New Free, Open-Source Social Security Calculator

[Sunset]

Not to seen paranoid, but I wonder sometimes if a "side" purpose of these free tools is to collect data, even though it may not be personally identifiable, to leverage in other ways.

Often they are for that purpose.

We would like you to re-enter your values but use your correct birthday this time

 

[Chuckanut]

One thing it doesn't seem to take into account is those who fall into that 'crease' in the system that lets them collect on a spouse's SS account while our personal benefit continues to increase until age 70.

 

[pb4uski]

Some more details on this calculator and some updates:

https://obliviousinvestor.com/long-will-collect-social-security-survivor-benefits/

Today I just wanted to give you a quick heads-up about some updates to the Open Social Security calculator, as well as address a question many people have asked about it. I promise we’ll discuss something other than Social Security next time.

• The calculator now reflects withholding (and eventual benefit adjustment) for the earnings test (i.e., for people receiving benefits and working while under full retirement age).
• The default mortality table has been updated for the newly-released 2015 SSA period table. (It previously used the 2014 table, as that was the newest available until this month.)
• The calculator now allows for the selection of a specific “I will die at” age rather than using a mortality table.
• The calculator now allows for situations in which one of two spouses has already filed, in order to get a suggestion for the other spouse. (Important caveat: It does not currently have “voluntary suspension” functionality, so if the ideal solution is for the spouse who has already filed to suspend benefits at/after full retirement age, the calculator won’t know to suggest that.)
• Now, when you load the page, the calculator automatically looks up the yield on 20-year TIPS to use as the default discount rate.

In the last two weeks, a common question about the calculator has been why it uses mortality tables (to calculate a probability of being alive in each given year) rather than simply assuming the user will die precisely at their life expectancy. The answer has to do with survivor benefits for married couples. ....

 

[Bongleur]

Thank you for the feedback, everybody.

Printout is badly formatted. Cuts off the last digit in the tabular data; the table is not sized to the margins. Also it uses many more pages than actually necessary due to white space between lines & font issues.. Would prefer a non-PDF way of saving it, so I can format it to suit myself. Generally HTML sucks...

Would be nice to automatically calculate the total benefits from filing at earliest, FRA, and age 70 so you can compare them to the optimized values. It would take me some time to even figure out the correct month & year for that, to utilize the "test alternative claiming strategy" function

Maybe also show the four items as a line graph over time.

Oh, and a way to turn this into one's after-tax value of SS is necessary. Maybe some input for what the user thinks his taxable portion of SS will be? Or hints at using the tabular values as inputs into other SWR calculators?

 

[Bongleur]

And this useful explanation isn't printing:
"A "discount rate" is necessary to reflect the fact that a dollar today is worth more than a dollar in the future, because a dollar today can be invested. The default here is the yield on 20-year TIPS. See this article for a discussion of why that is chosen as the default."

 

[Bongleur]

Hmmm. I think it useful to know the percentage loss between the optimum & the other 3 filing dates. Then you can compare that to the percentage difference between various Discount Rates.

If the filing date difference is about the same as the discount rate difference, then the filing date difference is not a high probability "fact" in predicting value since the discount rate is more unknown & may be the more "significant" force in actual value.

So I'd like to have it automatically calculate Discounts of 1,2,3,4% and all 4 filing dates & show the % differences in a table. If the difference between best & worst is "small enough" then it really doesn't matter much which filing date you use. So choose some other criteria for picking your filing date. Maybe pick later to minimize taxes on SS because other income is happening "early."

 

[Bongleur]

If you check the "Advanced" box near the top of the page then you'll see the discount rate assumption of 1% (0.01) under Other Inputs.

I philosophically disagree with using a TIPs rate since if I did take early I would stay with my current AA.... so I use 4%... a 6% investment return less 2% for inflation. Makes a big difference.

A first order analysis obviously says that if can earn a greater rate of return on money invested, then you should take SS earlier so that you have more unspent money to invest.


Except that that there is a Bad Sequence Of Returns risk. If you take SS early and the stock market tanks for the next 5 to 10 years, maybe you made a bad decision.


Perhaps a person who needs to spend their SS to live should use the 1% discount rate. A person does not can play with higher discount rates.

 

[Bongleur]

I'm confused about the default date for Alternative Strategy. Its showing birth year + 70 = default year, but month 6 which is not my birth month. So its filing some months BEFORE I reach age 70.

 

[Bongleur]

OP: I'm having trouble with this paragraph due to the double negatives embedded within:
>
https://obliviousinvestor.com/claim...ate-of-return-discount-rate-should-we-assume/
For an unmarried male, the necessary rate of return that would make claiming Social Security at 62 as good as claiming at 70 is about 1.7% above inflation. For an unmarried female, the necessary return would be about 2.9% above inflation.*

If delaying Social Security provides such an expected return, with a low level of risk, it doesn’t usually make sense to forgo additional Social Security in order to continue owning bonds that have a lower expected return (or a similar expected return and a higher level of risk).
>
It parses to "If delaying Social Security provides 1.7% (male) or 2.9% (female)... it DOES make sense to TAKE EARLIER SS to continue owning bonds with a lower REAL expected return than 1.7% (male) or 2.9% (female)."

 

[pb4uski]

A first order analysis obviously says that if can earn a greater rate of return on money invested, then you should take SS earlier so that you have more unspent money to invest.


Except that that there is a Bad Sequence Of Returns risk. If you take SS early and the stock market tanks for the next 5 to 10 years, maybe you made a bad decision.


Perhaps a person who needs to spend their SS to live should use the 1% discount rate. A person does not can play with higher discount rates.

On the first part, it is not necessarily correct that you should take SS earlier even with a higher opportunity cost of money... it also depends on mortality. Even though I use a 4% real rate of return opensocialsecurity.com still has an optimal solution of not taking SS right away.

I concede that by deferring I am taking some risk and there is a chance that it could not work out to my benefit, but I can afford to take the chance since it is more likely than not that it will work out to my benefit.

If someone needs their SS to live then there is no choice so there isn't really any need to go to the website.

 

[pb4uski]

Printout is badly formatted. Cuts off the last digit in the tabular data; the table is not sized to the margins. Also it uses many more pages than actually necessary due to white space between lines & font issues.. Would prefer a non-PDF way of saving it, so I can format it to suit myself. Generally HTML sucks...

Try Landscape.

 

[pb4uski]

I'm confused about the default date for Alternative Strategy. Its showing birth year + 70 = default year, but month 6 which is not my birth month. So its filing some months BEFORE I reach age 70.

So stop bitching and just change it.

 

[Bongleur]

This calculator accounts for both spouses, which is somewhat unusual & useful.

But I'm seeing 3 scenarios for what you want to do with the SS money.
The type of people using this calculator don't "need it now, to live on," so the SS is a "bonus income" that can be utilized 3 ways:
1) longevity insurance - does this calculator show any instance where you should NOT wait until age 70 to claim? I guess you should always pick the default Discount Rate to match the risk?

2) spend it now as extra income -- seems that the calculator shows the optimum claiming ages to maximize this as "current" income. Are there reasons to choose other than the default Discount Rate? ie is the default the most conservative number?

3) take risk with it to increase wealth - so pick a Discount Rate for equity growth. BUT I think the calculator

3a) implicitly presumes you are saving it all, forever.
What if you are:

3b) spending just the dividend income, or

3c) spending some percentage of its total return.


EDIT 4) Maximize income for surviving spouse.

 

[pb4uski]

What the calculator does is to determine for each year what you would receive in SS if you are living based on the information that you input... those cash flows are what you see in the output tables.

Then it multiplies the cash flow in the output tables by the probability of your being alive to receive the cash flow based on the mortality tables that you select (assuming that you don't chose the assumed age at death option)... this is what is called the expected value.

Then it discounts the expected values for the time value of money using discount rate that you provide and adds them up to get an expected present value... which it refers to as "present value".

 

[bizlady]

Mine was interesting. DH started benefits at age 62 last year, and I do not plan to do so until age 70. The plan said he should SUSPEND benefits at FRA and restart them again at 67 and 7 months. Kept me at age 70

 

[Bongleur]

Try Landscape.

Did. Not a fix. Also tried printing at 90%. The Table is not resizing, I think.

 

[Bongleur]

So stop bitching and just change it.

To what, exactly? I don't know the SS math rule -- do I file at the start of my birth month, the month after, there is something about being born in January... -- I want to know what the default means, or is it an error?


FRA is harder since its 66 2/3.

 

[Bongleur]

On the first part, it is not necessarily correct that you should take SS earlier even with a higher opportunity cost of money... it also depends on mortality. Even though I use a 4% real rate of return opensocialsecurity.com still has an optimal solution of not taking SS right away.

I concede that by deferring I am taking some risk and there is a chance that it could not work out to my benefit, but I can afford to take the chance since it is more likely than not that it will work out to my benefit.

If someone needs their SS to live then there is no choice so there isn't really any need to go to the website.

I did say "first order." And doesn't mortality need to be a constant when varying Discount Rate? Versus, if you presume you will live longer, than you have less risk of lifetime loss from a Bad Initial Sequence, so less risky to use a higher Discount Rate.

 

[pb4uski]

Did. Not a fix. Also tried printing at 90%. The Table is not resizing, I think.

Dunno... changing to Landscape worked for me.

 

[Bongleur]

I can see that waiting to age 70 yields about 11% less money than the Optimum Age from the calculator. That amount equals 3.3 more years of life (at Survivor rate). So what is the probability that the survivor will live 3 more years than the "averaged" age of death used by the calculator?


>
OBLIVIOUS INVESTOR site (author of this tool) - as quoted elsewhere but no URL:
the calculator uses year-by-year probability of being alive rather than assuming that the user dies in a given year.

The difference is not significant for a single person. But for a married couple, it more accurately reflects the expected outcome (i.e., with a greater duration of time between the first spouse’s death and the second), with the net result being that Open Social Security is more likely to suggest an early filing date for the lower earner and a later filing date for the higher earner than other calculators or DIY analyses might.
>

 

[pb4uski]

I did say "first order." And doesn't mortality need to be a constant when varying Discount Rate? Versus, if you presume you will live longer, than you have less risk of lifetime loss from a Bad Initial Sequence, so less risky to use a higher Discount Rate.

I dunno that you might be overthinking it.

We're 63. I ran alternatives of taking now, at FRA, at 65 and as late as possible (at FRA for DW and 70 for me) using the same assumptions. The EPVs between taking now and the optimal solution was 3.3% different, but the EPVs between the optimal solution and either both at 65 or both at FRA or as late as possible were all within 1%.

IOW, in our case with our assumptions, anywhere between 65 and 70 is fine.

A bigger factor for me is that once we start SS our headroom to reduce our tax-deferred accounts by withdrawals or Roth conversions to mitigate the tax torpedo goes away so we are leaning to later rather than sooner... especially since our family longevity is long.

 

[Bongleur]

I wonder if I got 11% because I just used the default $1000 PIA. We both have about the same PIA, but since SS has a (non linear?) maximum amount, it may have skewed the answers... Have to figure out a closer to real PIA to plug in...
Will using $1000 result in half the money of $2000? Like to see that graph...

 

[pb4uski]

.... Will using $1000 result in half the money of $2000? Like to see that graph...

It does double for both a single or a couple with PIAs at $1000 or at $2000.

Not sure if would be true if PIAs were not the same for the couple.

 

[pjigar]

Wow! I learned something new using this calculator. I have a disabled child so the calculator says that our family lifetime benefit can be maximized if I file at age 62. Who knew! I have always planned to file at 70 so I can preserve my assets for my disabled child but the whole plan can change based on what this calculator suggested.

Thank you so much to OP for helping me see the light.

PS: Everyone: Please explore the "advanced options". That is how I found the gem for my situation.