The Biggest Mistakes People Make With Social Security

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vineviz
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Re: The Biggest Mistakes People Make With Social Security

Post by vineviz »

sunny_socal wrote: Sun May 16, 2021 7:09 am
cbeck wrote: Sun May 16, 2021 5:32 am
JoeRetire wrote: Sun May 16, 2021 5:08 am
cbeck wrote: Sun May 16, 2021 1:11 am Makes sense. 56% of retirements of people over 50 in long-term, full-time work are involuntary.
The linked article actually says something different.

"56 percent of workers over the age of 50 in long-term, full-time positions lost their jobs involuntarily."

Losing a job isn't the same as retiring.

I was laid off twice over my career. In neither of those cases did I retire.
That's true. An AARP survey had this to say about earlier-than-planned retirements:

Image

https://www.retirery.com/retirement-fac ... index.html
Graph adds up to 186%, I guess I won't turn to AARP for any of my math questions
People can have more than one reason for doing something.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Johm221122
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

smitcat wrote: Thu May 13, 2021 1:53 pm
JS-Elcano wrote: Thu May 13, 2021 1:17 pm
JoeRetire wrote: Thu May 13, 2021 6:11 am
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.
You are correct with that none of this may come to pass. I was simply trying to imagine reasons for why people might claim early, arguing that there may be emotional reasons for it, such as anxiety caused by the uncertainty of SS's future benefits structure (1 bird in the hand is better than 2 in the bush), rather than looking at the probable developments rationally.
"I was simply trying to imagine reasons for why people might claim early,"
Searching for data will supply the answer for 'most' people.
Most people file as early as possible.
Most people have very little saved for retirement
Most people need the funds early on.
Most people need funds early, is not what I observe. Most people want the funds is more my experience and I actually see people count the days too they hit 62
YMMV
smitcat
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Re: The Biggest Mistakes People Make With Social Security

Post by smitcat »

Johm221122 wrote: Sun May 16, 2021 7:28 am
smitcat wrote: Thu May 13, 2021 1:53 pm
JS-Elcano wrote: Thu May 13, 2021 1:17 pm
JoeRetire wrote: Thu May 13, 2021 6:11 am
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.
You are correct with that none of this may come to pass. I was simply trying to imagine reasons for why people might claim early, arguing that there may be emotional reasons for it, such as anxiety caused by the uncertainty of SS's future benefits structure (1 bird in the hand is better than 2 in the bush), rather than looking at the probable developments rationally.
"I was simply trying to imagine reasons for why people might claim early,"
Searching for data will supply the answer for 'most' people.
Most people file as early as possible.
Most people have very little saved for retirement
Most people need the funds early on.
Most people need funds early, is not what I observe. Most people want the funds is more my experience and I actually see people count the days too they hit 62
YMMV
"Most people need funds early, is not what I observe."
Research the data and look for yourself.
Most folks leave the workforce around 62.
Most folks have very little saved at 62.
Once you see the data on the age distribution for SS collection and the amount saved at 62 its pretty clear.
Johm221122
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Re: The Biggest Mistakes People Make With Social Security

Post by Johm221122 »

smitcat wrote: Sun May 16, 2021 7:33 am
Johm221122 wrote: Sun May 16, 2021 7:28 am
smitcat wrote: Thu May 13, 2021 1:53 pm
JS-Elcano wrote: Thu May 13, 2021 1:17 pm
JoeRetire wrote: Thu May 13, 2021 6:11 am
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.
You are correct with that none of this may come to pass. I was simply trying to imagine reasons for why people might claim early, arguing that there may be emotional reasons for it, such as anxiety caused by the uncertainty of SS's future benefits structure (1 bird in the hand is better than 2 in the bush), rather than looking at the probable developments rationally.
"I was simply trying to imagine reasons for why people might claim early,"
Searching for data will supply the answer for 'most' people.
Most people file as early as possible.
Most people have very little saved for retirement
Most people need the funds early on.
Most people need funds early, is not what I observe. Most people want the funds is more my experience and I actually see people count the days too they hit 62
YMMV
"Most people need funds early, is not what I observe."
Research the data and for yourself.
Most folks leave the workforce around 62.
Most folks have very little saved at 62.
Once you see the data on the age distribution for SS collection and the amount saved at 62 its pretty clear.
Most folks leave the workforce at 62, recent trend
The labor force participation rate—the percentage of the population that is either employed or unemployed (that is, either working or actively seeking work)—has been declining in recent years, from a peak of 67.3 percent in early 2000 to an average of 62.8 percent in 2016
https://www.bls.gov/opub/mlr/2017/artic ... trends.htm

Most people have little saved doesn't mean they just can't keep working in most cases. Hitting 62 doesn't just instantly change your health

When people claim SS doesn't make it a need for it. In many cases it's a want
smitcat
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Re: The Biggest Mistakes People Make With Social Security

Post by smitcat »

Johm221122 wrote: Sun May 16, 2021 7:42 am
smitcat wrote: Sun May 16, 2021 7:33 am
Johm221122 wrote: Sun May 16, 2021 7:28 am
smitcat wrote: Thu May 13, 2021 1:53 pm
JS-Elcano wrote: Thu May 13, 2021 1:17 pm

You are correct with that none of this may come to pass. I was simply trying to imagine reasons for why people might claim early, arguing that there may be emotional reasons for it, such as anxiety caused by the uncertainty of SS's future benefits structure (1 bird in the hand is better than 2 in the bush), rather than looking at the probable developments rationally.
"I was simply trying to imagine reasons for why people might claim early,"
Searching for data will supply the answer for 'most' people.
Most people file as early as possible.
Most people have very little saved for retirement
Most people need the funds early on.
Most people need funds early, is not what I observe. Most people want the funds is more my experience and I actually see people count the days too they hit 62
YMMV
"Most people need funds early, is not what I observe."
Research the data and for yourself.
Most folks leave the workforce around 62.
Most folks have very little saved at 62.
Once you see the data on the age distribution for SS collection and the amount saved at 62 its pretty clear.
Most folks leave the workforce at 62, recent trend
The labor force participation rate—the percentage of the population that is either employed or unemployed (that is, either working or actively seeking work)—has been declining in recent years, from a peak of 67.3 percent in early 2000 to an average of 62.8 percent in 2016
https://www.bls.gov/opub/mlr/2017/artic ... trends.htm

Most people have little saved doesn't mean they just can't keep working in most cases. Hitting 62 doesn't just instantly change your health

When people claim SS doesn't make it a need for it. In many cases it's a want
"Most people have little saved doesn't mean they just can't keep working in most cases. Hitting 62 doesn't just instantly change your health"
Agreed - many folks have left the workforce by 62 and have littel saved.
As a result they need to take SS benefits as early as possible to cover expenses as they have no significant other funds.
michaeljc70
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Re: The Biggest Mistakes People Make With Social Security

Post by michaeljc70 »

Stoic9 wrote: Wed May 12, 2021 1:13 pm 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.
Those will also be the big reasons for me also. 1) Spouse is 7 years younger than me and made less. 2) Hoping that will be the case. 3) Plan to do Roth conversations age 65-69 after ACA eligibility is irrelevant (or before then in years it is irrelevant).
Ivygirl
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Re: The Biggest Mistakes People Make With Social Security

Post by Ivygirl »

New Providence wrote: Thu May 13, 2021 7:46 am I'll take it at 62.

Analysis is of little value because the most relevant data point, life span, is unknown.
Do you mind if I borrow your quote, New Providence, to segue into an idea of my own I haven't seen discussed yet?

It's good to ask the right question, which is, what is one's own most relevant data point?

I've aspired through my life to pay my own way plus 10% more, to avoid dependency upon others, and to be a burden on no one. As a single person, I am waiting until 70 to claim so that my old age will be better provided for. If I live to be so old I have spent all my own resources and gone on Medicaid (the kindness of strangers), the nursing home will get a bigger benefit when my Social Security is assigned to them. And who else should get a bigger benefit, but the institution which is taking care of me? I know the cost of my care is likely to exceed whatever they will get.

I don't understand the obsession with "I'm taking it now so the nursing home/the gov'ment won't get it," which I hear a lot from people who claimed or intend to claim at 62. Like it is important to them to deny paying for their own care, and they have "won" by getting something for nothing? In the end somebody has to pay, and for my own care, I believe that someone should be me.

So given my most relevant data point, math is of very little use. My decision on when to take Social Security is determined by how I believe my life should be lived. So analysis is of little value. The right choice is the largest annuity at the oldest age.
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Artsdoctor
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Re: The Biggest Mistakes People Make With Social Security

Post by Artsdoctor »

JoeRetire wrote: Fri May 14, 2021 7:33 pm
Artsdoctor wrote: Fri May 14, 2021 5:31 pm Like many of my fellow Bogleheads, I thought that both I and my spouse would begin social security benefits at 70. That plan was actually part of my IPS years ago.

However, there were some data out there that slowly changed my mind. Individual life expectancies and couple life expectancies are two very different things. There are some terrific articles out there but a quick Google search brings up one (of many) which is pretty clear is looking at some numbers that influenced my decision, and that may help others understand some claiming strategies.
So, if not both claiming at 70, what was your actual decision? What numbers influenced your decision? Did you check that decision using https://opensocialsecurity.com/ ?
If you're both considerably claiming at 70, just play out the numbers. It's very unlikely that you'll live to be the same age and die together.
Right, but in many cases it doesn't matter that you don't die together.

For example, using https://opensocialsecurity.com/ you can see that if you both have about the same PIA, and are both about the same age, you could die 10 years apart (say 88 and 98), and still having both claim at age 70 would give you the highest lifetime benefits.

You can just use this link, then click Submit to see the results for yourself:
https://opensocialsecurity.com/?additio ... dren=false
It was gradual process of crunching numbers but in the end, I found that Mike Piper's book (superb) and software program to be the most valuable. I also just started looking around at family members and patients, so to do a reality check. Although you can definitely find couples who age together and both die in their 90's within months apart, that's not really the most common scenario.

A lot of it is decided on whether or not you're still working. If you're working in your early 60's, it's a moot point since you won't be getting your social security when you have income of any significance. For us, I did warm up to the concept of one person filing at 70 (higher PIA) while the other would file when stopping working even if before FRA.
cbeck
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Re: The Biggest Mistakes People Make With Social Security

Post by cbeck »

sunny_socal wrote: Sun May 16, 2021 7:09 am
cbeck wrote: Sun May 16, 2021 5:32 am
JoeRetire wrote: Sun May 16, 2021 5:08 am
cbeck wrote: Sun May 16, 2021 1:11 am Makes sense. 56% of retirements of people over 50 in long-term, full-time work are involuntary.
The linked article actually says something different.

"56 percent of workers over the age of 50 in long-term, full-time positions lost their jobs involuntarily."

Losing a job isn't the same as retiring.

I was laid off twice over my career. In neither of those cases did I retire.
That's true. An AARP survey had this to say about earlier-than-planned retirements:


https://www.retirery.com/retirement-fac ... index.html
Graph adds up to 186%, I guess I won't turn to AARP for any of my math questions
You're unfamiliar with the concept of overlapping categories?
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JoeRetire
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

dknightd wrote: Sun May 16, 2021 7:05 amAs near as I can figure we will never get out of SS what we put into it. So our ROI will likely be negative. I'm OK with that. It was designed that way.
You may or may not "get out of SS" what you "put into it". That would depend on what you paid in, how long you live, if you count spousal/survivor benefits, if other family members collect on your benefits, etc, etc.

But since it's not an investment account, there's no ROI with Social Security. Just like there's no ROI for Homeowner's Insurance, etc.

What you put into it was used to support folks who collected benefits at that time. Perhaps your grandparents and parents.
Just remember: it's not a lie if you believe it.
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telemark
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Re: The Biggest Mistakes People Make With Social Security

Post by telemark »

This is a situational question. Not everyone needs longevity insurance; if you have enough saved that you will never need the money, it makes financial sense to start collecting and investing it as soon as possible, presumably in order to leave a larger estate. At the other extreme, if you need the money right away, then you need it right away. If you are somewhere in between, then the annuity aspect assumes more importance.
michaeljc70
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Re: The Biggest Mistakes People Make With Social Security

Post by michaeljc70 »

telemark wrote: Sun May 16, 2021 9:07 pm This is a situational question. Not everyone needs longevity insurance; if you have enough saved that you will never need the money, it makes financial sense to start collecting and investing it as soon as possible, presumably in order to leave a larger estate. At the other extreme, if you need the money right away, then you need it right away. If you are somewhere in between, then the annuity aspect assumes more importance.
But....if you have saved enough....taxes becomes an issue. Unless all your savings are in retirement accounts. Even then, taking SS early keeps you from doing Roth conversions at a (possibly) lower rate. Ignoring spousal considerations...and if you are really rich (top tax bracket no matter what)....and you don't' need the money ASAP.....it probably makes sense to wait due to tax considerations IMO. I'd collect at 62...if taxes weren't a factor.
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telemark
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Re: The Biggest Mistakes People Make With Social Security

Post by telemark »

michaeljc70 wrote: Sun May 16, 2021 10:25 pm
telemark wrote: Sun May 16, 2021 9:07 pm This is a situational question. Not everyone needs longevity insurance; if you have enough saved that you will never need the money, it makes financial sense to start collecting and investing it as soon as possible, presumably in order to leave a larger estate. At the other extreme, if you need the money right away, then you need it right away. If you are somewhere in between, then the annuity aspect assumes more importance.
But....if you have saved enough....taxes becomes an issue. Unless all your savings are in retirement accounts. Even then, taking SS early keeps you from doing Roth conversions at a (possibly) lower rate. Ignoring spousal considerations...and if you are really rich (top tax bracket no matter what)....and you don't' need the money ASAP.....it probably makes sense to wait due to tax considerations IMO. I'd collect at 62...if taxes weren't a factor.
Good point. Taxes complicate everything :(
cbeck
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Re: The Biggest Mistakes People Make With Social Security

Post by cbeck »

telemark wrote: Sun May 16, 2021 9:07 pm This is a situational question. Not everyone needs longevity insurance; if you have enough saved that you will never need the money, it makes financial sense to start collecting and investing it as soon as possible, presumably in order to leave a larger estate. At the other extreme, if you need the money right away, then you need it right away. If you are somewhere in between, then the annuity aspect assumes more importance.
Or you can protect your legacy against having to eat it up in very old age by increasing your SS lifetime annuity. Very foolish to decide ahead of time that only one scenario is possible.
CloseEnough
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Re: The Biggest Mistakes People Make With Social Security

Post by CloseEnough »

I am wondering whether this calculator https://opensocialsecurity.com/ considers in its algorithm the solvency risk in Social Security? It would seem that in considering when to take SS some people factor into their analysis whether benefits will be reduced or available at all. While it cannot be known whether benefits will change I would think it needs to be factored into analysis calculators.
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JoeRetire
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

CloseEnough wrote: Tue May 18, 2021 6:34 am I am wondering whether this calculator https://opensocialsecurity.com/ considers in its algorithm the solvency risk in Social Security? It would seem that in considering when to take SS some people factor into their analysis whether benefits will be reduced or available at all. While it cannot be known whether benefits will change I would think it needs to be factored into analysis calculators.
Yes. The tool has the ability to use a reduced benefit, along with the date the reduction starts.

It's the "Possible Future Cut in Social Security benefits" checkbox.
Just remember: it's not a lie if you believe it.
CloseEnough
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Re: The Biggest Mistakes People Make With Social Security

Post by CloseEnough »

Thanks. Guess that means people have to make their own decision about what discount to apply, if any, as opposed to having one applied by the calculator. Interesting. Just one more assumption to enter in evaluation of when to take benefits, but more fun than guessing date of death.
michaeljc70
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Re: The Biggest Mistakes People Make With Social Security

Post by michaeljc70 »

CloseEnough wrote: Tue May 18, 2021 6:34 am I am wondering whether this calculator https://opensocialsecurity.com/ considers in its algorithm the solvency risk in Social Security? It would seem that in considering when to take SS some people factor into their analysis whether benefits will be reduced or available at all. While it cannot be known whether benefits will change I would think it needs to be factored into analysis calculators.
I'm not sure how a calculator can be updated for the unknown. We don't know if the current projections will be entirely accurate. We can't speculate on legislation, but the history of the US government cutting entitlements is very small.
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David Jay
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Re: The Biggest Mistakes People Make With Social Security

Post by David Jay »

michaeljc70 wrote: Tue May 18, 2021 6:41 amWe can't speculate on legislation, but the history of the US government cutting entitlements is very small.
Not to mention that those on SS are a large and reliable (i.e. they show up at the polls) voting bloc.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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JoeRetire
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Re: The Biggest Mistakes People Make With Social Security

Post by JoeRetire »

CloseEnough wrote: Tue May 18, 2021 6:40 am Thanks. Guess that means people have to make their own decision about what discount to apply, if any, as opposed to having one applied by the calculator. Interesting. Just one more assumption to enter in evaluation of when to take benefits, but more fun than guessing date of death.
You don't have to decide.
If you choose to go the "haircut" route, the default is 2034 and 23%. You could always use that.
Just remember: it's not a lie if you believe it.
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