If you missed Part 1, go here: http://tinyurl.com/yrl957
It would NOT make a lot of sense to dive right into Part2!
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Here’s Vanguard’s table, where they want to urge you to delay taking benefits until you capture the higher benefit. But it ignores how inflation rots your money!
*** begin quote ***
If you begin collecting Social Security benefits at And your monthly benefit* is By age 75, you will have received By age 80, you will have received By age 85, you will have received By age 90, you will have received
Age 62 $1,200 $187,200 $259,200 $331,200 $403,200
Age 66 $1,600 $172,800 $268,800 $364,800 $460,800
Age 70 $2,200 $132,000 $264,000 $396,000 $528,000
*** end quote ***
Able immediately collects 1200 at 62
Baker waits 3 years and collects 1600 at 65
Charlie waits 8 years and collects 2200 at 70
We need to consider that they die in each year until age 90, or elapsed time of 28 years. Then come up with what’s the average impact on their wealth.
We can assume that they will “save” it since premise #1 is if the need it then they would take it and use it.
If we assume that investment returns will sort of match inflation, then we can ignore that factor.
Able at age 62 gets his first check for 1200. Those dollars are different in purchasing power than Charlie’s first check for 2200 eight years later. So we have to do all calculations in constant dollars assuming 5% inflation.
So, in year one, a dollar received is worth 95 cents. In year 30, that dollar is worth 0.226 in constant dollars.
(See spread sheet below as a I run the numbers!)
Wow!!
Stunning as it may sound, in constant dollars, Able is the clear winner. This says that regardless of when they actually die, Able is always a winner.
It highlights another question. What about taxes? Factoring taxes, say 25% on the ½ of ssi payment is that enough to overcome Able’s head start in collecting?
Your comments?
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Year Discount Able Baker Charlie
1 1.000 14400
2 0.950 13680 28080 0 0
3 0.903 12346 40426 18240 0
4 0.857 10585 18240 51012 33879 0
5 0.815 8622 15639 59633 46616 0
6 0.774 6671 12738 66305 56472 0
7 0.735 4904 9856 71209 63718 0
8 0.698 3425 7245 18436 74634 68777 18436
9 0.663 2272 5060 12231 76906 72134 30667
10 0.630 1432 3357 7709 78337 74249 38376
11 0.599 857 2116 4615 79195 75516 42991
12 0.569 488 1267 2625 79683 76236 45616
13 0.540 264 720 1419 79946 76626 47035
14 0.513 135 389 728 80081 76826 47763
15 0.488 66 200 355 80147 76923 48118
16 0.463 31 97 165 80178 76968 48283
17 0.440 13 45 72 80191 76988 48355
18 0.418 6 20 30 80197 76996 48385
19 0.397 2 8 12 80199 77000 48397
20 0.377 1 3 5 80200 77001 48402
21 0.358 0 1 2 80200 77001 48403
22 0.341 0 0 1 80200 77001 48404
23 0.324 0 0 0 80200 77002 48404
24 0.307 0 0 0 80200 77002 48404
25 0.292 0 0 0 80200 77002 48404
26 0.277 0 0 0 80200 77002 48404
27 0.264 0 0 0 80200 77002 48404
28 0.250 0 0 0 80200 77002 48404
29 0.238 0 0 0 80200 77002 48404
30 0.226 0 0 0 80200 77002 48404
80200 77002 48404
# # # # #
| Year | Discount | Able | Baker | Charlie |
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