New SS Payment Calculator

[Alan]

I played with this new calculator this morning. Says I should file for SS at 66 but delay payments, and DW should file at 66 for spousal benefits, then both she and I should file for our own SS at age 70.

The article introducing the new calculator is here.

[chinaco]

Thanks for the link.


This is a complicated topic.... similar to the pension analysis.


I got the same results as the OP.

It is a simple calculator seems to focus mainly on illustrating how to maximize payout (which simply means delaying taking SS till an older age). They do show a caveat about life expectancy.

Quote:

* If you're in poor health, you may get less over your lifetime the later you claim.

DW and I both qualify for SS. Our current plan is to use the early/late (62/70) strategy. One spouse will get the spousal benefit from the early SS at 66.x (on the early SS till 70).

However, a plan is a plan... we will make the actual decisions based on facts at that time (when we begin to qualify for the payout).

Here are some charts from SS on the percentages for reduced payout (early) and increased payout (late).

Full retirement age
Delayed retirement credits

[obgyn65]

Thanks for sharing, Alan.

[FANOFJESUS]

Thanks it gives good ballpark numbers quick. Mine was only about $12 different from the SS own website.

[Fshnfool]

It does't seem that this calculation takes into account the extra value of potential earnings on earlier payments. Of course, if one spends all SS payments as you get them, the calculation shows at what ages you should start payments to maximize lifetime earnings. But if one takes the early payments, saves and invests it, that should change the break-even points. Yes? Pretty sensitive to projected investment earnings, though. Wish I was really smart in predicting that.

[rescueme]

Quote:

Originally Posted by Fshnfool But if one takes the early payments, saves and invests it, that should change the break-even points. Yes?

I would think that most folks (other than on this forum) would spend the SS deposit as soon as it was deposited to their bank.

Additionally, nobody invests in the same manner and there is no consistant market (or even CD) return, for planning purposes.

I would think that would cloud the issue for the AARP folks that may use the calculator.

It's instructional in use for a lot of people (pay me now, pay me more - later) and just makes them aware of that possibility. In that case, I would say that it is "good enough"...

[bizlady]

DH and I are just months apart in age, and our SS payouts are very close as well. My perhaps foolish question is this: Why can't we EACH apply for beneifts at 66.x, suspend, then take spouse benefits until age 70?

[rescueme]

Quote:

Originally Posted by bizlady Why can't we EACH apply for beneifts at 66.x, suspend, then take spouse benefits until age 70?

Because one of you must be actually receiving SS benefits. In your case, neither would be collecting. One can file/suspend one, but not both.

The file/suspend is for those folks in where the higher earner reaches FRA age and at that time "activates" their SS (though not collect) by the file/suspend action. They are "deemed" as if they are collecting (in name only), which allows the spouse to claim against an active SS participant, and get a higher benefit.

In your case - to get the max - both would not claim till age 70.

In DW/my case (we're the same age - within a few months of each other), I won't file/suspend, but I will claim against her when she reaches FRA age of 66. I'll collect 50% of her benefits through my age 69, and then claim my own at age 70 (of course, this all assumes we live that long).

Not as much combined SS if we both waited till age 70, but "good enough" for us.

What's most important is that I (being the higher earner, and delaying till 70, and assuming my DW will outlive me) that DW will have a better long term SS "outcome" in the long run.

The way the rules are (currently), DW will receive an amount equal to what I would have received in SS (claimed or not) on the day before my death. She does not receive "my benefit", but her benefit is adjusted upward to equal my SS amount (same thing - yes, I know, but that's how it's computed)...

[67walkon]

Nice find! I'm 61 and my wife is 56, or almost. If I wait until 70 and she takes the spousal benefit at 66 and then her benefit at 70, our SS income would be around $56,000 annually. That's pretty hefty!

It does affect the long term thinking. We have a well secured income stream of just under $100,000 that will last until I'm 69, some rental income that isn't quite so secure, and then some bonds and retirement accounts that spin off another $45,000 or so a year. We re-invest all of the $45,000 and haven't touched the $100,000 for the 2.5 years we've been getting it--it just goes into the investment account.

My wife is already retired and my thoughts have been to retire as soon as we can either get the rental property under a longer term lease or sold, living off the $100,000 and the rents/sale money while re-investing the bond/retirement account money. The $100,000 stops right around my 69th birthday. Assuming I live to 70, the SS on this calculator plus the $45,000 a year we are getting in mostly tax free monies now is enough to live on in today's dollars. Of course, the $45,000 will grow if we re-invest it and should be substantially more.

The only things keeping me working are health insurance, a free car and some moderate uncertainty about the rental income. If I get the rental situation more clarified, then it will just be health insurance I need to deal with. The calculators all say it works, and now this new SS calculator makes it look even better.

Can I quit now?

[rescueme]

Quote:

Originally Posted by 67walkon Can I quit now?

You can quit anytime you wish.

However, if you wish to retire - and have enough assets to carry you till your end-of-time? That's a different question (and a different answer for everybody )...

[youbet]

This calculator, like all the others I've tried, fails to give the correct advise for the situation where one spouse is SS and the other is impacted by WEP and GPO and the goal is to provide maximum protection for the WEP/GPO spouse. The answer in that case is that the SS spouse should take SS at 62 thereby reducing annual portfolio depletion by the SS amount and increasing the size of the residual portfolio for the WEP/GPO spouse at the SS spouse's death.

Having one spouse WEP/GPO impacted makes for an interesting scenario, especially when it the wife who typically lives longer. You want to provide longevity protection for her but she cannot collect SS based on your record due to GPO and will get no/little SS of her own due to WEP.

It took me a long time to determine confidently that the max protection for DW would result from starting my SS at 62.

[MasterBlaster]

The calculator is a pretty good tool...

But it ignores taxes and tax effects. And as others have pointed out, it ignores the tradeoff between taking SS early versus spending down a growing nestegg.

It also optimizes for current rules. I suspect when some of us go to collect in a few years the rules may be quite different. So for example, if SS gets a payment cap and you delay until 70 will a payment cap affect you ?

So how can we game the system when the rules are very likely to change ?

[packrat44]

I did not find this to be a very effective tool.

There are too many factors it failed to take into account to be able to come to an accurate determination as to what is most beneficial.

[tmm99]

No matter what I enter, I get "You receive your maximum Social Security benefit amount at age 70." What am I doing wrong? I mean I already know I will get the maximum SS amount if I wait until 70.

[MasterBlaster]

The other thing is that there is a very real chance that you won't make it to old age.

The IRS publishes mortality rates for men and women of which I just happen to have a plot.

If I eye-ball the chart correctly, between 62 and 70 about 13 percent of men (shown in the blue curve ) will die. That is if you make it to 62 you have about a 13 percent chance of dying by 70.

If I guess your "break-even" age is 77. then there is around a 30 percent chance (between 62 and 77) that you won't live that long.

Somehow we need to come to terms with these mortality facts before we "optimize" our withdrawal method.

[kyounge1956]

Quote:

Originally Posted by youbet This calculator, like all the others I've tried, fails to give the correct advise for the situation where one spouse is SS and the other is impacted by WEP and GPO and the goal is to provide maximum protection for the WEP/GPO spouse. The answer in that case is that the SS spouse should take SS at 62 thereby reducing annual portfolio depletion by the SS amount and increasing the size of the residual portfolio for the WEP/GPO spouse at the SS spouse's death. Having one spouse WEP/GPO impacted makes for an interesting scenario, especially when it the wife who typically lives longer. You want to provide longevity protection for her but she cannot collect SS based on your record due to GPO and will get no/little SS of her own due to WEP. It took me a long time to determine confidently that the max protection for DW would result from starting my SS at 62.

The calculator asked me whether I had ever been a government employee. I answered both ways and got exactly the same outcome however I answered. How can the calculator give an accurate result when it doesn't even ask whether I paid into the SS system while working for a government entity?

[haha]

Quote:

Originally Posted by MasterBlaster Somehow we need to come to terms with these mortality facts before we "optimize" our withdrawal method.

I don't know why. If you are dead, you will not be needing money. But if you are alive at 85, or 90, or whenever, you may.

Ha

[bizlady]

We are not concerned about getting what we put in. We are concerned with having what we need, so will choose when to take it based on our portfolio at the time, and then figure out how to maximize the net after taxes.

[MasterBlaster]

Quote:

Originally Posted by haha I don't know why. If you are dead, you will not be needing money. But if you are alive at 85, or 90, or whenever, you may. Ha

By that reasoning then, we would always sacrifice present living standards for some low probability of living to be very old. Your logic could be taken to extreme levels.

So No, I believe everyone must decide for themselves what level of income they can have now versus some bigger amount that just may never be needed.

[ERD50]

Quote:

Originally Posted by MasterBlaster The other thing is that there is a very real chance that you won't make it to old age. ... Somehow we need to come to terms with these mortality facts before we "optimize" our withdrawal method.

Quote:

Originally Posted by haha I don't know why. If you are dead, you will not be needing money. But if you are alive at 85, or 90, or whenever, you may. Ha

I agree with haha - I think you are trying to apply big-group averages to individuals. If I'm the 1 in 10 that makes it to X years of age, what good does it do me to reflect on that stats that 9 of 10 times I wouldn't need any money, and now I'm old & broke? Should I ask my wife & kids what they think of that situation? We only get one spin of this wheel.

If I could pool my money with a big group, I could feel differently. I will, from time to time, investigate buying an annuity versus maintaining a portfolio that should be big enough to last my remaining years.

edit/add - I cross posted with your reply:

Quote:

Originally Posted by MasterBlaster By that reasoning then, we would always sacrifice present living standards for some low probability of living to be very old. Your logic could be taken to extreme levels.

Well, I don't plan on living to 235 YO. But I do look at that Vanguard calculator, and the odds of me and/or DW living to late 90s ( I forget the exact numbers) is not minuscule. And as you plan for 40 years, the WR approaches the 'forever' scenario anyhow, it all becomes pretty moot - the unknowns will likely swamp out any knowns.

Sure it involves sacrifice! TANSTAAFL!

-ERD50