Forbes: 44 "secrets" about Social Security

[growing_older]

Quote:

15. Millions of Baby Boomers can significantly raise their retirement benefits by continuing to work in their sixties. This may also significantly raise the spousal, child, and mother and father benefits their relatives collect.

I wish there was more explanation of this one. Is this just because their earnings record improves, or is it because of the way age 60 is taken as the wage base against which past earnings are computed to account for inflation, thus making earnings after age 60 push your total earnings up? Or is it because there are still a few years in the calculation before the wage cap was indexed for inflation, so these years replace those artificially limited earlier years? Os something else?

[marko]

I found the "start/stop/start" provision (#2) to be interesting until I did the math (always a dangerous thing for me!).

What my numbers show is that if I suspend at 66 and resume at 70, I'd get more money but I'd have to live to be 83 to break even...once again actuarially neutral, I think.

So, applying at 62 and suspending at 66 would make sense if, in those four years you realize that you'll likely live well beyond 83. YMMV.

[samclem]

Quote:

Originally Posted by marko So, applying at 62 and suspending at 66 would make sense if, in those four years you realize that you'll likely live well beyond 83. YMMV.

Yes, but it's not just about the raw number of dollars each option is likely to produce. The inflation-adjusted, non-market-linked, can't-outlive-it nature of the income stream makes SS a very important tool for reducing longevity risk. That tool is a bit more potent if SS is delayed to age 70.

[marko]

Quote:

Originally Posted by samclem Yes, but it's not just about the raw number of dollars each option is likely to produce. The inflation-adjusted, non-market-linked, can't-outlive-it nature of the income stream makes SS a very important tool for reducing longevity risk. That tool is a bit more potent if SS is delayed to age 70.

Ok, got that. But what if your only other option is to withdraw that same amount each year from your IRA/401k as you wait to age 70? (I'm ignoring spousal/survivor benefits)

If you keep that $ in your IRA, you could be earning more than the 8% that SS is pegged at (hopefully) and in many cases, you're not paying the full tax load in fed/state income tax as you would with an IRA withdrawal.

[imoldernu]

For those who will be using the SS website for info, I will pray for you.

[Independent]

Quote:

Originally Posted by marko Ok, got that. But what if your only other option is to withdraw that same amount each year from your IRA/401k as you wait to age 70? (I'm ignoring spousal/survivor benefits) If you keep that $ in your IRA, you could be earning more than the 8% that SS is pegged at (hopefully) and in many cases, you're not paying the full tax load in fed/state income tax as you would with an IRA withdrawal.

You probably already know this, but your wording here is pretty fuzzy. Deferring Social Security doesn't "earn more than 8%"

The monthly benefit goes up by 8% (non-compounded) for each year you delay past the normal retirement age. For those of us with an NRA of 66, that means the monthly benefit if we start at 70 is 32% higher than the monthly benefit if we start at 66.

The inflation-adjusted IRR on deferring from 66 to 70 is:
-100% if you die before 70
-13.4% if you die at 75
+2.6% if you die at 85
+5.6% if you die at 95

(assuming "you" are single.)

Deferring SS works well in those scenarios where living on savings struggles - long lives combined with poor market returns.

[braumeister]

Quote:

Originally Posted by growing_older Quote: 15. Millions of Baby Boomers can significantly raise their retirement benefits by continuing to work in their sixties. I wish there was more explanation of this one.

I would be very skeptical of the word "significantly" in the item you referenced.

[WhoDaresWins]

I called SS today and got the first available appointment at the office near me...April 23rd. This gives me plenty of time to do the maximizemysocialsecurity website. I will report back to the forum with my results and opinion of the site. I can compare the online calculator with what SS tells me.

Will pension and unearned income reduce the amount of survivor benefits I get? I know that taking benefits before FRA will reduce the amount. I will have 6.5 months of earned income this year but won't get any SS benefits until after my retirement date. I don't need these benefits when I turn 60. I can afford to wait until it is most advantageous to me.

[braumeister]

Quote:

Originally Posted by WhoDaresWins I called SS today and got the first available appointment at the office near me...April 23rd.

I have needed to visit the local SS office three times in the past ten years, and each time I simply looked up their hours and drove over there. I signed in and sat down to wait. In no case did I have to wait more than 20 minutes before getting to talk to a very helpful clerk.

You might want to try it.

[gcgang]

Great article with a lot to think about. Thanks.

Never knew SS could be so complicated.

[Hermit]

Here is a demo of Maximize My Social Security:
Quick Demo | Maximize My Social Security

You can also get to it from ES Planner. They are both created by Larry Kotlikoff.

[WhoDaresWins]

Quote:

Originally Posted by braumeister I have needed to visit the local SS office three times in the past ten years, and each time I simply looked up their hours and drove over there. I signed in and sat down to wait. In no case did I have to wait more than 20 minutes before getting to talk to a very helpful clerk. You might want to try it.

Thank you. Good suggestion as my office is about a five minute walk from the SS office. I made a visit there a couple of years ago with a friend who thought she could gather some info for her husband...plexiglass, armed security guard asking if we had any weapons, crowded waiting room with all the warmth of Sing Sing. Since then I have sent my case aide when I had any client-oriented business. I actually have some internal contacts at the local office but I feel funny asking for any special consideration for myself. I think next month will be an okay timeline for me.

[marko]

Quote:

Originally Posted by Independent Deferring Social Security doesn't "earn more than 8%" The monthly benefit goes up by 8% (non-compounded) for each year you delay past the normal retirement age.

Yes. What I meant is that if you leave the equivalent amount of your SS benefit in your portfolio, you could (hopefully) earn more than 8%.

IOW, taking your SS benefit instead of withdrawing that amount from your IRA allows that amount in the IRA to grow perhaps more than the 8% non-compounded benefit increase.

[Hermit]

Quote:

Originally Posted by marko Yes. What I meant is that if you leave the equivalent amount of your SS benefit in your portfolio, you could (hopefully) earn more than 8%. IOW, taking your SS benefit instead of withdrawing that amount from your IRA allows that amount in the IRA to grow perhaps more than the 8% non-compounded benefit increase.

To quantify the cost of waiting until 70, I added the payments for the 8 years between 62 and 70 and compared that to the cost of an equivalent annuity for the additional SS amount I would get at 70. Waiting until 70 won easily.

Most people are invested fairly conservatively by 62. A lot of folks on this forum use 5% rather than 8%.

[spncity]

Quote:

Originally Posted by braumeister I would be very skeptical of the word "significantly" in the item you referenced.

Here's one take on it. Probably not PC for an early retirement forum....

How Social Security Pays You to Work Forever | Making Sen$e | PBS NewsHour | PBS

Kindest regards.

[growing_older]

Quote:

Originally Posted by spncity Here's one take on it. Probably not PC for an early retirement forum.... How Social Security Pays You to Work Forever | Making Sen$e | PBS NewsHour | PBS Kindest regards.

This is however EXACTLY the answer I was looking for as to why "15. Millions of Baby Boomers can significantly raise their retirement benefits by continuing to work in their sixties." was included in the list. It may be an argument against ER, but the information about what the consequences are is very welcome. Thanks for the link.

[springnr]

Quote:

Originally Posted by spncity Here's one take on it. Probably not PC for an early retirement forum.... How Social Security Pays You to Work Forever | Making Sen$e | PBS NewsHour | PBS Kindest regards.

A quick skim to an example in the article:
Keep working until 70 + live to a hundred years old -
Ten more years could get you like $80K extra from Social Security!!!

If you love what your doing, why not, and here is an upside to the scenario.
How much Social Security Taxes would be paid on those wages?

[REWahoo]

Quote:

Originally Posted by spncity Here's one take on it. Probably not PC for an early retirement forum....

That's an understatement, with quotes like this from the article:

Quote:

Retirement can be awfully dull, and there is no guarantee that the grim reaper will make it on time.

Quote:

Wow! Working to age 80 will raise my lifetime Social Security benefits by 22 percent!

Wow indeed - calculated on living to age 100. Good luck with that.

[Dreamer]

Quote:

Originally Posted by springnr Question #2 scenario has been clear as mud for me too. I meet the 10 years / more than 2 years divorced etc., and I'm the high earner in this case. From reading - for a married couple the high earner can not claim spousal benefits at full retirement age and then draw on their own at 70. Is this one of those Social Security quirks where as a divorcee one gets a break and the high earner is able to claim spousal benefits at full retirement age and then draw on their own at 70?

No, it would apply to you also. If you are full retirement age, you can restrict your application for spouse's benefits only, and accrue the delayed retirement credits on your own record, and file for retirement benefits on your own record at age 70.

[mathjak107]

Quote:

Originally Posted by marko I found the "start/stop/start" provision (#2) to be interesting until I did the math (always a dangerous thing for me!). What my numbers show is that if I suspend at 66 and resume at 70, I'd get more money but I'd have to live to be 83 to break even...once again actuarially neutral, I think. So, applying at 62 and suspending at 66 would make sense if, in those four years you realize that you'll likely live well beyond 83. YMMV.

it should never be about what if i die, dead is dead. the real question should be what if i live?

to often folks make poor decisions because they look at things in terms of dying.

they buy the wrong products too. how many times do folks buy cash value life insurance as a product for what if they live.

you don't buy a product where you are betting you will die as a product for living. annuities are a product you buy for living.

throw in the fact most small investors suck at it, as well as get more conservative as they age and the chances of doing better than delayed ss become less and less.

if you look at the inflow and outflow numbers from the funds they show most small investors get a fraction of the gains the funds do left to their own devices in volatile times.