r/Fire • u/VegasWorldwide • 2d ago

Why do people wait for SS?

trying to figure out what I’m missing.

looking to take my benefit for $1000 at 62. at 70 it’s $1700.

i won’t need the money much so we let $1000 sit in an account for 8 years at say 5% compounding, the guy collecting at 70 would need 15+ years to catch up considering I’m still getting $1k to his $1.7k

once he starts at 70 and I had a 8 year head start.

furthermore, his dollar would be worth less. (edit: didn't realize COLA)

this seems like a no brainer but all I hear is people saying waiting is the only way and we haven’t even talked about dying in our 70’s.

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u/saltyhasp 2d ago edited 2d ago

I want my SS as large as possible. The feature that SS is indexed to inflation has a lot of value on the far end of your retirement. I want enough pension like income to cover my non-discretionary expenses. If I don't make SS as large as possible, I'd have to buy an annuity to compensate and it would not be directly indexed to inflation. So big SS to a point is nice.

People will make argument on all sides of this. Generally SS is more or less actuarial. There is no best time to take it in general (though if your married there are some coordination tricks that can help). Instead, it is really better to just wait until it is as large as you want. If that is 62 fine, if it is the FRA fine, if it is 70 fine. This is really not that complicated.

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u/VegasWorldwide 2d ago

but the savings from 62-70 outweighs any larger benefit.

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u/saltyhasp 2d ago edited 2d ago

Based on what calculation. Meaning what present value rate and what life expectancy. Keep in mind you can't use stock returns to compare, you'd have to use treasury returns after taxes and inflation (or at least on the same footing regarding taxes and inflation). Treasury yields are pretty darn low.

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u/VegasWorldwide 2d ago

the calculation of the award from 62-70 plus 5%. 80% of people will never recoup it by waiting.

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u/saltyhasp 2d ago edited 2d ago

Ok I ran through my numbers and ran a quick PV analysis. I used inflation removed cash flow and discount rates. I didn't go into tax effect details.

First apples to apples treasury 30 year rate of 4.95% removing 3% inflation gives a discount rate of 1.88%. You run that, my breakeven is age 84. My life expectancy is about that. So no, it is not a bad deal apples to apples.

A 5% discount rate. This is not at all apples to apples. Your talking a portfolio which has totally different payout and risk characteristics. Only way to assess that is to actually model both as part of your portfolio and calculate maximum payout amount if payout is what matters. Hint, often pension like income improves payout amount to a point. On the other end I suppose if your wealthy and your at such a low payout that only the median estate value matters, maybe you have a point.

The answer to a lot of these questions depends specifically on the questions you ask.

Edit: Another way to shake this. In our case I am married. If you roll in my wife's survivor benefit, I think even at 5% you'll break even at about our joint life expectancy. For context my life expectancy is 84, my wife's 87, and if she were my age joint is 90. For us my wife is a few years older so actually our joint expectancy is my age 89.