New Social Security study on claiming it too early

starry night, you just put a spoke in the wheel. Not sure what else can be said about that.
 
gwraigty said:
What kind of job though? In my locale, that may be true, if one wants to be a Walmart greeter or do other minimum wage jobs.
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Very true.

We've had a few threads here on not only the difficulty in finding a job after age 50 but also on the tendency for corporations to find ways to terminate those of us under 60.

Yes, there is always Walmart, McDonalds, Costco etc but for a true professional job after 50? Rough sledding...been there.

We even had a discussion on the concept of preparing for a likely unplanned RE versus a planned one.
 
starry night said:
OK, here are three ways in which SSA policies are modified to the benefit of SSA and not to their recipients. I’d welcome your list of the policy changes that have leaned to the other side of the scale, that is, that benefit the recipients rather than the Admin.
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It's laughable that you believe the SSA has anything to do with changing these rules.
 
Red Badger said:
For some of us, its not about milking the last dime. DW, who is older than me, will file at FRA. I will file early. We want to grab that cash and p!ss away a lot of our portfolio in our go-go years. SS, pensions, and great health care will be enough when were at go-slow, no-go, and sliding closer to the 6 foot ditch. We'd like to leave a little of our egg behind, but its not a priority.
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+1, well said
 
starry night said:
OK, here are three ways in which SSA policies are modified to the benefit of SSA and not to their recipients. I’d welcome your list of the policy changes that have leaned to the other side of the scale, that is, that benefit the recipients rather than the Admin.

1. We all have discussed the elimination of the File and Suspend strategies. No need to elaborate more about this one.

2. They changed the benefit deposit schedule. Used to be that all recipients received benefit payment on the 3rd of the month. They have changed that to a scheduled release, such that you receive your deposit on the 2nd, 3rd or 4th Wednesday depending on your birth day if the month. This accrues a great investment benefit it Admin in hanging on to your money, and disadvantages the recipients in receiving it later.

3. They changed the COLA calculation from the more universal CPI-U to the less relevant CPI-W. CPIW is the one for lower wage earners “Urban Hourly and Clerical Workers”. This depresses the more generous COLA we would receive under the more universal index. See below about SSA COLA determination:

“The COLA is calculated using data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Of the CPI groups that the Bureau of Labor Statistics (BLS) measures, the CPI-W covers only 28% of the total U.S. population, and specifically excludes households “with no one in the labor force, such as retirees.”

You read that right.

The index used to determine the COLA of retirees does not measure the spending patterns of retirees, but younger workers instead. Retirees, we all know, spend their money differently than younger people and must spend a far bigger share of their budgets on housing and medical costs — two categories of spending that often rise several times faster than overall inflation.

There are better and more fair choices for indexing the COLA. The BLS also measures the price change experience of All Urban Consumers (CPI-U) which covers about 88% of the U.S. population including retirees as well as younger people, and it even maintains a “senior-specific” experimental CPI, the Consumer Price Index for the Elderly (CPI-E), that our government has quietly tinkered with since 1983, but has never used to calculate the COLA.”
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1. File and suspend... easy peasy... a loophole that enough people took advantage of that they decided to close the loophole.... I find it hard to gripe about them taking away a benefit that was never intended to begin with. IIRC, it cost us about $25k in total... not a big deal.

2. Talk about a nit... if this make a difference to you then you probably should not have retired.

3. You may have a point here... but OTOH SS is meant to replace earnings from work while you are retired so one could argue that CPI-W is appropriate since SS is to replace workplace earnings. While I agree on medical costs most retirees have paid off houses so their housing costs of retirees are probably lower than hourly and clerical workers.

Finally, to the degree they tweak benefits it will naturally be to constrain rather than expand benefits given that they have a well known underfunding problem... you better get used to it.

The discounts and premia from your PIA amounts were designed to be actuarially neutral, which is why the crossover point of age 82 is the same as the average life expectancy for a 65 year old of 82... so you're barking up the wrong tree on that one too.
 
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starry night said:
3. They changed the COLA calculation from the more universal CPI-U to the less relevant CPI-W. CPIW is the one for lower wage earners “Urban Hourly and Clerical Workers”. This depresses the more generous COLA we would receive under the more universal index. See below about SSA COLA determination:

“The COLA is calculated using data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Of the CPI groups that the Bureau of Labor Statistics (BLS) measures, the CPI-W covers only 28% of the total U.S. population, and specifically excludes households “with no one in the labor force, such as retirees.”

You read that right.
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Could you please provide a source for that COLA information. I would like to review it. Thanks.
 
I will cross that bridge when I get there. My current thinking is to wait until FRA, but I might change my mind and claim early or later. I gave up predicting the future a long time ago, especially my own.
 
pb4uski said:
Finally, to the degree they tweak benefits it will naturally be to constrain rather than expand benefits given that they have a well known underfunding problem... you better get used to it.

The discounts and premia from your PIA amounts were designed to be actuarially neutral, which is why the crossover point of age 82 is the same as the average life expectancy for a 65 year old of 82... so you're barking up the wrong tree on that one too.
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These are my points exactly. SSA policies are not constructed to be a bonus to late filers. Benefit structure is actuarially neutral, and overseen by some of the best actuarial calculations on the planet.
To me, the critical factor in choosing early-, FRA-, or delayed-filing has more to do with one’s alternate sources of income if one chooses to delay benefits.
 
I dunno about the last part about needing alternative sources of income... I only have a small pension as a source of income but will delay because it is likely to be beneficial for us... I have savings that I can live on for those years and in effect buy a COLA adjusted annuity.

There are numerous nuances to actuarial neutrality to be considered. The discounts and premia are based on uni-sex mortality so women, who tend to live longer all else being equal, have a natural advantage. Wealther people tend to live longer than those of low wealth, so all else being equal the wealthy have a natural advantage. For married couples where one spouse had much higher eanings than another so benefits include a significant spousal benefit then joint motality comes into play.

Finally, there have generally been mortality improvements since the current discounts and premia were put in place so current beneficiaries have a slight advantage.
 
pb4uski said:
Finally, there have generally been mortality improvements since the current discounts and premia were put in place so current beneficiaries have a slight advantage.
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I apologize if I have been misunderstood in my rambling posts. I am merely trying to say that the SSA policies of discounting benefits for filing early and delayed credits for filing later are constructed to be an EQUITY, NOT AN ADVANTAGE. SS was originally a simple “at age 65 old age pension”. When it evolved that some people need their benefit before age 65, and others don’t want it until after age 65, they instituted the “present value of future benefit” for the early-file discounted benefit, and “future value” of the benefit to achieve the delayed credits.

Regarding “mortality improvements “, there is a difference between mortality and life expectancy. Overall mortality rates have indeed improved in past century, largely due to improved infant mortality. Life expectancy, however, is in decline (see item below) due to drug overdose, suicide, health and environmental stresses. Still, they can do great things medically to improve our chances of longevity.

https://www.aafp.org/news/health-of-the-public/20181210lifeexpectdrop.html
 
My situation (not relevant to my question, but I thought I'd share):
Wife is a 2nd grade teacher who wants to teach forever. She will claim when she stops working probably in the age 64-66 range. Due to WEP, her SS will be $450-$500/month.
I will claim at age 70, $3,600+/month before inflation adjustments. For us, the potential spousal survivor benefit tips the scales. If I collect at FRA or thereabouts, GPO would almost eliminate the survivor benefit due to her half-pension (only 15+ years service). If I let my SS benefit grow to age 70, the GPO adjustment will be less encompassing and only reduce roughly half of the benefit.

My question
I understand the arguments about claiming at age 62 and those about claiming at age 70. I also understand the arguments of a "wait and see" strategy that does not claim at 62 but is willing to pull the trigger if something happens (market, health, etc.) before age 70.

I also understand an age 65 target to coordinate SS with Medicare premiums.

I do not understand the FRA claiming target. If I understand the rules correctly, for someone born in 1957 (me) my benefit is increased 6.67%/year for the 36 months between age 62 and 65 (5/9th% per month). Then between 65 and FRA it is increased 3.33%/year for the 18 month period (5/18th% per month). After FRA it is increased 8% per year (8/12% per month) for the 42 months to age 70.

Given the puny benefit increases between age 65 and FRA, weathering that period makes sense to me if you plan to delay past FRA and get those 8% increases. Otherwise, waiting until FRA seems meaningless. Why not 18 months earlier or five months later? What is magic about FRA?

I understand the arguments for 62, 65, 70, and "wait and see". But understand less why one would choose FRA. Why do some of you advocate claiming at FRA?

(Note, I understand that age 62 to 65 is actually a 6.67% annual reduction of FRA benefits (not a 6.67% increase of the age 62 benefit) and FRA to 70 is not exactly an 8% annual increase, but an 8% of FRA benefit increase per year, even so, hopefully my narrative is not misleading. Also, I acknowledge my question is nit-picking. Delay from 65 to FRA, or not, probably makes little difference to anyone. Just thought I would question the logic. Everyone should do what makes them happy).
 
^^I've been nit picky on opensocialsecurity.com, plugging all different ages and scenarios. Because of pension and survivor benefits I keep leaning towards 70 to claim. We're healthy (now anyway) and have longevity on both sides. I totally understand missing out on the years not claiming and that our portfolio can grow by claiming earlier. All the discussion and arguments make sense. I enjoy reading every post and every position. I just keep an open mind and keep reading.
 
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Niuatoputapu said:
Otherwise, waiting until FRA seems meaningless. Why not 18 months earlier or five months later? What is magic about FRA?
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One of the things about FRA that may or not apply: Earnings limits. If you are drawing SS before FRA, any earnings over $17,600 will result in a reduction in SS benefits. So for folks with on-going income, there may be a reason to wait.
 
Clone said:
One of the things about FRA that may or not apply: Earnings limits. If you are drawing SS before FRA, any earnings over $17,600 will result in a reduction in SS benefits. So for folks with on-going income, there may be a reason to wait.
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Any earnings, income? Interest income, CG, dividends?
 
I believe it is W2 income or income that is subject to self employment tax.
 
starry night said:
This may help....
https://www.ssa.gov/pubs/EN-05-10069.pdf

Also, please be aware that you will receive back any income that was withheld under the earnings limits. You would get it all back after you reach Full Retirement Age. See pages 6-7 in that link above.
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Thank you, great link, easy to read and understand. Sorry font won't reduce.



"For the earnings limits, we don’t count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains."
 
the model than follows a stepwise
optimization sequence that seeks to minimize lifetime taxes and maximize Social Security
income as a proxy for maximizing wealth (since retirement age and investment allocations are
fixed in this analysis).
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They didn't optimize on the right thing. My models indicate that, depending on market returns, many scenarios have me paying MORE tax but being able to spend MORE by taking SS early. They also don't disclose the rates of return they used, calling them "proprietary" (gimme a break!)


I don't want to maximize SS income. I don't want to minimize taxes. I want to have the most money to spend or pass on. The latter is not the same as the former pair.



It's trivial to build a model that makes take at 70 a slam-dunk: just make market returns horrible. And the opposite: great returns, take ASAP. This analysis doesn't disclose the rates of return so goes directly into the dust bin.
 
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When we use a probability tree type analysis on claiming age, after factoring in the odds of dying before the breakeven point and the very real possibility of future benefit cuts or additional SS taxes, especially on relatively higher income households, 62 wins out for us. Not due to a lack of psychological grit, but math and the very real SS forecast shortfall projections, which are stated pretty clearly on the Social Security web site.

If we were doing project estimates like SS at work in a project evaluation decision, we wouldn't ignore the possibility that future benefits are not 100% guaranteed.
 
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daylatedollarshort said:
When we use a probability tree type analysis on claiming age, after factoring in the odds of dying before the breakeven point and the very real possibility of future benefit cuts or additional SS taxes, especially on relatively higher income households, 62 wins out for us. Not due to a lack of psychological grit, but math and the very real SS forecast shortfall projections, which are stated pretty clearly on the Social Security web site.

If we were doing project estimates like SS at work in a project evaluation decision, we wouldn't ignore the possibility that future benefits are not 100% guaranteed.
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It would be fun to see that probability tree.

As we all know, you can make a probability tree come to any conclusion you prefer by using different probabilities.
 
opensocialsecurity.com essentially takes that probability tree approach (without showing you the tree).

For those just seeking a summary explanation, let's consider the simplest example scenario: an unmarried person, using the calculator prior to age 62. For such a person, the calculator:

  1. First assumes they file as early as possible, at 62.
  2. Calculates the amount of their monthly retirement benefit under such assumption.
  3. For each year up to age 115, the calculator multiplies the annual retirement benefit by the user's probability of being alive in such year, to arrive at a probability-weighted annual benefit.
  4. That probability-weighted benefit is then discounted back to age-62 value using the discount rate the user provided as input (i.e., to account for the fact that a dollar today can be invested and is therefore worth more than even an inflation-adjusted dollar in the future).
  5. All of those probability-weighted, discounted benefit amounts are summed, to arrive at a total "present value" for the assumed claiming strategy (e.g., claiming ASAP at 62).
  6. The above process is repeated for each possible claiming age (i.e., every month between 62 and 70).
  7. The claiming age that had the highest present value is then suggested to the user, and the present value associated with such claiming age is provided as well.
If the person is older than 62 when using the calculator, claiming strategies that are no longer possible (i.e., filing in the past) are eliminated from the analysis.

For a married couple, it's the same sort of process, but with more going on. Specifically:

  1. In addition to retirement benefits, spousal benefits and survivor benefits are included in the analysis.
  2. Probability weighting the various benefits each period involves separate calculations for "probability only Spouse A is alive", "probability only Spouse B is alive", and "probability both spouses are still alive."
  3. Each combination of possible claiming ages must be considered, for both spouses, and for both types of benefits (i.e., retirement and spousal).
https://opensocialsecurity.com/about/
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