Social Security Claiming Question
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Social Security Claiming Question
Good morning,
DW and I turn 62 in Feb next year. Our PIA Full Retirement Age 66 years 10 months is 5 times hers as she was mostly a homemaker while raising kids, a few part time jobs. I plan on delaying until 70 to max mine out and increase her Survivor benefit also.
Question is, I did the Open Social Security tool and it has starting DW at like age 65 years 6 months to max out total benefits, but the difference from that to starting hers at 62 is only $1,500 which is over, I believe, many years. Just think we should take her small benefit ($345 month) at 62 and benefit from over 3 years of taking that before optimal, if it means such a small difference in total as I delay to 70. Am I thinking clearly, advice welcome? Thanks in advance.
DW and I turn 62 in Feb next year. Our PIA Full Retirement Age 66 years 10 months is 5 times hers as she was mostly a homemaker while raising kids, a few part time jobs. I plan on delaying until 70 to max mine out and increase her Survivor benefit also.
Question is, I did the Open Social Security tool and it has starting DW at like age 65 years 6 months to max out total benefits, but the difference from that to starting hers at 62 is only $1,500 which is over, I believe, many years. Just think we should take her small benefit ($345 month) at 62 and benefit from over 3 years of taking that before optimal, if it means such a small difference in total as I delay to 70. Am I thinking clearly, advice welcome? Thanks in advance.
Re: Social Security Claiming Question
Run some scenarios through your income tax software, or https://www.dinkytown.net/v3/999160/Tax1040.html
Consider:
Are you planning Roth conversions?
Would using Social Security for part of your income reduce your MAGI for Medicare-IRMAA at age 63?
If you are planning some major expenses - renovations or travel or new car -- could your income without SS trigger Net Investment Income Taxes?
Consider:
Are you planning Roth conversions?
Would using Social Security for part of your income reduce your MAGI for Medicare-IRMAA at age 63?
If you are planning some major expenses - renovations or travel or new car -- could your income without SS trigger Net Investment Income Taxes?
Ipsa scientia potestas est. Bacon F.
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Re: Social Security Claiming Question
Thanks MJS, I have done some Roth Conversions. I have quite a bit of space to get to the NIIT threshold for married couples of $250k MAGI. 22% tax bracket right now but considering converting into 24% tax bracket but staying under the $250k MAGI NIIT threshold.
Re: Social Security Claiming Question
One thing I would add is that optimizing SS claiming strategy based on maximizing total payment misses some assumptions or other factors:
1) First and foremost, it is based on average mortality and while we may not know where we will fall in all that, it will be a major factor in which strategy ends up actually being the best
2) Are there factors around timing that should be considered? Could you use the money now? Are you going to have more money than you know what to do with when you are 70 and you begin receiving the larger amount plus begin taking RMDs soon? Are there things you could do at 62 like a bucket list backpacking trip that might be out of the question at 65 or 70? Or are you just going to end up paying extra taxes on money taken earlier?
As you said, the difference in claiming strategy is relatively small and is uncertain anyway. Other factors could easily override that.
1) First and foremost, it is based on average mortality and while we may not know where we will fall in all that, it will be a major factor in which strategy ends up actually being the best
2) Are there factors around timing that should be considered? Could you use the money now? Are you going to have more money than you know what to do with when you are 70 and you begin receiving the larger amount plus begin taking RMDs soon? Are there things you could do at 62 like a bucket list backpacking trip that might be out of the question at 65 or 70? Or are you just going to end up paying extra taxes on money taken earlier?
As you said, the difference in claiming strategy is relatively small and is uncertain anyway. Other factors could easily override that.
Re: Social Security Claiming Question
The Open Social Security calculator mentioned in the original post is indeed "based on average mortality" for whatever mortality table is chosen. (By default it uses the SSA 2017 Period Life Table.) In determining the optimum age for the wife to claim it uses the probabilities that both the husband and wife are alive. This is because her benefit will cease after either of them dies. [1] (For example the "Alive" sheet of my Longevity Estimator Excel workbook shows -- based on this mortality table -- a 52% chance both members of a man / woman couple each age 62 will survive until age 78 and a 35% chance they'll both live to age 82.)
However, instead of using average mortalities we can base the calculation on benefits continuing until a specific age. The following table does that. It calculates the present value (PV) of the benefits when claimed at ages 63 to 70 compared to the the present value if claimed at age 62. For example it shows -- given the three assumptions in cells B1, B3, & B4 -- if SS is claimed at age 65 and if it continues until age 78, the PV would be $1,101 more than if claimed at age 62. [2] But if benefits continued until age 82, the maximum advantage would be $8,927 by delaying until age 68.
Code: Select all
Row Col A Col B Col C Col D Col E Col F Col G Col H Col I Col J ColK
1 Born 1959
2 NRA 66.833 Normal Retirement Age
3 PIA 500 Primary Insurance Amount
4 Rate (0.57%) Today's default Open Social Security
------------------------ Claiming Age and Percent of PIA -----------------------
5 62 63 64 65 66 67 68 69 70
6 70.833% 75.833% 81.111% 87.778% 94.444% 101.333% 109.333% 117.333% 125.333%
7 Die Age PV @ 62 ------------------ Difference vs Claiming at Age 62 ------------------ Best
Code: Select all
8 71 39,363 (1,797) (4,106) (6,566) (9,872) (13,977) (18,762) (24,582) (31,446) 62
9 72 43,863 (1,480) (3,453) (5,489) (8,372) (12,040) (16,316) (21,628) (27,984) 62
10 73 48,389 (1,160) (2,796) (4,406) (6,864) (10,091) (13,856) (18,657) (24,502) 62
11 74 52,941 (839) (2,136) (3,318) (5,346) (8,131) (11,382) (15,669) (21,000) 62
12 75 57,519 (516) (1,471) (2,222) (3,820) (6,160) (8,894) (12,664) (17,477) 62
13 76 62,123 (191) (803) (1,121) (2,286) (4,177) (6,392) (9,641) (13,935) 62
14 77 66,753 136 (131) (13) (742) (2,184) (3,875) (6,601) (10,372) 63
15 ===> 78 71,410 465 544 **1,101** 810 (178) (1,344) (3,544) (6,789) 65 <===
16 79 76,094 795 1,224 2,221 2,371 1,838 1,202 (470) (3,185) 66
17 80 80,805 1,128 1,907 3,348 3,942 3,867 3,762 2,623 439 66
18 81 85,542 1,462 2,595 4,481 5,521 5,907 6,337 5,733 4,084 68
19 ===> 82 90,307 1,799 3,286 5,621 7,109 7,958 **8,927** 8,861 7,750 68 <===
20 83 95,099 2,137 3,982 6,767 8,706 10,022 11,532 12,007 11,437 69
21 84 99,919 2,477 4,681 7,920 10,313 12,097 14,151 15,171 15,146 69
22 85 104,766 2,819 5,384 9,080 11,929 14,184 16,786 18,353 18,875 70
23 86 109,641 3,163 6,091 10,246 13,554 16,283 19,436 21,553 22,626 70
24 87 114,544 3,509 6,803 11,419 15,188 18,394 22,101 24,771 26,398 70
25 88 119,475 3,857 7,518 12,598 16,832 20,518 24,781 28,009 30,192 70
26 89 124,434 4,207 8,238 13,785 18,485 22,653 27,476 31,264 34,008 70
27 90 129,422 4,560 8,962 14,978 20,147 24,801 30,187 34,538 37,846 70
28 91 134,438 4,914 9,689 16,178 21,819 26,961 32,914 37,831 41,705 70
29 92 139,483 5,270 10,422 17,385 23,501 29,133 35,656 41,143 45,587 70
30 93 144,557 5,628 11,158 18,598 25,192 31,318 38,414 44,474 49,491 70
31 94 149,660 5,988 11,898 19,819 26,893 33,515 41,187 47,824 53,417 70
32 95 154,792 6,350 12,643 21,047 28,604 35,725 43,977 51,194 57,366 70
- If she dies first, he will continue to receive his benefit; and if he dies first, she will begin receiving his benefit as a widow.
- Calculation using the Excel PV function:
Code: Select all
72,511 = -PV(-0.57%, 78 - 65, 500 * 12 * 87.778%, 0, 0) / (1 - 0.0057) ^ (65 - 62) 71,410 = -PV(-0.57%, 78 - 62, 500 * 12 * 70.833%, 0, 0) 1,101 = 72511 - 71410
Re: Social Security Claiming Question
Didn't you just prove it makes little difference? So why do you think you should take hers early?cloneman33 wrote: ↑Sat Sep 19, 2020 10:22 amJust think we should take her small benefit ($345 month) at 62 and benefit from over 3 years of taking that before optimal, if it means such a small difference in total as I delay to 70.
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Re: Social Security Claiming Question
Of course https://opensocialsecurity.com/ can do that as well.
This isn't just my wallet. It's an organizer, a memory and an old friend.
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Re: Social Security Claiming Question
+1 These less quantifiable factors should be considered. Sometimes we get too focused on the math.Kenkat wrote: ↑Sat Sep 19, 2020 12:45 pm One thing I would add is that optimizing SS claiming strategy based on maximizing total payment misses some assumptions or other factors:
1) First and foremost, it is based on average mortality and while we may not know where we will fall in all that, it will be a major factor in which strategy ends up actually being the best
2) Are there factors around timing that should be considered? Could you use the money now? Are you going to have more money than you know what to do with when you are 70 and you begin receiving the larger amount plus begin taking RMDs soon? Are there things you could do at 62 like a bucket list backpacking trip that might be out of the question at 65 or 70? Or are you just going to end up paying extra taxes on money taken earlier?
As you said, the difference in claiming strategy is relatively small and is uncertain anyway. Other factors could easily override that.
An important key to investing is having a well-calibrated sense of your future regret.