Social Security (revisited)

[Broland]

Situation: Age: 64. Retired 8 yrs. Wife (65) never worked outside home. No debt. 90% of pretax monies in equities, remainder in reserve for living expenses if market crash (no need to discuss this as too aggressive, I'm comfortable with it due to the amount I have). Few hundred K in post-tax cash (all in equities). Focused on staying below $170k AGI to keep my wife's IRMAA from kicking in, very annoying!

Question: I'm conflicted on when to start collecting SS. Since most of my money is pre-tax I was thinking of collecting SS soon and using that to pay my taxes (keeping below $170K) and avoiding having to sell additional equities for taxes. Of course "conventional wisdom" is to wait until 70 because of the 8% per year increase.

I ran firecalc starting SS every year from now through age 70 with a horizon to age 90. Almost all ended up in the same place (high and low amounts) left over monies and all 100% success.

So ... Why should I wait? I have the resources to wait till age 70, but firecalc shows there really is no benefit to doing so, perhaps because I'm so heavily invested in equities? Perhaps because my wife will get 50% of my SS, but her increases stop at my age 67?

Looking for some thoughts/points/counterpoints ... Thanks!

 

[RunningBum]

[-]Maybe have her start collecting now, but you wait until 70? That way if you die first, she gets your benefit so it makes sense to maximize yours, but meanwhile she is getting something. I say this with the caveat that I'm single and haven't spent too much time looking at spousal strategies, but I think this is correct.[/-]It's been pointed out that this is incorrect, so I'm retracting this part.

Sounds like it doesn't matter too much either way. My own plan is to hold off until 70 unless there's a big drop in the market, and I don't want to be selling equities at a low. Or if there's a benefit reduction in the works and maybe those already collecting won't be impacted, I'd want to be in the "already collecting" group.

 

[pb4uski]

I'm deferring until 70 for two reasons.

First, by deferring I have more headroom to do low tax cost Roth conversions.

Second, IMO deferring is a screaming deal to "buy" a joint life COLA adjusted annuity. Let's say that your FRA is 66, your PIA is $3,000/mo. At 62 you would receive 75% or $2,250/month or at 70 you would receive 132% or $3,960/month. So by forgoing $2,250/month for 8 years or a total of $216,000 you would receive an additional $1,710/month for your life (and the life of your spouse). That's a 9.5% payout rate.... very attractive.

 

[JoPeter57]

I'll keep it short: Wife cannot collect spousal SS until you start your own. I say you start now...and have wife wait till her FRA (I'll assume her FRA is 66 & 2 months since she was born in 1955?)

 

[Dtail]

[-]Maybe have her start collecting now, but you wait until 70? That way if you die first, she gets your benefit so it makes sense to maximize yours, but meanwhile she is getting something. I say this with the caveat that I'm single and haven't spent too much time looking at spousal strategies, but I think this is correct.[/-]It's been pointed out that this is incorrect, so I'm retracting this part.

Sounds like it doesn't matter too much either way. My own plan is to hold off until 70 unless there's a big drop in the market, and I don't want to be selling equities at a low. Or if there's a benefit reduction in the works and maybe those already collecting won't be impacted, I'd want to be in the "already collecting" group.

This is where my head is at.

 

[Rianne]

DH/me are 63. We haven't decided what to do about SS. We want to do backdoor Roth conversions, have a pension starting at 65 and have EE Bonds and I Bonds to cash. I want to see what the new administration or old administration is going to do with SS. No need to rush into a decision now.

 

[ivinsfan]

I'll keep it short: Wife cannot collect spousal SS until you start your own. I say you start now...and have wife wait till her FRA (I'll assume her FRA is 66 & 2 months since she was born in 1955?)

Or look at it this way, you only get two checks until one of you dies. Why not start collecting both checks ASAP. My vote would be that no matter what age you start collecting the primary check, your spouse should start collecting hers ASAP.

 

[CRLLS]

There are possibly thousands of ways to file for SS. The good news is that for the average person, it makes little difference in the long run. The problem is that none of us is "average". I would recommend to look at your expenditures first. Can your current assets safely support your future expenditures and estate plans? Consider if you pass on somewhere close to age 70 and DW is now in a different tax bracket, can she still live on those assets, then it makes no real difference how/when you claim SS benefits. If you will need to supplement your investment income with SS, then...... more planning for SS withdrawal is necessary.

There was a time not too long ago when you could "file and suspend" then DW could collect spousal benefits, but that time has passed. Searching the internet may bring up some old advice. Just be aware of that.

 

[cyber888]

I have a similar situation. Wife has never worked a day outside the house, but she does the cooking and all the housing stuff. She's older than me.

If I claim social security at 62 years old, she will be above 70 years old. The max she can collect appears to be 50% of the amount I will collect at 67 years old, not 70.

So, correct me if I'm wrong, but let's say I'm collecting $1,900 at 62 and $2,900 at 67, If I decide to collect $1,900 at 62, my wife will collect 50% of $2,900 or the amount projected when I'm 67 - which is $1,450, and not 50% of $1,900 because she has reached that age ... anyone confirm this ?

 

[skipro33]

I'm deferring until 70 for two reasons.

First, by deferring I have more headroom to do low tax cost Roth conversions.

Second, IMO deferring is a screaming deal to "buy" a joint life COLA adjusted annuity. Let's say that your FRA is 66, your PIA is $3,000/mo. At 62 you would receive 75% or $2,250/month or at 70 you would receive 132% or $3,960/month. So by forgoing $2,250/month for 8 years or a total of $216,000 you would receive an additional $1,710/month for your life (and the life of your spouse). That's a 9.5% payout rate.... very attractive.

Just collect and let accumulate the $216,000, investing it until age 70.
$2250 a month at a conservative 4%, you would have over $250,000. At 7% you would have over $285,000. Then take the draw down on that for your life expectancy (84 years old or 14 more years at age 70) along with the original SS @ 62 of $2,250.
At 4%, that would be $2000 a month along with the $2250 for $4450. Much more attractive than the $3960, and at 7% savings rate, add another $700 a month to that for $5150 a month. Plus, if something should happen to you or to SS, you'd have a nest egg built up that is inheritable. SS is not.

 

[skipro33]

I have a similar situation. Wife has never worked a day outside the house, but she does the cooking and all the housing stuff. She's older than me.

If I claim social security at 62 years old, she will be above 70 years old. The max she can collect appears to be 50% of the amount I will collect at 67 years old, not 70.

So, correct me if I'm wrong, but let's say I'm collecting $1,900 at 62 and $2,900 at 67, If I decide to collect $1,900 at 62, my wife will collect 50% of $2,900 or the amount projected when I'm 67 - which is $1,450, and not 50% of $1,900 because she has reached that age ... anyone confirm this ?

Your wife's draw is based on her age and your PIA. So, yes, she gets 50% f your PIA ($2900) at her full retirement age no matter how old you are or if you are or aren't currently drawing SS.

 

[ivinsfan]

Your wife's draw is based on her age and your PIA. So, yes, she gets 50% f your PIA ($2900) at her full retirement age no matter how old you are or if you are or aren't currently drawing SS.

No, to get a spousal your spouse must also be drawing their benefit..

already posted on post 4.. sometimes it pay to actually read some of the comments.

 

[Telly]

I have a similar situation. Wife has never worked a day outside the house, but she does the cooking and all the housing stuff. She's older than me.

If I claim social security at 62 years old, she will be above 70 years old. The max she can collect appears to be 50% of the amount I will collect at 67 years old, not 70.

Correct. In your situation, the max $$ your spouse can collect is 50% of your FRA amount IF you file for SS at your FRA or later. The only way she can get more for herself is for you to die, then she gets 100% of what you were getting as spousal survivor benefit. Of course, then the net family $$ then goes down as only one person is collecting SS, her, using your old amount, and you collect... nothing but dust.

 

[ivinsfan]

I have a similar situation. Wife has never worked a day outside the house, but she does the cooking and all the housing stuff. She's older than me.

If I claim social security at 62 years old, she will be above 70 years old. The max she can collect appears to be 50% of the amount I will collect at 67 years old, not 70.

So, correct me if I'm wrong, but let's say I'm collecting $1,900 at 62 and $2,900 at 67, If I decide to collect $1,900 at 62, my wife will collect 50% of $2,900 or the amount projected when I'm 67 - which is $1,450, and not 50% of $1,900 because she has reached that age ... anyone confirm this ?

You've had quit a few different questions about this, but yes. you wife cannot draw before you draw and if you are 62 and she is 70 when you begin to draw, yes her benefit has been frozen at from her FRA to 70 she gets no additional bump, she is just out that money. It would be the 1450 amount.

 

[Dash man]

You've had quit a few different questions about this, but yes. you wife cannot draw before you draw and if you are 62 and she is 70 when you begin to draw, yes her benefit has been frozen at from her FRA to 70 she gets no additional bump, she is just out that money. It would be the 1450 amount.

But if they divorced and had been married more than ten years, wouldn’t she be able to collect 50% at age 67 or less at 62? This seems messed up.

 

[youbet]

Just collect and let accumulate the $216,000, investing it until age 70.
$2250 a month at a conservative 4%, you would have over $250,000. At 7% you would have over $285,000. Then take the draw down on that for your life expectancy (84 years old or 14 more years at age 70) along with the original SS @ 62 of $2,250.
At 4%, that would be $2000 a month along with the $2250 for $4450. Much more attractive than the $3960, and at 7% savings rate, add another $700 a month to that for $5150 a month. Plus, if something should happen to you or to SS, you'd have a nest egg built up that is inheritable. SS is not.

This pretty well describes what I did. Thanks to the favorable markets over those years, my stash at 70 worked out similar to what you described.

I took this path because DW cannot collect any of my SS due to GPO and I wanted to provide her with some longevity insurance. The fact that my lower SS + a conservative WR from the accumulated stash = more than my SS at 70 would have been was just a lucky outcome from years of favorable market returns.

 

[RunningBum]

But if they divorced and had been married more than ten years, wouldn’t she be able to collect 50% at age 67 or less at 62? This seems messed up.

That seems like it'd be a nightmare for the divorced couple otherwise, if they are no longer in touch. This way the lower income one doesn't need to keep querying the SSA to find out whether the other one has started collecting yet.

 

[ivinsfan]

That seems like it'd be a nightmare for the divorced couple otherwise, if they are no longer in touch. This way the lower income one doesn't need to keep querying the SSA to find out whether the other one has started collecting yet.

Why should a divorced couple be treated more favorably then a married one? So they need to query SS, that's what they have to do.

 

[Monterey298sc]

I'm deferring until 70 for two reasons.

First, by deferring I have more headroom to do low tax cost Roth conversions.

Second, IMO deferring is a screaming deal to "buy" a joint life COLA adjusted annuity. Let's say that your FRA is 66, your PIA is $3,000/mo. At 62 you would receive 75% or $2,250/month or at 70 you would receive 132% or $3,960/month. So by forgoing $2,250/month for 8 years or a total of $216,000 you would receive an additional $1,710/month for your life (and the life of your spouse). That's a 9.5% payout rate.... very attractive.

Live expectancy is 78 so you get 8 years on average

 

[USGrant1962]

Live expectancy is 78 so you get 8 years on average

False.

At age 62, life expectancy for a male is ~20 years (82) and for a female is ~23 years (85). https://www.ssa.gov/oact/STATS/table4c6.html

But the whole point of claiming at 70 (i.e., annuitizing) is cheap longevity insurance. That is insuring against the chance that you are the 50% that lives past 82/85, especially if you live long past. Or, even more importantly and likely for marrieds, that one of you does.

 

[pb4uski]

False.

At age 62, life expectancy for a male is ~20 years (82) and for a female is ~23 years (85). https://www.ssa.gov/oact/STATS/table4c6.html

But the whole point of claiming at 70 (i.e., annuitizing) is cheap longevity insurance. That is insuring against the chance that you are the 50% that lives past 82/85, especially if you live long past. Or, even more importantly and likely for marrieds, that one of you does.

Exactly. Plus the 4% or 7% are not a sure thing, especially in this low interest rate environment.

However, the fact that the OP's wife didn't work throws a wrinkle. I'd see what opensocialsecurity.com recommends.

 

[troutnut1]

I went through all this and forgot to look into the most important variable in the equation which is life expectancy. Finally at 67 I went for a lung CT scan to rule out lung cancer due to my smoking history. No cancer, but turns out I have “severe emphysema”. That surprised me as I quit smoking 20 years ago and ski 70 days a year with no symptoms. But I changed my mind about waiting until 70 and claimed immediately. My heirs can get a stepped up basis on most of my estate, but they won’t get anything on my SS. I should have had all my medical tests done at 62 and made the decision based upon that. I don’t plane on checking out anytime soon, but I am unlikely to set any new longevity records either.

 

[Sarah S]

Why should a divorced couple be treated more favorably then a married one? So they need to query SS, that's what they have to do.

A married couple at least in theory will make decisions as a team for their mutual benefit. A divorced couple is different. Ex spouse a may have decided for their best interest to delay until 70 which may put ex spouse b in a bad situation if they do not have a decent ss amount on their own record.

 

[ivinsfan]

A married couple at least in theory will make decisions as a team for their mutual benefit. A divorced couple is different. Ex spouse a may have decided for their best interest to delay until 70 which may put ex spouse b in a bad situation if they do not have a decent ss amount on their own record.

You do understand that allowing one person to draw a spousal before the ex or current spouse files for benefits is a huge advantage..Why should divorced couples be treated better then married ones. Open it to everyone or no one that's my viewpoint.

 

[Ducati52]

Here's a good, free Social Security calculator:
https://opensocialsecurity.com/

Of course, it doesn't take a myriad of personal variables into account, but it will at least get you started.

If you want more personalized advice/information, here's a firm one of my friends used and recommended highly:
https://www.premiersocialsecurityconsulting.com/