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.

Mike Piper |
Roth is a name, not an acronym.