Social Security - When to start benefits..

[chinaco]

I think you meant to say that those are the three key questions for you and your situation. But other people with different situations have different questions to consider, goals to target and missions to accomplish. For example, the situation that Don and I post about above regarding being married with one spouse having no SS and subject to the GPO provision.

You are correct, there could be any number of special situations or personal reasons for delaying SS or not (rational, irrational, ignorance, or just don't care). One situation that may make one adjust their decision is if the market is severely down and they would have to sell their securities cheap to live. It is not a simple question to answer.

My comment was a generalization. But those questions cover the basics for most people (assuming you are not in the camp of believers that SS will be taken away or severely diminished and therefore decide you want to get it as soon as you can). It seems that many struggle with working through issues like: Do I need the money now? Hey, but what about my estate... If I die young I missed out? I hope I (or DW) don't run low on income in there very late years... I would hate to resort to eating cat food.

I might be missing some aspect of your point or perhaps I could have been more clear... but Item 1 covers - do you have enough money (assets or other income) to bridge the period of time you delay taking SS. Taking it as soon as possible may be the only way one could afford to retire.

 

[rescueme]

I think there are three key questions:

1. Can you wait (do you have enough bridge assets to delay)
2. Do you want/need to mitigate longevity risk
3. Do you have a goal of trying to maximize your estate

How we faced the question of when to take SS was originally "shot in the dark" analysis, based upon the options available to a married couple, in our situation.

However, after using various "methods", it came down to using the Fidelity Retirement Income Planner (RIP) - that is the full planner - not the quick one.

For those unfamiliar with the forecast tool, it gives you a year by year breakdown of income, withdrawal rate %, and the impact of excess RMD's (and higher taxes due) after age 70.5 till your end-of-plan.

Our situation is that DW/me are the same age (currently 62), my wife being a few months younger, and during our working years her income was less than mine.

What I did was to plug into the planner the variables of SS such as taking it at age 62, 66 (FRA), and 70, and variances of each age for both of us. I also used the option for myself to claim 50% of my wife's FRA benefit (for my age 66-69).

The results turned out that for our situation, the best results would be achieved when my DW would take it at age 66, I would file the 50% spousal benefit at that time, and I would take my SS at age 70.

The reports were interesting not only in what they revealed on the effect of SS on our withdrawal rate till end-of-plan (for us, age 100), but also how delaying SS reduced the amount of excess RMD's after age 70.5, due to the draw down of retirement portfolio assets in the early years.

A couple of disclaimers. First of all, you may/may not agree with the results of RIP. As for me, I've used it in retirement planning before I retired (at age 59), and also after retirement to see if it is close in actual results vs. plan. In our case, it is.

Secondly, we don't want to take the "apply early - pay back later" option. For me, it has a couple of pitfalls, IMHO. The question of where to safely invest the money (and today, safe means a low rate), along with paying taxes on $$$ you can't currently use - even if you can reclaim it later is of little interest to us. Additionally, this action would eliminate the 50% spousal option, which would give an instant increase in spending (or reduce portfolio withdrawals).

Third, we're of the thought that we don't worry if we "die early and don't get our "value" from SS". When you're dead - well, you know. While I'm delaying SS till age 70 for the benefit of my DW (assuming I pass first), that's the only "what if I die" question that we have.

Fourth, we have little estate issues. We don't have family other than one son, who is disabled. While he will get the proceeds of our liquidated estate (managed by a trust) after we pass, his lifestyle requires very little money, and is currently handled by his SSD income, along with a bit of income from a sheltered workshop. After he passes, the remainder of the trust will be going to our named charities. Assuming tax laws are the same or similar, most of that will result in little/no tax to the folks that can continue to do their "good works".

Those being the case, in answer to your questions:
1. Yes
2. No.
3. No.


...

 

[Fireup2020]

There's also political risk -- the risk that the longer you wait, the more likely future reforms will negatively impact you. I think it's likely that future SS reform that makes it a worse deal will not affect people already in the program, so to me personally that would be a factor in taking it ASAP -- I'd more likely be grandfathered out of a worse deal.

I agree Ziggy. For the younger folks here that MIGHT have a chance at the SS buffet, we could be better off getting "in" at an earlier age - maybe just to get something for a few years before the system is completely defunct! I plan on filling all that paperwork out for collection at age 62. If 2037 is when it all goes bust, well, I'll have milked out 5 years worth of "reduced" payments, rather than missing the boat alltogether.

 

[chemist]

There's also political risk -- the risk that the longer you wait, the more likely future reforms will negatively impact you. I think it's likely that future SS reform that makes it a worse deal will not affect people already in the program, so to me personally that would be a factor in taking it ASAP -- I'd more likely be grandfathered out of a worse deal.

Also, higher payouts at 70 could combine with RMDs at 70.5 to make 85% of SS income taxable instead of 50% or even not at all.

The last time they made a major change to SS in 1983, when they made FRA older than 65 for a lot of us boomers, everybody 46 and older was grandfathered in. No guarantees it will be the same next time they tinker with it, but I would think there would be a major outcry if people were 60 or 61 and they only granfathered in folks already collecting....

So my guess is as a 55 year old I will be grandfathered in based on prior outcomes.

We are planning on a restricted app where my wife draws her benefit at 62 and I file for spousal benefits at my FRA of 66 yrs 2 months - then take my own benefit at 70. She is 3 years younger and women live long in her family - I have had cancer 4x and don't rate to make it to the far side of the mean life expectancy (but you never know!).

 

[chinaco]

...
The results turned out that for our situation, the best results would be achieved when my DW would take it at age 66, I would file the 50% spousal benefit at that time, and I would take my SS at age 70.
...

Could you describe what you mean by the best result? If it was not longevity mitigation or concern about maximizing the estate... What were you trying to achieve. Maximize early income? Reduce taxes?

I have been considering the approach where DW takes hers at 62 and I take mine at 66.x or 70 (depending on our situation at the time) to provide some mitigation against longevity and just in case something happened to our other assets such that the income they could provide were diminished. I figured that since I cannot predict the future, straddling the take it early benefit (theory) and take it late benefit (theory) might be the best approach. My rationale is that it might be the best optimization approach given the unknown factors. But I will admit, I have not run the numbers with a variety of what if scenarios.

 

[rescueme]

Could you describe what you mean by the best result?

At age 100, the report showed the smallest maximum annual withdrawl rate, the least amount of excess RMD withdrawls (from age 73-100) - also reducing taxes, along with the highest portfolio terminal value...

All other scenerios that I ran had results that turned out "less" in the three-axis target I was testing against. Again, our results are based upon our specific "facts", including the situation that we have quite a bit in tax-deferred instruments and can face retirement for many years - even discounting SS income and the actual content/breakdown of our joint retirement portfolio.

If you want to "run the numbers" with RIP, you will have to plug in your specific situation, and I would recommend paying attention and entering your budget numbers using the spreadsheets, including reporting variance of specific cost variations along the way (as we have for trip expenses, which are reduced by decade, as we age along with increasing projected medical expenses beyond the 7% annual increase as a product default).

 

[Marc]

Maybe I missed it but I could not find recommendation in the article for the case when the lower earning's spouse's benefit is less than 40% of the higher earner. I don't know if it is best for my wife when she is 62 to 1) take her benefits or 2) for me to take my benefits but immediately suspend them and for her to get spousal benefit. Then, again when I hit FRA, should I take spousal benefits based on her account or just take full benefits?

If anyone can shine light, I would appreciate it.

Marc

 

[Rustward]

...
We are planning on a restricted app where my wife draws her benefit at 62 and I file for spousal benefits at my FRA of 66 yrs 2 months - then take my own benefit at 70. She is 3 years younger and women live long in her family - I have had cancer 4x and don't rate to make it to the far side of the mean life expectancy (but you never know!).

Can you file on your spouse if you have a record of your own and the benefit on your record will be larger than the spousal benefit?

From Do you also qualify for benefits on someone else's Social Security record?
If you qualify on your own record, we will pay you that amount first. But if you also qualify for a higher amount as a spouse, widow or widower on another record, you'll get a combination of benefits that equals that higher amount.

 

[rescueme]

Can you file on your spouse if you have a record of your own and the benefit on your record will be larger than the spousal benefit?

Yes you can. Your reference pertains to those who are looking to supplement/replace their benefit with another. This is not the case.

Back to my situation (my wife/me same age - within a few months). My PIA amount is less than double of hers at age 66 (our FRA). There is no benefit for me to file & suspend at age 66 that she may receive a higher benefit.

When I file against her (50% of her PIA at age 66), I am going against her record alone - not a combination of records.

However, assuming I live till 70, claim my SS, and pass after that date since my total benefit will be much more than hers, she will get my full benefit amount when I pass. If I pass sometime between the ages of 66 - 70, she will claim a benefit equal to 100% of the benefit I would have received on the day before I passed.

 

[Tadpole]

My factors and plan

I don't know if I have optimized but I have made a decision to postpone SS. I will retire this year at 62. My concern is my husband whose family on average lives more than 20 years longer than my own. I am two years younger and my earnings averaged more than 3 times his over our years of paying into SS. I know things can change but right now SS will at least keep up with CPI under current law.

Most of our retirement money is in deferred accounts (75-80%).

Factors:

1) Our initial income from pensions and SS (assuming I took it) would be 143% of what we currently are living on after tax based on current tax law.

2) His pension gets a plus up only if the state legislature decides to throw a bone - unlikely in todays situation. My FERS gets a diet-cola. So over 25 years his pension becomes a joke and mine erodes year by year.

3) A 1.8%/year withdrawal from our deferred accounts will almost replace my age 62 SS and will reduce the amount of money subject to RMD later on.(Reduces initial spending to 138% of current spending after tax under current tax law.)

4) At the time I retire he will be only 2 years from his full retirement age. He is currently taking his age 63 SS. My full retirement age projection with retirement at 62 under the SS intermediate estimate of inflation is about twice his projected age 66 SS income.

5) His income reduces by his SS income amount when he switches to mine if and when I die.

6) His spousal FERS is 50% of my unreduced FERS pension. Another reduction.

7) Upon my death his after tax income is reduced by at least 30% but many of his major expenses remain the same (property tax, car and property insurance, house maintenance, etc.)

8) I can worry about the future but can only make numbers based on the present so my plans are the best I can do to try to provide for my husband's cursed long lifetime projections.

So, SS under current law is the only income that promises full COLA.

The plan:

At retirement I will start a TIAA payout annuity (currently about 4% guaranteed). At the end of the ten year period the deferred savings will be reduced by 18% and the old 403b account will be depleted. If I die and he switches to my SS, he will put the TIAA and, after 70 1/2, RMD payout that he doesn't need into after tax savings or investments for his future. I really don't care if he dies with millions of dollars. I just want his last year to have enough money for what he needs. Life is never certain; you do the best you can.

 

[Dave J]

Yes you can. Your reference pertains to those who are looking to supplement/replace their benefit with another. This is not the case.

Back to my situation (my wife/me same age - within a few months). My PIA amount is less than double of hers at age 66 (our FRA). There is no benefit for me to file & suspend at age 66 that she may receive a higher benefit.

When I file against her (50% of her PIA at age 66), I am going against her record alone - not a combination of records.

However, assuming I live till 70, claim my SS, and pass after that date since my total benefit will be much more than hers, she will get my full benefit amount when I pass. If I pass sometime between the ages of 66 - 70, she will claim a benefit equal to 100% of the benefit I would have received on the day before I passed.

+ 1

An article in the March 2012 SmartMoney magazine by Glenn Ruffenach also tells of this.I had not noticed this strategy before. I have been planning on my SO to draw at 62 and me at 70, but this, on my SO record, will give me an additional 29k by age 70. Others may get more if SO had higher earnings than mine.
I'm posting this to maybe bring this to more folks attention.

 

[jeffmete]

I read all these strategies than entail waiting till 70 to get SS, then as I was reading the obituaries this morning, I realized most of the people passing are in their 50's-60's and 70's. We all would like to think we're living till 90, but stuff happens and life can change pretty fast. I'll bet SS has figured out that on average, all these methods work out the same. For every person that chooses to delay and lives to 100, there are those that don't make it.

 

[Dave J]

If I die at 50's, 60's or 70 yo, SS means nothing. If I live to 90, SS may just mean a bunch. That is why I am trying to maximise the $$ amount in older years.
It means an extra 200k by going with the above strategy, instead of both drawing at 62.

 

[Alan]

If I die at 50's, 60's or 70 yo, SS means nothing. If I live to 90, SS may just mean a bunch. That is why I am trying to maximise the $$ amount in older years.
It means an extra 200k by going with the above strategy, instead of both drawing at 62.

+1

DW, who is a year younger than me has several relatives who lived well into their 90's. It's a type of insurance than I am prepared to invest in. It only needs one of us to live into our 80's for it to have been worth waiting until I am 70 for SS.

 

[jeffmete]

If I die at 50's, 60's or 70 yo, SS means nothing. If I live to 90, SS may just mean a bunch. That is why I am trying to maximise the $$ amount in older years.
It means an extra 200k by going with the above strategy, instead of both drawing at 62.

I guess I miss your point. The money has to come from somewhere to live from 62 till your 70 (assuming your retiring at 62)? So your effectively just trading your savings now for increased SS later. The present value of money has to be calculated into this equation, not just absolute dollars.

 

[NYEXPAT]

Planned parenthood

YW and I are going to use the Planned Parenthood method. I will wait until age 70 to collect my maximum benefit, In the meantime in 3 1/2 years ( when I reach 62) my current and future children will be able to collect 180% of my full (age 66) benefit ($40k a year as I have been retired 24 years already). When I am 85 (parents 94 in good health) my YW will turn 55 and be able to collect on my record as long as we have lived in the states (and she has worked) for a period of time. She plans to retire back in Peru (owns oceanfront property) once I kick the bucket.

 

[Moemg]

YW and I are going to use the Planned Parenthood method. I will wait until age 70 to collect my maximum benefit, In the meantime in 3 1/2 years ( when I reach 62) my current and future children will be able to collect 180% of my full (age 66) benefit ($40k a year as I have been retired 24 years already). When I am 85 (parents 94 in good health) my YW will turn 55 and be able to collect on my record as long as we have lived in the states (and she has worked) for a period of time. She plans to retire back in Peru (owns oceanfront property) once I kick the bucket.

Actually it is a lot less than 180% more like 50%.Benefits For Children

 

[ejman]

I guess I miss your point. The money has to come from somewhere to live from 62 till your 70 (assuming your retiring at 62)? So your effectively just trading your savings now for increased SS later. The present value of money has to be calculated into this equation, not just absolute dollars.

Yes, for some reason I frankly do not understand all of these threads of SS at 62 vs 70 (and there have been many) simply ignore the time value of your nest egg that remains invested (i.e. monies you did not take out from your investments to live on)when you start taking SS at 62. When I run the calculations for my own situation, the increase of the next egg vastly exceeds the additional SS payments starting at age 70 as long as the rate of return in you investments exceeds about 5% and inflation remains at about 3%. My own rate of return over many years has been about 7.5% so I'm taking SS at 62

 

[haha]

I guess I miss your point. The money has to come from somewhere to live from 62 till your 70 (assuming your retiring at 62)? So your effectively just trading your savings now for increased SS later. The present value of money has to be calculated into this equation, not just absolute dollars.

This is a good point, and I thought about it when deciding to wait until 70 as a single man. But today's discount rate if taken off securities with similar safety to SS annuities is very, very low. Also, for couples or even single women the scales are tipped well toward waiting.

Another factor for me is that it gives me just one more reason to live a long time-to finally get something back from My Uncle whom I have supported so royally for so many years.

Ha

 

[NYEXPAT]

Actually it is a lot less than 180% more like 50%.Benefits For Children

Sorry, I was "1/2 in the bag" when I wrote that. It is 50% per child, with a maximum family benefit of 180%. In our case we will be collecting 150% of FRA beginning at age 62.

 

[Dave J]

I guess I miss your point. The money has to come from somewhere to live from 62 till your 70 (assuming your retiring at 62)? So your effectively just trading your savings now for increased SS later. The present value of money has to be calculated into this equation, not just absolute dollars.

I have plenty of money on hand to cover 62 to 70. Also, above strategy give me(in my situation) $29,000 extra from 66 to 70 drawing on SO record.
My SO is 2 years younger than me.
Go to

Strategies to Max Out Social Security Benefits - SmartMoney.com

and especially read the part on "Bob & Carol.
For the other questioner, I am already retired and will turn 60 this year,
being retired a little over 10 years now.
I just ran my personal numbers using 83 yo for me and 90 for my So and come up with $162190 more from SS total. Present value can not come close to making up that,IMO.

 

[braumeister]

Go to

Strategies to Max Out Social Security Benefits - SmartMoney.com

After reading that article recently, I went to Social Security Solutions and paid the $50 for their recommendations.

I was very pleasantly surprised to see that they gave me a strategy for maximizing the SS benefits for DW and me that was far and away better than any other I've seen (such as the one at AARP) and much better than I would have come up with on my own.

 

[Dave J]

Yes, for some reason I frankly do not understand all of these threads of SS at 62 vs 70 (and there have been many) simply ignore the time value of your nest egg that remains invested (i.e. monies you did not take out from your investments to live on)when you start taking SS at 62. When I run the calculations for my own situation, the increase of the next egg vastly exceeds the additional SS payments starting at age 70 as long as the rate of return in you investments exceeds about 5% and inflation remains at about 3%. My own rate of return over many years has been about 7.5% so I'm taking SS at 62

I'm sure you did, but did you add the 3% inflation to your amount to draw starting at 66 and 70?

Are you single? I'm talking stratagy for married folks.

Do you think you can keep a return of 7% for the next 30 + years?

 

[Dave J]

After reading that article recently, I went to Social Security Solutions and paid the $50 for their recommendations.

I was very pleasantly surprised to see that they gave me a strategy for maximizing the SS benefits for DW and me that was far and away better than any other I've seen (such as the one at AARP) and much better than I would have come up with on my own.

Please share your strategy.

 

[jeffmete]

I have plenty of money on hand to cover 62 to 70. Also, above strategy give me(in my situation) $29,000 extra from 66 to 70 drawing on SO record.
My SO is 2 years younger than me.
Go to

Strategies to Max Out Social Security Benefits - SmartMoney.com

and especially read the part on "Bob & Carol.
For the other questioner, I am already retired and will turn 60 this year,
being retired a little over 10 years now.
I just ran my personal numbers using 83 yo for me and 90 for my So and come up with $162190 more from SS total. Present value can not come close to making up that,IMO.

If Bob and Carol both started at 62 taking the reduced benefits and put the money under their mattress, they would have 130K at 66. I believe all these strategies aren't as dramatically different when the you consider what the money can be doing for you now. Like you said, you have the money to live on, but using that money really has to work into your equation. I do agree if you have dramatic age differences between you and your wife, or a child on SS, waiting later can help them.