CMA Reddit Mentions | ChartExchange

Except that, if you collected starting at 62, by 70 you will have $136.7k base assets to start from that the 70 year old **does not have**. The 70 year old **starts from zero**. This is a gigantic disadvantage to the person waiting until 70, because check this:
If you let those lower $1424 payments just keep accumulating into a Cash Management Account at Fidelity that automatically holds the money in a way that is completely liquid for the owner (with autoredemptions when withdrawn or spent) it will be invested in SPAXX collecting coupons on short term government treasuries, AKA close to the "risk free rate" (at least for now while American debt is considered risk free) you'll earn whatever the current Fed funds rate is minus a quarter point for the convenience being fully liquid; or if you want the full yield of government treasuries you can have them deposited into a vanilla brokerage anywhere (Schwab, Vanguard, Fidelity etc.) (or even use the aforementioned CMA) where you can create auto-investment rules to automatically buy as many shares as possible of SGOV or something similar to get close to the full Fed funds rate each month and then also have those dividends for the coupon payments re-invested. We don't know ow what the fed funds rate will be next year let alone 5 or 8 years forward, but we know it's probably going to be between 0% and 10%, with a great deal of that probability density likely hanging between 1% and 5% to fulfill the Fed mandate on employment and inflation. Right now its 3.66%, lets just make it simple and make an educated guess that the average rate over that period is about 3% yearly, roughly 0.25% per month.
So you can compute the total return for each months worth of investment as a mathematical series summing up the compounding return for each months return over `n` months with a growth (return) rate of `r` where `1+r` is the factor by which the individual deposits of `x` currency units grow (or decay if `r` is negative) each month. It contains `n` separate terms in the sum computing each return as a lump sum deposit left to grow on its own for each month. If you simplify that expression, we can write in in the form:
T = x \[(1+r)^(n) \- 1\] / r
Just notice for this simplified expression r=0 results in 0 divided by zero which is indeterminate but it turns out that the left and right side limits as r approaches zero yield a limit of
T = x \* n
and for n=96, x=1424, that would be exactly the $136.7k figure prior if we have zero growth. But we won't likely have zero growth, in specifically in the case that the CAGR for the 8 years works out to 0.25% per month, T = 1424 \* (1.0025^(96) \- 1) / 0.0025 = $154286.68, so over that time period we've actually earned $17.6k without taking any risk just holding 4 week treasuries when getting to 70 years old.
So your figure of \~40k is already missing $17.6k which still has another 20 years to grow.
In reality there's no need to be in such an ultraconservative allocation as only short term treasuries. A 60/40 US stocks / US bonds allocation is pretty standard retirement portfolio that keeps most of the driver of portfolio growth while smoothing out risk from crashes, at least traditionally, and it has one of the best risk adjusted returns easily implementable by average people. In the [past 150 years the 60/40 portfolio](https://www.morningstar.com/economy/6040-portfolio-150-year-markets-stress-test) has had 11 bear markets and has performed much better during those periods than the 100% equity portfolio while delivering a way better return than a full bond portfolio (bonds undergo bear markets infrequently compared to stocks so they are generally considered "safer" we we only care about retaining nominal purchasing power). Over that 150 year period $1 invested in a 60/40 portfolio grew -- in real terms -- by 440,700% to $4408, much less than the 3,551,700% growth ($1 becoming $35518) in a 100% equity portfolio. If we take the 150th root of the first percentage, we get the CAGR of the 60/40 portfolio 1.0575 or 5.75% annualized, which is great for a nominal rate let alone a real rate for the downside protection. The 100% equity will return is a CAGR of 1.0723, or 7.23% annualized. So using the expression for T I showed earlier, we convert the annualized return to a monthly return: 1.0575\^(1/12)=1.00467, 0.467% per month. We have a fairly safe way to earn 5.75 real return and get 1424\*\[(1.00467)\^96-1\] / 0.00467=$172k. In 8 years we've generated 75 months worth of the higher payments we'd get by waiting until 70, while simultaneously starting 70 with $172k more wealth than we'd have if we waited.
Do you see objectively how you can never make an argument to wait unless you're so bad with money that you know you're going to gamble it all on horse races and buy drugs with it?

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