Wait until 70 to take social security?

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You Know What I Mean
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Re: Wait until 70 to take social security?

Post by You Know What I Mean »

Escapevelocity wrote: Sun Nov 15, 2020 12:33 pm
papiper wrote: Sun Nov 15, 2020 8:43 am With a younger wife with lower earnings, it's a lot better to wait if other conditions let you unless she has a low life expectancy. The future value from her point of view is huge. For you it's neutral if you live into your 80's. She also would start at 67 - no need to wait until she is 70 to take 1/2 of yours.
I might be wrong, but from what I've researched you can't collect spousal benefit until the primary beneficiary begins collecting.
You are correct, but I think you have missed something. The wife is four years younger in this case. When she is 67, her husband will be 71 and will have filed for his benefit already. So, papiper's comment is valid.
Beehave
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Re: Wait until 70 to take social security?

Post by Beehave »

Any apples-to-apples comparison is difficult not only because of the direct financial differences between Social Security income and stock investments, but also because of the implications of the psychological differences between holding these different types of assets and the fact that each individual's reaction will differ not only because of their personality but also because of their financial and family situations. Thus, "I did X and look how happy I am with that choice" is anecdotally interesting and useful, but also limited in usefulness because of the individuality of all of these circumstances and sequence of returns that happened to be at play during the period of analysis.

For example - - I took a pension rather than lump sum about a decade and a half ago. It enabled me to be more aggressive towards stocks in my other resource allocations than I otherwise might have been. Moreover, despite having received the monthly income for the 15 or so years, the "current value" (in terms of replacement cost) for the pension if starting fresh if today is greater than its value a decade and a half ago. But even having these facts at hand, it is not possible for me to compare in retrospect the choice I was presented with a decade and a half ago to come up with a dollar-to-dollar what-if comparison. How would I have really reacted in 2009 when the market crashed if I had lump-summed and did not have that monthly pension income? With the security of that monthly income what I did in fact was rebalance into that downturn, and I came out quite alright. Would I have done the same without that monthly income? I don't know and can't know. If OP waits to 70 and the market tanks afterwards will the added monthly income make for aggressive stock-buying rather than panicked inaction or selling? Will there be such a drop? Will Social Security benefits and taxation regulations stay the same or somehow change? Will stocks soar while inflation eats away at the actual buying power of Social Security payments despite the COLA feature? We don't know and cannot know.

The two basic things this says to me are:

- 1 - Your personality matters MUCH more in this decision than the actuarial assumptions that you must make to to come up with comparison figures about the choice of whether to delay taking SS about future inflation, future stock prices, future of Social Security funding, future of capital gains/dividend/income/Social Security benefit taxation policies.

- 2 - When you do not and cannot know the future, it makes sense to look at the spectrum of reasonable options available to you and diversify your holdings prudently by looking at future possibilities and using the diversification as best you can to provide growth together with protection against reasonably possible adversities.
bikechuck
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Re: Wait until 70 to take social security?

Post by bikechuck »

vineviz wrote: Sun Nov 15, 2020 1:25 pm
bikechuck wrote: Sun Nov 15, 2020 12:52 pm
I agree with this analysis with one exception. The SS Trust Fund is depleting so I do not consider waiting to be equivalent to "a risk free investment".
A depleting trust fund doesn’t change your calculated benefit. Only a change in the Social Security Act can do that.
Once the trust fund is depleted we are in uncharted territory so I am reluctant to consider the 8% growth in benefits between full retirement age and age 70 as "risk free". I am hopeful that things do not unravel which is why I have chosen to defer my benefit until the age of 70. It could be a wild and interesting ride before we know how this plays out.
Escapevelocity
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Re: Wait until 70 to take social security?

Post by Escapevelocity »

You Know What I Mean wrote: Mon Nov 16, 2020 9:22 am
Escapevelocity wrote: Sun Nov 15, 2020 12:33 pm
papiper wrote: Sun Nov 15, 2020 8:43 am With a younger wife with lower earnings, it's a lot better to wait if other conditions let you unless she has a low life expectancy. The future value from her point of view is huge. For you it's neutral if you live into your 80's. She also would start at 67 - no need to wait until she is 70 to take 1/2 of yours.
I might be wrong, but from what I've researched you can't collect spousal benefit until the primary beneficiary begins collecting.
You are correct, but I think you have missed something. The wife is four years younger in this case. When she is 67, her husband will be 71 and will have filed for his benefit already. So, papiper's comment is valid.
Ah, thanks for that clarification! My wife and I are the same age so I have a mental block with that. In my case she was a stay at home Mom. I will probably wait until 70 to collect and she would wait as well to 70 since her own earnings record does not amount to anything. Her spousal benefit will be based on my age 67 benefit though so it tops out earlier than mine.
protagonist
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Re: Wait until 70 to take social security?

Post by protagonist »

midareff wrote: Mon Nov 16, 2020 7:47 am

The SS monthly would have gained 8% annually, the money I didn't use to replace that benefit grew at over 9% annually and continues to do so through today, I'll be 73 next month.

That completely secure 8% annual figure looks pretty good these days. I. too, probably would have done better if I took SS at 62, but that is because of the luck of a raging bull market with its associated risk. I feel like, given the info available to me when I turned 62 in 2014, I definitely made the right decision to defer, despite the fact that I would have more money today if I didn't.
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Re: Wait until 70 to take social security?

Post by cryingshame »

chuckb84 wrote: Mon Nov 16, 2020 1:06 am
protagonist wrote: Sun Nov 15, 2020 11:15 am
A huge mistake I humbly believe that many people make on this site is equating "maximum wealth" with "happiness" and "better life"...the latter is much more correlated with peace of mind. In that context, deciding when to start benefits is easy.

He who dies with the most toys does not always win. He who dies happily and in peace does.
Exactly this! I knowingly and with eyes wide open took SS at 62, because:

1. One dollar for a healthy 62 year old is more fun than extra money in your 80's. I knew I was signing up for less money, but more time in retirement, and a retirement that started when I was athletic and healthy.

2. SS is an income stream, not an asset. SS is not inheritable. I didn't want to drawdown savings and "make it up later" from bigger SS payments. What if I didn't live to make up the savings drawdown?

3. SS benefits, under current law, will drop by 25% in 2031. So getting benefits for longer before that date really changes all those break even calculations. I have no idea if this will actually happen, nor do we discuss hypothetical tax law changes here, but that's the current law.


I totally get all your reasoning....I most likely will delay to 65 due to the ACA clift. After that I will take it year by year, if the market would take a prolonged downturn I feel I would take SS ...To me I would rather my investments not dwindle as quick versus trusting the future of SS . I would hopefully also have more opportunities for investments in a down market be it real estate...stocks or something else by not having as much of a draw down on my portfolio.... Or the confidence to ride it out ....
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midareff
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Re: Wait until 70 to take social security?

Post by midareff »

protagonist wrote: Mon Nov 16, 2020 3:02 pm
midareff wrote: Mon Nov 16, 2020 7:47 am

The SS monthly would have gained 8% annually, the money I didn't use to replace that benefit grew at over 9% annually and continues to do so through today, I'll be 73 next month.

That completely secure 8% annual figure looks pretty good these days. I. too, probably would have done better if I took SS at 62, but that is because of the luck of a raging bull market with its associated risk. I feel like, given the info available to me when I turned 62 in 2014, I definitely made the right decision to defer, despite the fact that I would have more money today if I didn't.
Every situation is different protagonist and no one knows what Mr. Market has in store for us next. If I had waited I would have an additional $828 +/- dollars a month now. I also would not have the roughly $150K (by 70 to keep apples to apples) I did not withdraw to replace that SS income. To put it in a nutshell, $150K @ 9% return is $13,500 a year or$1125 a month and while 9% growth continuing is a reach, perhaps an insurmountable one, that money will keep growing by far more than the SS CPI adjustment if history is an indicator, not to mention what will be left for my heirs..... instead of 11 years now at a >9% total return average it could easily have been a decade of nothing. It was what it was and I'll certainly stand by my choice as right for me, especially in the rear view mirror.
Last edited by midareff on Mon Nov 16, 2020 6:56 pm, edited 1 time in total.
FactualFran
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Re: Wait until 70 to take social security?

Post by FactualFran »

MathWizard wrote: Sun Nov 15, 2020 11:00 am Roth conversions now are under the 10/12/22 bracket ranges.
Where has the IRS stated that? I did a Roth conversion in 2019 (and will do in one 2020). The conversion caused some income to be taxed at a rate greater than 22%.
McDougal
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Re: Wait until 70 to take social security?

Post by McDougal »

midareff wrote: Mon Nov 16, 2020 8:22 am
JoeRetire wrote: Sun Nov 15, 2020 5:30 pm
midareff wrote: Sun Nov 15, 2020 10:48 am I retired and started SS @ age 64, later converted to age 65.
What does "converted" mean her?
When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall.
What does "overall total received" mean here?
My employer had misrepresented how my final accrual payouts were going to be reported to the IRS which led to the IRS submitting a request to me for a penalty that exceeded the amount they paid for my year 64. Instead they offered to allow me to pay back that amount and restart SS at age 65.
Isn't everyone entitled to a one-time-only do over within the first 12 months of starting SS? You pay back what they paid you, and re-apply when you want to?
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FiveK
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Re: Wait until 70 to take social security?

Post by FiveK »

FactualFran wrote: Mon Nov 16, 2020 6:42 pm
MathWizard wrote: Sun Nov 15, 2020 11:00 am Roth conversions now are under the 10/12/22 bracket ranges.
Where has the IRS stated that? I did a Roth conversion in 2019 (and will do in one 2020). The conversion caused some income to be taxed at a rate greater than 22%.
Perhaps what was meant was "10/12/22/etc." as opposed to "10/15/25/etc."
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midareff
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Re: Wait until 70 to take social security?

Post by midareff »

McDougal wrote: Mon Nov 16, 2020 6:48 pm
midareff wrote: Mon Nov 16, 2020 8:22 am
JoeRetire wrote: Sun Nov 15, 2020 5:30 pm
midareff wrote: Sun Nov 15, 2020 10:48 am I retired and started SS @ age 64, later converted to age 65.
What does "converted" mean her?
When I ran the calculations the breakeven point was right at age 78 and 9 months. The overall total received was not a breakeven until much later, in the 90's as I recall.
What does "overall total received" mean here?
My employer had misrepresented how my final accrual payouts were going to be reported to the IRS which led to the IRS submitting a request to me for a penalty that exceeded the amount they paid for my year 64. Instead they offered to allow me to pay back that amount and restart SS at age 65.
Isn't everyone entitled to a one-time-only do over within the first 12 months of starting SS? You pay back what they paid you, and re-apply when you want to?
I would not be comfortable citing SS policy or procedure but can report on my experience with them, which was as I stated. They even let me do it on a credit card, and yes, it was a 2% cash back card.
chuckb84
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Re: Wait until 70 to take social security?

Post by chuckb84 »

JoeRetire wrote: Mon Nov 16, 2020 7:26 am
chuckb84 wrote: Mon Nov 16, 2020 1:06 am Exactly this! I knowingly and with eyes wide open took SS at 62, because:

1. One dollar for a healthy 62 year old is more fun than extra money in your 80's. I knew I was signing up for less money, but more time in retirement, and a retirement that started when I was athletic and healthy.
So you wouldn't have been able to retire at 62 if not for the social security income?
2. SS is an income stream, not an asset. SS is not inheritable. I didn't want to drawdown savings and "make it up later" from bigger SS payments. What if I didn't live to make up the savings drawdown?
Then you would be dead, and thus unable to care that you didn't live as long as expected.
3. SS benefits, under current law, will drop by 25% in 2031. So getting benefits for longer before that date really changes all those break even calculations. I have no idea if this will actually happen, nor do we discuss hypothetical tax law changes here, but that's the current law.
It only changes the break even calculations by a small amount. Those changes can be factored in.
I assume you calculated your break even age before you started taking benefits?
Could have retired at 62 without SS, but wouldn't have had the disposable income we wanted. Like I said, it was a conscious trade off.

"Then you would be dead, and thus unable to care that you didn't live as long as expected."

Of course, but my DW and kids would care, and that's what motivated the decision.
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JoeRetire
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Re: Wait until 70 to take social security?

Post by JoeRetire »

chuckb84 wrote: Mon Nov 16, 2020 10:46 pmCould have retired at 62 without SS, but wouldn't have had the disposable income we wanted. Like I said, it was a conscious trade off.
So you wanted a certain level of disposable income before you would retire. And starting your benefits at 62 allowed you to get to that level sooner, trading off having more money later. I understand.
"Then you would be dead, and thus unable to care that you didn't live as long as expected."

Of course, but my DW and kids would care, and that's what motivated the decision.
Do you have a short life expectancy?

Most folks who need the extra money would likely be better off deferring until 70 so that their spouse would get a higher survivor's benefit, if they had a normal or longer life expectancy.

I chose to delay until 70 in order to maximize the guaranteed, inflation-protected, tax-beneficial, spouse-beneficial income stream that social security provides. But of course I was able to retire when I wanted while still having enough disposable income - something not everyone can afford to do.
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MathWizard
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Re: Wait until 70 to take social security?

Post by MathWizard »

FactualFran wrote: Mon Nov 16, 2020 6:42 pm
MathWizard wrote: Sun Nov 15, 2020 11:00 am Roth conversions now are under the 10/12/22 bracket ranges.
Where has the IRS stated that? I did a Roth conversion in 2019 (and will do in one 2020). The conversion caused some income to be taxed at a rate greater than 22%.
I should have put ellipsis after the ranges, to indicate that under current law, Tax Cuts and Jobs Act (TCJA) the
10/12/22/ ...
ranges end after 2025, and become
10/15/25/ ...

Assuming OP will be in the 12 or 22 % brackets in retirement, filling up the appropriate bracket save 3% over waiting until later.
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Re: Wait until 70 to take social security?

Post by loukycpa »

At 47 I haven't analyzed this decision much. Question for those who have - beyond just maximizing what is received over life expectancy, how do you weigh the importance of accelerating income into 60s and early 70s when presumably you are more able to travel and enjoy a more active lifestyle?

Catching up on the income side when you are in your late 70s and 80s doesn't sound that appealing to me if you can't enjoy the money to the same extent you could in your 60s.
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Re: Wait until 70 to take social security?

Post by ObliviousInvestor »

loukycpa wrote: Tue Nov 17, 2020 4:04 pm At 47 I haven't analyzed this decision much. Question for those who have - beyond just maximizing what is received over life expectancy, how do you weigh the importance of accelerating income into 60s and early 70s when presumably you are more able to travel and enjoy a more active lifestyle?
For most Bogleheads it should not be a factor in the analysis. Filing earlier doesn't mean being able to spend more money earlier, unless there are no savings (i.e., unless the benefits received now would literally be the only way to spend the desired amount now). A dollar of Social Security is interchangeable with a dollar of savings (taxes aside).

Said differently, the filing age (or combination of filing ages) that maximizes after-tax dollars received over one's lifetime is the filing age that maximizes total spendable dollars. And if there's sufficient liquid savings, those dollars can be spent earlier or later, regardless of filing age.
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Re: Wait until 70 to take social security?

Post by loukycpa »

ObliviousInvestor wrote: Tue Nov 17, 2020 4:08 pm
loukycpa wrote: Tue Nov 17, 2020 4:04 pm At 47 I haven't analyzed this decision much. Question for those who have - beyond just maximizing what is received over life expectancy, how do you weigh the importance of accelerating income into 60s and early 70s when presumably you are more able to travel and enjoy a more active lifestyle?
For most Bogleheads it should not be a factor in the analysis. Filing earlier doesn't mean being able to spend more money earlier, unless there are no savings (i.e., unless the benefits received now would literally be the only way to spend the desired amount now). A dollar of Social Security is interchangeable with a dollar of savings (taxes aside).

Said differently, the filing age (or combination of filing ages) that maximizes after-tax dollars received over one's lifetime is the filing age that maximizes total spendable dollars. And if there's sufficient liquid savings, those dollars can be spent earlier or later, regardless of filing age.
That makes sense to me, thank you.

Watched my parents agonize over this and both filed early at 62, despite having decent savings. They have rental properties rather than stock/bond portfolio so liquidity was part of it. But mostly psychological hang up, can't escape the "principal versus income" mindset. In their minds they can only spend income, never spend principal. And they never have enough "income".
MathWizard
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Re: Wait until 70 to take social security?

Post by MathWizard »

FiveK wrote: Mon Nov 16, 2020 6:50 pm
FactualFran wrote: Mon Nov 16, 2020 6:42 pm
MathWizard wrote: Sun Nov 15, 2020 11:00 am Roth conversions now are under the 10/12/22 bracket ranges.
Where has the IRS stated that? I did a Roth conversion in 2019 (and will do in one 2020). The conversion caused some income to be taxed at a rate greater than 22%.
Perhaps what was meant was "10/12/22/etc." as opposed to "10/15/25/etc."
Yes, exactly.
Just stated poorly.

Thanks
chuckb84
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Re: Wait until 70 to take social security?

Post by chuckb84 »

"Do you have a short life expectancy?"



Interesting question. My father just died at 94, his father died at 98. My uncle recently passed at about age 70. My grandfather on the maternal side lived into his late 80's. However......

I've been very healthy all my life....until 4 months ago when I was diagnosed with a very serious illness. Two hospital stays, one of them 10 days, emergency surgery and now 4 months of treatment. Things have improved, but, as the Marines said when Wake Island was being overrun by the Japanese "Issue in doubt".

And that was a factor in my early retirement decision, because you just don't know what's coming.
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Re: Wait until 70 to take social security?

Post by Dottie57 »

I want the largest income stream possible for my earnings record. I view SS as longevity insurance. Waiting until age 70. At that point $$ from my portfolio needed goes to half..

If I die before collecting, that’s hw it goes.
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Gabelli2020
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Re: Wait until 70 to take social security?

Post by Gabelli2020 »

Chuckb84-I’m sorry you’re having the health issues- best of luck
As a newbie to the forum I just want to thank everyone who posted. Levels of expertise far above what I expected!
checkyourmath
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Re: Wait until 70 to take social security?

Post by checkyourmath »

How many people on here have ran the calculations for the breakeven point using the Retiree Portfolio Model? Cola isn't a lot of money but 20+ years on a larger number adds up to be the real benefit. I think the 8% gain per year is great on the deferral, but compounding exponential numbers gets a little tricky especially with taxes. 80% of folks take SS early so I really wonder what percentage of the people can multiple. I gave my mother a gift of 10k and I am helping to support her until she is 70 just so she can defer. If you don't need the money you would be crazy to take it. She doesn't actually need the money she just wants it which is why I am loaning her money until she turns 70. The psychological component is something SS administration has been able to tee off for a long time. I recommend taking SS if you think you are going to die that is how the SS administration should state the obvious.
Last edited by checkyourmath on Wed Nov 18, 2020 2:32 pm, edited 1 time in total.
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Re: Wait until 70 to take social security?

Post by LadyGeek »

checkyourmath, Welcome! Here's the link: Retiree Portfolio Model
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checkyourmath
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Re: Wait until 70 to take social security?

Post by checkyourmath »

LadyGeek wrote: Wed Nov 18, 2020 2:31 pm checkyourmath, Welcome! Here's the link: Retiree Portfolio Model
LadyGeek you rock! You are making the world a better place. I know how involved you are with the spreadsheet. I can't wait for the December version to come out. I think that spreadsheet should be used by everyone on the planet. Tax optimization is much more fun to play with than debating whether to take SS early.
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Re: Wait until 70 to take social security?

Post by LadyGeek »

Thanks! That spreadsheet helped me decide to defer taking Social Security until 70. I don't need the money now, so I'll take the increased benefit amount at 70.

To consider - If anything happens to your primary income stream between 62.5 and 70, e.g. company pension disappears, it's a great safety net. Defer now, turn it on when needed.

The spreadsheet is also good for highlighting areas that need further investigation. For example, I forgot that RMDs kick in at 72. The spreadsheet was very clear to show me that.
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JoeRetire
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Re: Wait until 70 to take social security?

Post by JoeRetire »

chuckb84 wrote: Wed Nov 18, 2020 12:32 am "Do you have a short life expectancy?"



Interesting question. My father just died at 94, his father died at 98. My uncle recently passed at about age 70. My grandfather on the maternal side lived into his late 80's. However......

I've been very healthy all my life....until 4 months ago when I was diagnosed with a very serious illness. Two hospital stays, one of them 10 days, emergency surgery and now 4 months of treatment. Things have improved, but, as the Marines said when Wake Island was being overrun by the Japanese "Issue in doubt".

And that was a factor in my early retirement decision, because you just don't know what's coming.
My dad passed last year at 87, my mom the year before. One aunt passed at 99, another at 97. I've been healthy all my life, until I got cancer a few years ago. After a few years of infusion treatments, I'm now cancer-free.

But none of that had anything to do with when I decided to retire. Because it's not connected. If we planned retirement dates based on "you just don't know", you would never work a day.

What is connected is the plan for starting social security benefits, since in that case longevity matters.

I wish you well with your health.
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PartIrish
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Re: Wait until 70 to take social security?

Post by PartIrish »

Ah, thanks for that clarification! My wife and I are the same age so I have a mental block with that. In my case she was a stay at home Mom. I will probably wait until 70 to collect and she would wait as well to 70 since her own earnings record does not amount to anything. Her spousal benefit will be based on my age 67 benefit though so it tops out earlier than mine.

I'm not sure there is any benefit for your wife waiting until age 70, since she will be taking 1/2 your FRA benefit, not your age 70 benefit. I'm not 100 percent sure, but I believe she will optimize by taking spousal at her FRA. Others may wish to chime in.
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Re: Wait until 70 to take social security?

Post by Lalamimi »

Escapevelocity wrote: Mon Nov 16, 2020 12:38 pm Ah, thanks for that clarification! My wife and I are the same age so I have a mental block with that. In my case she was a stay at home Mom. I will probably wait until 70 to collect and she would wait as well to 70 since her own earnings record does not amount to anything. Her spousal benefit will be based on my age 67 benefit though so it tops out earlier than mine.
[ quote fixed by admin LadyGeek]

You might think on this and have wife start drawing hers at FRA, then switching to Spousal when you start at 70. It would be a bit more than "not amount(ing) to anything".
checkyourmath
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Re: Wait until 70 to take social security?

Post by checkyourmath »

Lalamimi wrote: Wed Nov 18, 2020 10:36 pm
Escapevelocity wrote: Mon Nov 16, 2020 12:38 pm Ah, thanks for that clarification! My wife and I are the same age so I have a mental block with that. In my case she was a stay at home Mom. I will probably wait until 70 to collect and she would wait as well to 70 since her own earnings record does not amount to anything. Her spousal benefit will be based on my age 67 benefit though so it tops out earlier than mine.
[ quote fixed by admin LadyGeek]

You might think on this and have wife start drawing hers at FRA, then switching to Spousal when you start at 70. It would be a bit more than "not amount(ing) to anything".
I think you can use the spreadsheet referenced above. The social security piece is kind of fun to play with.
You Know What I Mean
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Re: Wait until 70 to take social security?

Post by You Know What I Mean »

Lalamimi wrote: Wed Nov 18, 2020 10:36 pm
Escapevelocity wrote: Mon Nov 16, 2020 12:38 pm Ah, thanks for that clarification! My wife and I are the same age so I have a mental block with that. In my case she was a stay at home Mom. I will probably wait until 70 to collect and she would wait as well to 70 since her own earnings record does not amount to anything. Her spousal benefit will be based on my age 67 benefit though so it tops out earlier than mine.
[ quote fixed by admin LadyGeek]

You might think on this and have wife start drawing hers at FRA, then switching to Spousal when you start at 70. It would be a bit more than "not amount(ing) to anything".
I second that. I would recommend at least trying Mike Piper's excellent calculator (if you have not done so already): opensocialsecurity.com.

By the way, escapevelocity, my wife and I are also the same age. I have to constantly remind myself that not all couples are likewise!
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Re: Wait until 70 to take social security?

Post by Stuckinmn »

This whole argument that waiting each year is a guaranteed 8% return has always struck me as misleading. Yes, you get more money in the future payments but you give up the benefit of current payments. It's not a real "return".

Here's my viewpoint, the system is designed so that the break even point is living to 78 1/2 no matter when you claim, assuming no real return. However, conservatively applying the old 4% rule and that stretches out to late 80s as the break even point as follows:

Claim at 67=1500 month
Claim at 62= 1050 month
Between 62 and 67, collect 60 months at lower rate and pocket 63000. Even assuming that 63000 is never invested in that 5 years and just remains 63k, that still kicks out 210 month under the 4% rule so your benefit is now 1260 per month from claiming at 62 and investing the difference. That stretches the break-even age to very late 80s.

So my decision tree looks like this- Claiming at 67 only benefits me (or more precisely, my heirs) if all 3 apply-1) I live a very long time, 2) SS remains solvent during that time and 3) the market is historically awful in that time period such that the 4% rule fails. And if #3 happens, #2 probably won't.

TLDR- Claiming early probably doesn't make sense for the average Joe that lives paycheck to paycheck and doesn't understand saving and investing. But that sure doesn't seem to be the average boglehead posting on this board.
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Re: Wait until 70 to take social security?

Post by JoeRetire »

Stuckinmn wrote: Sun Dec 27, 2020 1:53 pm Here's my viewpoint, the system is designed so that the break even point is living to 78 1/2 no matter when you claim, assuming no real return. However, conservatively applying the old 4% rule and that stretches out to late 80s as the break even point as follows:

Claim at 67=1500 month
Claim at 62= 1050 month
Between 62 and 67, collect 60 months at lower rate and pocket 63000. Even assuming that 63000 is never invested in that 5 years and just remains 63k, that still kicks out 210 month under the 4% rule so your benefit is now 1260 per month from claiming at 62 and investing the difference. That stretches the break-even age to very late 80s.
Does "the average Joe that lives paycheck to paycheck and doesn't understand saving and investing" actually invest the difference?
So my decision tree looks like this- Claiming at 67 only benefits me (or more precisely, my heirs) if all 3 apply-
By "my heirs" are you including a spouse? Social Security claiming decisions should always include both partners.
1) I live a very long time, 2) SS remains solvent during that time and 3) the market is historically awful in that time period such that the 4% rule fails. And if #3 happens, #2 probably won't.
Social Security solvency is not connected to market performance.
TLDR- Claiming early probably doesn't make sense for the average Joe that lives paycheck to paycheck and doesn't understand saving and investing.
Folks who live paycheck to paycheck often have the most to gain from delaying until 70 if they can.

"Nonetheless, the decision to delay Social Security can be evaluated based on the implicit rate of return it creates by choosing to delay, and over longer time horizons – when clients may “need the money most” as they have more years of retirement expenses to cover in the first place – the return of the Social Security delay becomes quite compelling. In fact, the return is generally far superior to any risk-adjusted returns that can be achieved over comparable time periods by the available alternatives, whether investing in risk-free bonds, growth equities, or buying a commercially available annuity. And because the system is indexed to inflation, its real returns will be maintained even if inflation rises, and will only become better if longevity continues to increase as well. In fact, ultimately the decision to delay Social Security delivers the best results when there is either unexpected inflation, unusually long longevity, or especially bad market returns, which are the exact three scenarios that traditional portfolios are the least effective at managing, making the decision to delay Social Security the ultimate form of “anti-fragile” triple hedge!"

https://www.kitces.com/blog/how-delayin ... y-can-buy/
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Re: Wait until 70 to take social security?

Post by willthrill81 »

Stuckinmn wrote: Sun Dec 27, 2020 1:53 pm This whole argument that waiting each year is a guaranteed 8% return has always struck me as misleading. Yes, you get more money in the future payments but you give up the benefit of current payments. It's not a real "return".
You're correct. SS benefits are designed to be actuarially fair over the populace as a whole. There is no advantage in terms of expected payouts for the 'average person' by deferring benefits.
Stuckinmn wrote: Sun Dec 27, 2020 1:53 pm So my decision tree looks like this- Claiming at 67 only benefits me (or more precisely, my heirs) if all 3 apply-1) I live a very long time, 2) SS remains solvent during that time and 3) the market is historically awful in that time period such that the 4% rule fails. And if #3 happens, #2 probably won't.
It's certainly possible for individuals to 'game the system' a bit because they can use information to decide when to begin benefits that is not used by the SSA when determining benefits.

However, the '4% rule' failing is fairly independent from SS maintaining solvency. Technically, the '4% rule' failed (barely) for 1966 retirees, but SS benefits didn't go down. SS solvency is mostly dependent on demographics, primarily the proportion of those collecting benefits to those contributing to SS.
Stuckinmn wrote: Sun Dec 27, 2020 1:53 pm TLDR- Claiming early probably doesn't make sense for the average Joe that lives paycheck to paycheck and doesn't understand saving and investing. But that sure doesn't seem to be the average boglehead posting on this board.
Deferring SS benefits is the only way that most individuals, including those on this forum, can 'buy' a larger inflation-adjusted life annuity since those are no longer sold on the open market. A few can do this with pensions, but even many of those are not specifically tied to inflation.

It's true that claiming SS benefits and investing those funds may outperform deferring benefits in certain regards, but the key word there is 'may'.
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Re: Wait until 70 to take social security?

Post by Stuckinmn »

Does "the average Joe that lives paycheck to paycheck and doesn't understand saving and investing" actually invest the difference?
No, that's my point. If you're [expletive deleted by moderator oldcomputerguy] with money, by all means you should delay as long as possible to guarantee higher payments. Again, that's not the profile of this board's users.
Social Security solvency is not connected to market performance.
Not directly, but an economic crash resulting in the market underperforming would also likely affect the solvency of government programs and given the $27 trillion debt, something's going to have to give. I could certainly see them either capping payments or converting it to a pure needs based test in order to collect.
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Re: Wait until 70 to take social security?

Post by willthrill81 »

Stuckinmn wrote: Sun Dec 27, 2020 3:31 pm Not directly, but an economic crash resulting in the market underperforming would also likely affect the solvency of government programs and given the $27 trillion debt, something's going to have to give. I could certainly see them either capping payments or converting it to a pure needs based test in order to collect.
Again, the '4% rule' barely failed in 1966, but SS benefits didn't skip a beat. Stocks had negative real returns from 2000-2009, but SS benefits didn't change.

SS will become insolvent (i.e. unable to pay out promised benefits) around 2035, but it won't have literally anything to do with stocks' performance. It will be due to there being too many receiving SS benefits compared to the number of people paying in to SS.
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Re: Wait until 70 to take social security?

Post by tj »

willthrill81 wrote: Sun Dec 27, 2020 4:00 pm
Stuckinmn wrote: Sun Dec 27, 2020 3:31 pm Not directly, but an economic crash resulting in the market underperforming would also likely affect the solvency of government programs and given the $27 trillion debt, something's going to have to give. I could certainly see them either capping payments or converting it to a pure needs based test in order to collect.
Again, the '4% rule' barely failed in 1966, but SS benefits didn't skip a beat. Stocks had negative real returns from 2000-2009, but SS benefits didn't change.

SS will become insolvent (i.e. unable to pay out promised benefits) around 2035, but it won't have literally anything to do with stocks' performance. It will be due to there being too many receiving SS benefits compared to the number of people paying in to SS.
SS will still be something like 78% funded in 2035 from the FICA and SECA inflows, it's not like it's going to bankrupt.
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Re: Wait until 70 to take social security?

Post by JoeRetire »

Stuckinmn wrote: Sun Dec 27, 2020 3:31 pm
Social Security solvency is not connected to market performance.
Not directly, but an economic crash resulting in the market underperforming would also likely affect the solvency of government programs and given the $27 trillion debt, something's going to have to give.
What happened with Social Security solvency during the long bull market?
I could certainly see them either capping payments or converting it to a pure needs based test in order to collect.
Idle speculation not related to the current Social Security laws. There are dozens of possibilities - these seem unlikely to me. Time will tell what actually happens.
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Re: Wait until 70 to take social security?

Post by willthrill81 »

tj wrote: Sun Dec 27, 2020 4:53 pm
willthrill81 wrote: Sun Dec 27, 2020 4:00 pm
Stuckinmn wrote: Sun Dec 27, 2020 3:31 pm Not directly, but an economic crash resulting in the market underperforming would also likely affect the solvency of government programs and given the $27 trillion debt, something's going to have to give. I could certainly see them either capping payments or converting it to a pure needs based test in order to collect.
Again, the '4% rule' barely failed in 1966, but SS benefits didn't skip a beat. Stocks had negative real returns from 2000-2009, but SS benefits didn't change.

SS will become insolvent (i.e. unable to pay out promised benefits) around 2035, but it won't have literally anything to do with stocks' performance. It will be due to there being too many receiving SS benefits compared to the number of people paying in to SS.
SS will still be something like 78% funded in 2035 from the FICA and SECA inflows, it's not like it's going to bankrupt.
Yes. Insolvency doesn't mean no income. It means that one is incapable of funding one's obligations.
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Re: Wait until 70 to take social security?

Post by capran »

David Jay wrote: Sat Nov 14, 2020 11:33 pm What you are missing is that when one spouse passes, the surviving spouse receives the amount of the larger of the two benefits. So regardless of which spouse passes, the survivor will get the 2760/3607. The odds are very high that one spouse will live into their early 90s.

In our case, my wife (the low earner) filed at age 62 for cash flow (remember, that benefit is temporary). I am delaying to 69/70, depending on variables. You can do what-if scenarios at http://opensocialsecurity.com
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
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Re: Wait until 70 to take social security?

Post by David Jay »

capran wrote: Sun Dec 27, 2020 6:04 pmIn our case, my wife (the low earner)
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
If both spouses have filed for benefits and have reached normal retirement age, it is simply “survivor receives the larger of the two benefits”. If one benefit is $2500 and the other is $1800, the surviving spouse receives the $2500. No other qualification. Nothing about age, claiming date or any other parameter.

This is why for most married couples it makes sense for the spouse with the larger earnings history to delay claiming because that benefit becomes the survivor’s benefit. In many cases the lower earning spouse can even claim early as we did.
Last edited by David Jay on Sun Dec 27, 2020 11:05 pm, edited 1 time in total.
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Re: Wait until 70 to take social security?

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I removed a post conjecturing on the future of Social Security. The future of Social Security requires changes in US law, a political process and is off-topic in this forum (proposed / future legislation). Speculation about future legislation is prohibited by forum policy, see Unacceptable Topics:
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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.

We allow discussions regarding the future of Social Security, but only for planning purposes - such as deciding on the amount future benefits to include for retirement planning.
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Re: Wait until 70 to take social security?

Post by JoeRetire »

David Jay wrote: Sun Dec 27, 2020 6:47 pm
capran wrote: Sun Dec 27, 2020 6:04 pmIn our case, my wife (the low earner)
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
If both spouses have filed for benefits, it is simply “survivor receives the larger of the two benefits”. If one benefit is $2500 and the other is $1800, the surviving spouse receives the $2500. No other qualification. Nothing about age, claiming date or any other parameter.
Almost. This is true only if the survivor claims survivor benefits after reaching their own full retirement age.

If the survivor benefits start at an earlier age, they are reduced a fraction of a percent for each month before full retirement age.
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Re: Wait until 70 to take social security?

Post by David Jay »

JoeRetire wrote: Sun Dec 27, 2020 8:22 pm
David Jay wrote: Sun Dec 27, 2020 6:47 pm
capran wrote: Sun Dec 27, 2020 6:04 pmIn our case, my wife (the low earner)
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
If both spouses have filed for benefits and have reached normal retirement age, it is simply “survivor receives the larger of the two benefits”. If one benefit is $2500 and the other is $1800, the surviving spouse receives the $2500. No other qualification. Nothing about age, claiming date or any other parameter.
Almost. This is true only if the survivor claims survivor benefits after reaching their own full retirement age.

If the survivor benefits start at an earlier age, they are reduced a fraction of a percent for each month before full retirement age.
See my edit, here and above.
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Re: Wait until 70 to take social security?

Post by turnberry72 »

Beyond the 8% return factor, I view my wait strategy as "extended bear market insurance."

I am single, soon to be 63 with FRA of 66 1/2, and project/guess I will live into my mid-to-late 80's. If the stock market goes south for longer than 18 months or so, before I reach age 70, I can pull the trigger on claiming SS -- providing me, I hope, the income needed to NOT draw on stock investments, long enough for the market to recover.

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Re: Wait until 70 to take social security?

Post by Golf maniac »

Adfmacro wrote: Sun Nov 15, 2020 8:57 am Run the numbers but lower earner taking SS at 62 and higher earner waiting until 70 might not be a bad play. Since she has enough in SS on her own, it does not appear she will not need to concern herself with maximizing spousal benefits.

If you have a pension that does not have 100% survivor benefits, the delay in taking your SS until 70 may increase your wife’s peace of mind.
+1, this is exactly our situation and what we are doing.
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Re: Wait until 70 to take social security?

Post by basspond »

Read the obituaries for several weeks and keep tabs of who died before and after the SS break even age point. I did and it was around 50/50. If projections indicate your portfolio will survive you at any age then it doesn’t matter when to take. If it won’t, then something more then delaying might need to be implemented.
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Re: Wait until 70 to take social security?

Post by smitcat »

basspond wrote: Mon Dec 28, 2020 8:03 am Read the obituaries for several weeks and keep tabs of who died before and after the SS break even age point. I did and it was around 50/50. If projections indicate your portfolio will survive you at any age then it doesn’t matter when to take. If it won’t, then something more then delaying might need to be implemented.
Unless of course delaying SS also gives you an opportunity to convert 401K $$ to Roth at very favorable rates which would not be available if you take SS earlier.
You can calculate these comparisons utilizing the RPM and it was quite eye opening for us.
YMMV
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Re: Wait until 70 to take social security?

Post by Carl53 »

David Jay wrote: Sun Dec 27, 2020 11:04 pm
JoeRetire wrote: Sun Dec 27, 2020 8:22 pm
David Jay wrote: Sun Dec 27, 2020 6:47 pm
capran wrote: Sun Dec 27, 2020 6:04 pmIn our case, my wife (the low earner)
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
If both spouses have filed for benefits and have reached normal retirement age, it is simply “survivor receives the larger of the two benefits”. If one benefit is $2500 and the other is $1800, the surviving spouse receives the $2500. No other qualification. Nothing about age, claiming date or any other parameter.
Almost. This is true only if the survivor claims survivor benefits after reaching their own full retirement age.

If the survivor benefits start at an earlier age, they are reduced a fraction of a percent for each month before full retirement age.
See my edit, here and above.
https://www.ssa.gov/benefits/survivors/ ... rtred.html

The full retirement age for survivors is not always the same as the full retirement age for receiving self or spousal benefits. For example for someone born in 1957 the survivor full retirement age is 66 years and two months while the full retirement age for self/spousal benefits is 66 years and 6 months.
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Re: Wait until 70 to take social security?

Post by David Jay »

Carl53 wrote: Mon Dec 28, 2020 8:17 am
David Jay wrote: Sun Dec 27, 2020 11:04 pm
JoeRetire wrote: Sun Dec 27, 2020 8:22 pm
David Jay wrote: Sun Dec 27, 2020 6:47 pm
capran wrote: Sun Dec 27, 2020 6:04 pmIn our case, my wife (the low earner)
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
If both spouses have filed for benefits and have reached normal retirement age, it is simply “survivor receives the larger of the two benefits”. If one benefit is $2500 and the other is $1800, the surviving spouse receives the $2500. No other qualification. Nothing about age, claiming date or any other parameter.
Almost. This is true only if the survivor claims survivor benefits after reaching their own full retirement age.

If the survivor benefits start at an earlier age, they are reduced a fraction of a percent for each month before full retirement age.
See my edit, here and above.
https://www.ssa.gov/benefits/survivors/ ... rtred.html

The full retirement age for survivors is not always the same as the full retirement age for receiving self or spousal benefits. For example for someone born in 1957 the survivor full retirement age is 66 years and two months while the full retirement age for self/spousal benefits is 66 years and 6 months.
The IRS has started to use “normal retirement age (NRA) in place of full retirement age (FRA). So yes, both spouses must have reached their personal NRA for my statement to be correct.
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Re: Wait until 70 to take social security?

Post by capran »

JoeRetire wrote: Sun Dec 27, 2020 8:22 pm
David Jay wrote: Sun Dec 27, 2020 6:47 pm
capran wrote: Sun Dec 27, 2020 6:04 pmIn our case, my wife (the low earner)
Does it matter if the surviving spouse started SS earlier in regards to the surviving spouse getting the higher SS of the two. In other words, lets say the older spouse (by three years) started taking their SS at 64, and the other spouse (younger by 3 years) waits until 70 to start. If the spouse that started SS at 64 were to outlive the younger spouse who waited to 70, would they get the higher benefit? or would the higher benefit be unavailable or reduced because they started at 64? (yes, hind sight is 2020 and I should have not taken SS at 64, but that ship has sailed. Had a friend die from a fall at 70 which got me thinking at the time, and made a rash decision.)
If both spouses have filed for benefits, it is simply “survivor receives the larger of the two benefits”. If one benefit is $2500 and the other is $1800, the surviving spouse receives the $2500. No other qualification. Nothing about age, claiming date or any other parameter.
Almost. This is true only if the survivor claims survivor benefits after reaching their own full retirement age.

If the survivor benefits start at an earlier age, they are reduced a fraction of a percent for each month before full retirement age.
I thought I tried to be clear about my question, but from the several relevant answers, it maybe appears in the rare event of me being a survivor, I might get a little more of a survivor benefit if spouse waits till 70, but would not get her full amount. I was born in 1952, and after checking see I started receiving benefits at 63 years 6 months. my FRA age 66 benefit would have been $2225. but by taking it early it was reduced to $1834. (so if math is correct my benefit is 82.4% of my FRA benefit.) based on comments, I am guesstimating that if spouse delays to 70, there would be a similar reduction applied to a survivor benefit. Our life time earnings were very very close to each other, and like I said, I had two friends die early, one at 65 within 2 months of retiring, and the other at 70. When the 70 year old passed, I had visions of something like that happening, which was a major error in my thinking (and pre bogleheads). At the time, I had not yet started to receive my pension... Oh well, life goes on and it is what it is. Thanks for walking me through that.
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