Social Security - When to start benefits..

[rescueme]

"If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between. "

From the SS web page.

True. However, they don't measure nor report on joint life expectations nor include any marriage based scenerios in any SS documents that I have ever read.

Had to "run the numbers" to come up with a solution for our specific situation based upon age, income, applicaion of SS rules, etc.

Again, every situation is different...

 

[huusom]

There is one thing people do not talk about is if you want to leave as much as can to your kids or grand kids then it better to start collecting SS early in order to preserve as much of your money as you can just in case you die early.

 

[rescueme]

There is one thing people do not talk about is if you want to leave as much as can to your kids or grand kids then it better to start collecting SS early in order to preserve as much of your money as you can just in case you die early.

OTOH, if you outlive your lifespan expectation, you will have to use more from your investments to cover the shortages you will have by claiming SS early.

(There's no free lunch )...

 

[TromboneAl]

Here is a possibility that no one has mentioned. The chances are slight but it's more likely than you realize.

Ready?

What if, 20 years from now, someone discovers something that will significantly extend your healthy lifespan? What if you can expect to live to 120?

Many researchers believe this possible and likely.

Chew on that.

 

[grasshopper]

Here is a possibility that no one has mentioned. The chances are slight but it's more likely than you realize.

Ready?

What if, 20 years from now, someone discovers something that will significantly extend your healthy lifespan? What if you can expect to live to 120?

Many researchers believe this possible and likely.

Chew on that.

Than I will get to use that silver bullet.

 

[ziggy29]

Here is a possibility that no one has mentioned. The chances are slight but it's more likely than you realize.

Ready?

What if, 20 years from now, someone discovers something that will significantly extend your healthy lifespan? What if you can expect to live to 120?

Many researchers believe this possible and likely.

Chew on that.

Free booze, cigarettes and Big Macs for everyone! All you can drink, smoke and eat! It's cheaper than the alternative!

 

[Packman]

Al, I'm still chewing, and then thought of something else, maybe not quite as remote. That is the probability that the trust funds will not keep up with payouts - for a multitude of reasons including your increased life span thought. How many people really believe that the funds will dry up in their lifetimes? I'll bet about 90%. So therefore, the majority of people say "take it now, or I'll miss out". I have a rather wealthy,very bright, friend that took his SS at 62 using that logic.

 

[gerntz]

From the SS site:

"When a worker files for retirement benefits, the worker's spouse may be eligible for a benefit based on the worker's earnings. Another requirement is that the spouse must be at least age 62 or have a qualifying child in her/his care. By a qualifying child, we mean a child who is under age 16 or who receives Social Security disability benefits.
The spousal benefit can be as much as half of the worker's "primary insurance amount," depending on the spouse's age at retirement. If the spouse begins receiving benefits before "normal (or full) retirement age," the spouse will receive a reduced benefit. However, if a spouse is caring for a qualifying child, the spousal benefit is not reduced."

I read this to say that if my spouse files for benefits, I can file for spousal benefits if I'm at least 62. Won't be 50% of her FRA benefit, but something anyway. Net, I wouldn't need to wait till my FRA to collect.

Well, separate from the SS site, I've learned there's there's a catch to a plan (my plan) of taking spousal benefits before full retirement age: The person taking the spousal benefit must have a benefit from their own record that's LESS than the spouse they are taking the spousal benefit from UNTIL FRA. Well for us, that ain't true. So those saying you must wait till FRA to take the spousal benefit must have a higher personal benefit - as I do. Oh well, I'll have to suck it up.

 

[Dave J]

Well, separate from the SS site, I've learned there's there's a catch to a plan (my plan) of taking spousal benefits before full retirement age: The person taking the spousal benefit must have a benefit from their own record that's LESS than the spouse they are taking the spousal benefit from UNTIL FRA. Well for us, that ain't true. So those saying you must wait till FRA to take the spousal benefit must have a higher personal benefit - as I do. Oh well, I'll have to suck it up.

Where did you find "MUST"?

I found this a week or so ago when researching this very question. From the SS site I found this FAQ.....
Delay my Social Security retirement and receive spouse's benefits

Delay my Social Security retirement and receive spouse's benefits

Updated 03/02/2012 12:50 PM | ID# 1944
How does delaying my Social Security retirement and receiving benefits as a spouse affect me?
It depends on your age.
If you are full retirement age, and your spouse is receiving Social Security benefits, you can choose to file and receive benefits on just your spouse's Social Security record and delay filing for benefits on your own record up until age 70.
By filing for just benefits as a spouse, you may receive a higher retirement benefit on your own record later based on the effect of delayed retirement credits. You can earn delayed retirement credits up to age 70 as long as you do not collect your own benefits.

 

[clifp]

A much better than average article on when to take social security is in today's Smartmoney.

The important addition that the two professors made was to account for interest rates. It turns out Social Security doesn't factor in interest rates when adjusting for age. The lower the real interest rate the more sense it makes to delay Social Security. (Which is sensible if interest rate are high you can earn more money by getting the benefits earlier). Right now with 10 year TIPs yield near 0% it makes sense for everyone to wait. However if real rate go up to 2.5% the calculation is more complicated and while married couple still should wait single guys should take it early.

I am looking forward to reading the full paper.

Also this study is looking only at the SS as investment, the insurance aspect which has been discussed in this thread, also should be factored in.

 

[jdw_fire]

Except that historically, benefit levels before you start collecting rise according to overall wage increases, not inflation. And historically (though this may be changing), wage increases have exceeded inflation.

Again, this may not be the case any more -- wage growth has essentially been zero over the last five years or so.

actually, everyones PIA is computed when they reach the age of 62 (based on wage indexing only on the work years up to their age of 60) and then that PIA is given the SS COLA every year, whether SS is currently being paid out or not

 

[gerntz]

Where did you find "MUST"?

I found this a week or so ago when researching this very question. From the SS site I found this FAQ.....
Delay my Social Security retirement and receive spouse's benefits

Delay my Social Security retirement and receive spouse's benefits

Updated 03/02/2012 12:50 PM | ID# 1944
How does delaying my Social Security retirement and receiving benefits as a spouse affect me?
It depends on your age.
If you are full retirement age, and your spouse is receiving Social Security benefits, you can choose to file and receive benefits on just your spouse's Social Security record and delay filing for benefits on your own record up until age 70.
By filing for just benefits as a spouse, you may receive a higher retirement benefit on your own record later based on the effect of delayed retirement credits. You can earn delayed retirement credits up to age 70 as long as you do not collect your own benefits.

In an outside private communication. But what you posted says the same thing:
"If you are full retirement age, and your spouse is receiving Social Security benefits, you can choose to file and receive benefits on just your spouse's Social Security record and delay filing for benefits on your own record up until age 70."

 

[jclarksnakes]

In an outside private communication. But what you posted says the same thing:
"If you are full retirement age, and your spouse is receiving Social Security benefits, you can choose to file and receive benefits on just your spouse's Social Security record and delay filing for benefits on your own record up until age 70."

I think you are reading that very differently than Dave J and I read it. The very first link in this thread is written by someone who also reads it the way we do.

 

[haha]

Except that historically, benefit levels before you start collecting rise according to overall wage increases, not inflation. And historically (though this may be changing), wage increases have exceeded inflation.

Again, this may not be the case any more -- wage growth has essentially been zero over the last five years or so.

This idea has been addressed many times on this forum. The shift comes at age 62, and has nothing to do with one's working vs retired status

 

[gerntz]

I think you are reading that very differently than Dave J and I read it. The very first link in this thread is written by someone who also reads it the way we do.

We may be talking past each other.

From the original article you cited:

"When someone applies for benefits before attaining FRA, the Social Security Administration calculates her benefits based on her own earnings record and the spouse's record, and it pays the larger amount. However, if she applies for benefits after attaining FRA, she can begin benefits based on the spouse's record and later switch to benefits based on her own record."

That is, before you reach FRA, you can't collect spousal benefits if your own benefit(the larger amount above) is more than the spousal benefit. That no longer applies after you reach FRA.

What do you think I'm missing/incorrect about? Thanks.

 

[tightasadrum]

I could look this up, but all the experts here might know the answer already.

Let's assume my intentions are to wait until 70 to draw SS benefits and have DW take 50% of mine since her own earnings would mean lower benefit.

1. Would DW receive 50% of my 70yo benefit at her full retirement age of 66, or would she have to also wait until 70yo to receive 50%?

2. And what if, in spite of my best efforts to the contrary, I died suddenly before ever receiving by SS benefit? Would DW draw 50% of what my benefit would have been at my age at death, say 68 for sake of argument, or of age 66, or none of the above?

Item #2 above might affect whether a waited longer than 66 to start my benefits.

 

[jclarksnakes]

We may be talking past each other.

From the original article you cited:

"When someone applies for benefits before attaining FRA, the Social Security Administration calculates her benefits based on her own earnings record and the spouse's record, and it pays the larger amount. However, if she applies for benefits after attaining FRA, she can begin benefits based on the spouse's record and later switch to benefits based on her own record."

That is, before you reach FRA, you can't collect spousal benefits if your own benefit(the larger amount above) is more than the spousal benefit. That no longer applies after you reach FRA.

What do you think I'm missing/incorrect about? Thanks.

I think you are right we have been talking past each other. I was never talking about or considering taking the spousal benefit before FRA.

 

[Cut-Throat]

Here's the deal.......After studying SS for 10 years.

There are only 2 GOOD reasons to take S.S. at age 62 instead of age 70....

1.) You need the money to live on, because you didn't plan for your retirement. (probably about 95% fall into this category)

2.) You want to preserve your nest egg, so that your heirs can spend it, instead of yourself.

********************************************************************************************

There are other reasons of course (Not Good) , to take SS early.

1.) Government Paranoia......The urge to get your money now, because the government won't be around when you are 70. Even though the cash in your pocket is from the same government that you fear is 'going out of business'.

2.) Math was not your strong point in school.

3.) You believe that you are such a superior investor that you can beat the market and the guaranteed 8% returns, that delaying SS will give you. (All Bogleheads know how this ends up)

 

[Khan]

I have decided to start Social Security at 62, as that is when my pension decreases.

 

[heirloom]

I'll be getting my first check this month. I almost waited until next year because the check would be 8% more. But everyone is telling me I'm crazy, so I decided to take it now and invest put it in my bank. It was paying 2%, but now only 1.5%. After I see what the I bonds rate is in May, I'll either purchase some then, or keep the money in the bank.

Yes, I do have gov. paranoia, after all the SS site is only guaranteeing 20 yrs. of pmt at the time. You know the system is running out of money when a lot of candidates are talking about hiking the age for takingy SS early.

 

[MichaelB]

I'll be getting my first check this month. I almost waited until next year because the check would be 8% more. But everyone is telling me I'm crazy, so I decided to take it now and invest put it in my bank. It was paying 2%, but now only 1.5%. After I see what the I bonds rate is in May, I'll either purchase some then, or keep the money in the bank.

Yes, I do have gov. paranoia, after all the SS site is only guaranteeing 20 yrs. of pmt at the time. You know the system is running out of money when a lot of candidates are talking about hiking the age for takingy SS early.

Heirloom, would you mind posting a link to the SS where they only guarantee 20 years of payments?

 

[rescueme]

Let's assume my intentions are to wait until 70 to draw SS benefits and have DW take 50% of mine since her own earnings would mean lower benefit.

1. Would DW receive 50% of my 70yo benefit at her full retirement age of 66, or would she have to also wait until 70yo to receive 50%?

2. And what if, in spite of my best efforts to the contrary, I died suddenly before ever receiving by SS benefit? Would DW draw 50% of what my benefit would have been at my age at death, say 68 for sake of argument, or of age 66, or none of the above?

Item #2 above might affect whether a waited longer than 66 to start my benefits.

#1 - From what I read, the 50% is computed against the PIA of FRA (in your case, assuming age 66). It is not increased due to your claiming after the age of 66. Reference: Benefits for Spouses , assuming you are still alive. IOW, there is no gain to be had for her wating until age 70, if you are still breathing.

#2 - This one I know since we're doing the 66/70 "split". DW will receive an adjustment to her SS (at age 66) to equal 100% of my benefit, regardless of when I die after my FRA age of 66. Note that she does not get my benefit, but an adjustment to hers (a small point, but some folks don't understand what is done "under the covers"). Even though I'm planning not to take SS till age 70, if I pass at age 68 (as you said), my FRA benefit would roughly be 16% more (8% per year of delay), along with any possible COLA. This is a survivor benefit situation rather than a spousal benefit - what you specified in #1, so the rules are a bit different.

In our case, since we're the same age (within a few months), I'll still get SS - however it won't be mine, but based upon her age 66 FRA amount, at 50%. She gets to support me with her SS at age 66-69, and I get to support her (at close to double her benefit), assuming I pass first and after the age of 70.

Since I turn 66 in 21 months - DW a few months after that, stay tuned for any reported "hitches" ...

 

[FIRE'd@51]

Here's the deal.......After studying SS for 10 years.

You believe that you are such a superior investor that you can beat the market and the guaranteed 8% returns, that delaying SS will give you.

It appears that your 10 years of study did not result in your understanding how to properly calculate the return on an annuity.

The 8% is an increased withdrawal rate, not a guaranteed return.

I am not taking sides on the SS debate, but it is abundantly clear that the return on an annuity can only be calculated if you know (or assume) the date on which the last payment occurs (the death date of the annuitant).

 

[rescueme]

...the return on an annuity can only be calculated if you know (or assume) the date on which the last payment occurs (the death date of the annuitant).

Actually, in certain situations you can ...

I don't know the entire thread of your discussion, but just to add something to think about...

DW/I have a life SPIA contract with guaranteed term/payments for our calculated joint lifespan.

Keeping all other factors out of it (i.e. the insurance company will go under ), we created an Excel spreadsheet using the IRR function, specifying the premium paid and each years total payments through the calculated period. We know exactly (for our contract) what the return is.

If we both pass before the end of the "contract", payments continue to our beneficiary/estate on the same payment schedule through the period, thus maintaining that return rate, even after we're both gone.

The "kicker" is that if one of us beats the odds and live longer than the computed termination date, the payments continue (at 100%) until we're both gone. In that case, the IRR will actually rise by adding additional periods to the spreadsheet, however unlikely.

BTW, any reference to SS and 8% only applies to the four year period of age 66 through 69 (assuming an FRA age of 66), plus any COLA's that may be applied. Reference: Delayed retirement credits

 

[FIRE'd@51]

Actually, in certain situations you can ...

DW/I have a life SPIA contract with guaranteed term/payments for our calculated joint lifespan.

Keeping all other factors out of it (i.e. the insurance company will go under ), we created an Excel spreadsheet using the IRR function, specifying the premium paid and each years total payments through the calculated period. We know exactly (for our contract) what the return is.

If we both pass before the end of the "contract", payments continue to our beneficiary/estate on the same payment schedule through the period, thus maintaining that return rate, even after we're both gone.

The "kicker" is that if one of us beats the odds and live longer than the computed termination date, the payments continue (at 100%) until we're both gone. In that case, the IRR will actually rise by adding additional periods to the spreadsheet, however unlikely.

Actually, this only guarantees a minimum IRR. The actual realized IRR will still depend upon when the latter of you passes, should one of you live beyond the guaranteed period.