Delaying Social Security: is the wisdom still relevant

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MathWizard
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Re: Delaying Social Security: is the wisdom still relevant

Post by MathWizard »

I appreciate all who have contributed to this discussion of what the current law regarding SS benefits is. I now have some new information that I need to digest.
JonnyB
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Re: Delaying Social Security: is the wisdom still relevant

Post by JonnyB »

afan wrote: Tue Jul 14, 2020 6:10 pm When planning SS claiming strategy, it is wise to take into account what will happen under current law. Current law for taxation of benefits, current law for income tax rates including the scheduled increase in rates, and current law for future SS benefits. Current law for Roth conversions, current law for IRMAA. Simply deciding that something else will happen is not planning. It is daydreaming.
Assuming that nothing will change is also daydreaming. Why should that be your default assumption? It seems no more valid. Nothing's going to change? To me that seem extremely unlikely.
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willthrill81
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Re: Delaying Social Security: is the wisdom still relevant

Post by willthrill81 »

JonnyB wrote: Tue Jul 14, 2020 8:42 pm
afan wrote: Tue Jul 14, 2020 6:10 pm When planning SS claiming strategy, it is wise to take into account what will happen under current law. Current law for taxation of benefits, current law for income tax rates including the scheduled increase in rates, and current law for future SS benefits. Current law for Roth conversions, current law for IRMAA. Simply deciding that something else will happen is not planning. It is daydreaming.
Assuming that nothing will change is also daydreaming. Why should that be your default assumption? It seems no more valid. Nothing's going to change? To me that seem extremely unlikely.
Because you have to make some kind of assumption in order to make a plan, and the most logical assumption is usually the status quo. We may suspect that something in our plans will change, and we'll adapt to that change as best we can if/when it occurs, but 'the more things change, the more they stay the same.'

Making plans for a change in the law to occur that has not yet occurred is, at best, speculation and, more likely, gambling. That's why discussion of proposed legislation is not allowed on the forum.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
JonnyB
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Re: Delaying Social Security: is the wisdom still relevant

Post by JonnyB »

willthrill81 wrote: Tue Jul 14, 2020 9:29 pm Because you have to make some kind of assumption in order to make a plan, and the most logical assumption is usually the status quo.
That is not "logical." It is merely your opinion and you are welcome to it. Meanwhile, I will make reasonable assumptions about the future, and I am quite confident that the status quo is not it.
Making plans for a change in the law to occur that has not yet occurred is, at best, speculation and, more likely, gambling. That's why discussion of proposed legislation is not allowed on the forum.
That is not a logical argument. The reason for not discussing proposed legislation is to prevent prevent bitter arguments as forum policy, which is fine. It has nothing to do with the validity of those arguments or the likelihood of change.
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willthrill81
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Re: Delaying Social Security: is the wisdom still relevant

Post by willthrill81 »

JonnyB wrote: Tue Jul 14, 2020 9:42 pm That is not a logical argument. The reason for not discussing proposed legislation is to prevent prevent bitter arguments as forum policy, which is fine. It has nothing to do with the validity of those arguments or the likelihood of change.
The mods don't think so.
LadyGeek wrote:The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.
viewtopic.php?t=203640
emphasis in original
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JonnyB
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Re: Delaying Social Security: is the wisdom still relevant

Post by JonnyB »

Head in the sand can be a useful strategy for some people and I won't say it is wrong for them. But personally I put it in the same category as the Efficient Market Hypothesis. No thanks.
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Nestegg_User
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Re: Delaying Social Security: is the wisdom still relevant

Post by Nestegg_User »

(Vineviz)

There isn't any difference between the SS case and the the case of those required to work during prior furloughs:
various civil service employees (GS/other pay systems/uniformed service) were required to work, but because there was no appropriation by Congress, did not get paid (and I am not talking about furloughed employees). In the same manner that they did work, and were thus covered under labor laws, they should have been paid under the normal schedule but weren't. (and, unlike those furloughed, they couldn't even file for unemployment; some states had furloughed employees file for unemployment but just didn't process them, instead waiting for the results of Congressional action).

It's clear that, especially given the citations of law given in the prior posts, that no checks would be issued for above the amounts of funds available per law. That the impact is greater (all SS recipients in that case versus all the government employees that were required to work) is just a matter of scale... and is the only real impetus for any action.

So, for me (eligible but still deferring) I use for planning purposes that the amount of SS expected will be the lower number that has been given in their statements (currently 76%, I use 75% in my future value). In our planning (the PIA's are similar, with mine slightly lower), the fact that I'm older and male along with the scheduled drop makes the highly likely claiming age to be December of year of FRA (so as to receive any deferred credits apply immediately). I've looked at results for various ages of death and both break even and resultant benefits for surviving spouse (ie, she claims surviving spouse immediately while maximizing her benefits until age 70 for overall maximum benefit). {the SS optimizer programs are highly dependent upon the discount rate used in the calculation; the actual numbers don't vary significantly between that date and age 70 benefits, so keeping more funds in our portfolio for future use versus delay is preferable for the surviving spouse (whichever it is)}
vested1
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Re: Delaying Social Security: is the wisdom still relevant

Post by vested1 »

Why must every thread dealing with the issue of either delaying or not delaying SS devolve into the "Armageddon" of the depletion of the SS trust fund in 2034 by those who insist on bringing it up. Fully two of the four pages of the responses to this question have centered on that single issue.

"It's the law, it's going to happen" is simplistic, but is unfortunately (IMHO) the only argument allowable on the forum in order to avoid speculation on possible remedies, which would lead to the inevitable arguments. Arguments still occur however, and I salute the moderators for keeping them in check. There are possible solutions, which I assume everyone is aware of. I tend to favor the belief that logic will eventually prevail and that SS is truly "Too Big to Fail", but that could be the optimist in me.

I guess the path of least resistance dictates that a prospective retiree should plan for the worst and retrofit the fixed income from SS in their three legged stool of retirement income with an adjustable leveler on the bottom of that leg to moderate expectations. If a 24% reduction in your SS benefit (in 2034) would result in disaster then perhaps more attention should be paid to other sources of income in order to pick up the slack. If you don't need that extra cushion after the much vaunted "Armageddon" date is in the rearview mirror, so much the better.

But consider this as it pertains to the original question posed by the OP, using the future benefit reduction argument. How would you feel if you didn't delay and when 2034 rolled around your SS benefit was still reduced by 24%? Would that make you feel better or worse? Maybe it's just me, but my delay which will result in 132% of my PIA at age 70 two years from now, or 77% more of the amount than I would have had I filed at 62, is a lot more appealing than 24% less of either smaller number from filing earlier. Now that you're totally confused please proceed to the next paragraph.

In my case at age 82, once the law took effect in 2034, my benefit with a 24% reduction would be 108% of PIA. If I had filed at FRA my benefit would be reduced to 76% of PIA. I'll have to remember to ask my wife which number she would prefer as my survivor. Similarly, had I filed at age 62 my early filing penalty would be increased by 24% once the law took effect.

Bottom line: More money is better. Whodathunkit?
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Re: Delaying Social Security: is the wisdom still relevant

Post by tibbitts »

vested1 wrote: Wed Jul 15, 2020 6:25 am Why must every thread dealing with the issue of either delaying or not delaying SS devolve into the "Armageddon" of the depletion of the SS trust fund in 2034 by those who insist on bringing it up.
Because whatever happens when the fund is depleted can have an effect on most of us that's thousands of times greater and far less predictable than the .04% expense ratio differences or $200 account opening bonuses that we debate for page after page. It's the gorilla in the room of retirement planning for people who must decide on a claiming strategy before having even a vague idea of what amount we'll be claiming.
smitcat
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Re: Delaying Social Security: is the wisdom still relevant

Post by smitcat »

tibbitts wrote: Wed Jul 15, 2020 7:19 am
vested1 wrote: Wed Jul 15, 2020 6:25 am Why must every thread dealing with the issue of either delaying or not delaying SS devolve into the "Armageddon" of the depletion of the SS trust fund in 2034 by those who insist on bringing it up.
Because whatever happens when the fund is depleted can have an effect on most of us that's thousands of times greater and far less predictable than the .04% expense ratio differences or $200 account opening bonuses that we debate for page after page. It's the gorilla in the room of retirement planning for people who must decide on a claiming strategy before having even a vague idea of what amount we'll be claiming.
The Bogle board is excellent at discussing all kinds of future investment issues including things like AA, fund placements , 'rules' on when you have enough, draw down strategies etc.
Due to this site I have learned a huge amount of information and gained numerous valuable opinions and tools to make retirement that much easier.
Most all of these rely on future taxes , portfolio returns , future inflation, and future SS.
Since the site does not allow discussions on future speculations (likely a very good policy) it seems very important to me to gain that information elsewhere. Just like posts where folks require more information that is legal based or medical based I would encourage people to search that information out at places other than this board.

So if you want to plan for your retirement and need to have more information and a broader view of what may be the future for SS and/or tax rates and/or the ACA I would offer the same advice - seek it elsewhere.
SS has had changes in the past, SS has over a dozen possible remedies that can be utilized alone or in combinations, other countries have faced very similar problems to their "SS systems" in the recent past.
Research the past, research the current possible remedies, and research the paths other countries have recently taken to solve this issue and make your own best fit informed choice(s).
JonnyB
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Re: Delaying Social Security: is the wisdom still relevant

Post by JonnyB »

I certainly understand the forum rule that you aren't supposed to discuss changes to current law. That is for the comity of the site. But somehow this gets translated into the notion that you are not supposed to even think about changes to current law. That's nonsense.

And that notion is inconsistently applied. Supposedly you must plan for a 25% cut in social security because that is current law. But you are not supposed to plan for the default of U.S. treasuries when that is the current law.
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

vineviz wrote: Tue Jul 14, 2020 5:31 pm
JoeRetire wrote: Tue Jul 14, 2020 3:14 pm Even with a completely depleted Trust Fund, SS will be able to pay reduced benefits, and will never actually become insolvent.
I thought I made it more clear than this: if $100 in benefits are owed but there is only $90 available to pay those benefits, the program is insolvent.
By any reasonable definition of "insolvent", that would be true only if $100 in benefits were actually "owed". But that's not how the current SS rules work. Once the trust fund is depleted, you might expect to get $100, but the current rules say you'll get less.
Issuing an IOU for $10 - even if the Treasury had the authority to do that ( it does not) wouldn’t change that.
Don't expect an IOU. The current rules don't call for that at all.
SS cannot legally pay reduced benefits without a change in the law.

Delaying benefits due to Congressional inaction would result in a default by the US Treasury in a legal obligation. I can’t figure out what about this is confusing you? Such a default is possible, but there’s no way to spin it as “legal”.
Sorry. I don't know how to say it any other way - you are confused. Your beliefs are inconsistent with the current laws. You seem to think the current laws obligate the SSA to pay out current benefits even in the face of a completely depleted Trust Fund. In that you are simply wrong.

Now I happen to think that the entire point will be moot, and that Congress will act to prevent the Trust Fund from reaching zero. But if they don't act at all, there is simply only one course of action, as defined by the Social Security Act. There is no paradox here, it''s well-defined.
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

willthrill81 wrote: Tue Jul 14, 2020 9:29 pm Because you have to make some kind of assumption in order to make a plan, and the most logical assumption is usually the status quo.
I would argue that the most logical assumption is not at all the status quo.

I would argue that the most logical assumption is a set of changes that prevent the across-the-board benefits cuts, but the details of which we could only guess. Thus, it's not beneficial to try to discuss those unknowable changes yet.
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averagedude
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Re: Delaying Social Security: is the wisdom still relevant

Post by averagedude »

I believe the smart people who are healthy has done a good job of delaying social security. I believe the dumb people are those that take social security at the earliest age and put all or most of their retirement savings in an annuity that someone sold them.
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vineviz
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Re: Delaying Social Security: is the wisdom still relevant

Post by vineviz »

JoeRetire wrote: Wed Jul 15, 2020 4:11 pm
vineviz wrote: Tue Jul 14, 2020 5:31 pm
JoeRetire wrote: Tue Jul 14, 2020 3:14 pm Even with a completely depleted Trust Fund, SS will be able to pay reduced benefits, and will never actually become insolvent.
I thought I made it more clear than this: if $100 in benefits are owed but there is only $90 available to pay those benefits, the program is insolvent.
By any reasonable definition of "insolvent", that would be true only if $100 in benefits were actually "owed". But that's not how the current SS rules work. Once the trust fund is depleted, you might expect to get $100, but the current rules say you'll get less.
This is clearly false. The Social Security Act spells out the benefits that participants are "owed", and the solvency/insolvency of the trust funds plays no roll in those calculations.

Congress can amend the Act to reduce benefits (an action we shouldn't speculate about), but if they DON'T amend the Act then participants are - in fact - "owed" benefits as currently calculated.

Look for yourself: where in the Social Security Act do you find any mention of an automatic reduction in benefits?

I'm confident you won't find it, because I've read the Act, but if I'm mistaken the easiest way to prove it is to point to the section in the code that you think will trigger an automatic benefit reduction.
JoeRetire wrote: Wed Jul 15, 2020 4:11 pm You seem to think the current laws obligate the SSA to pay out current benefits even in the face of a completely depleted Trust Fund.
You must be mixing me up with someone else.

I've already carefully explained that all of the benefits the SSA pays out must come from current SS income plus the trust fund balance.

However, the amount of benefits that the SSA owes to participants is calculated by law according to the Social Security Act. That amount is not reduced due to insolvency.

If Congress allows the trust fund to be depleted without amending the Social Security Act to reduce the benefits that participants are own the Social Security Act then the US Treasury will be in a pickle because it will be obligated to do something it is forbidden to do. Call that a conundrum or a paradox or a sticky wicket, but that's what the law says.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

vineviz wrote: Wed Jul 15, 2020 4:55 pm
JoeRetire wrote: Wed Jul 15, 2020 4:11 pm
vineviz wrote: Tue Jul 14, 2020 5:31 pm
JoeRetire wrote: Tue Jul 14, 2020 3:14 pm Even with a completely depleted Trust Fund, SS will be able to pay reduced benefits, and will never actually become insolvent.
I thought I made it more clear than this: if $100 in benefits are owed but there is only $90 available to pay those benefits, the program is insolvent.
By any reasonable definition of "insolvent", that would be true only if $100 in benefits were actually "owed". But that's not how the current SS rules work. Once the trust fund is depleted, you might expect to get $100, but the current rules say you'll get less.
This is clearly false. The Social Security Act spells out the benefits that participants are "owed", and the solvency/insolvency of the trust funds plays no roll in those calculations.

Congress can amend the Act to reduce benefits (an action we shouldn't speculate about), but if they DON'T amend the Act then participants are - in fact - "owed" benefits as currently calculated.

Look for yourself: where in the Social Security Act do you find any mention of an automatic reduction in benefits?

I'm confident you won't find it, because I've read the Act, but if I'm mistaken the easiest way to prove it is to point to the section in the code that you think will trigger an automatic benefit reduction.
JoeRetire wrote: Wed Jul 15, 2020 4:11 pm You seem to think the current laws obligate the SSA to pay out current benefits even in the face of a completely depleted Trust Fund.
You must be mixing me up with someone else.

I've already carefully explained that all of the benefits the SSA pays out must come from current SS income plus the trust fund balance.

However, the amount of benefits that the SSA owes to participants is calculated by law according to the Social Security Act. That amount is not reduced due to insolvency.

If Congress allows the trust fund to be depleted without amending the Social Security Act to reduce the benefits that participants are own the Social Security Act then the US Treasury will be in a pickle because it will be obligated to do something it is forbidden to do. Call that a conundrum or a paradox or a sticky wicket, but that's what the law says.
(shrug) I give up. I wish you well.
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tibbitts
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Re: Delaying Social Security: is the wisdom still relevant

Post by tibbitts »

averagedude wrote: Wed Jul 15, 2020 4:49 pm I believe the smart people who are healthy has done a good job of delaying social security. I believe the dumb people are those that take social security at the earliest age and put all or most of their retirement savings in an annuity that someone sold them.
If you are talking historically, you might make that argument. If someone delays only to then have his or her social security benefits drop to zero, not so much.
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#Cruncher
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Re: Delaying Social Security: is the wisdom still relevant

Post by #Cruncher »

vested1 wrote: Wed Jul 15, 2020 6:25 am... my delay which will result in 132% of my PIA at age 70 two years from now, ... In my case at age 82, once the law took effect in 2034, my benefit with a 24% reduction would be 108% of PIA. If I had filed at FRA my benefit would be reduced to 76% of PIA.
You seem to assume, vested1, that any reduction would be of the Primary Insurance Amount (PIA). More likely, I believe it would be of the actual benefit. If so, your age 70 benefit would fall from 132% of PIA to 100.32% (132% X 76%), not to 108% (132% - 100% X 24%). Regardless, in your case a reduction in 2034 wouldn't hurt unless you lived beyond age 82 when the reduction kicked in.

But consider someone born in 1964 instead of 1952 as you were. That person would receive no years of the pre-reduction benefit if he delays until age 70 since that's when the reduction would begin. But if that person claimed at age 62, he'd get 8 years of SS before the reduction. As shown below, if he died at age 82, his real return [1] from delaying would only be -1.3%.

Code: Select all

Row       Col A  ColB    Col C     Col D     Col E     Col F
  1         Born          1964
  2          NRA        67.000
  3  Year change          2034
  4       Change         (24%)
  5    Start age            62        70
  6   Pct of PIA         70.00    124.00
  7         Year  Age    Early      Late      Diff      IRR

Code: Select all

  8         2027   63    70.00              (70.00)
  9         2028   64    70.00              (70.00)
 10         2029   65    70.00              (70.00)
 11         2030   66    70.00              (70.00)
 12         2031   67    70.00              (70.00)
 13         2032   68    70.00              (70.00)
 14         2033   69    70.00              (70.00)
 15         2034   70    70.00              (70.00)
 16         2035   71    53.20     94.24     41.04 
 17         2036   72    53.20     94.24     41.04 
 18         2037   73    53.20     94.24     41.04
 19         2038   74    53.20     94.24     41.04    (19.8%)
 20         2039   75    53.20     94.24     41.04    (14.9%)
 21         2040   76    53.20     94.24     41.04    (11.3%)
 22         2041   77    53.20     94.24     41.04     (8.6%)
 23         2042   78    53.20     94.24     41.04     (6.5%)
 24         2043   79    53.20     94.24     41.04     (4.8%)
 25         2044   80    53.20     94.24     41.04     (3.4%)
 26         2045   81    53.20     94.24     41.04     (2.2%)
 27         2046   82    53.20     94.24     41.04     (1.3%) <==
 28         2047   83    53.20     94.24     41.04     (0.5%)
 29         2048   84    53.20     94.24     41.04      0.2% 
 30         2049   85    53.20     94.24     41.04      0.8% 
 31         2050   86    53.20     94.24     41.04      1.3% 
 32         2051   87    53.20     94.24     41.04      1.8% 
 33         2052   88    53.20     94.24     41.04      2.2% 
 34         2053   89    53.20     94.24     41.04      2.5% 
 35         2054   90    53.20     94.24     41.04      2.8%
This is 2.8% points less than the real return of +1.5% by age 82 if there were no reduction.

Code: Select all

Row         Year  Age    Early      Late      Diff      IRR

Code: Select all

  8         2027   63    70.00              (70.00)
  9         2028   64    70.00              (70.00)
 10         2029   65    70.00              (70.00)
 11         2030   66    70.00              (70.00)
 12         2031   67    70.00              (70.00)
 13         2032   68    70.00              (70.00)
 14         2033   69    70.00              (70.00)
 15         2034   70    70.00              (70.00)
 16         2035   71    70.00    124.00     54.00 
 17         2036   72    70.00    124.00     54.00 
 18         2037   73    70.00    124.00     54.00
 19         2038   74    70.00    124.00     54.00    (15.5%)
 20         2039   75    70.00    124.00     54.00    (10.9%)
 21         2040   76    70.00    124.00     54.00     (7.6%)
 22         2041   77    70.00    124.00     54.00     (5.1%)
 23         2042   78    70.00    124.00     54.00     (3.2%)
 24         2043   79    70.00    124.00     54.00     (1.7%)
 25         2044   80    70.00    124.00     54.00     (0.4%)
 26         2045   81    70.00    124.00     54.00      0.6% 
 27         2046   82    70.00    124.00     54.00      1.5%  <==
 28         2047   83    70.00    124.00     54.00      2.2% 
 29         2048   84    70.00    124.00     54.00      2.8% 
 30         2049   85    70.00    124.00     54.00      3.3% 
 31         2050   86    70.00    124.00     54.00      3.8% 
 32         2051   87    70.00    124.00     54.00      4.2% 
 33         2052   88    70.00    124.00     54.00      4.5% 
 34         2053   89    70.00    124.00     54.00      4.8% 
 35         2054   90    70.00    124.00     54.00      5.1%
To perform this calculation with other assumptions follow these steps:
  • Select All, Copy, and Paste [2] the following at cell A1 of a blank Excel sheet:

    Code: Select all

    Born	1964
    NRA	=MIN(67,66+MAX(0,B1-1954)/6)
    Year change	2034
    Change	-0.24
    Start age		62	70
    Pct of PIA		=100*IF(C5<$B2,1-(5/900)*MIN(36,($B2-C5)*12)-(5/1200)*MAX(0,($B2-C5)*12-36),1+(8/1200)*(C5-$B2)*12)	=100*IF(D5<$B2,1-(5/900)*MIN(36,($B2-D5)*12)-(5/1200)*MAX(0,($B2-D5)*12-36),1+(8/1200)*(D5-$B2)*12)
    Year	Age	Early	Late	Diff	IRR
    =B1+63	63	=IF($B8<=C$5,0,C$6*IF($A8<=$B$3,1,1+$B$4))	=IF($B8<=D$5,0,D$6*IF($A8<=$B$3,1,1+$B$4))	=D8-C8	=IRR(E$8:E8)
    =A8+1	=B8+1	=IF($B9<=C$5,0,C$6*IF($A9<=$B$3,1,1+$B$4))	=IF($B9<=D$5,0,D$6*IF($A9<=$B$3,1,1+$B$4))	=D9-C9	=IRR(E$8:E9)
  • Format for readability.
  • Copy cells A9:F9 down for as many rows as you wish.
  • Enter your year of birth in cell B1, and two claiming ages in cells C5:D5 (whole numbers only).
  • Enter the assumed year benefits would change and the assumed percent change (+ or -) in cells B3:B4. (For simplicity the change is assumed to occur on your birthday in whatever year you enter. If you enter a change of 0%, the year you enter doesn't matter.)
  1. The rate of return is calculated with the Excel IRR function.
  2. If you have trouble pasting, try "Paste Special" and "Text".
grok87
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Re: Delaying Social Security: is the wisdom still relevant

Post by grok87 »

#Cruncher wrote: Wed Jul 15, 2020 7:29 pm
vested1 wrote: Wed Jul 15, 2020 6:25 am... my delay which will result in 132% of my PIA at age 70 two years from now, ... In my case at age 82, once the law took effect in 2034, my benefit with a 24% reduction would be 108% of PIA. If I had filed at FRA my benefit would be reduced to 76% of PIA.
You seem to assume, vested1, that any reduction would be of the Primary Insurance Amount (PIA). More likely, I believe it would be of the actual benefit. If so, your age 70 benefit would fall from 132% of PIA to 100.32% (132% X 76%), not to 108% (132% - 100% X 24%). Regardless, in your case a reduction in 2034 wouldn't hurt unless you lived beyond age 82 when the reduction kicked in.

But consider someone born in 1964 instead of 1952 as you were. That person would receive no years of the pre-reduction benefit if he delays until age 70 since that's when the reduction would begin. But if that person claimed at age 62, he'd get 8 years of SS before the reduction. As shown below, if he died at age 82, his real return [1] from delaying would only be -1.3%.

Code: Select all

Row       Col A  ColB    Col C     Col D     Col E     Col F
  1         Born          1964
  2          NRA        67.000
  3  Year change          2034
  4       Change         (24%)
  5    Start age            62        70
  6   Pct of PIA         70.00    124.00
  7         Year  Age    Early      Late      Diff      IRR

Code: Select all

  8         2027   63    70.00              (70.00)
  9         2028   64    70.00              (70.00)
 10         2029   65    70.00              (70.00)
 11         2030   66    70.00              (70.00)
 12         2031   67    70.00              (70.00)
 13         2032   68    70.00              (70.00)
 14         2033   69    70.00              (70.00)
 15         2034   70    70.00              (70.00)
 16         2035   71    53.20     94.24     41.04 
 17         2036   72    53.20     94.24     41.04 
 18         2037   73    53.20     94.24     41.04
 19         2038   74    53.20     94.24     41.04    (19.8%)
 20         2039   75    53.20     94.24     41.04    (14.9%)
 21         2040   76    53.20     94.24     41.04    (11.3%)
 22         2041   77    53.20     94.24     41.04     (8.6%)
 23         2042   78    53.20     94.24     41.04     (6.5%)
 24         2043   79    53.20     94.24     41.04     (4.8%)
 25         2044   80    53.20     94.24     41.04     (3.4%)
 26         2045   81    53.20     94.24     41.04     (2.2%)
 27         2046   82    53.20     94.24     41.04     (1.3%) <==
 28         2047   83    53.20     94.24     41.04     (0.5%)
 29         2048   84    53.20     94.24     41.04      0.2% 
 30         2049   85    53.20     94.24     41.04      0.8% 
 31         2050   86    53.20     94.24     41.04      1.3% 
 32         2051   87    53.20     94.24     41.04      1.8% 
 33         2052   88    53.20     94.24     41.04      2.2% 
 34         2053   89    53.20     94.24     41.04      2.5% 
 35         2054   90    53.20     94.24     41.04      2.8%
This is 2.8% points less than the real return of +1.5% by age 82 if there were no reduction.

Code: Select all

Row         Year  Age    Early      Late      Diff      IRR

Code: Select all

  8         2027   63    70.00              (70.00)
  9         2028   64    70.00              (70.00)
 10         2029   65    70.00              (70.00)
 11         2030   66    70.00              (70.00)
 12         2031   67    70.00              (70.00)
 13         2032   68    70.00              (70.00)
 14         2033   69    70.00              (70.00)
 15         2034   70    70.00              (70.00)
 16         2035   71    70.00    124.00     54.00 
 17         2036   72    70.00    124.00     54.00 
 18         2037   73    70.00    124.00     54.00
 19         2038   74    70.00    124.00     54.00    (15.5%)
 20         2039   75    70.00    124.00     54.00    (10.9%)
 21         2040   76    70.00    124.00     54.00     (7.6%)
 22         2041   77    70.00    124.00     54.00     (5.1%)
 23         2042   78    70.00    124.00     54.00     (3.2%)
 24         2043   79    70.00    124.00     54.00     (1.7%)
 25         2044   80    70.00    124.00     54.00     (0.4%)
 26         2045   81    70.00    124.00     54.00      0.6% 
 27         2046   82    70.00    124.00     54.00      1.5%  <==
 28         2047   83    70.00    124.00     54.00      2.2% 
 29         2048   84    70.00    124.00     54.00      2.8% 
 30         2049   85    70.00    124.00     54.00      3.3% 
 31         2050   86    70.00    124.00     54.00      3.8% 
 32         2051   87    70.00    124.00     54.00      4.2% 
 33         2052   88    70.00    124.00     54.00      4.5% 
 34         2053   89    70.00    124.00     54.00      4.8% 
 35         2054   90    70.00    124.00     54.00      5.1%
To perform this calculation with other assumptions follow these steps:
  • Select All, Copy, and Paste [2] the following at cell A1 of a blank Excel sheet:

    Code: Select all

    Born	1964
    NRA	=MIN(67,66+MAX(0,B1-1954)/6)
    Year change	2034
    Change	-0.24
    Start age		62	70
    Pct of PIA		=100*IF(C5<$B2,1-(5/900)*MIN(36,($B2-C5)*12)-(5/1200)*MAX(0,($B2-C5)*12-36),1+(8/1200)*(C5-$B2)*12)	=100*IF(D5<$B2,1-(5/900)*MIN(36,($B2-D5)*12)-(5/1200)*MAX(0,($B2-D5)*12-36),1+(8/1200)*(D5-$B2)*12)
    Year	Age	Early	Late	Diff	IRR
    =B1+63	63	=IF($B8<=C$5,0,C$6*IF($A8<=$B$3,1,1+$B$4))	=IF($B8<=D$5,0,D$6*IF($A8<=$B$3,1,1+$B$4))	=D8-C8	=IRR(E$8:E8)
    =A8+1	=B8+1	=IF($B9<=C$5,0,C$6*IF($A9<=$B$3,1,1+$B$4))	=IF($B9<=D$5,0,D$6*IF($A9<=$B$3,1,1+$B$4))	=D9-C9	=IRR(E$8:E9)
  • Format for readability.
  • Copy cells A9:F9 down for as many rows as you wish.
  • Enter your year of birth in cell B1, and two claiming ages in cells C5:D5 (whole numbers only).
  • Enter the assumed year benefits would change and the assumed percent change (+ or -) in cells B3:B4. (For simplicity the change is assumed to occur on your birthday in whatever year you enter. If you enter a change of 0%, the year you enter doesn't matter.)
  1. The rate of return is calculated with the Excel IRR function.
  2. If you have trouble pasting, try "Paste Special" and "Text".
thanks #cruncher. i think you've validated my less rigorous analysis posted upthread
viewtopic.php?f=2&t=319613#p5358043
cheers,
grok
RIP Mr. Bogle.
smitcat
Posts: 6466
Joined: Mon Nov 07, 2016 10:51 am

Re: Delaying Social Security: is the wisdom still relevant

Post by smitcat »

grok87 wrote: Wed Jul 15, 2020 7:40 pm
#Cruncher wrote: Wed Jul 15, 2020 7:29 pm
vested1 wrote: Wed Jul 15, 2020 6:25 am... my delay which will result in 132% of my PIA at age 70 two years from now, ... In my case at age 82, once the law took effect in 2034, my benefit with a 24% reduction would be 108% of PIA. If I had filed at FRA my benefit would be reduced to 76% of PIA.
You seem to assume, vested1, that any reduction would be of the Primary Insurance Amount (PIA). More likely, I believe it would be of the actual benefit. If so, your age 70 benefit would fall from 132% of PIA to 100.32% (132% X 76%), not to 108% (132% - 100% X 24%). Regardless, in your case a reduction in 2034 wouldn't hurt unless you lived beyond age 82 when the reduction kicked in.

But consider someone born in 1964 instead of 1952 as you were. That person would receive no years of the pre-reduction benefit if he delays until age 70 since that's when the reduction would begin. But if that person claimed at age 62, he'd get 8 years of SS before the reduction. As shown below, if he died at age 82, his real return [1] from delaying would only be -1.3%.

Code: Select all

Row       Col A  ColB    Col C     Col D     Col E     Col F
  1         Born          1964
  2          NRA        67.000
  3  Year change          2034
  4       Change         (24%)
  5    Start age            62        70
  6   Pct of PIA         70.00    124.00
  7         Year  Age    Early      Late      Diff      IRR

Code: Select all

  8         2027   63    70.00              (70.00)
  9         2028   64    70.00              (70.00)
 10         2029   65    70.00              (70.00)
 11         2030   66    70.00              (70.00)
 12         2031   67    70.00              (70.00)
 13         2032   68    70.00              (70.00)
 14         2033   69    70.00              (70.00)
 15         2034   70    70.00              (70.00)
 16         2035   71    53.20     94.24     41.04 
 17         2036   72    53.20     94.24     41.04 
 18         2037   73    53.20     94.24     41.04
 19         2038   74    53.20     94.24     41.04    (19.8%)
 20         2039   75    53.20     94.24     41.04    (14.9%)
 21         2040   76    53.20     94.24     41.04    (11.3%)
 22         2041   77    53.20     94.24     41.04     (8.6%)
 23         2042   78    53.20     94.24     41.04     (6.5%)
 24         2043   79    53.20     94.24     41.04     (4.8%)
 25         2044   80    53.20     94.24     41.04     (3.4%)
 26         2045   81    53.20     94.24     41.04     (2.2%)
 27         2046   82    53.20     94.24     41.04     (1.3%) <==
 28         2047   83    53.20     94.24     41.04     (0.5%)
 29         2048   84    53.20     94.24     41.04      0.2% 
 30         2049   85    53.20     94.24     41.04      0.8% 
 31         2050   86    53.20     94.24     41.04      1.3% 
 32         2051   87    53.20     94.24     41.04      1.8% 
 33         2052   88    53.20     94.24     41.04      2.2% 
 34         2053   89    53.20     94.24     41.04      2.5% 
 35         2054   90    53.20     94.24     41.04      2.8%
This is 2.8% points less than the real return of +1.5% by age 82 if there were no reduction.

Code: Select all

Row         Year  Age    Early      Late      Diff      IRR

Code: Select all

  8         2027   63    70.00              (70.00)
  9         2028   64    70.00              (70.00)
 10         2029   65    70.00              (70.00)
 11         2030   66    70.00              (70.00)
 12         2031   67    70.00              (70.00)
 13         2032   68    70.00              (70.00)
 14         2033   69    70.00              (70.00)
 15         2034   70    70.00              (70.00)
 16         2035   71    70.00    124.00     54.00 
 17         2036   72    70.00    124.00     54.00 
 18         2037   73    70.00    124.00     54.00
 19         2038   74    70.00    124.00     54.00    (15.5%)
 20         2039   75    70.00    124.00     54.00    (10.9%)
 21         2040   76    70.00    124.00     54.00     (7.6%)
 22         2041   77    70.00    124.00     54.00     (5.1%)
 23         2042   78    70.00    124.00     54.00     (3.2%)
 24         2043   79    70.00    124.00     54.00     (1.7%)
 25         2044   80    70.00    124.00     54.00     (0.4%)
 26         2045   81    70.00    124.00     54.00      0.6% 
 27         2046   82    70.00    124.00     54.00      1.5%  <==
 28         2047   83    70.00    124.00     54.00      2.2% 
 29         2048   84    70.00    124.00     54.00      2.8% 
 30         2049   85    70.00    124.00     54.00      3.3% 
 31         2050   86    70.00    124.00     54.00      3.8% 
 32         2051   87    70.00    124.00     54.00      4.2% 
 33         2052   88    70.00    124.00     54.00      4.5% 
 34         2053   89    70.00    124.00     54.00      4.8% 
 35         2054   90    70.00    124.00     54.00      5.1%
To perform this calculation with other assumptions follow these steps:
  • Select All, Copy, and Paste [2] the following at cell A1 of a blank Excel sheet:

    Code: Select all

    Born	1964
    NRA	=MIN(67,66+MAX(0,B1-1954)/6)
    Year change	2034
    Change	-0.24
    Start age		62	70
    Pct of PIA		=100*IF(C5<$B2,1-(5/900)*MIN(36,($B2-C5)*12)-(5/1200)*MAX(0,($B2-C5)*12-36),1+(8/1200)*(C5-$B2)*12)	=100*IF(D5<$B2,1-(5/900)*MIN(36,($B2-D5)*12)-(5/1200)*MAX(0,($B2-D5)*12-36),1+(8/1200)*(D5-$B2)*12)
    Year	Age	Early	Late	Diff	IRR
    =B1+63	63	=IF($B8<=C$5,0,C$6*IF($A8<=$B$3,1,1+$B$4))	=IF($B8<=D$5,0,D$6*IF($A8<=$B$3,1,1+$B$4))	=D8-C8	=IRR(E$8:E8)
    =A8+1	=B8+1	=IF($B9<=C$5,0,C$6*IF($A9<=$B$3,1,1+$B$4))	=IF($B9<=D$5,0,D$6*IF($A9<=$B$3,1,1+$B$4))	=D9-C9	=IRR(E$8:E9)
  • Format for readability.
  • Copy cells A9:F9 down for as many rows as you wish.
  • Enter your year of birth in cell B1, and two claiming ages in cells C5:D5 (whole numbers only).
  • Enter the assumed year benefits would change and the assumed percent change (+ or -) in cells B3:B4. (For simplicity the change is assumed to occur on your birthday in whatever year you enter. If you enter a change of 0%, the year you enter doesn't matter.)
  1. The rate of return is calculated with the Excel IRR function.
  2. If you have trouble pasting, try "Paste Special" and "Text".
thanks #cruncher. i think you've validated my less rigorous analysis posted upt
hread
viewtopic.php?f=2&t=319613#p5358043
cheers,
grok
How would you account for these potential issues with this case:
- Roth conversions prior to SS
- the after tax 'spendable' money rather than the total dollars
- the affects of early filing if one spouse were to have an early demise
- what it would mean tax wise to a potential heir
And of course the likelihood that you were exactly the same SS qualifying age as when the SS rules changed and that those rules changed in this exact manner?
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

tibbitts wrote: Wed Jul 15, 2020 6:45 pmIf someone delays only to then have his or her social security benefits drop to zero, not so much.
Drop to zero? What is the scenario which leads to that outcome?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
smitcat
Posts: 6466
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Re: Delaying Social Security: is the wisdom still relevant

Post by smitcat »

JoeRetire wrote: Thu Jul 16, 2020 7:17 am
tibbitts wrote: Wed Jul 15, 2020 6:45 pmIf someone delays only to then have his or her social security benefits drop to zero, not so much.
Drop to zero? What is the scenario which leads to that outcome?
"Drop to zero? What is the scenario which leads to that outcome?"
Death?
wolf359
Posts: 2194
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Re: Delaying SSi: is the wisdom still relevant

Post by wolf359 »

David Jay wrote: Tue Jul 07, 2020 9:19 pm I think it is safe to say that if changes are made, it will be for future generations, not for current or soon-to-be retirees. Look at the current FRA age increases as an example: It affected those born in 1955 (turning 62 in 2017) and the change was implemented in 1983 when said individual was Age 32.
The 1983 Social Security law was passed after a bi-partisan commission studied the problem for several years. The resulting compromise has lasted until the current day. However, in today's hyper-partisan environment, it is difficult to conceive that a similar bi-partisan effort could succeed. Rather than getting into specifics (and violating forum rules), I'd suggest that it is best to be prepared for any changes, even if it affects current retirees.

The main reason for this is that under current law, cuts will happen across the board automatically. In the absence of any changes to the law, everyone gets a 25% cut around 2034.

That estimate is from the 2020 Social Security Trustee's report, which is based on 2019 numbers. I anticipate that the large unemployment numbers in the United States this year has affected the collection of the payroll tax which funds Social Security. Next year's report is likely to be ugly. The actual amount of time Congress has to work with depends upon how the economy recovers, and the long-term costs and impact of Covid (which didn't play into any previous projections.) Covid may: 1) reduce tax revenues; 2) encourage people to claim earlier because they're out of options; 3) reduce the number of payees because it disproportionately affects older Americans; 4) increase Medicare, non-Medicare insurance, and uninsured medical costs such that it swallows the Social Security payment; 5) or some of these in various combinations or degrees.

TLDR: Be prepared for any changes, even those that affect current retirees. If it happens, it's not likely until about 2030 or so, but that's only 10 years away. There's still time to plan for your individual situation.
orlandoman
Posts: 511
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Re: Delaying Social Security: is the wisdom still relevant

Post by orlandoman »

Article today in USA Today 'The coronavirus pandemic could lead to Social Security cuts happening sooner than you think' https://www.usatoday.com/story/money/20 ... 112154662/

'Because nobody knows what will happen, it's a good idea to plan on benefits being reduced as you're preparing for retirement.'
"Don't Believe Everything You Think"
tibbitts
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Re: Delaying Social Security: is the wisdom still relevant

Post by tibbitts »

smitcat wrote: Thu Jul 16, 2020 7:34 am
JoeRetire wrote: Thu Jul 16, 2020 7:17 am
tibbitts wrote: Wed Jul 15, 2020 6:45 pmIf someone delays only to then have his or her social security benefits drop to zero, not so much.
Drop to zero? What is the scenario which leads to that outcome?
"Drop to zero? What is the scenario which leads to that outcome?"
Death?
Without straying into prohibited subjects, I'm sure everyone can envision scenarios where some recipients' SS payments could be reduced by a much higher percentage than others. Although I still suggest that generally the current law and the reductions it provides for everyone should be the defaults for planning, personally I'm using more conservative estimates, and in the absence of new information will probably claim earlier as a result.
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

smitcat wrote: Thu Jul 16, 2020 7:34 am
JoeRetire wrote: Thu Jul 16, 2020 7:17 am
tibbitts wrote: Wed Jul 15, 2020 6:45 pmIf someone delays only to then have his or her social security benefits drop to zero, not so much.
Drop to zero? What is the scenario which leads to that outcome?
"Drop to zero? What is the scenario which leads to that outcome?"
Death?
That's one heck of a euphemism!
"How's Henry?" "Well, his Social Security benefits dropped to zero last month."
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

tibbitts wrote: Thu Jul 16, 2020 8:57 am
smitcat wrote: Thu Jul 16, 2020 7:34 am
JoeRetire wrote: Thu Jul 16, 2020 7:17 am
tibbitts wrote: Wed Jul 15, 2020 6:45 pmIf someone delays only to then have his or her social security benefits drop to zero, not so much.
Drop to zero? What is the scenario which leads to that outcome?
"Drop to zero? What is the scenario which leads to that outcome?"
Death?
Without straying into prohibited subjects, I'm sure everyone can envision scenarios where some recipients' SS payments could be reduced by a much higher percentage than others.
Under the current laws, I can't envision such a scenario... which is why I asked.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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willthrill81
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Re: Delaying Social Security: is the wisdom still relevant

Post by willthrill81 »

JoeRetire wrote: Thu Jul 16, 2020 2:17 pm
tibbitts wrote: Thu Jul 16, 2020 8:57 am
smitcat wrote: Thu Jul 16, 2020 7:34 am
JoeRetire wrote: Thu Jul 16, 2020 7:17 am
tibbitts wrote: Wed Jul 15, 2020 6:45 pmIf someone delays only to then have his or her social security benefits drop to zero, not so much.
Drop to zero? What is the scenario which leads to that outcome?
"Drop to zero? What is the scenario which leads to that outcome?"
Death?
Without straying into prohibited subjects, I'm sure everyone can envision scenarios where some recipients' SS payments could be reduced by a much higher percentage than others.
Under the current laws, I can't envision such a scenario... which is why I asked.
Laws are malleable though.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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JoeRetire
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Re: Delaying Social Security: is the wisdom still relevant

Post by JoeRetire »

willthrill81 wrote: Thu Jul 16, 2020 2:50 pm
JoeRetire wrote: Thu Jul 16, 2020 2:17 pm
tibbitts wrote: Thu Jul 16, 2020 8:57 am
smitcat wrote: Thu Jul 16, 2020 7:34 am
JoeRetire wrote: Thu Jul 16, 2020 7:17 am
Drop to zero? What is the scenario which leads to that outcome?
"Drop to zero? What is the scenario which leads to that outcome?"
Death?
Without straying into prohibited subjects, I'm sure everyone can envision scenarios where some recipients' SS payments could be reduced by a much higher percentage than others.
Under the current laws, I can't envision such a scenario... which is why I asked.
Laws are malleable though.
Of course. But if you wish to consider future changes through law changes, then virtually anything is possible. Which is why I asked. Still waiting for an answer...
Last edited by JoeRetire on Thu Jul 16, 2020 4:32 pm, edited 1 time in total.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
smitcat
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Re: Delaying Social Security: is the wisdom still relevant

Post by smitcat »

JoeRetire wrote: Thu Jul 16, 2020 3:21 pm
willthrill81 wrote: Thu Jul 16, 2020 2:50 pm
JoeRetire wrote: Thu Jul 16, 2020 2:17 pm
tibbitts wrote: Thu Jul 16, 2020 8:57 am
smitcat wrote: Thu Jul 16, 2020 7:34 am

"Drop to zero? What is the scenario which leads to that outcome?"
Death?
Without straying into prohibited subjects, I'm sure everyone can envision scenarios where some recipients' SS payments could be reduced by a much higher percentage than others.
Under the current laws, I can't envision such a scenario... which is why I asked.
Laws are malleable though.
Of course. But if you wish to consider future changes through law changes, then virtually anything is possible. Which is why I asked.
If we did plan for zero SS and it came through at either the unreduced or reduced rate as seen on our SS statements we would have done a very poor job of tax and income management.
There can be clear and direct downsides to planning for zero SS... choose wisely.
FactualFran
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Re: Delaying Social Security: is the wisdom still relevant

Post by FactualFran »

JonnyB wrote: Wed Jul 15, 2020 10:45 am And that notion is inconsistently applied. Supposedly you must plan for a 25% cut in social security because that is current law. But you are not supposed to plan for the default of U.S. treasuries when that is the current law.
In that case, some of us are not doing what we supposedly must do.

What current law will cause U.S. Treasuries (plural, generally indicating Treasury securities) to default? Or is it that the U.S. Treasury (singular, generally indicating the Department) will default on an obligation?
afan
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Re: Delaying Social Security: is the wisdom still relevant

Post by afan »

Yes. But one could be far off if planning for getting full or reduced benefits and ending up with zero as well.

Difficult to plan when the outcome is subject to change by the political branches.

My base plan includes SS with the reduced benefits expected under current law.
It assumes income tax rates go back up as provided under current law.
I do scenarios with zero SS just as I model 1% real return on investments, although I hope the market does better over decades.

Just as I don't bother to plan for 4% real returns, I don't plan for full SS. If that happens, great. But I don't count on it.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
afan
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Re: Delaying Social Security: is the wisdom still relevant

Post by afan »

smitcat wrote: Thu Jul 16, 2020 6:22 am

How would you account for these potential issues with this case:
- Roth conversions prior to SS
- the after tax 'spendable' money rather than the total dollars
- the affects of early filing if one spouse were to have an early demise
- what it would mean tax wise to a potential heir
And of course the likelihood that you were exactly the same SS qualifying age as when the SS rules changed and that those rules changed in this exact manner?
The advisability of doing Roth conversions depends on current and future tax brackets and future income. Reductions in SS benefits would reduce future income and hence tax paid on that income. It might shift one to a lower tax bracket, in which case that would argue against Roth conversions. It might leave one in the same tax bracket, in which case the Roth analysis would not be affected.

After tax spendable money would go down if SS were reduced since the tax rate, under current law, is less than 100%. Depending on income, IRMAA may change. But IRMAA also has brackets, so a reduction in income may or may not drop to a lower adjustment. The total range of IRMAA for a couple filing jointly is rather small, so it may not make a big difference.


Depends on whether it is a higher or lower earning spouse. One would have to run the numbers either way.

Heirs might benefit from Roth conversions if their income tax rates are higher than those paid on the converted amounts. If their rates were lower, then heirs might benefit from thier parents keeping the money in tax deferred accounts. In the estate is large enough to be subject to estate taxes, then it could be better to do conversions and pay the income tax but save on estate taxes, rather than keep the money in tax deferred and subject it to both taxes.

Don't know what your heirs' incomes will be 20 years from now? Don't know how long you will live or which member of a couple will die first? Part of the reason it is difficult to calculate one's way to the correct claiming strategy.
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KarenC
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Re: Delaying Social Security: is the wisdom still relevant

Post by KarenC »

FactualFran wrote: Thu Jul 16, 2020 6:31 pm […] What current law will cause U.S. Treasuries (plural, generally indicating Treasury securities) to default? […]
FWIW:
In American English, bills, notes, bonds, and securities issued by the United States Department of the Treasury are Treasurys­. […]
https://grammarist.com/spelling/treasurys/
"The first principle is that you must not fool yourself, and you are the easiest person to fool." — Richard P. Feynman
JonnyB
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Re: Delaying Social Security: is the wisdom still relevant

Post by JonnyB »

KarenC wrote: Thu Jul 16, 2020 11:02 pm In American English, bills, notes, bonds, and securities issued by the United States Department of the Treasury are Treasurys­. […]
Hmmm. So how about Treasury securitys.
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vineviz
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Re: Delaying Social Security: is the wisdom still relevant

Post by vineviz »

KarenC wrote: Thu Jul 16, 2020 11:02 pm
FactualFran wrote: Thu Jul 16, 2020 6:31 pm […] What current law will cause U.S. Treasuries (plural, generally indicating Treasury securities) to default? […]
FWIW:
In American English, bills, notes, bonds, and securities issued by the United States Department of the Treasury are Treasurys­. […]
https://grammarist.com/spelling/treasurys/
Grammarist has got this one incorrect.

Some publications have "Treasurys" as their preferred usage but "Treasuries" is by far the most common usage in American English. Both have their fans, of course, but virtually all investment professionals use "Treasuries" and "treasuries".

Heck, even the US Treasury uses "Treasuries": https://www.treasury.gov/connect/blog/P ... arket.aspx
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Tejfyy
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Re: Delaying Social Security: is the wisdom still relevant

Post by Tejfyy »

vested1 wrote: Wed Jul 15, 2020 6:25 am Why must every thread dealing with the issue of either delaying or not delaying SS devolve into the "Armageddon" of the depletion of the SS trust fund in 2034 by those who insist on bringing it up. Fully two of the four pages of the responses to this question have centered on that single issue.

In my case at age 82, once the law took effect in 2034, my benefit with a 24% reduction would be 108% of PIA. If I had filed at FRA my benefit would be reduced to 76% of PIA. I'll have to remember to ask my wife which number she would prefer as my survivor. Similarly, had I filed at age 62 my early filing penalty would be increased by 24% once the law took effect.

Bottom line: More money is better. Whodathunkit?
As the OP I too noticed the devolution of the topic. Your point is well taken. :sharebeer.
JBTX
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Re: Delaying Social Security: is the wisdom still relevant

Post by JBTX »

willthrill81 wrote: Tue Jul 14, 2020 9:29 pm
JonnyB wrote: Tue Jul 14, 2020 8:42 pm
afan wrote: Tue Jul 14, 2020 6:10 pm When planning SS claiming strategy, it is wise to take into account what will happen under current law. Current law for taxation of benefits, current law for income tax rates including the scheduled increase in rates, and current law for future SS benefits. Current law for Roth conversions, current law for IRMAA. Simply deciding that something else will happen is not planning. It is daydreaming.
Assuming that nothing will change is also daydreaming. Why should that be your default assumption? It seems no more valid. Nothing's going to change? To me that seem extremely unlikely.
Because you have to make some kind of assumption in order to make a plan, and the most logical assumption is usually the status quo. We may suspect that something in our plans will change, and we'll adapt to that change as best we can if/when it occurs, but 'the more things change, the more they stay the same.'

Making plans for a change in the law to occur that has not yet occurred is, at best, speculation and, more likely, gambling. That's why discussion of proposed legislation is not allowed on the forum.
So current law with social security involves funding depletion in early mid 2030s. This isn't speculation. This is fact. Either by law, or logical extension, if no changes benefits would be reduced. Is that what we should use for planning? That is current law.

Based on current law I should file as soon as I hit 62.

Current law is that income taxes increase again after 2026. So I assume when doing traditional / Roth planning you use the post 2026 rates, correct? (That's a trick question, I've seen you argue multiple times that the appkicable retirement income tax rate will be 12%).
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Re: Delaying Social Security: is the wisdom still relevant

Post by JBTX »

JonnyB wrote: Tue Jul 14, 2020 9:42 pm
willthrill81 wrote: Tue Jul 14, 2020 9:29 pm Because you have to make some kind of assumption in order to make a plan, and the most logical assumption is usually the status quo.
That is not "logical." It is merely your opinion and you are welcome to it. Meanwhile, I will make reasonable assumptions about the future, and I am quite confident that the status quo is not it.
Making plans for a change in the law to occur that has not yet occurred is, at best, speculation and, more likely, gambling. That's why discussion of proposed legislation is not allowed on the forum.
That is not a logical argument. The reason for not discussing proposed legislation is to prevent prevent bitter arguments as forum policy, which is fine. It has nothing to do with the validity of those arguments or the likelihood of change.
I have some sympathy for your POV. I Turn 62 before the SS "bust" and turn 70 probably after the bust. So if I am to assume no changes, I would likely file at 62 to get 5-7 pre bust years in.

In the past I would have assumed it highly unlikely that nothing changes before then. Surely there will be some sort of intervention. Now I am not so sure.

It is a vexing question. I'm not sure it is safe to assume that current payout rates will be there post bust. To assume so would not be assuming "current law". And if you assume there will be intervention to "fix" the system, then any scenario is fair game.
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FiveK
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Re: Delaying Social Security: is the wisdom still relevant

Post by FiveK »

JBTX wrote: Tue Jul 21, 2020 9:14 pm So current law with social security involves funding depletion in early mid 2030s. This isn't speculation. This is fact. Either by law, or logical extension, if no changes benefits would be reduced. Is that what we should use for planning? That is current law.
One may use whatever future benefit rates, tax rates, etc., that one wishes when deciding actions one should take now.

Forum rules just say there shouldn't be discussions of "US or world economic, political, tax, health care [or] climate policies" that might affect such rates.
afan
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Re: Delaying Social Security: is the wisdom still relevant

Post by afan »

FiveK wrote: Tue Jul 21, 2020 9:54 pm
JBTX wrote: Tue Jul 21, 2020 9:14 pm So current law with social security involves funding depletion in early mid 2030s. This isn't speculation. This is fact. Either by law, or logical extension, if no changes benefits would be reduced. Is that what we should use for planning? That is current law.
One may use whatever future benefit rates, tax rates, etc., that one wishes when deciding actions one should take now.

Forum rules just say there shouldn't be discussions of "US or world economic, political, tax, health care [or] climate policies" that might affect such rates.
I suggest using the current laws, including fund depletion in 2034, tax increases, no changes in the SSA or Anti Deficiency Act and no new Court decisions that would change the analysis of the CRS report.

Then stress test those plans by assuming some combinations of deeper cuts in SS benefits, poor financial markets returns, even higher taxes and increases in personal expenses.

To feel better, you can also include assumptions of better outcomes- SS benefits go up, taxes go down, markets do great, or you inherit from an unknown rich relative.

If any of that happens, wonderful. Just have a plan of what you will do if current law stays the same or changes in ways that do not benefit you.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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