Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

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sreynard
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by sreynard » Wed Aug 01, 2018 12:22 pm

neurosphere wrote:
Wed Aug 01, 2018 6:02 am
2015 wrote:
Tue Jul 31, 2018 9:15 pm
Columns 3 and 4 show the impact of delayed SS for each year from 62-70 if COLA is 2.5%. The larger raises shown for each delayed year is due to the effect of compounding.
I understand why 2.5% applied to a bigger number results in an increase which is larger than that applied to a small number.

But I don't understand why it's relevant in any way when it comes to making decisions about when to claim social security benefits.
Agree. I don't understand what the COLA has to do with anything. Unless he is saying that the announced COLA is larger than his personal rate of inflation, why would a high COLA make any difference on the value of delaying? Why would anyone cheer about it regardless of what it was?

I would cheer for a zero COLA and zero real inflation. A high COLA would just mean my bond interest and pension payments have decreased. This is a good thing?!? :shock:

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neurosphere
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by neurosphere » Wed Aug 01, 2018 3:07 pm

2015 wrote:
Wed Aug 01, 2018 11:25 am
And I agree with you that it might not be relevant to some people making decisions about when to claim. AFAICT, the decision about when to claim is highly personal and based on a number of factors (e.g., health history, funds need, emotional impact on current market performance, etc.).
This is what I disagree with. It is not financial relevant to anyone, COLAs that is. It's simply a way of preserving the purchasing power of whatever benefit you initially opt to take.

Assume that there were such a thing as negative COLAs. If one knew that COLAs would be negative over the life of their benefits, would that mean that taking a benefit as 62 was now preferable (because age 62 benefits would be reduced "less" than age 70 benefits)? So why should one claim at age 70 only to have a "larger" reduction in benefit due to a negative COLA?

COLAs are irrelevant to decisions of when to claim benefits. I haven't yet heard (or understood) an argument for why I'm wrong? They affect all benefits equally: they simply preserve the purchasing power of whichever size benefit was initially elected (based on claiming age). It doesn't matter what the absolute increase (or hypothetical decrease). And that's why the article is misleading.

2015
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by 2015 » Wed Aug 01, 2018 8:28 pm

neurosphere wrote:
Wed Aug 01, 2018 3:07 pm
2015 wrote:
Wed Aug 01, 2018 11:25 am
And I agree with you that it might not be relevant to some people making decisions about when to claim. AFAICT, the decision about when to claim is highly personal and based on a number of factors (e.g., health history, funds need, emotional impact on current market performance, etc.).
This is what I disagree with. It is not financial relevant to anyone, COLAs that is. It's simply a way of preserving the purchasing power of whatever benefit you initially opt to take.

...

COLAs are irrelevant to decisions of when to claim benefits. I haven't yet heard (or understood) an argument for why I'm wrong? They affect all benefits equally: they simply preserve the purchasing power of whichever size benefit was initially elected (based on claiming age). It doesn't matter what the absolute increase (or hypothetical decrease). And that's why the article is misleading.
I can't agree. Compounded COLA's as a result of delayed SS benefits do more than simply preserve purchasing power of a benefit. As a result of whatever chosen delay, compounded COLA's are larger than those claimed earlier without the benefit of compounding. This is easy to see in the chart in the article that I mentioned above. Compounded COLA's may or may not influence an individual's claiming decision, but that's a personal matter.

2015
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by 2015 » Wed Aug 01, 2018 8:31 pm

sreynard wrote:
Wed Aug 01, 2018 12:22 pm
neurosphere wrote:
Wed Aug 01, 2018 6:02 am
2015 wrote:
Tue Jul 31, 2018 9:15 pm
Columns 3 and 4 show the impact of delayed SS for each year from 62-70 if COLA is 2.5%. The larger raises shown for each delayed year is due to the effect of compounding.
I understand why 2.5% applied to a bigger number results in an increase which is larger than that applied to a small number.

But I don't understand why it's relevant in any way when it comes to making decisions about when to claim social security benefits.
Agree. I don't understand what the COLA has to do with anything. Unless he is saying that the announced COLA is larger than his personal rate of inflation, why would a high COLA make any difference on the value of delaying? Why would anyone cheer about it regardless of what it was?

I would cheer for a zero COLA and zero real inflation. A high COLA would just mean my bond interest and pension payments have decreased. This is a good thing?!? :shock:
An compounded COLA increase as a result of delaying SS has nothing to do with bond interest or pension payments. The higher COLA increase is a result of compounding due to delay only.

sreynard
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by sreynard » Thu Aug 02, 2018 9:44 am

2015 wrote:
Wed Aug 01, 2018 8:31 pm
sreynard wrote:
Wed Aug 01, 2018 12:22 pm
neurosphere wrote:
Wed Aug 01, 2018 6:02 am
2015 wrote:
Tue Jul 31, 2018 9:15 pm
Columns 3 and 4 show the impact of delayed SS for each year from 62-70 if COLA is 2.5%. The larger raises shown for each delayed year is due to the effect of compounding.
I understand why 2.5% applied to a bigger number results in an increase which is larger than that applied to a small number.

But I don't understand why it's relevant in any way when it comes to making decisions about when to claim social security benefits.
Agree. I don't understand what the COLA has to do with anything. Unless he is saying that the announced COLA is larger than his personal rate of inflation, why would a high COLA make any difference on the value of delaying? Why would anyone cheer about it regardless of what it was?

I would cheer for a zero COLA and zero real inflation. A high COLA would just mean my bond interest and pension payments have decreased. This is a good thing?!? :shock:
An compounded COLA increase as a result of delaying SS has nothing to do with bond interest or pension payments. The higher COLA increase is a result of compounding due to delay only.
Sorry, you are typing words, but I don't understand what they mean. What is a "compounded COLA increase"? A COLA doesn't increase anything in any way shape or form. A COLA keeps everything, ideally, exactly as they were before. Now, if there was real inflation and you did not get a COLA, as happens for most private pensions and bonds, then you would get a compounding of a loss in earnings power.

Let's look at the two cases:

Low COLA: Today's dollar is worth the same as last year's dollar. SS Check stays the same. Pensions and bonds stay the same. I can buy exactly as much stuff as last year.

High COLA: Today's dollar is worth less than last year. SS Check goes up. Pensions and bonds payments aren't worth as much. You can buy exactly the same stuff as last year with your SS check, but less stuff with your pensions or bonds.

Now you tell me, what situation is happy and which is sad? Why should I be cheering about a high COLA? At best I'm loosing money and at worse I stay exactly the same. :confused

clockman323
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by clockman323 » Thu Aug 02, 2018 12:28 pm

My social security statement shows $2978 per month if I continue working and retire at FRA. I am in my mid 50's with nearly 30 years of taxable earnings, about 2/3 of them at the SSA max.

The calculations on the SSA web site show a drop of around 10% if I retire now and have no future earnings.

SGM
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by SGM » Sat Aug 04, 2018 12:16 pm

I just received written notice of what my SS payment will be shortly. It was within one dollar of what I expected given earlier statements. One of the online estimators was $20 off. One time I ran it the results were $20 high with a slightly different change it was $20 low. Anyway when I looked at my back of the envelope calculation it was real close. After doing the file and suspend some years ago it wasn't clear what they were using for my PIA at my full retirement age for the spousal benefit. The spousal benefit was a little more than half of what I thought was my PIA at FRA. The spousal benefit went up because of the COLA.

The IRMMA premium was nasty but not a surprise. Previously Medicare payments came out of a joint account that my pension goes to and which DW uses for ongoing expenses... so she is getting a raise equivalent to my monthly IRMMA premium. :D

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neurosphere
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by neurosphere » Sat Aug 04, 2018 12:36 pm

2015 wrote:
Wed Aug 01, 2018 8:28 pm
Compounded COLA's may or may not influence an individual's claiming decision, but that's a personal matter.
I'm curious how you, personally, would be influenced in your decision making about when to start taking benefits, if you knew in advance that over the life your your benefits, compounded COLAs would be negative (assuming it were possible) vs positive.

I asked this question earlier, but it may have been missed with all the back and forth.

Chip
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by Chip » Sat Aug 04, 2018 4:06 pm

Small Law Survivor wrote:
Mon Jul 30, 2018 9:47 am
My wife will turn 66 in October, and she'll start her benefit then. When I turn 70 she'll convert over her spousal benefit, which will be larger.

I'm wondering exactly how she should apply - online? Go to our local SS office (a depressing place ..). And when, in advance of her October birthday should she apply? Could she wait until 2019, apply then, and get retroactive benefits that would push that income into 2019 for tax purposes?
SLS, you probably know this but if you are at your full retirement age when she files for her benefit AND you were born before 1/2/54, you can apply for a spousal benefit on HER earnings record. I'm assuming from what you have written you are delaying taking your benefit on your work record until you reach age 70.

P.S. How did you fix the gouge in your deck board?

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David Jay
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by David Jay » Sat Aug 04, 2018 6:05 pm

clockman323 wrote:
Thu Aug 02, 2018 12:28 pm
My social security statement shows $2978 per month if I continue working and retire at FRA. I am in my mid 50's with nearly 30 years of taxable earnings, about 2/3 of them at the SSA max.

The calculations on the SSA web site show a drop of around 10% if I retire now and have no future earnings.
Yes, filling in those 5 “zero” years will make a difference. After that, you are replacing a “not-max” amount with a “max” Amount, so each year’s change will be very minor.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

2015
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by 2015 » Sun Aug 05, 2018 8:18 pm

neurosphere wrote:
Sat Aug 04, 2018 12:36 pm
2015 wrote:
Wed Aug 01, 2018 8:28 pm
Compounded COLA's may or may not influence an individual's claiming decision, but that's a personal matter.
I'm curious how you, personally, would be influenced in your decision making about when to start taking benefits, if you knew in advance that over the life your your benefits, compounded COLAs would be negative (assuming it were possible) vs positive.

I asked this question earlier, but it may have been missed with all the back and forth.
I'm sorry, I don't understand the question. I don't know how anything benefiting from compounding can be negative. Here's Kiplinger on the subject of compounded COLA's as a result of delayed SS.

https://www.kiplinger.com/article/retir ... -safe.htmle
Delaying benefits beyond that means your payout will grow by 8% a year until age 70. Delaying benefits also increases the value of annual cost-of-living adjustments because they’ll be compounded on a higher base.


BTW, my personal decision to delay is not based on increased COLA's as a result of compounding (although the idea of lifelong post-70 compounded SS COLA's is quite attractive), but instead on my personal situation of (a) projected better than average health based on lifelong health habits; (b) financial situation allowing for retirement funds to come from sources other than SS; and (c) having a personal delayed 70 benefit high enough that dovetails nicely into my overall LMP strategy.

2015
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Re: Soc Sec benefit estimates: Anyone get a nasty surprise when filing?

Post by 2015 » Sun Aug 05, 2018 8:27 pm

sreynard wrote:
Thu Aug 02, 2018 9:44 am
2015 wrote:
Wed Aug 01, 2018 8:31 pm
sreynard wrote:
Wed Aug 01, 2018 12:22 pm
neurosphere wrote:
Wed Aug 01, 2018 6:02 am
2015 wrote:
Tue Jul 31, 2018 9:15 pm
Columns 3 and 4 show the impact of delayed SS for each year from 62-70 if COLA is 2.5%. The larger raises shown for each delayed year is due to the effect of compounding.
I understand why 2.5% applied to a bigger number results in an increase which is larger than that applied to a small number.

But I don't understand why it's relevant in any way when it comes to making decisions about when to claim social security benefits.
Agree. I don't understand what the COLA has to do with anything. Unless he is saying that the announced COLA is larger than his personal rate of inflation, why would a high COLA make any difference on the value of delaying? Why would anyone cheer about it regardless of what it was?

I would cheer for a zero COLA and zero real inflation. A high COLA would just mean my bond interest and pension payments have decreased. This is a good thing?!? :shock:
An compounded COLA increase as a result of delaying SS has nothing to do with bond interest or pension payments. The higher COLA increase is a result of compounding due to delay only.
Sorry, you are typing words, but I don't understand what they mean. What is a "compounded COLA increase"? A COLA doesn't increase anything in any way shape or form. A COLA keeps everything, ideally, exactly as they were before. Now, if there was real inflation and you did not get a COLA, as happens for most private pensions and bonds, then you would get a compounding of a loss in earnings power.

Let's look at the two cases:

Low COLA: Today's dollar is worth the same as last year's dollar. SS Check stays the same. Pensions and bonds stay the same. I can buy exactly as much stuff as last year.

High COLA: Today's dollar is worth less than last year. SS Check goes up. Pensions and bonds payments aren't worth as much. You can buy exactly the same stuff as last year with your SS check, but less stuff with your pensions or bonds.

Now you tell me, what situation is happy and which is sad? Why should I be cheering about a high COLA? At best I'm loosing money and at worse I stay exactly the same. :confused
You are conflating two entirely unrelated concepts. The principle of compounded COLA's as a result of delayed SS have nothing to do with what pensions or bonds or inflation do/does or do/does not do. The principle relates only the action of compounding on COLA's as a result of delaying SS itself. It doesn't matter whether a COLA is low or high, only that delayed SS results in COLA's that compound.

See the Kiplinger link in my post above for a description of how compounded COLA's benefit from delayed SS.

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