The early SSI retirement gold stack!

MGLICKER

Joe twelve pack is considering whether to collect Social Security benefits early. 62 vs 66.5 years of age.

For the sake of argument, his benefit at the younger age is $1200. At 66.5 he would be receiving $1600*

Assuming that he does not need the money, JTP could pick up an ounce of gold** each month with the early benefit and by the time he reaches 66.5, he would have a nice hoard of 54 ounces.

Does your crystal ball like this idea?


*I believe that my numbers are pretty accurate. I am sure that any errors of consequence will quickly and graciously be called to my attention.

**Impossible to predict the price of gold over 54 months so current price will have to suffice. Consider as well the understated but real COLA increases on SSI. Also assuming that Apmex offers Pamp bars at spot on the third of each month.

Baley

If he "doesn't need the money", what difference will it make?

MGLICKER

<< <i>If he "doesn't need the money", what difference will it make? >>



Joe Twelve Pack is not wealthy in this hypothetical as much of his extra money went towards out of state bowling tournaments and the occasional upgrade to Michelob.

In not needing the money, he is able to cover his monthly expenses with existing resources but does not have a tremendous store of assets.

rawteam1

<< <i>

<< <i>If he "doesn't need the money", what difference will it make? >>




Personally, I think if the person "doesn't need the money", then they should wait. One never knows today what they'll need tomorrow. >>


??? Lol ...
Then they should take the $$$ now cause tomorrow is today tomorrow ...

TennesseeDave

I would say to start drawing it at the earlier age. He could get $64,800 before age 66.5 and it would take until he turned 80, before there would be any difference. If I figured this correctly.
In both scenarios he would draw $ 259,200 by age 80

mrpaseo

<< <i>I would say to start drawing it at the earlier age. He could get $64,800 before age 66.5 and it would take until he turned 80, before there would be any difference. If I figured this correctly.
In both scenarios he would draw $ 259,200 by age 80 >>



There is your answer.

If you draw now and save every cent into any medium, then at the age of 66.5. You could sell a little of what you saved each month to make up the difference. It would take until you are 80to feel the difference


The only two differences is 1) You would have money sooner that you could sock away somehow to build your nest egg. And 2) At the ripe age of 80ish you would feel the drop in income. But by that time you could be either dead or spending much lessoney (which is the norm as I understand it).

GrumpyEd

<< <i>I would say to start drawing it at the earlier age. He could get $64,800 before age 66.5 and it would take until he turned 80, before there would be any difference. If I figured this correctly. >>



I agree with that.
I tried figuring it out and assume that by using the early payments it avoids pulling out your own savings and assuming you kept your own savings longer in safe investments like a ladder of fixed income insured investments (nothing risky) that it works out to about 85 or later before there would be a difference.

Every week there are articles saying to assume that you'll live forever and wait. LOL!

RedTiger

Current life expectancy for the average American male that has reached age 62 is to live until 84. So based on the average, a person is better off waiting.
source:
http://www.ssa.gov/oact/STATS/table4c6.html

Genes, life style, over all health are factors to consider. If a person's parents lived to a ripe old age, that increases the odds of a long life. If a person has poor health already, and/or has a low health life style (overweight, smoker, high stress) those kinds of factors might tip towards the taking the money side. If a person is in the middle range with average health, average life style, the odds favor waiting. Of course odds mean nothing in individual cases, an auto accident or other freak event could happen tomorrow.

None of this factors in the second element, what gold (or other chosen investments) might do if all that money was invested during the next few years.

Higashiyama

I definitely agree with RedTiger's assessment.

Personally, unless I had some obvious health problem, or had an immediate need for a monthly income, I would defer.

Baley

<< <i>Current life expectancy for the average American male that has reached age 62 is to live until 84. So based on the average, a person is better off waiting.
source:
http://www.ssa.gov/oact/STATS/table4c6.html

Genes, life style, over all health are factors to consider. If a person's parents lived to a ripe old age, that increases the odds of a long life. If a person has poor health already, and/or has a low health life style (overweight, smoker, high stress) those kinds of factors might tip towards the taking the money side. If a person is in the middle range with average health, average life style, the odds favor waiting. Of course odds mean nothing in individual cases, an auto accident or other freak event could happen tomorrow.

None of this factors in the second element, what gold (or other chosen investments) might do if all that money was invested during the next few years. >>



yeah, that's a great answer. Buying an ounce a month would be better than gambling the money away at the local casino or drinking it away at the local bar, but might be a lot worse than buying the investment that performs well and provides 2x or 3x the returns of the gold

morbidsteve

I may be a little unrealistic for your purposes as I'll have a military retirement at 38 years old, but I would definitely wait. The money will add up over time, which is why they offer the different amounts.

MGLICKER

<< <i>yeah, that's a great answer. Buying an ounce a month would be better than gambling the money away at the local casino or drinking it away at the local bar, but might be a lot worse than buying the investment that performs well and provides 2x or 3x the returns of the gold >>



Not so easy to predict which assets will perform best over 4 and a half months, or twenty five years for that matter.

jmski52

It's a good question. The theoretical breakeven is 80 years - assuming everything else is equal.

Do you feel lucky? Well, do ya?

I only have one recommendation. Don't buy bonds right now.

RR

Take the money at the younger age. Doubt I'd buy an ounce each month but would still take my money earlier given the other conditions you mentioned.

RR

gsa1fan

How many years will SS still be around is my #1 question

Take the early $$, stack Au is my choice

trozau

<< <i>How many years will SS still be around is my #1 question

Take the early $$, stack Au is my choice >>



Ditto.

BAJJERFAN

<< <i>

<< <i>If he "doesn't need the money", what difference will it make? >>



Joe Twelve Pack is not wealthy in this hypothetical as much of his extra money went towards out of state bowling tournaments and the occasional upgrade to Michelob.

In not needing the money, he is able to cover his monthly expenses with existing resources but does not have a tremendous store of assets. >>



So essentially he is subsisting instead of living.

Weather11am

Consider how much it costs to buy a SPIA paying $1200 now or a 4.5 year DIA paying $1600.

Consider your current longevity risk and inflation risk in your portfolio.

BAJJERFAN

I guess it would depend if your monetary resources were from existing funds [savings, etc.] or from income, i.e. employment. Another consideration would be tax obligation/s if any. No matter what your genetics, family history, etc. your future is NOT GUARANTEED. On the basis that it's better to have it and not need it, than it is to need it and not have it, I can't think of one good reason not to start taking it at 62. If as TennesseeDave figured, both choices lead to $ 259,200 at age 80 why does it really matter? Who cares about life after age 80? I'd rather start living at 62 instead of waiting until age 80.

RedTiger

<< <i>I guess it would depend if your monetary resources were from existing funds [savings, etc.] or from income, i.e. employment. Another consideration would be tax obligation/s if any. No matter what your genetics, family history, etc. your future is NOT GUARANTEED. On the basis that it's better to have it and not need it, than it is to need it and not have it, I can't think of one good reason not to start taking it at 62. If as TennesseeDave figured, both choices lead to $ 259,200 at age 80 why does it really matter? Who cares about life after age 80? I'd rather start living at 62 instead of waiting until age 80. >>



If a person reasonably expects to live to 100+, and that is not unreasonable for a person in good health, with good genes, the cost might be enormous over the years. Again, average expectancy is 84. That 84 number includes the 25% to 50% or more that might be morbidly obese, the smokers, those with already diagnosed chronic health problems such as diabetes or heart disease.

Running out of money in old age can be a horrible problem. Again, the money is not needed right now. The person is living just fine without taking the early payout.

I tell my young adult relatives to plan to live to 120 and beyond. It might mean working until 80 or 90 or 100 or worse if they plan their finances poorly. Modern health advances might be truly amazing. The average working class male in 1900 lived until age 46.

/edit to add: it boils down to an adult version of the kid marshmallow test. The test is to put out one marshmallow. If the kid can wait for five minutes before eating the one marshmallow they get two marshmallows.

BAJJERFAN

<< <i>

<< <i>I guess it would depend if your monetary resources were from existing funds [savings, etc.] or from income, i.e. employment. Another consideration would be tax obligation/s if any. No matter what your genetics, family history, etc. your future is NOT GUARANTEED. On the basis that it's better to have it and not need it, than it is to need it and not have it, I can't think of one good reason not to start taking it at 62. If as TennesseeDave figured, both choices lead to $ 259,200 at age 80 why does it really matter? Who cares about life after age 80? I'd rather start living at 62 instead of waiting until age 80. >>



If a person reasonably expects to live to 100+, and that is not unreasonable for a person in good health, with good genes, the cost might be enormous over the years. Again, average expectancy is 84. That 84 number includes the 25% to 50% or more that might be morbidly obese, the smokers, those with already diagnosed chronic health problems such as diabetes or heart disease.

Running out of money in old age can be a horrible problem.

I tell my young adult relatives to plan to live to 120. It might mean working until 80 or 90 if they plan their finances poorly. >>



As long as you're on SS, you won't run out of money unless the SSA does in which case half or more of the country will be SOL. In the OP's scenario it can be assumed that the person would have enough money to meet his needs until death whether that be 70 or 90 and the SS payments would be gravy. With a $65K head start and some investing savvy, one should be able to make up any shortfall that might arise from taking SS early. As much as I love the stuff, I do not think that I would buy an ounce of gold [or any other PM] every month. I do not think that a couple hundred a month in old age is going to take one from dire straits to the life of Riley.

RedTiger

Let me add that my view is influenced by a relative that did take SS payments at age 62. In her case it turned out to be a mistake for a variety of reasons that might not apply to other people. She was talked into the decision by well meaning relatives and friends, many made similar arguments that have been presented here.

/edit to add: I am also a big fan of odds. If the odds skew heavily one way, I prefer to be on the plus side of the line where the odds are in my favor. People can rationalize all they want about the minus side of the line, but they tend to be making emotional bets, not rational ones. On any single roll of the dice, odds don't mean that much because of luck. However, over a lifetime of decisions, all those pluses add up, as do all the minuses. This is just one more decision, and I would much prefer to be on what I see as the 60% (or 80% side for those in good health with good genes) vs. what I see as the 40% (or 20% side).

BAJJERFAN

<< <i>Let me add that my view is influenced by a relative that did take SS payments at age 62. In her case it turned out to be a mistake for a variety of reasons that might not apply to other people. She was talked into the decision by well meaning relatives and friends, many made similar arguments that have been presented here. >>



Everyone has to evaluate their own personal situation. Some do it by necessity and some by choice. If you can afford to take it and invest it, you will probably do better than waiting. I took mine at 63 since waiting to 66 would have cost me about $65K and I didn't want to start depleting my retirement savings that soon. I have no regrets.

I suppose it's possible that some might have regrets about taking it out too soon. That can be undone simply by returning all of the money that the SSA has paid out to you. Of course if you've already spent it, that could be a problem.

golden

Take it early. Get all you can out of SS while there is still some to get.

Baley

Well there are three main answers: No, wait and take the money later. Yes, take the money now and spend it. (and the third is take the money and save it as money)

The argument for take the money later is essentially, by waiting, you get a larger number of dollars over the long run when "the curves cross"

The argument for taking the money sooner and saving it as money in a bank or as cash are that if you don't make it to the curve cross point, you get more dollars by starting sooner.

As for taking the money sooner and spending it, that breaks down into two main branches: spend it on living, or spend it on investing.

The spend it living better, by eating better, having more experiences, having nicer stuff around you, and generally stimulating "the economy" with your spending and consumption

The investing part breaks down into infinite things you could buy with the intent of holding and selling later for more money for spending on living, than you would otherwise have by saving as cash, and far more for use later than if you'd spent it as you got it. Gold is one of those things you could invest in, and also look at and heft in the meantime.

There are other things to invest in that might grow more or less than the gold would in value, and they'd have different risk /reward dynamics, but any recognized, liquid, general type of investment would be better than just spending the money as you go and have nothing to show for it. Unless those memories of the betterlifestyle are "worth it" for the individual.

These are very personal decisions that we will face, and all handle differently. I'm a middle of the road, split-the-difference kind of guy, so if my choices were to start at 62, 65, or 68, I'd probably choose the 65. That way, my chances of doing exactly the wrong thing is reduced, at the admitted expense of a reduced probability of doing exactly the right thing.

ricko

Red Tiger has the best advice.... and, speaking from experience, it works.... Cheers, RickO

bluelobster

<< <i>

<< <i> Buying an ounce a month would be better than gambling the money away at the local casino or drinking it away at the local bar, >>



Now, that's just crazy talk.. ;~

roadrunner

Factors also to be considered that probably can't be planned for include COLA adjustments if any (calculated off of CPI), the strength of the US dollar and it's buying power, and modifications and alterations to the SS program which is never guaranteed. Those factors will also determine your payout. The government would probably recommend to J6P the course of action that will most benefit the govt in the long run. I suspect that would be a recommendation of delaying it as long as you can. The 1900 life expectancy of 46 years for working males is also weakened by the large # of deaths occurring before age 10. A white male making it to age 30 back then was projected to live to 64+. If making it to age 40 the projection was to 67 (same projection as it was in 1850). In the past 110 years modern medicine has tacked on 7 years of life to those reaching 60, 5 additional years for those reaching 70, and 3 years for those reaching 80. Interesting that back in 1990, those same additions (from 1900-1990) were 3, 2, 1 respectively. I'd have expected that to be a lot larger.

BAJJERFAN

<< <i> The government would probably recommend to J6P the course of action that will most benefit the govt in the long run. I suspect that would be a recommendation of delaying it as long as you can. >>



Hopefully, in their eyes you'll be dead by then.

If one is almost wholly dependent on SSA funds for their retirement income $1600 a month is better than $1200 per month, but in either case you're in a world of hurt. If you don't have much saved for retirement, chances are you'll be taking SSA benefits near the lower end instead of near the top end.

In the OP's scenario, I'd take the $$$ now and invest it and not worry so much about 15-20 years down the road. Then again "Joe Twelve Pack is not wealthy in this hypothetical as much of his extra money went towards out of state bowling tournaments and the occasional upgrade to Michelob" may not be the best custodian of those funds/assets.