated.
I have figured the payments starting at 62, added 6% interest for 8 years.
Then for 63 added 6% interest for 7 years, at 64 added 6% interest for 6 years etc.
In these calculations I have also subtracted 15% of 85% of the payment to pay the taxes.
My wife still works so I will owe tax.
I also modified each first year because I don't have the full amount for the full year.
I also added 3% to the payment each year for cost of living adjustment.
So after 8 years, I have about \$160,000.
either at the 62 yr old rate or at the 70 yr old rate.
For the 62 year old total, I need to add the \$160,000.
Here's where I'm confused, Do I continue to grow the \$160,000 at my 6% rate for the next
22 years?  (calculating to 92 yrs old.)
If I do that, I should also do it for the additional years growing at 6% with 3% cost of living adjustments, for both the lower rate at 62 and the higher rate at 70.
This all assumes I will not spend the SS income or not spend the same amount from my portfolio.
Where is my logic wrong and what have I missed. In the spread sheet, my growth rate and inflation rate will be adjustable.
My preliminary calculations show collecting at 70 puts you ahead at 92, but I want to continue
and find where the crossover point is.
Any help is highly appreciated. Thanks.

#### MDM

• Senior Mustachian
• Posts: 11492
##### Re: Need help with logical thinking.
« Reply #1 on: September 17, 2017, 01:04:54 PM »
My preliminary calculations show collecting at 70 puts you ahead at 92, but I want to continue
and find where the crossover point is.
That seems about the same as others usually get.

The higher the return one assumes, and the sooner one expects to die, the earlier starting SS makes sense - and the other way 'round.  If only one knew those in advance.... ;)

See also Try a Social Security Calculator Before Claiming if you want to compare roll-your-own with pre-packaged.

#### Simpli-Fi

• Bristles
• Posts: 329
##### Re: Need help with logical thinking.
« Reply #2 on: September 17, 2017, 01:42:37 PM »

#### BTDretire

• Magnum Stache
• Posts: 3074
##### Re: Need help with logical thinking.
« Reply #3 on: September 17, 2017, 02:29:52 PM »

Is your suggestion that, this has already been determined and all I need to do
is figure what date I'm going to die? :-)

Maybe, but it is also an exercise to learn/practice with OpenOffice.

#### YoungInvestor

• Bristles
• Posts: 409
##### Re: Need help with logical thinking.
« Reply #4 on: September 18, 2017, 11:42:21 AM »
Many professionals are paid to ensure that both options are similar in value to you.

If you live longer than average, it's probably best to collect later, if you live shorter, the sooner is likely the better. A good proxy for longevity is your health and family history.

#### BTDretire

• Magnum Stache
• Posts: 3074
##### Re: Need help with logical thinking.
« Reply #5 on: September 18, 2017, 12:55:45 PM »
Many professionals are paid to ensure that both options are similar in value to you.

If you live longer than average, it's probably best to collect later, if you live shorter, the sooner is likely the better. A good proxy for longevity is your health and family history.

Yep, but that is a difficult call. Dad died at 74 but had his 1st heart attack at 43. Mom lived until 84. I'm still in good health at 62, I expect to out live mom.
But I'm not sure the professional are figuring on you saving and investing the SS checks from
62 to 70. Anyone know?

#### MDM

• Senior Mustachian
• Posts: 11492
##### Re: Need help with logical thinking.
« Reply #6 on: September 18, 2017, 06:36:37 PM »
But I'm not sure the professional are figuring on you saving and investing the SS checks from
62 to 70. Anyone know?
See Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits and Will It Last? - wp307.pdf for perhaps more math than you want.

In short, that study did look at discount rates (i.e., expected returns) between 3% and 9% (if my skimming was correct).  There is one comment that
Quote
the adjustments are close to actuarially fair for discount rates consistent with his­toric (average) levels of (real) interest rates of long-dated treasuries.

I expected more analysis of the discount rate effect, and maybe it is in there, but a quick skim didn't find it.

#### BTDretire

• Magnum Stache
• Posts: 3074
##### Re: Need help with logical thinking.
« Reply #7 on: September 23, 2017, 02:54:18 PM »
But I'm not sure the professional are figuring on you saving and investing the SS checks from
62 to 70. Anyone know?
See Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits and Will It Last? - wp307.pdf for perhaps more math than you want.

In short, that study did look at discount rates (i.e., expected returns) between 3% and 9% (if my skimming was correct).  There is one comment that
Quote
the adjustments are close to actuarially fair for discount rates consistent with his­toric (average) levels of (real) interest rates of long-dated treasuries.

I expected more analysis of the discount rate effect, and maybe it is in there, but a quick skim didn't find it.
I didn't find discount rate effect either, very complicated paper, may need to print and make notes.
I think I will just wait until my wife retires, then I can collect without taxes being incured.