I think the foregone income is accounted for... isn't that what the discount rate is all about?
I think the foregone income is accounted for... isn't that what the discount rate is all about?
There is no need for a net present value here, because there are no outflows. The closest thing to an outflow here is an opportunity cost.Watty wrote: ↑Sat Sep 29, 2018 10:32 amI think where I am getting confused is that if I delay starting Social Security after my FRA then I would have to fund $30,000 a year from my retirement savings until I start Social Security at the recommended age of 70. If you are wanted to look at the "net present value", which seems to be more relevant, instead of just the "present value" then wouldn't that $30K a year be need to be considered as a "relevant cash outflow" like you described in your description?
Good idea. That will be included the next time I roll out an update. Here's the table in question, by the way, in case it's helpful in the meantime:
Deemed filing does not apply to survivor benefits.onthecusp wrote: ↑Tue Oct 02, 2018 9:16 amAn additional question brought on by considering our own Mortality.
In the "Year by Year Benefit Amounts" section of the results display you say:
The survivor benefit amounts at the bottom of the table assume that a) the deceased person lived at least until the age at which they planned to file for their retirement benefit and that b) the surviving person waits at least until their full retirement age to file for a survivor benefit.
That makes sense, and I don't think additional calculations of alternatives etc. would be an improvement on an otherwise well laid out and simple presentation of the facts. I could probably answer my own question by trying alternative claiming strategies, but directionally, the question is:
What should I tell my wife to do if I die before FRA? In other words I violate (a)) above .
We want to maximize the survivor benefit so (b)) above should be followed. She just turned 62 and her PIA is about 1/3 of mine. If she takes her benefit at say 62 and 4 months she is in the system. I'm 7 months younger. If I should die at say 63 will she then be deemed to have applied for the survivor benefit? That would be before her FRA and mine both and permanently reduce the benefit. Might this be another reason for her to delay claiming her benefit until my FRA? If this is a misconception, is there a simple statement you might add to the output to allay this fear, or if it is a real issue a different statement that might point out the potential benefit of delay?
I did the comparisons and now figure that the larger estimated increase in my median age at death out weighed the smaller decrease in her's, estimating extra time where we received benefits on both our records.onthecusp wrote: ↑Mon Oct 01, 2018 10:59 pmI noticed this when I played around with alternate tables as my wife is a former smoker so I changed her table to Smoker Preferred and mine to non smoker preferred as I am in decent health. I was surprised when this changed the recommendation for my lower earning wife to take benefits later (close to FRA instead of the previous recommendation of 62+1 mo). The new recommendation lined up close to results from previous use of the old bedrock capital calculator, so I would like to explore that a little more.
For each year until both people would be age 115, the calculator calculates:
I was reminded of the couple's life expectancy by something linked to from your blog, which I looked at last night. Very nice. Good point about the first to die. No guarantees, but the probability is there to be considered!ObliviousInvestor wrote: ↑Tue Oct 02, 2018 2:08 pmFor each year until both people would be age 115, the calculator calculates:
1) What the couple's total benefit would be if both people are alive,
2) What the couple's total benefit would be if only person A is alive, and
3) What the couple's total benefit would be if only person B is alive.
Then it multiplies each of 1, 2, and 3 by the applicable probability and sums the probability-weighted amounts.
And yes, the second-to-die joint life expectancy of a couple is longer than the longer of the two individual life expectancies. And the first-to-die joint life expectancy of a couple is shorter than the shorter of the two individual life expectancies. Many Social Security analyses overestimate the value of delaying for the lower earner in a couple (and underestimate the value of delaying for the higher earner) by ignoring this fact.
You may be thinking of the discussion that occurred on pages 2 and 3 of this thread:
Yes, I will do this next time I roll out an update.One Ping wrote: ↑Tue Oct 02, 2018 2:46 pmFor each of the four alternative mortality tables you provide the median age at death for 62 year old males and females. You don't provide that same information for your default table. I think it would be instructive to see how the four alternatives differ not only with respect to each other, but also with respect to the default. Can you add those numbers to your description page?
Thanks, Mike. This is my go to tool for analyzing SS claiming options.
Thank you for the comment, and thank you for the feedback.goblue100 wrote: ↑Thu Oct 11, 2018 6:19 amI want to join the others in thanking you for your efforts on this calculator. As to the question, it's a little hard for me to picture the difference between the two displays, but I believe I would prefer to see 2017 in its own row based on the description you gave.
Hmm, I may change my answer, and say it should just be lumped in the 2018 row. I assume it will be obvious to the user that year included backdated payments?
Well, the suggested strategy output will include the word "retroactive." But whether or not the meaning of the table will be obvious to the user is one of my concerns.
Consistency is good. For that reason, using the same logic for retroactive filing as for normal filing seems better.
That would match my needs... I will start benefits in 2019, but want to avoid SS income in 2018, so I may request 6 months retroactive benefits. Speaking of which, I asked a question about that in another thread, but haven't yet received any replies: viewtopic.php?f=2&t=261110
Indeed it would be more helpful for tax planning.
The SS benefits statements and online calculators assume that future wage and price inflation is zero. In that way, the benefit estimates always remain in "today's dollars". The max PIA is tricky, as it depends on your age and also the specific years in which you have earnings, even if those earnings were maximal. So one can calculate a retrospective max PIA, but any future max PIA will be influenced by future wage inflation and also COLA (because COLA details can cause a situation where the max earnings subject to tax does not go up, even when there is wage inflation).TBillT wrote: ↑Mon Oct 22, 2018 3:46 pmWhat's confusing is when Social Security quotes the PIA for a person (eg; per the"annual" statement), often times they do not say: (1) what cost-of-livng updates were included, and (2) they do not say what the max PIA is in theory, so it's hard to interpret the numbers without re-doing all the calcs by hand yourself.
In order to troubleshoot, I need to know the inputs used.Big Dog wrote: ↑Thu Nov 08, 2018 10:32 amany suggestions for Testing an Alternative Strategy? I put in an alternative Claim date for Spouse (from 62 to 63 to sensitivity test) and click the bottom Submit button and nothing happens. If I then go and click on the Submit button in the middle of the page (after Other Inputs-Discount Rate), the cursor just spins and spins.
Tried it on both Safari and Chrome.
Well the Main Stream Media frequently quotes the max PIA for example "In 2017, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $2,687. In 2018, the maximum benefit will increase $101 per month to $2,788."neurosphere wrote: ↑Thu Nov 08, 2018 10:54 amThe SS benefits statements and online calculators assume that future wage and price inflation is zero. In that way, the benefit estimates always remain in "today's dollars". The max PIA is tricky, as it depends on your age and also the specific years in which you have earnings, even if those earnings were maximal. So one can calculate a retrospective max PIA, but any future max PIA will be influenced by future wage inflation and also COLA (because COLA details can cause a situation where the max earnings subject to tax does not go up, even when there is wage inflation).TBillT wrote: ↑Mon Oct 22, 2018 3:46 pmWhat's confusing is when Social Security quotes the PIA for a person (eg; per the"annual" statement), often times they do not say: (1) what cost-of-livng updates were included, and (2) they do not say what the max PIA is in theory, so it's hard to interpret the numbers without re-doing all the calcs by hand yourself.
Yes, that was one of my points. During the past 60 or so years, the contribution of one year of maximal earning to the average indexed monthly earnings (AIME) for someone who turned 62 this year ranges from a low value of $51,900 to a high of $132,900, depending on when those earnings took place. In order to earn the maximum benefit, one would have to rank the 35 highest possible years indexed maximal earnings, and ensure maximal earnings in at least those 35 years. For example, maximal earnings in any of the years 2008 to 2014 all count much more than earnings in 2016. As much as $9000 more. But the summary is this: For a person whose last years of earnings is 2019 who has exceeded the max the largest possible PIA requires maximal earnings in the most recent 35, EXCEPT swap earnings in the year 1988 with 1984. However, there are still possibilities where one could earn LESS than the max in Year X, but that year count more towards the PIA than the maximal earnings in Year Y.TBillT wrote: ↑Thu Nov 08, 2018 2:19 pmAlso many sources seem to quote that you have to have given max amount to SS for 35 years to get max PIA, but truth is you still may not get the max PIA even if you gave the max for 35 years, it is a more complex equation than that, apparently it depends on exactly which 35 years you paid the max.
Props to Oblvious for his prompt attention.Just posting to note that Big Dog shared the relevant inputs via PM for privacy's sake, and the issue has been resolved.
You are correct that WEP disappears when a person dies, and the calculator does not account for such. How to deal with this has basically been an unsettled question for the entire time I've been working on the calculator.Bythesea wrote: ↑Fri Nov 09, 2018 12:17 pmI'm not clear whether the WEP is fully taken into account in this calculator. When I plug in the numbers using the reduced PIA (worked out from the SS site) and the non-covered pension amounts, survivor benefits are the same as the reduced PIA. I thought WEP didn't apply to survivor benefits and that they would thus amount to the unreduced PIA increased by 132% assuming delaying SS till 70. Have I got that wrong?