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Reduction in Soc Sec by retiring early
Old 09-09-2014, 08:15 PM   #1
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Reduction in Soc Sec by retiring early

Hi everyone,

It has been a few months since we sold the business and retired - still getting used to things although I cannot for the life of me figure out how I ever had time to work. Lol

I'm trying to budget and plan for when to take social security and how much it will be.

If I were to continue to work, at 62 I would receive $1904 according to the calculators - but they are assuming I will work up to 62 - I am now 57. When I plug in my earnings and $0 for the next five years until I hit 62, the calculator says I will get $1817 per month.

Now, I cannot figure out how to determine what my payment would be if I wait until 66 and a half years or 70 years.

If the $1817 is 95% of the $1904 amount, would it make sense to take the numbers that social security is saying they will pay at 66.6 and 70 (as they assume I'm still working) and take 95% of those figures? Or is that all wrong - I'm sorry - I'm not the best with numbers.

Second question is: My DH earned lower wages and is also six and a half years younger than me! He is going to have no earnings for 12 years, so his social security payments are going to be low. I'm assuming that at some point he can apply for half of mine while his grows? Does that work in this scenario since I'm an older woman?

I don't see how I can figure out when best for me to take Social Security if I don't know the amounts. My inclination is to try to wait until 70, as long as the money holds out.

Thanks,

Debbie
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Old 09-09-2014, 08:51 PM   #2
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Hi Debbie,

For a general number I would use the $1,817 the calculator gave you. I'm assuming it was the SS calculator.

For your SS benefit at Full Retirement Age (FRA) I would multiply $1,817 x the factor listed for your birth year on SS website: Retirement Planner: Benefits By Year Of Birth

For example for some one born between 1943 and 1954, there is a 25% reduction for taking SS at 62. For a person born in 1957 there is a 27.5% reduction

If we use the same age group (1943-1954) there is a 32% increase for deferring SS from FRA at 66 to age 70. Since you are a bit younger you need to get your factors from the SS website.

Since I'm guessing you were born around 1957 I would estimate your SS benefit at FRA of 66.6 years to be $1,817 x 1.275 = $2,317.

At age 70 I would estimate it to be $2,317 x 1.28 = $2,966

Remember that amount is todays dollars, not considering future COLA increases.

Hope this helps and other posters can check my math and assumptions
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Old 09-09-2014, 09:29 PM   #3
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The delayed FRA credit - from age 66.6 to 70 amounts to an 8% increase/year. You can plug your actual SSA earnings record in using this link after providing some basic information:

Quick Calculator

That should give a pretty solid estimate of your "early" and delayed benefits.
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Old 09-09-2014, 10:08 PM   #4
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Yes, I did that calculator, but wasn't sure how to figure approximate benefit at FRA and 70, as opposed to taking at 62. And thanks Lancelot for the numbers, it is exactly what I needed. Now I can plug them into firecalc and other calculators for more accurate projections.

Also, am I understanding it correctly that if I wait until 70 to claim, DH can claim spousal at 67 ( will he get half of my FRA amount?) And then claim his at 70? ( I am 6.5 years older)

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Old 09-10-2014, 08:20 PM   #5
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A general premise of SS early/late, is that overall it costs the government the same due to reduced payments of early payments. For the individual, it matters a LOT whether you believe you will live until starting the "later" payment, and what you can do with the "early" payment if you turn it on early.

There are a number of threads on this board about it. My personal calculations are that I will turn on SS as soon as I hit 62, since I might die the next day, or any following day before "full" SS, and every cent I receive in the gap can be invested such that it produces greater funds than the increase by waiting.
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Old 09-10-2014, 09:44 PM   #6
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Originally Posted by unno2002 View Post
A general premise of SS early/late, is that overall it costs the government the same due to reduced payments of early payments. For the individual, it matters a LOT whether you believe you will live until starting the "later" payment, and what you can do with the "early" payment if you turn it on early.

There are a number of threads on this board about it. My personal calculations are that I will turn on SS as soon as I hit 62, since I might die the next day, or any following day before "full" SS, and every cent I receive in the gap can be invested such that it produces greater funds than the increase by waiting.
Except for couples. Taking spousal benefits while waiting for your own benefit adds extra value to the whole thing. And the survivor gets the larger benefit, also an extra value. Both of these should be considered by the OP.
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Old 09-10-2014, 09:48 PM   #7
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^ Or for divorced folks
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Old 09-10-2014, 10:34 PM   #8
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Yes, since his SS payment will be lower than mine, I think it wise for him to claim spousal while his grows. I just need to get specifics, like does he have to wait until FRA to claim, etc. I was on the SS govt site today and I think I am more confused than before.
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Old 09-11-2014, 02:14 AM   #9
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I was on the SS govt site today and I think I am more confused than before.
Hi' I'm Lance, I'm from the government- and I'm here to help you

*Sorry, couldn't resist*

OK back OT, as I understand the 'claim' strategies, your husband can claim a spousal benefit as early as age 62. However, in general he should probably wait until his FRA, then claim a spousal benefit, allowing his benefits to grow.

If your husband elects to collect before his FRA, SS will automatically award which ever benefit is higher (His or the spousal benefit.) At his FRA he can choose which benefit he wants. At 62 your husband should be able to easily determine which benefit is higher.

Continue to educate yourself about SS; I know the rules are some what byzantine, but the more you read about it and hash the strategies out with others it will become less convoluted. You can do it

At least that's my story and I'm sticking to it

You might peruse these articles and glean some information which might be applicable to your situation.

http://www.forbes.com/sites/kotlikof...nefits-at-fra/

http://www.fool.com/retirement/gener...st-out-of.aspx
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Old 09-11-2014, 03:32 AM   #10
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I tried to get accurate estimates from the SSA calculators and website. The results I got using their various tools did not agree with each other. So I ended up buying ESPlanner which has IMHO a much more trustworthy SS calculator.

Using ESPlanner I found that in our particular situation we're better off taking SS early. This has been the result that we've found over and over. We ran a new model yesterday with an even earlier retire date and still came up with the same answer.
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Reduction in Soc Sec by retiring early
Old 09-11-2014, 10:46 AM   #11
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Reduction in Soc Sec by retiring early

Quote:
Originally Posted by Lancelot View Post
^ Or for divorced folks

Thanks. Divorced folks are often forgotten in these discussions. Often the examples are for a single person, never married, or married couples. But, those who have been married, often for decades, then divorced, seem to be left out. Yet, there are so many of us.
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Old 09-11-2014, 11:37 AM   #12
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Originally Posted by Lancelot View Post
If your husband elects to collect before his FRA, SS will automatically award which ever benefit is higher (His or the spousal benefit.) At his FRA he can choose which benefit he wants.
That's the most concise description of this issue I've seen. From online sources I've never been able to clearly identify that distinction.
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Old 09-11-2014, 05:04 PM   #13
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Hi Debbie,

For a general number I would use the $1,817 the calculator gave you. I'm assuming it was the SS calculator.

For your SS benefit at Full Retirement Age (FRA) I would multiply $1,817 x the factor listed for your birth year on SS website: Retirement Planner: Benefits By Year Of Birth

For example for some one born between 1943 and 1954, there is a 25% reduction for taking SS at 62. For a person born in 1957 there is a 27.5% reduction

If we use the same age group (1943-1954) there is a 32% increase for deferring SS from FRA at 66 to age 70. Since you are a bit younger you need to get your factors from the SS website.

Since I'm guessing you were born around 1957 I would estimate your SS benefit at FRA of 66.6 years to be $1,817 x 1.275 = $2,317.

At age 70 I would estimate it to be $2,317 x 1.28 = $2,966

Remember that amount is todays dollars, not considering future COLA increases.

Hope this helps and other posters can check my math and assumptions

I believe the correct figure at 66.6 years would be $1817 x 1.379 = $2505. At age 70, the estimate would be $2505 x 1.28 = $3206.

The 27.5% reduction figure for birthyear 1957 is correct, but that's a reduction off of an estimate at FRA. Since the estimate cited by the OP is for age 62, you need to increase that figure by 37.9% for the FRA value.
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Old 09-11-2014, 06:34 PM   #14
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My two favorite links:

SS benefits claiming strategy: Social Security Benefits Evaluator - T. Rowe Price

Spousal benefits: Retirement Planner: Benefits For You As A Spouse
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Old 09-11-2014, 07:54 PM   #15
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MileKing,

Well I like your numbers better!

Animorph, I will check out both links. I feel so inferior when it comes to these things - even after running a successful company for over a quarter of a century, I am just not a spreadsheet/math problem type person.

I am debating between Quicken Lifetime Planner and the ES Planner. I want to track my budget and hopefully interface with my bank and Vanguard and do tax scenario calculations. I am awaiting the closing of my company 401K and final profit sharing, rolling over to Vanguard IRA and then have Vanguard advisor that will help me set and forget I hope.

Thanks, you guys rock!

Debbie
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Old 09-11-2014, 08:30 PM   #16
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Bummer, the T Rowe Price calculator (link above) cannot help me as there is a six year age difference.... sheesh...

So, can I determine my DH's approximate FRA and age 70 benefits with the same formula as above? I received his age 62 benefit amount from ss site calculator using his actual earnings.
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Old 09-11-2014, 09:16 PM   #17
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Originally Posted by MileKing View Post
I believe the correct figure at 66.6 years would be $1817 x 1.379 = $2505. At age 70, the estimate would be $2505 x 1.28 = $3206.

The 27.5% reduction figure for birthyear 1957 is correct, but that's a reduction off of an estimate at FRA. Since the estimate cited by the OP is for age 62, you need to increase that figure by 37.9% for the FRA value.
You are correct M, yes it depends where you start from, thanks for the clarification.
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Old 09-11-2014, 09:20 PM   #18
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That's the most concise description of this issue I've seen. From online sources I've never been able to clearly identify that distinction.
Thanks, I've researched that particular rule at length because I'm divorced and plan to claim spousal benefits at FRA and increase my own benefit with deferred credits to age 70.

Here it is, right from the 'horses' mouth

you have reached full retirement age and you are eligible for a spouse's benefit and your own retirement benefit, you have a choice.

You can choose to receive only the divorced spouse's benefits now and delay receiving retirement benefits until a later date. If retirement benefits are delayed, a higher benefit may be received at a later date based on the effect of Delayed Retirement Credits.

http://www.ssa.gov/retire2/divspouse.htm
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Old 09-11-2014, 10:14 PM   #19
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Thanks. Divorced folks are often forgotten in these discussions. Often the examples are for a single person, never married, or married couples. But, those who have been married, often for decades, then divorced, seem to be left out. Yet, there are so many of us.
I agree. And claiming spousal benefits at FRA -while letting your own benefit grow to age 70- can be substantial. Especially for women who in general tend to live a longer.
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