First question: estimating SS benefits for early retirement

[Brett_Cameron]

What is interesting/perplexing is that when I run the numbers in the spreadsheet I have constructed (which allows me to plug in all sorts of scenarios for diff. returns, tax brackets, ss age, 'death') - I end up with more assets to pass on to heirs if I start collecting SS at 62 vs 70.

By starting at 62, I think I am not drawing down as much on my assets and they actually grow from age 80 thru 100.

When I delay ss to age 70, my overall assets still grow over time, but the final amount at 'death' is lower than if I start ss at 62.

Yep. That is how it works!

 

[Independent]

What is interesting/perplexing is that when I run the numbers in the spreadsheet I have constructed (which allows me to plug in all sorts of scenarios for diff. returns, tax brackets, ss age, 'death') - I end up with more assets to pass on to heirs if I start collecting SS at 62 vs 70.

By starting at 62, I think I am not drawing down as much on my assets and they actually grow from age 80 thru 100.

When I delay ss to age 70, my overall assets still grow over time, but the final amount at 'death' is lower than if I start ss at 62.

Your spreadsheet allows you to vary the assumed investment return. You should find that this result is very sensitive to that assumption.

Be careful how you handle inflation, remember that SS is CPI adjusted.
When I do this calculation, I find that if I'm looking at net worth at age 100, I need to assume more than CPI+6% to make the start-at-62 option look better.

 

[Animorph]

Your spreadsheet allows you to vary the assumed investment return. You should find that this result is very sensitive to that assumption.

Be careful how you handle inflation, remember that SS is CPI adjusted.
When I do this calculation, I find that if I'm looking at net worth at age 100, I need to assume more than CPI+6% to make the start-at-62 option look better.

+1

 

[ParFour]

Very interesting - thank you. I found the section on the ssa web site that describes this. Apparently to get from the age 67 number down to the age 62 number you subtract 30%.

So I guess I can deduce that if my age 62 number without working any further is $1,631, then my age 67 number is $1,631 / .7 = $2,330, and my age 70 number is $2,330 x 1.24 = $2,889.

So the $2,889 figure is $480 lower than the figure I would earn if I keep working for another decade. Well, that makes me feel even better, since I have no desire to work ten more years to earn an extra $480/month.

Between the link Gauss posted and the details on the SSA.gov site, I have constructed my spreadsheet to forecast benefits at various ages and with various work stop dates. Both sources mention addition of COLA if collecting after age 62. Unable to determine if the estimates from SSA.gov included COLA projections or not. Does anyone know? How do folks here handle that aspect of estimating SSA Benefits? Project based on average CPI over recent periods, leave it out since it is unknown, etc.?

Thanks.

 

[teejayevans]

Between the link Gauss posted and the details on the SSA.gov site, I have constructed my spreadsheet to forecast benefits at various ages and with various work stop dates. Both sources mention addition of COLA if collecting after age 62. Unable to determine if the estimates from SSA.gov included COLA projections or not. Does anyone know? How do folks here handle that aspect of estimating SSA Benefits? Project based on average CPI over recent periods, leave it out since it is unknown, etc.?

Thanks.

I assume it goes up with the average wage index which is already part of the calculations for wage normalizing and the estimate calculation. Your estimate is based on today's dollars, it will rise with inflation, but there is talk of changing it, in other words, lower it, not sure that idea got very far.

 

[meierlde]

I assume it goes up with the average wage index which is already part of the calculations for wage normalizing and the estimate calculation. Your estimate is based on today's dollars, it will rise with inflation, but there is talk of changing it, in other words, lower it, not sure that idea got very far.

The benefit increases with wage increases till age 62. At that point since some folks at least start taking SS it switches over to cola for all even those who have not started, because that maintains the actuarial equivalence of benefits no matter when they are started.

 

[rescueme]

Interesting. I tried the Northwestern Mutual Life "Longevity Game" and picked answers that I thought were "most healthy". I got a life expectancy of 95 for a male who has already reached 70. So your 30 years doesn't look overly optimistic.

FWIW, we had another one in the obit's this morning that passed at age 101 (and a man, no less ).

I've mentioned this on another thread; living in a state (PA) which has a lot of elderly, I'm surprised at the number (multiples) of those that have passed at/above the century mark, in a monthly period.

While DW/me have planned our retirement income (including SS) for 100 years (taking SS at age 70; I'm 66, DW will be the same in May), we've always planned for meeting our income needs assuming a long life.

If we're wrong? So what. Money is for the living, not the dead , and like I've always said I would rather die with money than live without it ...

FWIW...

 

[Independent]

Between the link Gauss posted and the details on the SSA.gov site, I have constructed my spreadsheet to forecast benefits at various ages and with various work stop dates. Both sources mention addition of COLA if collecting after age 62. Unable to determine if the estimates from SSA.gov included COLA projections or not. Does anyone know? How do folks here handle that aspect of estimating SSA Benefits? Project based on average CPI over recent periods, leave it out since it is unknown, etc.?

Thanks.

The SS numbers are in current dollars. They assume no change in the wage index or the CPI between now and when you start benefits.

You should be able to verify this by matching the SS with your worksheet.

I plan based on "real" dollars. My simple assumption is that my basic spending goes up with the CPI, and SS goes up with the CPI, so SS gives me a constant real income.

As others have mentioned, SS actually goes up with a wage index prior to retirement. The historic difference between wages and CPI has been about 1.0 - 1.5%. I have just ignored that difference for planning.