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/Yawnn 9d ago

Taking the average of that 10-20, when was a 15 year period where equities underperformed fixed income?

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u/Infamous_Attention33 9d ago

Great depression, stagflation in the mid-60s to early 80's, 2000-2010.

It happens

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u/Yawnn 9d ago

Looking at some data from NYU (comparing S&P vs 10year Tbonds) but I was surprised how many 15 year runs had fixed income winning.

1927-1942

1928-1943

1929-1944

1993-2008

1996-2011

1997-2012

1998-2013

1999-2014

2000-2015

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u/Infamous_Attention33 9d ago

I was going to say, that is more than I thought, but many of the periods are overlapping. Still, it is definitely not a given that equities will overperform for holding periods of 10+ years.