Forbes: 44 "secrets" about Social Security

[Independent]

Ok, got that. But what if your only other option is to withdraw that same amount each year from your IRA/401k as you wait to age 70? (I'm ignoring spousal/survivor benefits)

If you keep that $ in your IRA, you could be earning more than the 8% that SS is pegged at (hopefully) and in many cases, you're not paying the full tax load in fed/state income tax as you would with an IRA withdrawal.

You probably already know this, but your wording here is pretty fuzzy. Deferring Social Security doesn't "earn more than 8%"

The monthly benefit goes up by 8% (non-compounded) for each year you delay past the normal retirement age. For those of us with an NRA of 66, that means the monthly benefit if we start at 70 is 32% higher than the monthly benefit if we start at 66.

The inflation-adjusted IRR on deferring from 66 to 70 is:
-100% if you die before 70
-13.4% if you die at 75
+2.6% if you die at 85
+5.6% if you die at 95

(assuming "you" are single.)

Deferring SS works well in those scenarios where living on savings struggles - long lives combined with poor market returns.

 

[braumeister]

15. Millions of Baby Boomers can significantly raise their retirement benefits by continuing to work in their sixties.

I wish there was more explanation of this one.

I would be very skeptical of the word "significantly" in the item you referenced.

 

[WhoDaresWins]

I called SS today and got the first available appointment at the office near me...April 23rd. This gives me plenty of time to do the maximizemysocialsecurity website. I will report back to the forum with my results and opinion of the site. I can compare the online calculator with what SS tells me.

Will pension and unearned income reduce the amount of survivor benefits I get? I know that taking benefits before FRA will reduce the amount. I will have 6.5 months of earned income this year but won't get any SS benefits until after my retirement date. I don't need these benefits when I turn 60. I can afford to wait until it is most advantageous to me.

 

[braumeister]

I called SS today and got the first available appointment at the office near me...April 23rd.

I have needed to visit the local SS office three times in the past ten years, and each time I simply looked up their hours and drove over there. I signed in and sat down to wait. In no case did I have to wait more than 20 minutes before getting to talk to a very helpful clerk.

You might want to try it.

 

[gcgang]

Great article with a lot to think about. Thanks.

Never knew SS could be so complicated.

 

[Hermit]

Here is a demo of Maximize My Social Security:
Quick Demo | Maximize My Social Security

You can also get to it from ES Planner. They are both created by Larry Kotlikoffhttp://www.forbes.com/sites/kotlikoff/.

 

[WhoDaresWins]

I have needed to visit the local SS office three times in the past ten years, and each time I simply looked up their hours and drove over there. I signed in and sat down to wait. In no case did I have to wait more than 20 minutes before getting to talk to a very helpful clerk.

You might want to try it.

Thank you. Good suggestion as my office is about a five minute walk from the SS office. I made a visit there a couple of years ago with a friend who thought she could gather some info for her husband...plexiglass, armed security guard asking if we had any weapons, crowded waiting room with all the warmth of Sing Sing. Since then I have sent my case aide when I had any client-oriented business. I actually have some internal contacts at the local office but I feel funny asking for any special consideration for myself. I think next month will be an okay timeline for me.

 

[marko]

Deferring Social Security doesn't "earn more than 8%"

The monthly benefit goes up by 8% (non-compounded) for each year you delay past the normal retirement age.

Yes. What I meant is that if you leave the equivalent amount of your SS benefit in your portfolio, you could (hopefully) earn more than 8%.

IOW, taking your SS benefit instead of withdrawing that amount from your IRA allows that amount in the IRA to grow perhaps more than the 8% non-compounded benefit increase.

 

[Hermit]

Yes. What I meant is that if you leave the equivalent amount of your SS benefit in your portfolio, you could (hopefully) earn more than 8%.

IOW, taking your SS benefit instead of withdrawing that amount from your IRA allows that amount in the IRA to grow perhaps more than the 8% non-compounded benefit increase.

To quantify the cost of waiting until 70, I added the payments for the 8 years between 62 and 70 and compared that to the cost of an equivalent annuity for the additional SS amount I would get at 70. Waiting until 70 won easily.

Most people are invested fairly conservatively by 62. A lot of folks on this forum use 5% rather than 8%.

 

[spncity]

I would be very skeptical of the word "significantly" in the item you referenced.

Here's one take on it. Probably not PC for an early retirement forum....

How Social Security Pays You to Work Forever | Making Sen$e | PBS NewsHour | PBS

Kindest regards.

 

[growing_older]

Here's one take on it. Probably not PC for an early retirement forum....

How Social Security Pays You to Work Forever | Making Sen$e | PBS NewsHour | PBS

Kindest regards.

This is however EXACTLY the answer I was looking for as to why "15. Millions of Baby Boomers can significantly raise their retirement benefits by continuing to work in their sixties." was included in the list. It may be an argument against ER, but the information about what the consequences are is very welcome. Thanks for the link.

 

[springnr]

Here's one take on it. Probably not PC for an early retirement forum....

How Social Security Pays You to Work Forever | Making Sen$e | PBS NewsHour | PBS

Kindest regards.

A quick skim to an example in the article:
Keep working until 70 + live to a hundred years old -
Ten more years could get you like $80K extra from Social Security!!!

If you love what your doing, why not, and here is an upside to the scenario.
How much Social Security Taxes would be paid on those wages?

 

[REWahoo]

Here's one take on it. Probably not PC for an early retirement forum....

That's an understatement, with quotes like this from the article:

Retirement can be awfully dull, and there is no guarantee that the grim reaper will make it on time.

Wow! Working to age 80 will raise my lifetime Social Security benefits by 22 percent!

Wow indeed - calculated on living to age 100. Good luck with that.

 

[Dreamer]

Question #2 scenario has been clear as mud for me too.

I meet the 10 years / more than 2 years divorced etc., and I'm the high earner in this case.
From reading - for a married couple the high earner can not claim spousal benefits at full retirement age and then draw on their own at 70.

Is this one of those Social Security quirks where as a divorcee one gets a break and the high earner is able to claim spousal benefits at full retirement age and then draw on their own at 70?

No, it would apply to you also. If you are full retirement age, you can restrict your application for spouse's benefits only, and accrue the delayed retirement credits on your own record, and file for retirement benefits on your own record at age 70.

 

[mathjak107]

I found the "start/stop/start" provision (#2) to be interesting until I did the math (always a dangerous thing for me!).

What my numbers show is that if I suspend at 66 and resume at 70, I'd get more money but I'd have to live to be 83 to break even...once again actuarially neutral, I think.

So, applying at 62 and suspending at 66 would make sense if, in those four years you realize that you'll likely live well beyond 83. YMMV.

it should never be about what if i die, dead is dead. the real question should be what if i live?

to often folks make poor decisions because they look at things in terms of dying.

they buy the wrong products too. how many times do folks buy cash value life insurance as a product for what if they live.

you don't buy a product where you are betting you will die as a product for living. annuities are a product you buy for living.

throw in the fact most small investors suck at it, as well as get more conservative as they age and the chances of doing better than delayed ss become less and less.

if you look at the inflow and outflow numbers from the funds they show most small investors get a fraction of the gains the funds do left to their own devices in volatile times.

 

[marko]

it should never be about what if i die, dead is dead. the real question should be what if i live?

to often folks make poor decisions because they look at things in terms of dying.
.

My personal view/situation is that if I make it to 83, I'll be thrilled! Really. Already had two close calls in the past 2 years and I'm only 61!

If my break-even on SS is 79 or so and I start 'losing' money at that point, I don't think I'll care; I'd rather have the extra money to spend now.

Obviously, the break-even doesn't mean the money stops, it just means I will be getting a bit less than had I taken it later. I can live with that as I enter my 80's. Plus it means that I had 17 years of NOT withdrawing that amount from my IRA so there should be some gains there to supplement.

 

[mathjak107]

aaaah but you do have that extra money. what if i don't break even is old school thinking.

today i look at it as we can take far more in withdrawals early on at 62 then we would otherwise since if we wait we can refill our buckets from the higher out of pocket spending later on.

knowing we will get 78% more if we live to 70 will have us spending more now while we can enjoy it. it is liike a longevity annuity kicking in.

that extra dough for a life time will act as longevity insurance if we live that long. if not, then we spent even more in the early years than had we taken ss early on.

also you don't have to plan as far out with that big ss payment and colas kicking in for a lifetime .plan only to 85 instead of 95 and you can spend alot more today as well .

it is all a matter of flipping things and re-thinking about what is best for living and not dying. you will find there is a lot you can do now while waiting to collect than you had in your equation of just waiting.

 

[LRDave]

^^^^ I see your point here. But this still brings me back to the (unanswerable) question I have that lead me to find this forum many years ago:

What is the risk that the rules will change and my benefits will be diminished between my 62nd year (7 years from now) and my 70th year?

 

[mathjak107]

so far so good is the only answer.
but common sense says unless they want everyone to take it as early as they can and drain the system they would never screw with the deferral amount.

that would be like losing your virginity. you get one shot and the deed is done forever. no one would trust this system and delayed credits and trust are what the system is based on.

 

[marko]

Mathjak, an excellent point that I hadn't considered....

LRDave: my concern as well... they might change the rules

 

[pb4uski]

...What is the risk that the rules will change and my benefits will be diminished between my 62nd year (7 years from now) and my 70th year?

I don't think you can point to anywhere changes have been made to near-retirees in the past and the political implications are daunting enough that such changes are extremely unlikely IMO.

 

[Independent]

^^^^ I see your point here. But this still brings me back to the (unanswerable) question I have that lead me to find this forum many years ago:

What is the risk that the rules will change and my benefits will be diminished between my 62nd year (7 years from now) and my 70th year?

I've thought about that, too. The most likely change is some sort of means testing based on non-SS assets or income. I figure that if I defer SS, I will arrive at 70 with fewer assets and less non-SS income than I would have had if I had started at 62. This makes it less likely that I'll get caught by some future means testing rule.

Of course, "most likely" is based on my reading of political tea leaves. I can't claim any special abilities on that.

 

[marko]

but common sense says unless they want everyone to take it as early as they can and drain the system
.

As they claim it to be "actuarially neutral", is it possible to drain the system in one case and not the other? (serious question...I"m no mathematician)

 

[rayvt]

No. No matter how many times "actuarially neutral" is brought up, people still persist on refusing to realize what that means. Kinda depressing, really, to see people who know about the concept of "time value of money" seem to forget that when the subject of Social Security comes up.

What's even more interesting is the study about it done at the behest of the SSA. The paper that said the take-early benefits were tilted
[*] in favor of high-income earners and away from low-income earners. I'd guess that most people who frequent boards like this are in the former category. If that's the case, then we are the people who most benefit from taking SS early.
[*] Not a huge tilt, but discernable.


And if it was the case that delaying is financially beneficial to the recipient, then it is a detriment to the SSA fund. So it would be people who delay that are draining the system. Early claimers would be a lower drain on the system.

 

[mathjak107]

I would think if 70 million baby boomers all wanted their benefits this year that would be a huge drain .