Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-25-2008, 01:06 AM   #21
Confused about dryer sheets
 
Join Date: Mar 2008
Posts: 5
Thanks...I will search for more info. At least I know that it is not a simple answer.
__________________

__________________
davemcmullen is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-25-2008, 01:13 AM   #22
Recycles dryer sheets
aenlighten's Avatar
 
Join Date: Apr 2007
Posts: 275
Quote:
Originally Posted by rayvt View Post
That's crazy! A twenty year break-even period is way too long to be acceptable.
It can be, but some can expect to live 40 years and profit nicely by delaying. I just hope they are up to spending it when they do.
__________________

__________________
aenlighten is offline   Reply With Quote
Old 03-25-2008, 06:59 PM   #23
Thinks s/he gets paid by the post
 
Join Date: May 2006
Location: Largo
Posts: 1,945
I just read an interesting paper from the Center for Retirement Research at Boston College talking about the negative financial effect on wives caused by married men taking social security benefits early. The assumptions are that wives typically outlive their husbands and his benefit is greater than hers.

The break-even calculation for the husband was one number to look at but so also was the additional amount collected by the wife over her lifetime after the husband had died. They discussed the possibility of having the wife sign-off on the husband taking benefits at 62 - kind of like with a pension where the wife has to sign-off if the husband wants to take 100% during his life and leave nothing for his wife after his death. If she has been a stay-at-home wife all her life and has no earnings of her own, she may need her husband to wait until FRA in order for her to survive financially after he dies.

They also talked about reducing his SS by even more than normal at 62 so that the wife would get a full benefit when he died.

Of course, waiting is not always a decision one gets to make if employment or health issues arise.
__________________
Buckeye is offline   Reply With Quote
Old 03-25-2008, 07:17 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
I'm not going decide until I have to (in about 8 years), but current strategy is:

1. Start taking at 62.

2. At some age between 65 and 70 evaluate my situation, my life expectancy, and SS's situation, and if I'm going to live a lot longer, pay it back and start anew.
__________________
Al
TromboneAl is online now   Reply With Quote
Old 03-25-2008, 07:47 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by Buckeye View Post
They discussed the possibility of having the wife sign-off on the husband taking benefits at 62 - kind of like with a pension where the wife has to sign-off if the husband wants to take 100% during his life and leave nothing for his wife after his death. If she has been a stay-at-home wife all her life and has no earnings of her own, she may need her husband to wait until FRA in order for her to survive financially after he dies.

They also talked about reducing his SS by even more than normal at 62 so that the wife would get a full benefit when he died.
As if any more arguments were needed, one more reason for men to be single.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Wash??
Old 03-25-2008, 07:47 PM   #26
Recycles dryer sheets
 
Join Date: Oct 2005
Posts: 150
Wash??

For married couples, it certainly is not a wash whichever way you take it. As I have written about and proven, if the higher earner in a married couple delays SS, you can expect much higher lifetime SS, tap spousal benefits that would be otherwise wasted, have a surviving spouse recieve higher lifetime income, and enjoy signficant tax advantages due to the way the tax laws are written. In other words, you can retire earlier or enjoy higher after-tax income by creating an optimal strategy. It certainly isn't six in one hand, a half dollar in the other.
__________________
New Thinking is offline   Reply With Quote
Old 03-26-2008, 03:59 AM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,412
theres a new thinking about not taking ss as early as you can and now delaying it as long as you can. the reason is its no longer about breaking even if you wait. its now about being able to have more each year to live on by delaying it. with the comfort of knowing if you wait your future payments will refill your nest egg with as much as 30% more , you can actually take a bigger withdrawl rate right from day 1 of retirement. as long as you have the extra dough to layout the fact that if you spend more in your early years of retirement and withdraw more than the traditional 4% it will be replensished later on at the higher rate. its kind of like buying an annuity.

its not about dying with the biggest pile, its about having the best life you can while alive
__________________
mathjak107 is offline   Reply With Quote
Old 03-26-2008, 08:03 AM   #28
Confused about dryer sheets
judyjht's Avatar
 
Join Date: Feb 2007
Posts: 1
I just heard about this over the weekend on the radio talk show. What a deal!! This article was in Forbes.

"Millions of retired Americans could substantially raise their living standards throughout retirement by sending checks for tens of thousands of dollars to the Social Security Administration. That's right, to the government.

At least that's the conclusion of Boston University Professor of Economics Laurence J. Kotlikoff, who began evaluating this strategy after reading an article in Forbes that noted an obscure and surprising provision of the Social Security law.
In Pictures: Seven Smart Ways To Save

Incredibly, a recipient can "undo" his decision to take Social Security retirement benefits early simply by paying back--without any interest or inflation adjustment--the benefits he's received. He can then re-apply for Social Security and claim the bigger monthly checks paid to those who wait until an older age to claim benefits.
Click here to download a free report on 50 stocks, ETFs and funds that top-performing Forbes gurus are buying for 2008.

Does this really pay off? Yes, if you compare the Social Security ploy with what you'd have to pay an insurance company for a similar annuity.

Kotlikoff provides this example: A couple, now both 70, claimed Social Security retirement benefits at 62, as more than half of Americans do. They now collect $11,556 each a year. If they had waited until 70 to claim benefits, they would be entitled to $20,000 each a year--even though they didn't earn more wages between the ages of 62 and 70.

The couple fills out Social Security's form 521, "Request for Withdrawal of Application", and pays back $79,305 each in benefits. They then reapply--and begin collecting $20,000 a year each. In effect, they've each bought an extra $8,444 a year in inflation-adjusted annuity. The cheapest commercial annuity would cost them 40% more, Kotlikoff calculates.

Still, many couples might gag at the thought of writing a check for $158,610 to Uncle Sam. What about leaving money to the kids? What if one of them keels over tomorrow?

Here's a potentially more palatable option: Have only one spouse trade in benefits. For $79,305, the couple gets an $8,444 joint life annuity. Joint life, because if the spouse who buys the higher benefit dies first, the survivor gets to take the deceased spouse's bigger Social Security check instead of his or her own smaller one. In other words, you get the survivor's benefit for free. Buying this annuity from a commercial insurer would cost 80% more, Kotlikoff says.

"If anybody is going to buy an annuity, they should buy it from Social Security first,'' he concludes.

Unfortunately, part of what you save by buying your annuity from Social Security, you could have to pay back to the government in the form of taxes. Depending on your income, up to 85% of your Social Security benefits is subject to federal income taxes. If you buy an immediate commercial annuity with after-tax dollars, a large part of what you get back is considered a nontaxable return of principal. A 70-year-old couple buying a joint life annuity would typically be able to exclude 64% of the annuity payment from federal taxable income.

So Kotlikoff also evaluated the Social Security trade-in strategy using ESPlanner, financial planning software he co-developed, that aims to maximize and smooth consumption over a lifetime while taking taxes into account. Say our 70-year-old couple has no pension, no Individual Retirement Accounts, and $400,000 in taxable investments. They invest conservatively and want to make sure that their assets last until they're both 100.

If they both trade in for higher Social Security benefits, they will be able to spend 25% more a year; if they both buy commercial annuities paying an extra $8,444 a year, their living standard goes up only 12%, the program shows. That 25% increase in living standards, Kotlikoff notes, is the equivalent of the couple getting a $200,000 inheritance.

If the same couple also has $400,000 in pretax IRA accounts, Social Security is still a better buy than a commercial annuity, but its advantage is smaller. That's because mandatory withdrawals from their IRAs raise their gross income and make more of their Social Security benefits taxable. They'll get a 14% living standard boost from buying bigger checks from Social Security, versus an 11% increase if they buy commercial annuities.

But even for this higher-income couple, Social Security is a big winner over a commercial annuity if they (reasonably) bet that that only one of them will live to be very, very old and only one spouse trades up to a bigger Social Security check. After the first spouse dies, the survivor has a 17% higher living standard than if the couple had done nothing. By contrast, buying an expensive commercial joint life annuity would raise the survivor's living standard by only 6%.

Is repaying Social Security to gain higher benefits legal? Yep, says Mark Lassiter, a spokesman for the Social Security Administration. "We don't consider it naughty,'' he says. Form 521 asks for your reason for withdrawing your initial benefit application, but that's only so that Social Security employees can make sure the person filing the application understands what he's doing.

You can write that your reason is that it's better for you financially and the SSA won't nix your application, Lassiter says. About 100,000 folks file Form 521 each year, but the Social Security Administration doesn't tally the reasons they give. Some, no doubt, have simply decided not to quit working so soon.
In Pictures: Seven Smart Ways To Save

Kotlikoff, for his part, is convinced millions of retirees in their late 60s and early 70s would benefit from trading in their benefits. Be aware that the return from trading in declines after 70. That's because Social Security benefits don't continue to grow past that age, and you'll have more years of previous benefits to repay.

This all raises the question of whether--assuming you don't actually need a Social Security check to live on at age 62--you should wait until 69 or 70 to claim a bigger Social Security check or file for benefits at 62, invest the money, repay the early benefits at 69 or 70, and then claim that bigger check.

Kotlikoff says the answer depends on many factors. Among them: a couple's other income, which will determine how much of those Social Security benefits they receive from 62 to 70 will be taxed, and at what rate.
__________________
judyjht is offline   Reply With Quote
Old 03-26-2008, 08:07 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,275
Read Want2Retire and New Thinking....

If single... it does not matter... we can all think we will live to 90 or 100... but die anyhow (my BIL used to tell me how fit he was.... died of a heart attack a few months back at 72)...

SO, if single.... it really does not matter as it is a gamble either way... the BIG variable is how long we live and NOBODY knows that number...

If we are married... then we SHOULD think of our spouse which I assume we still love if we are still married... if 'she' is younger, then it is a no brainer to wait until 70... if 'he' is younger... well, then it might or might not be good...

For most married couples it is best to wait.... but as my other BIL said, what is he supposed to do while waiting until 70? Work?
__________________
Texas Proud is online now   Reply With Quote
Old 03-26-2008, 08:30 AM   #30
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,107
Quote:
Originally Posted by Texas Proud View Post
For most married couples it is best to wait.... but as my other BIL said, what is he supposed to do while waiting until 70? Work?
Cue the annuity salespeople...
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 03-26-2008, 09:22 AM   #31
Dryer sheet aficionado
pie2008's Avatar
 
Join Date: Mar 2008
Posts: 26
IMHO, this plan to pay SS back at 70 and take a higher benefit is one of those MBA "looks great on paper" schemes. Remember the Laffer Curve? Remember trickle-down economics? Remember the recent mortgage practices which have all but ruined real estate and financial markets?

Why has this theory become all the buzz lately? Who is promoting this? I get suspicious anytime I hear a "too good to be true!" promotion. Just my 2 cents.

After having read hundreds of articles and many books on financial planning, I'm perplexed that so many of these writers describe in great detail the problems of continuing to fund SS benefits and that there will have to be extreme changes or reductions for the system to continue; then, they continue to suggest that one should not collect till 66 or 70 to receive higher benefits. Whaaaaa??

My husband and I experienced his pension being frozen a few years ago, thus depriving us of nearly 1/3 of the pension income we were expecting when we retire in the next few weeks. I certainly have no intention of trusting SS. We're taking our benefits as soon as we are eligible.
__________________
pie2008 is offline   Reply With Quote
Old 03-26-2008, 01:07 PM   #32
Full time employment: Posting here.
 
Join Date: Sep 2007
Posts: 717
<i>The couple fills out Social Security's form 521, "Request for Withdrawal of Application", and pays back $79,305 each in benefits. They then reapply--and begin collecting $20,000 a year each. In effect, they've each bought an extra $8,444 a year in inflation-adjusted annuity. </i>

I agree with the "looks great only on paper" comment. Except that I'm not sure that it even passes the laugh test on paper. So, how does this work?
They are having trouble getting by on $11,556 (each) and they really need $20,000. So they write a check for $79K (each!)?

Duh--maybe I'm stupid, but just where did they get the $79K? Perhaps they've been putting the $11,556 into a savings account? If so, they they haven't been using it to live on, have they? De facto, they don't need the $11K, so why do they say they can't make it on $11K and really need $20K.

I really think this is mostly another example of "if you need to do it, you can't----but if you can then you don't need to do it".
__________________
rayvt is offline   Reply With Quote
Old 03-26-2008, 01:31 PM   #33
Thinks s/he gets paid by the post
 
Join Date: Dec 2007
Posts: 4,764
What we all are not going to live to 95 and spend every penny we got? Bah
__________________
Notmuchlonger is offline   Reply With Quote
Taking it early and paying it back
Old 03-26-2008, 01:34 PM   #34
Recycles dryer sheets
aenlighten's Avatar
 
Join Date: Apr 2007
Posts: 275
Taking it early and paying it back

makes sense over buying an annuity, but an annuity only makes sense if you expect to live longer than median. Fundamentally, your life expectancy is the important factor. I think most people have realistic ideas of their life expectancy by the time they reach this age and should behave accordingly.
__________________
aenlighten is offline   Reply With Quote
Old 03-26-2008, 01:53 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by aenlighten View Post
Fundamentally, your life expectancy is the important factor. I think most people have realistic ideas of their life expectancy by the time they reach this age and should behave accordingly.
Unless you have untreatable cancer, all those other chronic problems are not very meaningful to an individual, as opposed in an actuarial sense to a group.

Before he was 50 my Dad had picked up a couple chronic ills, and he and some others assumed he would not live a real long time. But he retired at 65, and lived more than 20 years after that in mostly good health.

So I would not underestimate the insurance value of SS, and the risk reduction of waiting to get a larger monthly payment if one is able to do so.

For me at least, another factor is that I do not want to bet against my own longevity. It isn't that I think I will necessarily live to 95; it's just that I don't want the bad karma of betting against that possibility.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 03-26-2008, 02:19 PM   #36
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 927
Quote:
I certainly have no intention of trusting SS. We're taking our benefits as soon as we are eligible.
Me too. With the economy the way it is the gummit is going to be looking under the seat cushions for every bit of spare change it can find.

If I even make it to eligibility before they cut my benefit (I'm 51 now), I'll run, not walk down to the nearest SS office to file my papers.
__________________
Caroline is offline   Reply With Quote
Old 03-26-2008, 04:09 PM   #37
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 987
Quote:
Originally Posted by mathjak107 View Post
its not about dying with the biggest pile, its about having the best life you can while alive
I would rather die with money than live without it.

For me/DW, she will take SS at 62 and me at 70. Using whatever forecast tool (FIRECalc, Vanguard's F.E., Fidelity's R.I.P.), it "makes the numbers look better". Additionally, assuming I go first, my wife will be collecting 3x as much when I die (assuming I go at/after 70) than what she will be getting at 62.

- Ron
__________________
rs0460a is offline   Reply With Quote
I disagree
Old 03-26-2008, 05:23 PM   #38
Recycles dryer sheets
 
Join Date: Oct 2005
Posts: 150
I disagree

Quote:
SO, if single.... it really does not matter as it is a gamble either way
I respectively disagree with this post. As we have discussed before and I have written about, there is still a tremendous tax saving for a typical single individual to tap qualified assets for income and delay SS to 70. For example, in a recent paper, when delaying SS, we found that a nest egg only 54% of the size is needed at age 62 compared to someone who also retires at 62 and draws SS right away. The nest egg needed when delaying SS was slightly over $200,000 less than a typical individual taking SS at 62 and using a "4% safe withdrawal method" with typical mutual funds. For middle income folks, it will take 13-15 years to accumulate another $200,000 in a 401k.
__________________
New Thinking is offline   Reply With Quote
On paying back
Old 03-26-2008, 05:31 PM   #39
Recycles dryer sheets
 
Join Date: Oct 2005
Posts: 150
On paying back

One other point on the whole "take it at 62 and pay it back"..Other than this being highly unlikely for someone to actually do, it is not the optimal approach for most married couples. When you pay back benefits at an advanced age, say age 70, you have to pay spousal benefits back as well. If you are in a situation that you are generating spousal benefits, the better approach is to wait until Full Retirement Age and then filing for benefits and then suspending them. This triggers the spousal benefit being paid. In other words, you may have four years of spousal benefits being paid (say from higher earning spouse's age 66-70) that are in excess of the amount someone "paying back at age 70" would earn.

If your spouse earned a benefit on her/his own, it is better for her to start her benefits early and then the higher earning spouse requests ONLY spousal benefits off of the other spouse's benefits to be paid. Again, "extra" income for four or so years compared to "paying back at age 70".

For single folks, these strategies do not work, but married couples should seek to maximize benefits and I cannot see how filing at 62 and then repaying and starting over at age 70 does that.
__________________
New Thinking is offline   Reply With Quote
Old 03-26-2008, 06:39 PM   #40
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Quote:
Originally Posted by New Thinking View Post
I respectively disagree with this post. As we have discussed before and I have written about, there is still a tremendous tax saving for a typical single individual to tap qualified assets for income and delay SS to 70. For example, in a recent paper, when delaying SS, we found that a nest egg only 54% of the size is needed at age 62 compared to someone who also retires at 62 and draws SS right away. The nest egg needed when delaying SS was slightly over $200,000 less than a typical individual taking SS at 62 and using a "4% safe withdrawal method" with typical mutual funds. For middle income folks, it will take 13-15 years to accumulate another $200,000 in a 401k.
By recent paper, do you mean Rethinking Social Security Claiming in a 401(k) World?
__________________

__________________
ats5g is offline   Reply With Quote
Reply

Tags
social security


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Social Security Carol0720 Other topics 5 07-19-2007 01:18 PM
Social Security, --- Again Sundance Kid Other topics 12 03-05-2007 08:53 PM
Do you think Social Security will be there? GTM Other topics 23 01-06-2006 02:38 PM
SS benefits, delay taking Social Security, Scott Burns article landover FIRE and Money 11 11-29-2005 06:58 PM
When do Social Security payments start? Retiredtwice Other topics 3 11-18-2005 11:29 AM

 

 
All times are GMT -6. The time now is 08:46 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.