When should I start taking Social Security?

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When should I start taking Social Security?

Postby ilskeptic » Tue May 07, 2013 10:16 am

Here’s the setup.

Me: 65 in August, retired last month. No pension, have not started SS yet. Would get $2100/mo now, $2300 at FRA, 3K at 70. Traditional IRA in mid-six figures at Vanguard. Generally good health (knock on wood).

Wife: 66, Retired teacher on state pension. She has virtually no SS credits, and her pension is too big for her ever to receive any spousal benefits through me. Her check covers virtually all of our regular monthly expenses (bigger, periodic bills like property taxes can come out of IRA or my SS, depending on when I start it). We have no debt.

The kicker: My wife has been diagnosed with a cognitive condition – yes, that one – that virtually guarantees she will have to enter a nursing home if she lives long enough and/or I become unable to care for her.

What I need: A strategy for the worst-case financial scenario, which would be if we both live beyond the point where I can care for her. Our savings would be depleted a lot faster if they have to support both her in a nursing home and me elsewhere, raising the specter of eventually relying on Medicaid for her. That, in turn, would limit me to living on no more than about $34,000 a year and a savings cap of $110,000.

Questions, at least for starters: Should I start taking SS now, spend what I need to and squirrel the rest away, thus increasing our savings for possible (probable?) nursing home bills? Or should I wait on SS and use up more of our savings in advance of any Medicaid considerations? Is there any value to my converting annual chunks of the TIRA into a Roth? Is there any other long-term financial strategy I should consider?

Please treat this solely as a financial question. I’m not looking for sympathy – life gives you what it gives you, and we’ve been pretty lucky till now – and I’m definitely not interested in being guilted about Medicaid. Thanks for your thoughts.
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Re: When should I start taking Social Security?

Postby MN Finance » Tue May 07, 2013 10:36 am

Well, I would definitely wait to collect SS on your record to 70. It doesn't appear that you have any significant need for income now, so that encourages waiting. Second, if you indeed end up spending though everything to care for your wife, then this gives you something long term they can't take. This ends up being your own longevity protection.

I don't know a lot about Medicaid and each state is different. But there's an income test and an asset test, so it doesn't always help to try and "shift" money from income to assets or from assets to income (like delay SS, spend down assets or the opposite). I do know that your homestead is exempt, so if you put money into your home it's protected. You could increase home size (though you have all the risks associated and wouldn't want to upgrade or buy beyond your needs), then downsize at a future point should you outlive your wife. It would be helpful to visit with an elder law (not estate planning) attorney in your area to help with details. Roth is an interesting topic to raise because the asset tests don't pay attention to what the asset is, so clearly you'd want to have Roth money be the "last" money you are able to hold onto. If that is enough to make the case for conversions is probably impossible to measure, but certainly something to think about.
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Re: When should I start taking Social Security?

Postby jjustice » Tue May 07, 2013 10:54 am

I concur with MN Finance's view that you should wait until 70, but your wife should not wait. You can file and suspend at FRA (66) so that your wife can start collecting spousal benefits before you start your own. Mike Piper is a good source for information: http://www.obliviousinvestor.com/social-security-strategies-for-married-couples/
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Re: When should I start taking Social Security?

Postby ObliviousInvestor » Tue May 07, 2013 11:34 am

If live-a-long-time scenarios are the most financially scary ones, it seems to me that waiting (for you) is likely a good idea.

As far as the strategies that often apply to married couples, it's simplified somewhat by the fact that your wife cannot get a spousal benefit due to her pension. If she does have the necessary credits to qualify for a retirement benefit (however small it may be), you might as well claim spousal benefits from your age 66 to 70.
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Re: When should I start taking Social Security?

Postby gerrym51 » Tue May 07, 2013 12:35 pm

plenty of opinions. no perfect answer. i took mine at 62. as i've posted on other threads-ss is Not usually taken in a vacuum. taxes come into play especially after 70 when you start taking minimum distributions from your retirement accounts.

the irs brackets on how SS is taxed do not adjust for inflation. just something to think about.
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Re: When should I start taking Social Security?

Postby JW Nearly Retired » Tue May 07, 2013 2:03 pm

If you don't have an immediate need for the income I think it's an easy call to delay. If/when your wife passes and much of your IRA is depleted, you will be a lot better off with a $3000/month SS colaed income floor than you would be with only $2100.
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Re: When should I start taking Social Security?

Postby MathWizard » Tue May 07, 2013 2:27 pm

Waiting to 70 is likely the best.

I'd find out what effect the pension has on the widow's benefit, assuming you pre-decease her.
If she can benefit neither from neitrher the sposal benefit nor the widow's benefit, then the call is
much closer. Then your health situation is probably the primary determing factor.
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Re: When should I start taking Social Security?

Postby pshonore » Tue May 07, 2013 2:39 pm

I beleive the same effect applies to a widows benefit. 2/3 of her pension from a job not covered by SS would be used to offset SS spousal or survivors benefit (the so called GPO rule)
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Re: When should I start taking Social Security?

Postby ilskeptic » Tue May 07, 2013 4:19 pm

Sorry, should have been clearer. No, she's never going to get a dime from Social Security, either through her own work history or mine. On the other hand, if she predeceases me, I'll receive a survivor's annuity, 50 percent of her amount.
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Re: When should I start taking Social Security?

Postby gerrym51 » Tue May 07, 2013 4:23 pm

ilskeptic wrote:Sorry, should have been clearer. No, she's never going to get a dime from Social Security, either through her own work history or mine. On the other hand, if she predeceases me, I'll receive a survivor's annuity, 50 percent of her amount.


are you saying she can't inherit your SS but you will get 1/2 of her retirement. if that true i would take now
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Re: When should I start taking Social Security?

Postby gerrym51 » Tue May 07, 2013 4:25 pm

ilskeptic wrote:Here’s the setup.

Me: 65 in August, retired last month. No pension, have not started SS yet. Would get $2100/mo now, $2300 at FRA, 3K at 70. Traditional IRA in mid-six figures at Vanguard. Generally good health (knock on wood).

Wife: 66, Retired teacher on state pension. She has virtually no SS credits, and her pension is too big for her ever to receive any spousal benefits through me. Her check covers virtually all of our regular monthly expenses (bigger, periodic bills like property taxes can come out of IRA or my SS, depending on when I start it). We have no debt.

The kicker: My wife has been diagnosed with a cognitive condition – yes, that one – that virtually guarantees she will have to enter a nursing home if she lives long enough and/or I become unable to care for her.

What I need: A strategy for the worst-case financial scenario, which would be if we both live beyond the point where I can care for her. Our savings would be depleted a lot faster if they have to support both her in a nursing home and me elsewhere, raising the specter of eventually relying on Medicaid for her. That, in turn, would limit me to living on no more than about $34,000 a year and a savings cap of $110,000.

Questions, at least for starters: Should I start taking SS now, spend what I need to and squirrel the rest away, thus increasing our savings for possible (probable?) nursing home bills? Or should I wait on SS and use up more of our savings in advance of any Medicaid considerations? Is there any value to my converting annual chunks of the TIRA into a Roth? Is there any other long-term financial strategy I should consider?

Please treat this solely as a financial question. I’m not looking for sympathy – life gives you what it gives you, and we’ve been pretty lucky till now – and I’m definitely not interested in being guilted about Medicaid. Thanks for your thoughts.



i just carefully read your post-i would go to an Eldercare attorney NOW. do not wait. you need professional advice.
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Re: When should I start taking Social Security?

Postby ilskeptic » Tue May 07, 2013 4:56 pm

Again, sorry for incomplete info earlier, was trying to keep the original post at a manageable length. Our eldercare attorney has done his thing. We've got wills, POAs, even an irrevocable trust that should guarantee the kids a little bit of money (didn't count that in the 'mid-six figures' mentioned in the original post, and it is a relatively small amount).

Those were all done while I was still working; just now coming to the when-to-take-SS and Roth conversion issues. I actually think this board might have better answers than a lawyer on those questions.
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Re: When should I start taking Social Security?

Postby BL » Tue May 07, 2013 5:14 pm

I would seriously consider waiting until age 70 for SS as it is the best deal around for a guaranteed COLAd annuity. No one can take it away from you. For the same reason, you might want to consider a SPIA annuity in a few years to guarantee income to you from some of your savings. Sorry, don't know the specifics on how this affects Medicaid, but at least it would guarantee more future income.
Best wishes.
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Re: When should I start taking Social Security?

Postby meebers » Tue May 07, 2013 8:05 pm

Assuming no changes
Taking SS @ 65 ($2100,Aug 2013) Until Mar, 2030 you will have withdrawn 420K Age 81, 7 mo
Taking SS @ 70 ($3000,Aug 2018) Until Mar, 2030 you will have withdrawn 420K Age 81, 7 mo
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Re: When should I start taking Social Security?

Postby LarrynKy » Wed May 08, 2013 8:25 pm

Here are my ideas for your situation.

I believe your wife will be eligible for a spousal benefit based on your work record. Some or all of the SS may be subject to Federal taxation (state taxation varies). Since she has reached her FRA, she will receive 50% of your FRA benefit ($1,150 based on your $2,300 FRA benefit.) as long you are drawing your age 65 benefit. If you have not reached your FRA and are not taking your benefit, your spouse can not receive the spousal benefit based on your work record.

If you delay taking SS until later, this will not increase her spousal benefit, as it is always 50% of your FRA amount. Now when you reach age 66, your FRA, you could suspend your benefit and she will continue to receive the spousal benefit. This $1,150/month needs to be included when determining when to start your own.

Also consider this, when you are receiving benefits, the COLA, if any, will be applied to the benefit you and your spouse are receiving. If you are in a delay, you do not get the COLA but will get an increase based on the delay. Certainly the delay will be be a greater increase than the COLA. But an assumed COLA should be considered.

Hope this helps.
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Re: When should I start taking Social Security?

Postby Peter Foley » Wed May 08, 2013 9:15 pm

I would suggest delaying at least a couple years, possibly until age 70. Keeping your income relatively low now might allow you to take some long term capital gains with no taxes. In addition, you may be able to do Roth conversions. The Roth conversions will provide you with more spendable income later. Living off your wife's pension and joint assets for the next few years makes the most sense to me.

I certainly would not take SS while trying to do Roth conversions. Try to map out your annual income so that you stay below the 25% tax bracket (<$72,500) for the next few years.
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Re: When should I start taking Social Security?

Postby rickmerrill » Thu May 09, 2013 1:10 am

I don't know of any strategy that will help if your worst case scenario should occur. In that case I think your best plan is to attempt to maximize your wealth and protect yourself against longevity, just like we all are trying to do. To that end, delaying SS until 70 seems the correct strategy.
If I am stupid I will pay.
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Re: When should I start taking Social Security?

Postby patriciamgr2 » Thu May 09, 2013 3:58 am

I agree with an earlier poster that talking to a specialist in elder care law would be an important step for you. This is different from wills, trusts, power of attorney, etc. from an estate planning attorney. If your estate lawyer can't refer you to a specialist, consider asking the social worker or patient services rep at your local hospital for suggestions. AARP may also have a referral service, or some guides.

http://www.nolo.com has a free legal encyclopedia entry on "medicaid protections of spousal income during long-term care", which is a general reference on how to maximize the assets/income which you as the community spouse can retain while your wife still qualifies for medicaid in order to ensure that you as a couple maximize the amount available. this general article is not specific enough for you to rely on; you really need to talk to someone who understands qualification for Medicaid in your state of residence & the different levels of income/asset requirements for different levels of service (nursing home vs. home health care). this area of the law is changing right now, so you need someone who deals with these issues quite often.

If, for example, in your state the community spouse's own income does not need to be spent down before the other spouse can qualify for medicaid, but only a portion of the couple's assets is exempt--it may make sense for you to delay SS to maximize your personal income & avoid building up assets (or paying off debts) in your joint estate. Please let me emphasize--I don't know your state's rules; so this is totally hypothetical. I'm just identifying why it may be useful to really understand Medicaid planning in your particular state before deciding on social security.

Our thoughts & prayers are with you & your family.

[edited to remove non-working link]
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Re: When should I start taking Social Security?

Postby patriciamgr2 » Thu May 09, 2013 6:01 am

One further point to consider on converting Trad IRA to Roth. Converting a portion of the TIRA each year to "use up" your lower tax bracket typically makes sense.

However, in your case, I do not know how tax deductions for higher medical expenses in the future would impact your tax situation. [Because the threshold for deducting med expenses is a percentage of your income, it's not a straightforward calculation.]

Also, if the medicaid asset exemption in your state does not distinguish between pre-tax (TIRA) and after-tax (Roth) assets, then obviously would be desirable to have the balance you're not forced to spend down in a Roth.
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Re: When should I start taking Social Security?

Postby trasmuss » Thu May 09, 2013 6:40 am

When you review your states laws with your elder care attorney check into how income is treated vs. assets. You may find it beneficial to consider purchasing a large immediate single fixed annuity when you get closer to your wife going into a nursing home. You would first find out the spousal impoverishment rules to see how much cash you can keep before medicade checks in. Do anything you wish on your house, upgrade your car if needed/desired, check into pre-paid funerals, etc. depending upon your laws. If you are concerned with having a large annuity quit if you die early, get one with a minimum of benefits (e.g. 10 years). That will protect your heirs if you die shortly after taking one out. Buy annities from different companys depending upon your states insurance amounts (e.g. $100k, $250k, etc.). Also check to see if any part of an IRA or Roth would be protected beyond the normal spousal impoverishment amount.

Based on the information you have provided, I would wait until 70 to collect social security.

Tom
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Re: When should I start taking Social Security?

Postby johnep » Thu May 09, 2013 8:27 am

gerrym51 wrote:
ilskeptic wrote:Here’s the setup.

Me: 65 in August, retired last month. No pension, have not started SS yet. Would get $2100/mo now, $2300 at FRA, 3K at 70. Traditional IRA in mid-six figures at Vanguard. Generally good health (knock on wood).

Wife: 66, Retired teacher on state pension. She has virtually no SS credits, and her pension is too big for her ever to receive any spousal benefits through me. Her check covers virtually all of our regular monthly expenses (bigger, periodic bills like property taxes can come out of IRA or my SS, depending on when I start it). We have no debt.

The kicker: My wife has been diagnosed with a cognitive condition – yes, that one – that virtually guarantees she will have to enter a nursing home if she lives long enough and/or I become unable to care for her.

What I need: A strategy for the worst-case financial scenario, which would be if we both live beyond the point where I can care for her. Our savings would be depleted a lot faster if they have to support both her in a nursing home and me elsewhere, raising the specter of eventually relying on Medicaid for her. That, in turn, would limit me to living on no more than about $34,000 a year and a savings cap of $110,000.

Questions, at least for starters: Should I start taking SS now, spend what I need to and squirrel the rest away, thus increasing our savings for possible (probable?) nursing home bills? Or should I wait on SS and use up more of our savings in advance of any Medicaid considerations? Is there any value to my converting annual chunks of the TIRA into a Roth? Is there any other long-term financial strategy I should consider?

Please treat this solely as a financial question. I’m not looking for sympathy – life gives you what it gives you, and we’ve been pretty lucky till now – and I’m definitely not interested in being guilted about Medicaid. Thanks for your thoughts.



i just carefully read your post-i would go to an Eldercare attorney NOW. do not wait. you need professional advice.


I totally agree with consulting with an eldercare attorney. Your situation is more complex than most regarding when to take SS and requires a holistic view of your situation. Attorney can hopefully advise you best way to preserve your assets and income while providing best care for your wife. Best wishes as you embark on this difficult journey.
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Re: When should I start taking Social Security?

Postby JW Nearly Retired » Thu May 09, 2013 8:46 am

Be careful, you cannot do the SS file and suspend thing until you are FRA.

from http://www.ssa.gov/retire2/yourspouse.htm
If you or your spouse are full retirement age:

If you are full retirement age, you can apply for retirement benefits and then request to have payments suspended.That way, your spouse can receive a spouse's benefit and you can continue to earn delayed retirement credits until age 70.

If your spouse has reached full retirement age and is eligible for a spouse's benefit and his or her own retirement benefit, he or she has a choice. Your spouse can choose to receive only the spouse's benefit now and delay receiving retirement benefits until a later date. If retirement benefits are delayed, a higher benefit may be received at a later date based on the effect of delayed retirement credits.

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Re: When should I start taking Social Security?

Postby nonnie » Thu May 09, 2013 9:34 pm

ilskeptic wrote:Again, sorry for incomplete info earlier, was trying to keep the original post at a manageable length. Our eldercare attorney has done his thing. We've got wills, POAs, even an irrevocable trust that should guarantee the kids a little bit of money (didn't count that in the 'mid-six figures' mentioned in the original post, and it is a relatively small amount).

Those were all done while I was still working; just now coming to the when-to-take-SS and Roth conversion issues. I actually think this board might have better answers than a lawyer on those questions.


"In some situations, the purchase of a restricted SPIA can help an individual qualify for Medicaid assistance sooner, and potentially pass on a greater estate to their heirs at death. In effect, the assets placed in such an annuity are no longer considered as assets that must be "spent down" prior to Medicaid eligibility. At death, any remaining payments are paid to the beneficiary and may be shielded from Medicaid collection." You need to check with your attorney or speak with someone familiar with this process about the possible benefits of an SPIA.
This post may be monitored for quality assurance purposes.
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