Bogleheads® Live: Submit ?s for Mike Piper on Social Security

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JonL
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Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

As announced on the last episode of Bogleheads® Live, our guest on Wednesday, May 11th is Mike Piper. 4:00 PM Eastern/1:00 PM Pacific. This will be on a Wednesday, a change from our usual Thursday schedule.

We'll be discussing his updated book on Social Security. You can check it out here:

https://www.amazon.com/Social-Security- ... 50967115/

You can submit your questions below for Mike Piper. (I may include your question in the episode. No guarantees.) Or, you can ask your questions live by joining us on Twitter Spaces.

Use this link to access the event on Wednesday:

https://twitter.com/i/spaces/1ynKOZYYYZwxR?s=20


While anyone can listen to a live Twitter Space event on desktop, you'll need to be using the Twitter app from a mobile device to ask questions (if you’d like to participate in the Q&A).

If you're not already signed up for Twitter, you can do so here: https://twitter.com/. You can sign up with your Google or Apple account, or via phone, or by email.

Looking forward to seeing you there.

Thank you,
Jon Luskin
Host
Bogleheads® Live
Last edited by JonL on Tue May 10, 2022 12:50 pm, edited 2 times in total.
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FiveK
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

There are misunderstandings (one way or the other...) about the way Delayed Retirement Credits For Social Security payments work. See that thread for more - in particular, does one ever get the full lifetime benefit (including a lump sum catch-up if needed) one would expect when beginning SS between FRA and age 79? Or is some amount "forfeited" in the first year, never to be made up?

There is a brief mention of this linked in the Forum discussions section of the Social Security wiki, but it probably warrants more details in that wiki article itself, if indeed there is a "forfeited" amount.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

Thanks for your question, FikeK.

As I won't be able to reference those forum postings during the live show, can you please provide a synopsis, so I can include it in your question?

Thank you,
Jon
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

I'll give it a try. It probably needs a preamble because many will be unaware of the issue, even though it can affect anyone delaying SS benefits beyond full retirement age. Sending this to Mike beforehand (if he won't already have read it here) could be useful.

Others may be able to word it better, but here goes:

Preamble
People with a little knowledge of the subject understand that "Social Security retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond full retirement age [FRA]" (that quote and the one in the next paragraph are from Benefits Planner: Retirement | Delayed Retirement Credits | SSA). The natural assumption is that when benefits begin, one gets the full amount of that increase in the first and every subsequent month of benefit receipt.

But that assumption is not correct, because "If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start receiving benefits."

OK, one might think, "so I have to wait until January of the year after I start benefits to get all of what I'm owed, and then I'll get a lump sum to make up for the months I was shortchanged." It seems, however, that no such lump sum payment is made and the recipient simply forfeits the shortfall that occurs in the first year of receiving benefits. Having thus set the stage:

Questions
Q1: Is it correct that those delaying benefits beyond FRA but short of age 70 may not receive the full amount of their delayed retirement credits (DRCs) in the first year receiving benefits, and that shortfall is never recouped?

Q2a: If the answer to Q1 is "yes," will at least one month's worth of DRCs always be lost, or
Q2b: is it possible not to lose any DRC by starting to receive benefits in January (or some other month)?
Due to the oft-confused difference between "the month benefits start" vs. "the month the first benefit is received", spelling out exactly what the filer should do to hit a particular "target month" would be useful.

Q3 (related to Q2b): Two different formulas have been proposed in the Bogleheads forum for the amount lost in that first year:
a) DRC * (14M - M^2 -13)
b) DRC * (13M - M^2)
Here, DRC is one month's credit, equal to (8%/12) * PIA, and M is the month of the year (Jan = 1, Feb = 2, etc.). Which (if either) is correct?

Q4: Does opensocialsecurity.com include the first year shortfall in its calculations?
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by RubyTuesday »

FiveK wrote: Wed May 04, 2022 1:14 am I'll give it a try. It probably needs a preamble because many will be unaware of the issue, even though it can affect anyone delaying SS benefits beyond full retirement age. Sending this to Mike beforehand (if he won't already have read it here) could be useful.

Others may be able to word it better, but here goes:

Preamble
People with a little knowledge of the subject understand that "Social Security retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond full retirement age [FRA]" (that quote and the one in the next paragraph are from Benefits Planner: Retirement | Delayed Retirement Credits | SSA). The natural assumption is that when benefits begin, one gets the full amount of that increase in the first and every subsequent month of benefit receipt.

But that assumption is not correct, because "If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start receiving benefits."

OK, one might think, "so I have to wait until January of the year after I start benefits to get all of what I'm owed, and then I'll get a lump sum to make up for the months I was shortchanged." It seems, however, that no such lump sum payment is made and the recipient simply forfeits the shortfall that occurs in the first year of receiving benefits. Having thus set the stage:

Questions
Q1: Is it correct that those delaying benefits beyond FRA but short of age 70 may not receive the full amount of their delayed retirement credits (DRCs) in the first year receiving benefits, and that shortfall is never recouped?

Q2a: If the answer to Q1 is "yes," will at least one month's worth of DRCs always be lost, or
Q2b: is it possible not to lose any DRC by starting to receive benefits in January (or some other month)?
Due to the oft-confused difference between "the month benefits start" vs. "the month the first benefit is received", spelling out exactly what the filer should do to hit a particular "target month" would be useful.

Q3 (related to Q2b): Two different formulas have been proposed in the Bogleheads forum for the amount lost in that first year:
a) DRC * (14M - M^2 -13)
b) DRC * (13M - M^2)
Here, DRC is one month's credit, equal to (8%/12) * PIA, and M is the month of the year (Jan = 1, Feb = 2, etc.). Which (if either) is correct?

Q4: Does opensocialsecurity.com include the first year shortfall in its calculations?
Based on prior threads by Alan S and SScritic, which included links to the law, the FRC, and SS POMS, the first 3 questions have been answered.

I too am interested in Q4, and suspect based on a brief experiment that opensocialsecurity.com doesn’t account for the DRCs not being credited until the following January.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Silk McCue »

RubyTuesday wrote: Wed May 04, 2022 5:07 am
I too am interested in Q4, and suspect based on a brief experiment that opensocialsecurity.com doesn’t account for the DRCs not being credited until the following January.
I came across obliviousinvestor’s response to this question just the other day. He does not account for DRCs not being credited until the following January. Basically it’s not crucial to the primary purpose of the tool which is optimal claiming strategy. It would also add more complexity to the code for little benefit, and generate more questions from users.

Edit to add link to post I found
viewtopic.php?p=4160115&hilit=Complex#p4160115

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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by sycamore »

There's some debate & discussion about whether "Social Security will be there for me?" or "how much will benefits be cut in 2034" etc.

Not looking for specific predictions on how the politics will play out but rather how does Mike think one should incorporate SS into one's retirement planning given the uncertainty.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

FiveK wrote: Wed May 04, 2022 1:14 am I'll give it a try. It probably needs a preamble because many will be unaware of the issue, even though it can affect anyone delaying SS benefits beyond full retirement age. Sending this to Mike beforehand (if he won't already have read it here) could be useful.

Others may be able to word it better, but here goes:

Preamble
People with a little knowledge of the subject understand that "Social Security retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond full retirement age [FRA]" (that quote and the one in the next paragraph are from Benefits Planner: Retirement | Delayed Retirement Credits | SSA). The natural assumption is that when benefits begin, one gets the full amount of that increase in the first and every subsequent month of benefit receipt.

But that assumption is not correct, because "If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start receiving benefits."

OK, one might think, "so I have to wait until January of the year after I start benefits to get all of what I'm owed, and then I'll get a lump sum to make up for the months I was shortchanged." It seems, however, that no such lump sum payment is made and the recipient simply forfeits the shortfall that occurs in the first year of receiving benefits. Having thus set the stage:

Questions
Q1: Is it correct that those delaying benefits beyond FRA but short of age 70 may not receive the full amount of their delayed retirement credits (DRCs) in the first year receiving benefits, and that shortfall is never recouped?

Q2a: If the answer to Q1 is "yes," will at least one month's worth of DRCs always be lost, or
Q2b: is it possible not to lose any DRC by starting to receive benefits in January (or some other month)?
Due to the oft-confused difference between "the month benefits start" vs. "the month the first benefit is received", spelling out exactly what the filer should do to hit a particular "target month" would be useful.

Q3 (related to Q2b): Two different formulas have been proposed in the Bogleheads forum for the amount lost in that first year:
a) DRC * (14M - M^2 -13)
b) DRC * (13M - M^2)
Here, DRC is one month's credit, equal to (8%/12) * PIA, and M is the month of the year (Jan = 1, Feb = 2, etc.). Which (if either) is correct?

Q4: Does opensocialsecurity.com include the first year shortfall in its calculations?
Thank you for clarifying. I'll add this to my list of questions for Mike.

:)
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

RubyTuesday wrote: Wed May 04, 2022 5:07 am
I too am interested in Q4, and suspect based on a brief experiment that opensocialsecurity.com doesn’t account for the DRCs not being credited until the following January.
Yep. This is a pretty interesting question. I'd like to know the answer, too. It's going on the list. (I use Mike's site often.)

:D
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by RubyTuesday »

JonL wrote: Wed May 04, 2022 4:24 pm
RubyTuesday wrote: Wed May 04, 2022 5:07 am
I too am interested in Q4, and suspect based on a brief experiment that opensocialsecurity.com doesn’t account for the DRCs not being credited until the following January.
Yep. This is a pretty interesting question. I'd like to know the answer, too. It's going on the list. (I use Mike's site often.)

:D
Someone reported in another thread that Mike Piper had responded that he doesn’t take this issue into account. I suspect it doesn’t change the optimal claiming strategy, but does impact the PV calculations for the initial year.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Chip Munk »

FiveK wrote: Wed May 04, 2022 1:14 am
Q3 (related to Q2b): Two different formulas have been proposed in the Bogleheads forum for the amount lost in that first year:
a) DRC * (14M - M^2 -13)
b) DRC * (13M - M^2)
Here, DRC is one month's credit, equal to (8%/12) * PIA, and M is the month of the year (Jan = 1, Feb = 2, etc.). Which (if either) is correct?
I'm curious where that second formula came from because a quick check of the result for a January claim date (M=1) produces a non-zero result which is incorrect. January is the one month where, if claiming Social Security after FRA but before age 70, you start off with credit for every DRC you have earned to date, so the result should be zero for M=1. (And by "claiming in January", I mean you apply for your benefits to start in January, so your first payment would be made in February since Social Security is paid one month in arrears.)

I believe the first formula works but just a reminder that it produces a correct result only if you are claiming Social Security in a month when you reached FRA no later than January of that year and will not turn 70 in that year. I claimed between FRA and age 70 and used the formula to calculate how much I would be shortchanged in my first year, based on different claiming months.

I agree it would be very worthwhile to ask Mike to cover this topic of when DRCs are actually credited and how that affects someone claiming between FRA and age 70. Fortunately I read about this (and how they do not "make you whole") here on Bogleheads before I applied. I would have been very confused about my benefit amount had I not known about this ahead of time. It also creates confusion when people check their annual Social Security statement.

Edited to clarify what I mean by "claiming in January".
Last edited by Chip Munk on Fri May 06, 2022 9:52 am, edited 1 time in total.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by should have »

Survival Benefits

I'm currently 63 (PIA 3,165) and my wife will turn 62 (PIA 1853) later this year. I plugged our PIAs in Mike's opensocialsecurity calculator where it tells my wife to file at 63 & 9 months and for me to wait to 70. From the official SocialSecurity.gov, I'm scared someone at SS will tell my wife to switch/file for survival benefits; if I follow Mike's filing dates for SS and I pass away early before my wife reaches full retirement age. I would like to see some documents where my wife can file to collect her own benefits until she reaches full retirement age before switching to survival benefits. Is there any official publications similar to IRS Documents?

Thanks
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

Chip Munk wrote: Wed May 04, 2022 8:10 pm
FiveK wrote: Wed May 04, 2022 1:14 am
Q3 (related to Q2b): Two different formulas have been proposed in the Bogleheads forum for the amount lost in that first year:
a) DRC * (14M - M^2 -13)
b) DRC * (13M - M^2)
Here, DRC is one month's credit, equal to (8%/12) * PIA, and M is the month of the year (Jan = 1, Feb = 2, etc.). Which (if either) is correct?
I'm curious where that second formula came from because a quick check of the result for a January claim date (M=1) produces a non-zero result which is incorrect. January is the one month where, if claiming Social Security after FRA but before age 70, you start off with credit for every DRC you have earned to date, so the result should be zero for M=1.
It came from reverse engineering the table in this post in SS: How do Delayed Retirement Credits work? - Bogleheads.org.

The fact that two intelligent posts show different conclusions is the impetus for the question. ;)
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Chip Munk »

FiveK wrote: Wed May 04, 2022 8:38 pm
Chip Munk wrote: Wed May 04, 2022 8:10 pm
FiveK wrote: Wed May 04, 2022 1:14 am
Q3 (related to Q2b): Two different formulas have been proposed in the Bogleheads forum for the amount lost in that first year:
a) DRC * (14M - M^2 -13)
b) DRC * (13M - M^2)
Here, DRC is one month's credit, equal to (8%/12) * PIA, and M is the month of the year (Jan = 1, Feb = 2, etc.). Which (if either) is correct?
I'm curious where that second formula came from because a quick check of the result for a January claim date (M=1) produces a non-zero result which is incorrect. January is the one month where, if claiming Social Security after FRA but before age 70, you start off with credit for every DRC you have earned to date, so the result should be zero for M=1.
It came from reverse engineering the table in this post in SS: How do Delayed Retirement Credits work? - Bogleheads.org.

The fact that two intelligent posts show different conclusions is the impetus for the question. ;)
In that particular post from Jan 2019 Alan states you are owed one DRC for 12 months if you claim in January which I believe is not correct. In another post from Sep 2021 SS Delayed Credits Timing he states that if you claim in February, you are owed one DRC for 11 months, in other words, you begin accumulating additional DRCs if you delay beyond January and claim in February or later, which I believe is correct.

So in the end, we each derived our formula based on an Alan S. post! But rather than throw a couple of formulas at Mike P. and expect him to evaluate them on the fly for correctness, the underlying question is, if you claim between FRA and age 70 AND in the month of January, are you due one DRC or would that be true only if you delayed by one month and claimed in February? The answer to that question will determine which of Alan S.'s posts is correct.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

Chip Munk wrote: Wed May 04, 2022 9:49 pm But rather than throw a couple of formulas at Mike P. and expect him to evaluate them on the fly for correctness....
Agreed - which is why it would be good if he had these beforehand. Of course, even if it's likely there's no guarantee that he'll know for sure.
...the underlying question is, if you claim between FRA and age 70 AND in the month of January....
Or is it claim in December for payments to start in January, etc.? ;)
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by USAFperio »

All else being equal, which is usually better—from a tax perspective—in the years between early retirement and SS/RMDs….Roth conversions or tax gain harvesting?
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by SchruteB&B »

I do not currently have enough credits to qualify for Social Security, so as things stand now I will only be entitled to a spousal benefit. My spouse is 2 years younger than I am. If spouse dies before either of us reaches Full retirement age (67 for both of us) then:

1. Am I entitled to 100% of what spouse would have received at full retirement age (I do not want to or intend to claim early)?

2. And if so, when am I claiming to get this 100%? When Spouse would have reached age 67 if they lived? Or when I reach age 67?
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Nestegg_User »

SchruteB&B wrote: Thu May 05, 2022 12:57 pm I do not currently have enough credits to qualify for Social Security, so as things stand now I will only be entitled to a spousal benefit. My spouse is 2 years younger than I am. If spouse dies before either of us reaches Full retirement age (67 for both of us) then:

1. Am I entitled to 100% of what spouse would have received at full retirement age (I do not want to or intend to claim early)?

2. And if so, when am I claiming to get this 100%? When Spouse would have reached age 67 if they lived? Or when I reach age 67?
Does this help?
https://www.ssa.gov/benefits/survivors/1945s.html
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by er999 »

For a couple with very unequal incomes (1 person earning the max social security wage, the other earning 20-40% of it), is there any benefit to the lower earning spouse continuing to earn social security credits or does the spousal benefits from the higher earner outweigh any additional benefits that the low earner could earn on their own?

This is my personal situation where my wife has earned 39 social security credit but isn’t currently working and when working was making in the $30-40k range. She will likely pick up a few hours part time this year to earn the final credit to get to 40 but I didn’t know if there would be any benefit from future social security benefits if she works more in the future. I will have likely 27-30 years at max social security earning before retirement (another 10 - 12 years of working to go) and a prior 5 years or so of credits before than at a lower earnings rate, so should have 35 years of earning from my own record.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

RubyTuesday wrote: Wed May 04, 2022 6:25 pm

Someone reported in another thread that Mike Piper had responded that he doesn’t take this issue into account. I suspect it doesn’t change the optimal claiming strategy, but does impact the PV calculations for the initial year.
Good to know. I'll make a note of this - and see if we can cover this during the Bogleheads® Live next week.

Thanks!
Last edited by JonL on Sat May 07, 2022 11:44 am, edited 1 time in total.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Sandi_k »

Where do we tune in if we want to listen live?
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

Sandi_k wrote: Fri May 06, 2022 2:07 pm Where do we tune in if we want to listen live?
Hi Sandi,

Use this link:

https://twitter.com/i/spaces/1ynKOZYYYZwxR?s=20

Thanks,
Jon
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

sycamore wrote: Wed May 04, 2022 12:55 pm There's some debate & discussion about whether "Social Security will be there for me?" or "how much will benefits be cut in 2034" etc.

Not looking for specific predictions on how the politics will play out but rather how does Mike think one should incorporate SS into one's retirement planning given the uncertainty.
Hello Sycamore,

Thanks for your great question. Like many in the space, I'm optimistic about future Social Security funding, at least for those closer to retirement. I'm curious to hear Mike's take.

:happy
When there are multiple solutions to a problem, choose the simplest one. ~Jack Bogle
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by ProsperGoalzz »

Any chance a recording may be available for those unable to attend?

My question is, how can I estimate my payment at FRA (67) age 70 if I plan to retire at 60? Its my understanding that what I see on my statement is an estimate based on the assumption that I will work until I claim. Thank you!
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

ProsperGoalzz wrote: Sun May 08, 2022 3:28 pm My question is, how can I estimate my payment at FRA (67) age 70 if I plan to retire at 60?
Any of the following will do that, based on what you enter and making no assumptions:
- The 'SocialSecurity' tab of the personal finance toolbox spreadsheet.
- The Downloadable Social Security Benefit Estimator spreadsheet.
- The Social Security Calculator web tool.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Silk McCue »

ProsperGoalzz wrote: Sun May 08, 2022 3:28 pm Any chance a recording may be available for those unable to attend?
They are recorded and transcribed.

Cheers
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

Silk McCue wrote: Sun May 08, 2022 3:49 pm
ProsperGoalzz wrote: Sun May 08, 2022 3:28 pm Any chance a recording may be available for those unable to attend?
They are recorded and transcribed.

Cheers
That's right. :)

You can find the first three episodes using the link below:

https://www.buzzsprout.com/1973223
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

FiveK wrote: Sun May 08, 2022 3:48 pm
ProsperGoalzz wrote: Sun May 08, 2022 3:28 pm My question is, how can I estimate my payment at FRA (67) age 70 if I plan to retire at 60?
Any of the following will do that, based on what you enter and making no assumptions:
- The 'SocialSecurity' tab of the personal finance toolbox spreadsheet.
- The Downloadable Social Security Benefit Estimator spreadsheet.
- The Social Security Calculator web tool.
Thanks for sharing these resources!
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

er999 wrote: Fri May 06, 2022 10:48 am For a couple with very unequal incomes (1 person earning the max social security wage, the other earning 20-40% of it), is there any benefit to the lower earning spouse continuing to earn social security credits or does the spousal benefits from the higher earner outweigh any additional benefits that the low earner could earn on their own?

This is my personal situation where my wife has earned 39 social security credit but isn’t currently working and when working was making in the $30-40k range. She will likely pick up a few hours part time this year to earn the final credit to get to 40 but I didn’t know if there would be any benefit from future social security benefits if she works more in the future. I will have likely 27-30 years at max social security earning before retirement (another 10 - 12 years of working to go) and a prior 5 years or so of credits before than at a lower earnings rate, so should have 35 years of earning from my own record.
Thanks for a great case study, er999! This is going on the list.

:happy
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

Folks - we go live tomorrow with Mike Piper, who will be answering your questions on Social Security.

4:00 PM Eastern/1:00 PM Pacific.

Use this link to access the event tomorrow:

https://twitter.com/i/spaces/1ynKOZYYYZwxR?s=20


While anyone can listen to a live Twitter Space event on desktop, you'll need to be using the Twitter app from a mobile device to ask questions (if you’d like to participate in the Q&A).

Looking forward to seeing you there!

Jon
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by SockMonkey »

As one cannot predict COLA increases, how does the opensocialsecurity calculator adjust for COLA when estimating future benefits?
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Agent 99 »

Questions about widow benefits - DH died at 69. He did not collect social security. My plan is to wait until 66 and 2 months so I can collect 100% of his benefit.

1. Does DH’s benefit get COLA adjusted from date of his death until I claim it?

2. If I claim his benefit at 65 (in 2 months) it is reduced by 5.4%. Given the 5.9% COLA this year should I take it now and reap the COLA benefit?

If my thinking is correct I didn’t lose in the prior years if the benefit isn’t COLA adjusted since the reductions for early benefit were much higher.

2017 COLA was 2.0, early benefit reduced by 29%
2018 COLA was 2.8, early benefit reduced by 24%
2019 COLA was 1.6, early benefit reduced by 20%
2020 COLA was 1.3, early benefit reduced by 15%
2021 COLA was 5.9, early benefit reduced by 10%

thank you.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Silk McCue »

SockMonkey wrote: Tue May 10, 2022 1:37 pm As one cannot predict COLA increases, how does the opensocialsecurity calculator adjust for COLA when estimating future benefits?
All numbers are in todays dollars. There is no adjustment for COLA.

Cheers
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JonL »

Silk McCue wrote: Tue May 10, 2022 2:40 pm
SockMonkey wrote: Tue May 10, 2022 1:37 pm As one cannot predict COLA increases, how does the opensocialsecurity calculator adjust for COLA when estimating future benefits?
All numbers are in todays dollars. There is no adjustment for COLA.

Cheers
That's correct.

:happy
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by JAZZISCOOL »

SockMonkey wrote: Tue May 10, 2022 1:37 pm As one cannot predict COLA increases, how does the opensocialsecurity calculator adjust for COLA when estimating future benefits?
I have the same question.

From his website it states:

"What about inflation?
Everything is done in "real" (i.e., inflation-adjusted) dollars. So there is no need for you to make manual inflation adjustments."

But doesn't this require an inflation assumption to produce a "real" PV calculation? Thanks.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

JAZZISCOOL wrote: Tue May 10, 2022 6:08 pm But doesn't this require an inflation assumption to produce a "real" PV calculation? Thanks.
Perhaps the assumption is that COLA = inflation.

If the future income calculation is increased by a factor of (1+COLA), and the present value calculation is discounted by (1+inflation), then assuming COLA=inflation makes it a wash.

Other assumptions could lead to different conclusions.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

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Bumping as a reminder. Event will be happening momentarily (4pm Eastern).
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

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ObliviousInvestor wrote: Wed May 11, 2022 2:48 pm Bumping as a reminder. Event will be happening momentarily (4pm Eastern).
Mike, thanks for the podcast. We didn't get to the delayed retirement credits (DRCs) question discussed in this thread. Can you weigh in, particularly in regards to whether "1 month" of DRCs will always be forfeited if one applies between FRA and 70, or whether one can get the full DRCs by picking the appropriate (Dec. or Jan.?) starting month?
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by ObliviousInvestor »

FiveK wrote: Wed May 11, 2022 3:49 pm
ObliviousInvestor wrote: Wed May 11, 2022 2:48 pm Bumping as a reminder. Event will be happening momentarily (4pm Eastern).
Mike, thanks for the podcast. We didn't get to the delayed retirement credits (DRCs) question discussed in this thread. Can you weigh in, particularly in regards to whether "1 month" of DRCs will always be forfeited if one applies between FRA and 70, or whether one can get the full DRCs by picking the appropriate (Dec. or Jan.?) starting month?
Yes, let me try to answer all of the related questions.

The rules come from here:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615690

Filing for your benefit to begin in January (received in Feb) means that no months are "missed."

Here's how it plays out, month by month (if you don't turn 70 in the year in question).

Jan: 12 months until DRCs are next made effective, but zero increment months. Zero dollars missed.
Feb: 11 months until DRCs are next made effective, 1 increment month. So 11 x 1 x 2/3 of 1% x PIA = amount missed.
March: 10 months until DRCs are next made effective, 2 increment months. So 10 x 2 x 2/3 of 1% x PIA = amount missed.
April: 9 months until DRCs are next made effective, 3 increment months. So 9 x 3 x 2/3 of 1% x PIA = amount missed.
May: 8 months until DRCs are next made effective, 4 increment months. So 8 x 4 x 2/3 of 1% x PIA = amount missed.
June: 7 months until DRCs are next made effective, 5 increment months. So 7 x 5 x 2/3 of 1% x PIA = amount missed.
July: 6 months until DRCs are next made effective, 6 increment months. So 6 x 6 x 2/3 of 1% x PIA = amount missed.
Aug: 5 months until DRCs are next made effective, 7 increment months. So 5 x 7 x 2/3 of 1% x PIA = amount missed.
Sept: 4 months until DRCs are next made effective, 8 increment months. So 4 x 8 x 2/3 of 1% x PIA = amount missed.
Oct: 3 months until DRCs are next made effective, 9 increment months. So 3 x 9 x 2/3 of 1% x PIA = amount missed.
Nov: 2 months until DRCs are next made effective, 10 increment months. So 2 x 10 x 2/3 of 1% x PIA = amount missed.
Dec: 1 months until DRCs are next made effective, 11 increment months. So 1 x 11 x 2/3 of 1% x PIA = amount missed.

So by this standard, January is best, and July is worst. But the difference is only 24% of your PIA.

The "missed" amount is not received later as a lump sum, because you're not supposed to get that amount.

As far as Open Social Security, it does not account for this. The reason for this decision is as follows. The difference is very small. For instance, imagine a single person with a PIA of $2,000. 24% of their PIA is $480. The expected PV of benefits for the recommended strategy is $337,866. $480 is 0.14% of that PV. And if we're talking about a married couple, it's an even smaller percentage. Point being, if you have two filing ages and a 0.14% change is enough to sway from one to the other, what we are learning from the calculator is not "oh this one is actually better" but rather that they are equally good. That difference ($480) is going to be overwhelmed by the uncertainty of how long the person lives and whether filing 6 months earlier or later turns out to be better in that regard.

Still, there's a point in favor of including this complication in the calculations, simply on principle of making them as accurate as possible. And that's a very valid point. The counterpoint is that it confuses people. As evidenced by recent threads, when people see this in the math, many will first assume that it's a mistake.

And as it is, I deal with many emails from people pointing out "mistakes" in the calculator's math, which are not mistakes. (Most commonly, people don't understand that yes you can receive both retirement and spousal/survivor benefits at the same time.)

So, I have come down on the side of not confusing people over a matter that is by definition small, though the point in favor of making the opposite decision (i.e., more accurate benefit calculations purely because accuracy is a good thing) is not without merit.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by FiveK »

ObliviousInvestor wrote: Wed May 11, 2022 4:10 pm The rules come from here:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615690

Filing for your benefit to begin in January (received in Feb) means that no months are "missed."

Here's how it plays out, month by month (if you don't turn 70 in the year in question).

Jan: 12 months until DRCs are next made effective, but zero increment months. Zero dollars missed.
Feb: 11 months until DRCs are next made effective, 1 increment month. So 11 x 1 x 2/3 of 1% x PIA = amount missed.
March: 10 months until DRCs are next made effective, 2 increment months. So 10 x 2 x 2/3 of 1% x PIA = amount missed.
April: 9 months until DRCs are next made effective, 3 increment months. So 9 x 3 x 2/3 of 1% x PIA = amount missed.
May: 8 months until DRCs are next made effective, 4 increment months. So 8 x 4 x 2/3 of 1% x PIA = amount missed.
June: 7 months until DRCs are next made effective, 5 increment months. So 7 x 5 x 2/3 of 1% x PIA = amount missed.
July: 6 months until DRCs are next made effective, 6 increment months. So 6 x 6 x 2/3 of 1% x PIA = amount missed.
Aug: 5 months until DRCs are next made effective, 7 increment months. So 5 x 7 x 2/3 of 1% x PIA = amount missed.
Sept: 4 months until DRCs are next made effective, 8 increment months. So 4 x 8 x 2/3 of 1% x PIA = amount missed.
Oct: 3 months until DRCs are next made effective, 9 increment months. So 3 x 9 x 2/3 of 1% x PIA = amount missed.
Nov: 2 months until DRCs are next made effective, 10 increment months. So 2 x 10 x 2/3 of 1% x PIA = amount missed.
Dec: 1 months until DRCs are next made effective, 11 increment months. So 1 x 11 x 2/3 of 1% x PIA = amount missed.
Chip Munk wrote: Wed May 04, 2022 9:49 pm So in the end, we each derived our formula based on an Alan S. post! But rather than throw a couple of formulas at Mike P. and expect him to evaluate them on the fly for correctness, the underlying question is, if you claim between FRA and age 70 AND in the month of January, are you due one DRC or would that be true only if you delayed by one month and claimed in February? The answer to that question will determine which of Alan S.'s posts is correct.
And that's consistent with the example in 20 CFR § 404.313 - What are delayed retirement credits and how do they increase my old-age benefit amount? that includes "When he became age 66 in January 1999, he stopped working and applied for benefits beginning with that month...He earned 12 credits, one for each month from January 1998 through December 1998." Would have been clearer to have an example showing the effect of claiming in a different month, but so it goes.

Mike, thanks again, and kudos to Chip Munk for also deciphering things!

Probably worth adding some of this to the Social Security wiki....
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Chip Munk »

FiveK wrote: Wed May 11, 2022 5:18 pm And that's consistent with the example in 20 CFR § 404.313 - What are delayed retirement credits and how do they increase my old-age benefit amount? that includes "When he became age 66 in January 1999, he stopped working and applied for benefits beginning with that month...He earned 12 credits, one for each month from January 1998 through December 1998." Would have been clearer to have an example showing the effect of claiming in a different month, but so it goes.

Mike, thanks again, and kudos to Chip Munk for also deciphering things!

Probably worth adding some of this to the Social Security wiki....
I remember visiting that Legal Information Institute web page a few months ago and thinking the same thing about their choice of January for their example -- not very helpful.

Thanks for the kudos but the credit really goes to Mike Piper and others here on the forum whose posts taught me what I needed to know on this subject.

Thank you Mike and Jon for the podcast!
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by jeffyscott »

ObliviousInvestor wrote: Wed May 11, 2022 4:10 pm The rules come from here:
https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615690
It appears that at least they don't penalize you for dying in the "wrong" month:
DRC increases are effective:
...in the month of death of the NH, for widow(er)s benefits with DRCs.

The "missed" amount is not received later as a lump sum, because you're not supposed to get that amount.
Right, but it is a very peculiar way to determine what you are supposed to get.
As far as Open Social Security, it does not account for this.
I agree that it is too small to matter for purposes of determining the optimal claiming age (and it's probably rare for the optimum to be in the window where there is this weird temporary, lower benefit for a few months, anyway).

Far less logical and confusing is the SS admin. decision to send out benefit estimates that tell one that their benefit amount if they retire at age 68, for example, is the smaller amount that they will get for between 1-11 months (if they didn't happen to be born in January), rather than the larger permanent benefit. And they include no explanation that the benefit would increase the following January. They do the same on the "My Social Security" website (though there may be a pop-up or something with an opaque note about this :?: ). Really how hard would it be to just present both numbers: "you would get a temporary benefit of $X for __ months and then an increase to your permanent benefit of $Y beginning the following January (or Feb, if that's when it actually would be paid).
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by ObliviousInvestor »

jeffyscott, FWIW, I agree with you, both regarding the peculiarity of the rule itself, as well as the lack of clarity of the SSA website's current method of showing benefit amounts.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Silk McCue »

jeffyscott wrote: Thu May 12, 2022 6:22 am
Far less logical and confusing is the SS admin. decision to send out benefit estimates that tell one that their benefit amount if they retire at age 68, for example, is the smaller amount that they will get for between 1-11 months (if they didn't happen to be born in January), rather than the larger permanent benefit. And they include no explanation that the benefit would increase the following January. They do the same on the "My Social Security" website (though there may be a pop-up or something with an opaque note about this :?: ). Really how hard would it be to just present both numbers: "you would get a temporary benefit of $X for __ months and then an increase to your permanent benefit of $Y beginning the following January (or Feb, if that's when it actually would be paid).
Thanks for posting this illuminating detail. When updating our custom spreadsheet each year I had noticed that the age 68 benefit was “wrong” for age 68 as reported by SS. For the past few years I have been plugging in our details to Opensocialsecurity.com and then replacing the age 68 benefit with what it reported accurately there.

This is a blatant failure on their part for reporting inconsistently and inaccurately the benefit amounts. Since our current plan is to claim at the ages 68/70 in 7 years that detail is of specific interest to us.

Cheers
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Eagle33 »

Silk McCue wrote: Thu May 12, 2022 7:59 am
jeffyscott wrote: Thu May 12, 2022 6:22 am
Far less logical and confusing is the SS admin. decision to send out benefit estimates that tell one that their benefit amount if they retire at age 68, for example, is the smaller amount that they will get for between 1-11 months (if they didn't happen to be born in January), rather than the larger permanent benefit. And they include no explanation that the benefit would increase the following January. They do the same on the "My Social Security" website (though there may be a pop-up or something with an opaque note about this :?: ). Really how hard would it be to just present both numbers: "you would get a temporary benefit of $X for __ months and then an increase to your permanent benefit of $Y beginning the following January (or Feb, if that's when it actually would be paid).
Thanks for posting this illuminating detail. When updating our custom spreadsheet each year I had noticed that the age 68 benefit was “wrong” for age 68 as reported by SS. For the past few years I have been plugging in our details to Opensocialsecurity.com and then replacing the age 68 benefit with what it reported accurately there.

This is a blatant failure on their part for reporting inconsistently and inaccurately the benefit amounts. Since our current plan is to claim at the ages 68/70 in 7 years that detail is of specific interest to us.

Cheers
For a Boglehead it may be an annoyance, but for the large number of people that claim SS prior FRA it would be overly confusing if SSA explained it. As Mike said, in the grand scheme of things it has little impact - just can't balance it to the penny. In cases like this I try to remind myself of:
In financial planning, greater precision only provides the illusion of greater accuracy. All data is, by definition, backward-looking while all decisions are, by definition, forward-looking.
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by Silk McCue »

Eagle33 wrote: Fri May 13, 2022 7:44 am
Silk McCue wrote: Thu May 12, 2022 7:59 am
jeffyscott wrote: Thu May 12, 2022 6:22 am
Far less logical and confusing is the SS admin. decision to send out benefit estimates that tell one that their benefit amount if they retire at age 68, for example, is the smaller amount that they will get for between 1-11 months (if they didn't happen to be born in January), rather than the larger permanent benefit. And they include no explanation that the benefit would increase the following January. They do the same on the "My Social Security" website (though there may be a pop-up or something with an opaque note about this :?: ). Really how hard would it be to just present both numbers: "you would get a temporary benefit of $X for __ months and then an increase to your permanent benefit of $Y beginning the following January (or Feb, if that's when it actually would be paid).
Thanks for posting this illuminating detail. When updating our custom spreadsheet each year I had noticed that the age 68 benefit was “wrong” for age 68 as reported by SS. For the past few years I have been plugging in our details to Opensocialsecurity.com and then replacing the age 68 benefit with what it reported accurately there.

This is a blatant failure on their part for reporting inconsistently and inaccurately the benefit amounts. Since our current plan is to claim at the ages 68/70 in 7 years that detail is of specific interest to us.

Cheers
For a Boglehead it may be an annoyance, but for the large number of people that claim SS prior FRA it would be overly confusing if SSA explained it. As Mike said, in the grand scheme of things it has little impact - just can't balance it to the penny. In cases like this I try to remind myself of:
In financial planning, greater precision only provides the illusion of greater accuracy. All data is, by definition, backward-looking while all decisions are, by definition, forward-looking.
I don’t think that you realize the specific point being addressed here. The age 68 estimate on SS accounts for the reduction in benefits due to delayed retirement credits. They don’t do that for any other claiming year. Having that figure reported differently without clear explanation as to why they would do so makes no sense.

Cheers
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Re: Bogleheads® Live: Submit ?s for Mike Piper on Social Security

Post by jeffyscott »

It may be a small thing, but it makes no sense for SS to send a statement that tells someone with an FRA of 67 and PIA of $2000, who happens to have been born in July: "If you begin your benefit at age 68, you will get $2080 per month."

Meanwhile for someone with exactly the same FRA and PIA, who happens to have been born in January, they will send a statement that says: "If you begin your benefit at age 68, you will get $2160 per month."

Yes, I realize that the vast majority are oblivious :wink: and would probably freak-out if their statement said they would get $2160 and then they start getting payments of $2080.

What really makes no sense is the rules/law that established this bizarre way of applying DRCs.
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