What is the PV of your SS benefits?

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What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 10:16 am

What is the Present Value of your Social Security benefits? by Sean Hanlon writing in Forbes.
Currently, interest rates are at historically low levels and if you listen to the Federal Reserve, interest rates will remain low until at least 2015.

“Present value” means the value today of a future payment or stream of payments, discounted at some appropriate compound interest. A key component is the current and immediate projected rates of interest. If you were to receive $10 today and invest it, you would expect it to be worth more in five years. Conversely, your right to receive $10 in the future would be worth less than $10 in present value. For that reason, it is never too early to start saving and investing for retirement.

As the below table illustrates, when interest rates are low the present value of future income streams such as social security payments increases. This table shows the effect of different interest rates on the present value of the right to receive an annual $20,000 payment over a 20-year time period. Each of the rates indicated in the table, with the exception of 0%, reflect the actual annual interest rate at one time in the past of the 30-year U.S. Treasury bond.

Code: Select all
Interest    Present
 Rate        Value
11%         $159,267
8%          $196,363
5%          $249,244
3%          $297,550
0%          $400,000

The lower the interest rate, the higher the present value of those future payments. Today, that makes the present value of your future social security benefits a very valuable asset.

I have highlighted how valuable, in present value terms, your social security benefits are. But like all human beings, now you probably are thinking “that’s interesting, but how can I get even more?” Of course when I say more, we always mean more net after tax income.

Some methods of increasing social security payments are delaying payments, having only one spouse elect payments while the other delays, and more. Also, avoiding distributions from tax generating accounts, such as other retirement plans, is another way to maximize your net after tax social security income. There are a variety of things that can be done to maximize the amount you receive in social security benefits.

If you are fortunate enough to be a participant in a defined benefit plan, the same logic applies. The present value of those future payments is now very high. This means that those making a lump sum versus periodic payment decision may never have a higher lump sum option.

...Review your retirement income needs and update your plans for retirement, keeping the value of your social security income benefits as an integral part of those plans. Make sure that you are saving enough in retirement and supplemental retirement accounts.


Link to article - http://www.forbes.com/sites/advisor/2013/03/22/what-is-the-present-value-of-your-social-security-benefits/

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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 10:28 am

bobcat2 wrote:What is the Present Value of your Social Security benefits? by Sean Hanlon writing in Forbes.
...Review your retirement income needs and update your plans for retirement, keeping the value of your social security income benefits as an integral part of those plans. Make sure that you are saving enough in retirement and supplemental retirement accounts.

Link to article - http://www.forbes.com/sites/advisor/2013/03/22/what-is-the-present-value-of-your-social-security-benefits/

There is no need to compute the current value (present value) of "social security income benefits" so long as this projected income stream is used in "your retirement plans."

Besides the last paragraph (left in quote above), I don't get the reason for this article - especially the title.
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 10:45 am

Social Security benefits are more valuable the lower the real interest rate. This makes strategies to maximize SS benefits more valuable when interest rates are low. In fact in some cases the best SS strategy changes when interest rates change a lot from high to low or vice versa.

I realize these ideas are somewhat subtle and not easy for most people to readily grasp on a first read.

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Re: What is the PV of your SS benefits?

Postby Jack » Sun Mar 24, 2013 10:54 am

Those interest rates should emphasize real, not nominal rates because Social Security payments are inflation adjusted. This means the present value is much greater than a quick glance at the table might suggest. You could use the 20-year TIPS real rate or the 20-year treasury and subtract 3% as an estimate of real rates.
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 11:03 am

Jack wrote:Those interest rates should emphasize real, not nominal rates because Social Security payments are inflation adjusted. This means the present value is much greater than a quick glance at the table might suggest. You could use the 20-year TIPS real rate or the 20-year treasury and subtract 3% as an estimate of real rates.
Ageed. :thumbsup

In my earlier reply to YDNAL I talked about real, not nominal rates.
bobcat2 wrote:Social Security benefits are more valuable the lower the real interest rate.

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Re: What is the PV of your SS benefits?

Postby Professor Emeritus » Sun Mar 24, 2013 11:05 am

It's quick and dirty but for all SS and other inflation protected annuities/pensions I use http://www.immediateannuities.com/ and add 25% for inflation protection

In our personal low tech asset allocation model I use the present value of our SS and pensions, add bonds and cash and call that the guaranteed or fixed side. I try to keep that at 60% of non home assets. Index funds in the wall street casino are the other 40%
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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 11:08 am

bobcat2 wrote:Social Security benefits are more valuable the lower the real interest rate. This makes strategies to maximize SS benefits more valuable when interest rates are low. In fact in some cases the best SS strategy changes when interest rates change a lot from high to low or vice versa.

I realize these ideas are somewhat subtle and not easy for most people to readily grasp on a first read.
bobcat2 wrote:In my earlier reply to YDNAL I talked about real, not nominal rates.
bobcat2 wrote:Social Security benefits are more valuable the lower the real interest rate.

Last I read, according to SS Administration, the VAST majority of people take SS benefits before full retirement Age based on NEED... there goes the "strategy to maximize SS benefits."

Computing PV of you SS benefit - as in the title of the article in your thread - is near* meaningless. Plan to use the income stream when you need it - period, the end.

* I'm being genereous.
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Re: What is the PV of your SS benefits?

Postby The Wizard » Sun Mar 24, 2013 11:09 am

The PV is almost useless except to the extent you feel like replicating an Income Stream.
For instance, if your SS benefit is $2500 a month at a certain age and you want a total gross of $5000 a month, this number gives you a rough idea of how much additional you'll need to ANNUITIZE to achieve that goal...
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Re: What is the PV of your SS benefits?

Postby NYBoglehead » Sun Mar 24, 2013 11:11 am

^You got that right. While many on this forum attempt to maximize the SS benefit, the reality is for most Americans they need to take Social Security before age 70.
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 11:21 am

The most straightforward way to compute when to take SS benefits is to make NPV calculations - comparing the PV of different SS claiming strategies and picking the one that maximizes the PV of the benefits. The value of different strategies changes with real interest rate changes. When real interest rates are low the NPV of a delay benefits strategy can best the "take benefits as soon as possible" strategy by more than $100,000 for a two earner couple. OTOH when real interest rates are high the NPV of the two strategies might be less than $25,000.

I agree that about 70% of people when retiring cannot afford to delay SS benefits, but what about the other 30%? And don't most Bogleheads fall into that 30%?

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Re: What is the PV of your SS benefits?

Postby ourbrooks » Sun Mar 24, 2013 11:25 am

Worse still, the article underestimates the PV by a factor of THREE!

1. Social Security is really two annuities: an annuity for the full benefit based on the life of the survivor and a spousal annuity for half that amount based on the life of the primary beneficiary. In the example in the article, a couple would actually be getting $30,000 a year until one of them dies. That brings the number for 3% interest rates to more like $450,000.

2. Second, Social Security is inflation adjusted. Inflation indexed SPIAs cost about 60% more than fixed amount ones. That make the total more like $720,000.

That measly $20,000 a year in SS benefits is worth a lot more than most people realize.
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Re: What is the PV of your SS benefits?

Postby The Wizard » Sun Mar 24, 2013 11:26 am

Maximizing SS benefits is a different question from the OP.
Max monthly payout obviously at age 70.
Max accumulated lifetime benefit total is not at all obvious; it depends on assumed investment returns and actual lifespan.
Take 10,000 people receiving SS at age 62 and investing at 5% annual return, vs another 10,000 at age 70.
Supposed to be actuarially neutral, so assumed return, along with income taxes, will determine the winner.
Me, I'm planning to wait till age 70...
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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 11:33 am

[edit] delete... see below
Last edited by YDNAL on Sun Mar 24, 2013 3:14 pm, edited 2 times in total.
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Re: What is the PV of your SS benefits?

Postby Sidney » Sun Mar 24, 2013 11:36 am

ourbrooks wrote:That measly $20,000 a year in SS benefits is worth a lot more than most people realize.

Likewise, it may cost a lot more than people think to add another "measly $20K a year" to their retirement income.
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 11:37 am

Social Security is actuarially neutral if real long-term interest rates are average. The SS Admin assumes average LT real interest rates are about 2.8%. When LT real interest rates are well below average, like they are today, there is substantial actuarial advantage in delaying benefits.

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Re: What is the PV of your SS benefits?

Postby jebmke » Sun Mar 24, 2013 11:43 am

YDNAL wrote:Bob, you insist in making a blanket assumption that people have a choice. It is NOT - and most SS benefits, according to SS Administration data - are taken based on NEED.

I run two TaxAide centers each year. A large majority of our retirees have social security, a modest pension and a small amount of bank interest. They certainly don't have the option to wait until age 70 to start SS.
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 11:47 am

YDNAL,

Most Americans have less than $150,000 in financial assets at retirement. This means nearly all the discussions about investing strategies here at Bogleheads have little value to them - not just SS strategies. Now if they were more like Bogleheads and had $400,000 or more at retirement then not only would the investment strategies at Bogleheads have value, but also SS strategies would have value.

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Re: What is the PV of your SS benefits?

Postby Professor Emeritus » Sun Mar 24, 2013 11:49 am

ourbrooks wrote:Worse still, the article underestimates the PV by a factor of THREE!
2. Second, Social Security is inflation adjusted. Inflation indexed SPIAs cost about 60% more than fixed amount ones. That make the total more like $720,000.
.


There is a big debate on whether inflation adjusted SPIA's are fairly priced. I use 25% which is a figure I got years ago from our pension actuaries.
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 11:56 am

YDNAL wrote:Bob, you insist in making a blanket assumption that people have a choice. It is NOT - and most SS benefits, according to SS Administration data - are taken based on NEED.

Here is what I actually wrote.
I agree that about 70% of people when retiring cannot afford to delay SS benefits, but what about the other 30%? And don't most Bogleheads fall into that 30%?

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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 12:01 pm

bobcat2 wrote:Social Security is actuarially neutral if real long-term interest rates are average. The SS Admin assumes average LT real interest rates are about 2.8%. When LT real interest rates are well below average, like they are today, there is substantial actuarial advantage in delaying benefits.

BobK

BobK, [edit to eliminate unnecessary sentence and provide link] the above is irrelevant to the million of elderly folk relying on SS benefits to stay warm and eat a meal or two. You and I are never going to agree here.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3261

Now,
bobcat2 wrote:YDNAL,

Most Americans have less than $150,000 in financial assets at retirement. This means nearly all the discussions about investing strategies here at Bogleheads have little value to them - not just SS strategies. Now if they were more like Bogleheads and had $400,000 or more at retirement then not only would the investment strategies at Bogleheads have value, but also SS strategies would have value.

BobK

Nothing can be further from the truth; and, there is no need to bold and underline your misguided point. Everyone would benefit from adhering to Boglehead principles, net worth notwithstanding.
1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep Costs Low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
link - http://www.bogleheads.org/wiki/Boglehea ... philosophy
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 12:11 pm

YDNAL,

Why would people that are relatively well off but spend time on investment boards only donate SS benefits to others? What's the difference between optimizing SS benefits vs optimizing portfolio assets when it comes to giving to charity?

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Re: What is the PV of your SS benefits?

Postby Beagler » Sun Mar 24, 2013 12:15 pm

bobcat2 wrote:I agree that about 70% of people when retiring cannot afford to delay SS benefits, but what about the other 30%? And don't most Bogleheads fall into that 30%?


Should SS become means-tested, or other tweaks make to payments, this PV computation becomes even more academic (and meaningless).
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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 12:24 pm

bobcat2 wrote:YDNAL,

Why would people that are relatively well off but spend time on investment boards only donate SS benefits to others? What's the difference between optimizing SS benefits vs optimizing portfolio assets when it comes to giving to charity?

BobK

One last time, SS benefit consumption is NOT an option for the VAST majority of people. Unless/until you recognize this, we are just talking past each other. And, the link in your thread discusses PV of SS benefits... nonesense, in MY book!

All that (and previously) said, are you mentioning "charity" because I brought it up?

if you read the "countless of discussion hours" I just mentioned, you see Beogleheads delaying SS benefits to 70.5+, discussing required minimum distributions and how to invest these distributions, etc. These are the folks most able to help others and I hope/wish they did. Like I said earlier, you and I will never agree on this subject, so I'm going to go watch some NCAA hoops (go Canes!).
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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 12:34 pm

YDNAL,

You wrote.
One last time, SS benefit consumption is NOT an option for the VAST majority of people.
I am not sure what you mean by this, I'm guessing you mean SS benefit delay. Your statement as it stands makes no sense. I feel that in replying to your posts I am responding to the black knight in the Monty Python film. :)

Have a good day. :happy

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Re: What is the PV of your SS benefits?

Postby Beagler » Sun Mar 24, 2013 12:39 pm

bobcat2 wrote:YDNAL,

You wrote.
One last time, SS benefit consumption is NOT an option for the VAST majority of people.
I am not sure what you mean by this, I'm guessing you mean SS benefit delay. Your statement as it stands makes no sense. I feel that in replying to your posts I am responding to the black knight in the Monty Python film. :)

Have a good day. :happy

BobK


Seems to me the "PV" proposition is the idea that's been cut down. :)
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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 12:43 pm

bobcat2 wrote:YDNAL,

You wrote.
One last time, SS benefit consumption is NOT an option for the VAST majority of people.
I am not sure what you mean by this, I'm guessing you mean SS benefit delay. Your statement as it stands makes no sense. I feel that in replying to your posts I am responding to the black knight in the Monty Python film. :)

Have a good day. :happy

BobK

BobK, you have been all over the place, just read your posts.

Conversely, I make one point (one point only), "SS benefit strategies" don't apply to the VAST majority of people that NEED this benefit to pay their darn bills (consumption).... period. If you don't get this, I can't help you!
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Re: What is the PV of your SS benefits?

Postby Austintatious » Sun Mar 24, 2013 12:44 pm

I don't question that 70% figure (CPA Journal says just over 72% opt in early), but I'm dubious of any assumption that essentially all of those folks are taking benefits early because their financial circumstances genuinely compel it. Though I'd guess that a very large number, likely a majority, rightly conclude that they "need' to opt in early, I suspect there's a substantial portion of those folks who, if thoroughly educated about all the options and their consequences, could and would conclude that they really don't need to, that there really are other options, like working longer. And I think that concepts like the present value of SS benefits, as is addressed in this article, could be meaningful to those people. An article like this, especially if it demonstrated the different values of each option - early, FRA and 70 - could be influential in helping someone make their decision. I guess my point is that there are many very poor financial decisions made simply because the individual is woefully uninformed, including decisions re SS, and articles like this one could be helpful to the decision making process.
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Re: What is the PV of your SS benefits?

Postby umfundi » Sun Mar 24, 2013 1:22 pm

Wow.

I don't know about the PV, but here's the point:

http://crr.bc.edu/briefs/should-you-buy ... -security/

Since the benefit from delaying SS is not adjusted for interest rates, it is now an incredibly good deal. And, SS underestimates your life expectancy. Buying that benefit as a real SPIA would cost more than twice as much, the last time I looked.

I also reject the idea that I need to bear guilt or blame that others have fewer SS choices than I do.

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Re: What is the PV of your SS benefits?

Postby bobcat2 » Sun Mar 24, 2013 1:45 pm

umfundi wrote:I don't know about the PV, but here's the point:
Since the benefit from delaying SS is not adjusted for interest rates, it is now an incredibly good deal.
The easiest way to calculate just how good that deal is for you, is to calculate the NPV of the SS delay strategy.

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Re: What is the PV of your SS benefits?

Postby ruralavalon » Sun Mar 24, 2013 1:55 pm

What is the PV of your SS benefits?

I cannot really compute this without knowing (or guessing):
1. how long I will live;
2. whether Congress will change the benefit formula, and if so what the change will be;
3. what the inflation rate will be over the rest of my life; and
4. what the inflation adjustment will be in the SS statute, that is what CPI formula will be used.

Nevertheless an interesting article, thanks for providing the link.
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Re: What is the PV of your SS benefits?

Postby Strevlac » Sun Mar 24, 2013 2:10 pm

YDNAL wrote:
bobcat2 wrote:YDNAL,

You wrote.
One last time, SS benefit consumption is NOT an option for the VAST majority of people.
I am not sure what you mean by this, I'm guessing you mean SS benefit delay. Your statement as it stands makes no sense. I feel that in replying to your posts I am responding to the black knight in the Monty Python film. :)

Have a good day. :happy

BobK

BobK, you have been all over the place, just read your posts.

Conversely, I make one point (one point only), "SS benefit strategies" don't apply to the VAST majority of people that NEED this benefit to pay their darn bills (consumption).... period. If you don't get this, I can't help you!


Am I missing something here? Is the title of the thread "PV as applied to SS benefits that are relevant to ALL Americans"?

All I see is Bob linking an article and starting a discussion regarding present value concepts and social security, a discussion about numbers. From my POV, you are the one who is all over the place with these comments about less fortunate people with fewer choices and value judgements about charity, etc.
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Re: What is the PV of your SS benefits?

Postby market timer » Sun Mar 24, 2013 2:26 pm

After just four years of full-time work (plus six years of low-paying side jobs), my PV is $141K. Pretty remarkable. [Political comment removed by admin LadyGeek]
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Re: What is the PV of your SS benefits?

Postby Austintatious » Sun Mar 24, 2013 2:43 pm

For those interested in the long term viability of SS, what can be done to keep it viable, and who might pay for it and how, the excellent discussion about SS that was part of the seven part investment webinar presented by Morningstar yesterday is a source to consider. I don't know if one can access the individual portions of the day long program by going to the Morningstar web site, but they say they'll be presenting it again. If you're on their email list, I think you'll be notified of the date and time. IMO, it was worthwhile, including the part on SS.
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Re: What is the PV of your SS benefits?

Postby YDNAL » Sun Mar 24, 2013 2:46 pm

Strevlac wrote:[From my POV, you are the one who is all over the place with these comments about less fortunate people with fewer choices and value judgements about charity, etc.

You, sir/madam, are correct in choosing one simple sentence to note it is judgmental. Thank you and I edited my post. In case you (or anyone else) wanted some further reading in summary form...
http://www.cbpp.org/cms/index.cfm?fa=view&id=3261

ALL Americans are not in position to "strategize" with regards to SS benefit. If you don't agree with this, have at it and give it your best shot. I'm all done here.
Strevlac wrote:Am I missing something here? Is the title of the thread "PV as applied to SS benefits that are relevant to ALL Americans"?
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Re: What is the PV of your SS benefits?

Postby Jack » Sun Mar 24, 2013 3:00 pm

Austintatious wrote:I don't question that 70% figure (CPA Journal says just over 72% opt in early), but I'm dubious of any assumption that essentially all of those folks are taking benefits early because their financial circumstances genuinely compel it.

From the Social Security Administration, about beneficiaries:
"http://www.ssa.gov/policy/docs/statcomps/income_pop55/index.html"

40% would have incomes below the poverty level without social security
24% have social security as their only income
36% get 90% of their income from social security
65% get at least half of their income from social security

The average social security benefit is less than $15,000 per year.

For most elderly, it's either work into old age or take social security. Social security isn't really optional.
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Re: What is the PV of your SS benefits?

Postby umfundi » Sun Mar 24, 2013 3:50 pm

65% get at least half of their income from social security


35% get less than half their income from Social Security.

100% can calculate a PV of their benefit.

(But yes, that calculation may only be relevant in considering options and choices.)

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Re: What is the PV of your SS benefits?

Postby Austintatious » Sun Mar 24, 2013 4:44 pm

Jack wrote:
Austintatious wrote:I don't question that 70% figure (CPA Journal says just over 72% opt in early), but I'm dubious of any assumption that essentially all of those folks are taking benefits early because their financial circumstances genuinely compel it.

From the Social Security Administration, about beneficiaries:
"http://www.ssa.gov/policy/docs/statcomps/income_pop55/index.html"

40% would have incomes below the poverty level without social security
24% have social security as their only income
36% get 90% of their income from social security
65% get at least half of their income from social security

The average social security benefit is less than $15,000 per year.

For most elderly, it's either work into old age or take social security. Social security isn't really optional.


Yes, it's depressing and downright scary. But are we considering working until 66 or 67 working into old age? For most people, I think not. It may well be that the majority, even the large majority, are opting in early because they have to, financially, perhaps especially so in our current economy. I won't dispute that, but I still suspect that the numbers opting in because they can, rather than as a matter of necessity, are substantial. Most of us know people who've done it when and because they could, because they thought they were ready to quit "the rat race" and enjoy "the good life", as they thought of it. Some may be leaving jobs paying no more than what's necessary to match what that $15K annually from SS would mean, but that might have sustained them until FRA. And many leave better jobs, when doing so stops the accumulation in workplace retirement plan, cuts off some/all of their benefits, and notably diminishes their future payout from SS, including the payout their spouse might have enjoyed. It's those folks, at least some of them, who might rethink the decision if they were well educated on the options and their monetary effects. Many are not. That's why I suggest that articles like this one could be helpful.
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Re: What is the PV of your SS benefits?

Postby Investor2 » Sun Mar 24, 2013 4:51 pm

Professor Emeritus wrote:
ourbrooks wrote:Worse still, the article underestimates the PV by a factor of THREE!
2. Second, Social Security is inflation adjusted. Inflation indexed SPIAs cost about 60% more than fixed amount ones. That make the total more like $720,000.
.


There is a big debate on whether inflation adjusted SPIA's are fairly priced. I use 25% which is a figure I got years ago from our pension actuaries.


I just checked the TSP annuity calculator (TSP is part of the federal employee retirement plan). Their "increasing payment" annuity will increase the amount paid from 0% to a maximum of 3% each year, based on the CPI. This option costs about 1/3 more than the "level payment" option.
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Re: What is the PV of your SS benefits?

Postby lawman3966 » Sun Mar 24, 2013 5:07 pm

bobcat2 wrote:This makes strategies to maximize SS benefits more valuable when interest rates are low. In fact in some cases the best SS strategy changes when interest rates change a lot from high to low or vice versa.
BobK


I do see the point that delaying SS benefits is more beneficial when interest rates are low. Two points. For single people, which I'm one of, the "strategy" is mind-numbingly simple: it simply entails waiting until age 70 to begin receiving benefits. Knowing the magnitude of the PV of future benefits doesn't help with this determination.

Second, the relevant data point is not the current magnitude of future SS benefits as measured in dollars (whether $400,000 or other figure). It seems to me that the relevant comparison is between (a) real interest rates; and (b) the benefit increase minus the mortality credit (about 3% ??) for each year of delay in taking benefits. It seems a no-brainer that with current interest rates, delaying benefits if you can is the right strategy.

I agree that some people don't have a choice but to take benefits early. I would contend that even more people in the U.S. understand little if anything about benefit increases with benefit delays, break-even points between two age-of-benefit decisions, interest rates, and mortality credits. I have to believe that some people of modest means could benefit by delaying benefits, but have no understanding of anything discussed in this thread.

By way of anecdote, a 64 year old acquaintance of mine(a college instructor no less), with about $350k in liquid assets, in a recent conversation on this topic revealed (a) a complete ignorance of the existence of benefit increases with age at which benefits begin; (b) that she thought one could only begin taking benefits at age 65; (c) that she thought she was obligated to take benefits the moment she stopped working.

Educating people about the system is a great idea. But, merely providing a PV equivalent of future benefits doesn't seem to accomplish that.
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Re: What is the PV of your SS benefits?

Postby lawman3966 » Sun Mar 24, 2013 5:11 pm

Professor Emeritus wrote:It's quick and dirty but for all SS and other inflation protected annuities/pensions I use http://www.immediateannuities.com/ and add 25% for inflation protection


I notice that public web accessible calculations of inflation adjusted SPIAs are becoming very hard to find.

I must say that the 25% figure above seems much lower than I recall from past comparisons of indexed and fixed SPIAs. I recall the adjust being more like 50-60% when benefits start at aget 60 or so.

Moreover, the added value of inflation indexed annuities increases with increasing annuity payment receiving periods, so this value is not a constant for all retirement ages.
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Re: What is the PV of your SS benefits?

Postby umfundi » Sun Mar 24, 2013 6:33 pm

lawman3966 wrote:
Professor Emeritus wrote:It's quick and dirty but for all SS and other inflation protected annuities/pensions I use http://www.immediateannuities.com/ and add 25% for inflation protection


I notice that public web accessible calculations of inflation adjusted SPIAs are becoming very hard to find.

I must say that the 25% figure above seems much lower than I recall from past comparisons of indexed and fixed SPIAs. I recall the adjust being more like 50-60% when benefits start at aget 60 or so.

Moreover, the added value of inflation indexed annuities increases with increasing annuity payment receiving periods, so this value is not a constant for all retirement ages.

There have been lots of recent posts on this issue. It seems like Vanguard has a good pass through from their site for real SPIAs.

Mike Piper has also addressed this issue in a number of his recent blogs. Ditto for Wade Pfau's recent papers. All can be found by searching Bogleheads.

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