SS at 66 or 70 - not such an easy question?

[pb4uski]

....Assuming most of the people in this forum are financially independent, isn't this crowd potential targets for social security means testing (income-based or asset-based.) How do you factor in that social security may be reduced or eliminated for people in this position? Wouldn't that argue for taking SS earlier before it disappears? Or do you simply assume it's too tough to forecast and leave it out of your analysis?

I recognize this as a risk but my view (and I know others will disagree) is that it is unprecedented and would be viewed as unfair (the Sue Spender vs Sally Saver argument) so is unlikely enough that I don't consider it in my plans.

Once I turn 62, I view myself as having an option to start SS if we have adverse investment results, it appears that SS will reduce benefits, our joint longevity takes a turn for the worse, etc but based on what I know now we would wait until FRA (for her) and 70 (for me).

 

[rayvt]

People who say it's a no-brainer to defer are wrong. It's actually a brainer.

Take a look at my spreadsheet. https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0 Plug in your own estimates and figures.

If you take SS at 66 FRA and invest/save that and earn 3% above inflation, the break-even age is 87.
17 years to break even. To me that's much too long to be attractive.

If you earn nothing above inflation, breakeven is 82, which is 12 years, and to me _still_ too long.

There is no clear-cut right answer, it's largely a matter of personal preference in how you'd like the shape of your income curve to be.
Of course, if you are selling annuities, your answer is going to be influenced by the commission you'll get.

 

[pb4uski]

Given Mom is still going strong at 85 despite some bad habits I don't have and Gram and Great-Aunt lived into their mid-late 90s plus improving longevity and joint longevity it is a no-brainer for us.

 

[Runner]

People who say it's a no-brainer to defer are wrong. It's actually a brainer.

Take a look at my spreadsheet. https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0 Plug in your own estimates and figures.

If you take SS at 66 FRA and invest/save that and earn 3% above inflation, the break-even age is 87.
17 years to break even. To me that's much too long to be attractive.

If you earn nothing above inflation, breakeven is 82, which is 12 years, and to me _still_ too long.

There is no clear-cut right answer, it's largely a matter of personal preference in how you'd like the shape of your income curve to be.
Of course, if you are selling annuities, your answer is going to be influenced by the commission you'll get.

Right, that is exactly what my quick calculation yielded - the break-even point was 82, which is Pretty Old even under the best of circumstances.

I make a hobby of reading the local obituaries. Yes, some people do live to be 85 in some semblance of health. But I am always struck by how many people "left us suddenly and unexpectedly" at 48, 54, 65, 71 or 73. It's a sobering alternative to the actuarial tables. Which is why I lean toward the "take it at FRA and cheerfully blow it on annual vacations" philosophy. The notion that "by God I'm covered even if I live to be 92" just doesn't do much for me. Concerns about the welfare of my wife would be the only thing driving me in the other direction.

 

[NW-Bound]

I understand... my point was that there is nothing to be gained by her waiting until she is 70. I guess she could claim spousal benefits anytime between when she turns 62 and her FRA.

No, as she did not work in the US, she does not have her own SS, and cannot claim spousal at 62 unless the OP also files.

It used to be that when she reached FRA, the OP can "file-and-suspend" his own benefit so his wife can claim spousal. This option goes away with the recent law change. And then, due to their age difference this point is moot as she will reach FRA about the same time the OP gets to 70 where he will file anyway.

I did not see where he said his DW as 61, but if so, then taking it at 70 means a much greater chance of living longer than the 12 year payback....

I am a fast reader and often miss important detail, but not this time.

In post #12, the OP wrote "my non-working wife (who is a mere child of 61 now)...".

 

[Bir48die]

There's always exceptions to every rule when making these decisions. My DW will take her SS at 62. I'll take mine at 66. I found out as I was making this decision that when I kick off she gains $600/mth on her pension and another $1,200/mth tax free from her late husband's VA benefit. So, she comes out ahead when I'm gone. Now I just need to keep an eye on her!

 

[fosterscik]

My plan depends entirely upon investment returns. I will not be someone with a large enough stash to get down to a 2 or 3 % WR.
I intend to "defer" SS until I see a large drop in my assets at the time I'm due to withdraw my next year's "pay". If stock/bond performance has decreased my stash significantly over the proceeding year, I will file for SS. That could be as early as 62 or as late as 70. In that way, I will only use the guaranteed SS income when it will especially help capital preservation. I plan to fund retirement from my stash; SS will act as sequence-of-return risk insurance and if not needed longevity insurance.

 

[Runner]

No, as she did not work in the US, she cannot claim spousal at 62 unless the OP also files.

It used to be that when she reached FRA, the OP can "file-and-suspend" his own benefit so his wife can claim spousal. This option goes away with the recent law change. And then, due to their age difference this point is moot as she will reach FRA about the same time the OP gets to 70 where he will file anyway.

Right - She can't file for her own benefit until I do, and she will reach FRA just about the time I'm 70. If I took SS at 66 and she took it at 62, her benefit (which is a maximum of 50% of my benefit as long as I'm alive) would be reduced just as if I had taken SS at 62. I was astounded to learn after I married her that she would be eligible for a SS benefit at all since she did not set foot in the U.S. until she was 54. I was alerted to this by a friend in France whose wife has still never lived in the U.S. At the time I thought he was joking.

The ignorance of most people - including me, until recently - about SS is amazing. "Financial expert" Dan Celia tells callers that SS is determined on your 5 highest years of earnings, when one of the first FAQs on the Social Security website describes this as one of the "biggest myths" about SS. I have heard him do this twice; the last time he and the caller went round and round as to whether it is the "last 5 years" or the "highest 5 years" (neither). The last time he did it, I called and alerted his call-screener that he was giving out 100% erroneous information. I even steered her to the SS site. I expected a correction in the next segment of the program ... but nooooooo, "financial experts" apparently don't admit their mistakes.

 

[pb4uski]

NWB, I'm not sure what your point is. I was responding to the OPs comment that his DW might wait until she is 70 to claim her benefits. There is no point to her waiting anything beyond her FRA... she gains nothing waiting from FRA to 70 and actually loses. See quotes below.

I realize that she can't claim spousal benefits until the OP files now that file and suspend is done so I concede that my comment about her taking spousal anytime between 62 and FRA would be dependent on the OP starting benefits.

....Actually, if I didn't take SS until age 70 and my non-working wife (who is a mere child of 61 now) waited until age 70 to take her benefit that is calculated as a percentage of mine, we could potentially come out way ahead. At 95, we'll be cackling our toothless heads off at the way we've gamed the system.

Runner, I think you will find that your DW is best off taking her benefit at FRA, not 70. She doesn't get any larger benefit by deferring from FRA to 70 but just forgoes benefits she could have otherwise had.....

 

[AtlasShrugged]

Or... Skip all the math, take it at 68 and realize you made at least 50% of the right choice applying 0% of your time worrying about it.


Sent from my iPhone using Early Retirement Forum

There's a lot to be said for the elegant simplicity of this approach. It makes sense to me.

 

[youbet]

If you plan to put the SS funds into a low interest savings account, putting it off until age 70 to help your DW is probably the better decision. If you invested the money in low to moderate risk dividend stocks, it may do better in the long run, but does carry more risk. It's very much a personal decision and needs to consider other assets you have, including survivor benefits on your pension. Be sure to include DW in the decision.


Sent from my iPhone using Early Retirement Forum

+1

I started SS at 62 in 2009 for DW's protection. (She is ineligible to collect any of my SS either as a spouse or as a survivor due to GPO). Because the markets have been quite favorable since I started SS, the accumulated value of the SS payments + earnings received over the past 6 years is conservatively enough to compensate for not waiting until 70. (My age 62 SS + 4% of the accumulated value of the early SS payments is larger than my age 70 SS would have been.)

But, but, but........ as you say, there are no guarantees. Had I started early SS in a less favorable market, or if I had chosen conservative investments, things would not have worked out this way.

 

[youbet]

"financial experts" apparently don't admit their mistakes.

That's correct and makes perfect sense. Their job is to attract listeners, readers and watchers of the various media outlets. Their job is not to educate people with factual information unless, on the small chance, that happens to be what is attracting the most people. That's how "the media" works.

 

[Runner]

That's correct and makes perfect sense. Their job is to attract listeners, readers and watchers of the various media outlets. Their job is not to educate people with factual information unless, on the small chance, that happens to be what is attracting the most people. That's how "the media" works.

Of course, since this is a financial advice call-in program where the callers are mostly people of modest means to whom SS is vitally important, one would hope that bad advice will eventually catch up with the host.

As one who has all of his eggs in extremely conservative baskets (Series I Savings Bonds are at the "risky" end of my portfolio), I am always struck by how these callers of very modest means live out their investment fantasies. They may only have $10K or $20K to their names, but it's all carefully allocated between gold, silver, Swiss francs, guns, 8 shares of this, 10 shares of that, some real estate scheme they heard about from a "really smart" friend, etc. They want to know if Dan thinks a stash of Singapore dollars would be a prudent addition to their portfolio.

Dan's principal objectives seem to be to (1) convince listeners to support his "ministry" by becoming "partners" for $85; (2) steer callers who have substantial sums toward charitable gift annuities with the American Family Foundation (his program is on American Family Radio); and (3) shill for the Timothy family of funds under the guise that they are "biblically responsible" (as though anything remotely connected with the American economy could qualify as biblically responsible).

 

[Alan]

But this question does highlight the importance of personal circumstances. My wife is a citizen of Belarus (as well as the U.S.), owns a home (in a high-rise) in Belarus, and has all her family in Belarus, where health care is 100% free if you go to government facilities and extremely cheap if you go to private facilities. If she wanted to return to Belarus, our savings and my life insurance would make her quite well-to-do by Belarusian standards, so the SS would be an issue only if I died first and she decided to remain in the U.S.

Even if she returned to Belarus after you die she is entitled to SS based on being your widow. The SS administration is very accustomed to paying out benefits to overseas recipients, directly into their overseas bank account if requested with an excellent exchange rate.

Just mentioned this as you might be thinking that she would lose that on returning home and may affect your calculations.

 

[mathjak107]

People who say it's a no-brainer to defer are wrong. It's actually a brainer.

Take a look at my spreadsheet. https://www.dropbox.com/s/gebanzrbr3g33qf/My SS breakeven calc.xls?dl=0 Plug in your own estimates and figures.

If you take SS at 66 FRA and invest/save that and earn 3% above inflation, the break-even age is 87.
17 years to break even. To me that's much too long to be attractive.

If you earn nothing above inflation, breakeven is 82, which is 12 years, and to me _still_ too long.

There is no clear-cut right answer, it's largely a matter of personal preference in how you'd like the shape of your income curve to be.
Of course, if you are selling annuities, your answer is going to be influenced by the commission you'll get.

comparing it at 62 to 70 the break even is 22-24 years by the time you count :

lost checks you didn't take

spending down invested assets to live on

no spousal adder of 4500.00 a year to my wifes early benefit since she does not get it until i file .

you are not held harmless against medicare increases .

22-24 years just to break even is a long time .

in fact you need to see 90 to even make enough of a difference to delay to 70 .

about the only good thing delaying is less dependency on markets , but then you shift to longevity risk instead .

 

[NW-Bound]

NWB, I'm not sure what your point is. I was responding to the OPs comment that his DW might wait until she is 70 to claim her benefits. There is no point to her waiting anything beyond her FRA... she gains nothing waiting from FRA to 70 and actually loses. See quotes below.

My apology. Now, I really missed the OP's statement regarding his wife waiting till 70.

It is true that her spousal benefit does not increase after her FRA. Hence, she will be forfeiting money by delaying.

I realize that she can't claim spousal benefits until the OP files now that file and suspend is done so I concede that my comment about her taking spousal anytime between 62 and FRA would be dependent on the OP starting benefits.

OK. We both take a point off for being partially wrong.

 

[pb4uski]

No points off... just no extra points.

 

[Runner]

Even if she returned to Belarus after you die she is entitled to SS based on being your widow. The SS administration is very accustomed to paying out benefits to overseas recipients, directly into their overseas bank account if requested with an excellent exchange rate.

Just mentioned this as you might be thinking that she would lose that on returning home and may affect your calculations.

Thanks, I did know that. But nothing is ever simple: Because Belarus is on the State Department's human rights hit list, SS checks cannot be deposited directly into Belarus bank accounts. You either have to have a bank account someplace like Poland or (so I was told by the officials a couple of years ago) you could possibly go to the U.S. Embassy in Minsk every month and physically pick up a check.

 

[Chuckanut]

Right, that is exactly what my quick calculation yielded - the break-even point was 82, which is Pretty Old even under the best of circumstances.

.

Im not sure that reading obituaries is a good way to measure expect life spans, but you can add my parents to the mix - One died just short of 90 the other at 92.

There are other factors that may come into play for you or not. For example, LTC. Many of us either can't get it, or don't like the current plans available. Holding off SS until 70 provides additional income in the event LTC is needed.

Despite what some may claim it is not a one-size-fits-all answer. Rather is a your-milage-may-vary answer depending upon many individual issues, some of which many of us have never even thought existed.

 

[Independent]

Right, that is exactly what my quick calculation yielded - the break-even point was 82, which is Pretty Old even under the best of circumstances.

I make a hobby of reading the local obituaries. Yes, some people do live to be 85 in some semblance of health. But I am always struck by how many people "left us suddenly and unexpectedly" at 48, 54, 65, 71 or 73. It's a sobering alternative to the actuarial tables. Which is why I lean toward the "take it at FRA and cheerfully blow it on annual vacations" philosophy. The notion that "by God I'm covered even if I live to be 92" just doesn't do much for me. Concerns about the welfare of my wife would be the only thing driving me in the other direction.

My observation is that most people who post here have enough savings that they aren't really afraid of running out of money before they die. For them, these discussions are about a few percent of their eventual estates. This might be the best approach http://www.early-retirement.org/for...uch-an-easy-question-79710-2.html#post1663091

( OTOH, most people seem to select pretty conservative withdrawal rates. Nobody says that "historical returns on US stocks have averaged CPI + 6%, therefore I'll start retirement with a 7% withdrawal rate". They seem to make conservative decisions based on "bad case" scenarios. )

If you have enough money to fund nice annual vacations if you take SS at 66, you almost certainly have enough money to fund nice annual vacations by deferring SS to age 70. Money is fungible.

In fact, people who like the 4% SWR can actually "prudently afford" to spend a little more in the early years if they defer SS.

 

[mathjak107]

Im not sure that reading obituaries is a good way to measure expect life spans, but you can add my parents to the mix - One died just short of 90 the other at 92.

There are other factors that may come into play for you or not. For example, LTC. Many of us either can't get it, or don't like the current plans available. Holding off SS until 70 provides additional income in the event LTC is needed.

Despite what some may claim it is not a one-size-fits-all answer. Rather is a your-milage-may-vary answer depending upon many individual issues, some of which many of us have never even thought existed.

unless the difference is at least 100k a year that larger ss check isn't a drip in the barrel when it comes to ltc in these parts .

 

[Senator]

unless the difference is at least 100k a year that larger ss check isn't a drip in the barrel when it comes to ltc in these parts .

Most patients do not require $100K a year.

I think you will find that LTC insurance policies are a smaller drip in the barrel. Many policies are only three years, and only cover up to $150 per day. That is $4,500 per month. If SS can cover $3,000 of that, you can self-insure for the remaining $1500 per month.

You were already going to self-insure for the amount over $150 a day, unless you buy a very expensive policy.

 

[mathjak107]

if the ltc policy is to small then you blew it by ahving it . it either covers the expense and keeps you off medicaid or it doesn't . it is useless in either case for doing so

 

[gerntz]

My plan is to wait until age 70. Here is why.

SS is actuarially neutral. When you are 66+, you are ahead of the odds. Your longevity is expected to beat the SS estimate.

Great point.

As of 2011, at age 66, USA male life expectancy is 17 years or age 83. If your wife is 62 at that point, her life expectancy is 23 years or to age 85. And if you're in good health & work at living longer - exercise of body & mind, healthy habits, they're higher still. It doesn't matter who else is dying, if you work to take care of your health you're likely to beat the averages. If you're a negative slug, yea, take SS early. My bet is those that take SS early died on average below the expectancy tables.

 

[youbet]

There are other factors that may come into play for you or not. For example, LTC. Many of us either can't get it, or don't like the current plans available. Holding off SS until 70 provides additional income in the event LTC is needed.

Of course, when LTC time arrived, if you had taken SS early you might have a nice pot of $250 to $300k or so (say 8 yrs of collecting $22k/yr + earnings) to apply towards LTC.

You can't have it both ways, unfortunately. Wait until 70 and have a significantly larger monthly check. Start at 62 and invest the money monthly into the S and P 500 and have $200k to $300k accumulated when you hit 70.

There are risks and pros/cons either way.