Social Security maximize plan for parents

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Topic Author
TexxinMike
Posts: 7
Joined: Wed May 25, 2016 8:12 pm

Social Security maximize plan for parents

Post by TexxinMike » Wed Oct 24, 2018 11:54 am

My expat parents are both 63 totally forgot about Social Security. They asked me to look into this for them. Dad is working full time but his income is foreign income and does not apply to social security. They are both in average health and don’t need the money right away, so my strategy is to simply maximize the benefit. The rules are confusing but after reading a few threads on this topic below is what I come up with

Data from Social Security Admin:
Mom
  • PIA $839
    Current Age 63: $717
    Age 70: $1107
Dad
  • PIA $1766
    Current Age 63: $1405
    Age 70: $2308
Strategy

1) Mom to file on at age 64 where benefits will be ~$738 per month
2) Dad to delay filing till age 70 where benefits will be $2,308 and Mom to immediately file for spousal benefits of $1766/2 = $883

Result: For the Years
  • Before Dad filed: total monthly benefit = mom’s benefit at time of application: $738
  • After Dad filed at age 70: total monthly benefit = Mom’s spousal benefit ($883) + Dad’s benefit at 70 ($2308) = $3191
Survivor Benefit after that
  • Mom = mom’s benefit at time of application ($738) + Dad’s PIA ($1766) = $2504
  • Dad = benefit after 70 ($2,308)
Please let me know if this all this is correct and any other any other away to improve on this.

Thanks!

marcopolo
Posts: 2787
Joined: Sat Dec 03, 2016 10:22 am

Re: Social Security maximize plan for parents

Post by marcopolo » Wed Oct 24, 2018 12:16 pm

TexxinMike wrote:
Wed Oct 24, 2018 11:54 am
My expat parents are both 63 totally forgot about Social Security. They asked me to look into this for them. Dad is working full time but his income is foreign income and does not apply to social security. They are both in average health and don’t need the money right away, so my strategy is to simply maximize the benefit. The rules are confusing but after reading a few threads on this topic below is what I come up with

Data from Social Security Admin:
Mom
  • PIA $839
    Current Age 63: $717
    Age 70: $1107
Dad
  • PIA $1766
    Current Age 63: $1405
    Age 70: $2308
Strategy

1) Mom to file on at age 64 where benefits will be ~$738 per month
2) Dad to delay filing till age 70 where benefits will be $2,308 and Mom to immediately file for spousal benefits of $1766/2 = $883

Result: For the Years
  • Before Dad filed: total monthly benefit = mom’s benefit at time of application: $738
  • After Dad filed at age 70: total monthly benefit = Mom’s spousal benefit ($883) + Dad’s benefit at 70 ($2308) = $3191
Survivor Benefit after that
  • Mom = mom’s benefit at time of application ($738) + Dad’s PIA ($1766) = $2504
  • Dad = benefit after 70 ($2,308)
Please let me know if this all this is correct and any other any other away to improve on this.

Thanks!
Assuming your benefit numbers are correct, your strategy is reasonable, but you do have a couple of assumptions incorrect.

1) Mom's spousal benefit is computed as 1/2(Dad's PIA) - (Mom's PIA) = (1766/2)-839 = $44.
This gets added to mom's benefit. If she claims at her Full Retirement Age (FRA), then it works out to 1/2(Dad's PIA), or $883.
But, since your plan has her claiming before FRA, when she claims spousal, she will get her benefit + spousal, $738 + $44 = $782.
She does not get back what she gave up by claiming early.
Whether it makes sense to wait for her to reach FRA to claim or not depends on assumptions about her life span.

2) At either spouse's death, the surviving spouse gets the higher of either benefit. So, which ever spouse survives would get the $2308
Not sure where you are getting the $2504 number calculation from, I do not believe that is correct.

As for further optimization, you could try on of the calculators out there, but the answers are only as good as your assumptions about life span.
Assuming health is reasonably good, Dad waiting to 70 probably makes sense.
Mom, could claim now, or wait until FRA, or claim anywhere in between, the difference is not huge, and optimal choice is unknowable.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Topic Author
TexxinMike
Posts: 7
Joined: Wed May 25, 2016 8:12 pm

Re: Social Security maximize plan for parents

Post by TexxinMike » Wed Oct 24, 2018 1:14 pm

Thanks @Marcopolo

Reread the rules and everything made more sense. Revised my number and they pretty much closely match https://opensocialsecurity.com/

I didn't wanted to make any assumptions on life span, dont to jinax anything. Just hope everyone continue to "live long and prosper" :beer

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JoeRetire
Posts: 4497
Joined: Tue Jan 16, 2018 2:44 pm

Re: Social Security maximize plan for parents

Post by JoeRetire » Wed Oct 24, 2018 2:12 pm

TexxinMike wrote:
Wed Oct 24, 2018 1:14 pm
I didn't wanted to make any assumptions on life span, dont to jinax anything. Just hope everyone continue to "live long and prosper" :beer
You must make some assumptions about lifespan.

For example, if you were expecting a very short lifespan for both parents, it might make sense to start benefits now.
Very Stable Genius

Topic Author
TexxinMike
Posts: 7
Joined: Wed May 25, 2016 8:12 pm

Re: Social Security maximize plan for parents

Post by TexxinMike » Wed Oct 24, 2018 4:16 pm

JoeRetire wrote:
Wed Oct 24, 2018 2:12 pm
TexxinMike wrote:
Wed Oct 24, 2018 1:14 pm
I didn't wanted to make any assumptions on life span, dont to jinax anything. Just hope everyone continue to "live long and prosper" :beer
You must make some assumptions about lifespan.

For example, if you were expecting a very short lifespan for both parents, it might make sense to start benefits now.
That's true but difficult to do at this point. Unless circumstances changes, I want to use social security as long term hedge against longevity, inflation, and poor market returns. In which delaying for maximized amount make more sense.

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JoeRetire
Posts: 4497
Joined: Tue Jan 16, 2018 2:44 pm

Re: Social Security maximize plan for parents

Post by JoeRetire » Wed Oct 24, 2018 7:07 pm

TexxinMike wrote:
Wed Oct 24, 2018 4:16 pm
JoeRetire wrote:
Wed Oct 24, 2018 2:12 pm
TexxinMike wrote:
Wed Oct 24, 2018 1:14 pm
I didn't wanted to make any assumptions on life span, dont to jinax anything. Just hope everyone continue to "live long and prosper" :beer
You must make some assumptions about lifespan.

For example, if you were expecting a very short lifespan for both parents, it might make sense to start benefits now.
That's true but difficult to do at this point. Unless circumstances changes, I want to use social security as long term hedge against longevity, inflation, and poor market returns. In which delaying for maximized amount make more sense.
I think it makes a lot of sense to consider longevity, inflation and potential poor market returns. And I think for most folks it makes sense to delay.

I do think it's best to run the factors through a strong calculator like https://maximizemysocialsecurity.com/ or https://opensocialsecurity.com/. For the former, you'll need to take a stab at longevity, although you can play a lot of "what if" games with various longevity values. For the latter, you also have the option to use "standard" longevity tables. The assumption in that case is that the recipients match the selected "standard" longevity profile.

The good thing about delaying is that you can change your mind and file at any time.
Very Stable Genius

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Lancelot
Posts: 247
Joined: Thu Jul 05, 2007 9:09 pm
Location: Philippines

Re: Social Security maximize plan for parents

Post by Lancelot » Wed Oct 24, 2018 7:51 pm

JoeRetire wrote:
Wed Oct 24, 2018 7:07 pm

I think it makes a lot of sense to consider longevity, inflation and potential poor market returns. And I think for most folks it makes sense to delay.
I agree, I think the recent fantastic market run up has persuaded folks to take the money early "get 10%+ returns by investing my social security." I understand the cash in hand argument but the insurance component of SS is an important factor as well. At least IMHO :sharebeer
No Where for Very Long...

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