SS at FRA vs. at 70 - Unexpected results

[karluk]

Quote:

Originally Posted by Texas Proud SS is neutral except when you throw a spouse into the calculations... DW is 10 years younger than me.... just that fact skews my decision into waiting as long as I can to maximize her survivor benefits... I have not done the math, but I bet that it is far from neutral for me....

It's true that, as a general rule, joint mortality is a huge factor in when to start SS benefits. But I don't believe it's relevant to this thread, which was started to discuss the effects of delaying SS past FRA at 66 until age 70. My understanding is (and feel free to correct me if I'm wrong) that survivor benefits can't be any larger than your benefit amount at FRA. So, if you're trying to maximize your spouse's benefit, you should indeed delay taking SS until age 66, but any delay after that only affects your benefit, not your spouse's. Whether delaying benefits past 66 is a good idea depends only on your life expectancy, not your joint life expectancy.

I am in a similar situation to yours, since DW is significantly younger than me. I also feel committed to delaying SS until FRA because of the improvement on survivor benefits, but after that it's not so clear. I have tentatively planned to wait until 70, but this is not written in stone. If I discover that I'm suffering from a life-threatening illness when I'm 67, for example, at that point I would not see any compelling reason to delay taking SS immediately.

[Dreamer]

Survivor's benefits can't be any larger than what you were receiving at the time of your death. If you were receiving delayed retirement credits, then your survivor would be able to receive them also.

[Texas Proud]

Quote:

Originally Posted by karluk It's true that, as a general rule, joint mortality is a huge factor in when to start SS benefits. But I don't believe it's relevant to this thread, which was started to discuss the effects of delaying SS past FRA at 66 until age 70. My understanding is (and feel free to correct me if I'm wrong) that survivor benefits can't be any larger than your benefit amount at FRA. So, if you're trying to maximize your spouse's benefit, you should indeed delay taking SS until age 66, but any delay after that only affects your benefit, not your spouse's. Whether delaying benefits past 66 is a good idea depends only on your life expectancy, not your joint life expectancy. I am in a similar situation to yours, since DW is significantly younger than me. I also feel committed to delaying SS until FRA because of the improvement on survivor benefits, but after that it's not so clear. I have tentatively planned to wait until 70, but this is not written in stone. If I discover that I'm suffering from a life-threatening illness when I'm 67, for example, at that point I would not see any compelling reason to delay taking SS immediately.

According to the website in a post a small number ago, your assumption is wrong...

The suggestion it gave me was file and suspend (in case I need a lump sum for some reason).... start taking at 70.... DW start spousal at 62... DW gets my full benefit when I pass... I believe they said 132% of FRA.... but could be wrong on that number....

The interesting thing is DW gets more benefits in total than I do...

[gerntz]

Quote:

Originally Posted by karluk I am in a similar situation to yours, since DW is significantly younger than me. I also feel committed to delaying SS until FRA because of the improvement on survivor benefits, but after that it's not so clear. I have tentatively planned to wait until 70, but this is not written in stone. If I discover that I'm suffering from a life-threatening illness when I'm 67, for example, at that point I would not see any compelling reason to delay taking SS immediately.

I see it the opposite. She's going to get a larger survivor benefit if you delay till death if before age 70.

[harley]

Like many others, my main reason to wait until 70 is so that DW will have a larger payment, assuming she outlives me. And yes, Karluk, your assumption about spousal survival benefits is wrong. DW doesn't like playing with finances the way I do, so a nice income stream will make her later years more pleasant.

But another reason to delay, for me, is to maintain more space in the 15% bracket so I can do Roth conversions for 4 more years. We are planning to leave money to DD and DGD when we die, and the Roth is a nice way to do it. I did my FIRE calculations without seriously taking SS into consideration, because since I didn't control that money I didn't trust it. But that was a decade ago, and at 59 I'm now assuming there will be SS income. Mine will be close to the max, so delaying it a few more years gives me a little more time to convert. Then at 70 or so, the big SS check plus RMDs will kick us out of the 15% bracket, probably forever. Oh well, so it goes.

[Chuckanut]

Quote:

Originally Posted by rayvt But if that's the case, what is the attraction for getting extra SS money, when you didn't need anything from SS up to then? What's the point? .

I can't speak for others, but for me the attraction is that taking SS at 70 is my form of LTC insurance or longevity insurance.

The current LTC insurance market is broken for most of us who don't have a policy or who are seeing their LTC premiums rapidly inflating.
However, the added boost from SS (inflation adjusted, of course) along with my modest pension should pay a big percentage of LTC expenses. And, if I don't need much LTC then I can spend the money on wine, my woman, and song.

Also, since Detroit, I am well aware that my solid gold, platinum plated modest pine and brass pension may not be as sure a thing as I once thought. SS at 70 is another way of protecting myself in the event that my pension is reduced or limited in some way. (Thankfully, unlike the Detroit pensioners, I was also part of the SS system.)

It's insurance. If I don't absolutely need it, I leave some $$'s on the table but I still am financially comfortable. If I do need it, I will be very grateful for the wisdom that the Creator gave me in the early years of retirement.

Everybody's situation is different. And often complicated. It is a capital mistake to assume all situations are similar.

[karluk]

Quote:

Originally Posted by Chuckanut Everybody's situation is different. And often complicated. It is a capital mistake to assume all situations are similar.

I think we all can agree on this sentiment. That's why I got involved in this thread in the first place, since the OP was making the case (essentially) that everybody's situation is similar and that you'd have to be a sucker to delay benefits past FRA. I think we've shown that line of reasoning to be clearly wrong.

Thanks also to the posters who corrected my misconception about starting SS between 66 and 70. I can still envision situations where I would start receiving benefits before 70, but now I know that there would be an impact on DW's survivor benefit.

[Mulligan]

I have minimal skin in SS (will get $110 or so at 62) but I enjoy reading the thought processes of posters in making their decision because of its impact on retirement income. Then I start thinking about "Joe Average". I bet he couldn't get 3 posts into this thread without his eyes glazing over. My guess he reaches his conclusion this way. "SS says I can get paid when Im 62. Sounds like a good idea to me".


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[karluk]

Quote:

Originally Posted by Mulligan Then I start thinking about "Joe Average". I bet he couldn't get 3 posts into this thread without his eyes glazing over. My guess he reaches his conclusion this way. "SS says I can get paid when Im 62. Sounds like a good idea to me".

I am 100% certain that many people think this way. Unfortunately, most of them don't have the financial resources of many of the people in this forum. A couple that we know have condemned themselves to a life of poverty due to this exact reasoning. The wife had already retired, but the husband was still working. He quite his job and started SS immediately after turning 62. They have no resources or income outside of SS, and were even having trouble paying their monthly bills with the husband working. We made some gentle suggestions that they were unlikely to be able to get by on SS alone, but the attitude of "Give me what's coming to me, right now!" carried the day. Sad, but now it's too late to change their mind. Last we heard, the wife was pressuring the husband to look for a job. Gee, what a surprise.

[Mulligan]

Quote:

Originally Posted by karluk I am 100% certain that many people think this way. Unfortunately, most of them don't have the financial resources of many of the people in this forum. A couple that we know have condemned themselves to a life of poverty due to this exact reasoning. The wife had already retired, but the husband was still working. He quite his job and started SS immediately after turning 62. They have no resources or income outside of SS, and were even having trouble paying their monthly bills with the husband working. We made some gentle suggestions that they were unlikely to be able to get by on SS alone, but the attitude of "Give me what's coming to me, right now!" carried the day. Sad, but now it's too late to change their mind. Last we heard, the wife was pressuring the husband to look for a job. Gee, what a surprise.

I share the exact same thoughts and I would imagine there are more people who fit your above scenario than people fitting this forums philosophy. Many people here wonder how so many people can choose to retire on way less than planners recommend. Its actually very simple. You just don't worry or even think about the multitudes of possible senior expenses and just say... "I am retiring and taking my SS".


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[karluk]

I should also add to my anecdote about the couple we know, that the wife retired after being disabled by a (relatively) mild stroke. She is certainly not lazy, but is no longer capable of working. That's the only reason she's pressuring her husband to find a job instead of looking for one herself.

[43WorkYears]

As she is disabled, she can apply for ss disability and collect her Full retirement amount once approved.


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[karluk]

Quote:

Originally Posted by 43WorkYears As she is disabled, she can apply for ss disability and collect her Full retirement amount once approved. Sent from my iPhone using Early Retirement Forum

I'm willing to believe she CAN get SSDI, but I know for a fact that she refuses to apply. However, you made a good suggestion that is worth passing on to her. Perhaps the pressure of being constantly short of money may cause her to change her mind and apply. My only concern is that it's been around a decade since her stroke. The fact that there's been such a long delay in filing for SSDI may cause the SSA to be skeptical about how real the disability is.

[fritz]

I make the horrible assumption (I might be wrong here) that the folks at SS have spent many long hours running the numbers and have minimized any advantage obtained by when you decide to sign up. I don't see them leaving any advantages in the future either.

Quote:

Originally Posted by MooreBonds As others have pointed out, SS is apparently calculated based on a single person, and is gender-neutral. When you add in a spouse, and different salary histories, AND differences in ages, it results in an almost "anything but" neutral. Granted, the numbers may not result in much differences, but if there are significant age and/or salary record differences, it can result in a sizable difference that is worth crunching the numbers to compare.

My last comments in my original post (included above) were meant to be (1) a reference to Social Security's intent to be set up to be neutral/minimize most financial advantages as to when an individual takes SS. (2) Given that SS is getting a lot of attention due to funding issues lately (2035 is the current line in the sand), I also believe a fix is likely in the near future - even with Congress's resistance to addressing it. I see that fix cutting both ways, with some sort of funding (tax) increase along with (selective) benefit reductions. Taxing all SS income for some, raising the eligibility age (ER as well as FRA), and advantageous spousal scenarios could all be on the table.

[43WorkYears]

Didn't realize is was that long ago. She could have been collecting all those years and had Medicare as well. There are people with less medical issues than a stroke on SSDI. Being out of work for a long time without applying may make her ineligible.


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[mathjak107]

we are playing ss by ear as i am retiring this year at 62.

if markets crap out we will take it earlier rather than spend down investments.

retiring early and delaying ss and spending down assets that are losing compounding forever really changes the equation and cuts any differences down by a lot.

i give up 4 years worth of checks if i delay. .

in our case for every year i wait until fra marilyn does not get 3k added to her own benefit since i can't get her the kicker added to hers until i file.

so if i wait until fra that is 12k given up in just spousal and 96k in my checks. .

we would spend down 4 years of investments giving up gains and compounding on that 96k that replace's my not getting checks plus the 12k that i can't add to my wife's benefit..

my medicare increases remain unlimited since i have not filed for ss . once you do you are protected from increases being more than cola's .

no protection exists if you are not collecting.

so all in all break even would get pushed out to 84-85 once all the things you are not getting get figured in ..

the gamble of betting on your own longevity is really not worth the risk until you reach around 90.

then the rewards of waiting pays off and you can see a 5% real return difference . but failing to live until 90 when all of the above is figured in makes waiting not worth the gamble.

you either delay and bet on your own longevity or you file early and bet on investments.

[rayvt]

Quote:

Originally Posted by karluk He quite his job and started SS immediately after turning 62. They have no resources or income outside of SS, and were even having trouble paying their monthly bills with the husband working.

Yeah, this was one of the people I mentioned about, that couldn't delay SS to 70 because they needed the money now.

He was financially stupid, retiring before he could afford to.

[eytonxav]

Seems that many on here have several years to go to get to 70. Given that and the strong prospects that SS will be reduced by means testing, tax, etc in the future makes me think that deferring to 70 may not be the best option for maximizing payout, well at least, it's another unknown to consider. As for me, I am 66 in June, and will continue to watch what our good stewards in DC are doing, but I am tempted to take it starting next January.

[btdt22]

At age 68 I'm in good health, and still waiting to take SS. I Have the best wife ever, and I chose to self insure ourselves against long term care needs, because I think the LTC insurance system is 'broken'. I use taking SS later as one leg of a three legged stool to address possible LTC needs, and for one or both of us, perhaps living long past our actuarial ages. We have a 96 year old widowed friend who can't pay all her bills, and I can only say in her case, thank god for children and friends.

We have always been a live-below-your-means , save as much as we reasonably can couple, so we now have no problem in off-setting our differed SS income, with savings and pension. Am I bragging, absolutely not, but when I see neighbors going so deep in debt for new cars, giant TV's and Caribbean spring breaks for their high school kids, I just have to shake my head, and wonder what they are putting into their retirement savings?

On a side note, I am also trying to keep my capital gains tax rate at zero, by staying at or below 15% taxable income before I reach 70. When I start taking maximum SS and the RMD's kick in at 70 1/2 my tax rate will soar, and I will then have to start paying a 15% rate on my capital gains. But then again maybe the market will have repeated one of it's many boom-and-bust cycles, and my now maxed out SS income will keep me from selling equities at the bottom of the cycle, like so many did in 2008-2009?

Bottom line - no one size fits all, and I wish everyone the best!

[pb4uski]

Quote:

Originally Posted by btdt22 .... I Have the best wife ever....

Welcome. By the way, you have a small brown spot on your nose....