Is 8%/year SocSec increase additive to COLA???

[lucky penny]

I finally started collecting my SS at the age of 70 last March. And boy was it worth it! My gross benefit is now more than $4,600 per month! And with no deductions for FICA, state or city income taxes, I don't mind a 22% deduction for FIT which actually is only on 85% of that amount! Some people go to a lot of trouble to evaluate the breakeven point. But I look at it differently! If I die early and left four years of benefits on the table, at this point it doesn't matter! I'd be DEAD. However if I live for a long time, the enhanced benefit is a good form of longevity insurance!

I'm 78 & also took SS at 70. I have a good pension with no COLA so I'm happy to have some income (the maximum SS) with a built-in increase.

FWIW, I've heard the "break-even" amount is around 81 or 82, but I've tracked the total SS amounts I've received vs what I could have collected at FRA (including the COLAs), & by the end of last year the total I received had surpassed the FRA total. Obviously if I'd saved & invested the SS I could have collected before 70, that changes the calculations, & maybe that explains the "break-even" number. I respect that others will think differently & choose a different path, but I did what I think is best for me.

 

[skyking1]

The 62/70 split. I love it! A retiree bowling term.
Another non-cola pensioner here, so timing all of these different things will work like a cola for our general income.

 

[jjbychko]

8% Doesn't compound

The delayed social security credits do not compound.

 

[Koolau]

Assuming you "plan" to wait unti 70, you can change your mind at any time. That's the way we looked at it. Wait until 70 but back-up is to take it early if need be. Waited until 70, no regrets, though my health has declined since then. Will I make 82? No idea, but DW will get my full SS benefit if not. YMMV

 

[jjbychko]

Surviving Spouse Benefits

A spouse receiving survival benefits can only get the full retirement age benefit.

 

[qwerty3656]

A spouse receiving survival benefits can only get the full retirement age benefit.

I'm pretty sure if the "primary" dies after full retirement age, (i.e. dies at or after 70 years of age) and waits til 70 to claim, the spouse would bet the bigger benefit.

 

[skyking1]

I'm pretty sure if the "primary" dies after full retirement age, (i.e. dies at or after 70 years of age) and waits til 70 to claim, the spouse would bet the bigger benefit.

My understanding as well.

 

[Koolau]

My understanding as well.

My understanding as well. Hope I'm not wrong on that.

 

[sengsational]

I'll go with the members that have 10s of thousands of posts here vs the one with 14, unless more than a one-liner without a reference is offered

 

[Koolau]

A spouse receiving survival benefits can only get the full retirement age benefit.

I'm pretty sure if the "primary" dies after full retirement age, (i.e. dies at or after 70 years of age) and waits til 70 to claim, the spouse would bet the bigger benefit.

Here is a site that (I hope) explains it.

https://www.forbes.com/sites/tomhag...l-i-get-from-social-security/?sh=5c930a292e25

Here is an excerpt that seems to nail it:


"If your deceased spouse DID FILE for benefits ON OR AFTER FULL RETIREMENT AGE, you are entitled to receive what the deceased was receiving at the date of death."


This would seem to indicate that the spouse that files at, say 70, and receives the enhanced benefit, passes that full SS benefit to spouse at the time of his/her death. Obviously, if the living spouse is eligible for a higher benefit on their own record at the time of spouse's death, the survivor benefit is moot.

I don't personally stand behind this, so do your own research!

Each site I've checked has "suggested" some version of this quote, but the Forbes quote seems most explanatory - even better than what I could find on SS.Gov. SO, YMMV!

 

[sengsational]

I like this quote for answering it, for those of us waiting, and might be hit by a proverbial bus:

If your deceased spouse HAS NOT FILED for benefits and passed away AFTER FULL RETIREMENT AGE, you are entitled to receive the deceased’s benefit as if they filed on the date of death

 

[GenXguy]

The 62/70 split. I love it! A retiree bowling term.
Another non-cola pensioner here, so timing all of these different things will work like a cola for our general income.

I'm retired, but neither 62 or 70 is in my plans. I still got some years to go, but I plan to hold off until 65 (plus some months) based on the ACA because SS benefits before 65 would increase my MAGI and drive up my health care insurance costs. It will definitely come in handy because real world inflation has really eaten into my purchasing power, so I hope that 25% haircut of benefits doesn't come to pass for those still in our 50's.

 

[pb4uski]

My understanding as well. Hope I'm not wrong on that.

+3 That is why we had DW take her benefit at FRA and I'm waiting until 70. Once I start one or the other will get my highest benefit possible for as long as one or the other of us lives and we'll get 50% of my PIA from when I claim until one or the other of us dies.

While we wait, she gets her PIA. And in all cases, with COLA added.

IOW, the maximum possible in our circumstances. If we get hit by a beer truck soon... sorry kids, it just didn't work out but we played the odds.

 

[GaryInCO]

I filed at my FRA (66 + 4 mo) in early 2023. My business income had suddenly pretty much dried up so I figured it must be time to retire. Now I'm wondering if it was a mistake. I could un-elect, pay back the SS $ I've received so far (with my puny IRA), live on IRA / savings / rentals until 70, then file for full-70 benefits. But I'm not sure it's worth it.

The dreaded "tax torpedo" doesn't look like a big deal. It just boosts your marginal rate to step you up to the next bracket quicker. I'm not sure how you avoid it if you do actually make the income. And my CPA is clueless. :-(

 

[pb4uski]

^^^ If you are in average or good health, I think that is a good idea. You are effectively buying longevity insurance.

Let's say that at 66/4 months your PIA was $1,000/month. That means at 70 it would be $1,293 with 8% simple growth for 3-2/3 years or $293/month more for the rest of your life.

So you would be forgoing $44,000 ($1,000/month for 44 months) in exchange for $3,516/month for life. That is an 8% payout rate ($3,516/$44,000).

An immediate annuity for a 70-yo male in CO would pay 8%, but that is a fixed benefit and not a COLAed benefit so buying a COLAed annuity from SS is a good deal.

If you live beyond 82-1/2 then you'll appreciate the extra income and if you don't will you really care?

And I am a CPA (retired CPA anyway).

And in the meantime the IRA money that you use to live on will be taxed at low rates and significantly reduce any future RMDs.

 

[GaryInCO]

I had two cancers in 2019, but they're both in remission and my doc says I'll die of old age. I'm active (hiking, biking, pickleball, light weights) so I think there's a good chance I'll beat the averages.

Due to various reasons and bad decisions my IRA is stupidly small and (without SS income) it wouldn't last me even to 70. I have decent-sized taxable accounts and rental income so I should be fine (don't expect to tap the taxable much after SS starts again), and I may spin up some more consulting income before 70. But in any event I don't think RMDs will be an issue for me. I WISH I had that problem!

 

[VanWinkle]

Thanks for the response. And WOWZA! Had not factored that in to my spreadsheet. Makes a huge difference, of course. From about $60K a year to $75K+ a year.

Remember the 8% per year increase after full retirement age does not compound. It is 8% of your full retirement age benefit added each year. Still a good deal, just making you aware. The Inflation boost is compounded.

 

[finnski1]

^^^ If you are in average or good health, I think that is a good idea. You are effectively buying longevity insurance.

Let's say that at 66/4 months your PIA was $1,000/month. That means at 70 it would be $1,293 with 8% simple growth for 3-2/3 years or $293/month more for the rest of your life.

So you would be forgoing $44,000 ($1,000/month for 44 months) in exchange for $3,516/month for life. That is an 8% payout rate ($3,516/$44,000).

An immediate annuity for a 70-yo male in CO would pay 8%, but that is a fixed benefit and not a COLAed benefit so buying a COLAed annuity from SS is a good deal.

If you live beyond 82-1/2 then you'll appreciate the extra income and if you don't will you really care?

And I am a CPA (retired CPA anyway).

And in the meantime the IRA money that you use to live on will be taxed at low rates and significantly reduce any future RMDs.

I agree with the logic however where did you come up with the "$3516/month for life" number? Am I missing something?

 

[Koolau]

I had two cancers in 2019, but they're both in remission and my doc says I'll die of old age. I'm active (hiking, biking, pickleball, light weights) so I think there's a good chance I'll beat the averages.

Due to various reasons and bad decisions my IRA is stupidly small and (without SS income) it wouldn't last me even to 70. I have decent-sized taxable accounts and rental income so I should be fine (don't expect to tap the taxable much after SS starts again), and I may spin up some more consulting income before 70. But in any event I don't think RMDs will be an issue for me. I WISH I had that problem!

Thanks for the perspective on RMDs. I needed that as I've been fighting a losing battle to lower my RMDs. YMMV

 

[pb4uski]

I agree with the logic however where did you come up with the "$3516/month for life" number? Am I missing something?

$293/ mo for life * 12 months = $3,516 a year for life.

COLA on top of that.

 

[Montecfo]

As many here have said, the best annuity deal in the USA is delaying SS until 70 if you can do so. Most can’t which is why taking SS at 62 is so often done. But, if you can…

Yes. If you ignore mortality risk.

 

[rayvt]

Longevity is linked to education and wealth as well as overall health and healthy habits.

As well as not being run over by an unlicensed drunk driver. Which has nothing to do with your health or longevity of your parents and grandparents.

 

[audreyh1]

As well as not being run over by an unlicensed drunk driver. Which has nothing to do with your health or longevity of your parents and grandparents.

Well sure, those odds apply to everyone.

 

[Echard]

So, I have a related question. I'm only 60. Every year I get a projected Social Security statement that says how much I would get at FRA (67) or at 70. That number hasn't changed over the years. But if there is a COLA being applied yearly to social security payments, shouldn't that number go up by the COLA amount? For example, if it's $3,500 at FRA and social security recipients receive a 3% COLA, then shouldn't my projected Social Security statement for the future show $3,500*1.03 at FRA?

 

[finnski1]

$293/ mo for life * 12 months = $3,516 a year for life.

COLA on top of that.

Yes but you said $3516/month not year.