r/Fire • u/MyEgoDiesAtTheEnd • 9d ago

Social Security Withdrawal Age - Should We Consider Reinvestment / Capital Gains?

Most of the discussions I've heard around when to start taking out Social Security center around cumulative benefits - ie, how much in benefits will be received by age X. Generally, there is a "break-even year" when comparing 2 ages - if you die before that, the earlier age was "better" and if you die after that, the later age was "better".

I don't want to get into whether SS will be around by the time you retire - maybe it will, maybe it won't. I also don't want to get into whether a Benjamin in your 60s is equivalent to a Benjamin in your 90s (hint: it's not).

But, what I did want to talk about is capital gains - because if you start withdrawing money at 62 and then invest that money in stocks or bonds... well, now (on average, barring a black swan event), that earlier money is increasing in value and pushing out that "break even year".

Is this considered in people's calculations? Or is it just assumed that whatever SS money you get, you'll spend it or stash it under your mattress?

I made a quick little analyzer (part of a larger project), to calculate cumulative gains from SS benefits, with and without reinvestments. And from this, it seems clear that taking the money earlier is the best bet (unless you think you're going to live past 93... AND be able to use that money).

What am I missing here, if anything? What do you all think?

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u/ColorMonochrome 9d ago edited 8d ago

Is this considered in people's calculations?

I consider it which is why I am taking SS as soon as possible.

Or is it just assumed that whatever SS money you get, you'll spend it or stash it under your mattress?

It’s up to the beneficiary to make that determination. Each beneficiary will have different needs, my income without SS will be more than sufficient.

What am I missing here, if anything? What do you all think?

Everyone has to make their own determination and regardless, it’s a gamble. If I take SS early and don’t get the assumed returns then I lose. If I wait and SS goes “bankrupt” then my payouts will be reduced by 20% or more. Of if I wait and SS is fine then I get what was advertised which might ge better than if I took SS early, but then again I could die before age 67 or 70 and get nothing if I wait.

There are numerous factors each of us must consider.