Social Security Updates...

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
haban01
Posts: 654
Joined: Thu Mar 01, 2007 9:55 pm
Location: Wisconsin

Social Security Updates...

Post by haban01 » Wed Jan 31, 2018 8:28 pm

I had a friend of mine asking about delaying benefits from the earliest date 62 to say 67 FRA. They asked if they update the benefit amount each month after 62. I did a search and came up empty handed so I turned to our group. :mrgreen:
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

User avatar
Epsilon Delta
Posts: 7432
Joined: Thu Apr 28, 2011 7:00 pm

Re: Social Security Updates...

Post by Epsilon Delta » Wed Jan 31, 2018 8:33 pm

Not sure what you mean.

Any reduction in benefit caused by claiming before FRA is calculate by the month. If you start at 62 and 2 months of age you will get a bit more than if you start at 62 and 1 month.

If you are talking about a web site that makes estimates, I don't know.

haban01
Posts: 654
Joined: Thu Mar 01, 2007 9:55 pm
Location: Wisconsin

Re: Social Security Updates...

Post by haban01 » Wed Jan 31, 2018 8:49 pm

Yes it was regarding their website and couldn't find any answer.
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

bayview
Posts: 1565
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: Social Security Updates...

Post by bayview » Wed Jan 31, 2018 9:06 pm

haban01 wrote:
Wed Jan 31, 2018 8:49 pm
Yes it was regarding their website and couldn't find any answer.
It’s not that they literally increase the benefit; it’s that they reduce the penalty for drawing before FRA (full retirement age.)

edit to add: if your friend meant: do they change the projected amount each month on the SS website, even if you are considering drawing early, then in my experience, yes they do. For each month closer that you get to FRA, you will see the projected benefit creep upward.

But it’s a lot easier to run the numbers yourself, IMO.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

sport
Posts: 7488
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Social Security Updates...

Post by sport » Wed Jan 31, 2018 10:10 pm

The friend should consider waiting even beyond FRA. The maximum benefit is achieved by waiting until age 70.

Beehave
Posts: 368
Joined: Mon Jun 19, 2017 12:46 pm

Re: Social Security Updates...

Post by Beehave » Wed Jan 31, 2018 10:56 pm

The question is a good one and not many people seem to understand fully the implications of the answer. The benefit increases each month you delay taking it. Here's what the Social Sec. website says, and below that are some important implications about the choice to delay or not that I've not seen discussed anywhere.

"Jun 18, 2015 - If, however, an individual waits until after reaching his or her FRA to claim benefits, the monthly benefit increases with delayed retirement credits ( DRC s). DRC s can be earned each month up to age 70 and can increase benefits by about 0.667 percent a month, or 8 percent a year."

Let's look at a sample to dig more deeply into what this actually means regarding delay. Suppose at FRA (full retirement age) your benefit will be $2548 a month. Each month you delay, the benefit increments by .667 percent, or $17.00 So, if you delay to FRA plus one month, your benefit will be $2548 + 17 = $2565. Delay two months, the benefit is $2565 + 17 = $2582.

Note, there is no compounding. The 0.667% is fixed throughout the 48 months you can delay (although COLA adjustments do compound and do factor in. But let's simply note that the COLA compounding is reasonable to view as a plus factor for delaying taking the benefit, as is the lower or non-taxability of Social Security income, and then ignore these two factors for the rest of this discussion).

If you wait the full 48 months beyond FRA of 66 years of age, your benefit increases by 8% times 4 = 32% = .32 * 2548 = $816 = 48 months * $17 per month - - so benefit at FRA plus 4 years = $2548 + $816 = $3364.

Now, look at month 47. If you took Soc'l Sec 47 months after FRA, and did not delay until the full 48 months, you would get $17 less per month for life than if you had waited that month. So you would start getting paid one month sooner than had you waited the full 48 months and you would receive $3364 - 17 = $3347 a month for life. Now, suppose instead you wait that extra month to completely max your Soc Sec benefit. You are giving up $3347 to get a $17 per month benefit for life. NOW, compare that to what it cost you at FRA (66 years) to get $17 more for life by waiting until FRA plus one month. At age 66 that wait of one month to get $17 more for life was only $2548. The longer you delay, the more the added benefit costs in raw dollars (not to mention that you are older at you approach FRA + 4 years than you are at FRA). Simply put, cost of one month delay at age 66 to get $17 more per month for life = $2548. Cost of one month delay at age 69 years 11 months to get $17 more per month = $3347, which is $799 more.

SO... is waiting a bad deal? Not necessarily. If you can afford to wait I'd say that in general, it is a good idea (with all the well-known caveats that argue against this). Rather than showing that it is dumb to wait for FRA + 4 to collect, what I think this all says is that at a minimum, it makes sense for many to delay at least a little bit before collecting if they possibly can, because the monthly increases at the beginning of the delay are a screaming bargain relative to the benefits of delaying long after FRA.

Hope this is a helpful addition to people's considerations and to be sure, each individual's situation is different and there is reason for some to collect ASAP, some to delay as long as possible, and everything in-between.

jcar
Posts: 167
Joined: Fri Jul 03, 2015 9:41 pm
Location: NC

Re: Social Security Updates...

Post by jcar » Wed Jan 31, 2018 11:00 pm

I got a SS estimate printed at SS office last month. It shows each month for me from 65 to 70.

vested1
Posts: 1610
Joined: Wed Jan 04, 2012 4:20 pm

Re: Social Security Updates...

Post by vested1 » Thu Feb 01, 2018 9:26 am

haban01 wrote:
Wed Jan 31, 2018 8:28 pm
I had a friend of mine asking about delaying benefits from the earliest date 62 to say 67 FRA. They asked if they update the benefit amount each month after 62. I did a search and came up empty handed so I turned to our group. :mrgreen:
The SSA has the best updated information on their website. On this page a dollar amount of $1,000 PIA (benefit amount at FRA) is reduced by a dollar amount based on progressive monthly increments. This link is valuable for variously aged retirees.

https://www.ssa.gov/planners/retire/agereduction.html

This page is found when clicking on the year of birth in the far left column, in this case "1960 and later", which sends you to a more detailed breakdown based on percentages, rather than dollar amounts.

https://www.ssa.gov/planners/retire/1960.html

vested1
Posts: 1610
Joined: Wed Jan 04, 2012 4:20 pm

Re: Social Security Updates...

Post by vested1 » Thu Feb 01, 2018 9:35 am

Your friend should also be aware that delaying beyond FRA is "rewarded" with an 8% per year increase, but that the increases accrue monthly as well, at 2/3 of 1%. Unlike the increases before FRA, the monthly increases after FRA are static and equal, percentage wise.

https://www.ssa.gov/planners/retire/delayret.html

User avatar
#Cruncher
Posts: 2692
Joined: Fri May 14, 2010 2:33 am
Location: New York City
Contact:

Re: Social Security Updates...

Post by #Cruncher » Thu Feb 01, 2018 12:41 pm

Epsilon Delta wrote:
Wed Jan 31, 2018 8:33 pm
Any reduction in benefit caused by claiming before FRA is calculate[d] by the month.
As shown in footnote c on this SSA webpage the reduction is 5/9% for each month up to 36 and 5/12% for each additional month.

Code: Select all

Months      ------ Reduction ------

Code: Select all

     1         5/9 %     (  0.56% )
     2      1  1/9 %     (  1.11% )
     3      1  2/3 %     (  1.67% )
     4      2  2/9 %     (  2.22% )
     5      2  7/9 %     (  2.78% )
     6      3  1/3 %     (  3.33% )
     7      3  8/9 %     (  3.89% )
     8      4  4/9 %     (  4.44% )
     9      5      %     (  5.00% )
    10      5  5/9 %     (  5.56% )
    11      6  1/9 %     (  6.11% )
    12      6  2/3 %     (  6.67% )
    
    13      7  2/9 %     (  7.22% )
    14      7  7/9 %     (  7.78% )
    15      8  1/3 %     (  8.33% )
    16      8  8/9 %     (  8.89% )
    17      9  4/9 %     (  9.44% )
    18     10      %     ( 10.00% )
    19     10  5/9 %     ( 10.56% )
    20     11  1/9 %     ( 11.11% )
    21     11  2/3 %     ( 11.67% )
    22     12  2/9 %     ( 12.22% )
    23     12  7/9 %     ( 12.78% )
    24     13  1/3 %     ( 13.33% )
    
    25     13  8/9 %     ( 13.89% )
    26     14  4/9 %     ( 14.44% )
    27     15      %     ( 15.00% )
    28     15  5/9 %     ( 15.56% )
    29     16  1/9 %     ( 16.11% )
    30     16  2/3 %     ( 16.67% )
    31     17  2/9 %     ( 17.22% )
    32     17  7/9 %     ( 17.78% )
    33     18  1/3 %     ( 18.33% )
    34     18  8/9 %     ( 18.89% )
    35     19  4/9 %     ( 19.44% )
    36     20      %     ( 20.00% )
    
    37     20  5/12%     ( 20.42% )
    38     20  5/6 %     ( 20.83% )
    39     21  1/4 %     ( 21.25% )
    40     21  2/3 %     ( 21.67% )
    41     22  1/12%     ( 22.08% )
    42     22  1/2 %     ( 22.50% )
    43     22 11/12%     ( 22.92% )
    44     23  1/3 %     ( 23.33% )
    45     23  3/4 %     ( 23.75% )
    46     24  1/6 %     ( 24.17% )
    47     24  7/12%     ( 24.58% )
    48     25      %     ( 25.00% )
    
    49     25  5/12%     ( 25.42% )
    50     25  5/6 %     ( 25.83% )
    51     26  1/4 %     ( 26.25% )
    52     26  2/3 %     ( 26.67% )
    53     27  1/12%     ( 27.08% )
    54     27  1/2 %     ( 27.50% )
    55     27 11/12%     ( 27.92% )
    56     28  1/3 %     ( 28.33% )
    57     28  3/4 %     ( 28.75% )
    58     29  1/6 %     ( 29.17% )
    59     29  7/12%     ( 29.58% )
    60     30      %     ( 30.00% )
Beehave wrote:
Wed Jan 31, 2018 10:56 pm
... suppose ... you wait that extra month to completely max your Soc Sec benefit [at age 70]. You are giving up $3347 to get a $17 per month benefit for life. NOW, compare that to what it cost you at FRA (66 years) to get $17 more for life by waiting until FRA plus one month. At age 66 that wait of one month to get $17 more for life was only $2548.
Indeed. The benefit of delaying one more month declines every month after full retirement age (FRA). The following table illustrates this. It shows how long one must live to recoup the forsaken month's benefit. This is shown in two ways: ignoring the time value of money (0% discount rate) and assuming money can be invested at a 2% real return.

Code: Select all

                   Breakeven Years
Months             @ Discount Rate
After              ---------------
 FRA   Benefit       0%       2%

Code: Select all

   0    1.0000
   1    1.0067     12.500   14.396
   2    1.0133     12.583   14.507
   3    1.0200     12.667   14.619
   4    1.0267     12.750   14.731
   5    1.0333     12.833   14.843
   6    1.0400     12.917   14.955
   7    1.0467     13.000   15.068
   8    1.0533     13.083   15.181
   9    1.0600     13.167   15.294
  10    1.0667     13.250   15.407
  11    1.0733     13.333   15.521
  12    1.0800     13.417   15.635
  
  13    1.0867     13.500   15.749
  14    1.0933     13.583   15.863
  15    1.1000     13.667   15.978
  16    1.1067     13.750   16.093
  17    1.1133     13.833   16.208
  18    1.1200     13.917   16.323
  19    1.1267     14.000   16.439
  20    1.1333     14.083   16.555
  21    1.1400     14.167   16.671
  22    1.1467     14.250   16.788
  23    1.1533     14.333   16.904
  24    1.1600     14.417   17.021
  
  25    1.1667     14.500   17.139
  26    1.1733     14.583   17.256
  27    1.1800     14.667   17.374
  28    1.1867     14.750   17.492
  29    1.1933     14.833   17.611
  30    1.2000     14.917   17.730
  31    1.2067     15.000   17.849
  32    1.2133     15.083   17.968
  33    1.2200     15.167   18.087
  34    1.2267     15.250   18.207
  35    1.2333     15.333   18.327
  36    1.2400     15.417   18.448
  
  37    1.2467     15.500   18.569
  38    1.2533     15.583   18.690
  39    1.2600     15.667   18.811
  40    1.2667     15.750   18.933
  41    1.2733     15.833   19.054
  42    1.2800     15.917   19.177
  43    1.2867     16.000   19.299
  44    1.2933     16.083   19.422
  45    1.3000     16.167   19.545
  46    1.3067     16.250   19.669
  47    1.3133     16.333   19.792
  48    1.3200     16.417   19.916 [1]
Delaying one month beyond FRA will produce the same cash benefits if one lives just 12.5 more years. But delaying from 47 to 48 months [2] beyond FRA requires living 16.417 more years to collect the same total benefits. If the one month's forsaken benefit can be invested at a 2% annual real return, one must live 14.396 more years to breakeven when delaying one month past FRA. But one must live 19.916 more years to breakeven when delaying from month 47 to 48.
  1. Confirm breakeven calculation when delay from month 47 to 48 -- using Excel PV function:

    Code: Select all

    ignore time value of money
       260.0 = (12 * 16.417 + 1) * 1.3133
       260.0 = (12 * 16.417)     * 1.3200
    
    present value of benefits discounted at 2%
       259.6 = -PV(2% / 12, 12 * 19.916 + 1, 1.3133, 0, 0)
       259.6 = -PV(2% / 12, 12 * 19.916,     1.3200, 0, 0) / (1 + 2% / 12)
  2. One can't delay beyond age 70. So if one's FRA is 66, this would be 48 months. But if one's FRA is 67, the maximum delay is 36 months. See the two left columns of the table on this SSA webpage to determine one's FRA (aka NRA).

haban01
Posts: 654
Joined: Thu Mar 01, 2007 9:55 pm
Location: Wisconsin

Re: Social Security Updates...

Post by haban01 » Thu Feb 01, 2018 9:41 pm

Excellent feedback from all :). I will pass it along!
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

gilgamesh
Posts: 1173
Joined: Sun Jan 10, 2016 9:29 am

Re: Social Security Updates...

Post by gilgamesh » Fri Feb 02, 2018 8:33 am

#Cruncher wrote:
Thu Feb 01, 2018 12:41 pm
Epsilon Delta wrote:
Wed Jan 31, 2018 8:33 pm
Any reduction in benefit caused by claiming before FRA is calculate[d] by the month.
As shown in footnote c on this SSA webpage the reduction is 5/9% for each month up to 36 and 5/12% for each additional month.

Code: Select all

Months      ------ Reduction ------

Code: Select all

     1         5/9 %     (  0.56% )
     2      1  1/9 %     (  1.11% )
     3      1  2/3 %     (  1.67% )
     4      2  2/9 %     (  2.22% )
     5      2  7/9 %     (  2.78% )
     6      3  1/3 %     (  3.33% )
     7      3  8/9 %     (  3.89% )
     8      4  4/9 %     (  4.44% )
     9      5      %     (  5.00% )
    10      5  5/9 %     (  5.56% )
    11      6  1/9 %     (  6.11% )
    12      6  2/3 %     (  6.67% )
    
    13      7  2/9 %     (  7.22% )
    14      7  7/9 %     (  7.78% )
    15      8  1/3 %     (  8.33% )
    16      8  8/9 %     (  8.89% )
    17      9  4/9 %     (  9.44% )
    18     10      %     ( 10.00% )
    19     10  5/9 %     ( 10.56% )
    20     11  1/9 %     ( 11.11% )
    21     11  2/3 %     ( 11.67% )
    22     12  2/9 %     ( 12.22% )
    23     12  7/9 %     ( 12.78% )
    24     13  1/3 %     ( 13.33% )
    
    25     13  8/9 %     ( 13.89% )
    26     14  4/9 %     ( 14.44% )
    27     15      %     ( 15.00% )
    28     15  5/9 %     ( 15.56% )
    29     16  1/9 %     ( 16.11% )
    30     16  2/3 %     ( 16.67% )
    31     17  2/9 %     ( 17.22% )
    32     17  7/9 %     ( 17.78% )
    33     18  1/3 %     ( 18.33% )
    34     18  8/9 %     ( 18.89% )
    35     19  4/9 %     ( 19.44% )
    36     20      %     ( 20.00% )
    
    37     20  5/12%     ( 20.42% )
    38     20  5/6 %     ( 20.83% )
    39     21  1/4 %     ( 21.25% )
    40     21  2/3 %     ( 21.67% )
    41     22  1/12%     ( 22.08% )
    42     22  1/2 %     ( 22.50% )
    43     22 11/12%     ( 22.92% )
    44     23  1/3 %     ( 23.33% )
    45     23  3/4 %     ( 23.75% )
    46     24  1/6 %     ( 24.17% )
    47     24  7/12%     ( 24.58% )
    48     25      %     ( 25.00% )
    
    49     25  5/12%     ( 25.42% )
    50     25  5/6 %     ( 25.83% )
    51     26  1/4 %     ( 26.25% )
    52     26  2/3 %     ( 26.67% )
    53     27  1/12%     ( 27.08% )
    54     27  1/2 %     ( 27.50% )
    55     27 11/12%     ( 27.92% )
    56     28  1/3 %     ( 28.33% )
    57     28  3/4 %     ( 28.75% )
    58     29  1/6 %     ( 29.17% )
    59     29  7/12%     ( 29.58% )
    60     30      %     ( 30.00% )
Beehave wrote:
Wed Jan 31, 2018 10:56 pm
... suppose ... you wait that extra month to completely max your Soc Sec benefit [at age 70]. You are giving up $3347 to get a $17 per month benefit for life. NOW, compare that to what it cost you at FRA (66 years) to get $17 more for life by waiting until FRA plus one month. At age 66 that wait of one month to get $17 more for life was only $2548.
Indeed. The benefit of delaying one more month declines every month after full retirement age (FRA). The following table illustrates this. It shows how long one must live to recoup the forsaken month's benefit. This is shown in two ways: ignoring the time value of money (0% discount rate) and assuming money can be invested at a 2% real return.

Code: Select all

                   Breakeven Years
Months             @ Discount Rate
After              ---------------
 FRA   Benefit       0%       2%

Code: Select all

   0    1.0000
   1    1.0067     12.500   14.396
   2    1.0133     12.583   14.507
   3    1.0200     12.667   14.619
   4    1.0267     12.750   14.731
   5    1.0333     12.833   14.843
   6    1.0400     12.917   14.955
   7    1.0467     13.000   15.068
   8    1.0533     13.083   15.181
   9    1.0600     13.167   15.294
  10    1.0667     13.250   15.407
  11    1.0733     13.333   15.521
  12    1.0800     13.417   15.635
  
  13    1.0867     13.500   15.749
  14    1.0933     13.583   15.863
  15    1.1000     13.667   15.978
  16    1.1067     13.750   16.093
  17    1.1133     13.833   16.208
  18    1.1200     13.917   16.323
  19    1.1267     14.000   16.439
  20    1.1333     14.083   16.555
  21    1.1400     14.167   16.671
  22    1.1467     14.250   16.788
  23    1.1533     14.333   16.904
  24    1.1600     14.417   17.021
  
  25    1.1667     14.500   17.139
  26    1.1733     14.583   17.256
  27    1.1800     14.667   17.374
  28    1.1867     14.750   17.492
  29    1.1933     14.833   17.611
  30    1.2000     14.917   17.730
  31    1.2067     15.000   17.849
  32    1.2133     15.083   17.968
  33    1.2200     15.167   18.087
  34    1.2267     15.250   18.207
  35    1.2333     15.333   18.327
  36    1.2400     15.417   18.448
  
  37    1.2467     15.500   18.569
  38    1.2533     15.583   18.690
  39    1.2600     15.667   18.811
  40    1.2667     15.750   18.933
  41    1.2733     15.833   19.054
  42    1.2800     15.917   19.177
  43    1.2867     16.000   19.299
  44    1.2933     16.083   19.422
  45    1.3000     16.167   19.545
  46    1.3067     16.250   19.669
  47    1.3133     16.333   19.792
  48    1.3200     16.417   19.916 [1]
Delaying one month beyond FRA will produce the same cash benefits if one lives just 12.5 more years. But delaying from 47 to 48 months [2] beyond FRA requires living 16.417 more years to collect the same total benefits. If the one month's forsaken benefit can be invested at a 2% annual real return, one must live 14.396 more years to breakeven when delaying one month past FRA. But one must live 19.916 more years to breakeven when delaying from month 47 to 48.
  1. Confirm breakeven calculation when delay from month 47 to 48 -- using Excel PV function:

    Code: Select all

    ignore time value of money
       260.0 = (12 * 16.417 + 1) * 1.3133
       260.0 = (12 * 16.417)     * 1.3200
    
    present value of benefits discounted at 2%
       259.6 = -PV(2% / 12, 12 * 19.916 + 1, 1.3133, 0, 0)
       259.6 = -PV(2% / 12, 12 * 19.916,     1.3200, 0, 0) / (1 + 2% / 12)
  2. One can't delay beyond age 70. So if one's FRA is 66, this would be 48 months. But if one's FRA is 67, the maximum delay is 36 months. See the two left columns of the table on this SSA webpage to determine one's FRA (aka NRA).
Thank you and beehave too.

Does your response to behave's post (and what he said) take into account the fact SS payments keep up with inflation...basically the inflation hedging it provides?

If it is indeed $17 (going by beehava's scenario above) more a month for life by forgoing previous month's SS payment, isn't your calculation assuming that $17 with no inflation hedging?

Your breakeven calculations are pretty much a benefit analysis of longevity hedging...I'm planning to delay SS, for both longevity and inflation hedging needs. Sort of like buying a COLA SPIA. What is the cost of $17 of COLA SPIA at each month delayed, is a more appropriate question for me? Or am I misunderstanding this.

Of course the price of COLA SPIA for $17 will go lower and lower and not higher and higher as above...but, I wonder whether an optimal point where delaying SS matching a COLA SPIA cost can be calculated? A breakeven point - Below which delaying SS is better and above which buying a COLA SPIA is better.

Thanks!

COLA based on CPI, and not just a percentage...Inflation adjusted SPIA is probably a better term. Thanks to smitcat I remembered the critical reason for me - higher spousal benefit....so now it's a COLA SPIA with survivorship benefit, but 2/3rd survivorship benefit at that - hot mess...but you may be upto it.
Last edited by gilgamesh on Fri Feb 02, 2018 2:32 pm, edited 3 times in total.

slalom
Posts: 47
Joined: Mon Dec 25, 2017 4:59 am

Re: Social Security Updates...

Post by slalom » Fri Feb 02, 2018 9:16 am

One thing these 14-16 year break even calculations never seem to consider is that not only does it take that long to get back the income you lost by not taking SS, it doesn’t include the 14-16 years you could’ve compounded investment gains of various types. Hundreds of thousands of dollars of investment capital was forfeited. I don’t understand delaying past FRA. What am I missing?

gilgamesh
Posts: 1173
Joined: Sun Jan 10, 2016 9:29 am

Re: Social Security Updates...

Post by gilgamesh » Fri Feb 02, 2018 9:41 am

slalom wrote:
Fri Feb 02, 2018 9:16 am
One thing these 14-16 year break even calculations never seem to consider is that not only does it take that long to get back the income you lost by not taking SS, it doesn’t include the 14-16 years you could’ve compounded investment gains of various types. Hundreds of thousands of dollars of investment capital was forfeited. I don’t understand delaying past FRA. What am I missing?
#cruncher had a 2% return...more than reasonable for guaranteed real return.

smitcat
Posts: 2076
Joined: Mon Nov 07, 2016 10:51 am

Re: Social Security Updates...

Post by smitcat » Fri Feb 02, 2018 9:55 am

slalom wrote:
Fri Feb 02, 2018 9:16 am
One thing these 14-16 year break even calculations never seem to consider is that not only does it take that long to get back the income you lost by not taking SS, it doesn’t include the 14-16 years you could’ve compounded investment gains of various types. Hundreds of thousands of dollars of investment capital was forfeited. I don’t understand delaying past FRA. What am I missing?
"What am I missing?"
- minimum 15% of SS is not taxed
- Survivor benefits
- SS is adjusted for inflation
- Roth conversions
- How SS is used and fits into your entire portfolio and risk plan

Ron
Posts: 6386
Joined: Fri Feb 23, 2007 7:46 pm

Re: Social Security Updates...

Post by Ron » Fri Feb 02, 2018 10:35 am

smitcat wrote:
Fri Feb 02, 2018 9:55 am
slalom wrote:
Fri Feb 02, 2018 9:16 am
One thing these 14-16 year break even calculations never seem to consider is that not only does it take that long to get back the income you lost by not taking SS, it doesn’t include the 14-16 years you could’ve compounded investment gains of various types. Hundreds of thousands of dollars of investment capital was forfeited. I don’t understand delaying past FRA. What am I missing?
"What am I missing?"
- minimum 15% of SS is not taxed
- Survivor benefits
- SS is adjusted for inflation
- Roth conversions
- How SS is used and fits into your entire portfolio and risk plan
And for us older (fortunate) folks, don't forget the file/suspend/spousal claim option.

My wife has been collecting on my record for over 3.5 years (she starts her own age-70 SS benefit in May). Up to that time, she's collected over $60k additional SS income (15% tax-free), in addition to getting a much larger monthly check (deposit) in June.

BTW, I've already received my first age-70 SS deposit this month; I was paid two weeks early due to the manual calculation they had to make on my record for the 48 month DRC's (Delayed Retirement Credits, for those that don't know the acronym :annoyed ).

One other thing. Folks always bring up how much they can be ahead if they take SS early and invest the proceeds. FWIW, if a person is intent to get the money earlier than normal (meaning FRA), I wonder how many truly invest the funds rather than increasing their lifestyle by spending those payments along the way.

As for us? We're happy to just get back what we, along with our employers contributed over the years. I'll be getting back all contributions by age 73, my wife by age 74. Yes, I cheated since I didn't adjust contributions for inflation, but hey - just the idea makes me happy.

SS at age 70? No regrets at all. Heck, due to the market, our respective retirement portfolios are still up even though we've primary used our retirement investments for income; me for almost 11 years, my wife for almost six.

Everybody has a different view on the subject and certainly different options based upon their own personal wishes and requirements. There is no one correct answer for all, but there is one correct answer for every individual.

- Ron

vested1
Posts: 1610
Joined: Wed Jan 04, 2012 4:20 pm

Re: Social Security Updates...

Post by vested1 » Fri Feb 02, 2018 1:31 pm

While trying not to be a rabid advocate of delaying, let's explore the "break-even" argument in my case, and for argument's sake, for that of my wife's as well. This may add more grist for the mill. Leaving aside that I consider break-even invalid, in that SS is income not a lump sum, our numbers refute the claims by some that you need to live until 80 or so to break-even.

My wife is delaying until July of 2018, when she turns 65. If she would have filed at age 62 she would have received $488 less per month than she will be in July. The total amount "lost" for her 3 years of delay with zero SS income is $53,496. 53,496 divided by 488 = 109.6 months or 9.1 years. 65 (her age at filing) plus 9.1 years = 74.1 years of age to break even.

I will file a restricted application simultaneously in July 2018 when I turn 66. If I would have filed at age 62 I would have received $1,807 a month/$21,684 per year x 4 (age 62 to 66) = $86,736 "lost". The difference between the restricted application benefit and my age 62 benefit is $749 month x 12 (months) or $8,988 a year x 4 years = $35,952 additional "lost". 86,736 + 35, 952 = $122,688 "lost" by age 70. My age 70 benefit is $1,498 a month higher than it would have been had I filed at age 62. 122,688 divided by 1,498 = 81.9 months or 6.8 years. The difference had I filed at 62 rather than 70 results in 76.8 years of age to break-even.

Both of our parents lived into their 90's and all of our much older siblings are still alive. Even if I gave credence to break even amounts, our numbers, which indicate ages 74.1 (wife) and 76.8 (me) favor delaying in my opinion.

This flies in the face of articles that tend to lump all retirees into the same mold, ignoring various scenarios and income. This article by Schwab which compares maximum benefits at different filing ages states that my estimated break-even age is between 80 and 81 (delay of 62 to 70), which ignores our particular filing plan, and illustrates the need to do the math.

https://www.schwab.com/resource-center/ ... l-security

Like Ron, I also compared total SS dollars received from July of this year and on to the amount my wife and I paid into FICA. I will be 71.5 when all of our contributions will have been paid back. For fun I added our employer's contributions, which push that (my) age to 75.3.

As for the file early and invest argument, those who use it tend to ignore Medicare deductions and taxes taken from the benefit when they calculate a projected market gain. Since those investing dollars, if not working, have to go into taxable there are other additions to taxes due to dividends and capital gains as well. Like Ron, I wonder how many who say they will invest early filings actually do so, rather than simply consuming the added income.

I also consider the advantages of my spouse getting $3,305 a month (current age 70 benefit) as compared to $1,807 (if filed at 62) a month should I die before her.

Post Reply