Modelling when to take Social Security and other pensions

[Time2]

Here my complexities which I assume many others have.


I don't need any income.

I want to do maximum Roth conversions before I turn 72 yrs old.

I want my younger wife to get my maximum SS benefit when I'm gone.


I have not run any analysis, but these 3 items make me think I should wait until 70. My wife is 5 years younger, I don't know whether delaying hers will help us keep Roth converting in a low tax bracket or not. I expect about $32k of SS at 70, not including COL adjustments over the next 4 years.


Do any of the programs use these type of complexities in their calculations?

[chassis]

Quote:

Originally Posted by Time2 I want my younger wife to get my maximum SS benefit when I'm gone. Do any of the programs use these type of complexities in their calculations?

The only thing that matters for this point is when you take your SS. So take yours at age 70. Your spouse, if a low or non-earner, can receive a maximum of 50% of the earner's benefit, when the low earner starts claiming at full retirement age. If your spouses' full retirement age is 67, the highest monthly amount she will receive is if you claim when you turn 70 and she claims when she turns 67.

Portfoliovisualizer has a "financial goals" feature which allows you to enter custom cashflows, whether positive (contributions) or negative (withdrawals). If you do your own side calculation for SS income, based on various claiming scenarios, you can enter this into Portfoliovisualizer to see the impact on your total net worth.

No calculator that I am aware of will sift and sort all of your possible claiming options to arrive at the "best" scenario for you. Financial advisors are happy to take your money and provide with that service. I prefer to run the numbers myself. I recommend that, running the numbers yourself.

[Time2]

Quote:

Originally Posted by chassis Your spouse, if a low or non-earner, can receive a maximum of 50% of the earner's benefit, when the low earner starts claiming at full retirement age.

I need to clarify this. Are you saying If I start at 70, my wife can also collect 50% on my earnings?
Or My wife can only get 50% of my earnings when she files at 67 years old. (that doesn't seem right)

Quote:

If your spouses' full retirement age is 67, the highest monthly amount she will receive is if you claim when you turn 70 and she claims when she turns 67.

Are you saying she cannot wait until 70 and get the additional 8% per yr?
Now I'm confused!!

[latexman]

Quote:

Originally Posted by qwerty3656 The 5% and the 6%-8% are not comparable numbers. The cashflows start on different dates, but end on the same date. A simple example I will either give you (a) $100 this year plus $105 next year or I will give you b) $150 next year - which do you choose? (option (a) grows at 5% and option (b) grows at 50%)

a) $205 vs. b) $150

Yes, your example a) and b) are not comparable. Obviously, a).


I really didn't think of the cash flow timings from OP other than when to collect SS at 62, 67, or 70, because they did not speak of them. I just looked at the returns.

[ProGolferWannabe]

Quote:

Originally Posted by RunningBum Is it though? If you do care about leaving your heirs more, this is where breakeven analysis comes into play. Assuming you spend the same in either case, if you outlive the breakeven point, you will leave your heirs more by delaying SS. And of course if you die earlier, you leave your heirs more by taking SS sooner. Another factor in this is, if you die early, you likely won't have chewed through a lot of your investment savings. So even though you didn't optimize SS benefits for your heirs, you still left them a lot. If you live past the breakeven, you might have used more of your savings, but at least you optimized SS and left as much as you could.

The answer to your question is “yes”. I said it “might” be a sensible alternative, and a logical factor to consider.

[Lawrencewendall]

I'm a big fan of PC. The free version allows creating multiple scenarios (I have 8 created, don't know what the max is) which you can compare side by side. I verified that the numbers are the same for each scenario. Here's what it tells me.

[chassis]

Quote:

Originally Posted by Time2 I need to clarify this. Are you saying If I start at 70, my wife can also collect 50% on my earnings? Or My wife can only get 50% of my earnings when she files at 67 years old. (that doesn't seem right) Are you saying she cannot wait until 70 and get the additional 8% per yr? Now I'm confused!!

@Time2 have you read this? https://www.investopedia.com/ask/ans...l-security.asp

Your wife can receive a maximum of 50% of your benefit. Period. No more. To receive 50% she must claim at her full retirement age, example 67.

Because you said you don’t need the money, have you considered claiming before your full retirement age and investing the money? Then your wife can start claiming at her full retirement age and receive 50% of your (reduced) benefit, and invest the money. This is a strategy different from your first question.

The return on delayed social security filing is very small, and the payback occurs late in life, in practical terms at the actuarial death age. Therefore I see delayed claiming as non-beneficial to me.

It matters very little, and it matters very late. Therefore it doesn’t matter.

[lesjrp]

Quote:

Originally Posted by RunningBum Unless you don't have enough at that point. Then you will care. Wouldn't the larger monthly benefit be nice in that case? Maybe not likely for that to happen, but not impossible?

True, and I won’t be taking SS till 70 anyway, because I am playing the reduce tax strategy, Roth conversions, best guesses/fears on tax rates. However when I am in my 80s, I am guessing the decision I make now will be less significant to me. But that’s probably the case with a lot of decisions I made in the past when I am in my 80’s.

[Time2]

Quote:

Originally Posted by chassis @Time2 have you read this? https://www.investopedia.com/ask/ans...l-security.asp Your wife can receive a maximum of 50% of your benefit. Period. No more. To receive 50% she must claim at her full retirement age, example 67.

Maybe we are talking about two different things. My point is my wife's benefit after I die.

"When a Social Security beneficiary dies, his or her surviving spouse is eligible for survivor benefits. A surviving spouse can collect 100 percent of the late spouse’s benefit if the survivor has reached full retirement age",
From, https://www.aarp.org/retirement/soci...ouse-dies.html

And,

• The rules are different for survivor benefits. A widow or widower whose spouse waited until 70 to file for Social Security is entitled to the full amount the deceased was getting — including the delayed retirement credits — so long as the surviving spouse has reached full retirement age.
• From, https://www.aarp.org/retirement/soci...y-benefit.html

Quote:

Because you said you don’t need the money, have you considered claiming before your full retirement age and investing the money? Then your wife can start claiming at her full retirement age and receive 50% of your (reduced) benefit, and invest the money. This is a strategy different from your first question.

She doesn't need to collect 50% of my benefit, her benefit will be more than 50% of mine.

Are you saying she could collect 50% of mine before FRA, then when she is FRA, she can collect on her own at full benefit?

Quote:

The return on delayed social security filing is very small, and the payback occurs late in life, in practical terms at the actuarial death age. Therefore I see delayed claiming as non-beneficial to me. It matters very little, and it matters very late. Therefore it doesn’t matter.

[mh]

Does open social security have provisions to take into account spouse “child-in-care” and disabled dependent benefits ? I’m pretty sure since I qualify for those at 62 , it’s pretty much a no brainer for me to start at 62 since spouse is ten years younger than me, But it would be nice to use something to verify it.

[pb4uski]

Quote:

Originally Posted by Time2 Here my complexities which I assume many others have. I don't need any income. I want to do maximum Roth conversions before I turn 72 yrs old. I want my younger wife to get my maximum SS benefit when I'm gone. I have not run any analysis, but these 3 items make me think I should wait until 70. My wife is 5 years younger, I don't know whether delaying hers will help us keep Roth converting in a low tax bracket or not. I expect about $32k of SS at 70, not including COL adjustments over the next 4 years. Do any of the programs use these type of complexities in their calculations?

opensocialsecurity.com uses the third one.

I am with you... we don't need the income and the longevity insurance might be helpful... and I definitely want to mazimize Roth conversions and taking SS early gets in the way of that.

That said, as excited that we tend to get about SS in our case the decision isn't life changing looking at the range of expected present values... just a bit of tweaking for optimization.

[pb4uski]

Quote:

Originally Posted by chassis ... No calculator that I am aware of will sift and sort all of your possible claiming options to arrive at the "best" scenario for you. ...

Actually, opensocialsecurity.com does exactly that. You provide your and your spouse birthdates and PIA amounts. The software determines every possible claiming strategy by month between 62 or your current age if you are over 62 and age 70 for you and your spouse and what you would receive in benefits for each claiming strategy. It then adjusts the cashflows for your probability of being alive to receive it to get an expected cash flow. It then discounts the expected cash flows for the time value of money using a real discount rate that you provide.

So each possible claiming strategy is boiled down to a single number... and expected present value for that claiming strategy. The claiming strategy with the higher expected present value is the optimal solution.

Pretty cool.... and did I mention that it is free?

[pb4uski]

Quote:

Originally Posted by mh Does open social security have provisions to take into account spouse “child-in-care” and disabled dependent benefits ? I’m pretty sure since I qualify for those at 62 , it’s pretty much a no brainer for me to start at 62 since spouse is ten years younger than me, But it would be nice to use something to verify it.

Yes, I think it does... if you check the box at the top of the page and then a checkbox for Children you'll see something like this to input children's ages and if they are disabled.

[Out-to-Lunch]

Quote:

Originally Posted by mh Does open social security have provisions to take into account spouse “child-in-care” and disabled dependent benefits ? I’m pretty sure since I qualify for those at 62 , it’s pretty much a no brainer for me to start at 62 since spouse is ten years younger than me, But it would be nice to use something to verify it.

Yes, at least for the second factor. (I don't know what the first one is.) But you have to click the button near the top that says "CCertain situations require additional input. Click here to select situation(s) that may apply to you (and/or your spouse, if filing jointly)."

Then you get to choose the following factors for consideration:

Quote:

Disability Currently receiving Social Security disability and expecting to stay on disability until full retirement age. Still working Pension from employment not covered by Social Security taxes Mortality Table other than the 2017 Social Security Period Life Table. See the "About" page for information about mortality tables. Children under age 19 or permanently disabled Discount Rate other than the default (currently -0.26%) Possible Future Cut in Social Security benefits

[mh]

Quote:

Originally Posted by Out-to-Lunch Yes, at least for the second factor. (I don't know what the first one is.) But you have to click the button near the top that says "CCertain situations require additional input. Click here to select situation(s) that may apply to you (and/or your spouse, if filing jointly)." Then you get to choose the following factors for consideration:

Thanks for the responses. I will check it out

[chassis]

This is pretty succinct, if a person "does not need" Social Security:

"If you are wealthy enough to delay taking Social Security until age 70, you're wealthy enough to take it at 62, and save and invest the monthly benefit."

https://retireearlyhomepage.com/SS_delay_70.html

I ascribe to the above idea.

[latexman]

Quote:

Originally Posted by chassis This is pretty succinct, if a person "does not need" Social Security: "If you are wealthy enough to delay taking Social Security until age 70, you're wealthy enough to take it at 62, and save and invest the monthly benefit." https://retireearlyhomepage.com/SS_delay_70.html I ascribe to the above idea.

That linked article fails to mention you only have 12 months after you begin receiving benefits to file Form SSA-521. It will not work the way described.

[chassis]

Quote:

Originally Posted by latexman That linked article fails to mention you only have 12 months after you begin receiving benefits to file Form SSA-521. It will not work the way described.

OK, shame on me for providing the source link. What I connected with is the one sentence quote.

I ascribe to taking Social Security at age 62 and investing it, if SS is not needed to achieve a successful portfolio at one's life expectancy.

[Out-to-Lunch]

Quote:

Originally Posted by chassis OK, shame on me for providing the source link. What I connected with is the one sentence quote. I ascribe to taking Social Security at age 62 and investing it, if SS is not needed to achieve a successful portfolio at one's life expectancy.

Context is everything. That quote, in full, reads

Quote:

The Social Security Withdrawal of Application option allows beneficiaries to have their cake and eat it, too. If you are wealthy enough to delay taking Social Security until age 70, you're wealthy enough to take it at 62, and save and invest the monthly benefit.

But, as Latexman points out, you CANNOT have your cake and eat it too. Your article is from 2008, and it says that you can start claiming at 62, and decide at 70 to take a "do-over" and withdraw your application, pay back the funds, and start over with a new (higher) benefit. Maybe you could back then? But you cannot now. Therefore, the conclusion that the article draws, and that you appear to take stock in, is founded on a false premise.

[Navigator]

When I retired I obsessed over the right time to take Social Security, going so far as to see how taking it at 70 compared to taking it at 62 and investing it. I used actual historical returns since 1928 to get a real sense of which is better. Through age 92, taking SS at 62 was better 77% of the time. However, when the P/E of the S&P 500 was above average, this dropped to 50%. For a married couple, the high earner taking at 70 and low earner at 62 seemed to work well.

Since I retired, I’ve come to the conclusion that anyone who has enough assets to worry about taking SS at 62 or 70 will be fine no matter what they do.