----- "Delaying Social Security As The Best Long-Term Return Money Can Buy" -----
The above phrase which Michael Kitces highlights in bold-face near the end of his article would appear better suited for selling cars than providing serious financial advice. ... However, based on that proposition (and assuming I just fell off the turnip-truck), is there any way by which I might mail some additional money to the government for them to invest for me in this wonderful opportunity?
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Kitices writes: "... ultimately, delaying Social Security benefits provides superior risk-adjusted returns to equities and portfolio investing in the long run. ... Obviously, this is not true in the short run – as noted earlier, it takes more than 15 years to breakeven at all. Yet if the retiree’s time horizon was that short, the proper investment would not likely be equities anyway."
1. I dispute the assertion that a retire with a 15-year time horizon would not want to own some equities. I don't think the smart folks at T. Rowe Price view it that way. Their Balanced Retirement Fund, designed for people already in retirement, carries about 40% equities. Even their conservative Spectrum Income Fund includes a 10-15% allocation to income-producing equities. If we include even a modest allocation to equities and corporate bonds in the investments of older people, I suspect many of his assumptions fail to hold water.
2. Kitices' reference to "superior risk-adjusted returns" have not been documented. He has not analyzed for us the risks of owning different types of equities, or different types of bonds, or tried to quantify for us the risks of potential drastic changes in either tax policy or SS structure - any of which could upset his delicate apple cart.
3. Kitices "proves" that deferring Social Security is a better investment than buying an annuity.
OK - I'll give him that one. What investment isn't?
4, It's somewhat incidental to the referenced article ... but part of the consideration is whom you would rather have in control of that sum of money, yourself or the government?
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I detest the pop-ups that have begun appearing asking me to send Mr. Kitices some $$ to subscribe to his newsletter. :)

Are you sure Social Security is taxed in Mass? From Mass.gov:

21. Are Social Security benefits taxable in Massachusetts? Is the Medicare tax withheld from my Social Security benefits deductible on my return?
Massachusetts does not tax benefits received from U.S. Social Security, Railroad Retirement (Tier I and II), Public Welfare assistance, Veterans' Administration payments or workers' compensation. Any portion of such income, which may be taxed under federal law, is not subject to Massachusetts's income tax.

Regarding the parts of Medicare - A is hospitalization, 100% covered (once you begin SS benefits or apply if you don't claim SS benefits by age 65); B is doctor services, typically 80% covered, and you pay a premium (currently $104/mo). That premium is inflation adjusted and may be higher for high income retirees. The premium also goes up, permanently, if you don't start part B within roughly a year of eligibility (unless you're still working w/group coverage).
D is for 'D'rugs. Since these are private insurance plans, their premiums vary, but are still subject to penalty and high income premiums like part B. And since these are nonstandardized, each insurer has a different formulary. Like employer plans, those are subject to change with little notice.
C is Medicare Advantage. Like the group PPO/HMO plans you're familiar with, they (usually) cover everything (including drugs) but have their own networks of physicians and hospitals. So it replaces A/B/D if you use it.
You always pay your Part B premium to Medicare (even if you take Medicare Advantage instead of vanilla Medicare parts A/B/D). Some Medicare Advantage plans charge extra (and provide extra benefits), some do not. The networks are the major drawback; IMHO the major plusses are a cap on out of pocket expenses and no additional part D (drug) premium. (Under "original" medicare, you'd need a Medicare Supplement - Medigap - plan for an out-of-pocket cap.)
Medicare has standardized Medicare Supplemental Plans, so what one insurer offers must be the same as what another insurer offers for the same plan. These plans go by letters - too complicated to go into here. Since new Medigap plans (starting in 2020) cannot cover all your deductibles (new law), Medigap plans C and F will be changing, though no one knows exactly how yet. To that extent, MJG is correct, you cannot know the future exactly. But you can still have a pretty good idea of what's coming down the (Mass) Pike.
Good luck.

Nothing wrong with 529 plans, but in the priority of savings they fall far lower on the savings ladder. I would first fully fund an employer's retirement match through a workplace / self directed retirement account. Second on the savings wrung would be to fully fund a Roth IRA. Third would be funding an emergency fund in a (taxable account) equal to 3-6-9-12 months of one's salary. As important, would be to have a plan to pay off high interest loans (revolving credit).
As a "good" parent we think saving for college is a requirement. My opinion is that the fewer dollars specifically ear marked for funding college the more dollars will be offered to your college student in financial aid (grants, loans, internships, work study, etc) as they are mostly all needs based.
Your college student should strive to be a good candidate to get into college (good academics, athletic, and civic minded), but they should also be a good candidate for financial help.
Nothing wrong with 529 plans other than you are short changing your kid the opportunity to receive financial aid and sticking them with the burden and guilt of your financial insecurity.
Let your kid be needy...they'll thank you for it.

Re msf's question:
JohnC is correct that "funds-of-funds" should be viewed differently and might warrant a higher allocation. One of these, RPSIX, currently comprises my largest holding at just over 14%.
1. I prefer to view money management decisions in terms of percentages (not in dollar sums).
2. I don't have set limits. However, I become uncomfortable when any one fund exceeds about 20% of total assets. With equity funds, 10% in any single fund is enough.
3. I believe it's wise to diversify (fairly evenly) among at least 3 different fund houses or other custodians.
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Added: The above reflects the thinking of a 70+ year-old, 15-20 years into retirement, already in the distribution stage. Were I younger, I'd have a higher risk tolerance and would be much more concentrated in a few good growth funds.

This is going to sound contrived but it's true as true could be. A hiking friend of mine always use to ride me for taking early benefits. He was a meticulous planner and had some longevity genes from his parents. He was fit as fit could be, no real history of any health issues, etc. etc. and had more than enough to enjoy a comfortable retirement. But he was bound and determined to milk SS for all it's worth and take his maximum benefits at 70 and live happily ever after. His motto financially was the more the better. You know where this is going. He passed away at age 67 - stroke related. While he was still slaving away in a consultancy business, his friends and I were hiking our lives away in the Great Outdoors. While frugality should be a lifelong pursuit, at some point you have to stop and smell the roses before it is too late.

Hi Guys,
I’m somewhat amazed at how many MFOers retired at so early an age. Contrary to earlier periods, nowadays older folks are and are planning to work longer.
You guys who opted for early retirement are swimming against the prevailing, but ever changing, tide. It’s great that you had the wherewithal to assemble the requisite financial resources to implement your preferences. Congratulations to all retirees of all ages!
The early retirement goal is an illustration of an eroding characteristic that contributed to our Nation’s original success story. I’m speaking of our famed hard work ethic. Mostly we came to America, not to extract riches from the soil and leave, but to toil the soil and build. We worked harder and longer than most others around the globe.
What was true in the past still remains true today, although to a lesser degree. Here’s a Link to a worldwide survey that lists annual hours worked by nation:
https://stats.oecd.org/Index.aspx?DataSetCode=ANHRS
Among developed nations, the US still works longer hours; compared to underdeveloped nations, that is not so. Note that our annual work hours have decreased slightly since 2000. But that’s not the trendline with our older population segment.
Today, approximately 80% of baby boomers anticipate that they will work beyond the normative retirement age. That’s likely to change because of our pernicious system of laws and rules. Remember that most laws are commands; they are prohibitive or compulsive by design with limiting options and opportunities. All this makes a retirement decision still more complex.
There are many personal reasons why the current trend is against early retirement. Work
tasks have become less physically and more mentally demanding that allows for a longer
work life. A worker may need the job to protect family financial security, or to keep healthy, or because he finds the job enjoyable and stimulating. This last reason seems especially attractive given today’s job market.
From a national perspective, a delayed retirement should also benefit the Nation’s prosperity and strength. Presumably, the retiree is incrementally adding more value in doing his assigned tasks than he is being paid. That’s a net increase in our GDP. Also, since he is presumably experienced at his job, his efficiency and effectiveness should be at a high profitable level. If it were not, an employee would choose a younger less talented individual who would command a lower salary.
It’s not altogether a bad thing that our aging population is migrating back to the workforce. Like most complex happenings, there are both pluses and minuses. But the current trend is clear: Our older folks are freely electing to rejoin that workforce for a variety of excellent reasons. Those of you who have chosen the “other path” have similarly made free choices to satisfy your own personal situations and preferences. More power to all our aging population.
By the way, the when to initiate SS benefits issue has no simple answer from my perspective. It depends on too many uncertain variables like how long you will actually live. The statistics can give you a rough number, but the actuality is something else entirely. As you might anticipate, I did Monte Carlo analyses on this matter without much final help. The uncertainties dominated any worthwhile insights. Make your best speculative guess and just do it.
I’ve enjoyed each and everyone’s story on this exchange. Each has its own logic and its own quirks. We’re all the same, yet we’re all so different. Thank you all for sharing.
Best Regards.

Neither the best written nor the best read article. The underlined phrase is just part of the sentence. Notice that it is set off by commas. I'll emphasize the effect of that punctuation by replacing the commas with parentheses:

Of course, the best way to maximize Social Security is to delay claiming benefits until full retirement age (which is climbing gradually to 67) or beyond.

That is, the "or beyond" applies to "the best way to maximize SS" is to wait until FRA or beyond. The parenthetical remark simply clarifies what FRA is - it does not assert that FRA is rising beyond age 67.
The title is misleading, because actuarially speaking, benefits (on a constant dollar basis) are the same regardless of when you start taking them. They are not reduced if you start them at age 62. Of course, if you take them earlier, you're spreading them over more years, so the rate at which you receive your benefits is reduced. (There are ancillary benefits, like spousal payments that are indeed reduced if you claim before FRA.)
@Junkster - New medicare supplemental policies starting in 2020 will not cover 100% of what Medicare doesn't pay. (You're grandfathered in, but Dex is not.) Specifically, "Under the doc-fix law, Medigap plans will no longer cover the annual Part B deductible for new enrollees ($147 this year). That will mean changes for Medigap "C" and "F" plans, the two most popular plan choices and the only ones that cover Part B deductibles. Starting in 2020, seniors would have to pay it themselves. "
That's from M*: What the Medicare 'Doc Fix' Means for Your Pocketbook
It's actually rather debatable whether Medicare supplemental insurance is even worth it (given that part A is 100% covered without it). Here's a column suggesting that these policies are cash cows for insurers. He overstates his case, but the numbers seem sound. IMHO, the main virtue of these policies is for catastrophic insurance (i.e. they cap out-of-pocket expenses).

Dex, everyone here enjoys your retirement articles including your personal journey. Did I miss it or have you written why you retired at such a young age? I took early SS at 62 (4/09) and have not regretted it in the least. That was money I didn't have to take from my trading accounts. I was *lucky* the markets were so vigorous after that time.

I did not write about it. I had a very easy office job, watched TV and read the internet, people worked for me and made good money. I worked since I was 15 and it just felt like the right time. I have a travel trailer and like to travel. Right now I'm at home getting dental work, check ups and soon a colonoscopy. I'm 60 now and might like to find some work during the winter months Nov - Jan. Other then that life is good.

Dex, everyone here enjoys your retirement articles including your personal journey. Did I miss it or have you written why you retired at such a young age? I took early SS at 62 (4/09) and have not regretted it in the least. That was money I didn't have to take from my trading accounts. I was *lucky* the markets were so vigorous after that time.
Edit: Wait till you get to 65 and Medicare. In my opinion the greatest thing since sliced bread. But you have to get the supplemental policy that covers 100% of what Medicare doesn't pay.

I wonder if the impact of 0-Care on people is forcing them in taking SS early?
Another thought is that by taking SS early, one does not have to use their tax deferred retirement savings, in the hope they will experience gains. In my calculations, if I take SS at FRA ,my break even age is 70 figuring the total amount received if I took it at 62.

Did you include COLA in your calculation? Remember, you will often receive COLA increases most years and they are cumulative. Also, this lower income may qualify you for programs that are income dependent.
The hardest nut seems to be covering healthcare costs yourself during these early retirement years prior to qualifying for Medicare at age 65.

I wonder if the impact of 0-Care on people is forcing them in taking SS early?
Another thought is that by taking SS early, one does not have to use their tax deferred retirement savings, in the hope they will experience gains. In my calculations, if I take SS at FRA ,my break even age is 70 figuring the total amount received if I took it at 62.

http://www.marketwatch.com/story/3-out-of-4-retirees-receiving-reduced-social-security-benefits-2015-05-05
"Of course, the best way to maximize Social Security is to delay claiming benefits until “full retirement age,” which is climbing gradually to 67, or beyond. A person due to receive a benefit of $1,000 at a full retirement age of 66 would receive only $750 at age 62 (the earliest age at which most people can claim benefits) – and $1,320 at age 70."
Note that underlined part. People will still need to take it earlier but (I'm guessing) when they do take it earlier and the full amount is 67 or later they will receive even less at 62.
This adds to my "give up hope of retiring early" thread.
From what I not see about my finances (having been retired for 9 years, starting at 51) I am feeling less flush. A the major change in that feeling is Obamacare. I was paying $3,000/year before OC. I will be paying $7,200 under OC. If, OC was the law before my retiring I may have had second thoughts.

"I put 10% of a price target fund (an appropriate year) as a control on how I was doing.While probably not as capable as some on this site I suspect I am at least average. Some years I outperformed, other years I didn't My underperformance in recent years occurred for two major reasons. Too much in emerging markets in recent years and using more stable income than a bond fund. Both strategies were wrong in recent years/I think you have to be very capable to have a diversified portfolio that will outperform a decent target fund over a longish period of time."
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Jerry: I assume your reference is to T. Rowe Price. Yep - they do a great job overall. I like not only their retirement funds, consisting largely of holdings in other Price funds, but also most of their "fund-of-funds." During healthy markets it's difficult for an individual to outperform these. What you give up is the ability to overweight sectors (be it cash, currencies, gold or whatever) that you think are undervalued. I'm not sure that's a great idea anyway.
Currently hold TRRIX and RPSIX. I read somewhere once that they give investors a slight break when they determine fees for these funds, figuring it's cheaper for them to administer a single fund for someone rather than having the person own, say, a half dozen different funds. I haven't been able to re-confirm that however. That would mean you can own several funds under the umbrella of one of these at a lower ER than if you owned each fund individually.
The strong performance of their fund-of-funds, including the target date series, is likely related to three factors: (1) a strong underlying fund line-up, (2) attractive fees on these funds, (3) excellent calls when it comes to underweighting or overweighting specific areas inside their fund-of-funds. In addition, I think you'll also find Price generally takes a somewhat more aggressive position on the amount of equity exposure an individual should undertake at various stages of their life.
My one concern about all target date funds is the glide path that moves to increasingly higher bond allocations over time. This near 0% interest rate environment is unprecedented as far as I know. And where I think JohnC and others have a valid point is that one can own the same types of investments these target date funds hold at a substantially lower cost. In theory, anyway, that should translate into better long-term performance.
Regards

"Target-date funds have selected dates at which time the assets will be liquidated"
Once again we find a financial writer who doesn't seem to know what he is talking about.
Target date funds' dates refer to the general date of one's retirement. They tend to come in two varieties: one with a glide path that reaches its terminal allocation at the retirement date (e.g. 70/30 or 80/20), and one where the fund holds a gradually declining amount of equities for 10-15 years into retirement (in anticipation of a 25-35 year need). Either way, these funds are not liquidated.
There are two types of funds I'm aware of that are liquidated on a specified date (excluding UITs that pretty much by definition terminate). One type is target maturity bond funds, like the American Century Zero Coupon Bond Funds, or Fidelity's newer Defined Maturity Funds, or Guggenheim BulletShare ETFs. Here's a good Vanguard paper on defined-maturity bond funds.
Another type includes some managed payout funds. Managed payout funds are funds that are designed to work like annuities (if all goes well - they're not guaranteed). Some, like Vanguard's, are designed to pay out in perpetuity. Others, like Fidelity's Income Replacement Funds, are designed to terminate on a specific date. These funds hold a mix of equity and debt, and are liquidated on the specified date.
That subtype of managed payout fund is the only one I know that match the description of a "target date fund" given in the article here.

Mark makes a very good point. Maybe I'm wrong, but my sense is we have very few "stay-put" type investors posting on this board. There's one notable exception (And I'd rather not go there, thank you.)

Hi hank,
I am a "stay-put" investor. Leaving out bonds in my retirement accounts and internationals where I like to go active, for the most part, my returns are inevitably superior with passive index funds. I have a few exceptions like a Primecap Managed fund, but my exceptions are far and few between.
I have never learned how to time the market, which to me is synonymous to being "active", so the best I have learned is that if I want to gamble with some percentage of my portfolio, and I do, the ER will not be over 50 basis points. The least I can try to do is put some odds on my side.
Best Regards,
Mona

Thanks for posting this Ted. I had been considering similar items for my sleeve of holdings which account for 4 years of spending dollars heading into retirement. I had previously considered short terms bond funds, or market neutral funds like MERFX. Your post is handy as it provides some additional options for this purpose.
Press

Deleted post and graph. Speaking of one-fund lazy retirement portfolios, I tried to compare the two conservative five star funds listed here with my beloved junk bond funds over the past 10/15 years. I used one of my favorite five star junk bond funds and a present holding PHYTX. It was no contest with PHYTX the clear winner. But then I am biased! Junk bond funds are notable for their trend persistency and low volatility making them amenable to various trading methodologies using tight stops. Yes, I know 2008 was a disaster but the tight stop methodology would have kept you out of harm's way.

Mona, a good point, especially with different managers. But with the slightly deeper 08-09 dip followed by faster bounceback, probably attributable to megacap orientation (?)
I also wonder if Ted's listing would hold for the VWIAX Admiral shares, since those differences are so petite.
As I get farther into retirement I wonder if I should go 50-50 with these two funds, hmm.
I was speaking earlier of the Midwest, and see that one of the current VWINX managers is a UWisc econ / biz grad, same as famous Oakmark folkx and MAPOX as well, IIRC. If I were still an assigning editor, I would get a research story on UWisc mfund connections.

@bee: I guess the early bird gets the worms before the bee can pollinate the flowers.
Regards,
Ted
http://www.mutualfundobserver.com/discuss/discussion/20639/the-one-fund-lazy-retirement-income-portfolio-vwiax#latest

From Article:
"Through our own independent research and due diligence as a risk manager, I have found that one of the best single funds to own for retirees seeking a modest income stream and a diversified exposure to the equity and fixed-income markets is the Vanguard Wellesley Income Fund. I want to highlight this fund because I think it makes sense as both a portfolio building block, and as a stand-alone single-fund strategy."
the-one-fund-lazy-retirement-income-portfolio