{"id":127838,"date":"2025-03-12T06:15:04","date_gmt":"2025-03-12T06:15:04","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/investing\/morningstars-latest-retirement-spending-research-as-it-relates-to-social-security-oblivious-investor\/"},"modified":"2025-03-12T06:15:04","modified_gmt":"2025-03-12T06:15:04","slug":"morningstars-latest-retirement-spending-research-as-it-relates-to-social-security-oblivious-investor","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=127838","title":{"rendered":"Morningstar\u2019s Latest Retirement Spending Research (as it Relates to Social Security) \u2014 Oblivious Investor"},"content":{"rendered":"


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A reader writes in, asking:<\/p>\n

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\u201cCould you please clarify Morningstar\u2019s new findings from Jason Kephart that delaying social security until age 70 while using one\u2019s retirement portfolio may not be the optimal approach. Confusing after years of reading research advising of benefits to use portfolio to cover bridge from start of retirement to age 70\u00a0for highest income person.\u201d<\/p>\n<\/blockquote>\n

For reference, for anybody who hasn\u2019t encountered it yet:<\/p>\n

I would say that nothing in the Morningstar paper, as it relates to Social Security, should be surprising. However, one of the key tables (exhibit 1 in the paper, which shows up again later as exhibit 19, and which also appears in the article linked above) is causing some confusion, in particular due to using the term \u201cbridge\u201d in a way that is different than what is typical.<\/p>\n

What\u2019s a Social Security Bridge?<\/h3>\n

Typically, a Social Security \u201cbridge\u201d refers to allocating a part of the portfolio to some fixed-income product (most often, a TIPS ladder), to satisfy the extra level of spending that is necessary until Social Security kicks in. For example, you retire at age 62, but delay Social Security until age 70. And you buy an 8-year TIPS ladder (your \u201cbridge\u201d) that will provide an annual amount of spending during those 8 years of delay that is equal to what your Social Security payment would have been.<\/p>\n

However, in the table in question, when the authors use the term \u201cSocial Security at 70 w\/ Bridge\u201d what they mean is a case in which something external to the portfolio<\/em> performs the role of a bridge. In other words, this is essentially a \u201cdelay Social Security to 70 by working part-time until 70<\/em>\u201d strategy.<\/p>\n

And what they find about that strategy is that it results in a higher amount of lifetime spending (and a higher combined \u201clifetime spending plus ending portfolio balance\u201d) than a strategy of stopping work at 67 and filing for Social Security at 67. That\u2019s pretty intuitive and uncontroversial. If you work longer, you\u2019ll be able to spend more per year in retirement.<\/p>\n

Delaying Filing, While Spending from Savings<\/h3>\n

The title of the interview above is, \u201cMaybe You Shouldn\u2019t Delay Taking Your Social Security Benefits After All.\u201d The sub-headline states, \u201cNew Morningstar research suggests that in some cases, the advantage of delayed filing may be overstated.\u201d<\/p>\n

Both of those statements are factually true. Some people shouldn\u2019t delay. And sometimes the benefit of delaying is<\/em> overstated. (See for example, anybody who suggests that you get an 8% return when you delay<\/a>.)<\/p>\n

But I think it\u2019s still very fair to say that most<\/em> people should delay, and this paper doesn\u2019t really pose a major challenge that assertion.<\/p>\n

The big point that those two headlines are getting at is the following finding:<\/p>\n