grabiner wrote: ↑Wed Sep 12, 2018 8:43 pm

Here's how I estimate the break-even. It's easiest to do one year at a time. Suppose that you have enough money to cover this year's Social Security. You can ... take Social Security now and buy a TIPS ladder which will cover the future years' payments. The break-even is the point where the TIPS ladder runs out.

If you are 66 and your benefit is $20,000, waiting one year will increase your benefit to $21,600 (all numbers growing with inflation). If you spend $20,000 to buy TIPS, ... Current yields on a TIPS portfolio with a 7-year duration are 0.85%, which is enough to make the ladder last 13.3 years, ... That is to age 80.

We can get David's result with the Excel

NPER function:

**13.3 = NPER(0.85%, 1600, -20000, 0, 0)**
The following table uses this function to show the breakeven age for each of eight one year delays from 62 to 63, 63 to 64, …, & 69 to 70.

Code: Select all

```
Row Col A Col B Col C
1 Born 1952
2 NRA 66.000
3 Rate 0.850% 1 Year
4 Spouse 0.000% Delay
5 Start Pct PIA BE Age
6 62 75.000%
7 63 80.000% 79.1
8 64 86.667% 76.7
9 65 93.333% 78.8
10 66 100.000% 81.0
11 67 108.000% 80.3 = 67 + 13.3
12 68 116.000% 82.4
13 69 124.000% 84.5
14 70 132.000% 86.7 = 70 + 16.7
```

The table shows the results for a single person with a Normal Retirement Age (NRA) of 66 and a 0.85% discount rate. Do the following to see the results for a different NRA or discount rate or for a couple like the one in the original post with a fixed spousal benefit.

- Select All, Copy, and Paste [ * ] the following at cell A1 of a blank Excel sheet.

Code: Select all

```
Born 1952
NRA =MIN(67,66+MAX(0,B1-1954)/6)
Rate 0.0085
Spouse 0
Start Pct PIA BE Age
62 =IF($A6<B$2,1-(5/900)*MIN(36,(B$2-$A6)*12)-(5/1200)*MAX(0,(B$2-$A6)*12-36),1+(8/1200)*($A6-B$2)*12)+B$4
63 =IF($A7<B$2,1-(5/900)*MIN(36,(B$2-$A7)*12)-(5/1200)*MAX(0,(B$2-$A7)*12-36),1+(8/1200)*($A7-B$2)*12)+B$4 =NPER((1+B$3)^(A7-A6)-1,B7-B6,-B6,0,0)*(A7-A6)+A7
=2*A7-A6 =IF($A8<B$2,1-(5/900)*MIN(36,(B$2-$A8)*12)-(5/1200)*MAX(0,(B$2-$A8)*12-36),1+(8/1200)*($A8-B$2)*12)+B$4 =NPER((1+B$3)^(A8-A7)-1,B8-B7,-B7,0,0)*(A8-A7)+A8
```

- Format for readability.
- Copy row 8 down to row 14.
- Enter birth year in cell B1 and discount rate in cell B3.
- If the spouse will receive a fixed percent of the worker's PIA whenever the worker starts benefits (as in the original post), enter the percent in cell B4.

BigoteGato wrote: ↑Thu Sep 13, 2018 2:29 pm

Grabiner - I find your reasoning clear and compelling. Let's see how it may apply to the OP's situation of a high and a low wage earner. Assume the low wage earner would get $0 SS, the high would get $20K as in your example. If high earner files, then low earner can get $10K (spousal benefit). So your examples are modified to include buying $30K in TIPS, not $20K. Now your 66 yrs old's break-even age becomes 50% higher - 20.25 yrs, or 86.5. The 69 yr old's break-even age is pushed to 95.25.

That's not how the math works, BigoteGato. Apparently you're using

**Grabiner**'s case with a 0% rate of return. This simplifies the calculation considerably.

Code: Select all

```
BE Years = Forsaken amt / extra amt
12.5 = 20000 / 1600 single 66 to 67
15.5 = 24800 / 1600 single 69 to 70
18.75 = 30000 / 1600 with spouse 66 to 67
21.75 = 34800 / 1600 with spouse 69 to 70
```

This can also be seen in a modification of the table above:

Code: Select all

```
Row Col A Col B Col C
1 Born 1952
2 NRA 66.000
3 Rate 0.000% 1 Year
4 Spouse 50.000% Delay
5 Start Pct PIA BE Age
6 62 125.000%
7 63 130.000% 88.00
8 64 136.667% 83.50
9 65 143.333% 85.50
10 66 150.000% 87.50
11 67 158.000% 85.75 = 18.75 + 67
12 68 166.000% 87.75
13 69 174.000% 89.75
14 70 182.000% 91.75 = 21.75 + 70
```

* If you have problems pasting, try "Paste Special" and "Text".