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Trade in your social security check for a bigger one
Old 02-22-2008, 03:17 PM   #1
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Trade in your social security check for a bigger one

Didn't know you could do this...
http://finance.yahoo.com/focus-retir...-post-spending
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Old 02-22-2008, 03:24 PM   #2
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Do some searches on the forum and you'll find lots of discussion on this subject. Also, Scott Burns had a recent column describing how this works.
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Old 02-22-2008, 07:56 PM   #3
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Im in!

Now all I have to do is wait 21 years to get that early check and the save to money for 8 more to get my 200,000 inheritance.

I guess the point is I should plan on taking SS early but who knows what the rules will be in 20 years.
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Old 02-23-2008, 06:52 AM   #4
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If people begin gaming the system, it will be changed. When I read about this option, I thought that it had to be approved. If that is true, and it begins to happen too often, they could simply begin rejecting requests (tighten the bureaucratic rules).
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Old 02-23-2008, 07:59 AM   #5
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Originally Posted by bearkeley View Post
Im in!

Now all I have to do is wait 21 years to get that early check and the save to money for 8 more to get my 200,000 inheritance.

I guess the point is I should plan on taking SS early but who knows what the rules will be in 20 years.
Personally, unless I become seriously ill I don't plan to take it early due to familial longevity. I think that assuming you can give it back and get the higher payment later on puts you at the mercy of whatever bureaucrats you encounter in your local SS office.

So, to me all of this reverts to the old "when to take social security" dilemma which has been the topic of many previous threads.

As far as I can tell, SS has ensured that taking SS early or later is six of one, half a dozen of the other, and that taking it early and repaying is a PITA.
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Old 02-23-2008, 09:56 AM   #6
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If people begin gaming the system, it will be changed.
As has been pointed out: The vast majority of SS recipients would not have the resources to risk a six figure amount for a bet on his/her mortality. (not to mention, even coming up with such a sum) I don't see this ever becoming a fad.
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Old 02-23-2008, 10:11 AM   #7
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I think there are some good reasons to delay taking SS:

1. Longevity in my family. I hope to be similarly lucky.
2. As a COLA part of my retirement I want it to be as large as possible
3. Taking early SS then returning it and starting over is vulnerable to rule changes
4. Postponing that income gives a longer time to do gradual Roth conversions
5. Decision is flexible and I can easily apply earlier if circumstances change
6. Larger SS offers more protection from old old age out of money.

If I am wrong the downside is I leave a slightly smaller estate than I could have. This seems a minor concern. I think everyone has to decide what's best in their own situation.
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Old 02-23-2008, 10:29 AM   #8
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The major reason that I will delay SS is to increase the benefit to my DW in the case of an early demise (or she kills me whichever comes first)

It is not just your age but the payment to a spouse that will only get one check if/when you die.

There are reasons to start early and reasons to start late - you have to apply each to your situation and risk tolerance.
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Old 02-23-2008, 10:33 AM   #9
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If people begin gaming the system, it will be changed.
To illustrate what Ron said, a friend was talking about deciding whether to delay SS or take it right away. I told her that she could take it right away, and pay it back later, and jump to the higher figure. She laughed and said "And where would I get the money to do that?"
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Old 02-23-2008, 11:54 AM   #10
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As has been pointed out: The vast majority of SS recipients would not have the resources to risk a six figure amount for a bet on his/her mortality. (not to mention, even coming up with such a sum) I don't see this ever becoming a fad.

Good point.
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Old 02-23-2008, 02:14 PM   #11
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According to the SSA it does happen about 100,000 times a year. I doubt the local office does not know about it as the SSA phone operators sure do and give some very good advice and information about it.
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For married folks
Old 02-24-2008, 06:09 PM   #12
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For married folks

My two cents is that this strategy is usually sub-optimal for married folks. If your wife is a low earner, it usually will be much more beneficial to file for benefits and then suspend them (when the higher earner reaches Full Retirement Age) so she gets spousal benefits for the years before the primary reaches age 70. With the withdraw and repay, she has to pay back all her spousal benefits until the primary's age 70.

On the other hand, if she is a high earner, it is likely more beneficial for the primary to file for spousal benefits based on her work record when the primary earner hits Full Retirement Age.
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Old 02-24-2008, 06:55 PM   #13
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[quote=New Thinking;620171] With the withdraw and repay, she has to pay back all her spousal benefits until the primary's age 70.

I was considering this. Does my spouse also have to repay her benefits because I am electing this pay back option?
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Old 02-24-2008, 07:05 PM   #14
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Does my spouse also have to repay her benefits because I am electing this pay back option?
My understanding is that this is an individual decision.

http://www.ssa.gov/online/ssa-521.pdf

I don't see an option for group participation.
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Old 02-24-2008, 07:12 PM   #15
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Originally Posted by Want2retire View Post
As far as I can tell, SS has ensured that taking SS early or later is six of one, half a dozen of the other, and that taking it early and repaying is a PITA.
I would think that even without special reasons to think that one's family confers longer than average life expectancy just being a woman means defer it if you don't need the money immediately.

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Old 02-25-2008, 06:38 AM   #16
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I guess each case may be different but this is what it is for a spouse who is 3 years older than the husband. These are not actual numbers, but close.

She draws on her own record at 62 (300 a month).

Husband draws on his record at 62 (1000 a month), she gets kicked to 500 a month.

At age 67 husband withdraws application and repays his benefits and the additional benefits she got (extra 200 a month) (with her concurrence, of course).

Husband then files for benefits on HER record and gets (150 a month). 1/2 of her revised benefits after pay back. (not much but, for now, pays Medicare Part B).

At age 70 husband applies again under his record and gets benefits (1,600 per month). Her benefits are then kicked to 800 a month (1/2 of his full age 70 benefits).

Benefits received before age and after pay back 70: Spouse (300 a month to husbands age 70 or 10 years at 300 per month = 36,000. Husband 10 years at 150 per month = 18,000. Total benefits 54,000. Combined Benefits from age 70 forward = 2,400 per month or 28,800 per year.

Since there is a pay back amount to be considered (approximately 72,000 in this example) along with CPI increases over the 8 year deferred period at about a 3% compounded rate and the lost income on the 72,000 for the deferred 3 year period (husbands age 67 to 70) it appears the payback period would be about 5 to 7 years. So if he lives longer than the payback period OR she lives beyond his death she would gain substantially if she lives about 3 years longer than he does.

I think this is a far greater deal than a SPIA since it is COLA'd and has a 50% survivor benefit (If he dies first, in this case, but in all cases if the higher benefited person goes first).

All dollars are amounts are kept steady just for explanation purposes, as time goes by they would get substantially larger.
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Old 02-25-2008, 01:35 PM   #17
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I am subject to SS offset and have very modest SS, spouse not offset impaired. Any opinion team?
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Old 02-25-2008, 02:04 PM   #18
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I am subject to SS offset and have very modest SS, spouse not offset impaired. Any opinion team?
Same here Brat. I paid big time into SS seemingly forever. DW paid in a little (enough to qualify) but WEP and GPO make her SS based on her own earnings near zero and completely eliminate her receiving anything based on my earnings. This makes the decision interesting since few have this scenario: you have a spouse to consider but spouse will receive no/little SS on his/her own and none based on your earnings.

It seems to me that to act in the best interest of DW, I should start SS at 62 and use that income to reduce portfolio withdrawals and keep the portfolio value as high as possible given our spending rate. If I croak early, she'll benefit from a larger portfolio than if I delay SS and spend more from the portfolio. She gets no SS based on my earnings record regardless of when I die or whether I've already started SS or not.
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Old 02-25-2008, 02:46 PM   #19
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Every time I think I know the answer on when to take SS my opinion gets changed. So many pro/con on taking it at 62 or later. If I only knew for certain how long we will live...without committing suicide
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Old 02-25-2008, 03:05 PM   #20
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My two cents is that this strategy is usually sub-optimal for married folks. If your wife is a low earner, it usually will be much more beneficial to file for benefits and then suspend them (when the higher earner reaches Full Retirement Age) so she gets spousal benefits for the years before the primary reaches age 70. With the withdraw and repay, she has to pay back all her spousal benefits until the primary's age 70.
On the other hand, if she is a high earner, it is likely more beneficial for the primary to file for spousal benefits based on her work record when the primary earner hits Full Retirement Age.
The problem with logical thinking about SS benefits is that this type of system still has more mortality risk than the "take it now and pay it back later" approach. People can do math (or pay people to do it for them) but it's kinda hard to predict the future translate actuarial demographic data into individual accidental-death predictions.

For example, spouse and I have similar earnings records. I could start SS at age 62 and spouse could also do so a year later when she reaches age 62 (on her own record). When we reach age 70 we repay and start over.

Everyone still has to do their own math, and I probably won't start my spreadsheet until I turn age 61 in 2021. And then I'd have to decide what to do with the money for that eight years-- invest it in Berkshire Hathaway or pay down the mortgage. Gosh, we could get low-interest home-equity loan to pay back the SS at age 70, restart, and invest the extra in the stock market!

The real challenge is helping people (other than the 100,000/year) to actually save enough money for eight years to repay and restart. Instead of a "Christmas Club" we could market it as a "Social Security Club"...
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