Social Security - Periods Where Waiting Has No Benefit?

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Social Security - Periods Where Waiting Has No Benefit?

Postby Electron » Tue Jan 29, 2013 7:51 pm

Here is an article discussing periods where waiting to take Social Security may not increase the benefit.

They cite age 62 through age 63 and 11 months, and age 65 and 4 months through age 66 and 8 months. These numbers are for those with full benefits at age 66.

http://blogs.marketwatch.com/encore/201 ... rat-holes/

They state that the reason for these periods is that increases for waiting are not uniform.

Can anyone confirm that these periods do exist? I wonder if the online calculators and AnyPIA program show the same result.
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby sscritic » Tue Jan 29, 2013 8:18 pm

Increases are not uniform in two ways; as a fixed percentage of your PIA and as a percentage of your current benefit at the moment you consider "take or wait." The other issue is that being alive one more year, doesn't increase your life expectancy by one year, and the shortfall is not uniform.

Here are some numbers from my post from 5 days ago (where I mention 64 and 67 as the sweet spots - recalled from about 10 years ago)
male age 62 + 19.63 = 81.63
male age 70 + 14.21 = 84.21

Now let's fill in age 66; if everything was uniform we would get 66 + 16.92 = 82.92. The facts:
male age 66 + 16.79 = 82.79.

Surviving from 62 to 66 gets you 1.16 years; surviving from 66 to 70 gets you 1.42 years.

As I recall, and I haven't done any real serious thinking about this in a number of years, 64 and 67 were two of my favorite years. So men would come out slightly ahead by starting at 64 (but only in some probabilistic expected value sense) and women would come out slightly ahead starting at 67.
viewtopic.php?p=1593773#p1593773

Of course the biggest issue is sex, which the article never mentioned (I can't believe that the authors didn't).
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby mickeyd » Tue Jan 29, 2013 8:19 pm

Interesting article. It seems to apply to only single SS participants.
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby sscritic » Tue Jan 29, 2013 8:23 pm

P.S. you have to understand the meaning of "not increase benefits" means. Your monthly benefits go up, but you don't live long enough to collect more* than if you had just started a little earlier.

* I am not sure what more means. More nominal dollars? More real dollars? A larger NPV, but using what discount rate? I haven't read the paper, and I doubt the article author did either. :)
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby Electron » Wed Jan 30, 2013 12:53 am

sscritic wrote:P.S. you have to understand the meaning of "not increase benefits" means. Your monthly benefits go up, but you don't live long enough to collect more* than if you had just started a little earlier.

Thanks sscritic and mickeyd for your replies. I now understand the point the author was trying to make, but I also wonder if maximizing the collected benefit is necessarily the best approach.

One could also state that a person may need extra money during the last few years of their life which could justify waiting until age 70 regardless of their estimated life expectancy. It becomes a matter of insurance. On the other hand, one could argue that maximizing the enjoyment of life over all years might be more important. As usual, there are many things to consider, and I realize that many individuals may not be able to wait to start collecting the benefit.
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby mickeyd » Wed Jan 30, 2013 5:39 pm

One of the things about SS that I have learned to appreciate during the last couple of years is how flexible SS is. If taking it at age 62 fits you~start the flow @ age 62. If you figure that making a maximum delay is worth your while~ don't touch it until age 70. If you have a spouse that worked as well as you~ the options increase once again. It is also the most effective way to pay for Medicare IMHO~so there's another benefit.
Last edited by mickeyd on Thu Jan 31, 2013 7:27 pm, edited 1 time in total.
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby Electron » Thu Jan 31, 2013 12:27 am

mickeyd wrote:One of the things about SS that I have learned to appreciate during the last couple of years is how flexible SS is.

Excellent point and I agree. Waiting could also be a benefit to those that might be hit with Medicare surcharges. The threshold is not all that high for single taxpayers.

Here is another question for anyone with experience using the AnyPia program that may be downloaded from the Social Security website.

AnyPia calculates the correct benefit for any starting month for my case leading up to full retirement age at 66. However, after full retirement age the benefit is shown as the exact same number every month until the next age increment is hit. The benefit only changes once for age 66, 67, 68, and 69 which occurs in January. Am I doing something wrong?

I do realize that the benefit is easy to calculate after full retirement age. The benefit increases 8% per year in my case which is 2/3 of 1% each month. Note that there is no compounding, and all calculations are based on the Primary Insurance Amount at age 66. That means that the percentage increase from month to month is greatest the first month and falls off a little every month after that.
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby sscritic » Thu Jan 31, 2013 12:41 am

Delayed retirement credits are first paid in the following January. If you start in February, you don't get the January credit until the next January. If you start in March, you don't get the January and February credits until the next January. Both starting benefits are the same. Look at the benefit the next January and you will see the two different benefits.
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Re: Social Security - Periods Where Waiting Has No Benefit?

Postby Electron » Thu Jan 31, 2013 1:58 am

sscritic wrote:Delayed retirement credits are first paid in the following January.

Thanks for the explanation.

If I understand this, one can apply for benefits after full retirement age and start receiving benefits often the next month. The amount would go up the following January based on delayed retirement credits.

I also noticed that one can ask to be paid retroactively for up to 6 months as long as the first month is after full retirement age. That would appear to result in a multi-month payment with the official starting date back somewhat in time.
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