Determining when to take Social Security if you don’t need the money

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J295
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Determining when to take Social Security if you don’t need the money

Post by J295 » Thu Sep 13, 2018 8:08 am

We are lucky in that we do not intend on needing Social Security for our living expenses, and intend to leave a legacy to our family. Now age 59 and we are a retired couple. I am entitled to a rather significant payment, and my spouse’s amount at half of my amount is higher than what would be available to her under her own account.


Some of the recent threats got me thinking about what process we will need to employee to determine when each of us takes Social Security. Apparently there are various spreadsheets/tools available out there, including one by forum member that has been discussed in a thread in the past few months.

Is using the tools the best process to try and arrive at a reasonable decision? Do I employee an “expert” to help us figure this out? Do I do my best drilling down to figure this out myself and then post my analysis for insights from others here? For whatever reason, I’m not highly interested in becoming a social security expert, and feel some help and guidance would be prudent.

Thanks in advance for insights.

smitcat
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Re: Determining when to take Social Security if you don’t need the money

Post by smitcat » Thu Sep 13, 2018 9:07 am

here is what we did....
1. First we used an online SS calculator
2. Then we spent some time over a few moths making a spreadsheet to maximize SS. First had each of us, then the options between the two, then we added columns to adjust for present dollars, then we added columns to adjust for taxes, and we felt like we were being overwhelmed by the options.
3. Then we realized that our SS decision was directly affected by our other portfolio holdings, other variables and our plan for heirs.
4. we then used a few combined calculators which take many factors into consideration.
5. Stumbled across the long version of the IORP calculator and have found that to be quick and valuable when assessing the decisions including taking SS. We use this to whittle down our options to those that are most applicable to our goals.
6. Then we take our most applicable options and use the RPM spreadsheet calculator to get much more detail on our plan and assess things like Roth converts and the like. This tool takes much more time to utilize but it is well worth it in our experience. We then test some years of the RPM calculator using tax software - we have found it to be accurate.

FWIW - if I had to do this again knowing what I know now I would have started at number 5.

MJS
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Re: Determining when to take Social Security if you don’t need the money

Post by MJS » Thu Sep 13, 2018 9:37 am

The SS start calculators are useful but insufficient. A few of the many factors to consider:
*Will you be doing Roth conversations?
*Is SS an insurance product or an income stream?
*Do you have Long Term Insurance? Is your legacy fund protected from catastrophic medical or family needs?
*If the market crashed, might you start SS money for your financial needs, or to protect your capital from withdrawals, or to buy more stocks while the market was on sale?
*What will happen to your income streams if one of you dies in a year? Or you both live to 109 in good health?
*How well protected are you against inflation?
*How important is increasing your legacy fund?

Happy juggling!

curmudgeon
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Re: Determining when to take Social Security if you don’t need the money

Post by curmudgeon » Thu Sep 13, 2018 11:50 am

It's possible to way overthink this one, and since the interaction of two lifespans (and potential political changes) can't be predicted, it's all a bit of a stab in the dark. For our case I view SS as primarily "longevity insurance" in the case I (or more likely my wife) ends up living to an extended age. For this purpose, I'm willing to sacrifice a bit of potential value for a better outcome in the "live to 103" case, even though that is not the probable scenario.

We have a similar benefit scenario. Because of the survivor factor (the higher of the two benefits will continue with whoever lives longest), we'll defer my benefit until age 70. My wife's benefit is less than half mine, so there is no point in deferring it past age 67 (FRA). If she claims sooner, there will be a reduction in what she would otherwise get when I claim and spousal kicks in, but the calculators indicate that the net effects one way or the other would be pretty minor. We may split the difference and have her claim at age 64 or so.

JoeRetire
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Re: Determining when to take Social Security if you don’t need the money

Post by JoeRetire » Thu Sep 13, 2018 11:58 am

J295 wrote:
Thu Sep 13, 2018 8:08 am
Is using the tools the best process to try and arrive at a reasonable decision? Do I employee an “expert” to help us figure this out?
If you work with a good fee-only fiduciary financial planner, they will work with you to come up with a claiming strategy tailored to your goals, your benefits, your other assets, your tax situation, your other income streams, etc. That's the best way, IMHO.

If you don't work with a financial planner or if you just want to learn more, then you need to educate yourself, using whatever learning mechanisms works best for you.

There are good books out there. In particular: "Get What's Yours: The Secrets to Maxing Out Your Social Security" - is the best and most thorough that I have read. Also good is "Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less", although it is a bit less comprehensive.

There are also plenty of great tools. https://maximizemysocialsecurity.com/ is the best IMHO. But https://opensocialsecurity.com/ is very good as well (and it's free).

And of could you can read the many, many threads discussion social security claiming strategies here.

Admiral
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Re: Determining when to take Social Security if you don’t need the money

Post by Admiral » Thu Sep 13, 2018 2:28 pm

J295 wrote:
Thu Sep 13, 2018 8:08 am
We are lucky in that we do not intend on needing Social Security for our living expenses, and intend to leave a legacy to our family. Now age 59 and we are a retired couple. I am entitled to a rather significant payment, and my spouse’s amount at half of my amount is higher than what would be available to her under her own account.


Some of the recent threats got me thinking about what process we will need to employee to determine when each of us takes Social Security. Apparently there are various spreadsheets/tools available out there, including one by forum member that has been discussed in a thread in the past few months.

Is using the tools the best process to try and arrive at a reasonable decision? Do I employee an “expert” to help us figure this out? Do I do my best drilling down to figure this out myself and then post my analysis for insights from others here? For whatever reason, I’m not highly interested in becoming a social security expert, and feel some help and guidance would be prudent.

Thanks in advance for insights.
W/o knowing your particulars (which you didn't post), if you intend to leave a specific legacy, that means you may want to preserve more of your portfolio rather than spending it down, which may make the case for taking SS earlier. It's rarely a good idea to take it at 62 (except in cases where the money is needed or there are longevity issues) but FRA or at least some point b/w 62 and FRA might make sense. It depends on how your portfolio is structured.

Thesaints
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Re: Determining when to take Social Security if you don’t need the money

Post by Thesaints » Thu Sep 13, 2018 2:34 pm

The way I see the issue is that if one needs their SS payment, then there is no choice. If one does not need it, then it means they would be investing it.
Therefore it becomes an issue of comparing possible market returns. with their relative degree of uncertainty, to certain returns one obtains by delaying. All this topped by the uncertainty in one's date of death.

Admiral
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Re: Determining when to take Social Security if you don’t need the money

Post by Admiral » Thu Sep 13, 2018 2:39 pm

Thesaints wrote:
Thu Sep 13, 2018 2:34 pm
The way I see the issue is that if one needs their SS payment, then there is no choice. If one does not need it, then it means they would be investing it.
Therefore it becomes an issue of comparing possible market returns. with their relative degree of uncertainty, to certain returns one obtains by delaying. All this topped by the uncertainty in one's date of death.
I assumed the question was intended as "take it at 62, or later" not "take it whenever and invest it." You're not likely to be able to best the guaranteed return of waiting by investing it at 62. Possible, but not assured.

yosh99
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Re: Determining when to take Social Security if you don’t need the money

Post by yosh99 » Thu Sep 13, 2018 2:56 pm

Is it really that complex? I was born in '51, my wife in '52. My SS benefit is much higher than hers. She began collecting at 66 and I'm getting half of that. At 70, I'll collect mine and she'll get half of that. Assuming that you live long enough isn't this generally the best strategy to maximum payout?

misterno
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Re: Determining when to take Social Security if you don’t need the money

Post by misterno » Thu Sep 13, 2018 3:08 pm

The retirement check difference between 62 and 70 years old is too big too ignore.

My approach is too simplistic. If I feel okay and healthy at age 62 I will wait as long as possible.

If health issues start around 62 years old, that's a sign so I will start taking the salary at 62

I wish we were allowed to pay back the checks we received with interest and have the option to restart at 70 but that would ruin the government budget :)

misterno
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Re: Determining when to take Social Security if you don’t need the money

Post by misterno » Thu Sep 13, 2018 3:09 pm

yosh99 wrote:
Thu Sep 13, 2018 2:56 pm
Is it really that complex? I was born in '51, my wife in '52. My SS benefit is much higher than hers. She began collecting at 66 and I'm getting half of that. At 70, I'll collect mine and she'll get half of that. Assuming that you live long enough isn't this generally the best strategy to maximum payout?
There is a missing point here

If you wait too long what if you die before you collect anything?

Admiral
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Re: Determining when to take Social Security if you don’t need the money

Post by Admiral » Thu Sep 13, 2018 3:15 pm

yosh99 wrote:
Thu Sep 13, 2018 2:56 pm
Is it really that complex? I was born in '51, my wife in '52. My SS benefit is much higher than hers. She began collecting at 66 and I'm getting half of that. At 70, I'll collect mine and she'll get half of that. Assuming that you live long enough isn't this generally the best strategy to maximum payout?
You can no longer file and suspend. So yes, it is complex.

eli80
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Re: Determining when to take Social Security if you don’t need the money

Post by eli80 » Thu Sep 13, 2018 3:31 pm

misterno wrote:
Thu Sep 13, 2018 3:09 pm
yosh99 wrote:
Thu Sep 13, 2018 2:56 pm
Is it really that complex? I was born in '51, my wife in '52. My SS benefit is much higher than hers. She began collecting at 66 and I'm getting half of that. At 70, I'll collect mine and she'll get half of that. Assuming that you live long enough isn't this generally the best strategy to maximum payout?
There is a missing point here

If you wait too long what if you die before you collect anything?
What happens if you live until 90?

Thesaints
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Re: Determining when to take Social Security if you don’t need the money

Post by Thesaints » Thu Sep 13, 2018 3:39 pm

As market returns are concerned, we select a certain expected return, with its associated volatility, and then hope to be on the positive side of that volatility.
Same goes for our date of death: we accept its expected value and hope to be on the positive side of its associated volatility. Unless we started collecting SS early, apparently :)

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David Jay
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Re: Determining when to take Social Security if you don’t need the money

Post by David Jay » Thu Sep 13, 2018 3:45 pm

Will you still have adequate cash flow after one spouse passes (the financial worst case choice of spouse)? If there is any question then the higher earning spouse should delay to age 70 to provide the largest possible “insurance” benefit.

The other spouse can file early to create some cash for investing for legacy goals.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

J295
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Re: Determining when to take Social Security if you don’t need the money

Post by J295 » Thu Sep 13, 2018 4:37 pm

I really appreciate the responses of everyone. Thank you.

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dodecahedron
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Re: Determining when to take Social Security if you don’t need the money

Post by dodecahedron » Thu Sep 13, 2018 6:30 pm

Admiral wrote:
Thu Sep 13, 2018 3:15 pm
yosh99 wrote:
Thu Sep 13, 2018 2:56 pm
Is it really that complex? I was born in '51, my wife in '52. My SS benefit is much higher than hers. She began collecting at 66 and I'm getting half of that. At 70, I'll collect mine and she'll get half of that. Assuming that you live long enough isn't this generally the best strategy to maximum payout?
You can no longer file and suspend. So yes, it is complex.
Admiral is correct that folks can no longer file and suspend, but the strategy described by yosh99 is not a file and suspend. What yosh99 describes is a ¨restricted filing,¨ and that is still an option at FRA for anyone born on or before Jan 1, 1954. However it will not be an option for the OP since he was born after that date.

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grabiner
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Re: Determining when to take Social Security if you don’t need the money

Post by grabiner » Thu Sep 13, 2018 7:48 pm

If you don't need the money, then you should go by expected value, and that depends on your life expectancy. For singles, the optimal age for a man of average life expectancy is 69, but most men making this decision know that they have above-average life expectancy and are better off waiting until 70, or that they have below-average life expectancy and should start immediately. (If you get diagnosed with cancer, claiming SS immediately increases your expected return.)

For a couple, the higher-earning spouse should usually take SS at 70, since this benefit will last until both spouses die. The lower-earning spouse may start somewhere between FRA and 70. For example, if the lower-earning spouse is significantly older, then he or she will be unlikely to get a widow/er's benefit and is better off optimizing as if he or she were single.
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flyingaway
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Re: Determining when to take Social Security if you don’t need the money

Post by flyingaway » Thu Sep 13, 2018 7:53 pm

If you don't need it, why do you care about optimizing it? I would take it at a time I feel comfortable. For example, one at 62, another at any time after that.

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calmaniac
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Re: Determining when to take Social Security if you don’t need the money

Post by calmaniac » Thu Sep 13, 2018 8:18 pm

As usual, grabiner's analysis is on the mark.

OP notes "we do not intend on needing Social Security for our living expenses" and further "(we) intend to leave a legacy to our family". My understanding is that they want to maximize the payout that will go to their family. Unless there are issues with anticipated decreased longevity, the choice with the highest probability of maximizing payout to heirs is for the OP to take SS at 70. Don't need to make it more complicated than that.

smitcat
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Re: Determining when to take Social Security if you don’t need the money

Post by smitcat » Thu Sep 13, 2018 8:38 pm

calmaniac wrote:
Thu Sep 13, 2018 8:18 pm
As usual, grabiner's analysis is on the mark.

OP notes "we do not intend on needing Social Security for our living expenses" and further "(we) intend to leave a legacy to our family". My understanding is that they want to maximize the payout that will go to their family. Unless there are issues with anticipated decreased longevity, the choice with the highest probability of maximizing payout to heirs is for the OP to take SS at 70. Don't need to make it more complicated than that.
That does not take into account potential tax situations with both the OP and the heirs. Maximizing SS is not necessarily maximizing your overall after tax spendable dollars nor your after tax value to heirs.

The Wizard
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Re: Determining when to take Social Security if you don’t need the money

Post by The Wizard » Thu Sep 13, 2018 8:55 pm

What if I'm making a large $X00,000 amount in my 30s or 40s, what do I do?
I save the excess to add to my Financial Independence.

So if I'm retired and have excess income from SS or RMDs or wherever, I do likewise.
I add it to my portfolio to ensure that the coming 50% decline in equities doesn't impact my lifestyle...
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