Break-even SS 62 vs 66 vs 70 calculators ?

[wanaberetiree]

Any suggestions to a simple but reliable calculator to compare Social Security benefits. e.g. 62 vs 66 vs 70 ?

Thx

 

[Cut-Throat]

Any suggestions to a simple but reliable calculator to compare Social Security benefits. e.g. 62 vs 66 vs 70 ?

Thx

The best one I've seen...... All you need to know is your FRA amount and when you're going to die.

SSAnalyze - Bedrock Capital Management

 

[Lawrencewendall]

I used a simple spreadsheet that tallied the 3 columns to see where each colum matched or was greater than the other/s.

 

[Big_Hitter]

and when you're going to die.

trying to figure that out has been killing me lately

 

[Cessna152]

Any suggestions to a simple but reliable calculator to compare Social Security benefits. e.g. 62 vs 66 vs 70 ?

Thx

When do you plan to die?

 

[joeea]

trying to figure that out has been killing me lately

I see what you did there... and I liked it!

 

[joeea]

The best one I've seen...... All you need to know is your FRA amount and when you're going to die.

SSAnalyze - Bedrock Capital Management

SSAnalyze is pretty good, but makes a few odd assumptions that you may wish to override.

For example, it assumes a COLA of 2.39% because that's the average COLA for the past 25 years.
Yet it assumes a discount rate of 2% because they say that's a rouge approximation of future inflation.

I have no idea why one value uses an average of past years and the other uses an estimate of future years.

And I have no idea why they would estimate that COLA is higher than inflation. That seems unlikely to occur.

 

[Independent]

The best one I've seen...... All you need to know is your FRA amount and when you're going to die.

...., and what investment returns you'll get in the future.

 

[Cut-Throat]

...., and what investment returns you'll get in the future.

I'm not seeing any 'Investment returns' - Just cost of living and Inflation for the SS Payouts.... Which I set to zero.

Bottom Line... If you understand how SS works, you should not even be calculating Break Even Age... It's like trying to Calculate your Break Even amounts on Fire Insurance, Medical Insurance....etc.

 

[wanaberetiree]

SSAnalyze is pretty good, but makes a few odd assumptions that you may wish to override.

For example, it assumes a COLA of 2.39% because that's the average COLA for the past 25 years.
Yet it assumes a discount rate of 2% because they say that's a rouge approximation of future inflation.

I have no idea why one value uses an average of past years and the other uses an estimate of future years.

And I have no idea why they would estimate that COLA is higher than inflation. That seems unlikely to occur.

Agree, sounds like will have to do own spreadsheet

 

[joeea]

Agree, sounds like will have to do own spreadsheet

You don't need to accept the defaults. You can put in whatever value you would use in your spreadsheet if you prefer.

 

[Mdlerth]

The more I learn the more I find I didn't know

Bottom Line... If you understand how SS works, you should not even be calculating Break Even Age... It's like trying to Calculate your Break Even amounts on Fire Insurance, Medical Insurance....etc.

+1

Even the "I" in OASDI (the official name for Social Security) stands for "Insurance". It's not as simple as comparing it to an annuity or a bond.

Well before you file for it, even decades before you retire, you already are reaping some of its benefits. They may be intangible, just like insurance coverage provides coverage on which you may never make a claim, but that doesn't mean they aren't real.

 

[wanaberetiree]

+1

Even the "I" in OASDI (the official name for Social Security) stands for "Insurance". It's not as simple as comparing it to an annuity or a bond.

Well before you file for it, even decades before you retire, you already are reaping some of its benefits. They may be intangible, just like insurance coverage provides coverage on which you may never make a claim, but that doesn't mean they aren't real.

I don't get this point.
Walk me thru how you would decide when to start taking SS pls ?

 

[Mdlerth]

I think I'm managing risk, but I could be wrong

I don't get this point.
Walk me thru how you would decide when to start taking SS pls ?

Here's my thinking.

DW is likely to outlive me. So, since I view SS as insurance, in this case longevity insurance, I plan to take it at 70 to preserve the maximum buffer for her. DW will be okay.

Of course, if I croak on the way home this evening, I won't be able to fulfill that plan; nowhere near 70 yet. But OTOH, she'll get a survivor benefit right away. Again, I'm viewing it as insurance.

Also, if I don't die right away but still croak before 70, it'll be fewer years that I'd be imposing my maintenance costs (food and beer, mostly) on our portfolio. So DW wins again!

When I buy insurance, I'm know I'm choosing an option which is guaranteed to cost something in return for reducing a possible loss which could potentially be larger.

Maybe I'm not succeeding, but I'm at least trying to be consistent in my approach to managing risk. For example, I am constructing a retirement kitty to last for about 30 years. Over a thirty year period, equities are likely to substantially outperform debt instruments, but I nonetheless will keep some fixed income assets in my AA. I'm sacrificing some potential growth to reduce some downside risk.

Anyway, that's my reasoning. Perhaps I'm full of chicken salad, but this was my thought process.

 

[joeea]

When I buy insurance, I'm know I'm choosing an option which is guaranteed to cost something in return for reducing a possible loss which could potentially be larger.

Maybe I'm not succeeding, but I'm at least trying to be consistent in my approach to managing risk. For example, I am constructing a retirement kitty to last for about 30 years. Over a thirty year period, equities are likely to substantially outperform debt instruments, but I nonetheless will keep some fixed income assets in my AA. I'm sacrificing some potential growth to reduce some downside risk.

IMHO, this is exactly the right way to think about it.

 

[Winemaker]

IMHO, this is exactly the right way to think about it.

+100 Me, too.

 

[HMMY]

You can't solve for breakeven age because there is more than one variable. It depends on inflation, how much you invest, how your assets are invested, and how much they grow. Basically, if you think that you will be short-lived, take it early. If you need the money to survive, take it early. If you think you will have an average life span, take it at FRA. You get the full benefit of delaying to 70 if you live longer than the average bear. Regardless, if you can afford it, I would delay to 70 because I consider SS as longevity insurance and there is no annuity with a guaranteed 8% growth from 67 to 70 with annual COLA increases.

 

[RunningBum]

I think you do want to know the breakeven point. SS isn't like fire insurance, which you will hopefully never use, but if you do it may pay off big. SS will start paying whenever you start taking it between 62-70.


I also like the longevity insurance aspect, but I still want to know when I might break even. If it's not until I'm 115, then it's not very good longevity insurance.


I've made my own spreadsheet, so I can factor in investment return (to account for keeping more invested if I take SS early), inflation rate for SS benefit increases, and possible benefit reductions at some point in the future.

 

[wanaberetiree]

I guess I am missing something here

Why is SS like insurance? To me it's a source of income.
Say you have completed required amount of units and @62 you may get $1800, @67 - $2800 and @70 - $3100

Sure you will need to account for inflation (maybe yes or not) and life expectation. But why this math problem requires anything else?

If you define your goal as - max amount of $'s received over the total life.

Wrong?

 

[Cut-Throat]

I guess I am missing something here

Why is SS like insurance? To me it's a source of income.
Say you have completed required amount of units and @62 you may get $1800, @67 - $2800 and @70 - $3100

Sure you will need to account for inflation (maybe yes or not) and life expectation. But why this math problem requires anything else?

If you define your goal as - max amount of $'s received over the total life.

Wrong?

Think of it as "Old Age Insurance".... Yes, you get income at age 62, but by waiting until age 70, you'll get much more.... You are insuring that you'll have more money if you live a long time. No one knows the length of 'Total Life' as you say, so you buy a little insurance.

Basically it's the same reason that people Plan their withdrawal amounts and plan out to age 100, even though most people don't live that long. If someone told you that their financial plan ended at at age 80, you'd probably warn them, that they and their spouse may live a lot longer than that.....But for some reason when it comes to S.S. there are a lot of people that take the early amount and fail to insure that they may live a lot longer.... (The exception are people, who are so broke, that they cannot afford to delay the benefit)

 

[wanaberetiree]

Think of it as "Old Age Insurance".... Yes, you get income at age 62, but by waiting until age 70, you'll get much more.... You are insuring that you'll have more money if you live a long time. No one knows the length of 'Total Life' as you say, so you buy a little insurance.

Basically it's the same reason that people Plan their withdrawal amounts and plan out to age 100, even though most people don't live that long. If someone told you that their financial plan ended at at age 80, you'd probably warn them, that they and their spouse may live a lot longer than that.....But for some reason when it comes to S.S. there are a lot of people that take the early amount and fail to insure that they may live a lot longer.... (The exception are people, who are so broke, that they cannot afford to delay the benefit)

That makes sense to me. You could calculate 'Total Life' as 100 for "stress" purposes, but still it's an simple math problem. That's why I started this thread 'Break-even SS 62 vs 66 vs 70 calculators ?' and confused when we start including into this all FIRE related decisions and calculators.

PS: Although I find this conversation very interesting and useful !

 

[Cut-Throat]

That makes sense to me. You could calculate 'Total Life' as 100 for "stress" purposes, but still it's an simple math problem. That's why I started this thread 'Break-even SS 62 vs 66 vs 70 calculators ?' and confused when we start including into this all FIRE related decisions and calculators.

PS: Although I find this conversation very interesting and useful !

Here is another Calculation that you'll find useful....

Spend more money at age 62, by delaying S.S. to age 70.

 

[CRLLS]

I guess I am missing something here

Why is SS like insurance? To me it's a source of income.
Say you have completed required amount of units and @62 you may get $1800, @67 - $2800 and @70 - $3100

Sure you will need to account for inflation (maybe yes or not) and life expectation. But why this math problem requires anything else?

If you define your goal as - max amount of $'s received over the total life.

Wrong?

Considering a source of income, SS is less like the big payoff of a life insurance policy, more like disability insurance or unemployment insurance then.

That being said, some insurance policies have an income stream built in. I have an old whole life policy where I get to make the same tradeoffs as SS with the cash value, I get to choose when I collect, and how I collect it. Life with 10 yrs certain or 20 yrs certain, vs life, vs joint life (50% or 100%), vs 10 yr payout and the list goes on. So in that manner it can be compared to an insurance policy.

As for the "max amount", assuming you will be needing some money to cover your living expenses from 62-70 and beyond, you'll be balancing one's investment returns against SS. One does not know how long that life is. That makes it not so simple a an evaluation, certainly not with a high degree of accuracy.

 

[Independent]

I'm not seeing any 'Investment returns' - Just cost of living and Inflation for the SS Payouts.... Which I set to zero.

Bottom Line... If you understand how SS works, you should not even be calculating Break Even Age... It's like trying to Calculate your Break Even amounts on Fire Insurance, Medical Insurance....etc.

It asks for "discount rate". To me, that's equivalent to asking what you think your non-SS money will earn.

I agree with your second paragraph.

 

[Independent]

If you define your goal as - max amount of $'s received over the total life.

Wrong?

The dollars I need over my life depend on the number of years I live. If I live a lot of years, I'll spend a lot of dollars. If I live a few years, I'll spend just a few dollars.

The decision on when to start SS can be viewed as whether you want to use SS to provide a better match of lifetime dollars of income to lifetime dollars of spending.

I'm not sure if an analogy helps, but I'll try anyway. I know that insurance companies pay fewer dollars in claims than they collect in premiums. If I want to maximize my expected estate I should not buy insurance.

But, I still buy it. With insurance, the dollars I might possibly get if my house burns down are timed to match the extra dollars I need if that unlikely event occurs. Insurance improves my match between income and outgo.

The unexpected event that deferring SS may help with is the possible (though unlikely) case that I survive to an unusually old age. In that case I need extra money, and deferring SS may give me extra money just when I need it.