[Help with Decision to delay Social Security]

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

[Help with Decision to delay Social Security]

Postby Sandman62 » Wed Feb 06, 2013 5:49 pm

[I moved this post to a new thread, from Social Security - Why Delay ?. See below in blue --admin LadyGeek]

These seem to be the two most pertinent counterpoints to me:

1)
umfundi wrote:Approximately:

Assume you have $25,000. You can go and buy an inflation protected annuity with survivor benefits that pays you 4% ($1,000) per year for the rest of your life. Same thing with a presumed Safe Withdrawal Rate of 4%.

Now, assume also you can draw a SS payment of $25,000. Here's the choice: Should you invest your $25,000 and draw Social Security? Or, should you defer SS for a year and use your $25,000 for living expenses?

The answer is, your $25,000 of deferred SS benefits pays you 8% ($2,000) for the rest of your life. There is no better deal on the planet!

Increased life expectancy and a presumption about future interest rates have converged to make deferring SS the best choice for virtually everyone that has any savings, in my opinion.

Keith


2)
Whatyear? wrote:When I think whether to start SS benefits at 62 v. 67 v. 70, it's more from a "bird in the hand" perspective. In other words, wouldn't it be better/safer to start drawing sooner in case the program "goes away", or gets reduced for people with a certain level of alternative support, etc.? Does anyone else look at it that way? Barring that, I would delay to age 70 without a second thought, since I know I can support myself and my family from age 62 - 70 without it.

If I at all trusted politicians and wasn't afraid that SS will be greatly reduced by the time of or during our retirement, I do think we'd wait til age 70. But if the benefits we expect to gain by waiting longer are reduced or eliminated between our age 62 and 70, then we could lose a lot. Kind of an emotional gambling sense vs. the raw numbers dilemma.

Any advice specific to our situation?
I have an appointment next week with a financial planner. But in the meantime, aside from the crystal-balling exercise I mentioned above regarding the SSA's future, is there any financial reason for us not to wait til age 70 for SS?

AGES:I am currently age 50 and wife is 49. We plan to retire at age 55 and 54.
SALARIES: Her salary is about 80% of mine.
PENSIONS: We both have them, assuming they aren't raided. Mine at age 55, hers was supposed to be 52, now 59, but union is in court with state over pension reform. Hers would've been 65%, currently 40%, but I suspect after law suits to end up somewhere in between - so hopefully about 50% of salary if we're lucky. Mine will be around 60%. She'll receive 60% of mine if I die; I'd get 50% of hers.
SS:
Mine:
At full retirement age (67): $2,540 a month
At age 70: $3,188 a month
At early retirement age (62): $1,738 a month
Wife's:
At full retirement age (67): $2,208 a month
At age 70: $2,786 a month
At early retirement age (62): $1,470 a month
401k/403b: $608k, 80% stock, 20% bond mutual funds. Only saving 10% each but I also get 6% employer match. Strongly considering maximizing catchup contributions once daughter graduates college this summer. That would increase annual savings (including employer match) to around 36k for next 5 years.
HEALTH COVERAGE: Access to my employer plan from retirement til Medicaid, which will cost less than $3,000/yr for the two of us. Similarly-attractive supplemental plan available for Medicaid.
DEBT: None currently. Mortgage paid, one kid almost through college with no loans, another just started (no loans). Cars are approaching 5 and 7 yrs old and we intend to drive them another 5+ yrs.
EMERGENCY FUND: Yes.

Thank you in advance.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby sscritic » Wed Feb 06, 2013 6:47 pm

You are 50. Your first point of decision will be at 62. That is 12 years from now.
is there any financial reason for us not to wait til age 70 for SS?

Maybe not, but there is no particular reason to worry about whether there is reason now. Maybe all your fears will be realized in the next 12 years and anything you think today will be irrelevant. I suggest you relax and keep reading the SS threads as they pop up (and that's pretty regularly). Then in 10 years, come back and ask about your particular situation. It may have changed even more than SS.

P.S. One thing you do want to be sure about is that the pensions come from covered work, so even if you work for government, you have been paying into SS. From the numbers, it looks like you have.
sscritic
 
Posts: 21858
Joined: Thu Sep 06, 2007 9:36 am

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Wed Feb 06, 2013 7:34 pm

Thanks for the reply. Our strategy has always been to kind of ignore SS and try to cover ourselves with pensions and retirement. I've started to become more concerned with it now because of my wife's teacher pension raid (uh, I mean "reform" :annoyed). It's made us more aware that even benefits which we've paid into for decades may not be there as expected - and that led me for the first time to login to SSA and to start at least learning about some best-case SS scenarios.

Thanks again.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby Peter Foley » Wed Feb 06, 2013 9:52 pm

There are other decisions that you will make along the way that may determine how long to delay in taking SS. Part of this will hinge on the final benefits you will receive from your pensions. You may be in a situation for 7+ years where you will be living off your pensions and savings. You might find yourselves in a very low tax bracket for those years and have some control over your taxable income. Moving some money to Roths might be part of the equation.
In short, don't wait 10 years to check back, do so about a year in advance of retirement. There may be no better guidance on SS at that point, but there may be some suggestions to help you keep your taxes low and maximize your spendable income.
User avatar
Peter Foley
 
Posts: 2338
Joined: Fri Nov 23, 2007 11:34 am
Location: Lake Wobegon

Re: [Help with Decision to delay Social Security]

Postby JW Nearly Retired » Wed Feb 06, 2013 10:16 pm

Sandman62 wrote:AGES:I am currently age 50 and wife is 49. We plan to retire at age 55 and 54.
SS:
Mine:
At full retirement age (67): $2,540 a month
At age 70: $3,188 a month
At early retirement age (62): $1,738 a month

I just want to suggest you check your numbers for someone who stops work and SS contributions at age 55. I think, sscritic can correct me, that the online estimates often assume you will keep working until the SS claiming age. I'm a little suspicious of your numbers because your PIA is close to mine and I have worked and contributed the max for 40 years.
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4068
Joined: Sun Dec 16, 2007 1:25 pm

Re: [Help with Decision to delay Social Security]

Postby archbish99 » Wed Feb 06, 2013 10:27 pm

Your Social Security is at no more risk than your pensions are, certainly, and possibly a good bit less. But as noted, a lot can happen in 12 years. You may have the option of waiting longer, for example. You should also be careful with your quoted benefits, since they assume you will continue working until retirement age, which you clearly don't intend to do. There a calculator at SS.gov which lets you change assumptions and put zeros after your intended retirement year and see how that changes things; I don't know if you made that change when you got these estimates. But let's assume current law and go with your numbers for now.

As I mentioned in the other thread, waiting becomes most valuable when you consider the survivor benefits. You often should attempt to delay the higher earner's benefits if possible, and get as much from the lower earner's benefits as possible in the meantime since the lower benefit will last only so long as you're both alive.

So setting aside any concerns about the solvency of SS or rule changes, a reasonable claiming strategy would be:
  • She claims at 62 (you are 63): $1,470/month
  • At your FRA, you file a restricted application (you are 67, she is 66): $1,470/month for her, $1,104/month for you
  • At age 70, you file for your benefits (she is 69): $1,470/month for her, $3,188/month for you
  • At EOL (one of you is ??, the other of you is dead): $3,188/month for the survivor

What you may want to do is carve off a portion of your portfolio to pay you the difference: $4658/month until age 63/62, $3188/month until age 67/66, and $1,104 until age 70/69. If you like, add further tiers based on when your pensions kick in, once you know that with a little more confidence. Put this in something safe, with the goal of keeping up with inflation and providing consistent real annual payout. You expect to exhaust this portfolio entirely by age 70/69. A TIPS ladder around retirement age is a solution that I like -- you're essentially building your own government-backed pension. The balance you can invest longer-term with a reasonable percentage in equities, pulling out 2-3%/year for the rest of your life.

Here's the catch: At least right now, that level of income would require around $940k to buy an equivalent TIPS ladder, and that's without accounting for the years until your pensions start. Double-check to see when you're closer to retirement -- the interest rate environment will hopefully have improved, and your portfolio will hopefully have grown, possibly with a pension buy-out or two. Otherwise, the situation may be that you can't really afford to retire at that income level. You would need to save longer (so fewer years to spend down and more money to spend over those years) or take less money (for example, not planning to delay all the way to age 70).
I'm not a financial advisor, I just play one on the Internet.
User avatar
archbish99
 
Posts: 1305
Joined: Fri Jun 10, 2011 7:02 pm

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Wed Feb 06, 2013 10:39 pm

JW Nearly Retired wrote:
Sandman62 wrote:AGES:I am currently age 50 and wife is 49. We plan to retire at age 55 and 54.
SS:
Mine:
At full retirement age (67): $2,540 a month
At age 70: $3,188 a month
At early retirement age (62): $1,738 a month

I just want to suggest you check your numbers for someone who stops work and SS contributions at age 55. I think, sscritic can correct me, that the online estimates often assume you will keep working until the SS claiming age. I'm a little suspicious of your numbers because your PIA is close to mine and I have worked and contributed the max for 40 years.
JW

Good point and thanks for pointing out that I missed this (emphasis added):
"Your estimates are based on the assumption that you will earn $x a year from now until retirement."

I can't seem to get to their Retirement Estimator though:
Forbidden
Unfortunately, you do not have access to this service. Please check your url for errors and try again.
Last edited by Sandman62 on Wed Feb 06, 2013 11:00 pm, edited 1 time in total.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Wed Feb 06, 2013 10:54 pm

archbish99 wrote:...
Here's the catch: At least right now, that level of income would require around $940k to buy an equivalent TIPS ladder, and that's without accounting for the years until your pensions start. Double-check to see when you're closer to retirement -- the interest rate environment will hopefully have improved, and your portfolio will hopefully have grown, possibly with a pension buy-out or two. Otherwise, the situation may be that you can't really afford to retire at that income level. You would need to save longer (so fewer years to spend down and more money to spend over those years) or take less money (for example, not planning to delay all the way to age 70).

Thanks for the detailed reply. Am I misinterpreting something though? I can start collecting my 60% pension in 5 years at 55? My wife's pension could end up not being available til 59 and just 40%, though it may end up closer to 54 or 55 and possibly 50-60%. Given those pensions available well before FRA, as well as current $600k in retirement and another 5 years of contributing 25-36k (including employer match), no mortgage or other debt... Is retiring at 55 really not feasible, even disregarding SS? :?
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby archbish99 » Thu Feb 07, 2013 1:56 am

That would be the "take less money" option. 😉. What I outlined takes your peak SS income and backfills it over the earlier portion of your retirement to allow the same amount of disposable cash annually. One primary argument for not waiting is wanting to have that peak income while still "young enough."

You don't have enough to keep your real spendable amount constant for the rest of your life -- you'll have some leaner years and a spike at age 70. But that's not the real requirement, just an approximation -- the requirement is to meet your spending needs for the rest of your life. What are those? Only you know.
I'm not a financial advisor, I just play one on the Internet.
User avatar
archbish99
 
Posts: 1305
Joined: Fri Jun 10, 2011 7:02 pm

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Thu Feb 07, 2013 8:02 am

What percent of our current income does your strategy use? 100? 80, 70? With no more college tuitions (that we currently pay out of current income), no more need to save for retirement, no mortgage, and nonextravagant lifestyles, even with a little increased travel perhaps, we're thinking in the 75% range should suffice.

BTW, I ran the SS Retirement Estimator and plugged in 55 for retirement age; the revised age 62 benefits would be 1593 for me and 1230 for my wife. Thanks again for pointing this out.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby johnep » Thu Feb 07, 2013 8:40 am

Are your pensions indexed to CPI or some other inflation index? That makes a huge difference over a long period of time. It is especially important to you because you will be retiring so young. If they are not tied to inflation, that would be another argument for delaying SS as longevity insurance.
johnep
 
Posts: 1126
Joined: Wed Dec 28, 2011 10:56 am
Location: North Carolina

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Thu Feb 07, 2013 9:21 am

My wife's teacher pension froze COLAs but they could return (doubtful). Mine does not adjust.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby archbish99 » Thu Feb 07, 2013 10:46 am

Sandman62 wrote:What percent of our current income does your strategy use? 100? 80, 70? With no more college tuitions (that we currently pay out of current income), no more need to save for retirement, no mortgage, and nonextravagant lifestyles, even with a little increased travel perhaps, we're thinking in the 75% range should suffice.

BTW, I ran the SS Retirement Estimator and plugged in 55 for retirement age; the revised age 62 benefits would be 1593 for me and 1230 for my wife. Thanks again for pointing this out.


It's not based on your current income, it's based strictly on evening out Social Security income in retirement. So let's look at it with your current pension assumptions instead. You haven't said what your current income is, so I don't know what fraction of it those SS numbers would be. Your pensions aren't inflation-adjusted, so a lot of the increase in SS will go toward compensating for that. I'm going to approximate your salary at $85k, since you didn't say. You say that your wife's salary is 80% of yours, so:
  • Current net household income: 1.8X, where X is your current salary (approx. $153k/year)
  • Desired retirement income: 1.35X, where X is your current salary (approx. $115k/year)
  • Income you anticipate:
    • Your pension: .6X beginning at age 55/54, decreasing in real terms with inflation
    • Her pension: .4X beginning at age 60/59, decreasing in real terms with inflation
    • Her SS on her record: $1230/month beginning at age 63/62.
    • Your SS on her record (restricted application): $820/month beginning at age 67/66
    • Your SS on your record: $2803/month beginning at age 70/69 (increase of $1983/month)

Then you need to back-fill:
  • Nothing through 55/54: You'll still be working (and saving)
  • .75X (approx. $64k/year) for five years, plus inflation adjustments on pension
  • .35X (approx. $30k/year) for three years, plus inflation adjustments on pensions
  • Approx. $15k/year for four years, plus inflation adjustments on pensions
  • Approx. $5k/year for three years, plus inflation adjustments
  • Whatever inflation adjustments aren't covered by the increased Social Security for the remainder of your lives

That's a lot more doable -- you'll probably have a bit of income above your target in your early 70s, but you likely won't complain about that. :D To buy that TIPS ladder is under $500k (and you could do a portion of it in I-Bonds over the next several years, which would have a better yield for that short a time period), and the balance of your 403b will probably cover the inflation-adjustments to your pension. The separation between the two is strictly mental accounting, due to the fact that you plan to spend one piece down by age 70, and the other you intend to draw from more slowly as needed to balance inflation.
I'm not a financial advisor, I just play one on the Internet.
User avatar
archbish99
 
Posts: 1305
Joined: Fri Jun 10, 2011 7:02 pm

Re: [Help with Decision to delay Social Security]

Postby JW Nearly Retired » Thu Feb 07, 2013 10:52 am

Sandman62 wrote:
BTW, I ran the SS Retirement Estimator and plugged in 55 for retirement age; the revised age 62 benefits would be 1593 for me and 1230 for my wife. Thanks again for pointing this out.

One more thing to verify..... your wife does teach in a social security state doesn't she? SS tax is taken out of her current checks? Lots of states opt out of SS for teachers, which isn't good.

Quoting from a google......"In fact federal laws, known as Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) actually reduce a Social Security benefit a teacher earned in previous work and reduce any survivor benefits earned by a spouse."
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4068
Joined: Sun Dec 16, 2007 1:25 pm

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Thu Feb 07, 2013 2:12 pm

archbish99 wrote:It's not based on your current income, it's based strictly on evening out Social Security income in retirement. So let's look at it with your current pension assumptions instead. You haven't said what your current income is, so I don't know what fraction of it those SS numbers would be. Your pensions aren't inflation-adjusted, so a lot of the increase in SS will go toward compensating for that.

I'll have to reread this more at home tonight; all these SS options are new to me. Evidently, I've come to the right place though. Much appreciate the education.

Ill definitely have to recrunch numbers once the pension lawsuits settle. 40% at 59 is a whole lot different than the originally-contracted 65% at 52 for my wife. Once the lawsuits are settled, she may still be at 40/59, but I'm predicting a negotiated settlement somewhere closer to 50-55% at 55-57. We shall see over the next couple years, as this drags out through appeals.

BTW, our current incomes are 105,000 and 81,000.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Thu Feb 07, 2013 2:15 pm

JW Nearly Retired wrote:
Sandman62 wrote:
BTW, I ran the SS Retirement Estimator and plugged in 55 for retirement age; the revised age 62 benefits would be 1593 for me and 1230 for my wife. Thanks again for pointing this out.

One more thing to verify..... your wife does teach in a social security state doesn't she? SS tax is taken out of her current checks? Lots of states opt out of SS for teachers, which isn't good.

Quoting from a google......"In fact federal laws, known as Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) actually reduce a Social Security benefit a teacher earned in previous work and reduce any survivor benefits earned by a spouse."
JW

Yes, SS has been deducted from her check the last 17 or so years. However, I believe that her first ten years, in a different town (same state), they did NOT deduct SS. How might this affect her SS benefit and would the estimate on ssa.gov factor that in already?
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby donall » Thu Feb 07, 2013 2:32 pm

Sandman62 wrote:
JW Nearly Retired wrote:
Sandman62 wrote:
BTW, I ran the SS Retirement Estimator and plugged in 55 for retirement age; the revised age 62 benefits would be 1593 for me and 1230 for my wife. Thanks again for pointing this out.

One more thing to verify..... your wife does teach in a social security state doesn't she? SS tax is taken out of her current checks? Lots of states opt out of SS for teachers, which isn't good.

Quoting from a google......"In fact federal laws, known as Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) actually reduce a Social Security benefit a teacher earned in previous work and reduce any survivor benefits earned by a spouse."
JW

Yes, SS has been deducted from her check the last 17 or so years. However, I believe that her first ten years, in a different town (same state), they did NOT deduct SS. How might this affect her SS benefit and would the estimate on ssa.gov factor that in already?


http://www.ssa.gov/pubs/10045.html
http://www.ssa.gov/pubs/10007.html

The longer your wife works and contributes to SS (does not have to be the teaching job), the less impact on her SS adjustment of benefits. You have a complex calculation to make, as there a scenarios where it may make sense for your wife to retire and receive a pension and then find another job that pays into SS or continue to teach at her present job. Please calculate your wife's SS using the GPO and WEP: the effects can be huge. My neighbor (who worked in SS positions during summers) has a nice teacher pension and receives $100/mo from SS, just enough to pay her Medicare premium.
donall
 
Posts: 529
Joined: Tue Mar 13, 2012 7:45 am

Re: [Help with Decision to delay Social Security]

Postby bobcat2 » Thu Feb 07, 2013 2:59 pm

HEALTH COVERAGE: Access to my employer plan from retirement til Medicaid, which will cost less than $3,000/yr for the two of us. Similarly-attractive supplemental plan available for Medicaid.
I assume you mean Medicare, not Medicaid.

Your reasoning about SS is a POV I always find puzzling. You appear tremendously worried about SS, but blithely assume Medicare will be there. This despite the fact that Medicare is in much worse financial shape than SS. If you are planning no SS or drastic cuts in SS, then mere consistency would argue for planning for NO Medicare.

Also when planning to take SS at 70, if at any time between ages 62 and 70 cuts are passed or even seriously proposed in Congress, you can immediately start SS benefits at that time if you so choose. Although it is hardly clear that the cuts would make taking SS at 62 beneficial. What would probably be more important is the level of real interest rates once you are in your early and mid-60s in determining how beneficial starting SS at different ages is.

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
User avatar
bobcat2
 
Posts: 4232
Joined: Tue Feb 20, 2007 4:27 pm
Location: just barely Outside the Beltway

Re: [Help with Decision to delay Social Security]

Postby archbish99 » Thu Feb 07, 2013 4:15 pm

Sandman62 wrote:Ill definitely have to recrunch numbers once the pension lawsuits settle. 40% at 59 is a whole lot different than the originally-contracted 65% at 52 for my wife. Once the lawsuits are settled, she may still be at 40/59, but I'm predicting a negotiated settlement somewhere closer to 50-55% at 55-57. We shall see over the next couple years, as this drags out through appeals.


50% of 80% of your salary was 40% of your salary, just to keep everything in multiples of one thing. That's where I got the 40% number. Let me have a single unknown rather than two unknowns. Good old linear algebra. :wink:

Then your pensions would be slightly higher, but so is the amount of income you're targeting.
  • Current net: $186k
  • Desired: $140k
  • Anticipated:
    • Your pension: ~$63k (modulo any raises, but let's assume they just keep pace with inflation)
    • Her pension: ~$40k (same deal, but she may have a couple years of inflation post-retirement without corresponding raises)
    • SS unchanged by this data, but the WEP/GPO info is definitely something to investigate

Makes numbers a little larger, by eyeball -- I don't feel like rerunning everything right now. The gist of it is that your stated desired income level is probably possible, but may turn out a little tight. You should make sure you maintain the flexibility to reduce spending, set aside emergency funds, etc. With lower taxes, no need for future retirement savings, no mortgage, and no more kids to send to college, you should be able to reduce your expenses a good bit if needed, at least up to the point where you need LTC. (LTC insurance might be something to consider.)

You've got a few years -- as part of saving aggressively, maybe you could work out what your approximate retirement budget might look like, and try to keep non-work-related expenses in that ballpark. (And for a mild reality check by comparison, I live in a high cost of living area, make about what you're looking at as a retirement budget, have a mortgage, save for retirement, etc. and don't feel deprived in the least. So you're not doing too badly, even if you need to trim a little bit.)
I'm not a financial advisor, I just play one on the Internet.
User avatar
archbish99
 
Posts: 1305
Joined: Fri Jun 10, 2011 7:02 pm

Re: [Help with Decision to delay Social Security]

Postby JW Nearly Retired » Thu Feb 07, 2013 4:49 pm

Sandman62 wrote:
JW Nearly Retired wrote:
Sandman62 wrote:
BTW, I ran the SS Retirement Estimator and plugged in 55 for retirement age; the revised age 62 benefits would be 1593 for me and 1230 for my wife. Thanks again for pointing this out.

One more thing to verify..... your wife does teach in a social security state doesn't she? SS tax is taken out of her current checks? Lots of states opt out of SS for teachers, which isn't good.

Quoting from a google......"In fact federal laws, known as Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) actually reduce a Social Security benefit a teacher earned in previous work and reduce any survivor benefits earned by a spouse."
JW

Yes, SS has been deducted from her check the last 17 or so years. However, I believe that her first ten years, in a different town (same state), they did NOT deduct SS. How might this affect her SS benefit and would the estimate on ssa.gov factor that in already?

I'm pretty sure it would not be factored in. Is her pension based on 27 years or 17 years? or is it two pensions? This looks really complicated and I have no idea how the calculation is made or how much damage it might do. I would guess not insignificant.

You could start here http://www.ssa.gov/gpo-wep/
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4068
Joined: Sun Dec 16, 2007 1:25 pm

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Thu Feb 07, 2013 8:53 pm

Yes, bobcat, I meant Medicare, not Medicaid. Thanks.

You're right JW; this IS getting quite complicated (at least my wife's).

Thanks to all for the WEP/GPO info. I'd never heard of WEP, and yes, unfortunately, it will affect my wife's SS. From what I can tell at first glance, it looks like her 90% number would be reduced to 60% (for 24 years total at age 54 in her SS-paying jobs). I haven't run exact numbers yet, but I downloaded their calculator and will. Need to read the manual though.

I also started trying the Online WEP calculator, but have a question regarding this: Enter the monthly amount of your non-covered pension.
Though my wife's prior job didn't pay into SS, as I mentioned, it was part of the same state teacher pension system to which she currently belongs. So her entire pension will be calculated on her entire career, which includes both school systems. Does that mean we'd have to obtain a calculation for the amount of her eventual total pension that is related just to her 10 years at the non-SS school system? It wouldn't seem right or fair for her to have to calculate this based on her total pension (which will include 22 years of also paying into SS). :confused

I just started reading about GPO. At first glance, might she be exempt?
Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:
...
paid Social Security taxes on your earnings during the last 60 months of government service.

So seeing she will have worked 22 years since the 10 years she worked and didn't pay into SS, would she be exempt from GPO?

Good thing we've always considered SS "gravy" and have tried to plan to retire [early] on pensions and savings. :wink:

archbish, I do tend to agree with you and we feel like we can live on much less than the 70-80% of current income I've read about for so long. In just what we spend now on before-tax savings, plus expenses for colleges, and what we used to spend on mortgage up until last year, I feel that accounts for about 1/3 of current pretax income. Considering lower taxes on lower income too would also seem to lower our needs. Reducing other kid-related expenses once they move out would shave some more (i.e. auto insurance, cell phones, clothes, food, etc.). I'm spit-balling needing somewhere around 60% of current income. And though our pensions don't have COLAs, at age 55 retirement, they would cover darned close to that. Retirement savings would hopefully cover the small gap and the effects of inflation on our pensions (or maybe I'm just wishful thinking this?). Obviously, some serious time with a CFP will be in order (another nice benefit from my employer, who will give me $500 toward this between now and my retirement ;)).

Lots more reading to do. Thanks again everyone!
Last edited by Sandman62 on Thu Feb 07, 2013 9:40 pm, edited 2 times in total.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby JW Nearly Retired » Thu Feb 07, 2013 9:32 pm

Sandman62 wrote:Thanks to all for the WEP/GPO info.
Lots more reading to do. Thanks again everyone!

You are very welcome! I for one am feeling quite rewarded that you have been following up on our comments so quickly and effectively. Makes helping fun. :beer
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4068
Joined: Sun Dec 16, 2007 1:25 pm

Re: [Help with Decision to delay Social Security]

Postby Sandman62 » Fri Feb 08, 2013 4:24 pm

Bump for a couple more questions. Thanks.
Sandman62
 
Posts: 69
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: [Help with Decision to delay Social Security]

Postby archbish99 » Fri Feb 08, 2013 5:10 pm

Sandman62 wrote:I just started reading about GPO. At first glance, might she be exempt?
Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:
...
paid Social Security taxes on your earnings during the last 60 months of government service.

So seeing she will have worked 22 years since the 10 years she worked and didn't pay into SS, would she be exempt from GPO?

The bolded seems like the key phrase. Her benefits as a spouse won't be impacted, but her benefits on her own record might be. You weren't previously planning on getting any of those benefits unless you died first, because her own benefit was higher. This might change that a little bit, but definitely good to know her survivor's benefits wouldn't be impacted.
I'm not a financial advisor, I just play one on the Internet.
User avatar
archbish99
 
Posts: 1305
Joined: Fri Jun 10, 2011 7:02 pm


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: Baidu [Spider], boomingaway, jrcase, Lizzie8025, Logan T, Rockman, Yahoo [Bot] and 68 guests