"Open Social Security" calculator: feature requests, bug reports, etc

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ObliviousInvestor
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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by ObliviousInvestor » Thu Nov 29, 2018 6:37 am

jmk wrote:
Wed Nov 28, 2018 11:24 pm
It might just be me, but is anyone else confused by the figures in the generated "Year-by-Year Benefit Amounts" table?

After reading the background info carefully I'm thinking these figures represent future real dollars anchored the year you'd turn 62, or perhaps the year you start getting benefits. In other words, not in current dollars. But this is never stated outright. I'm wondering if it would help to add a simple sentence to the explanation above the table explaining what year anchors the figures?
The table and the PV calculation are completely separate.

In the PV calculation, future dollars must be discounted. (And they are probability-weighted as well.)

For ease of understanding, the table simply reports current year dollars -- not discounted and not probability-weighted. Otherwise, for example, a person's retirement benefit would be shown as a slightly smaller amount each year than the previous year, which I suspect would confuse many people.
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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by jmk » Thu Nov 29, 2018 12:37 pm

ObliviousInvestor wrote:
Thu Nov 29, 2018 6:37 am
jmk wrote:
Wed Nov 28, 2018 11:24 pm
It might just be me, but is anyone else confused by the figures in the generated "Year-by-Year Benefit Amounts" table?
For ease of understanding, the table simply reports current year dollars -- not discounted and not probability-weighted. Otherwise, for example, a person's retirement benefit would be shown as a slightly smaller amount each year than the previous year, which I suspect would confuse many people.
Which totally makes sense. My suggestion is to add a short sentence that makes that clear, e.g. "Figures are in current dollars."

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by ObliviousInvestor » Thu Nov 29, 2018 2:35 pm

jmk wrote:
Thu Nov 29, 2018 12:37 pm
My suggestion is to add a short sentence that makes that clear, e.g. "Figures are in current dollars."
Noted. Thank you.

After the current big piece of functionality is finished, there's a laundry list of things I intend to improve as far as documentation/interface.
Mike Piper, author/blogger

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by capemaydiamond » Thu Dec 06, 2018 9:27 pm

Mike, would you explain in simple terms, maybe give some examples, of the difference between solving for max PV vs solving for longevity risk? What are some examples where choosing the recommended strategy (ie largest PV) would not get you the best in terms of longevity? Much of this discussion is over my head and I don't need to understand on such a deep level. Just need to know how to think about what your calculator is telling me vs wanting the best solution for longevity risk. FWIW, I am 63 and my spouse is almost 66. Your calculator says our best strategy is for her to file at 67 and for me to wait until 70. I am the higher earner. We also tried her filing at 66 and me at 70. The PV difference is only $580 less. But her annual payment would be almost $1000 less. Are one or both of those factors why the best strategy is for her to wait a year until age 67? Thanks.

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by ObliviousInvestor » Thu Dec 06, 2018 9:46 pm

capemaydiamond wrote:
Thu Dec 06, 2018 9:27 pm
Mike, would you explain in simple terms, maybe give some examples, of the difference between solving for max PV vs solving for longevity risk? What are some examples where choosing the recommended strategy (ie largest PV) would not get you the best in terms of longevity? Much of this discussion is over my head and I don't need to understand on such a deep level. Just need to know how to think about what your calculator is telling me vs wanting the best solution for longevity risk.
There is no such thing as "solving for longevity risk" per se. Longevity risk is the risk of living a very long time. And there's no real end-cap on it, if we aren't considering probabilities.

In other words, with respect to minimizing longevity risk, the optimal solution is always for each person to max out their benefit fully (i.e., waiting until 70 to file for retirement, or waiting until FRA to file for spousal). Because in a live-a-super-duper-long-time scenario, the highest benefit works out best (because you'd be collecting it for such a long time).

A probability-weighted PV calculation (such as that done by this calculator) considers the probability of living for such a long time. So, for example, the "both spouses live until 110" scenario is included, but it gets very little weight in the calculation, because it's so unlikely.
capemaydiamond wrote:
Thu Dec 06, 2018 9:27 pm
FWIW, I am 63 and my spouse is almost 66. Your calculator says our best strategy is for her to file at 67 and for me to wait until 70. I am the higher earner. We also tried her filing at 66 and me at 70. The PV difference is only $580 less. But her annual payment would be almost $1000 less. Are one or both of those factors why the best strategy is for her to wait a year until age 67? Thanks.
The decision for the lower earner typically isn't nearly as impactful as the decision for the higher earner. The reason it's saying for her to wait until 67 is simply, "because that's what happens to give the highest probability-weighted present value." But as you noticed, varying her filing age doesn't make a dramatic difference. (That is, the higher benefit at 67 is almost offset by the fact that it would be collected for slightly fewer months.)
Mike Piper, author/blogger

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by capemaydiamond » Thu Dec 06, 2018 10:06 pm

capemaydiamond wrote:
Thu Dec 06, 2018 9:27 pm
FWIW, I am 63 and my spouse is almost 66. Your calculator says our best strategy is for her to file at 67 and for me to wait until 70. I am the higher earner. We also tried her filing at 66 and me at 70. The PV difference is only $580 less. But her annual payment would be almost $1000 less. Are one or both of those factors why the best strategy is for her to wait a year until age 67? Thanks.
The decision for the lower earner typically isn't nearly as impactful as the decision for the higher earner. The reason it's saying for her to wait until 67 is simply, "because that's what happens to give the highest probability-weighted present value." But as you noticed, varying her filing age doesn't make a dramatic difference. (That is, the higher benefit at 67 is almost offset by the fact that it would be collected for slightly fewer months.)
[/quote]

Thanks. Don't know if I replied properly, including only the final quote. Anyway, your response is helpful. But it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy. Her claiming amount at 67 with the best strategy is only $12,800 per year so losing $1000 every year for claiming one year early seems like it should be quite significant.....

Thanks for your good work.

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by ObliviousInvestor » Thu Dec 06, 2018 10:42 pm

capemaydiamond wrote:it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy. Her claiming amount at 67 with the best strategy is only $12,800 per year so losing $1000 every year for claiming one year early seems like it should be quite significant
As the spouse with the lower PIA, when she delays benefits it increases the amount that you will receive (as a couple) as long as both of you are still alive. This first-to-die joint life expectancy is shorter than many people intuitively expect, because most people think in terms of individual life expectancies -- but this expected length of time is (in most cases) significantly shorter than the shorter of the two individual life expectancies.

(Overall point being again that, in this case, the higher/lower benefit from your wife delaying or not delaying another year is approximately offset by the difference in number of months for which that benefit will be received.)
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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by vtMaps » Fri Dec 07, 2018 4:20 am

capemaydiamond wrote:
Thu Dec 06, 2018 10:06 pm
But it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy.
In addition to what ObliviousInvestor explained, there are also other factors at work here... The calculator assumes that by claiming one year earlier, you didn't spend down about $12k of your retirement savings. The calculator assumes that $12k is invested and growing.

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by capemaydiamond » Fri Dec 07, 2018 6:30 am

vtMaps wrote:
Fri Dec 07, 2018 4:20 am
capemaydiamond wrote:
Thu Dec 06, 2018 10:06 pm
But it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy.
In addition to what ObliviousInvestor explained, there are also other factors at work here... The calculator assumes that by claiming one year earlier, you didn't spend down about $12k of your retirement savings. The calculator assumes that $12k is invested and growing.

--vtMaps
The calculator factors in the growth of unspent investments because one is collecting that amount in social security?

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by ObliviousInvestor » Fri Dec 07, 2018 6:43 am

capemaydiamond wrote:
Fri Dec 07, 2018 6:30 am
vtMaps wrote:
Fri Dec 07, 2018 4:20 am
capemaydiamond wrote:
Thu Dec 06, 2018 10:06 pm
But it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy.
In addition to what ObliviousInvestor explained, there are also other factors at work here... The calculator assumes that by claiming one year earlier, you didn't spend down about $12k of your retirement savings. The calculator assumes that $12k is invested and growing.

--vtMaps
The calculator factors in the growth of unspent investments because one is collecting that amount in social security?
Yes, that is what any Social Security present value calculation is doing.
Mike Piper, author/blogger

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by Carl53 » Fri Dec 07, 2018 8:26 am

ObliviousInvestor wrote:
Fri Dec 07, 2018 6:43 am
capemaydiamond wrote:
Fri Dec 07, 2018 6:30 am
vtMaps wrote:
Fri Dec 07, 2018 4:20 am
capemaydiamond wrote:
Thu Dec 06, 2018 10:06 pm
But it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy.
In addition to what ObliviousInvestor explained, there are also other factors at work here... The calculator assumes that by claiming one year earlier, you didn't spend down about $12k of your retirement savings. The calculator assumes that $12k is invested and growing.

--vtMaps
The calculator factors in the growth of unspent investments because one is collecting that amount in social security?
Yes, that is what any Social Security present value calculation is doing.
Think about this scenario, where spouse might take own benefit at 66 or 67, of $12500 or $13500, for possibly 7 or 6 years if capemaydiamond has high enough earnings such that the spouse might switch to spousal benefits at that time. If they have no need of the additional income and as such are not spending down additional retirement funds the spouse would receive $87500 or $81000, with the $81000 being delayed a year in starting, prior to the switch. It seems hard to understand how the later smaller benefit would be better by $500 PV or by any amount. Of course capemaydiamond might not have that high of benefit, just larger than the spouse, such that the spouse will never switch to spousal benefits. In that case I could see that what capemaydiamond is stating might happen.

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Re: "Open Social Security" calculator: feature requests, bug reports, etc

Post by capemaydiamond » Fri Dec 07, 2018 10:59 pm

Carl53 wrote:
Fri Dec 07, 2018 8:26 am
ObliviousInvestor wrote:
Fri Dec 07, 2018 6:43 am
capemaydiamond wrote:
Fri Dec 07, 2018 6:30 am
vtMaps wrote:
Fri Dec 07, 2018 4:20 am
capemaydiamond wrote:
Thu Dec 06, 2018 10:06 pm
But it is difficult to grasp that my spouse claiming 1 year earlier, and an amount that is $1000 less, would only result in a $500 reduction in the PV as compared to the best strategy.
In addition to what ObliviousInvestor explained, there are also other factors at work here... The calculator assumes that by claiming one year earlier, you didn't spend down about $12k of your retirement savings. The calculator assumes that $12k is invested and growing.

--vtMaps
The calculator factors in the growth of unspent investments because one is collecting that amount in social security?
Yes, that is what any Social Security present value calculation is doing.
Think about this scenario, where spouse might take own benefit at 66 or 67, of $12500 or $13500, for possibly 7 or 6 years if capemaydiamond has high enough earnings such that the spouse might switch to spousal benefits at that time. If they have no need of the additional income and as such are not spending down additional retirement funds the spouse would receive $87500 or $81000, with the $81000 being delayed a year in starting, prior to the switch. It seems hard to understand how the later smaller benefit would be better by $500 PV or by any amount. Of course capemaydiamond might not have that high of benefit, just larger than the spouse, such that the spouse will never switch to spousal benefits. In that case I could see that what capemaydiamond is stating might happen.
Unfortunately my benefit is not more than double that of my spouse's, so a spousal benefit isn't viable for us.....

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