Clear article about when to take Social Security

[Midpack]

Our family history suggests we’ll both live to 90 if not we’ll past, so we’re delaying SS until we’re 70. That math is simple...for most situations.

 

[Mr._Graybeard]

DW was born in late '53 so she is eligible to file and restrict, filing for SS but only claiming her spousal benefit. I was going to wait till 70, but that file-and-restrict option changed my mind. I will file this year at 65 the month before DW turns 66 so she can claim spousal benefits and defer her full check until she's 70.

 

[GTFan]

As long as the ACA is in place, we'll probably wait until 65 to start taking SSI because it counts against the ACA subsidies. Makes things simpler for Medicare as well since payments come out of SSI.

 

[Ian S]

Our family history suggests we’ll both live to 90 if not we’ll past, so we’re delaying SS until we’re 70. That math is simple...for most situations.

Like you, I believe that going by overall population averages when looking at breakeven points is foolish. Your lifespan is an individual measurement and although we can't predict with certainty, there are reasonable estimates that can be made. I've done a couple of online calculations where you input family history as well as your own health and lifestyle circumstances and get a longevity estimate. Mine turns out to be 93 (not unreasonable since my mother is still going at 97.). That's different enough from a breakeven point based on the total population statistics that I've decided to wait beyond FRA before taking SS. I may not wait until I'm 70 due to other financial considerations but I'm already nearly two years beyond my FRA.

 

[steelyman]

I’m one of those who’ll be affected by WEP (Windfall Elimination Provision) which will reduce my SS benefit quite a bit. SS income for me won’t mean much in terms of living expenses.

As best as I can tell, the benefit estimate given by the annual SS summary is the amount projected before the WEP reduction is applied.

My current thinking is to start SS at FRA (full retirement age). That’s a few years away so I’ll revisit at that time and will also have more concrete numbers in hand regarding Medicare/health costs.

 

[jkern]

The article also forgets to include any possible future actions by the Government that could alter the value of your future payments. There are no written guarantees from the Government. What if they decide to start wealth means testing when you turn 70 and tell you that you are too rich, sorry Charley.

I don't believe we will be cut out completely, but maybe increasing the tax to 100%, implementing Chained CPI increases or just reducing benefits due to lack of funding. All of these actions will have the effect of pushing out the break even point.

 

[Teacher Terry]

Steel, yes the amount on your statement is before WEP. The most they are taking now is 463.

 

[Chuckanut]

I would not be surprised to see some for of wealth means testing used to increase the tax on SS benefits to 100% of the benefit.

However, punishing people who plan to take SS later would be a huge political bombshell in terms of fairness. SS is supposed to be relatively equal overall in regards to when benefits start. So if they cut benefits for everybody regardless of when the benefits started, we might see something like a freeze in benefits (ie. no more COLA) until those who took it early are equalized to those who took it later. Just a thought.

 

[daylatedollarshort]

Most of the SS calculation articles do not discount for the possibility of future benefit cuts, and right now that is the default path. Not pure speculation, but the default under current SS funding. Any means testing or income maximums and it is most likely the seniors with assets and investment income who are going to see increased taxes or reduced benefits in the future.

 

[ShokWaveRider]

I would like to thank the OP for posting this as it does give one the real numbers for different scenarios. That is valuable. Thank you! It is another piece of ammo in the arsenal of SS decision making.

 

[steelyman]

Steel, yes the amount on your statement is before WEP. The most they are taking now is 463.

Thanks, that figure agrees with what's listed here (and will apply to me):



https://www.ssa.gov/planners/retire/wep-chart.html



My ELY (Eligibility Year, another acronym!) is off in the future so I'll know more when the time comes.

[ADDED] My most recent monthly benefit estimate is $749.

 

[potto0213]

What I find irritating about the Motley Fool is that on one day they will post an article listing the reasons why you should wait until 70 and the very next day they will post an article telling you why waiting until 70 is a big mistake. They have guest columnists and they are all over the place in terms of the "When to take SS" issue. All this does is serve to confuse people who are looking to the Motley Fool site for answers.

My gripe about this particular article is that it is presented in terms of when do you break even. Most people who decide to wait until 70 to take SS don't view the argument that way. The "wait till 70" people, in general, view SS as longevity insurance. So in my mind this article is not a serious article on the pros and cons of the SS claiming strategy as not only does it not address the longevity insurance angle but it also ignores all the spousal strategies that complicate the question. Once again, the Motley Fool is just posting "click bait".

 

[Rianne]

The spousal benefit is the only reason I'd consider waiting to take SS at FRA. Open Source Social Security made that pretty clear. As long as portfolio performs well, it really doesn't matter, but that's not a guarantee. Even if SS takes a 25% haircut, that spousal benefit is something to consider.


Edit: The best spousal benefit is DH at 70. Not going to happen.

 

[Starsky]

It seems like there are a lot of variables that would make this decision very unique for each person and way beyond the scope of any article.

Health/Life expectancy
Benefit amount
Retirement savings
Need for income
Survivor benefits
SS maximization
Family issues
Legislative changes
Job satisfaction
Employment opportunities
Tax issues
Hobbies and interests
etc., etc.... and,
Just because.

YMMV.

 

[braumeister]

What I find irritating about the Motley Fool is that on one day they will post an article listing the reasons why you should wait until 70 and the very next day they will post an article telling you why waiting until 70 is a big mistake.
...
Once again, the Motley Fool is just posting "click bait".

Well, yes, but well balanced clickbait.

 

[Teacher Terry]

My husband is also affected by WEP. His will be much higher at 67 (FRA) than at 62 so unless we really need it we will wait.

 

[pb4uski]

Here is chart at 5% interest. Shows about the same amount at 87-89 yrs.

While it is important to include the time value of money, is it also important to consider mortality (the probability of living to receive the benefit).

opensocialsecurity.com is a useful tool that includes mortality and the time value of money.

Below are the expected present values of 4 scenarios for a single male born on 4/15/1957 (currently 62 yo) with a PIA of $1,457/month (like in the Motly Fool article) using 2017 Preferred mortality (reasonably healthy) and a 3% real discount rate (the 5% interest above less 2% Fed target for inflation):

Age 62.............................. $201,310
FRA (66/6 months)................204,463
Optimal (67/4 months)...........205,291
Age 70.................................199,726

Note that Age 70 is only 2.7%/$5,565 lower than the optimal solution... so as much as we vigorously debate this topic at the end of the day arguably any decision is fine (in this case of a single person... for a couple with a lower earning spouse the difference can be more).

 

[mh]

Nice calculation. The conventional wisdom of taking SS at 70 is the best is questionable unless you could live beyond 90 years. Why not take it earlier than 70 since longevity is uncertain?

Or you wait until 70 because ... longevity is uncertain ! You might live to a hundred [emoji1782]

 

[pb4uski]

Nice calculation. The conventional wisdom of taking SS at 70 is the best is questionable unless you could live beyond 90 years. Why not take it earlier than 70 since longevity is uncertain?

See post#42.

 

[Which Roger]

IMO, the biggest flaw in the article is that it assumes that one's goal is to maximize (expected) lifetime benefits. It does not even consider that one's goal may be instead to minimize the probability of running out of money.

 

[gwraigty]

IMO, the biggest flaw in the article is that it assumes that one's goal is to maximize (expected) lifetime benefits. It does not even consider that one's goal may be instead to minimize the probability of running out of money.

Yes. Isn't that the premise behind some of the calculators? Unless you know when you're going to die, you can't plan on maximizing benefits, even if that is someone's goal, which it may not be.

 

[Crabby Mike]

Edit: The best spousal benefit is DH at 70. Not going to happen.

I'm curious as to why that would be, since spousal benefit doesn't grow beyond FRA (right?).

 

[gwraigty]

I'm curious as to why that would be, since spousal benefit doesn't grow beyond FRA (right?).

You are correct.

 

[pb4uski]

I'm curious as to why that would be, since spousal benefit doesn't grow beyond FRA (right?).

Spousal benefit doesn't grow after FRA but survivor benefit does.... perhaps that is what Rianne is referring to.

In our case, DW was a SAHM so my PIA is more than 3 times DW's PIA. So she'll get 1/2 of my PIA from when I file until I die and then my benefit once I am gone.... so if I wait then her survivor benefit will be greater.

So let's say that my PIA is $3,000/month and my FRA is 66. She'll get $1,500/month once I file... but once I die, she'll get $3,000 for life if I file at my FRA or $3,960/month if I waited until 70 to file.

 

[CRLLS]

While it is important to include the time value of money, is it also important to consider mortality (the probability of living to receive the benefit).

opensocialsecurity.com is a useful tool that includes mortality and the time value of money.

Below are the expected present values of 4 scenarios for a single male born on 4/15/1957 (currently 62 yo) with a PIA of $1,457/month (like in the Motly Fool article) using 2017 Preferred mortality (reasonably healthy) and a 3% real discount rate (the 5% interest above less 2% Fed target for inflation):

Age 62.............................. $201,310
FRA (66/6 months)................204,463
Optimal (67/4 months)...........205,291
Age 70.................................199,726

Note that Age 70 is only 2.7%/$5,565 lower than the optimal solution... so as much as we vigorously debate this topic at the end of the day arguably any decision is fine (in this case of a single person... for a couple with a lower earning spouse the difference can be more).

Nice data.

My takeaway from that is that they are all virtually identical, as they should be. If one is following the "I must maximize my lifelong benefit" then there is a very good chance that waiting until 70 is the way to go. My reasoning is it is a 50-50 chance that you will lose that $5,565 as these are all average life expectancy. All you have to do is take the Age 70 and live 4 more months and that plan comes out the winner. Due to this and many other reasons, I chose/choose to wait until 70 to file on my earnings.