SS at 66 or 70 - not such an easy question?

[Senator]

if the ltc policy is to small then you blew it by having it . it either covers the expense and keeps you off medicaid or it doesn't. it is useless in either case for doing so

You are right, but many people cannot even get a LTC policy. A Long Term Care Insurance Rates for Single Age 55 would be 2007 per year and that would cover a Daily benefit of $150 and 3 year benefit period.

If you want a higher premium, it is MUCH higher. Starting at 70, higher yet.

That is why many people opt for the Medicaid route. No premiums, and 100% coverage for as long as you need it. Generally in a sub-standard place...

A higher level of SS could help, if it's in the bank or in a monthly check, it all adds up. Most will avoid a LTC situation before 70. Generally, if you go in before 65, you will recover and get discharged, and your health insurance will cover the entire trip.

• For every 100 elderly patients in a nursing home in a given year, 38 will recover or stabilize so they can be discharged.
• About 88% of the 1,500,000 US nursing home residents (in 16,500 facilities) are over the age of 65
• The average stay for elderly patients who die in a nursing home is just shy of 2 years.

https://www.longtermcarelink.net/eldercare/nursing_home.htm

Ir really depends on the health you have each year whether or not to collect SS at that time. Statistics mean nothing when the doctors says "I have some bad news..."

 

[Texas Proud]

Even if she returned to Belarus after you die she is entitled to SS based on being your widow. The SS administration is very accustomed to paying out benefits to overseas recipients, directly into their overseas bank account if requested with an excellent exchange rate.

Just mentioned this as you might be thinking that she would lose that on returning home and may affect your calculations.

Glad someone pointed this out....

And this IS important.... SS is payable to your spouse in almost every country... there are a few where they will not send it to (think Iran etc.), but she still can get it in the US.... and it is not lost if she does not get it monthly.... not sure how that works, but I did read it one time...

 

[statsman]

Isn't the non-worker spousal benefit based on the other spouse's actual benefit or normal retirement age benefit, whichever is less? Meaning if a spouse's normal retirement age is 66 and they work beyond that, that spouse's normal retirement age benefit is used to determine the spousal benefit.

 

[mathjak107]

Great point.

As of 2011, at age 66, USA male life expectancy is 17 years or age 83. If your wife is 62 at that point, her life expectancy is 23 years or to age 85. And if you're in good health & work at living longer - exercise of body & mind, healthy habits, they're higher still. It doesn't matter who else is dying, if you work to take care of your health you're likely to beat the averages. If you're a negative slug, yea, take SS early. My bet is those that take SS early died on average below the expectancy tables.

as of 2015 a 65 year old man has a 42 % chance of seeing 85 and women a 54% chance but as a couple they have a whopping 73% chance .

in fact as a couple one of them has a 47% chance of seeing 90 .

but statistics mean little to us mortals .

every year the insurers can tell us how many will die but they can't tell us who .

so for us mortals we only have 2 outcomes possible . we are either dead or alive or things work out as planned or they don't ..

if you are dead , well you need no money but if you or your spouse are alive then you need all that planning that goes with having longevity .

so basically we always plan around the possibility it is us that is on the other side of the statistic .

we insure against the things that can be devastating to us if we were the unlucky statistic .

we insure our homes for fire even though less then 1% of us will have our home burn down . we insure our lives when we are younger even though there is a minuscule chance we will die so young , just about everything in life we insure has the odds way not in our favor of collecting more then we pay in . in fact just good retirement planning has us figuring well in to our 90's regardless of statistics .

so looking at statistics for ltc and trying to determine your stay in a home or chances of needing long term expensive care is not going to help much if you are on the opposite side of the statistic .

i know my dad spent 6 years in a home after a stroke and my 55 year old co-worker just had a stroke after hip surgery and is now paralyzed so playing the statistic game can be financially devastating when you are on the other side of things ..

but that is why all insurance protects us against the remote flyers that if it is us it could be totally devastating and lead to an impoverished lifestyle for the stay at home spouse or the living spouse .


unfortunately if it is us that it happens to , since it has to happen to someone ,we can't call for a do over .

 

[mathjak107]

Most patients do not require $100K a year.

I think you will find that LTC insurance policies are a smaller drip in the barrel. Many policies are only three years, and only cover up to $150 per day. That is $4,500 per month. If SS can cover $3,000 of that, you can self-insure for the remaining $1500 per month.

You were already going to self-insure for the amount over $150 a day, unless you buy a very expensive policy.

the policy's that run 3 years are generally state partnership plans not private insurance which to be worth anything need at least 5 years so assets can be protected and clear the look back stage .

policy's that are 3 years like our new york state partnership plan run 3 years because they carry no look back period and no asset shifting and a special agreement with our state . .

they also don't require that the stay at home spouse live's an impoverished lifestyle either with the medicaid restricted income once the insurance runs out and medicaid is involved .

in our case the 3 years insurance was just icing on the cake .

you do realize that once you go on medicaid the stay at home spouse has a very low restricted income even if assets are shifted in to trusts and are preserved .

the fact after the insurance is up that we keep all assets and income while a special version of medicaid pays the bills is where the policy value really is .

we took 300 a day inflation adjusted by 5% a year for 3 years coverage and 6 year's in home care . care runs about 450 -500 a day in our area for a decent place but we can absorb the difference .

it is the perks after the insurance is up that are priceless to us ..

 

[Dawg52]

Or... Skip all the math, take it at 68 and realize you made at least 50% of the right choice applying 0% of your time worrying about it.

Ha. My philosophy as well. Only the decision for me is either 62 or 66. So I will probably go with 64.

 

[Runner]

as of 2015 a 65 year old man has a 42 % chance of seeing 85 and women a 54% chance but as a couple they have a whopping 73% chance .

in fact as a couple one of them has a 47% chance of seeing 90 .

The problem being, how many 85 or 90 year olds have anything resembling "quality of life" versus "wish they were dead and probably would be better off dead"? We can all point to exceptions, but I have considerable actual experience with the very elderly and it is not a state that I look forward to (even though, at 66, I have zero health problems and am fitter than 99.9% of my peers). Most of the very elderly that I know are miserable regardless of whether they are in state-run warehouses or private facilities. Those who are happiest (relatively speaking) seem to be those who remain in their homes, even long after this is a safe alternative. I just don't see worrying about what my situation is going to be if and when I'm 87 or 93 as even being part of the equation.

 

[rayvt]

Of course, when LTC time arrived, if you had taken SS early you might have a nice pot of $250 to $300k or so (say 8 yrs of collecting $22k/yr + earnings) to apply towards LTC.

You can't have it both ways, unfortunately. Wait until 70 and have a significantly larger monthly check. Start at 62 and invest the money monthly into the S and P 500 and have $200k to $300k accumulated when you hit 70.

There are risks and pros/cons either way.

One of my activities since retiring has been modelling finance things in spreadsheets. In addition to the SS spreadsheet I posted above, there's another for S&P500 portfolio returns, including customizable stock/bond allocation.
The median long(ish)-term total return for a 60/40 allocation is 9%/yr
FWIW, the median 100/0 return is about 10.5%/yr.

If you plug into my SS sheet an earnings rate of 9% and a 2.5% COLA, the breakeven age for 66 vs. 70 is ... 110. That's basically never.

Playing further, the worst 20 year return for 100/0 (all S&P500, no bonds) was 6.3% annual.
Plug in 6.3% return and 2.5% COLA, the breakeven age is 89.
SSA says the life expectancy of a 70 year old born in 1950 is 16 years or age 86.

 

[Senator]

One of my activities since retiring has been modelling finance things in spreadsheets. In addition to the SS spreadsheet I posted above, there's another for S&P500 portfolio returns, including customizable stock/bond allocation.
The median long(ish)-term total return for a 60/40 allocation is 9%/yr
FWIW, the median 100/0 return is about 10.5%/yr.

If you plug into my SS sheet an earnings rate of 9% and a 2.5% COLA, the breakeven age for 66 vs. 70 is ... 110. That's basically never.

Playing further, the worst 20 year return for 100/0 (all S&P500, no bonds) was 6.3% annual.
Plug in 6.3% return and 2.5% COLA, the breakeven age is 89.
SSA says the life expectancy of a 70 year old born in 1950 is 16 years or age 86.

You cannot compare the S&P to SS. You would need to compare a 100% guaranteed return to make an apples to apples comparison.

 

[Senator]

we took 300 a day inflation adjusted by 5% a year for 3 years coverage and 6 year's in home care . care runs about 450 -500 a day in our area for a decent place but we can absorb the difference.

What does a policy like this cost? Is it two individual policies, or a couples policy?

 

[mathjak107]

it is two individual policy's .

our mistake was not taking it younger since you save nothing by waiting , it only gets more expensive .

we pay 6900 a year FOR BOTH. i am 63 an my wife 65 and i get a 1600 .00 tax credit from nys plus whatever we manage to take on our federal .

by waiting i got diagnosed as diabetic and even though i am high normal now on no meds i was surcharged .


but as i pointed out in our ltc discussion , to self insure properly it really means having that insurance money safe , secure and liquid at all times .

risking 1/2 may be gone in a extended downturn is not self insuring in my opinion .

so that being the case just a fraction of the average returns on keeping a large sum like that which would have to be set a side and not invested , fully invested because we have the policy pays for the policy .

 

[pb4uski]

....but as i pointed out in our ltc discussion , to self insure properly it really means having that insurance money safe , secure and liquid at all times .

risking 1/2 may be gone in a extended downturn is not self insuring in my opinion ....

Perhaps in your opinion, but not in mine. It would be silly to insist that money for expenses that will not be incurred for years be bound up in totally liquid, low-risk investments. Even the insurer doesn't do that.

And when in the history of man have we had an extended period where a portfolio declined 50% and stayed there... never to my knowledge.

 

[mathjak107]

you never know when you will need that money . my co-worker needed it by age 55 my dad at 65 .

why bother to have life insurance at all if you are younger ? wouldn't that be just as foolish since statistically you have little chance ?

the answer is insurance protects against life's remote flyers if they can be financially devastating since you never know if it is you .

while we have not had a a long extended down turn yet it is no different then asking yourself when was the last time you had a stroke ? never is the answer most likely .

but that is what insurance is for , the remote chances in life . that is also why insurance company's have restrictions on where they can invest that insurance money

 

[misanman]

Not sure why we so often return to beat the LTC dead horse. I think that most all of us have an opinion on one side or the other and are unlikely to be swayed by constantly debating it. Sorry if I'm off base here but I get tired of seeing the same arguments over and over.

 

[Golden sunsets]

People who say it's a no-brainer to defer are wrong. It's actually a brainer. Take a look at my spreadsheet. https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0 Plug in your own estimates and figures. If you take SS at 66 FRA and invest/save that and earn 3% above inflation, the break-even age is 87. 17 years to break even. To me that's much too long to be attractive. If you earn nothing above inflation, breakeven is 82, which is 12 years, and to me _still_ too long. There is no clear-cut right answer, it's largely a matter of personal preference in how you'd like the shape of your income curve to be. Of course, if you are selling annuities, your answer is going to be influenced by the commission you'll get.

Rayvt; I've seen your conclusions before which run counter to most conventional wisdom, or if not counter, then much later cross over points. Your spreadsheets look impressive, however I have no idea if there are any mathematical errors in your computations or if you are failing to factor in any important assumptions. But for the moment if one were to accept your premise, have you done any calculations on the results for those who are collecting spousal benefits at FRA while letting their own benefits accumulate between FRA and age 70? Wouldn't that scu your results by reducing the BE point?

 

[REWahoo]

Not sure why we so often return to beat the LTC dead horse. I think that most all of us have an opinion on one side or the other and are unlikely to be swayed by constantly debating it. Sorry if I'm off base here but I get tired of seeing the same arguments over and over.

Please go to the "pay off the mortgage early", "Mac or PC" and "when to take SS" threads for an entirely new perspective on beating a dead horse.

 

[pb4uski]

Not sure why we so often return to beat the LTC dead horse. I think that most all of us have an opinion on one side or the other and are unlikely to be swayed by constantly debating it. Sorry if I'm off base here but I get tired of seeing the same arguments over and over.

Agreed, it is one thing to debate whether or not to self insure (I usually don't participate in those debates ). But it is a whole different thing to debate that if one decides to self insure that it should be funded with safe, liquid investments when the LTC payments are unlikely to be made for years and even when they do start are paid over time.

A balanced portfolio is more than adequate in such situations just like it is for retirement living expenses that inflate and are paid out over time.

 

[audreyh1]

Agreed, but it is one thing to debate whether or not to self insure (I usually don't participate in those debates) and a whole different debate that if one decides to self insure that it should be funded with safe, liquid investments when the LTC payments are unlikely to be made for years and even when they do start are paid over time.

A balanced portfolio is more than adequate in such situations just like it is for retirement living expenses that inflate and are paid out over time.

Totally agree. Especially if your retirement portfolio can support withdrawals larger than you are currently needing.

 

[mathjak107]

however there is no guarantee that a balanced portfolio or any portfolio for that matter will keep up with the inflation in healthcare .

those who did this in 2000 saw less then a 2% real return over 15 years . certainly not nearly enough to keep up with the 5% - 7% inflation we saw on care .

the guaranteed 5% inflation increase in a policy yearly is tough to guarantee on your own . the insurers have dead body's that make that possible , we do not .

 

[btdt22]

Isn't the non-worker spousal benefit based on the other spouse's actual benefit or normal retirement age benefit, whichever is less? Meaning if a spouse's normal retirement age is 66 and they work beyond that, that spouse's normal retirement age benefit is used to determine the spousal benefit.

You are correct. It's at FRA, even if the primary earner waits until 70 to take SS

 

[AtlasShrugged]

Agreed, it is one thing to debate whether or not to self insure (I usually don't participate in those debates ). But it is a whole different thing to debate that if one decides to self insure that it should be funded with safe, liquid investments when the LTC payments are unlikely to be made for years and even when they do start are paid over time.

A balanced portfolio is more than adequate in such situations just like it is for retirement living expenses that inflate and are paid out over time.

You are absolutely correct!

 

[pb4uski]

...those who did this in 2000 saw less then a 2% real return over 15 years . ...

Vanguard Wellington grew from $10k on 1/1/2000 to a tad over $30k today... Wellesley, which is more conservative is over $24k today compared to $10k at the beginning of 2000. Those are roughly 7.6% and 7.2% annual rates of return, respectively.

http://www.morningstar.com/funds/XNAS/VWENX/quote.html
http://www.morningstar.com/funds/xnas/vwiax/quote.html

Something that cost $10k in 2000 would cost almost $14k in 2015 inflated at CPI or about 2.2% a year. (http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=10000&year1=2000&year2=2015)

So the real rate of return for a balanced portfolio was much more than 2% real over the last 15 years, more like 5%.

Where are you getting a less than 2% real return over the last 15 years?

 

[mathjak107]

i was looking at the s&p which was below 2% .

i show the last 15 years vti was up 5.15% and vbtlx total bond 4.96% with inflation at 2.60%

so a 50/50 mix would be at a 5.50% return less 2.60% for inflation = 2.90% real return.

that may be hard to get going forward with a balanced fund looking at 4% possibly in nominal returns if guesstimates are correct . about 6% from equity's and 3%-4% from bonds .

 

[karen1972]

I think of it this way. You are forgoing $117k to get a COLA adjusted annuity of $790/month starting when you are 70 for as long as you or your spouse live. That is a 8.1% payout rate [($790*12)/$117k]

According to immediateannuities.com $117k would buy a fixed joint life annuity for a 70 yo couple of $613/month (6.3% payout rate). So delaying SS is a great deal because not only is $790/month much better than $630/month, the $790/month is also COLAed and the $630/month is fixed.

That's how I think of it too and I just had this conversation with someone the other day who is still working and doesnt' see the need to stop before 70 as they are in real estate and like what they do.

The other thing it that if you look at longevity statistics, a couple where one member lives to 95 is not that out of the question especially if both spouses are already in their 60s and still in good health. So if you factor that in, waiting till 70 so that you get better payouts from 70-95 would be my preference.

To me the only reason not to take it when your 70 is A) you don't plan to live very long due to current health issues B) you need the money now C) You have plenty of money and would rather have a "guarantee" of getting as much back out of the government as possible to leave your heirs should you pass early.

 

[audreyh1]

i was looking at the s&p which was below 2% .

i show the last 15 years vti was up 5.15% and vbtlx total bond 4.96% with inflation at 2.60%

so a 50/50 mix would be at a 5.50% return less 2.60% for inflation = 2.90% real return.

This example ignores rebalancing.