Social Security - Why Delay ?

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carolinaman
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Re: Social Security - Why Delay ?

Post by carolinaman » Tue Feb 05, 2013 9:31 am

sscritic wrote:
johnep wrote: I have a question. If you retired at 62 but deferred SS until 70, does SS recalculate the monthly benefit based upon inflation or COLAs in intervening years. For example, at age 62 your calculated full benefit at age 66 might be $2,000 and deferring to 70 is $2,640 (1.32X$2,000). If you defer SS to age 70 does SS adjust the benefit to reflect COLA and inflation between age 62 and 70. It seems like they would but I am not sure. It makes a difference in the analysis depending upon the answer. Thanks
Your PIA gets the COLA every year, collecting or not. Benefits are percentages of PIAs. As an example, 132% of a larger number is larger than 132% of a smaller number. COLAs count.

Edit: I like to do SS problems in real numbers. Then you just ignore the COLAs. 132% is just 132%.
Thanks sscritic for clearing this up for me. I agree using real numbers make analysis simpler and just as accurate.

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Epsilon Delta
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Re: Social Security - Why Delay ?

Post by Epsilon Delta » Tue Feb 05, 2013 9:33 am

sscritic wrote:
richard wrote: The danger of having one person start early is the other person dies and the early starter is stuck with lower benefits than if the early starter delayed until 70 (unless all benefits received to date are repaid).
Let's assume that Low starting early does not cause the death of High; High is going to die when High is going to die. Low might lose if High's PIA at death is less than 132% of low's PIA. If low means 75% of high or less, then starting early still works.

Example: Low PIA = $1500, High PIA = $2000; Low at 70 = $1980.

Assume same age (not true of many if not most couples) and Low starts at 62.
High dies at 62. Low gets choice of $1125 as self or 0.81 x 2000 = $1620 as widow. Since under the plan that High was waiting, Low could delay widow(er) until 66, when Low would get $2000.
High dies at 66. Low gets $2000.
High dies at 68. Low gets $2320.

In every case, Low can collect more than Low's own age 70 benefit as a widow(er).
If low's PIA is more than 75.75% of high's PIA it can make a difference who claims early. The closer the PIAs are the more it matters. This is because you stop earning delayed retirement credits when a person dies. If the PIA are very close and one of the spouses has a significantly impaired life expectancy it may make sense to claim the benefits of the unhealthy spouse early instead of those of the lower earner. This will be pretty rare, but if it applies to you it's nice to know.

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Re: Social Security - Why Delay ?

Post by sscritic » Tue Feb 05, 2013 9:43 am

Epsilon Delta wrote: If low's PIA is more than 75.75% of high's PIA it can make a difference who claims early. The closer the PIAs are the more it matters. This is because you stop earning delayed retirement credits when a person dies. If the PIA are very close and one of the spouses has a significantly impaired life expectancy it may make sense to claim the benefits of the unhealthy spouse early instead of those of the lower earner. This will be pretty rare, but if it applies to you it's nice to know.
I obviously picked 75% for a reason. :)

Yes, low has to mean low. When the numbers are 2000 and 2010, I don't call 2000 low. You have to run the numbers for your numbers. Death for High before FRA means the PIA is the PIA. Death after FRA but before 70 means the PIA increased for Delayed Retirement Credits is only increased by as many DRCs as High has at death, not the full 48 to be earned if High survives to 70 (assuming FRA of 66).

Every couple has to look at their own numbers and their own ages (and their own health) as you say.

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tadamsmar
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Re: Social Security - Why Delay ?

Post by tadamsmar » Tue Feb 05, 2013 9:45 am

I think the decision is sort of being mischaracterized here. The question is not really 62 or 70.

The decision is always should I delay an additional month or not. It's really a month by month decision process.

If at any point you can estimate your lifespan as being sufficiently short, then you should start SS ASAP. If not, then the decision is based on fuzzy math and is not all that important because delaying one additional month is not that big an investment.

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Re: Social Security - Why Delay ?

Post by dbr » Tue Feb 05, 2013 9:48 am

I'm sorry if this was already posted, but some people between the ages of 62 and 70 might delay SS to pry open an opportunity for tax optimization such as Roth conversions. Another situation might be unwinding in the money management stock options or other forms of delayed compensation.

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bUU
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Re: Social Security - Why Delay ?

Post by bUU » Tue Feb 05, 2013 9:50 am

sscritic wrote: SS is based on the best 35 years, not average of last 10.
Hmph! Where did I get that "average of the last 10 years" thing? Thanks for the correction.

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Padlin
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Re: Social Security - Why Delay ?

Post by Padlin » Tue Feb 05, 2013 9:56 am

bUU wrote:
sscritic wrote: SS is based on the best 35 years, not average of last 10.
Hmph! Where did I get that "average of the last 10 years" thing? Thanks for the correction.
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tadamsmar
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Re: Social Security - Why Delay ?

Post by tadamsmar » Tue Feb 05, 2013 10:12 am

Failing to think of the decision as anything more than a monthly decision after reevaluation is an example of behavioral finance. To be specific, it's a example of aversion to regret. The only way it becomes a 62 vs 70 decision is when you anticipate the regret you may feel about your decision at some future date, but that regret is irrational if you made good sound monthly reevaluations based on the info available at the time.

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archbish99
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Re: Social Security - Why Delay ?

Post by archbish99 » Tue Feb 05, 2013 10:36 am

Whatyear? wrote:In my case, I am 1 year older than my husband and by far the higher earner, so 50% of my benefit will be better for him, but he does or rather did have his work history (now he's a stay-at-home Dad and most likley will be until I retire). So in our case would the best strategy be:

He files at 62: I file as spouse at FRA; then I file on my own at age 70 (and then can he claim as spouse against my benefits, which would be higher?) And if at reaching age 62 we went into a local SS office, would they tell you about all these options?
He can claim as a spouse against your benefits as soon as he hits FRA, actually. You would file and suspend, then he would file a new application for spousal benefits. See examples above for how that would play out.
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sscritic
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Re: Social Security - Why Delay ?

Post by sscritic » Tue Feb 05, 2013 10:39 am

tadamsmar wrote:Failing to think of the decision as anything more than a monthly decision after reevaluation is an example of behavioral finance. To be specific, it's a example of aversion to regret. The only way it becomes a 62 vs 70 decision is when you anticipate the regret you may feel about your decision at some future date, but that regret is irrational if you made good sound monthly reevaluations based on the info available at the time.
Yes, but. In deciding whether to continue to work at your job, you have to consider the possibility of promotions and layoffs in the future. You make the decision this month, but you don't just look at this month. In deciding whether to take SS at 62, you have to compute all the future possibilities. Computing at 62 and 66 and 70 is a shortcut, an approximation of computing the values at

62, 62 and 1, 62 and 2, 62 and 3, 62 and 4, 62 and 5, 62 and 6, 62 and 7, 62 and 8, 62 and 9, 62 and 10, 62 and 11, 63, 63 and 1, 63 and 2, 63 and 3, 63 and 4, 63 and 5, 63 and 6, 63 and 7, 63 and 8, 63 and 9, 63 and 10, 63 and 11, ..., 69, 69 and 1, 69 and 2, 69 and 3, 69 and 4, 69 and 5, 69 and 6, 69 and 7, 69 and 8, 69 and 9, 69 and 10, 69 and 11, and 70.

Looking at different strategies and computing the benefits under each gives you more information to use in making your decision.

All of these values are "info available at the time" to be taken into consideration. Of course, there is no "at the time" until you reach age 62. What you compute at 58 are just numbers that help you to understand the process and help prepare yourself for "at the time."

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tadamsmar
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Re: Social Security - Why Delay ?

Post by tadamsmar » Tue Feb 05, 2013 12:20 pm

sscritic wrote:
tadamsmar wrote:Failing to think of the decision as anything more than a monthly decision after reevaluation is an example of behavioral finance. To be specific, it's a example of aversion to regret. The only way it becomes a 62 vs 70 decision is when you anticipate the regret you may feel about your decision at some future date, but that regret is irrational if you made good sound monthly reevaluations based on the info available at the time.
Yes, but. In deciding whether to continue to work at your job, you have to consider the possibility of promotions and layoffs in the future. You make the decision this month, but you don't just look at this month. In deciding whether to take SS at 62, you have to compute all the future possibilities. Computing at 62 and 66 and 70 is a shortcut, an approximation of computing the values at

62, 62 and 1, 62 and 2, 62 and 3, 62 and 4, 62 and 5, 62 and 6, 62 and 7, 62 and 8, 62 and 9, 62 and 10, 62 and 11, 63, 63 and 1, 63 and 2, 63 and 3, 63 and 4, 63 and 5, 63 and 6, 63 and 7, 63 and 8, 63 and 9, 63 and 10, 63 and 11, ..., 69, 69 and 1, 69 and 2, 69 and 3, 69 and 4, 69 and 5, 69 and 6, 69 and 7, 69 and 8, 69 and 9, 69 and 10, 69 and 11, and 70.

Looking at different strategies and computing the benefits under each gives you more information to use in making your decision.

All of these values are "info available at the time" to be taken into consideration. Of course, there is no "at the time" until you reach age 62. What you compute at 58 are just numbers that help you to understand the process and help prepare yourself for "at the time."
Not sure if I agree. In the OP example, the decision for the first month you are 62 is "Should I (in effect) spend (or forgo) $1500 for a small annuity?".

But the decision to take SS is a bit of a one-way street (it's hard or impossible to reverse). So you are giving up some flexibility if you start SS, you give up the option to buy more annuity and that option has some additional value I suppose.

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Re: Social Security - Why Delay ?

Post by richard » Tue Feb 05, 2013 12:50 pm

ObliviousInvestor wrote:Husband and Wife are the same age, with an FRA of 66. Husband has a PIA of $1,500. Wife has a PIA of $1,400. If they want to hold off on Husband's retirement benefit until 70 and claim Wife's retirement benefit at 62, the restricted application strategy works out like this while they're both still alive:

62 until FRA: 75% of Wife's $1,400 PIA ($1,050 per month).
FRA until 70: 75% of Wife's $1,400 PIA ($1,050) plus Husband collecting 50% of Wife's $1,400 PIA ($700), for a total of $1,750 per month.
70 and after: 75% of Wife's $1,400 PIA ($1,050) plus Husband collecting 132% of Husband's $1,500 PIA ($1,980) for a total of $3,030 per month.

...whereas the file and suspend strategy works out like this:

62 until FRA: 75% of Wife's $1,400 PIA ($1,050 per month).
FRA until 70: 75% of Wife's $1,400 PIA ($1,050). She gets no extra spousal benefit because her PIA is greater than 50% of his. Husband gets nothing because he's suspended his own benefit.
70 and after: 75% of Wife's $1,400 PIA ($1,050) plus Husband collecting 132% of Husband's $1,500 PIA ($1,980) for a total of $3,030 per month.
another alternative:
62 until FRA: nothing
FRA until 70: Wife collecting 50% of Husband's $1,500 PIA for a total of $750 per month [Husband files and suspends, Wife collects spousal benefit]
70 and after: 132% of Wife's $1,400 PIA ($1,848) plus 132% of Husband's $1,500 PIA ($1,980) for a total of $3,828 per month [both collect their own full benefit in their own right]

Compared to the first strategy above,
62 until FRA: $1,050 less per month, for a total of $50,400
FRA until 70: $1,000 less per month, for a total of $48,400
70 and after: $798 more per month

Ignoring the time value of money, it would take approximately 124 months, or approximately 10 years, to break even. For those who fear outliving their assets, this course might make sense.

Bonus math question: is there an easy way to do the time value of money calculation? If so, how?

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HomerJ
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Re: Social Security - Why Delay ?

Post by HomerJ » Tue Feb 05, 2013 2:22 pm

My wife and I will be taking SS as soon as we can... Two reasons. You can die at any moment and spending extra money from 62-69 is a lot more fun than spending extra at 86+.

Now you all make good points that we could spend more of our savings from 62-69 because we could count on that larger payment at 70, so that could, in theory, take care of reason #2 above.

But I've discovered we need cash flow to keep my wife happy. Spending down today's assets for larger amounts later may be smarter, but it doesn't fit her personality. She is NOT going to like seeing our savings go down from 62-69 even if I can convince her it will pay off from 70+ (It may be hard to convince myself even though I know it's true).

My wife quit her job recently, and we're on a budget for the first time in years... A generous budget, but we're tracking our expenses this year.

Currently, our income is a little lower than our budgeted outflow (like $100 a month), and it's driving her crazy. I'm saving 15% in the 401k (with a nice match), and I have another 10% of my income tied up in a employee stock purchase plan (where I get a 15% discount), but I have to keep that money in the brokerage firm for 2 years before I can withdraw it). I keep telling her that 15% gain will easily cover the shortfall, and after the 2 years are up, we can even withdraw money from that brokerage to replenish any dips in our bank account. I just don't want to pass up a free 15% return.

But I'm going to drop my contribution to that plan to 5%, just to make sure our income covers our expenses, even though it will cost us slightly in the long run. I think many people are like that (including myself). They are not happy unless the bank account is growing.

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archbish99
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Re: Social Security - Why Delay ?

Post by archbish99 » Tue Feb 05, 2013 2:56 pm

HomerJ wrote:Currently, our income is a little lower than our budgeted outflow (like $100 a month), and it's driving her crazy. I'm saving 15% in the 401k (with a nice match), and I have another 10% of my income tied up in a employee stock purchase plan (where I get a 15% discount), but I have to keep that money in the brokerage firm for 2 years before I can withdraw it). I keep telling her that 15% gain will easily cover the shortfall, and after the 2 years are up, we can even withdraw money from that brokerage to replenish any dips in our bank account. I just don't want to pass up a free 15% return.

But I'm going to drop my contribution to that plan to 5%, just to make sure our income covers our expenses, even though it will cost us slightly in the long run. I think many people are like that (including myself). They are not happy unless the bank account is growing.
This is one reason I think I would split the portfolio -- designate and split off the portion you expect to spend down before SS, and you can point to the rest as the amount that needs to be going up.
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Re: Social Security - Why Delay ?

Post by EternalOptimist » Tue Feb 05, 2013 3:18 pm

Three things..
:happy If it feels right do it, not all things are rational/statistical in life, you only live once!
:happy Keep it simple, all the calculations in the world are not going to tell you how long you will live!
:happy Believe in yourself, make a decision and go with, stop obsessing--in 50 years none of this will have mattered anyway!
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Re: Social Security - Why Delay ?

Post by theCase » Tue Feb 05, 2013 3:31 pm

I’m 58, retired and plan on taking SS ASAP. Here’s a quick story that helped me make this decision:
  • I worked at a local utility that printed an employee “newspaper” once a week. Beyond company news, it had a section where they went over new hires, who got married, promoted, had children, etc. It also listed recent retirees and those that died along with a short review of their career. What struck me was how short many people's retirement was; e.g. “Hank was a lineman working out of the northern district for 37 years, retired at age 65, moved to his cottage on his favorite lake and died at the age of 68”.
Just seemed a shame for someone to spend so much time working, only to have such a brief retirement.

Granted,it is just an anecdotal story, but it struck home to me what I feel life is about.

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Re: Social Security - Why Delay ?

Post by bUU » Tue Feb 05, 2013 3:37 pm

Here's the counter-argument: The story about the man who lived unexpectedly to age 90, and because he started taking SS at 62 by the time he was 90 it was so little money that he ended up dying of hunger and exposure on the streets.

Of course, my story was made-up and yours was real. I'm not sure I could say that what I suggested (which is the worst-case scenario for taking SS early, akin to your worst-case scenario for taking SS late) is necessarily never going to happen, but it just seems like the really negative things from taking SS early, comparable in negativity to the negative things from taking SS late, are just that much less likely - that perhaps there is an expectation that while nothing will be in the way of the worst-case scenario from taking SS late, there are things that would interfere in the worst-case scenario from taking SS early.

At least it seems that way to me.

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Re: Social Security - Why Delay ?

Post by richard » Tue Feb 05, 2013 3:57 pm

Some people live longer than the standard life expectancy, some live shorter.

I'd rather spend a bit less and not fear being broke in my 80s or 90s. Others would rather spend more sooner.

Different groups have different life expectancies. There are many factors that have major impacts on life expectancy. Women are expected to live about five years more than men. The top half of the income distribution is expected to live about five years more than the bottom half. Non-smokers are expected to live about ten years more than longtime smokers. There are numerous other examples.

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Re: Social Security - Why Delay ?

Post by Simbilis » Tue Feb 05, 2013 4:58 pm

According to this article in the New York Times, you can actually have it both ways. It's a 2008 article, so it's possible the rules have changed.

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Epsilon Delta
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Re: Social Security - Why Delay ?

Post by Epsilon Delta » Tue Feb 05, 2013 5:01 pm

Simbilis wrote:According to this article in the New York Times, you can actually have it both ways. It's a 2008 article, so it's possible the rules have changed.
They changed the rules, so this will no longer work.

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Re: Social Security - Why Delay ?

Post by john94549 » Tue Feb 05, 2013 5:12 pm

My wife and I opted for the "62 => spousal benefit => defer to later" scenario. We are both the same age (65, going on 66) and she was the higher earner by a bit.

My wife had absolutely no problem filing at the local S/S office (hint: make sure to take all your paperwork, e.g., birth certificate, marriage certificate and photo ID) and just received her spousal benefits confirmation. The amount she will receive corresponds exactly to the formula you have read here (and probably elsewhere):

Current monthly benefit (before withholding and Medicare Part B) of age 62 filer X 1.32 X 50%.

Pointer: the S/S rep had a long list of questions, but one question not on the list was whether my wife wanted withholding. If you want it, you need to ask for it. She did.

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Re: Social Security - Why Delay ?

Post by sscritic » Tue Feb 05, 2013 5:31 pm

john94549 wrote: Pointer: the S/S rep had a long list of questions, but one question not on the list was whether my wife wanted withholding. If you want it, apprently you need to ask for it. She did.
You can fill out the form later. You can start, stop, or change the percentage. The choices are 7%, 10%, 15%, and 25%. It is a W-4V and is used by other agencies as well.
Voluntary Withholding Request
(For unemployment compensation and certain federal government payments.)
http://www.irs.gov/pub/irs-pdf/fw4v.pdf

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Re: Social Security - Why Delay ?

Post by john94549 » Tue Feb 05, 2013 5:40 pm

sscritic, I was just curious because the topic (withholding) didn't even come up until I asked. I pointed it out because some might not be aware you can withhold with S/S (example: my Mom, who is 97). I was only aware because the on-line application I used back in 2009 brought it up, and gave the options to select, if desired.

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Re: Social Security - Why Delay ?

Post by umfundi » Tue Feb 05, 2013 6:27 pm

LAbob wrote:
If you wait to start it, the annual payment amount will increase 8% per year of delay. Where are you getting that kind of return these days?
I do not think that the 8% is a "return". A "return" assumes you also get back your principal. Here, there is no principal; you simply get more per month later on, if you delay. But if you start early and invest the SS payments, you WILL get a return on the invested amount(s). Am I wrong?
Read this. Then, read it again.

http://crr.bc.edu/wp-content/uploads/20 ... 10-508.pdf

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
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Re: Social Security - Why Delay ?

Post by sscritic » Tue Feb 05, 2013 6:36 pm

john94549 wrote:sscritic, I was just curious because the topic (withholding) didn't even come up until I asked. I pointed it out because some might not be aware you can withhold with S/S (example: my Mom, who is 97). I was only aware because the on-line application I used back in 2009 brought it up, and gave the options to select, if desired.
Nothing wrong with making people aware. My point was only that if it is missed in the initial application, you can always start withholding later.

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Re: Social Security - Why Delay ?

Post by TomatoTomahto » Tue Feb 05, 2013 10:49 pm

bUU wrote:Here's the counter-argument: The story about the man who lived unexpectedly to age 90, and because he started taking SS at 62 by the time he was 90 it was so little money that he ended up dying of hunger and exposure on the streets.

Of course, my story was made-up and yours was real.
With the COLA, the amount of SS monthly benefit when the man is 90 should buy him as much food as it did when he was 62. He might have spent all of his other assets and died of hunger and exposur for that reason.
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Re: Social Security - Why Delay ?

Post by OneDay » Tue Feb 05, 2013 11:02 pm

Part of the issue is behavioral as well. For 30 to 40 years good investors have made choices to prepare for the future. Once you hit 62 the choice becomes to invest for the futre (i.e. in case I live way to long) or take it now. Going against 30 years of behavior can be tough which is why I find it interesting that so many will take it earlier. (Assuming the were saving to begin with)

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Re: Social Security - Why Delay ?

Post by trudy » Wed Feb 06, 2013 1:09 am

EternalOptimist wrote:I took it at 62 (am now 63) and am happy I did. Forget about breakeven, sometimes life is not about money :!:
I took it early also. My Dad died at 62, and I was darned if I was going to not get anything back from all the taxes that had been collected for SS over the years if I died relatively young. I did some number crunching, and it would take a very long while for taking it early to be the bad choice for me.

Also, by having that income stream, I am not drawing down my savings as much and so they are earning more compound interest.

No one in my family has lived to be older than 86 except one person in several generations. Still I am planning my spending as though I'll live a very long time. I could live forever if it weren't for the cursed Fed.

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Re: Social Security - Why Delay ?

Post by bUU » Wed Feb 06, 2013 5:14 am

TomatoTomahto wrote:
bUU wrote:Here's the counter-argument: The story about the man who lived unexpectedly to age 90, and because he started taking SS at 62 by the time he was 90 it was so little money that he ended up dying of hunger and exposure on the streets.

Of course, my story was made-up and yours was real. ... it just seems like the really negative things from taking SS early, comparable in negativity to the negative things from taking SS late, are just that much less likely
With the COLA, the amount of SS monthly benefit when the man is 90 should buy him as much food as it did when he was 62. He might have spent all of his other assets and died of hunger and exposur for that reason.
Indeed (though I suspect those advocating for taking SS later would point out that COLA is not assured).

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Re: Social Security - Why Delay ?

Post by TomatoTomahto » Wed Feb 06, 2013 6:12 am

I am surprised that, in this low interest rate environment, so many opt for early benefits. I will be doing so also, but that was a close call even with the extra payout of two children who are eligible for some months of benefits alongside me.

I'm not an actuary, but from what I understand, the incentive to wait is 8% per year of delay, which beats anything else in my portfolio on a risk-adjusted basis.
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bUU
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Re: Social Security - Why Delay ?

Post by bUU » Wed Feb 06, 2013 6:18 am

Are you factoring in other people's longevity probabilities? Use 71 (the age my mother passed away) as "age at death" and you get completely different numbers than if you use 101 (the age my paternal grandmother passed away).

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Re: Social Security - Why Delay ?

Post by TomatoTomahto » Wed Feb 06, 2013 7:15 am

bUU wrote:Are you factoring in other people's longevity probabilities? Use 71 (the age my mother passed away) as "age at death" and you get completely different numbers than if you use 101 (the age my paternal grandmother passed away).
As I said, I am taking it early, but am surprised how much company I have in that decision. I don't have numbers, but my sense is that Bogleheads probably delay filing more than the population at large.

My personal break even point is somewhere in my mid 80s. If I live past that age, my joy at surviving will offset the financial error. :D I also sense that I am not alone in having this view.
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Re: Social Security - Why Delay ?

Post by bUU » Wed Feb 06, 2013 8:33 am

You are definitely NOT alone in that! :sharebeer

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tadamsmar
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Re: Social Security - Why Delay ?

Post by tadamsmar » Wed Feb 06, 2013 9:13 am

My wife started taking SS around age 64. Suppose delay until 70 to get a large benefit, one larger than her benefit. Will my spouse be able to start getting my larger benefit if I die first? I tried to find the answer on the web, but I found the info a bit confusing.

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Re: Social Security - Why Delay ?

Post by sscritic » Wed Feb 06, 2013 9:19 am

tadamsmar wrote:My wife started taking SS around age 64. Suppose delay until 70 to get a large benefit, one larger than her benefit. Will my spouse be able to start getting my larger benefit if I die first? I tried to find the answer on the web, but I found the info a bit confusing.
When are you dying? Is your benefit at 66 also larger than hers? Are you already 66? It matters.

If you die at 62, she can choose to get your then estimated age 66 benefit (your Primary Insurance Amount).
If you die at 66, she can choose to get what your age 66 benefit would have been.
If you die at 68, she can choose to get what your age 68 benefit would have been.
If you die at age 86, she can choose to get your age 86 benefit.

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Re: Social Security - Why Delay ?

Post by tadamsmar » Wed Feb 06, 2013 9:22 am

umfundi wrote:
Read this. Then, read it again.

http://crr.bc.edu/wp-content/uploads/20 ... 10-508.pdf
I think that article is a slam-dunk for delay until you can actually see the grim reaper coming over the horizon (or till age 70 when the annuity sale is over).

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Re: Social Security - Why Delay ?

Post by VictoriaF » Wed Feb 06, 2013 9:27 am

The flip side of the possibility of dying early is the possibility of life-extending treatments (stem cells, nanotechnologies) that may prolong retirement by dozens of years. Even if the benefits will be reduced, getting the maximum possible annuity is highly advantageous when one is planning to live until the age of 135 or 136.

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Re: Social Security - Why Delay ?

Post by tadamsmar » Wed Feb 06, 2013 9:45 am

sscritic wrote:
tadamsmar wrote:My wife started taking SS around age 64. Suppose delay until 70 to get a large benefit, one larger than her benefit. Will my spouse be able to start getting my larger benefit if I die first? I tried to find the answer on the web, but I found the info a bit confusing.
When are you dying? Is your benefit at 66 also larger than hers? Are you already 66? It matters.

If you die at 62, she can choose to get your then estimated age 66 benefit (your Primary Insurance Amount).
If you die at 66, she can choose to get what your age 66 benefit would have been.
If you die at 68, she can choose to get what your age 68 benefit would have been.
If you die at age 86, she can choose to get your age 86 benefit.
So, if I die at 70 or after, she can get the larger benefit that I am getting? Some of the web sites seem to imply that that would not be possible if she had started taking SS before full retirement age, but I was not sure.

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Re: Social Security - Why Delay ?

Post by ObliviousInvestor » Wed Feb 06, 2013 9:48 am

tadamsmar wrote:
sscritic wrote:
tadamsmar wrote:My wife started taking SS around age 64. Suppose delay until 70 to get a large benefit, one larger than her benefit. Will my spouse be able to start getting my larger benefit if I die first? I tried to find the answer on the web, but I found the info a bit confusing.
When are you dying? Is your benefit at 66 also larger than hers? Are you already 66? It matters.

If you die at 62, she can choose to get your then estimated age 66 benefit (your Primary Insurance Amount).
If you die at 66, she can choose to get what your age 66 benefit would have been.
If you die at 68, she can choose to get what your age 68 benefit would have been.
If you die at age 86, she can choose to get your age 86 benefit.
So, if I die at 70 or after, she can get the larger benefit that I am getting? Some of the web sites seem to imply that that would not be possible if she had started taking SS before full retirement age, but I was not sure.
As long as she claimed the survivor benefit at or after reaching her FRA, yes. (Doesn't matter when she claimed her own retirement benefit.)
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Re: Social Security - Why Delay ?

Post by sscritic » Wed Feb 06, 2013 9:56 am

ObliviousInvestor wrote: As long as she claimed the survivor benefit at or after reaching her FRA, yes. (Doesn't matter when she claimed her own retirement benefit.)
If you are 69 today and your wife just started at age 64 and you die the day you hit 70 and she is then 65, she can choose between
1) take yours reduced for starting as a widow a year early.
2) keep her own until she reached 66 and then switch to unreduced widow.
My guess is that none of these numbers apply to you. SS depends on age. Without known ages, all answers are contingent.

P.S. I know some men are sensitive about their ages, so I understand your reluctance to admit that you are six years younger than your wife or whatever else it is that is holding you back.

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Re: Social Security - Why Delay ?

Post by tadamsmar » Wed Feb 06, 2013 10:25 am

sscritic wrote:
ObliviousInvestor wrote: As long as she claimed the survivor benefit at or after reaching her FRA, yes. (Doesn't matter when she claimed her own retirement benefit.)
If you are 69 today and your wife just started at age 64 and you die the day you hit 70 and she is then 65, she can choose between
1) take yours reduced for starting as a widow a year early.
2) keep her own until she reached 66 and then switch to unreduced widow.
My guess is that none of these numbers apply to you. SS depends on age. Without known ages, all answers are contingent.

P.S. I know some men are sensitive about their ages, so I understand your reluctance to admit that you are six years younger than your wife or whatever else it is that is holding you back.
I am younger than my wife. (And, my wife made more than me when she worked.) (where's the embarassed emoticon? :) )

Did not think about how providing the ages would help you avoid having to list every possibility.

But I would probably have a larger SS benefit than her if I wait till age 70 to start SS. I am 62 and still working.

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Re: Social Security - Why Delay ?

Post by Skiffy » Wed Feb 06, 2013 11:37 am

My spouse and I are in our 50's. Spouse could retire at any time (at-will employement) with full pension. Spouse 4 years older, and makes a heck of alot more than I do.

Then I look at at my in-laws, who quit work and started drawing Social Security the minute they turned 62. Now after drawing ss for 20 years they are finding everything more expensive--utilities, insurance, health care etc. Oh maybe they shouldn't have bought that new car a few years ago, but I don't think they really crunched the numbers, to see if they could afford "early" retirement. They "thought" they had plenty. Trying drawing down your $$ for 20, 30, 40 years. They are not having much fun trying to live on SS. Your beginning number better be huge!

At least in my circle of family & friends, Bogleheads are a rare breed. No one even talks about these issues that seem to have lots and lots of posts!

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Re: Social Security - Why Delay ?

Post by Padlin » Wed Feb 06, 2013 12:56 pm

Of all the folks that I've talked to (maybe 20) about when to take SS, not 1 is planning on waiting or has waited longer then 62. I've given up trying to explain how or when delaying is adventagous, it' s gotta be the JD Wentworth philosophy.

By the way, this is/was a really helpfull thread, the examples given are very clear. Cut and pasted parts into my ISP. Thanks to all.
Regards | Bob

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Re: Social Security - Why Delay ?

Post by umfundi » Wed Feb 06, 2013 1:44 pm

Padlin wrote:Of all the folks that I've talked to (maybe 20) about when to take SS, not 1 is planning on waiting or has waited longer then 62. I've given up trying to explain how or when delaying is adventagous, it' s gotta be the JD Wentworth philosophy.

By the way, this is/was a really helpfull thread, the examples given are very clear. Cut and pasted parts into my ISP. Thanks to all.
Boston College has a lot of briefs and papers that are quite interesting and informative:
http://crr.bc.edu/

It seems most people simply draw SS when they retire, whatever their actual age is.

Keith
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Re: Social Security - Why Delay ?

Post by sscritic » Wed Feb 06, 2013 2:39 pm

umfundi wrote: Boston College has a lot of briefs and papers that are quite interesting and informative:
http://crr.bc.edu/

It seems most people simply draw SS when they retire, whatever their actual age is.

Keith
I saw one yesterday that said 65 was very popular even though the FRA is now 66.

Sticky Ages: Why Is Age 65 Still a Retirement Peak?
http://crr.bc.edu/working-papers/sticky ... ment-peak/
However, claiming and retirement peaks remain at age 65.
from the summary

One explanation is Medicare.

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Re: Social Security - Why Delay ?

Post by LadyGeek » Wed Feb 06, 2013 5:15 pm

FYI - We have a new member who posted in this thread, but needs help for a specific situation. I moved the post to a new thread. See: [Help with Decision to delay Social Security]

For continuity, here's a copy of Sandman62's response for this thread:

Sandman62 wrote: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.
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