I have not followed this topic much but wanted to double check if my back-of-envelope calculation is right. Example: say a person receives $X of SS for 4 years from age 67 to age 70 at which point they repay it all back (4*X), "reapply" and now receive 7-8% more for each of the 4 years (based on latest yahoo article), i.e. current X + approximately extra 0.3*X per year (~7.5% compounded for 4 years => ~30%).
Assuming SS is COLA-d to their inflation rate, and thus everything is in constant dollars, to recover back the given up $4*X, it will take 4/0.3 ~ 13 years. In other words, only after age 83 will this move be beneficial. If the person dies before 83, they should not have done it.
In addition...
(1) if personal inflation is different from COLA, corresponding adjustments have to be made - e.g. if personal inflation (such as medical expenses) go up faster that SS COLA, add more years to 13.
(2) if earnings on the given up $4*X amount is greater than COLA/inflation, it would take more years to recover back the full $4*X amount and potential earnings on this $4*X over and above the inflation/COLA rate.
(3) the person is taking some risk in assuming that SS benefits will be paid during these years as promised (perhaps a small risk for next 13 years.. ?? ).
I guess I am wondering why people say it makes sense to do this sort of trick - it does not seem all that definite to me that it's advantageous necessarily. Probably I am missing something...
Assuming SS is COLA-d to their inflation rate, and thus everything is in constant dollars, to recover back the given up $4*X, it will take 4/0.3 ~ 13 years. In other words, only after age 83 will this move be beneficial. If the person dies before 83, they should not have done it.
In addition...
(1) if personal inflation is different from COLA, corresponding adjustments have to be made - e.g. if personal inflation (such as medical expenses) go up faster that SS COLA, add more years to 13.
(2) if earnings on the given up $4*X amount is greater than COLA/inflation, it would take more years to recover back the full $4*X amount and potential earnings on this $4*X over and above the inflation/COLA rate.
(3) the person is taking some risk in assuming that SS benefits will be paid during these years as promised (perhaps a small risk for next 13 years.. ?? ).
I guess I am wondering why people say it makes sense to do this sort of trick - it does not seem all that definite to me that it's advantageous necessarily. Probably I am missing something...