The Biggest Mistakes People Make With Social Security

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Stoic9
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Re: The Biggest Mistakes People Make With Social Security

Post by Stoic9 »

I looked at this after I retired Me 60 Spouseiod 57. The best plan for us was Spouseiod claim at 62. I claim at 70 and spouseiod switches to Spousal. After taxes that gives us about $38K raise at my age 70. My assumptions are I'll live to 75 +- 2, spouseiod to 90 +- 4.

Reasons
1. Spouseiod longevity
2. money not needed
3. taxes

That was my plan and unless something changes it will remain my plan. Everyone has a different set of variables than we (ours are pretty clear and set). But make a plan logically then be flexible if a variable changes significantly.
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ObliviousInvestor
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

vested1 wrote: Wed May 12, 2021 1:11 pm Always learning something new.

I have a friend who was married to a woman 10 years younger than him for over 10 years before getting divorced 30 years ago. He got remarried and is delaying his own SS benefit until age 70. His ex got remarried but that marriage only lasted a few months. The ex is under the impression that she can file for spousal benefits on my friend's SS and get survivor benefits based on what he was getting when he dies.
The ex is correct.

It is not that getting remarried causes one to lose benefits on an ex-spouse's record, but rather that the current state of being married causes one (in most cases) not to be eligible for benefits on an ex-spouse's record. But because the ex is no longer married, she will be eligible for benefits on your friend's work record.

Edited to add:
The requirements in question can be found in CFR 404.331 (for spousal benefits) and CFR 404.336 (for survivor benefits).
https://www.ssa.gov/OP_Home/cfr20/404/404-0331.htm
https://www.ssa.gov/OP_Home/cfr20/404/404-0336.htm
(c) You are not married. (For purposes of meeting this requirement, you will be considered not to be married throughout the month in which the divorce occurred);
(e) You are unmarried, unless for benefits for months after 1983 you meet one of the conditions in paragraphs (e)(1) through (3) of this section:

(1) You remarried after you became 60 years old.

(2) You are now age 60 or older and you meet both of the conditions in paragraphs (e)(2)(i) and (ii) of this section:

(i) You remarried after attaining age 50 but before attaining age 60.

(ii) At the time of the remarriage, you were entitled to widow's or widower's benefits as a disabled widow or widower.

(3) You are now at least age 50 but not yet age 60 and you meet both of the conditions in paragraphs (e)(3)(i) and (ii) of this section:

(i) You remarried after attaining age 50.

(ii) You met the disability requirements in paragraph (c) of this section at the time of your remarriage (i.e., your disability began within the specified time and before your remarriage).
Last edited by ObliviousInvestor on Wed May 12, 2021 1:56 pm, edited 1 time in total.
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vested1
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Re: The Biggest Mistakes People Make With Social Security

Post by vested1 »

ObliviousInvestor wrote: Wed May 12, 2021 1:15 pm
vested1 wrote: Wed May 12, 2021 1:11 pm Always learning something new.

I have a friend who was married to a woman 10 years younger than him for over 10 years before getting divorced 30 years ago. He got remarried and is delaying his own SS benefit until age 70. His ex got remarried but that marriage only lasted a few months. The ex is under the impression that she can file for spousal benefits on my friend's SS and get survivor benefits based on what he was getting when he dies.
The ex is correct.

It is not that getting remarried causes one to lose benefits on an ex-spouse's record, but rather that the current state of being married causes one (in most cases) not to be eligible for benefits on an ex-spouse's record. But because the ex is no longer married, she will be eligible for benefits on your friend's work record.
Thank you, or should I say, she thanks you.
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JoeRetire
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

jackbeagle wrote: Wed May 12, 2021 12:33 pm Does your earnings cap get lifted when you turn 67? How does that work?
The earnings cap is lifted once you reach your Full Retirement Age. For you, that may be 67.

After that point, you can earn as much as you like without your benefits being reduced.
Just remember: it's not a lie if you believe it.
sid hartha
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Re: The Biggest Mistakes People Make With Social Security

Post by sid hartha »

JoeRetire wrote: Wed May 12, 2021 12:13 pm
RickBoglehead wrote: Wed May 12, 2021 12:06 pm
JoeRetire wrote: Wed May 12, 2021 11:59 am
RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
If you read the article, they point out:

- that can you get benefits if your marriage lasts 10 years (so if you were close to 10 years, you might hang on)
- that you can't get those benefits if you remarry, which someone might take into account and just live with someone
Thus, getting divorced wasn't the mistake.

Not waiting at least 10 years to get divorced might be a mistake with regard to social security benefits. And getting remarried rather than choosing to live together might be a mistake with regard to social security benefits.

Ridiculous.

By this definition, dying is a mistake.
(when you die before maximizing your spouse's survivor benefits at 70).
That's a great idea for my tombstone - "Here lies poor Sid, Failed to Maximize Spouse's Survivor Benefits"
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Re: The Biggest Mistakes People Make With Social Security

Post by willthrill81 »

ponyboy wrote: Wed May 12, 2021 12:15 pm Most people take SS before 70. Makes very little sense to wait that long to take back what is yours.
If you know that you'll die early, it makes great sense to do that. But if there is a possibility that you'll live to your mid 80s or beyond, deferring SS benefits for as long as possible makes perfect sense.
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Re: The Biggest Mistakes People Make With Social Security

Post by Mr.BB »

Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
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JoeRetire
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

sid hartha wrote: Wed May 12, 2021 4:03 pm
JoeRetire wrote: Wed May 12, 2021 12:13 pm
RickBoglehead wrote: Wed May 12, 2021 12:06 pm
JoeRetire wrote: Wed May 12, 2021 11:59 am
RickBoglehead wrote: Tue May 11, 2021 6:18 am 5) Getting Divorced

The Biggest Mistakes People Make With Social Security
While getting divorced may indeed be a mistake, how is that a mistake made with social security? Ridiculous.
If you read the article, they point out:

- that can you get benefits if your marriage lasts 10 years (so if you were close to 10 years, you might hang on)
- that you can't get those benefits if you remarry, which someone might take into account and just live with someone
Thus, getting divorced wasn't the mistake.

Not waiting at least 10 years to get divorced might be a mistake with regard to social security benefits. And getting remarried rather than choosing to live together might be a mistake with regard to social security benefits.

Ridiculous.

By this definition, dying is a mistake.
(when you die before maximizing your spouse's survivor benefits at 70).
That's a great idea for my tombstone - "Here lies poor Sid, Failed to Maximize Spouse's Survivor Benefits"
You might want to hold off on that inscription - unless you are planning to die early?
Just remember: it's not a lie if you believe it.
Morgan Dollar 1921
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Re: The Biggest Mistakes People Make With Social Security

Post by Morgan Dollar 1921 »

I see Mike is answering questions. I have two, then my own situation.

Question A, a friend's brother passed at age 70 and two months, give or take a few days, Covid-19. Single, self employed, high net worth, no survivor, what happens to his SSA money, he paid in?

Question B, a friend of mine passed at age 57, divorced, his ex-wife remarried years ago, not sure when. Seven years later his sister died at age 59. What happens to those funds paid in?

I filed at age 62, I am divorced and my Dad lived to 99, Mom lived to 71. Who knows whose genes, I got? I had two failed businesses, (low earning numbers for 7 years of the 42 I worked). Circulation issues in my legs after 35 years working on concrete floors. Auto dealer parts clerk. My personal benefit was higher, than 50% of my the ex-wife. I moved at age 62 due to girl friends job transfer, and no job opportunities in the new area after five months. I was considering filing early due to health, but when job search turned sour, the decision became easier. The bend points seemed to help my monthly benefit amount, as my ex was shocked when she heard what my benefit was compared to hers with 33 years of earnings.

I have always maintained that in most of these discussions, someone always says, I want my money back. They miss the fact that their employer paid in an equal amount in most cases. I once asked four financial planners/insurance agents, at a convention, when the best time to file for social security, and I got three different answers.

I then told them they were all wrong, the best time to file is while you are alive. Much more so, when single or divorced, I believe. The redeeming factors for my financial well being, is frugal lifestyle, a good attitude on wants vs needs, parents were products of the Great Depression, thus instilled a sense of doing without. Finally, a QDRO on the ex's pension, with COLA & survivorship clauses from the court, are the icing on the cake.

Few really have a good handle on the present value of the income stream of the largest asset they own, their stream of social security income. They also fail to grasp the cost of decisions made today and that impact 20 years down the road.

Their are a lot of standard answers for when to file, many cookie cutter couples, higher earning older husband, but the decision needs to be tailored to each individual or couples situation. The times they are a changin.

Thanks Mike, for your insight.
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

Morgan Dollar 1921 wrote: Wed May 12, 2021 7:08 pm I see Mike is answering questions.
When you pay Social Security tax the funds are contributed to the trust funds, from which distributions are made to pay for current beneficiaries.

https://www.ssa.gov/news/press/factshee ... eTrust.htm
What are the Trust Funds?

The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits.

Social Security taxes and other income are deposited in these accounts, and Social Security benefits are paid from them. The only purposes for which these trust funds can be used are to pay benefits and program administrative costs.

The Social Security trust funds hold money not needed in the current year to pay benefits and administrative costs and, by law, invest it in special Treasury bonds that are guaranteed by the U.S. Government. A market rate of interest is paid to the trust funds on the bonds they hold, and when those bonds reach maturity or are needed to pay benefits, the Treasury redeems them.
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Morgan Dollar 1921
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Re: The Biggest Mistakes People Make With Social Security

Post by Morgan Dollar 1921 »

"Social Security is longevity insurance, he says. That is, it offers protection against running out of money as we age. People don’t do break-even calculations when they buy home insurance, because they are protecting themselves against a catastrophic event like a fire. They shouldn’t do them with Social Security either, he says./quote]

The underlined section is the perfect argument against using break-even calculations when deciding when to file, but not the only one. SS is income, not a lump sum."

I struggle with this, fire is not a certain event, death is.
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Re: The Biggest Mistakes People Make With Social Security

Post by Morgan Dollar 1921 »

ObliviousInvestor wrote: Wed May 12, 2021 7:13 pm
Morgan Dollar 1921 wrote: Wed May 12, 2021 7:08 pm I see Mike is answering questions.
When you pay Social Security tax the funds are contributed to the trust funds, from which distributions are made to pay for current beneficiaries.

https://www.ssa.gov/news/press/factshee ... eTrust.htm
What are the Trust Funds?

The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits.

Social Security taxes and other income are deposited in these accounts, and Social Security benefits are paid from them. The only purposes for which these trust funds can be used are to pay benefits and program administrative costs.

The Social Security trust funds hold money not needed in the current year to pay benefits and administrative costs and, by law, invest it in special Treasury bonds that are guaranteed by the U.S. Government. A market rate of interest is paid to the trust funds on the bonds they hold, and when those bonds reach maturity or are needed to pay benefits, the Treasury redeems them.
I know where they go, but choosing to call it a tax, is not in my point of view. I view my earnings record and the contributions as mine, if I survive to withdraw. I have survived now, and have started the return of my money. I want what I and then what my employers paid in, and I hope I survive long enough to achieve that goal. Then I will start working on that return on my money, as so many like to label the value of waiting. By waiting and working I am also adding more and more real dollars each year to that "trust fund, while simply reducing the time I have to withdraw, and achieve my goal, each and every year. At some point we all jump off that roulette wheel, by starting to withdraw, or dying.

I have not looked at the impact of inflation even with the variance of the COLA, vs true inflation. Should be an interesting year for the COLA announcement this fall.
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Re: The Biggest Mistakes People Make With Social Security

Post by Artsdoctor »

ObliviousInvestor wrote: Tue May 11, 2021 10:09 am
CFM300 wrote: Tue May 11, 2021 10:03 am
ObliviousInvestor wrote: Tue May 11, 2021 8:43 am With regard to the married context though, the "annuity" view is complicated. Because planning for a "both of us live to be 100" scenario leads a couple to make a claiming decision that actually worsens the outcome in the "one of us lives to be 100 and the other dies roughly at, or before, his/her life expectancy" scenario. And for many couples, that's still a risky (i.e., potentially problematic) scenario -- and it's much more likely. So even ignoring ROI and looking purely from a risk-reduction standpoint, the benefit of having the lower earner wait is not so clear.
Suppose a couple decides to have the lower earner file at 62 and the higher earner file at 70. What happens to the lower earner's benefit if the higher earner dies before 70? I'm not posing this as a challenge to anything you've written. It's a sincere question about the mechanics of the system.
Lower earner continues to receive his/her own retirement benefit. Then, when the lower earner files for a survivor benefit (assuming they wait until their survivor FRA), their total monthly benefit would be:
1) The higher earner's PIA, if the higher earned died before their own FRA, or
2) The amount the higher earner would have received if they had filed on their date of death, if the higher earner died after their own FRA.

Example:

Spouse A has a PIA of $600. Spouse B has a PIA of $2,000.

Spouse A files 48 months prior to their FRA, so they get a retirement benefit of $450 (75% of PIA due to 48 months early).

Spouse B dies 24 months after their FRA, without yet having filed. Spouse A continues to receive their own $450/month. And when they file for a survivor benefit (assuming they've reached their own survivor FRA at that point), they would get a survivor benefit of $1,870. That is, it would be enough to bring their total monthly benefit up to 116% of Spouse B's PIA, because Spouse B died 24 months after their own FRA.

Edited to add: Note that in this example if Spouse A waited somewhat longer, any dollar increase in their own retirement benefit would be offset by a decrease in the survivor benefit. For example if they filed 36 months early instead of 48, and were therefore receiving $480/month instead of $450, their survivor benefit would be $1840 -- again, whatever is necessary to bring the total up to 116% of Spouse B's PIA. (Key point being that waiting resulted in a higher benefit -- but only for as long as both people were still alive.)
100% agree. Excellent synopsis.

People don't like contemplating the death of a spouse but the fact is that one spouse will most likely die well before the other. Couples make decisions based on two social security checks per month, but it's prudent to also plan for one. Survivor benefits are not high on most people's radar but it really should be.
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Re: The Biggest Mistakes People Make With Social Security

Post by Morgan Dollar 1921 »

Mr.BB wrote: Wed May 12, 2021 4:47 pm
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
Some of us are just lazy and enjoy listening to the Blue Jays, Cardinals, Finches, and Red Bellied Woodpeckers at the bird feeder in rural Ohio. Pick up ear corn the sheller missed, shuck it, shell it and crack it, free for a little labor, or go to Rural King or Tractor Supply and buy a 50 lb bag. Nine dollars for the corn, two dollars in gasoline for the round trip, and then you see something else you want, key word "want," they just blew $20. Choices, yes some must work or should work until they have the funds or additional pension to retire. What I think you are trying to say is if you failed to plan then you planned to fail. Oh, those years so long ago, when Gulf, Sinclair, Sohio and Esso gave away free road maps. Had to have them to get from home to your destination. Put a tiger in your tank! Some folks still got lost on the highway back then. Now, GPS. Oh, no cable bill when you wait and spot a Golden Finch or those amazing hummingbirds. My gal buys the sugar for the hummer feeder. I am tight, and lazy. Not being critical, just sharing the other side of life.
I-Know-Nothing
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Re: The Biggest Mistakes People Make With Social Security

Post by I-Know-Nothing »

Mr.BB wrote: Wed May 12, 2021 4:47 pm
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
That’s a bit simplistic, isn’t it? Many people don’t choose to retire out of laziness. They lose their jobs or are unable to perform them for health reasons. They need SS, and that’s why we have an SS system in place to begin with.
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Re: The Biggest Mistakes People Make With Social Security

Post by Mr.BB »

I-Know-Nothing wrote: Wed May 12, 2021 8:36 pm
Mr.BB wrote: Wed May 12, 2021 4:47 pm
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
That’s a bit simplistic, isn’t it? Many people don’t choose to retire out of laziness. They lose their jobs or are unable to perform them for health reasons. They need SS, and that’s why we have an SS system in place to begin with.
I'm not talking about people who lose their job or know they have a shorten life span. I'm talking about people who know they simply do not have enough to live on and choose not to work and don't try to maximize their income to help support themselves.
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Re: The Biggest Mistakes People Make With Social Security

Post by willthrill81 »

Mr.BB wrote: Wed May 12, 2021 8:41 pm
I-Know-Nothing wrote: Wed May 12, 2021 8:36 pm
Mr.BB wrote: Wed May 12, 2021 4:47 pm
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
That’s a bit simplistic, isn’t it? Many people don’t choose to retire out of laziness. They lose their jobs or are unable to perform them for health reasons. They need SS, and that’s why we have an SS system in place to begin with.
I'm not talking about people who lose their job or know they have a shorten life span. I'm talking about people who know they simply do not have enough to live on and choose not to work and don't try to maximize their income to help support themselves.
Over 50% (and maybe over 60%) of current retirees got that way due to a layoff (granted, many could have gotten other jobs, but that generally involves taking a big pay cut, which is hard for most to justify), deteriorating work environments, or medical issues, whether their own or those of a family member.
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Re: The Biggest Mistakes People Make With Social Security

Post by SteadyOne »

Yeah, if you claim at 70 and live past 84 then you will be ahead. By then I will be probably demented. So, give me my money NOW. Will claim at 62 and chill
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Re: The Biggest Mistakes People Make With Social Security

Post by Dottie57 »

Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
Bingo, bingo , bingo!
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Re: The Biggest Mistakes People Make With Social Security

Post by SteadyOne »

Morgan Dollar 1921 wrote: Wed May 12, 2021 7:20 pm "Social Security is longevity insurance, he says. That is, it offers protection against running out of money as we age. People don’t do break-even calculations when they buy home insurance, because they are protecting themselves against a catastrophic event like a fire. They shouldn’t do them with Social Security either, he says./quote]

The underlined section is the perfect argument against using break-even calculations when deciding when to file, but not the only one. SS is income, not a lump sum."

I struggle with this, fire is not a certain event, death is.
It’s a bad analogy, since one may need income to live on at 62 due to lack of employment opportunities or health issues. For those with alternatives as sufficient pensions or and 401k, the choices might be available. One does not buy home insurance if he lives under the bridge
“Every de­duc­tion is al­lowed as a mat­ter of leg­isla­tive grace.” US Federal Court
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Re: The Biggest Mistakes People Make With Social Security

Post by willthrill81 »

SteadyOne wrote: Wed May 12, 2021 9:02 pm Yeah, if you claim at 70 and live past 84 then you will be ahead. By then I will be probably demented. So, give me my money NOW. Will claim at 62 and chill
You don't think that you'll need any money when you're 'demented'?

Do you think that most 84 year olds are 'demented'?
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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Re: The Biggest Mistakes People Make With Social Security

Post by SteadyOne »

Mr.BB wrote: Wed May 12, 2021 4:47 pm
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
What if you had a stroke and cannot work anymore?
“Every de­duc­tion is al­lowed as a mat­ter of leg­isla­tive grace.” US Federal Court
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Re: The Biggest Mistakes People Make With Social Security

Post by SteadyOne »

willthrill81 wrote: Wed May 12, 2021 9:14 pm
SteadyOne wrote: Wed May 12, 2021 9:02 pm Yeah, if you claim at 70 and live past 84 then you will be ahead. By then I will be probably demented. So, give me my money NOW. Will claim at 62 and chill
You don't think that you'll need any money when you're 'demented'?

Do you think that most 84 year olds are 'demented'?
I am talking about myself. Few of my relatives lived pass 80.

Actually your second question led me to google it and I found that 35% of 80+ have dementia. So, answer to your question is No. But getting close at 85.
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Re: The Biggest Mistakes People Make With Social Security

Post by willthrill81 »

SteadyOne wrote: Wed May 12, 2021 9:21 pm
willthrill81 wrote: Wed May 12, 2021 9:14 pm
SteadyOne wrote: Wed May 12, 2021 9:02 pm Yeah, if you claim at 70 and live past 84 then you will be ahead. By then I will be probably demented. So, give me my money NOW. Will claim at 62 and chill
You don't think that you'll need any money when you're 'demented'?

Do you think that most 84 year olds are 'demented'?
I am talking about myself. Few of my relatives lived pass 80.

Actually your second question led me to google it and I found that 35% of 80+ have dementia. So, answer to your question is No. But getting close at 85.
Family history only explains about 20% of the variance in longevity. So your ancestors not living very long doesn't have much bearing on your own longevity.
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Re: The Biggest Mistakes People Make With Social Security

Post by Morgan Dollar 1921 »

SteadyOne wrote: Wed May 12, 2021 9:13 pm
Morgan Dollar 1921 wrote: Wed May 12, 2021 7:20 pm "Social Security is longevity insurance, he says. That is, it offers protection against running out of money as we age. People don’t do break-even calculations when they buy home insurance, because they are protecting themselves against a catastrophic event like a fire. They shouldn’t do them with Social Security either, he says./quote]

The underlined section is the perfect argument against using break-even calculations when deciding when to file, but not the only one. SS is income, not a lump sum."

I struggle with this, fire is not a certain event, death is.
It’s a bad analogy, since one may need income to live on at 62 due to lack of employment opportunities or health issues. For those with alternatives as sufficient pensions or and 401k, the choices might be available. One does not buy home insurance if he lives under the bridge
Or both,..... (one may need income to live on at 62 due to lack of employment opportunities or health issues.) I agree.
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Re: The Biggest Mistakes People Make With Social Security

Post by JS-Elcano »

Johm221122 wrote: Tue May 11, 2021 8:32 am
David Jay wrote: Tue May 11, 2021 8:03 am
Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
I agree with you it's debatable between view A/B. But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70. I'm guessing a large percentage of those 94% will regret there decision.
I know to many that have regretted there choice
Or they claim it early because they are afraid that SS law will change to reduce benefits. In such an event is less likely that people who are already recipients will be affected, whereas it is uncertain how those who have not yet started collecting will be affected. For example, I will be in my early 60s when SS becomes unable to pay full benefits. On my latest statement it says "The law governing benefit amounts may change because, by 2035, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits." So, maybe I am better off claiming slightly early and get 100% instead of waiting and only getting 79%. We are certainly in for interesting times. Not every BH has a multimillion $ portfolio where SS income doesn't matter.
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Re: The Biggest Mistakes People Make With Social Security

Post by HomerJ »

David Jay wrote: Tue May 11, 2021 8:03 am
Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
View C... I would totally be in View B camp, except can I trust the government not to CHANGE the SS program?
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Re: The Biggest Mistakes People Make With Social Security

Post by StealthRabbit »

dodecahedron wrote: Tue May 11, 2021 8:44 am
Johm221122 wrote: Tue May 11, 2021 8:32 am But only 6% wait to 70. That means 94% either need the money,think they'll not live long or can beat the return of guaranteed Social Security at 70.
There is one significant category you are leaving out among your characterizations of the 94%: folks whose benefits maximize prior to age 70.

Folks filing for surviving spouse benefits do not benefit from waiting until age 70, for example. Those benefits maximize at full-retirement-age.

Other folks (e.g., lower earning spouses who qualify for spousal benefits of a higher earning living spouse that greatly exceed their own work-record benefits, older parents/guardians of young or disabled children who qualify for dependent benefits) may also fall into the category of folks whose benefits maximize prior to age 70.
Very good points one need to consider...(take when benefits maximize (which may be before age 70) i.e. run the numbers. There is no real winners, except those who live a really long time! (not me / not spouse :twisted: )
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Re: The Biggest Mistakes People Make With Social Security

Post by lazynovice »

Last week, I started looking at Mike’s calculator for the first time. I was very surprised to find that the best claiming strategy for us is not for both of us to wait until we are 70. I am still a little confused by it.

We have roughly equivalent PIAs so I ran it at 2800 per month for both
He is 2 years older than she
The recommendation is for her to claim at 62 and 4 months and for him to claim at 70.

Running an alternate scenario of both claiming at 70, we’d end up with 2.5% less. Running a scenario where he claims at 62 and 4 months and she waits until,70 results in about 2.2% less.

Survivor benefits are identical in the three scenarios.

He currently has a few years of zero earnings due to early retirement. She will likely have one or two years of zero earnings. So PIA is being modeled on the SS website.

For us, the decision is VERY sensitive to the gap between our PIAs. Being equal at 2,800 yields the answers above. Drop his down to 2,650 and it changes the answer to she claims at 70 and he claims at 65 and 9 months.

How in the world do non- Bogleheads figure this out?
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Re: The Biggest Mistakes People Make With Social Security

Post by celia »

ajcp wrote: Tue May 11, 2021 11:45 am I also don't think SS is play money (in that they wouldn't be affected at all if it went to 0) for most people here, but I would say that most people here have enough of a cushion that the difference between the choice they take and the "optimal" choice is very unlikely to matter much at all to them when it's all said and done.
But it WILL matter if they need to do Roth conversions before RMDs start. Starting SS before 70 will use up some room in your tax brackets that might be better used for the Roth conversions!

AQ wrote: Wed May 12, 2021 12:22 pm A trivial question but hope to get a direct answer: Suppose my own SS payment would be $2K monthly, and my spouse is a homemaker and doesn't have own SS benefit. For my planning purpose, can I assume together we'll get $3K?
Yes, if you’ve been married 10 years. :D

And if you wait to get a larger amount, your spouse’s amount will be larger too.
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Re: The Biggest Mistakes People Make With Social Security

Post by celia »

SteadyOne wrote: Wed May 12, 2021 9:02 pm Yeah, if you claim at 70 and live past 84 then you will be ahead. By then I will be probably demented. So, give me my money NOW. Will claim at 62 and chill
That’s your choice, if you want to “lock in” the lowest benefit possible. But even “demented” old folks would rather have more than the lowest benefit (based on their lifetime earnings).
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Re: The Biggest Mistakes People Make With Social Security

Post by Mr.BB »

SteadyOne wrote: Wed May 12, 2021 9:16 pm
Mr.BB wrote: Wed May 12, 2021 4:47 pm
Flashes1 wrote: Tue May 11, 2021 8:47 am I think a lot of Bogleheads are missing the fact that most people NEED their SS prior to FRA. Not everyone has a $3 million NW before they're 40 and not everyone has great health up thru FRA. We can argue their plight is due to their own poor life choices, but the fact is most people haven't saved up big war chests and they depend on SS....for many of us, it's simply play money.
The basic math says if you do not have enough money saved up to cover your living expenses, why would you retire? If you are retiring just to not have to work anymore and collect SS, then that is just being lazy. If you choose not save enough (or couldn't) over the years, you need to work to age 70 and let your SS grow. If you need your SS before FRA then then odds are you need to work anyway and SS will deduct your monthly total until your FRA anyway. It makes no sense to try to retire if you simply don't have the means.
What if you had a stroke and cannot work anymore?
That is a completely different situation. Of course you would need your SS and/or disability income then.
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Re: The Biggest Mistakes People Make With Social Security

Post by Derpalator »

HomerJ wrote: Wed May 12, 2021 9:43 pm
David Jay wrote: Tue May 11, 2021 8:03 am
Johm221122 wrote: Tue May 11, 2021 7:10 am
Even so, only about 6% of Americans claiming Social Security in 2017 were age 70, according to the Center for Retirement Research
This is the one I don't understand. I make almost the median income exactly per year and at 70 Social Security would cover 100% of my current spending. It's a no brainer to wait to 70 if at all possible. I don't care if I break even or could make more investing the money, I want financial peace of mind in old age(a good chunk of my retirement accounts is for retirement before 70).
This topic always spirals down into a debate between two camps who talk past each other because they are operating from two very different viewpoints. It is not really about the math, it is about how you view the program:

View A (I call this the “ROI” view): I have been paying into SS my entire working life and I want to make every effort to recoup those funds. Since the date of my demise is unknown, the sooner I file the more likely it is that I can get most of my money back if I pass at a young age.

View B (I call this the “annuity” view): The date of my (“our”, if married) demise is unknown, I (one of us) may live to be 100. I want to assure the maximum income stream into my (our) golden years.

Again, neither view is “right”, but where you start almost always determines where you end up.
View C... I would totally be in View B camp, except can I trust the government not to CHANGE the SS program?
This statement I consider actionable. Assume the worst and plan on 79%.
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Re: The Biggest Mistakes People Make With Social Security

Post by vested1 »

SteadyOne wrote: Wed May 12, 2021 9:13 pm
Morgan Dollar 1921 wrote: Wed May 12, 2021 7:20 pm "Social Security is longevity insurance, he says. That is, it offers protection against running out of money as we age. People don’t do break-even calculations when they buy home insurance, because they are protecting themselves against a catastrophic event like a fire. They shouldn’t do them with Social Security either, he says./quote]

The underlined section is the perfect argument against using break-even calculations when deciding when to file, but not the only one. SS is income, not a lump sum."

I struggle with this, fire is not a certain event, death is.
It’s a bad analogy, since one may need income to live on at 62 due to lack of employment opportunities or health issues. For those with alternatives as sufficient pensions or and 401k, the choices might be available. One does not buy home insurance if he lives under the bridge
I was having trouble separating the quoted section so added to the confusion with my original comment on page one. The section in red is taken from the WSJ article that the OP linked and is a quote from Laurence Kotlikoff who wrote several books on the subject. The blue section is my comment on the red section. I believe the analogy is an accurate one, not a "bad" one. Death is a catastrophic event, and so is house fire. The negative effects of both can be mitigated by purchasing insurance. The one who dies will never reap the benefits of that insurance, but if they have a survivor, they surely will in both cases.

It may be that it is simply a matter of perspective, with single folks looking at it differently than those who are married. SS has a survivor benefit and a COLA, so it is better for a married couple than for a single person. It is more valuable than any home insurance available, or any annuity for that matter. Those who make the hard decision to delay, sacrifice lower current dollars for higher future dollars as a form of insurance, both for the survivor and to lessen the possibility of running out of money before they die. The analogy is appropriate because no one knows if or when their house will burn down, just as no one knows when they will die. Both are risks, one a possibility, and the other a certainty.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

JS-Elcano wrote: Wed May 12, 2021 9:39 pmSo, maybe I am better off claiming slightly early and get 100% instead of waiting and only getting 79%. We are certainly in for interesting times.
You are making a couple of assumptions here:
- Congress will not act to change the laws in order to allow Social Security to remain fully funded, even though it has always done so in the past
- You would somehow become "grandfathered" into your then-current benefit amount allowing you to keep 100% rather than get a 21% haircut, even though that is not what the current laws say

Fortunately, you don't have to decide today. My guess is that "claiming slightly early" will not be beneficial. We'll see.
Last edited by JoeRetire on Thu May 13, 2021 6:23 am, edited 2 times in total.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

HomerJ wrote: Wed May 12, 2021 9:43 pm View C... I would totally be in View B camp, except can I trust the government not to CHANGE the SS program?
I think it's pretty clear that the SS program will be changed.
Of course we have no idea what those changes will entail.
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

lazynovice wrote: Wed May 12, 2021 11:19 pm How in the world do non- Bogleheads figure this out?
- you don't have to be a Boglehead to read or to use OpenSocialSecurity
- some have competent financial advisors
- some have no choice in the matter, need the money, and start their benefits as soon as possible
- some don't try to 'figure it out' and just go with whatever seems right to them without regard to the math
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

celia wrote: Thu May 13, 2021 2:09 am
AQ wrote: Wed May 12, 2021 12:22 pm A trivial question but hope to get a direct answer: Suppose my own SS payment would be $2K monthly, and my spouse is a homemaker and doesn't have own SS benefit. For my planning purpose, can I assume together we'll get $3K?
Yes, if you’ve been married 10 years. :D

And if you wait to get a larger amount, your spouse’s amount will be larger too.
No. Spouse can end up with at most 50% of the PIA. If you wait, that won't change.
Survivor can get a larger amount.
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

JoeRetire wrote: Thu May 13, 2021 6:13 am
HomerJ wrote: Wed May 12, 2021 9:43 pm View C... I would totally be in View B camp, except can I trust the government not to CHANGE the SS program?
I think it's pretty clear that the SS program will be changed.
Of course we have no idea what those changes will entail.
For the purposes of retirement spend planning, my solution (and I believe many other folks) to this conundrum is to assume no spousal benefit in our planning. That assumption effectively reduces the planned amount while both are living by one third. It also over-assumes for the survivor years, but expect that will not have a detrimental impact on solvency in part due to potentially higher marginal tax rates on the SS benefit. Not precise, but I think reasonably well tuned to keep reality in our planning models.
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

retiringwhen wrote: Thu May 13, 2021 6:23 am
JoeRetire wrote: Thu May 13, 2021 6:13 am
HomerJ wrote: Wed May 12, 2021 9:43 pm View C... I would totally be in View B camp, except can I trust the government not to CHANGE the SS program?
I think it's pretty clear that the SS program will be changed.
Of course we have no idea what those changes will entail.
For the purposes of retirement spend planning, my solution (and I believe many other folks) to this conundrum is to assume no spousal benefit in our planning. That assumption effectively reduces the planned amount while both are living by one third. It also over-assumes for the survivor years, but expect that will not have a detrimental impact on solvency in part due to potentially higher marginal tax rates on the SS benefit. Not precise, but I think reasonably well tuned to keep reality in our planning models.
Why would you assume no spousal benefits?

I have never heard of anyone making such an assumption. I have heard of folks assuming (I think incorrectly) "there will be no SS benefits when my time comes". I have heard of many folks assuming "there will be around a 25% cut in 2034 or so". But I have never heard of anyone assuming "spousal benefits will be eliminated".

Are you also assuming there will be no survivor benefits? If not, why not?
Just remember: it's not a lie if you believe it.
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

JoeRetire wrote: Thu May 13, 2021 6:27 am
retiringwhen wrote: Thu May 13, 2021 6:23 am For the purposes of retirement spend planning, my solution (and I believe many other folks) to this conundrum is to assume no spousal benefit in our planning. That assumption effectively reduces the planned amount while both are living by one third. It also over-assumes for the survivor years, but expect that will not have a detrimental impact on solvency in part due to potentially higher marginal tax rates on the SS benefit. Not precise, but I think reasonably well tuned to keep reality in our planning models.
Why would you assume no spousal benefits?

I have never heard of anyone making such an assumption. I have heard of folks assuming (I think incorrectly) "there will be no SS benefits when my time comes". I have heard of many folks assuming "there will be around a 25% cut in 2034 or so". But I have never heard of anyone assuming "spousal benefits will be eliminated".

Are you also assuming there will be no survivor benefits? If not, why not?
Basically, it does two things for my planning:

1.) I don't have to guess when the first person dies, I only use actuarial data to make an educated guess at when the second dies.
2.) It bakes in an assumption/risk mitigation of some level of reduced benefits in the future (BTW, at my age, the planned reduced benefits in current law would kick in about 2 years after I turn 70).

How I plan:

I assume full survivor benefits by assuming the higher earning spouse is the second to die and that survivor benefits are not materially different reduced against that baseline.
I assume that the lesser benefit spouse takes it early at 62 or 63 and the higher at 70 as verified/suggested by opensocialsecurity.com
I end the lesser spouse's benefit at the time the higher spouse claims deferred benefit.

Bottom line, I consider this a conservative assumption about Social Security that removes both some longevity risk and future benefits reductions risk without throwing out the entire plan.

It is surely not the only way to plan but it has explicit reasoning for the approach that I believe is appropriate to our situation.

I should note that my retirement plans are not significantly impacted one way or another by this assumption as SS benefits are not make or break in our spend plan either way.
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Re: The Biggest Mistakes People Make With Social Security

Post by winterfan »

retiringwhen wrote: Thu May 13, 2021 6:23 am
JoeRetire wrote: Thu May 13, 2021 6:13 am
HomerJ wrote: Wed May 12, 2021 9:43 pm View C... I would totally be in View B camp, except can I trust the government not to CHANGE the SS program?
I think it's pretty clear that the SS program will be changed.
Of course we have no idea what those changes will entail.
For the purposes of retirement spend planning, my solution (and I believe many other folks) to this conundrum is to assume no spousal benefit in our planning. That assumption effectively reduces the planned amount while both are living by one third. It also over-assumes for the survivor years, but expect that will not have a detrimental impact on solvency in part due to potentially higher marginal tax rates on the SS benefit. Not precise, but I think reasonably well tuned to keep reality in our planning models.
I've never heard of this. I am definitely counting on survivor benefits as the younger and lower earning spouse. My spouse is 10+ years older than me. I'm not sure when he will take his SS. The calculators show that it's best when he is 70 since survivor benefits would be higher for me. However, we still have a minor child, so if he took it at 62, his SS+ the addition for our kid would cover most of our expenses and we could just let our savings grow. That's only for four years though.

If he waited until 70, it would give us time to spend down some of the 401k money (and/or convert to Roth) before the RMDs hit. There are some advantages to the RMD calculation when there is a 10+ year age gap, but not nearly as much as I thought it would be. The tax bomb if I have to file as a single person is a consideration for sure.
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Re: The Biggest Mistakes People Make With Social Security

Post by smitcat »

lazynovice wrote: Wed May 12, 2021 11:19 pm Last week, I started looking at Mike’s calculator for the first time. I was very surprised to find that the best claiming strategy for us is not for both of us to wait until we are 70. I am still a little confused by it.

We have roughly equivalent PIAs so I ran it at 2800 per month for both
He is 2 years older than she
The recommendation is for her to claim at 62 and 4 months and for him to claim at 70.

Running an alternate scenario of both claiming at 70, we’d end up with 2.5% less. Running a scenario where he claims at 62 and 4 months and she waits until,70 results in about 2.2% less.

Survivor benefits are identical in the three scenarios.

He currently has a few years of zero earnings due to early retirement. She will likely have one or two years of zero earnings. So PIA is being modeled on the SS website.

For us, the decision is VERY sensitive to the gap between our PIAs. Being equal at 2,800 yields the answers above. Drop his down to 2,650 and it changes the answer to she claims at 70 and he claims at 65 and 9 months.

How in the world do non- Bogleheads figure this out?
"I was very surprised to find that the best claiming strategy for us is not for both of us to wait until we are 70. I am still a little confused by it.
How in the world do non- Bogleheads figure this out?"
The best strategy for us includes Roth conversions which are affected by date of SS eclection but not driven by that date alone.
Even more complicated than figuring the best solution to SS alone in a vaccuum.
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Re: The Biggest Mistakes People Make With Social Security

Post by smitcat »

retiringwhen wrote: Thu May 13, 2021 6:54 am
JoeRetire wrote: Thu May 13, 2021 6:27 am
retiringwhen wrote: Thu May 13, 2021 6:23 am For the purposes of retirement spend planning, my solution (and I believe many other folks) to this conundrum is to assume no spousal benefit in our planning. That assumption effectively reduces the planned amount while both are living by one third. It also over-assumes for the survivor years, but expect that will not have a detrimental impact on solvency in part due to potentially higher marginal tax rates on the SS benefit. Not precise, but I think reasonably well tuned to keep reality in our planning models.
Why would you assume no spousal benefits?

I have never heard of anyone making such an assumption. I have heard of folks assuming (I think incorrectly) "there will be no SS benefits when my time comes". I have heard of many folks assuming "there will be around a 25% cut in 2034 or so". But I have never heard of anyone assuming "spousal benefits will be eliminated".

Are you also assuming there will be no survivor benefits? If not, why not?
Basically, it does two things for my planning:

1.) I don't have to guess when the first person dies, I only use actuarial data to make an educated guess at when the second dies.
2.) It bakes in an assumption/risk mitigation of some level of reduced benefits in the future (BTW, at my age, the planned reduced benefits in current law would kick in about 2 years after I turn 70).

How I plan:

I assume full survivor benefits by assuming the higher earning spouse is the second to die and that survivor benefits are not materially different reduced against that baseline.
I assume that the lesser benefit spouse takes it early at 62 or 63 and the higher at 70 as verified/suggested by opensocialsecurity.com
I end the lesser spouse's benefit at the time the higher spouse claims deferred benefit.

Bottom line, I consider this a conservative assumption about Social Security that removes both some longevity risk and future benefits reductions risk without throwing out the entire plan.

It is surely not the only way to plan but it has explicit reasoning for the approach that I believe is appropriate to our situation.

I should note that my retirement plans are not significantly impacted one way or another by this assumption as SS benefits are not make or break in our spend plan either way.

"Bottom line, I consider this a conservative assumption about Social Security that removes both some longevity risk and future benefits reductions risk without throwing out the entire plan."
I find it always good to be conservative with retirement planning but to take that into account with all of the plan and not 'sandbag' juts one aspect of the most likely scenario.

"It is surely not the only way to plan but it has explicit reasoning for the approach that I believe is appropriate to our situation."
When you model future plans and take into account performance , AA , taxes etc the act of eliminating spousal benefits could easily move you away from the most optimized plan.

We model our entire plan across the most likely future scenarios and handicap the results as a whole for the sake of being conservative.
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

winterfan wrote: Thu May 13, 2021 7:08 am I've never heard of this. I am definitely counting on survivor benefits as the younger and lower earning spouse.
See above, I assume full SURVIVOR benefits, not SPOUSAL benefits when both are alive. Everyone's situation is different. You have a much larger difference in age which immediately makes the planning options a bit different. As far as when you should take your benefits and when how that works out with children, etc. the opensocialsecurity.com calculator can be a very good help at identifying the most valuable options.

But remember, making any assumptions about benefits that are realistic, you need to answer two questions I mitigate with my plan. 1.) when is the first person going to die? 2.) Do I assume current law will be still in place to see a reduction in benefits in the mid-2030s?
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ObliviousInvestor
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Re: The Biggest Mistakes People Make With Social Security

Post by ObliviousInvestor »

Morgan Dollar 1921 wrote: Wed May 12, 2021 7:30 pm
ObliviousInvestor wrote: Wed May 12, 2021 7:13 pm
Morgan Dollar 1921 wrote: Wed May 12, 2021 7:08 pm I see Mike is answering questions.
When you pay Social Security tax the funds are contributed to the trust funds, from which distributions are made to pay for current beneficiaries.

https://www.ssa.gov/news/press/factshee ... eTrust.htm
What are the Trust Funds?

The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits.

Social Security taxes and other income are deposited in these accounts, and Social Security benefits are paid from them. The only purposes for which these trust funds can be used are to pay benefits and program administrative costs.

The Social Security trust funds hold money not needed in the current year to pay benefits and administrative costs and, by law, invest it in special Treasury bonds that are guaranteed by the U.S. Government. A market rate of interest is paid to the trust funds on the bonds they hold, and when those bonds reach maturity or are needed to pay benefits, the Treasury redeems them.
I know where they go, but choosing to call it a tax, is not in my point of view. I view my earnings record and the contributions as mine, if I survive to withdraw.
You explicitly requested my input, so here it is:

You are of course welcome to view it however you please and make whatever decisions you feel suit you, but from a factual point of view the Social Security tax is definitely a tax, and there definitely is not an account of dollars anywhere with your name on it. What you are describing here is choosing to believe something that is not true while also focusing on a sunk cost. These are not exactly the underpinnings of good financial planning decisions.
Last edited by ObliviousInvestor on Thu May 13, 2021 7:40 am, edited 1 time in total.
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retiringwhen
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Re: The Biggest Mistakes People Make With Social Security

Post by retiringwhen »

smitcat wrote: Thu May 13, 2021 7:25 am I find it always good to be conservative with retirement planning but to take that into account with all of the plan and not 'sandbag' juts one aspect of the most likely scenario.

When you model future plans and take into account performance , AA , taxes etc the act of eliminating spousal benefits could easily move you away from the most optimized plan.

We model our entire plan across the most likely future scenarios and handicap the results as a whole for the sake of being conservative.
No sandbagging involved, I make realistic (but pessimistic) assumptions about longevity and I take current law in account. Your plan must address both issues to be realistic. How are you planning for when the first will die? What is your assumption about benefits after 2034?

The tax question is an interesting one and I have modelled with and without spousal benefits. Regardless, our real tax challenges arrive after the first spouse dies. If anything, my thumb is on the side of assuming I need to reduce RMDs even more after the first passes, making the years before age 70 more important for balancing our accounts between tax-deferred, Roth and taxable.
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Re: The Biggest Mistakes People Make With Social Security

Post by smitcat »

retiringwhen wrote: Thu May 13, 2021 7:37 am
smitcat wrote: Thu May 13, 2021 7:25 am I find it always good to be conservative with retirement planning but to take that into account with all of the plan and not 'sandbag' juts one aspect of the most likely scenario.

When you model future plans and take into account performance , AA , taxes etc the act of eliminating spousal benefits could easily move you away from the most optimized plan.

We model our entire plan across the most likely future scenarios and handicap the results as a whole for the sake of being conservative.
No sandbagging involved, I make realistic (but pessimistic) assumptions about longevity and I take current law in account. Your plan must address both issues to be realistic. How are you planning for when the first will die? What is your assumption about benefits after 2034?

The tax question is an interesting one and I have modelled with and without spousal benefits. Regardless, our real tax challenges arrive after the first spouse dies. If anything, my thumb is on the side of assuming I need to reduce RMDs even more after the first passes, making the years before age 70 more important for balancing our accounts between tax-deferred, Roth and taxable.
"How are you planning for when the first will die? What is your assumption about benefits after 2034?"
We do model various potential outcomes - we do not center planning around the 'pessimistic' possibilities.
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Re: The Biggest Mistakes People Make With Social Security

Post by smitcat »

ObliviousInvestor wrote: Thu May 13, 2021 7:34 am
Morgan Dollar 1921 wrote: Wed May 12, 2021 7:30 pm
ObliviousInvestor wrote: Wed May 12, 2021 7:13 pm
Morgan Dollar 1921 wrote: Wed May 12, 2021 7:08 pm I see Mike is answering questions.
When you pay Social Security tax the funds are contributed to the trust funds, from which distributions are made to pay for current beneficiaries.

https://www.ssa.gov/news/press/factshee ... eTrust.htm
What are the Trust Funds?

The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits.

Social Security taxes and other income are deposited in these accounts, and Social Security benefits are paid from them. The only purposes for which these trust funds can be used are to pay benefits and program administrative costs.

The Social Security trust funds hold money not needed in the current year to pay benefits and administrative costs and, by law, invest it in special Treasury bonds that are guaranteed by the U.S. Government. A market rate of interest is paid to the trust funds on the bonds they hold, and when those bonds reach maturity or are needed to pay benefits, the Treasury redeems them.
I know where they go, but choosing to call it a tax, is not in my point of view. I view my earnings record and the contributions as mine, if I survive to withdraw.
You explicitly requested my input, so here it is:

You are of course welcome to view it however you please and make whatever decisions you feel suit you, but from a factual point of view the Social Security tax is definitely a tax, and there definitely is not an account of dollars anywhere with your name on it. What you are describing here is choosing to believe something that is not true while also focusing on a sunk cost. These are not exactly the underpinnings of good financial planning decisions.
"but from a factual point of view the Social Security tax is definitely a tax, and there definitely is not an account of dollars anywhere with your name on it"
+ 1 .... of course it is a tax. It is neither identifiable, equitable, or left to heirs if you expire before collecting.
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Re: The Biggest Mistakes People Make With Social Security

Post by New Providence »

I'll take it at 62.

Analysis is of little value because the most relevant data point, life span, is unknown.
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