Social Security Benefits

[mathjak107]

I found this chart on Motley Fool. Looks like the differences in benefits between starting at 62 or 70 do not become significant until around 85.

it actually is older than 85 . once you figure in "

the checks you gave up

no more compounding on the invested assets you spent down . just using TIPS TOOK 20 YEARS TO EVEN . A BALANCED FUND 22-23 YEARS

no protection from medicare increases

and in our case my wife does not get a 4200.00 dollar adder to her own early benefit until i file since 1/2 my full is more than her full.


it takes until 90 to see a real significant difference ..

but the larger ss check has no sequence risk so it does make you a lot less dependent on markets and rates .

it all boils down to risk and which you prefer . do you want longevity risk ? or market and interest rate risk ?

 

[Red Corvette]

If you retire at 62, but do not start taking your SS benefit then there is still a benefit from waiting. You might benefit more if you were still working and adding to your total career earnings that are also part of the basis for your benefit, but delaying the start of your payments will increase the benefit, up to age 70.

Is there more to the formula than just the highest 35 years of income? How do total earnings work in determining one's benefits?

 

[REWahoo]

? How do total earnings work in determining one's benefits?

This explains it: Understanding the Social Security Benefit Calculation

 

[bingybear]

If it plays out neutral till age 85, what's the debate?

This 85 does not take into account of higher order effects such as investment gains/losses and money spent on living while waiting to take your SS. But to your question, most of us will not die at 85, some earlier and some later. From the first order analysis, it is better to take SS late if you die after 85 and earlier if you die earlier.
With file and suspend, there were ways for a couple to really increase the amount they receive. This is in the process of being eliminated.. in the transition period now.
The higher order effects really have significant influence of what is better. But many of these like the sequence of investment returns can not be defined before it happens. Much depends upon where assets are located: after tax, IRA, Roth, life insurance (for those using LI as income), etc. Some have to take SS early because they just need it to live. Some try to optimize what they can use after tax and includes withdraw from all accounts.
My FIL took SS @ 65. Seemed early for on with good assets and health. At 67 he had a brain aneurysm go... and he was gone. So the best planning and analysis is easily trumped by an unforeseen health issue or accident.
Many use it as longevity insurance and take it late. This provides the highest payment in later years if they really live long.

 

[Independent]

Is there more to the formula than just the highest 35 years of income? How do total earnings work in determining one's benefits?

Earnings outside the 35 high years don't count.
But, earnings are indexed.

The SSA provides a nice example here: https://www.socialsecurity.gov/OACT/ProgData/retirebenefit1.html

 

[mathjak107]

our origonal plan was to play it by ear based on markets . i thought if markets were poor for a year or two i would file early rather then spend down investments .

after utilizing fidelity's social security optimizer that would be the wrong thing to do since ss returns are beating my own .

we are better off selling off lower returning cash and bonds , reducing rmd's and delaying .


the optimized plan fidelity came up with is a bit different then i would have come up with if i was delaying on my own .

my wife is 2 years older than me , she has been collecting since 62 and is 65 now .

i am 63.

so their plan has her stopping her early benefit at her fra .

she lets it grow until 70 .

at 67- 10 months i file restricted application for 1/2 hers and she gets a 30% bigger check then she was .

at 70 i file for my own and she gets a spousal benefit of 4200 .00 added to her benefit since half my full is 4200.00 higher then her full .