Taking Social Security early vs. not

[Independent]

Correct. Happily, your figures exactly match what I came up with, so that's verified.

In fact, at 0% the break-even age is 77.8. At 3% it's 79.5%.
FWIW, the SS mortality table gives a 66 y.o. male a life expectancy of age 82.

'course, one of the other things I ponder upon is not break-evens or percentage improvements, but the absolute dollar amounts.
If you can afford to eschew getting $933/mo for 5 years, then you have a pretty comfortable income without SS.
If you have a pretty comfortable income, then you don't have an urgent need for that extra $387/mo in 5 years time.

If all you have is SS, then your annual income would be either $11,200 or $15,800. And with either of those, you are so far under the poverty line that it doesn't matter.

But suppose you have a comfortable pension of $24,000 ($2k/mo). Now your total income will be $35,200 or $39,800. Your lifestyle at either of these figures is going to be essentially the same.

Eh...when you get down to it, it's just a matter of personal preference. Whether you take SS at 62 or at 70, there will be little difference in your overall financial situation.
$387/mo is not going to lift you from poverty to opulence. If you are poor, it will relieve some of the burden -- but in that case, you can't afford to skip 5 years of income. If you are rich, it's just another shrimp on the barbie.

Which, oddly enough, is what the SSA implicitly says, when they say that they are actuarially the same.

The people who need the money can't afford to wait 5 years.
The people who don't need the money, it doesn't matter whether or not they wait 5 years.

I think the important part of my post was that if I'm going to do the math, it's important that I use real SS numbers. Right now, deferring SS is a far more efficient way of buying lifetime income than buying a private annuity, so I shouldn't use private annuity numbers and assume that SS is about the same.

The unimportant part was my choice of $1,000, which was just a handy round number. However, note that the Federal Poverty Level for a single person is $11,490. I'd disagree that I'd be so far under the poverty line with either $11,200 or $15,800 that I wouldn't notice the difference. For people I know in that income range, I expect that $387/mo is a big deal. (however, the actual lifetime income difference isn't that big)

I'm currently deferring SS. The analysis that makes sense for my situation is that deferring reduces the uncertainty of my future income. It takes away some of the potential upside in return for limiting the downside.

 

[GolfingDuo]

You are severely missing the point in several of your posts. First of all, SS is only actuarially fair for a single taxpayer. If the taxpayer is married and especially if the spouse has a longer life expectancy at this point, then the Delayed Retirement Credits represent a free lunch.

Second, it is true that many people cannot afford to delay SS and for some others SS benefits are not important for funding retirement. However, that leaves many, many people for whom optimizing the benefit from SS can contribute significantly to their well-being during retirement. Probably most of the people on this board fall into that category. For many of these people optimizing SS benefits is likely to have a bigger effect than many investment decisions. An increase of 10% in COLA'ed income is not small; it's huge.

Even for a single person the decision to delay SS is not unimportant. The decision to delay is actuarially neutral only for the entire pool of participants, i.e. the SSA. For an individual, it is not neutral. The individual has risks of inflation and longevity that he cannot afford to bear. He can pay the SSA to assume more of that risk for him. Although if we use the median life expectancy only, his expected lifetime income may not have changed, but that ignores the 50% likelihood that he will live longer than the median life expectancy. It is a serious mistake in analyzing SS optimizing decisions to ignore risk, since risk is the big problem facing the retiree. Break-even analyses are beside the point.

Let me explain this point by analogy. A homeowner without fire insurance is bearing the risk of possibly ruinous loss himself. The cash value of that risk can be determined and is approximately equal to the premium that an insurance company would charge for fire insurance. (It isn't actuarially neutral because the insurance company intends to make a profit, unlike the SSA, but it's close enough.) So, when the homeowner recognizes the risk of financial ruin and decides to buy the fire insurance he merely transfers to the carrier the amount of the premium, which is about equal to the expected value of fire loss. So, the effect on his net worth is probably negligible. Nevertheless, you can't say the choice is unimportant, because now he does not live under the threat of financial ruin from fire.

Another way of saying this, with respect to SS, is that it is a huge mistake to treat the median life expectancy as certain or even very likely. Most participants will not live the median life expectancy even though it is the best estimate of how long they will live. It's like flipping a coin eight times. We know that the best estimate is that four heads and four tails will result, but it's unlikely that that is what will actually happen. Accordingly, if we consider how to provide for ourselves in the even that we live to 100, the buying more annuity from the SSA would be the best solution that is widely available.

irs calculation for taxable SS include

dividends
taxable interest
TAX-FREE interest
pension benefits
Ira distributions
ROTH IRA distributions
other taxable income
wages
1/2 social security received

the tax free interest and roth ira are NOT TAXABLE but are part of ss calculation for taxes.

the calculation and the 25,000,32000,and 44 thousand limits for single and married 50 percent and 85 percent are NOT inflation adjusted.

just like the AMT kept hitting more and more people as time passed unless the congress fixes this it will keep getting worse.

if you have substantial deferred accounts and have to pull money out after 70
the only adjustment to this is either pulling out more money out of accounts before it hits or take ss earlier to lessen the impact. 1/2 of whatever ss you are getting will be included in the calculation

I think the important part of my post was that if I'm going to do the math, it's important that I use real SS numbers. Right now, deferring SS is a far more efficient way of buying lifetime income than buying a private annuity, so I shouldn't use private annuity numbers and assume that SS is about the same.

The unimportant part was my choice of $1,000, which was just a handy round number. However, note that the Federal Poverty Level for a single person is $11,490. I'd disagree that I'd be so far under the poverty line with either $11,200 or $15,800 that I wouldn't notice the difference. For people I know in that income range, I expect that $387/mo is a big deal. (however, the actual lifetime income difference isn't that big)

I'm currently deferring SS. The analysis that makes sense for my situation is that deferring reduces the uncertainty of my future income. It takes away some of the potential upside in return for limiting the downside.

So as I read these three posts and apply them to my situation I should defer and convert in the meantime. Let me explain this out.

I will have two retirements. One military and one FERS both will gross 2k plus each per month. I get a FERS supliment of right now an unknown quantity until age 62. I have 400k plus right now in a 401k pretax contribution. I might have 10k in Roth. My wife is saving at a nice rate and I expect her savings to reach 100k by she reaches 62. We are both 55 now. My SS will be 2100 per month at 62 and if I wait I will get 2800 per. I will leave out other capital gains of sales of two homes and a business.

So based on what I have read I should take as soon as I can 2k or more per month to convert into Roth and use as needed in the meantime. Maybe I should take 4k so that I can draw down enough to mitigate the income tax bite later when I start drawing SS? Does that sound like something I should do? I anticipate not having any mortgage and probably only car payments on the wife's new car when we move to retirement community.

 

[GolfingDuo]

So as I read these three posts and apply them to my situation I should defer and convert in the meantime. Let me explain this out.

I will have two retirement pensions. One military and one FERS both will gross 2k plus each per month. I get a FERS supliment of right now an unknown quantity until age 62. I have 400k plus right now in a 401k pretax contribution. I might have 10k in Roth. My wife is saving at a nice rate and I expect her savings to reach 100k by she reaches 62. We are both 55 now. My SS will be 2100 per month at 62 and if I wait I will get 2800 per. I will leave out other capital gains of sales of two homes and a business.

So based on what I have read I should take as soon as I can 2k or more per month to convert into Roth and use as needed in the meantime. Maybe I should take 4k so that I can draw down enough to mitigate the income tax bite later when I start drawing SS? Does that sound like something I should do? I anticipate not having any mortgage and probably only car payments on the wife's new car when we move to retirement community.

I am not retiring yet. I will only if one they send me packing, which they could. Two I reach my maximum age of 60 and I am forced to retire. That is still 4 years away.

 

[gerrym51]

So as I read these three posts and apply them to my situation I should defer and convert in the meantime. Let me explain this out.

I will have two retirement pensions. One military and one FERS both will gross 2k plus each per month. I get a FERS supliment of right now an unknown quantity until age 62. I have 400k plus right now in a 401k pretax contribution. I might have 10k in Roth. My wife is saving at a nice rate and I expect her savings to reach 100k by she reaches 62. We are both 55 now. My SS will be 2100 per month at 62 and if I wait I will get 2800 per. I will leave out other capital gains of sales of two homes and a business.

So based on what I have read I should take as soon as I can 2k or more per month to convert into Roth and use as needed in the meantime. Maybe I should take 4k so that I can draw down enough to mitigate the income tax bite later when I start drawing SS? Does that sound like something I should do? I anticipate not having any mortgage and probably only car payments on the wife's new car when we move to retirement community.

I am not retiring yet. I will only if one they send me packing, which they could. Two I reach my maximum age of 60 and I am forced to retire. That is still 4 years away.

i made my taxable ss post not to convince anybody to take ss early but that you cannot take the early/late taking ss decision in a vacuum. there are other considerations to be accounted for.

although this is a transition year for me since i will start taking ss in may and will pay taxes at the end of this year i have figured it out how not to pay any taxes starting next year until i turn 70 in 8 years. this is also part of my total return calculation

 

[GolfingDuo]

i made my taxable ss post not to convince anybody to take ss early but that you cannot take the early/late taking ss decision in a vacuum. there are other considerations to be accounted for.

although this is a transition year for me since i will start taking ss in may and will pay taxes at the end of this year i have figured it out how not to pay any taxes starting next year until i turn 70 in 8 years. this is also part of my total return calculation

Okay but I guess that my post is a twofold question. I kind of think I will not need my SS. I anticipate with my wife's frugalness and my propensity to follow her wishes for the most part that we will be able to live on my two pensions once I am retired. She will be working a couple of years longer so for the first two years initially we will be able to live comfortably on income already in place. If I get a part time job that could add to it but I don't know how much I will make. Then there is the planned move so during that time we will need to put away moving expenses which I know will be a few thousand easily. We will have to sell our rental property during that time and our comb factory as well.

So putting off taking SS to roll over 401k money into Roth IRA and even start a Roth for my daughter in a trust is the question. Is that a good idea? I even think we can wait until 70 for both though I might have her start hers maybe so long as it don't raise our income too much.

 

[gerrym51]

Okay but I guess that my post is a twofold question. I kind of think I will not need my SS. I anticipate with my wife's frugalness and my propensity to follow her wishes for the most part that we will be able to live on my two pensions once I am retired. She will be working a couple of years longer so for the first two years initially we will be able to live comfortably on income already in place. If I get a part time job that could add to it but I don't know how much I will make. Then there is the planned move so during that time we will need to put away moving expenses which I know will be a few thousand easily. We will have to sell our rental property during that time and our comb factory as well.

So putting off taking SS to roll over 401k money into Roth IRA and even start a Roth for my daughter in a trust is the question. Is that a good idea? I even think we can wait until 70 for both though I might have her start hers maybe so long as it don't raise our income too much.

i love my 2 daughers and my granchildren. however i am divorced from their mother and remarried. my currrent wife has 2 children but no grandchildren
from them and will not have any.

i have to straddle a fine line in this regard. neither my wife's parents nor my parents left us anything(just an observation not a criticism). my wife and i are joint coholders or chief beneficiaries of everything . after the last spouse dies anything left gets divided among our 4 children evenly. thats the only way to maintain peace.

 

[GolfingDuo]

i love my 2 daughers and my granchildren. however i am divorced from their mother and remarried. my currrent wife has 2 children but no grandchildren
from them and will not have any.

i have to straddle a fine line in this regard. neither my wife's parents nor my parents left us anything(just an observation not a criticism). my wife and i are joint coholders or chief beneficiaries of everything . after the last spouse dies anything left gets divided among our 4 children evenly. thats the only way to maintain peace.

In our case we only have the one daughter. Neither of us has wed another. The Roth for the daughter is not even the question either. The real question comes down to if my two pensions of 48k is low enough to take portions of my 401k and roll it to Roth so that later it can off set other gains? We have other IRA's and the wife is still putting in money to her 401k. I know that is quite a complicated mess but at what point would I be income wise to be at to safely withdraw my 401k and pay the least amount of tax? Would I be wise to wait until I move to an income tax free state which is in the cards?

 

[gerrym51]

In our case we only have the one daughter. Neither of us has wed another. The Roth for the daughter is not even the question either. The real question comes down to if my two pensions of 48k is low enough to take portions of my 401k and roll it to Roth so that later it can off set other gains? We have other IRA's and the wife is still putting in money to her 401k. I know that is quite a complicated mess but at what point would I be income wise to be at to safely withdraw my 401k and pay the least amount of tax? Would I be wise to wait until I move to an income tax free state which is in the cards?

i do not link well. i suggest you use a ss calculator. i use at moneyover55.about.com

plug in the numbers using various amounts and combinations to find taxable ss.
make sure you click married filing jointly.

this gives you amounts you can fiddle with.

then go to irs longevity tables. usually at 70 it's divide by 27.1

then go to irs.gov and print the 1040 tax form(not book) just form

using these 3 items you can extrapolate various scenarios.

i just basically use standard deduction and 2 exemptions about 20,000 to subtract from adjusted gross-then work from there. impossible to do exact because future tax forms don't obviously exist but it does give you good idea.

 

[GolfingDuo]

i do not link well. i suggest you use a ss calculator. i use at moneyover55.about.com

plug in the numbers using various amounts and combinations to find taxable ss.
make sure you click married filing jointly.

this gives you amounts you can fiddle with.

then go to irs longevity tables. usually at 70 it's divide by 27.1

then go to irs.gov and print the 1040 tax form(not book) just form

using these 3 items you can extrapolate various scenarios.

i just basically use standard deduction and 2 exemptions about 20,000 to subtract from adjusted gross-then work from there. impossible to do exact because future tax forms don't obviously exist but it does give you good idea.

Thank you that SS calculator makes sense to me. It tells me that at 67 and 2 months apply for my SS benies and suspend them. Then a few year later have my wife take spousal benies. Then at age 70 take mine. and the same for her when she reaches 70. At this I will probably be doing pretty well with my golf game I suspect.

Then that begs to the question of paying some of the taxes at the time I can begin withdrawing my 401k. Is it wise to take more than the 4% rule from my funds then put them into Roth? Will it even make much of a difference? I know that MA will take its piece of my pie as long as I claim it as home.

 

[gerrym51]

Thank you that SS calculator makes sense to me. It tells me that at 67 and 2 months apply for my SS benies and suspend them. Then a few year later have my wife take spousal benies. Then at age 70 take mine. and the same for her when she reaches 70. At this I will probably be doing pretty well with my golf game I suspect.

Then that begs to the question of paying some of the taxes at the time I can begin withdrawing my 401k. Is it wise to take more than the 4% rule from my funds then put them into Roth? Will it even make much of a difference? I know that MA will take its piece of my pie as long as I claim it as home.

i wish i was a seer but i'm not. every couples case is different.-but one thing to pay close attention to.

the irs info again is NOT inflation adjusted. i would not look at just the first years but subsequent years. although i have ss at 62 and you at 70 both of our ss(and wives) with get cola adjustment. the government in general WANTS higher income earners and savers(namely us) to pay more. the irs provisions for ss will never be inflation indexed in our lifetimes

 

[Greg V]

Some thoughts for GD. If you have not retired yet and want a reasonable guess at the FERS annuity supplement you will receive until age 62, divide your number of years as a FERS employee (military buyback years for retirement, etc don't count) by 40 and multiply your expected age 62 SS annuity by that number. For me, I had ~16 yrs working as a FERS employee along with military buyback time when I retired last year so 16/40 times my age 62 SS annuity gave me a good estimate of the FERS Annuity Supplement.

For Roth conversions, if you have money outside the retirement accounts to pay the taxes due for a conversion, it may make sense. If you have to raid your retirement accounts to do the conversion, it is much more difficult for the numbers to work out.

Lastly, a reason to delay taking your SS (assuming your annuity is significantly higher than your spouse's) would be to maximize survivors benefits if you die first. Even if you chose maximum Survivors Benefits for both your FERS and Military annuities, your spouse would receive just over 50% of the annuity amount paid while you are alive. Maximizing SS survivors benefits by delaying when you start taking them may be an important long term consideration in your planning for your spouse's income.

As many folks in the thread have stated...lots of individual reasons to pick an earlier or later date. Just some thoughts as you make your financial and estate plans...

 

[gerrym51]

Some thoughts for GD. If you have not retired yet and want a reasonable guess at the FERS annuity supplement you will receive until age 62, divide your number of years as a FERS employee (military buyback years for retirement, etc don't count) by 40 and multiply your expected age 62 SS annuity by that number. For me, I had ~16 yrs working as a FERS employee along with military buyback time when I retired last year so 16/40 times my age 62 SS annuity gave me a good estimate of the FERS Annuity Supplement.

For Roth conversions, if you have money outside the retirement accounts to pay the taxes due for a conversion, it may make sense. If you have to raid your retirement accounts to do the conversion, it is much more difficult for the numbers to work out.

Lastly, a reason to delay taking your SS (assuming your annuity is significantly higher than your spouse's) would be to maximize survivors benefits if you die first. Even if you chose maximum Survivors Benefits for both your FERS and Military annuities, your spouse would receive just over 50% of the annuity amount paid while you are alive. Maximizing SS survivors benefits by delaying when you start taking them may be an important long term consideration in your planning for your spouse's income.

As many folks in the thread have stated...lots of individual reasons to pick an earlier or later date. Just some thoughts as you make your financial and estate plans...

although my at 62 payout is higher than my wifes she gets a small pension when combined with her ss is higher than my only ss. her pension payout dies with her.

 

[Greg V]

Having the choice of leaving the surviving spouse even a portion of your Military/Civil Service annuity is a really nice feature of the Federal retirement system not often replicated in private systems.

My remarks may have more relevance for GolfingDuo than other readers since our situation of having Civil Service and Military annuities is similar.

We'll (DW and me) be doing lots of reading, studying and pondering as we make our SS decisions in the upcoming years. Sometimes I think that the more options I discover, the confuseder I get.

 

[gerrym51]

Having the choice of leaving the surviving spouse even a portion of your Military/Civil Service annuity is a really nice feature of the Federal retirement system not often replicated in private systems.

My remarks may have more relevance for GolfingDuo than other readers since our situation of having Civil Service and Military annuities is similar.

We'll (DW and me) be doing lots of reading, studying and pondering as we make our SS decisions in the upcoming years. Sometimes I think that the more options I discover, the confuseder I get.

ditto to the confused part. No all right answer

 

[Independent]

So as I read these three posts and apply them to my situation I should defer and convert in the meantime. Let me explain this out.

I will have two retirements. One military and one FERS both will gross 2k plus each per month. I get a FERS supliment of right now an unknown quantity until age 62. I have 400k plus right now in a 401k pretax contribution. I might have 10k in Roth. My wife is saving at a nice rate and I expect her savings to reach 100k by she reaches 62. We are both 55 now. My SS will be 2100 per month at 62 and if I wait I will get 2800 per. I will leave out other capital gains of sales of two homes and a business.

So based on what I have read I should take as soon as I can 2k or more per month to convert into Roth and use as needed in the meantime. Maybe I should take 4k so that I can draw down enough to mitigate the income tax bite later when I start drawing SS? Does that sound like something I should do? I anticipate not having any mortgage and probably only car payments on the wife's new car when we move to retirement community.

Since my post was on your list, I feel I should reply. The post was really a before-tax analysis, taxes are very complex.

I did some tax modeling for our situation, which is simpler than yours. I noted that the factors in the taxable SS formula aren't indexed, so I will get into the range where 85% of my SS benefits will be included in taxable income. That means I'll eventually be in a 25% marginal bracket.

But, soon after I retired we were spending after-tax savings and had lower reported income. We were in the 15% marginal bracket. So, I made some IRA withdrawals, paid the 15% tax, and put the money into a Roth. That seemed like an easy decision at the time.

I'm not sure if that's relevant to your situation.

 

[GolfingDuo]

Some thoughts for GD. If you have not retired yet and want a reasonable guess at the FERS annuity supplement you will receive until age 62, divide your number of years as a FERS employee (military buyback years for retirement, etc don't count) by 40 and multiply your expected age 62 SS annuity by that number. For me, I had ~16 yrs working as a FERS employee along with military buyback time when I retired last year so 16/40 times my age 62 SS annuity gave me a good estimate of the FERS Annuity Supplement.

For Roth conversions, if you have money outside the retirement accounts to pay the taxes due for a conversion, it may make sense. If you have to raid your retirement accounts to do the conversion, it is much more difficult for the numbers to work out.

Lastly, a reason to delay taking your SS (assuming your annuity is significantly higher than your spouse's) would be to maximize survivors benefits if you die first. Even if you chose maximum Survivors Benefits for both your FERS and Military annuities, your spouse would receive just over 50% of the annuity amount paid while you are alive. Maximizing SS survivors benefits by delaying when you start taking them may be an important long term consideration in your planning for your spouse's income.

As many folks in the thread have stated...lots of individual reasons to pick an earlier or later date. Just some thoughts as you make your financial and estate plans...

Thank you. What the SS turns out is going to be 75% of my SS benefit at 62. That is a nice penny when I turn 60. That will make my first employment looks easier.

For the SSA that made sense to me as well. So I am pretty sure we will be doing the spousal benefit at the right age. It looks right to me since we will have a pretty good retirement as is at that point too provided good health.

On the last about the 401k I might have some I am not sure if my wife put her IRA after tax or before tax. I dont know how much that will be either but it should be in the mid to upper 5 figures.

Having the choice of leaving the surviving spouse even a portion of your Military/Civil Service annuity is a really nice feature of the Federal retirement system not often replicated in private systems.

My remarks may have more relevance for GolfingDuo than other readers since our situation of having Civil Service and Military annuities is similar.

We'll (DW and me) be doing lots of reading, studying and pondering as we make our SS decisions in the upcoming years. Sometimes I think that the more options I discover, the confuseder I get.

Yes it gets quite confusing. It is a bit more for you though at least in my experience. The new FERS system is pretty straight forward at least to me.

Since my post was on your list, I feel I should reply. The post was really a before-tax analysis, taxes are very complex.

I did some tax modeling for our situation, which is simpler than yours. I noted that the factors in the taxable SS formula aren't indexed, so I will get into the range where 85% of my SS benefits will be included in taxable income. That means I'll eventually be in a 25% marginal bracket.

But, soon after I retired we were spending after-tax savings and had lower reported income. We were in the 15% marginal bracket. So, I made some IRA withdrawals, paid the 15% tax, and put the money into a Roth. That seemed like an easy decision at the time.

I'm not sure if that's relevant to your situation.

It does and is relevant. I think I will be in a higher tax bracket though. It depends on how they adjust tax brackets over the years and my income in those future years.

Thanks for everyone here in helping out. This is a great help.

 

[Khufu]

GolfingDuo,

Your situation is more complicated than mine and mine is too complicated to make a decision without carefully comparing the numbers of each strategy. The only tool that I found to incorporate all of the factors is Esplanner from esplanner.com It will count all your assets, taxable and tax-deferred, your SS benefits, both your pensions, your annual federal and state tax, if any, your house, your intention to sell the house in the future, relocate to another state, and more. Esplanner takes all of this and puts out an amount that is your disposable income each year for the rest of both of your lives (based on your estimate of how long you will live.) Your goal in running the software is to maximize the disposable income and keep it consistent to support your standard of living.
I recommend that you buy the software and run a number of scenarios to see how much difference your choices might make.

The decision to do Roth conversions depends on several factors taken together. Without knowing all of the details it's not possible to say if a conversion would be a benefit for you or not.
These are:

1. the expected life span of the Roth IRA itself. This might be your life span, but it might be your wife's especially if she is younger or it could be that of your children. Your wife and your children who inherit your Roth will never have to pay taxes on the money.

2. Your tax rate now and in the future. If your marginal rate will be lower or if you plan to move to a no income-tax state at some point, doing the conversion now might not be advisable. Some of us are delaying SS until 70 and have IRA assets that will necessitate RMDs at age 70. Those income sources together at 70 can push us into a higher bracket meaning that converting before then while still in the lower bracket gives an advantage.

3. The rate of return of the assets in the Roth. Since you are paying the taxes on those assets earlier than necessary in order to get the tax-free status, the value depends on how much you tax you would have had to pay. It also matters if you trade relatively more since that would generate capital gains if in a taxable account.

Rules of thumb and back of the envelope calculations are not going to be adequate for the complex decisions that many of us face.

 

[mathjak107]

we will play it as we go ,the wild card being health. we plan on both retiring in 14 months.

for now the way it looks my wife is already receiving a 20k pension, we have another 20k in income from a real estate business and my wife just started collecting early benefits at 62 of about 800 a month.

our plan as it stands is i will take half my wifes at 66 and let my own continue to grow.

no way am i going to get 8% guaranteed and with colas on my own.

we will need about a 2%-2.5% withdrawal rate from assets to meet goal until i file and under 2% after i file..

our goal is about 120k in income in todays dollars to start.

we can spend way way more though in the early years if need be based on the fact we will refill later on after 70 with the much higher ss payments.

kind of like an annuity that will kick in at 70. we want to have the max we can spend early on while we are healthy and able to do anything we want.

but like everything else that is subject to change along the way.

glad to see you found your way here golfing duo.

 

[bUU]

Thank you that SS calculator makes sense to me. It tells me that at 67 and 2 months apply for my SS benies and suspend them. Then a few year later have my wife take spousal benies. Then at age 70 take mine. and the same for her when she reaches 70.

We're also discussing such strategies in another forum, and this morning someone put forward something I never thought about - they consider taking spousal benefits and then switching to your own benefits to be a "loophole" that may be closed soon. (It was expressed in the context of another loophole, recently closed - folks who work in jobs that don't earn social security credits, for most of their life, and then switch in their last years to get social security full benefits.)

I didn't really think anyone would consider filing for spousal benefits and then switching to one's own benefits later as a "loophole" until it I read that posting, to be honest. I suppose the logic for considering it a loophole is that the person filing for spousal benefits could file for their own benefits instead, and the only reason not to do so would be to avoid reduced benefits or gain delayed retirement credits, i.e., solely for the purpose of allowing one's own benefits to increase. Since the lower, early retirement benefit is clearly considered to be "enough", using this "tactic" could be viewed by some as a loophole. And given the environment in Washington, I suspect anything that could be considered a loophole by anyone is ripe to be considered a loophole to be closed in the interest of improving the solvency of the program overall. I wonder how likely it is, though.

I also wonder what form closing that "loophole" would take. The only thing I could think of is to make filing for spousal benefits versus one's own to be a terminal decision - choose one or the other. Are there any other ways they could change what we might encounter? (We're about twelve years away from the younger of us reaching age 62.)

 

[mathjak107]

while i certainly will take advantage of it , the restricted application and file and suspend options are kind of double dipping if you both have work records of your own.

quite frankly the only reason i see they have not cut that tap off is the fact congress utilizes it.

 

[GolfingDuo]

while i certainly will take advantage of it , the restricted application and file and suspend options are kind of double dipping if you both have work records of your own.

quite frankly the only reason i see they have not cut that tap off is the fact congress utilizes it.

I agree

 

[eytonxav]

We're also discussing such strategies in another forum, and this morning someone put forward something I never thought about - they consider taking spousal benefits and then switching to your own benefits to be a "loophole" that may be closed soon. (It was expressed in the context of another loophole, recently closed - folks who work in jobs that don't earn social security credits, for most of their life, and then switch in their last years to get social security full benefits.)

+1 whether we consider any of the provisions or formulas in SS loop holes does not really matter. The fact is that if Congress gets serious about deficit reduction, all bets may become moot as to our current thinking or strategies for collecting SS. While its always a good idea to plan with what we know today, its important to recognize our plans may need to change going forward.

 

[GolfingDuo]

+1 whether we consider any of the provisions or formulas in SS loop holes does not really matter. The fact is that if Congress gets serious about deficit reduction, all bets may become moot as to our current thinking or strategies for collecting SS. While its always a good idea to plan with what we know today, its important to recognize our plans may need to change going forward.

Without a doubt.

 

[Badger]

We're also discussing such strategies in another forum, and this morning someone put forward something I never thought about - they consider taking spousal benefits and then switching to your own benefits to be a "loophole" that may be closed soon. (It was expressed in the context of another loophole, recently closed - folks who work in jobs that don't earn social security credits, for most of their life, and then switch in their last years to get social security full benefits.)

I didn't really think anyone would consider filing for spousal benefits and then switching to one's own benefits later as a "loophole" until it I read that posting, to be honest. I suppose the logic for considering it a loophole is that the person filing for spousal benefits could file for their own benefits instead, and the only reason not to do so would be to avoid reduced benefits or gain delayed retirement credits, i.e., solely for the purpose of allowing one's own benefits to increase. Since the lower, early retirement benefit is clearly considered to be "enough", using this "tactic" could be viewed by some as a loophole. And given the environment in Washington, I suspect anything that could be considered a loophole by anyone is ripe to be considered a loophole to be closed in the interest of improving the solvency of the program overall. I wonder how likely it is, though.

I also wonder what form closing that "loophole" would take. The only thing I could think of is to make filing for spousal benefits versus one's own to be a terminal decision - choose one or the other. Are there any other ways they could change what we might encounter? (We're about twelve years away from the younger of us reaching age 62.)

I’m not sure if I understand this correctly. Let’s use the following scenario not using real numbers or considering any annual cost of living increases to make it simple.

Wife (66) is retired taking SS at $1000/month. I (65) delay taking my SS until 70 when it will be $2000/month. In the meantime for the next 5 years I apply and receive ½ of wife’s SS giving us a total of $1500/month. Then when I turn 70 I drop the payments that were based on my wife’s SS and start taking my own SS at the $2000/month. Now if I die first my wife can assume my SS that is a higher monthly payment.

Does this sound right? I'm so confused.

Cheers!

 

[GolfingDuo]

I’m not sure if I understand this correctly. Let’s use the following scenario not using real numbers or considering any annual cost of living increases to make it simple.

Wife (66) is retired taking SS at $1000/month. I (65) delay taking my SS until 70 when it will be $2000/month. In the meantime for the next 5 years I apply and receive ½ of wife’s SS giving us a total of $1500/month. Then when I turn 70 I drop the payments that were based on my wife’s SS and start taking my own SS at the $2000/month. Now if I die first my wife can assume my SS that is a higher monthly payment.

Does this sound right? I'm so confused.

Cheers!

I am pretty sure it is opposite. You file for your SS ben and delay taking. Your wife files taking spousal ben of yours. Then when you reach 70 she drops spousal and you collect full. I am pretty sure that is how you should do it. I am sure others will chime in if I am wrong. That is based on your numbers that is how I would work it. Should she out live you then she resumes spousal. You out live her you take spousal.