Another analysis: Why Early Social Security Provides the Greatest Spousal Benefit

[Jenna]

"I want my spouse to have a solid financial foundation in her twilight years after I am gone.

Therefore I plan to collect social security as early as possible and dump that income into an index fund. This will help avoid the virtually guaranteed loss that delayed Social Security offers for the first 25+/- years.

Upon my death, she will have a giant pile of cash and a monthly social security income stream that together are worth more than if I delayed collecting Social Security, providing the greatest spousal survivor benefit."

See full Article:https://www.gocurrycracker.com/why-early-social-security-provides-the-greatest-spousal-benefit/

 

[oldtimer]

Take early & invest aggressively if one assumes a less than average lifespan. But one is not enjoying the the early years because are delaying the investment returns to allow for investment compounding. If one lives a very long life than will be left with a shortage.

 

[VanWinkle]

Of course additional spending will never interrupt the investment of the early SS dollars. Holding off on claiming early has a guaranteed increase in benefits. There is no guarantee in investing. I don't dispute his numbers, just the fact that we are all human and decisions aren't always followed.

VW

 

[foxcreek9]

You turn 62 in 1966, the first 15 years

 

[Exchme]

Same old math mistake that has been exposed here over and over, assuming the hoped-for return of a risky portfolio is in some way equivalent to the guaranteed return of SS. The better comparison is to TIPs, check out the explanation at opensocialsecurity.com as to why.

 

[Exchme]

You turn 62 in 1966, the first 15 years

Yes, this! SS increases with age regardless of the market. The blogger is simply taking more risk.

 

[target2019]

Read article and comments. Blogger has no credentials IMO.

 

[Montecfo]

I'm always amused when people use the word "guaranteed" with regard to SS claiming strategies.

Hint 1: "Guaranteed" unless you
die
Hint 2: "Guaranteed" unless SS gets a haircut to remain solvent.

Each time the word "guaranteed" has been used so far in this thread, one or both of these "hints" need to be added for the statement to be correct.

Returning you now to your regularly scheduled programming.

 

[Joylush]

Doesn’t it make sense to take it early when you absolutely don’t need it? This allows you to spend less of your own retirement money and allow it to grow. For someone who can’t possibly outlive their savings, it seems to me taking it early is a good choice.

 

[VanWinkle]

Doesn’t it make sense to take it early when you absolutely don’t need it? This allows you to spend less of your own retirement money and allow it to grow. For someone who can’t possibly outlive their savings, it seems to me taking it early is a good choice.

From a tax perspective it makes more sense to spend down tax deferred money and let the SS benefit grow. This leads to less taxes later as SS is maximum 85% taxable while IRA withdrawals are 100% taxable. One reason to consider waiting on SS, but other reasons might trump this one.

VW

 

[Surewhitey]

SS is included in MAGI for those who are thinking of subsidies and health insurance before 65...this is a biggie for when we ER.

 

[LateToFIRE]

I'm early 60's now, planning to take SS at FRA (age 67) mostly for tax-related reasons - will have some big lumpy liquidity events for couple years that will push me into top bracket, may get decent amount of income from consulting projects, and want to execute some Roth conversions to put a dent in sizable t-IRA. So, the after-tax proceeds from taking SS early are not compelling for me just yet until the dust settles on other taxable income and events.

 

[MarieIG]

That scenario pre-supposes both that the funds will be invested and that they will perform as expected (not to mention that the surviving spouse is a good money manager).

 

[Kork13]

Same old math mistake that has been exposed here over and over, assuming the hoped-for return of a risky portfolio is in some way equivalent to the guaranteed return of SS. The better comparison is to TIPs, check out the explanation at opensocialsecurity.com as to why.

Certainly a risk-equivalent analysis is really no comparison -- delayed SS wins almost every time, especially if you're long-lived. But if a person/couple WANTS to assume more risk than SS represents (based on available income security from other means), or WANTS to retain a higher degree of control than SS's structure otherwise allows ... then the argument remains more or less valid ... no?

In the end it comes down to what assumptions you make. When you each might kick the bucket, future investment returns, what happens to the SS program in the future, on and on. Not saying one way or the other is right/wrong ... merely open to the possibility that there's not only one good answer.

 

[Fermion]

SS is included in MAGI for those who are thinking of subsidies and health insurance before 65...this is a biggie for when we ER.

This right here is a good reason to delay until at least age 66. The ACA subsidies are worth a third of the combined value of our SS.

 

[Aerides]

An early retiree is likely on the ACA from 62-65, so they must also factor in the probably increase in cost from reduced subsidies, as the SS income will almost certainly put them in a higher tier.

 

[Gumby]

Read article and comments. Blogger has no credentials IMO.

His argument might be a good one or a bad one, but it's not made better by "credentials" nor worse by the lack of them. Heck, most of us on this board have no credentials. We just read, think and reason as well as we can. Then we hash it out with other interested people.

 

[Joylush]

From a tax perspective it makes more sense to spend down tax deferred money and let the SS benefit grow. This leads to less taxes later as SS is maximum 85% taxable while IRA withdrawals are 100% taxable. One reason to consider waiting on SS, but other reasons might trump this one.

VW

That’s a good point to ponder.

 

[pb4uski]

^^^ Here is another point to consider. 62 year old retiree with $1m of retirement savings, $40k/year of SS at 67, 60/40 AA and 38 year time horizon (to age 100).

Option 1: Take $28,000 a year of SS starting in 2024 (30% discount for taking early). According to FIRECalc, safe spending at 95% success using the Investigate tab is $65,337 annually.

Option 2: Take $49,600 a year of SS starting in 2032 (24% premium for delayed benefits). According to FIRECalc, safe spending at 95% success using the Investigate tab is $69,873 annually... 7% more spending.

A similar result is obtained if you just use a simple 4% SWR. For Option 1 safe spending would be 4% of the $1m retirement portfolio plus $28k of SS or $68,000. For Option 2 and amount equal to 8 years of SS at $49,600, or $396,800 would be put into a side fund. The annual 4% withdrawals for the remaining $603,200 would be $24,128 annually, plus $49,600 from the side fund for ages 62-70 and SS thereafter would be a total of $73,726 of safe spending. Option 2 is 8.4% better.

In both cases, taking at 70 vs 64 allows higher annual safe spending.

 

[GrayHare]

Often overlooked is that if you die after FRA but before you claim, your spouse gets 100% of your benefit instead of just 50%.

 

[pb4uski]

^^^ That is my main reason for delaying to 70... DW was a SAHM so she'll get 50% of my PIA and my age 70 benefit will be 129% of my PIA and given our current good health it is likely that one or the other of us will live to our early 90s.

So once I claim we'll be collecting 179% of my PIA as long as both of us are alive and once one of us dies the surviving spouse will get 129% of my PIA for the rest of their life.

Longevity insurance for us. If it ends up that we both die earlier than expected... sorry kids!

 

[target2019]

His argument might be a good one or a bad one, but it's not made better by "credentials" nor worse by the lack of them. Heck, most of us on this board have no credentials. We just read, think and reason as well as we can. Then we hash it out with other interested people.

IMO = in my opinion.

One of the problems with social media articles and videos is the primary purpose is often clickbait. Yeah, I clock here and there, so I'm guilty too. As I mentioned, -I- read the article and comments. There are flaws as others are mentioning. The anonymous blogger (maybe the name is somewhere, but I couldn't find it) has no credentials I could find. Anonymous sources are for the naive, IMO. Clearly, there's more clickbait, and it grows every day.

Early social security is studied a lot, comes up often here. I am so glad to be past that decision. I'd put more weight into something from a known source, someone with credentials. YMMV, of course, as always.

 

[livingalmostlarge]

All the calculators don't matter. What matters is your personal guess as to health and family longevity history correct?

DH's uncle died at 70 before collecting. He was an early retiree and single but who knew he'd die at 70? My uncle died recently at 74. He collected at 62. If he started at 70, it wouldn't have been as much as 62.

So situationally you have to make your own educated guess correct?

 

[EastWest Gal]

I'm taking SS at FRA. I'm the younger of us by 8 months, but my income was significantly higher. DH will claim spousal at that time. If he claims spousal before my FRA, he will forever get less than he would have. We could wait until I'm 70, but I would prefer to keep more of the nest egg for future, such as LTC or DS inheritance. And who knows how long we will live anyway?

 

[Fermion]

Does the SS you would get at 70 make any difference to the amount you would get at 62 if you end up broke and having to go into LTC?

Honest question. If you have $40,000 income from SS at 75 and no other assets, how does that compare with someone who is 75 and has $30,000 in SS and no other assets, if they both end up needing LTC?

edit: I guess what I mean is that if LTC costs X, and you have Y or Z but both are less than X, does it make any difference in the care you will get?