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Personal Finance Advice and Education! (1 Viewer)

Andrew74

Footballguy
Quick tax preparation software question. My investments are all index funds, including IRAs, 401ks and a few plain ol' investments. The IRAs and 401k are all monthly (IRA) or bi-weekly (401k) cost-sharing type buys. I don't sell funds at all. Do I need to use the Premier version of TurboTax, or is the Deluxe version good enough since I am not buying/selling individual stocks or selling funds?
I use the Deluxe version.  I have 3 taxable brokerage accounts that have some trading and haven’t found the Deluxe version lacking for anything. 

 

Sand

Footballguy
Unless I am missing something, 35x or 30x seems like a really high figure.  If you use the 4% rule (flawed as it is), that gets you to 25x.

I am looking at retirement now at 20x, a really small pension, and social security in 10 years.  And Fidelity's model thinks I am in pretty good shape.
Pensions help a great deal.  I don't have that.  But, your right.  35x ain't bad.

 

-OZ-

Footballguy
Unless I am missing something, 35x or 30x seems like a really high figure.  If you use the 4% rule (flawed as it is), that gets you to 25x.

I am looking at retirement now at 20x, a really small pension, and social security in 10 years.  And Fidelity's model thinks I am in pretty good shape.
30 is reasonable imo, 35 very conservative. 
Imo Many people seem to be overestimating their expenses in 20 years, underestimating SS and their flexibility. Or they’re planning on living near their base level.  They also could be factoring in long term care, as we all should.

Those of us planning to spend a decent amount on optional things or experiences have greater flexibility. Therefore our “SWR” is higher because we can drop it when needed. Obviously the pension helps a LOT, as I have no doubt we’ll be able to live decently on the pension, decent health insurance, a paid off house, and SS. So I have no problem with a 6% or slightly higher withdrawal rate. 
 

to put it another way, the risk of lean fire is more than the risk in regular fire which is greater than fat fire. Assuming you’re willing to make decisions along the way. 

 
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pecorino

Footballguy
About time for an update to a post that I made so long ago that I cannot find it. In actuality, it was only about a year ago when I decided to study for and take the SIE and Series 65 exams to set myself on a path to becoming a financial advisor. Those exams were kind of fun to study for (if you like this sort of stuff) and I passed both of them last summer. My career has been in education at independent schools and I wanted to make myself more marketable plus possibly make a career change. This year's hiring season for schools is winding down, at least for the positions I'm seeking, and I'm not getting much love, so I applied to be a financial planner with Morgan Stanley. You can, too, on their web site.

The process was very cool. Step one is to upload your resume and give them some personal information. Then they have you take a 25-question, timed multiple choice reasoning test. It's been a while since I've done the GREs, but some of these puzzles struck me as harder than that. Lots of logic and deduction. It was fun as well. Guess I passed because then they invite you to do an online simulation of a typical day-in-the-life of a financial planner. I probably clicked on some radio button promising that I would not disclose anything about this part of the interview so I'll omit specifics but it was very cool. The simulation gave an example of what could happen to roil the markets (Russia, anyone?) and had you navigating calls or emails from anxious clients throughout the day. They also asked how you would build you book and forge relationships. Again, I must have done well enough because they invited me to the final step: a 20-minute video interview where they ask seven questions and you have three minutes to record your video answers, kind of like over Zoom. That was the most traditional part of the interview process and I would have preferred to talk with a person rather than record myself, so it was my least favorite part. But I was very impressed with their overall process, the tech worked very smoothly, and I really loved the puzzles and the simulation. To be continued if I hear from them and actually talk to a human...

 

-OZ-

Footballguy
About time for an update to a post that I made so long ago that I cannot find it. In actuality, it was only about a year ago when I decided to study for and take the SIE and Series 65 exams to set myself on a path to becoming a financial advisor. Those exams were kind of fun to study for (if you like this sort of stuff) and I passed both of them last summer. My career has been in education at independent schools and I wanted to make myself more marketable plus possibly make a career change. This year's hiring season for schools is winding down, at least for the positions I'm seeking, and I'm not getting much love, so I applied to be a financial planner with Morgan Stanley. You can, too, on their web site.

The process was very cool. Step one is to upload your resume and give them some personal information. Then they have you take a 25-question, timed multiple choice reasoning test. It's been a while since I've done the GREs, but some of these puzzles struck me as harder than that. Lots of logic and deduction. It was fun as well. Guess I passed because then they invite you to do an online simulation of a typical day-in-the-life of a financial planner. I probably clicked on some radio button promising that I would not disclose anything about this part of the interview so I'll omit specifics but it was very cool. The simulation gave an example of what could happen to roil the markets (Russia, anyone?) and had you navigating calls or emails from anxious clients throughout the day. They also asked how you would build you book and forge relationships. Again, I must have done well enough because they invited me to the final step: a 20-minute video interview where they ask seven questions and you have three minutes to record your video answers, kind of like over Zoom. That was the most traditional part of the interview process and I would have preferred to talk with a person rather than record myself, so it was my least favorite part. But I was very impressed with their overall process, the tech worked very smoothly, and I really loved the puzzles and the simulation. To be continued if I hear from them and actually talk to a human...
Good luck! 
Can you speak to compensation model and what hours you expect to pull? I have very little desire to do this full time and don’t want to go AUM. 

 

ConstruxBoy

Kate's Daddy
About time for an update to a post that I made so long ago that I cannot find it. In actuality, it was only about a year ago when I decided to study for and take the SIE and Series 65 exams to set myself on a path to becoming a financial advisor. Those exams were kind of fun to study for (if you like this sort of stuff) and I passed both of them last summer. My career has been in education at independent schools and I wanted to make myself more marketable plus possibly make a career change. This year's hiring season for schools is winding down, at least for the positions I'm seeking, and I'm not getting much love, so I applied to be a financial planner with Morgan Stanley. You can, too, on their web site.

The process was very cool. Step one is to upload your resume and give them some personal information. Then they have you take a 25-question, timed multiple choice reasoning test. It's been a while since I've done the GREs, but some of these puzzles struck me as harder than that. Lots of logic and deduction. It was fun as well. Guess I passed because then they invite you to do an online simulation of a typical day-in-the-life of a financial planner. I probably clicked on some radio button promising that I would not disclose anything about this part of the interview so I'll omit specifics but it was very cool. The simulation gave an example of what could happen to roil the markets (Russia, anyone?) and had you navigating calls or emails from anxious clients throughout the day. They also asked how you would build you book and forge relationships. Again, I must have done well enough because they invited me to the final step: a 20-minute video interview where they ask seven questions and you have three minutes to record your video answers, kind of like over Zoom. That was the most traditional part of the interview process and I would have preferred to talk with a person rather than record myself, so it was my least favorite part. But I was very impressed with their overall process, the tech worked very smoothly, and I really loved the puzzles and the simulation. To be continued if I hear from them and actually talk to a human...
Very cool and congrats on passing the tests. I am trying to join my cousin's small financial advisory firm. I took and passed the SIE right before Covid hit and started studying for the 7 and 66. But Covid has pushed back their plans to expand in my city as right now they have very few clients here. So they're hoping to be ready for me by early summer and start my re-study for the 7 and 66. But if that doesn't happen, I may just try one of the bigger boys like you did. Sounds like a fun process. 

 

pecorino

Footballguy
Good luck! 
Can you speak to compensation model and what hours you expect to pull? I have very little desire to do this full time and don’t want to go AUM. 
Thanks. I know very little about specifics but believe it is a salaried position (a low number) augmented by commissions. That mix may evolve as my client list grows. If I had to hazard a number, I'd guess that the entry-level pay along with commissions might be somewhere in the $50K - $70K range.

 

pecorino

Footballguy
Very cool and congrats on passing the tests. I am trying to join my cousin's small financial advisory firm. I took and passed the SIE right before Covid hit and started studying for the 7 and 66. But Covid has pushed back their plans to expand in my city as right now they have very few clients here. So they're hoping to be ready for me by early summer and start my re-study for the 7 and 66. But if that doesn't happen, I may just try one of the bigger boys like you did. Sounds like a fun process. 
Thanks. I assume the big boys have no shortage of clients and may stretch to fill open positions. Tons of boomers retiring or approaching retirement everyday, a new-found cadre of younger folks flush with cash from the government who are learning about investment, and everything in between. Feels like a good time to get into the profession.

 

DallasDMac

Footballguy
Sorry, but one more tax question. As you may recall, last year I had to recharacterize my Roth IRAs to Traditional when I had an unexpected bump in income that put me over the max AGI threshold for Roth IRA contributions. I did as my tax software recommended, recharacterizing the Roth contributions to a Traditional IRA. Fast forward to this year's tax software, it is telling me I need to file an appended 2020 return. As I recharacterized and filed as traditional per the software's guidance, does that seem right? Or is the software misguiding me this year? I am wondering if perhaps it is because there were gains or losses on the recharacterized contributions? That would perhaps make sense, but the software never really said why. It just said... amend.

Thanks...

 

NutterButter

Footballguy

PhillipPhoto

Footballguy
Would anyone consider buying 1/13 of a house? https://www.redfin.com/SC/Edisto-Island/5-Inlet-Point-Rd-29438/home/77070536
 

You aren’t allowed to rent out your weeks through a rental agency but you can rent to friends and family.  I’d be tempted, figure if you actually could use all 4 weeks that’s probably over $12,000/year in value. If we were closer or retired I’d strongly consider it. Great looking place too. 
Yeah but 12 x 150,000 is 50% over estimate.  Someone is making out, too timeshare-ish for me.  Wonder if there are maintenance fees or anything.  Find 7 friends to go in with you to buy something similar on your own and turn those 4 weeks into 6.5.  Or just vacation wherever you want each year for less.

 

-OZ-

Footballguy
In all seriousness not that I'll ever do this, but how does the payment of utilities, taxes, general upkeep, repairs, remodeling,  happen if its 12 different owners?  
I assume everyone just shares the cost. But that seems inefficient as there’s little incentive to not waste power. 

Yeah but 12 x 150,000 is 50% over estimate.  Someone is making out, too timeshare-ish for me.  Wonder if there are maintenance fees or anything.  Find 7 friends to go in with you to buy something similar on your own and turn those 4 weeks into 6.5.  Or just vacation wherever you want each year for less.
Completely on board with the friends plan. I don’t think just under $2M for that home, waterfront, is far off. 
but yeah, we’ll almost certainly just vacation multiple times at different places. The benefit of owning is much less when you share the home like this. 

 

NutterButter

Footballguy
-OZ- said:
I assume everyone just shares the cost. But that seems inefficient as there’s little incentive to not waste power. 
Not to mention who manages the logistics of that.  Who's the one that's actually paying these bills and then having to collect from the other 11 people.  Seems like it could be a real headache and just not worth it.  

 

Tom Hagen

Footballguy
Not to mention who manages the logistics of that.  Who's the one that's actually paying these bills and then having to collect from the other 11 people.  Seems like it could be a real headache and just not worth it.  
Off the top of my head, you would probably want to form an LLC and treat it as a partnership.  Set an annual budget with room for contingencies and a reserve and divide it by the number of owners.  One person would have to volunteer to handle collecting money and paying bills. At the end of the year, the budget would need to be adjusted for any surplus or shortfall. It would almost be like a mini HOA.

The advantage of the LLC is that in addition to liability protection if someone wants out they could be bought out of the LLC without the hassle of removing them from the deed.

 

PhillipPhoto

Footballguy
-OZ- said:
I assume everyone just shares the cost. But that seems inefficient as there’s little incentive to not waste power. 

Completely on board with the friends plan. I don’t think just under $2M for that home, waterfront, is far off. 
but yeah, we’ll almost certainly just vacation multiple times at different places. The benefit of owning is much less when you share the home like this. 
Zillow has it at 1.2M and some change.

Off the top of my head, you would probably want to form an LLC and treat it as a partnership.  Set an annual budget with room for contingencies and a reserve and divide it by the number of owners.  One person would have to volunteer to handle collecting money and paying bills. At the end of the year, the budget would need to be adjusted for any surplus or shortfall. It would almost be like a mini HOA.

The advantage of the LLC is that in addition to liability protection if someone wants out they could be bought out of the LLC without the hassle of removing them from the deed.
I'd wager it's already set up just like a timeshare by the guy/corp that's looking to make a quick 500K plus yearly fees.

 

-OZ-

Footballguy
Off the top of my head, you would probably want to form an LLC and treat it as a partnership.  Set an annual budget with room for contingencies and a reserve and divide it by the number of owners.  One person would have to volunteer to handle collecting money and paying bills. At the end of the year, the budget would need to be adjusted for any surplus or shortfall. It would almost be like a mini HOA.

The advantage of the LLC is that in addition to liability protection if someone wants out they could be bought out of the LLC without the hassle of removing them from the deed.
Right. The people who are buying into this probably aren’t taking the time and stress to manage it themselves. 

Zillow has it at 1.2M and some change.

I'd wager it's already set up just like a timeshare by the guy/corp that's looking to make a quick 500K plus yearly fees.
It’s entirely possible my comps are off, as I’ve been dreaming about HHI more, but $1.2 seems really low for that house at that location. 
really just wondering if anyone thought it was a good idea. I’m 99% sure we’re just going to move to one of the nearby lakes and take a healthy amount of vacations. We’re taking 5 this year as it is. Two spring breaks, one to a lake, the other to the gulf; one to Costa Rica (church mission trip), one to visit family, then our annual HHI trip in October. I can get behind this plan every year going forward. 

 

Craig_MiamiFL

Footballguy
I'd be steering clear of that timeshare with the $400+/mo HOA fees. 

At that point, I'd even prefer an Air Bnb where can pick new location (if desired) each time :shrug:  Less hassle between timeshare and HOA.

 
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Maik Jeaunz

Footballguy
quick question, and I apologize if this has already been covered in the thread...

I currently max out my 401k each year and have a separate brokerage account for "fun". I opened a Roth IRA to use for high growth stuff to avoid the tax, but it turns out I can't actually fund the account because we're over the income cap for contributions. I don't really want to open a traditional IRA for various reasons. I know I can do a "backdoor Roth conversion" with a traditional, but that just seems like a pain.

are there any other options for tax-advantaged trading, or should I just bite the bullet and continue to use my brokerage account for everything?

 

Andrew74

Footballguy
quick question, and I apologize if this has already been covered in the thread...

I currently max out my 401k each year and have a separate brokerage account for "fun". I opened a Roth IRA to use for high growth stuff to avoid the tax, but it turns out I can't actually fund the account because we're over the income cap for contributions. I don't really want to open a traditional IRA for various reasons. I know I can do a "backdoor Roth conversion" with a traditional, but that just seems like a pain.

are there any other options for tax-advantaged trading, or should I just bite the bullet and continue to use my brokerage account for everything?
A backdoor Roth isn’t a pain.  It’s super easy. I do my own taxes and the work there is simple (and I’m not an accountant).  I can’t think of anything else for you. Really rec’d doing the backdoor. 

 

PhillipPhoto

Footballguy
quick question, and I apologize if this has already been covered in the thread...

I currently max out my 401k each year and have a separate brokerage account for "fun". I opened a Roth IRA to use for high growth stuff to avoid the tax, but it turns out I can't actually fund the account because we're over the income cap for contributions. I don't really want to open a traditional IRA for various reasons. I know I can do a "backdoor Roth conversion" with a traditional, but that just seems like a pain.

are there any other options for tax-advantaged trading, or should I just bite the bullet and continue to use my brokerage account for everything?
Open a traditional and fund 6K (7K if over 50).  Next day call the bank and tell them to convert it to the Roth, not tax deductible.  Leave pennies in the traditional and keep it open so you can do it again next year.  It's a 5 minute phone call.  I did mine this morning.

Hurry and you can do it twice, once for last year (if you haven't already) and once for this year.  12K in before April 15th.  

 
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The Z Machine

Footballguy
Ugh.  Did my first pass at my taxes last weekend... I owe Uncle Sam 5 figures.  That includes an underpayment penalty of like $150.

My refi pushed my into the standard deduction category, nullifying the big charity contributions this year.

 

NutterButter

Footballguy
Ugh.  Did my first pass at my taxes last weekend... I owe Uncle Sam 5 figures.  That includes an underpayment penalty of like $150.

My refi pushed my into the standard deduction category, nullifying the big charity contributions this year.
Maybe you can get a refund.  I'm kidding.   

 

b-snatchers

Footballguy
So a Roth IRA question.

If you meet the income limit,  you can put in 6K (or 7K if over 50 years old) each year, and you have until April of this year for 2021 contributions, correct?

Also, the 5 year time period applies to earnings only and not contributions for when you can withdraw them correct? So I can take out any contributions whenever I want but need to wait at least 5 years before touching any earnings?

 

PhillipPhoto

Footballguy
So a Roth IRA question.

If you meet the income limit,  you can put in 6K (or 7K if over 50 years old) each year, and you have until April of this year for 2021 contributions, correct?

Also, the 5 year time period applies to earnings only and not contributions for when you can withdraw them correct? So I can take out any contributions whenever I want but need to wait at least 5 years before touching any earnings?
Correct.

Correct. The five-year period starts on the first day of the tax year for which you made a contribution to any Roth IRA before you can withdraw earnings tax free.

 

supermike80

Footballguy
Correct.

Correct. The five-year period starts on the first day of the tax year for which you made a contribution to any Roth IRA before you can withdraw earnings tax free.
So on the backdoor Roth IRA.  You can't convert a large one right? Or don't want to because of the tax implications?   

I have multiple 401K's that I would roll over from employer to employer until one day I decided to not roll over and converted it to an IRA so I could have a little more fund flexibility.  Don't flip that correct?

 

supermike80

Footballguy
Been a HUGE push from financial advisors regarding annuities and ULI's.

So far, I don't see a huge advantage to either over a traditional 401K.   Who has more insight?

 

PhillipPhoto

Footballguy
So on the backdoor Roth IRA.  You can't convert a large one right? Or don't want to because of the tax implications?   

I have multiple 401K's that I would roll over from employer to employer until one day I decided to not roll over and converted it to an IRA so I could have a little more fund flexibility.  Don't flip that correct?
Once you converted the 401Ks to a regular IRA you made yourself ineligible for contributing to a Roth without tax implications.  The tax man looks at all types of IRA account as one big IRA.  If you do a backdoor you owe a percentage of tax on the 6,000 dollars.

Either way a) you have tax implications because you have other IRAs or b) you want to put larger sums of money into Roth, you have to do the math to determine if paying taxes now on previous gains is worth future gains being tax free.  There are advantages to having taxable and non-taxable accounts in retirement too.

One strategy I've been considering lately is waiting until I retire, have zero income and then rolling all 401K over to ROTH, paying tax on gains during a year I have zero income (living off cash) and then everything would be tax free from then on out.

 

-OZ-

Footballguy
Been a HUGE push from financial advisors regarding annuities and ULI's.

So far, I don't see a huge advantage to either over a traditional 401K.   Who has more insight?
The only advantage is bring reasonably sure your money won’t run out which allows you to take more risk elsewhere. Either by keeping other funds in equities longer or a higher withdrawal rate in retirement. as a concept I think they make some sense. But they’re often horribly expensive. 
My pension is basically an annuity and apparently would cost around $1.5 million to buy a similar single person annuity without extras on the market. But it only pays about the same as a 4% WR and the money would be gone if I died. 

 

The Z Machine

Footballguy
Did another pass at the taxes and I'm in a situation where I should still itemize even if the standard deduction is better.  I will get enough back in a state refund (MD) to offest the difference and more.  State filing must match federal so it I itemize on one, they other follows.  Only about $500 difference all-in, but that's $500 less I have to outlay overall.  Still above 5 figures owed.

 

-OZ-

Footballguy
Did another pass at the taxes and I'm in a situation where I should still itemize even if the standard deduction is better.  I will get enough back in a state refund (MD) to offest the difference and more.  State filing must match federal so it I itemize on one, they other follows.  Only about $500 difference all-in, but that's $500 less I have to outlay overall.  Still above 5 figures owed.
I’m still cursing my decision to use Fundrise due to their K1 schedule. I’ll get like $1500 back but probably can’t file for a couple more weeks. 

 

ConstruxBoy

Kate's Daddy
The only advantage is bring reasonably sure your money won’t run out which allows you to take more risk elsewhere. Either by keeping other funds in equities longer or a higher withdrawal rate in retirement. as a concept I think they make some sense. But they’re often horribly expensive. 
My pension is basically an annuity and apparently would cost around $1.5 million to buy a similar single person annuity without extras on the market. But it only pays about the same as a 4% WR and the money would be gone if I died. 
To be fair, that's a pretty big advantage. I'm coming around to the idea of doing this as a deferred annuity that starts when I'm 80. Combine that with a long term care plan and social security and it may be worth having less money when you start retirement but being covered after 80 and only having 15 years to worry about with your nest egg. Lots of people underspend early in retirement, when they physically can do more, because they're worried about running out of money. 

The other reason advisors push them more now is getting money out of your estate and to your heirs with the elimination of the stretch IRA. But yes, you need to watch the fees and account for them. 

 

-OZ-

Footballguy
To be fair, that's a pretty big advantage. I'm coming around to the idea of doing this as a deferred annuity that starts when I'm 80. Combine that with a long term care plan and social security and it may be worth having less money when you start retirement but being covered after 80 and only having 15 years to worry about with your nest egg. Lots of people underspend early in retirement, when they physically can do more, because they're worried about running out of money. 

The other reason advisors push them more now is getting money out of your estate and to your heirs with the elimination of the stretch IRA. But yes, you need to watch the fees and account for them. 
people think I’m nuts but I’m really starting to think a flexible 7% WR is doable with the safety nets in place. I’ve tested it out with different sims, mostly my own, including an overall drop of 3% annual in the first decade and down years in 5 of the first 8 (worst scenario within reason imo). But only if you’re flexible, have the safety nets in place, a few years in cash / I bonds, and assume SS at 70. 

 

PhillipPhoto

Footballguy
So back to Social Security.   Leaning more towards collecting at 62.  You can invest it yourself to get back what the SS increase is at when 65 or 70 and you never know how long you are going to live so a bird in hand equals 2 in the bush.

Thoughts?

 

stbugs

Footballguy
So back to Social Security.   Leaning more towards collecting at 62.  You can invest it yourself to get back what the SS increase is at when 65 or 70 and you never know how long you are going to live so a bird in hand equals 2 in the bush.

Thoughts?
I’m definitely planning on 62 as well. I think about hoping that we’ll have a nice nest egg for my boys to inherit in a much more expensive world. That’s one bit advantage I see is that if you get a nice return of 6-7% you’ll have a large enough SS egg (or IRA/brokerage egg if you use SS for living expenses l) that the return on that egg in 8 years is equal to the difference in payout. If you equal it then that egg getting you that extra amount is your egg and if you and your wife pass, the kids get it. In the take SS at 70, that egg producing the extra amount over 62 payments is the government’s and when you and your wife pass it’s gone.

 

Gilroy34

Footballguy
So back to Social Security.   Leaning more towards collecting at 62.  You can invest it yourself to get back what the SS increase is at when 65 or 70 and you never know how long you are going to live so a bird in hand equals 2 in the bush.

Thoughts?
I don't plan on retiring until at least 65 so I will be waiting until FRA before starting ss.  The 25% reduction in benefits by taking it early is a hard pill to swallow and I recommend people waiting unless they really need the income or have a shorter life expectancy.

 

PhillipPhoto

Footballguy
I don't plan on retiring until at least 65 so I will be waiting until FRA before starting ss.  The 25% reduction in benefits by taking it early is a hard pill to swallow and I recommend people waiting unless they really need the income or have a shorter life expectancy.
I had to look it up.  Your 25% is waiting from age 67 too 70.  (3 years at 8.4%)

It jumps up 45% from 62 to 67.  (5 years at 9.0%)

But the thing is, you're not collecting and gaining interest.  You don't get a lump sum for previous years when you wait. 

Using round numbers, IF you can get 8% return, and assuming a nice round number of 1K per month and you die at 80 years old here is how the numbers work out:

62 - 1,000 - 450K

67 - 1450 - 374K

70 - 1812.5 - 315K

I'm going to do a spreadsheet with various percentages, but, it sure looks like for good investment returns it take a while to overcome not getting your hands on it sooner.

 

Andrew74

Footballguy
To be fair, that's a pretty big advantage. I'm coming around to the idea of doing this as a deferred annuity that starts when I'm 80. Combine that with a long term care plan and social security and it may be worth having less money when you start retirement but being covered after 80 and only having 15 years to worry about with your nest egg. Lots of people underspend early in retirement, when they physically can do more, because they're worried about running out of money. 

The other reason advisors push them more now is getting money out of your estate and to your heirs with the elimination of the stretch IRA. But yes, you need to watch the fees and account for them. 
How many people need to get money out of their estate?  Married exemption is over $24mm now.  If I have that much money, I’m not worried about outliving my money. And there are other ways to reduce estates without paying for an annuity (GRATs, SLATs, etc).

 

Gilroy34

Footballguy
I had to look it up.  Your 25% is waiting from age 67 too 70.  (3 years at 8.4%)

It jumps up 45% from 62 to 67.  (5 years at 9.0%)

But the thing is, you're not collecting and gaining interest.  You don't get a lump sum for previous years when you wait. 

Using round numbers, IF you can get 8% return, and assuming a nice round number of 1K per month and you die at 80 years old here is how the numbers work out:

62 - 1,000 - 450K

67 - 1450 - 374K

70 - 1812.5 - 315K

I'm going to do a spreadsheet with various percentages, but, it sure looks like for good investment returns it take a while to overcome not getting your hands on it sooner.
Understand I know a lot of people who prefer to take it early.  The risk of living well past 80 is offset a little bit by waiting and taking the higher income though.  One concern I do have is whether my social security gets reduced due to means testing or if solvency becomes an issue.

 

PhillipPhoto

Footballguy
Understand I know a lot of people who prefer to take it early.  The risk of living well past 80 is offset a little bit by waiting and taking the higher income though.  One concern I do have is whether my social security gets reduced due to means testing or if solvency becomes an issue.
Right. When I get some time I'm going to spreadsheet it. My grandpa, mom and dad all made it to 90-94 so I'm going to see if I find out if there is a better break point or not. 

 

ConstruxBoy

Kate's Daddy
How many people need to get money out of their estate?  Married exemption is over $24mm now.  If I have that much money, I’m not worried about outliving my money. And there are other ways to reduce estates without paying for an annuity (GRATs, SLATs, etc).
Fair enough. But certainly people affected by the estate tax, which could still get reduced, would be interested. 

 

-OZ-

Footballguy
So back to Social Security.   Leaning more towards collecting at 62.  You can invest it yourself to get back what the SS increase is at when 65 or 70 and you never know how long you are going to live so a bird in hand equals 2 in the bush.

Thoughts?
there’s definitely some value in taking it early and investing. Being 17 years away, I’m just planning to evaluate when we get closer. One issue would simply be how much risk are you willing to take with those investments at 62-70? 100% equities in recent years looks great. Heavy on bonds or down years, much less so. To a degree, knowing that we have what we need and not needing to take the risk leads to a preference to wait.  SS is basically fixed income and should be considered as part of your portfolio, not in a vacuum. 
The other part is your spouse being able to claim half your payment, for us it makes more sense for me to wait, I think.  
plus, I plan to live to 99 🤷

 
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PhillipPhoto

Footballguy
-OZ- said:
there’s definitely some value in taking it early and investing. Being 17 years away, I’m just planning to evaluate when we get closer. One issue would simply be how much risk are you willing to take with those investments at 62-70? 100% equities in recent years looks great. Heavy on bonds or down years, much less so. To a degree, knowing that we have what we need and not needing to take the risk leads to a preference to wait.  SS is basically fixed income and should be considered as part of your portfolio, not in a vacuum. 
The other part is your spouse being able to claim half your payment, for us it makes more sense for me to wait, I think.  
plus, I plan to live to 99 🤷
Interesting.  I just ran it with my real numbers (not including my wife's) and did 6% assumed interest with it all reinvested. 

Starting at 67 overtook the 62 at age 91.  Starting at 70 overtook the 62 at age 92.

Then I did it with my wife's (1.5 times my numbers) and it only bumped it up a year, 90 and 91.

I looked back and all the models ran by my financial advisor they started it at age 65 for whatever reason (I never messed with it until now), default retirement age I guess.  But I'm retiring early and they have me living off cash until social security starts and then retirement accounts last.  And at age 72 you have to start taking mandatory distributions from your retirement accounts.

I agree with your response about risk and evaluating it when age 62 comes along.  My wife is 6 years older than me so she'd be able to start withdrawing about the time I retire, if we decide to get it early.  Does she have to use hers until I retire or does she still get half of mine?  Anyway, I don't see any reason we'd wait unless my retirement accounts are suffering and we need to mitigate the risk.  If retirement accounts are good mandatory distributions are at age 72 anyway and I don't need to be flush with extra cash when I'm 90 years old and too old to enjoy it.

 

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