Does It Make Sense to Wait to Claim SocSec?

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BetaTracker
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Does It Make Sense to Wait to Claim SocSec?

Post by BetaTracker » Wed Jun 27, 2018 11:08 pm

Hi, my wife plans to retire soon when she reaches age 65 due to health and job stress issues. My question is: If she doesn’t work and we can figure out a way to live without claiming her Social Security benefits for a year or two (her full benefits don’t kick in until after age 66), does that sort of strategy make sense?
Fortunately, thanks to reading this site and the Bogleheads’ collective wisdom, we’ve paid off everything and have reached our retirement portfolio goals. We live simply and I really think we can make it on one income for awhile (I plan to keep working). But it’ll be tight!
My wife is wondering if we wait to claim her SS benefits, will she really earn more by waiting to claim at a later age — even though she won’t have any earned income in upcoming years?
I'd rather be content than happy -- Lao Tzu.

randomguy
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by randomguy » Wed Jun 27, 2018 11:16 pm

BetaTracker wrote:
Wed Jun 27, 2018 11:08 pm
Hi, my wife plans to retire soon when she reaches age 65 due to health and job stress issues. My question is: If she doesn’t work and we can figure out a way to live without claiming her Social Security benefits for a year or two (her full benefits don’t kick in until after age 66), does that sort of strategy make sense?
Fortunately, thanks to reading this site and the Bogleheads’ collective wisdom, we’ve paid off everything and have reached our retirement portfolio goals. We live simply and I really think we can make it on one income for awhile (I plan to keep working). But it’ll be tight!
My wife is wondering if we wait to claim her SS benefits, will she really earn more by waiting to claim at a later age — even though she won’t have any earned income in upcoming years?

This has been discusses a zillion times on this board so a search should give you a ton of great reading material.

The brief summary is that in general waiting to take SS makes sense for most people.

letsgobobby
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by letsgobobby » Wed Jun 27, 2018 11:27 pm

BetaTracker wrote:
Wed Jun 27, 2018 11:08 pm
Hi, my wife plans to retire soon when she reaches age 65 due to health and job stress issues. My question is: If she doesn’t work and we can figure out a way to live without claiming her Social Security benefits for a year or two (her full benefits don’t kick in until after age 66), does that sort of strategy make sense?
Fortunately, thanks to reading this site and the Bogleheads’ collective wisdom, we’ve paid off everything and have reached our retirement portfolio goals. We live simply and I really think we can make it on one income for awhile (I plan to keep working). But it’ll be tight!
My wife is wondering if we wait to claim her SS benefits, will she really earn more by waiting to claim at a later age — even though she won’t have any earned income in upcoming years?
Actuarially it doesn’t make a huge difference, though waiting favors women who tend to live longer than men. But you say your wife is retiring due to health issues. If those health issues are likely to limit her life span, waiting may not be a good idea.

BetaTracker
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by BetaTracker » Wed Jun 27, 2018 11:40 pm

Thanks! I tried to search and didn’t find a post about delaying with no earned income, but I probably missed something that would be obvious to most. This SS and retirement planning really seems confusing to me. I take it that waiting a few years won’t harm things much. (Her health issues are more about sore knees and a bad back than life threatening!)
I'd rather be content than happy -- Lao Tzu.

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FiveK
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by FiveK » Wed Jun 27, 2018 11:43 pm

Consider using the tool referenced in "Open Social Security" calculator: feature requests, bug reports, etc - Bogleheads.org, to see if that sheds any light.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Nate79 » Wed Jun 27, 2018 11:44 pm

Do you have a nest egg saved up? Its unclear from your post since you talk about how tight it will be if she stops working. Certainly the longer she waits the higher the SS will be. And the longer you work the higher your benefits will be and less you would rely on any savings.

BetaTracker
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by BetaTracker » Wed Jun 27, 2018 11:53 pm

Yes, thanks for asking! We can comfortably dip into our savings (investment portfolio) right now at around 3% a year, but I think we can get by without it for awhile. (Thanks again Bogleheads.)
I'd rather be content than happy -- Lao Tzu.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Beehave » Thu Jun 28, 2018 12:43 am

There is an aspect to the issue of waiting to claim that is rarely discussed and not necessarily obvious.

Here's an example, with made-up numbers.

Suppose your wife waits to age 66 to claim and at age 66 she gets $2000 per month. If she waits one month (again - - made-up numbers) she gets 2010 per month for the rest of her life. So, it costs $2000 to get $10 more per month.

Suppose now she decides to wait another month to collect. Now this next month costs $2010 to get that (same, non-compounding) $10 increase.
So now she will get $2020 per month for the rest of her life, and it cost her $4010. If she delays another month, then her cost will be $6030 for the $2030 per month benefit. The cost per month for the benefit increase compounds, but the benefit itself does not.

Each month you delay costs more money for a benefit increase that is constant and that you will receive for a 1 month shorter lifespan.

This does NOT necessarily mean you should not delay. On the contrary, what it may say to you is that the first few months of delay after age 66 are a screaming bargain compared to the last few before age 70 (if you max the SS out). In the example above, the last ten dollar monthly increment before collecting at age 70 costs $480 more than the first month did. That is a huge difference.

Whether to take at 62 or 66 or 70 or anywhere in between really depends on personal circumstances and preferences. There are different rates in effect before and after full retirement age. Each month you delay taking costs more. You can view it optimistically as a bargain relative to what further delay will cost, or as a negative relative to what you could have had in-hand today.

Think it through understanding the parameters and then do what makes you feel most comfortable. If you rationally understand the truth about how this operates, your gut will then tell you what's right for you.

Best wishes.

JoeRetire
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by JoeRetire » Thu Jun 28, 2018 7:21 am

BetaTracker wrote:
Wed Jun 27, 2018 11:08 pm
My wife is wondering if we wait to claim her SS benefits, will she really earn more by waiting to claim at a later age — even though she won’t have any earned income in upcoming years?
Yes. Waiting until her full retirement age (66) will increase her benefits for the rest of her life.
And waiting each year beyond her full retirement age (until age 70) will increase her benefits by 8% for each delayed year.

But you really should coordinate both of your benefits, particularly if one of you has earned significantly more than the other or if you aren't the same age. Spousal benefits and survivor benefits can have a significant impact on the overall lifetime benefits of a couple.

Consider spending $40 at https://maximizemysocialsecurity.com/ for a detailed analysis of your specific situation. It will give you an optimal claiming strategy and allow you to compare as many alternative strategies as you like.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Church Lady » Thu Jun 28, 2018 7:35 am

He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity. Ecclesiastes 1:8

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by The Wizard » Thu Jun 28, 2018 7:55 am

Answer depends to large degree on how much tax deferred money each person has.

If you have $1M in 401(k) + tIRA, then definitely consider delaying while spending down some of that, doing Roth conversions, and thus lowering eventual RMDs.

OTOH, if $100k in tax deferred, I probably would not delay much after terminating employment...
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soccerrules
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by soccerrules » Thu Jun 28, 2018 7:59 am

I would also run your numbers through firecalc and iorp to look at success rate of your desired yearly spending

I will say although I am 6-8 years from ER firecalc indicated our success rate was 5-10% higher in most scenarios if we took SS at 62 vs 70.

If you have longevity in your family (85+) then there are definitely benefits to waiting. However SS is structured to pay out benefits based on individual life expectancy and if everyone lived their exact life expectancy, we would be paid the same dollars in total whether we took benefits at 62,66,67,or 70.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Dottie57 » Thu Jun 28, 2018 8:03 am

I find this link really compelling. It is a link within the first link provided above


https://www.ssa.gov/OACT/ProgData/ar_drc.html

The Wizard
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by The Wizard » Thu Jun 28, 2018 9:15 am

soccerrules wrote:
Thu Jun 28, 2018 7:59 am
...However SS is structured to pay out benefits based on individual life expectancy and if everyone lived their exact life expectancy, we would be paid the same dollars in total whether we took benefits at 62,66,67,or 70.
That's not really true.
The easiest way to see why is that women have higher life expectancy than men, yet SS delayed retirement credits (as they're called) are gender neutral...
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Austintatious
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Austintatious » Thu Jun 28, 2018 11:12 am

BetaTracker wrote:
Wed Jun 27, 2018 11:53 pm
Yes, thanks for asking! We can comfortably dip into our savings (investment portfolio) right now at around 3% a year, but I think we can get by without it for awhile. (Thanks again Bogleheads.)
DW (65) and I (71) are both retired. We've decided to postpone DW's claiming under her own history. We're simply looking at the expected annual increase (7-8%) in benefits that comes with delaying as a means of assuring a very good return on the investment she might make with the money she'd receive from claiming earlier. DW comes from a family of long-lived women, a primary factor in our decision making.

I should mention that my modest pension and social security payments have been sufficient to meet our living expenses, so far. And DW will soon be able to file a restricted application for spousal benefits, a very important Social Security benefit yanked out from under the feet of those hard working Americans born after January 1, 1954. With a bit of luck ( absent some big health issue or other major setback), we won't have to dip into our retirement nest egg. Good luck!

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by nisiprius » Thu Jun 28, 2018 11:13 am

1) To a very rough approximation, it shouldn't matter.

2) All the experts seem to agree that it is slightly better to wait in almost every situation.

3) The conclusion that it is slightly better to wait is based on many, many assumptions. Many of them are hardly more than educated guesses.

4) I personally think the uncertainty of the future of everything--one's personal life expectancy, the future of Social Security (which rests on the future of politics), the future taxation of Social Security, and the future investment returns of the assets you will spend down while waiting to claim--are ten times more uncertain than any differences anyone can calculate.

5) The goal of claiming Social Security is to support you in retirement. Although that is related to extracting the largest number of dollars adjusted for inflation and the time value of money, it is not the same. Think about what is best for you, don't think about trying to do whatever is worst for Uncle Sam.

If you can get along fine without claiming Social Security, it's probably better to wait. If it is more comfortable and more convenient to claim sooner, claim sooner.

But don't forget to claim! Don't be like my late friend Paul, who reached age 73 without claiming! He just hadn't paid attention. I actually stood over him at his computer and said "I am standing here and I am not going to leave until you log into the Social Security website and file online."
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by delamer » Thu Jun 28, 2018 3:50 pm

The increase in benefits occurs for each month of delay, so even waiting 6 months will boost her Social Security for the long run.

But as noted earlier, you should be coordinating your Social Security claiming. Generally speaking, the higher earner should try to wait until age 70 to claim in order to maximize the survivor’s benefit. But if your wife is the lower earner, then it makes less sense for her to wait.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by JW-Retired » Thu Jun 28, 2018 4:24 pm

nisiprius wrote:
Thu Jun 28, 2018 11:13 am
1) To a very rough approximation, it shouldn't matter.

2) All the experts seem to agree that it is slightly better to wait in almost every situation.

3) The conclusion that it is slightly better to wait is based on many, many assumptions. Many of them are hardly more than educated guesses.
Ideally it shouldn't matter too much, but IMO frequently it does. Doesn't matter assumes the retiree can handle living on a nest egg of savings. We know some who just couldn't keep themselves from overspending their investments and running out of that money. They would have been far far better to have delayed SocSec.

Living on minimal early SS is tough so that matters a lot.
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soccerrules
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by soccerrules » Thu Jun 28, 2018 5:00 pm

Here are some general thoughts you may want to consider. (In our case spouse will only be claiming spousal benefit)
By taking reduced benefit (aka early)
1) I anticipate being more active at 62 than I will be at 70 -- could increase spend some which includes SS
2) I want to pass on an inheritance, we can not pass on SS to our kids.
3) By taking SS early allows for less withdrawals of nest egg -- and likelihood of more growth in portfolio (and longer).
4) if I die according to the actuarial tables then taking at 62 or 70 does not matter to ME,-- same total dollars paid out (but may matter to spouse)
5) Firecalc indicates a 5-10% increase in success of portfolio by taking reduced SS at 62 instead of max benefit at 70

By delaying:
1) you get a larger benefit
2) larger surviving spouse benefit
3) potentially more money over time if you beat the actuarial tables.
4) One could have less income (w/o SS) and more income tax space to do Roth conversions prior to age 70.5

There are probably additional pro's to both options or suggestions for something in the middle. We will keep our options open and see what things look like 3-4 years out from 62.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by MJS » Fri Jun 29, 2018 12:14 am

If she files early, her widow's benefit will be reduced by the same percent as her FRA.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by dknightd » Fri Jun 29, 2018 6:40 am

MJS wrote:
Fri Jun 29, 2018 12:14 am
If she files early, her widow's benefit will be reduced by the same percent as her FRA.
That is my understanding as well, but I could be wrong. This is a big part of why we choose what we did. She claimed at FRA. I will delay as long as possible. My benefits at FRA are more than twice hers. So when I claim the amount she receives as spouse will go up. When one of us dies the survivor will get 100% of my benefits.

It really does make sense to look at one, or more, of the SS benefit calculator tools. Every bodies situation is different. Usually, if you do not need the money right away, it is best if lower earner claims at FRA, and higher earner delays as long as possible (but not till after 70). But YMMV

You might both be old enough to do one of the "fancy" claim and delay things. If you were both born before 1954 this is worth looking into, and, the $40 calculator listed above would probably be $40 well spent. Unfortunately I was born after 1954 so those options do not apply to me.

I'm guessing, that on average, a Boglehead is likely to live longer than the general population that SS uses it its actuarial tables. But again YMMV.

invst65
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by invst65 » Fri Jun 29, 2018 8:28 am

Do you contribute to a 401k?

If so, could eliminating your contribution help solve your cashflow problem?

We're in the same boat as you, except that it is my wife who is still working (17 years younger). I've been retired for about 2 years now and I'm delaying SS until 70 (next year) even though it leaves us with a budgetary shortfall averaging around $1200/month.

As for the 401k, my wife was contributing the max of $24k/year when I retired. So I had a choice of reducing it to make up the shortfall or continuing to make the contributions and take money out of savings. I chose the latter so it's kind of like transferring money from savings to the 401k every month. And there's still more money coming in than going out.

I'm thankful to have such options. I know not everyone does. Our strategy makes sense to me but whether it will turn out to be optimal or not is impossible to say without a crystal ball to know what the future holds.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Bacchus01 » Fri Jun 29, 2018 9:00 am

randomguy wrote:
Wed Jun 27, 2018 11:16 pm
BetaTracker wrote:
Wed Jun 27, 2018 11:08 pm
Hi, my wife plans to retire soon when she reaches age 65 due to health and job stress issues. My question is: If she doesn’t work and we can figure out a way to live without claiming her Social Security benefits for a year or two (her full benefits don’t kick in until after age 66), does that sort of strategy make sense?
Fortunately, thanks to reading this site and the Bogleheads’ collective wisdom, we’ve paid off everything and have reached our retirement portfolio goals. We live simply and I really think we can make it on one income for awhile (I plan to keep working). But it’ll be tight!
My wife is wondering if we wait to claim her SS benefits, will she really earn more by waiting to claim at a later age — even though she won’t have any earned income in upcoming years?

This has been discusses a zillion times on this board so a search should give you a ton of great reading material.

The brief summary is that in general waiting to take SS makes sense for most people.
*some people, depending highly on circumstances. I think "most" is a bit high for the general population, but is probably aligned with the average boglehead.

Broken Man 1999
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Broken Man 1999 » Fri Jun 29, 2018 9:23 am

When wife was thinking about drawing her SS at 62, we set up an appointment with the local SS office to get the facts together.

A very helpful and knowledgeable SS staffer was able to determine how long it would take to make waiting until 67, or even 70 a better deal than drawing at 62.

It worked out that the time necessary to make the wait worthwhile was too long, in our opinion.

Seems there are some things that make the later drawing of SS when one spouse makes a substantial amount more than the other spouse not as great a deal.

So, we left the office with her signed up, end of tale.

I would highly recommend scheduling an appointment with a SS office for anyone contemplating drawing at 62, ore not. They have the tools to give you an individual recommendation.

Broken Man 1999
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by RadAudit » Fri Jun 29, 2018 9:37 am

nisiprius wrote:
Thu Jun 28, 2018 11:13 am
1) To a very rough approximation, it shouldn't matter.
Thank you.
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Shallowpockets » Fri Jun 29, 2018 9:48 am

Social Security for Dummies. The book. On Amazon for $15. If you don't want to spend $15 then you are not ready for retirement and you can piecemeal advice from these forums.
Might also get Medicare for Dummies. Another point in time where you can make mistakes due to erroneous information.
You don't know what you don't know.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by munemaker » Fri Jun 29, 2018 10:07 am

When you are single, it is a relatively simple decision.

When you are married, it gets a lot more complicated. The decision depends on the age difference between spouses, who is likely to live longer, who earns more and how much more. You have not provided nearly enough information, in my opinion.

Use one of the online calculators to come up with the best approach. Even the calculators do not consider all the factors, but it is a lot better than winging it.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Austintatious » Fri Jun 29, 2018 10:10 am

Shallowpockets wrote:
Fri Jun 29, 2018 9:48 am
Social Security for Dummies. The book. On Amazon for $15. If you don't want to spend $15 then you are not ready for retirement and you can piecemeal advice from these forums.
Might also get Medicare for Dummies. Another point in time where you can make mistakes due to erroneous information.
You don't know what you don't know.
These decisions regarding Social Security can be extremely important. As has been discussed on this forum, done wisely, some couples can receive more than a million dollars in Social Security benefits over the course of their retirement years. The relatively few dollars one might spend to educate themselves on the "ins and outs" of SS might well be the best money one has ever spent.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by jj45 » Fri Jun 29, 2018 1:23 pm

MJS wrote:
Fri Jun 29, 2018 12:14 am
If she files early, her widow's benefit will be reduced by the same percent as her FRA.
I have been trying to find out the answer to this for a while. I have found definitive statements that
  • if a person claims early and then dies, their survivor receives reduced benefits
  • if someone claims spousal benefits early, their benefit is reduced

But I haven't found anything that clearly says what happens if a person claims early on their own record and then their spouse dies. I do find statements like this:
Social Security uses the deceased worker’s basic benefit amount to calculate the percentage survivors can get. The percentage depends on the survivor’s age and relationship to the worker. If the worker who died was getting reduced benefits, we’ll base your survivor’s benefit on that amount.
https://www.ssa.gov/pubs/EN-05-10084.pdf
The fact this says nothing about the survivor claiming on their own record makes me think that the survivor's benefit is not affected by the survivor claiming early on their own record.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by johnz1001 » Fri Jun 29, 2018 1:26 pm

randomguy wrote:
Wed Jun 27, 2018 11:16 pm
BetaTracker wrote:
Wed Jun 27, 2018 11:08 pm
Hi, my wife plans to retire soon when she reaches age 65 due to health and job stress issues. My question is: If she doesn’t work and we can figure out a way to live without claiming her Social Security benefits for a year or two (her full benefits don’t kick in until after age 66), does that sort of strategy make sense?
Fortunately, thanks to reading this site and the Bogleheads’ collective wisdom, we’ve paid off everything and have reached our retirement portfolio goals. We live simply and I really think we can make it on one income for awhile (I plan to keep working). But it’ll be tight!
My wife is wondering if we wait to claim her SS benefits, will she really earn more by waiting to claim at a later age — even though she won’t have any earned income in upcoming years?

This has been discusses a zillion times on this board so a search should give you a ton of great reading material.

The brief summary is that in general waiting to take SS makes sense for most people.
I like that summary. You just saved me a lot of time! :sharebeer

JoeRetire
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by JoeRetire » Fri Jun 29, 2018 1:31 pm

nisiprius wrote:
Thu Jun 28, 2018 11:13 am
If it is more comfortable and more convenient to claim sooner, claim sooner.
But if you have a spouse, ex-spouse, deceased spouse, deceased ex-spouse, or young dependent children, spend more time analyzing things. A casual choice without regard to the others in your life may be costly.

Austintatious
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Austintatious » Fri Jun 29, 2018 3:04 pm

jj45 wrote:
Fri Jun 29, 2018 1:23 pm
MJS wrote:
Fri Jun 29, 2018 12:14 am
If she files early, her widow's benefit will be reduced by the same percent as her FRA.
I have been trying to find out the answer to this for a while. I have found definitive statements that
  • if a person claims early and then dies, their survivor receives reduced benefits
  • if someone claims spousal benefits early, their benefit is reduced

But I haven't found anything that clearly says what happens if a person claims early on their own record and then their spouse dies. I do find statements like this:
Social Security uses the deceased worker’s basic benefit amount to calculate the percentage survivors can get. The percentage depends on the survivor’s age and relationship to the worker. If the worker who died was getting reduced benefits, we’ll base your survivor’s benefit on that amount.
https://www.ssa.gov/pubs/EN-05-10084.pdf
The fact this says nothing about the survivor claiming on their own record makes me think that the survivor's benefit is not affected by the survivor claiming early on their own record.
Claiming early for a survivor's benefit has the same effect as it does for claiming early for a spousal benefit. If the survivor claims before full retirement age, he/she will receive a reduced amount commensurate with how early the claim was made.

Here's the SS page discussing survivor's benefits:

https://www.ssa.gov/planners/survivors/ifyou.html

and here's the the relevant text (see italics):
Widow Or Widower
If you are the widow or widower of a person who worked long enough under Social Security, you can:

receive full benefits at full retirement age for survivors or reduced benefits as early as age 60.
If you qualify for retirement benefits on your own record, you can switch to your own retirement benefit as early as age 62.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Peter Foley » Fri Jun 29, 2018 3:36 pm

A lot of good information has already been posted in response to the OP's question.

I would summarize some considerations as follows:

Health concern - does the early retiree have a normal life expectancy?
Spouse - does the spouse have higher SS benefits? If yes, can the couple afford to delay benefits for the higher earning spouse?
Are there significant tax deferred savings or long term capital gains that could be used to supplement one income?
Are there some potential tax advantages related to delaying for a couple years?

A "yes" answer to all four would strengthen the argument to delay. A "no" answer to the first question would present a strong argument to take benefits as early as possible.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by basspond » Fri Jun 29, 2018 4:01 pm

Peter Foley wrote:
Fri Jun 29, 2018 3:36 pm
A lot of good information has already been posted in response to the OP's question.

I would summarize some considerations as follows:

Health concern - does the early retiree have a normal life expectancy?
Spouse - does the spouse have higher SS benefits? If yes, can the couple afford to delay benefits for the higher earning spouse?
Are there significant tax deferred savings or long term capital gains that could be used to supplement one income?
Are there some potential tax advantages related to delaying for a couple years?

A "yes" answer to all four would strengthen the argument to delay. A "no" answer to the first question would present a strong argument to take benefits as early as possible.
Out of my grandparents, the one that was the healthiest and most active was the youngest to die. Life is not guaranteed.

Austintatious
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Austintatious » Fri Jun 29, 2018 4:20 pm

A bit more on the reduction of a survivor's benefit amount in the event the survivor makes a claim prior to full retirement age:

From Code of Federal Regulations section 404.410:

https://www.ssa.gov/OP_Home/cfr20/404/404-0410.htm

here's the relevant text (See paragraph 1 below, and be sure to check out the name of the lady in the example provided below :D :
(c) How does SSA reduce my widow's or widower's benefits? Your entitlement to widow's or widower's benefits may begin at age 60 based on age or at age 50 based on disability. Refer to § 404.335 for more information on the requirements for entitlement. Both types are reduced if entitlement begins prior to attainment of full retirement age (as defined in § 404.409).

(1) Widow's or widower's benefits based on age. Your widow's or widower's unreduced benefit amount (the worker's primary insurance amount after any reduction for the family maximum under § 404.403), is reduced or further reduced based on the number of months of entitlement prior to the month you attain full retirement age. This does not include any month in which you have in your care a child of the worker on whose earnings record you are entitled. The child must be entitled to child's benefits. The number of months of entitlement prior to full retirement age is multiplied by .285 and then divided by the number of months in the period beginning with the month of attainment of age 60 and ending with the month immediately before the month of attainment of full retirement age.

Example: Ms. Bogle is entitled to an unreduced widow benefit of $785.70 beginning at age 64. Her full retirement age for unreduced old-age benefits is 65 years and 4 months. She will receive benefits for 16 months prior to attainment of full retirement age. The number of months in the period from age 60 through full retirement age of 65 and 4 months is 64. The reduction in her benefit is $785.70 × 16 × .285 divided by 64 or $55.98. $55.98 is rounded to the next higher multiple of 10 cents ($56.00) and subtracted from $785.70. The result is a monthly benefit of $729.70.

pennywise
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by pennywise » Fri Jun 29, 2018 4:52 pm

letsgobobby wrote:
Wed Jun 27, 2018 11:27 pm
Actuarially it doesn’t make a huge difference, though waiting favors women who tend to live longer than men. But you say your wife is retiring due to health issues. If those health issues are likely to limit her life span, waiting may not be a good idea.
For a married couple, disregarding a wife's health issues, if the husband's benefit is larger I can't see that waiting based on the logic of being a woman/living longer makes any sense, because a widow can claim her spouse's higher SS payment as the survivor benefit.

Am I misunderstanding the survivor benefit? I thought it was the higher of an individual or the spouse's amount and upon the death of the first partner, the survivor can claim the higher level for the remainder of his or more often her life.

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munemaker
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by munemaker » Fri Jun 29, 2018 8:16 pm

pennywise wrote:
Fri Jun 29, 2018 4:52 pm
...if the husband's benefit is larger I can't see that waiting based on the logic of being a woman/living longer makes any sense, because a widow can claim her spouse's higher SS payment as the survivor benefit.
Sorry, I missed the part where he said his SS benefit will be higher than his wife's.

jj45
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by jj45 » Fri Jun 29, 2018 11:07 pm

Austintatious wrote:
Fri Jun 29, 2018 4:20 pm
A bit more on the reduction of a survivor's benefit amount in the event the survivor makes a claim prior to full retirement age:

(1) Widow's or widower's benefits based on age. Your widow's or widower's unreduced benefit amount (the worker's primary insurance amount after any reduction for the family maximum under § 404.403), is reduced or further reduced based on the number of months of entitlement prior to the month you attain full retirement age.
Ms. Bogle's scenario is not quite the scenario I am curious about. I would naively read the above as talking about what happens if you claim survivor's benefit early. The phrase "number of months of entitlement" makes me thing this is entitlement to survivors benefits.

Here is a concrete example I would like to know the answer to. Bob and Alice are married and the same age. Alice has a much larger FRA benefit than Bob, more than twice the amount. Bob files at 62 and gets a reduced benefit based on his record. Alice files at 70. Bob then gets the larger spousal benefit, which as I understand it, is reduced because he claimed early. Alice dies at 72. What is Bob's survivor benefit? He did not claim the survivor's benefit early, he claimed early on his own record.

SGM
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by SGM » Sat Jun 30, 2018 8:27 am

I will be celebrating my 70th birthday soon with two long-time friends who are also turning 70 in the same month. Each of us were the higher earners and delayed our SS until 70 so that the widow's benefit would be as high as possible. We all looked at SS delay as insurance against longevity.


I used the time between retiring and SS delay to convert to Roth accounts. The other two did not. One likes the idea of having a larger portfolio regardless of the tax consequences after 70 1/2. I like the idea of not having to take unneeded RMDs which would shove me into the next highest tax bracket.


Other friends took SS at 62 and cannot believe that we delayed. The others are afraid that they will die young. I won't have any regret if I die young.


My portfolio has been going up every year. This year it hasn't gone anywhere, but I have a sneaking suspicion that markets will make a big move one way or the other in the last quarter of this year. :P

You Know What I Mean
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by You Know What I Mean » Sat Jun 30, 2018 9:26 am

jj45 wrote:
Fri Jun 29, 2018 11:07 pm
Austintatious wrote:
Fri Jun 29, 2018 4:20 pm
A bit more on the reduction of a survivor's benefit amount in the event the survivor makes a claim prior to full retirement age:

(1) Widow's or widower's benefits based on age. Your widow's or widower's unreduced benefit amount (the worker's primary insurance amount after any reduction for the family maximum under § 404.403), is reduced or further reduced based on the number of months of entitlement prior to the month you attain full retirement age.
Ms. Bogle's scenario is not quite the scenario I am curious about. I would naively read the above as talking about what happens if you claim survivor's benefit early. The phrase "number of months of entitlement" makes me thing this is entitlement to survivors benefits.

Here is a concrete example I would like to know the answer to. Bob and Alice are married and the same age. Alice has a much larger FRA benefit than Bob, more than twice the amount. Bob files at 62 and gets a reduced benefit based on his record. Alice files at 70. Bob then gets the larger spousal benefit, which as I understand it, is reduced because he claimed early. Alice dies at 72. What is Bob's survivor benefit? He did not claim the survivor's benefit early, he claimed early on his own record.
Yes! Bob's spousal benefit would be reduced because he claimed early on his own retirement record. However, the good news is that doesn't affect his survivor benefit, contrary to some earlier posts. As long as Bob is at or after FRA when he claims the survivor benefit, it will not be reduced. So, in your example Bob's survivor benefit will be the full amount of Alice's age 70 benefit.

Good luck to all!

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by JW-Retired » Sat Jun 30, 2018 10:09 am

SGM wrote:
Sat Jun 30, 2018 8:27 am
I used the time between retiring and SS delay to convert to Roth accounts. The other two did not. One likes the idea of having a larger portfolio regardless of the tax consequences after 70 1/2. I like the idea of not having to take unneeded RMDs which would shove me into the next highest tax bracket.
Maybe I missed it, but looks like little or no mention in this thread that SS is likely to be taxed a ton less than your RMD dollars would be? A RMD usually is state income taxed but SS isn't taxed at all by a majority of them. That's a really big deal in my 10% income tax state. :oops:

The Federal tax on SS income is applied to from 0% to 85% of SS depending on your "other income" level. Meaning RMD dollars get roughly double taxed when the tax on SS is phasing in. When fully phased in, IRS SS taxation is still like a tax bracket lower than RMD dollars because at least 15% of SS is always tax free.

People really do need to understand how this "tax torpedo" works.
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bearwithbear
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by bearwithbear » Sat Jun 30, 2018 2:01 pm

I believe that a prior poster – You Know What I Mean – has it right. When you took your SS benefits doesn’t affect the SURVIVOR BENEFIT you get on the death of your spouse. As long you are at or past FRA when you apply for the SUVIVOR BENEFIT, then you get 100%. Even if you started taking your own SS benefit at 62.
Anyone able to verify or object???

Bear

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munemaker
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by munemaker » Sat Jun 30, 2018 2:09 pm

JW-Retired wrote:
Sat Jun 30, 2018 10:09 am

The Federal tax on SS income is applied to from 0% to 85% of SS depending on your "other income" level. Meaning RMD dollars get roughly double taxed when the tax on SS is phasing in. When fully phased in, IRS SS taxation is still like a tax bracket lower than RMD dollars because at least 15% of SS is always tax free.

People really do need to understand how this "tax torpedo" works.
JW
If your income is low enough, you need to understand how it works. Due to higher income, there is no way many of us can do anything to dodge the tax torpedo.

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munemaker
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by munemaker » Sat Jun 30, 2018 2:17 pm

SGM wrote:
Sat Jun 30, 2018 8:27 am
I will be celebrating my 70th birthday soon with two long-time friends who are also turning 70 in the same month. Each of us were the higher earners and delayed our SS until 70 so that the widow's benefit would be as high as possible. We all looked at SS delay as insurance against longevity.

I used the time between retiring and SS delay to convert to Roth accounts. The other two did not. One likes the idea of having a larger portfolio regardless of the tax consequences after 70 1/2. I like the idea of not having to take unneeded RMDs which would shove me into the next highest tax bracket.

Other friends took SS at 62 and cannot believe that we delayed. The others are afraid that they will die young. I won't have any regret if I die young.
We are doing something similar to what you are doing, i.e. I am waiting until 70 and using the prior years for Roth conversions, and looking at SS as longevity insurance; wife is taking hers at 64 and I can take spousal on hers. Due to family history, almost certain I will die young and she will live to 90+. Our friends, like yours, are taking it as early as possible to make sure they don't miss out. Our friends are in a different place though. They are retired government employees who live off of pensions, not savings/investments. Because of that, they have an entirely different view of (financial) life.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by vested1 » Sat Jun 30, 2018 6:29 pm

munemaker wrote:
Sat Jun 30, 2018 2:17 pm
SGM wrote:
Sat Jun 30, 2018 8:27 am
I will be celebrating my 70th birthday soon with two long-time friends who are also turning 70 in the same month. Each of us were the higher earners and delayed our SS until 70 so that the widow's benefit would be as high as possible. We all looked at SS delay as insurance against longevity.

I used the time between retiring and SS delay to convert to Roth accounts. The other two did not. One likes the idea of having a larger portfolio regardless of the tax consequences after 70 1/2. I like the idea of not having to take unneeded RMDs which would shove me into the next highest tax bracket.

Other friends took SS at 62 and cannot believe that we delayed. The others are afraid that they will die young. I won't have any regret if I die young.
We are doing something similar to what you are doing, i.e. I am waiting until 70 and using the prior years for Roth conversions, and looking at SS as longevity insurance; wife is taking hers at 64 and I can take spousal on hers. Due to family history, almost certain I will die young and she will live to 90+. Our friends, like yours, are taking it as early as possible to make sure they don't miss out. Our friends are in a different place though. They are retired government employees who live off of pensions, not savings/investments. Because of that, they have an entirely different view of (financial) life.
We too are doing this with my wife getting her first age 65 check in 11 days, and me getting 1/2 of her PIA starting in August for 4 more years. The longevity insurance aspect was so convincing to me that I couldn't pass it up.

You hear questions that ask how your delay will work out if you die before age 70. I feel so strongly about it that even if I knew I had a deadly disease and wouldn't make it to 70 I would still delay in order to get my wife as much of a survivor benefit as possible. I worry about money, and she doesn't. Anything I can do to ensure she is taken care of is of prime importance.

We have a plan to pay off our mortgage before RMD's begin, so withdrawing extra amounts from pre-tax IRA's accomplishes the same thing (exchanging a higher tax rate now and less tax later) as do Roth conversions. I would prefer to do Roth conversions, but we can't realistically do both. In this way, at my age 70 in four years our spendable income will greatly increase (paid off mortgage) and our taxes will go down.

Much like delaying SS, our plan is flexible in that if the markets drop into bear territory our pay-off-the-mortgage plan can be delayed if necessary. When my parents died in their 90's they still had a mortgage. I don't plan to follow suit.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by JW-Retired » Sat Jun 30, 2018 8:21 pm

munemaker wrote:
Sat Jun 30, 2018 2:09 pm
JW-Retired wrote:
Sat Jun 30, 2018 10:09 am

The Federal tax on SS income is applied to from 0% to 85% of SS depending on your "other income" level. Meaning RMD dollars get roughly double taxed when the tax on SS is phasing in. When fully phased in, IRS SS taxation is still like a tax bracket lower than RMD dollars because at least 15% of SS is always tax free.

People really do need to understand how this "tax torpedo" works.
JW
If your income is low enough, you need to understand how it works. Due to higher income, there is no way many of us can do anything to dodge the tax torpedo.
Yes there is. Delay SS to 70 and only draw from tax deferred until then. It results in you reducing your tax rate when you finally have to draw from everything. viewtopic.php?f=2&t=177441#p2686058
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Bacchus01
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Bacchus01 » Sun Jul 01, 2018 7:01 am

I love these threads. They are fascinating and things that I think the average person has no clue on. They simply take it when they take it.

My wife is 5 years older than me. Her amount will be considerably less than mine. The calculators seem to suggest taking hers as soon as possible or no later than her FRA and then I take half of hers. Then delay mine until 70 and then she switches to half of mine. We’d be drawing hers at least 10 years in that scenario if she drew at her earliest date.

We’re only 45/50, so we have quite a ways to go, but I love doing these scenarios as it all impacts our early retirement dates.

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by bearwithbear » Sun Jul 01, 2018 7:09 am

Bacchus01 – The plan that you have to take spousal and let yours grow isn’t available if you were born after Jan 1, 1954. And if you are 45 then you were born in the 1970s.

Bear

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Re: Does It Make Sense to Wait to Claim SocSec?

Post by dknightd » Sun Jul 01, 2018 5:04 pm

bearwithbear wrote:
Sun Jul 01, 2018 7:09 am
Bacchus01 – The plan that you have to take spousal and let yours grow isn’t available if you were born after Jan 1, 1954. And if you are 45 then you were born in the 1970s.

Bear
sad but true.

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Lancelot
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Re: Does It Make Sense to Wait to Claim SocSec?

Post by Lancelot » Sun Jul 01, 2018 8:46 pm

To the OP, here is a link advocating that working a mere three to six months longer has the same impact as saving an additional 1% of your salary for 30 years. (Author's words) https://www.cnbc.com/2018/06/22/forget- ... onger.html

Even short delays in SS can provide a nice increase in your benefits over a lifetime; think in terms of increments, not rigid delays to ages 66 or 70.

From reading your post, I gather you can wait if need be; you are fortunate to be in a position to do so. Personally I'm in the delay camp. However, both the take the money now and delay groups are convinced that theirs is the correct strategy, so do what makes you happy. We are actually lucky to have the choice :)
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