It's July 2017. All three retirees had stopped working when they were 60. In 2017, they were in the 28% tax bracket. Sam and Irma filed for Social Security benefits to start as soon as possible. Since their birthday was in June, that meant they would receive the first check in July. Coincidentally, they were both born on the 14th of June (as was Willie), so they will get their checks on the third Wednesday of the month. If they had been born on the 1st through the 10th, it would be cut on the second Wednesday, and if born on the 21st through the end of the month, the fourth. All three retirees had a good handle on living expenses, and wouldn't you know it, they are identical. Let's assume that inflation and COLA increases in SS will cancel each other out. In July, Irma and Sam received checks for $1971. Of that, 85% is taxable ($1675.35) so 28% of $1675.35 is $469.10 in Federal tax owed. Because they live in Iowa, there is no state tax on Social Security benefits (but IRA distributions are treated like ordinary income), so the real beauty here is NO state tax on SS benefits! (Some states don't tax either and some treat differently, so you should know your state's treatment of income for tax purposes. Your mileage may vary).
The result is they both had a net of $1552.20. If they had withdrawn that amount ($1971) from their IRAs, They would have paid $551.88 federal tax (28% of $1971), plus $177 of state tax (8.98%) for a net of $1242.12 which is $310.08 less, or 19.97% less. If they actually really needed a net of $1552.20 , they would need to draw closer to $2365.20 (119.97 x $1971) from their existing retirement accounts.
But the advantage doesn't stop there. By not withdrawing that $2365 from their IRAs, they are able to leave that money invested, and have it keep working for them. In a historically average year (8.5%), that would add roughly $16.75 per month to their accounts (The 100 year average of market returns is 8.5%). Delayed SS monthly benefits increase at the rate of 8% after age 62 up to age 70. They both made the decision that if their investments beat 8 %, they would always be ahead (plus the sum of money they would receive from age 62 - 66 (or 70)). And never in the history of the market has it averaged less than that over any given 20 year period. In a nutshell, that's the gamble they took.
The fund lost some ground during the month, starting at 25.22 a share, it dropped to 25.14 by the time withdrawals were made. Willie had a month end balance of $197,000. His monthly benefit check would be $1984 if he changed his mind and decided to file for benefits at this time. The benefit increases by 8% a year, or .66% for each month of delay.
Irma deposited the $1971 check and withdrew 2365 from her existing account, so her net total is $198,971.
Sam used his benefit check to supply $1552.20 of his monthly expenses. His untouched IRA account sat at $199,365.