SS break even formula?

[InParadise]

Hello, I am having difficulty figuring out the SS break even point. Can someone post the simple formula?

Example:
Say I would get $800 a month now.
If I wait 7 years I would get $1800 a month.
What would be the break even point or how many years would I break even.

Can you please show how you figured it too?

Thanks.

Are you married? Because that can make the scenarios much more complicated if you have to consider two SS payments and spousal benefits.

Our FP ran 5 different scenarios. The one we have decided on brings in the most money over our projected lifetimes, and has a wonderful insurance policy built in. DH's SS payout is way bigger than mine. He is 4 years older than I and more likely to die first. It is quite involved:

[FONT=&quot]Scenario Five[/FONT]

• [FONT=&quot]Wife files for retirement benefits to begin at age 62 + 1 month (first month she is age 62 for entire month) - $628 [/FONT]
• [FONT=&quot]Husband files a restricted application for "spouse only" benefits at age 66 + 10 months - $446 [/FONT]
• [FONT=&quot]Husband files for retirement benefits to begin at age 70 - $3,288 His "spouse only" benefit stops.[/FONT]
• [FONT=&quot]Wife files for additional spouse benefits to begin when her husband files for retirement benefits - $374[/FONT]
• [FONT=&quot]Wife's survivor benefit - $3,288 This benefit includes her [/FONT][FONT=&quot]retirement benefit and her spouse benefit stops.[/FONT]

Insurance: [FONT=&quot]Prior to age 70, the person can request all or some of the benefits previously suspended to be paid if they change their mind about delaying benefits. The request to receive benefits previously suspended must be made before benefits are started by Social Security automatically at age 70. The delayed retirement credits earned and the benefit amount would be adjusted downward if benefits previously suspended were paid. This would also reduce the survivor benefit payable to the spouse. The request to reinstate benefits must be made in the person's lifetime. Therefore, an unexpected death could result in the loss of benefits.
[/FONT]
[FONT=&quot]I thought the built in insurance kinda cool, a buffer if you will to insure that you won't be harmed by holding out for more at 70. If the person who suspended the benefit dies before you can reverse suspension, then you would go without those benefits they could have earned in their lifetime.
[/FONT]
[FONT=&quot]Spousal benefit does not get bigger by waiting til age 70...it is based on what the other spouse would have received at FRA.
[/FONT]

 

[Dave J]

Are you married? Because that can make the scenarios much more complicated if you have to consider two SS payments and spousal benefits.

Our FP ran 5 different scenarios. The one we have decided on brings in the most money over our projected lifetimes, and has a wonderful insurance policy built in. DH's SS payout is way bigger than mine. He is 4 years older than I and more likely to die first. It is quite involved:

[FONT=&quot]Scenario Five[/FONT]

• [FONT=&quot]Wife files for retirement benefits to begin at age 62 + 1 month (first month she is age 62 for entire month) - $628 [/FONT]
• [FONT=&quot]Husband files a restricted application for "spouse only" benefits at age 66 + 10 months - $446 [/FONT]
• [FONT=&quot]Husband files for retirement benefits to begin at age 70 - $3,288 His "spouse only" benefit stops.[/FONT]
• [FONT=&quot]Wife files for additional spouse benefits to begin when her husband files for retirement benefits - $374[/FONT]
• [FONT=&quot]Wife's survivor benefit - $3,288 This benefit includes her [/FONT][FONT=&quot]retirement benefit and her spouse benefit stops.[/FONT]

Insurance: [FONT=&quot]Prior to age 70, the person can request all or some of the benefits previously suspended to be paid if they change their mind about delaying benefits. The request to receive benefits previously suspended must be made before benefits are started by Social Security automatically at age 70. The delayed retirement credits earned and the benefit amount would be adjusted downward if benefits previously suspended were paid. This would also reduce the survivor benefit payable to the spouse. The request to reinstate benefits must be made in the person's lifetime. Therefore, an unexpected death could result in the loss of benefits.
[/FONT]
[FONT=&quot]I thought the built in insurance kinda cool, a buffer if you will to insure that you won't be harmed by holding out for more at 70. If the person who suspended the benefit dies before you can reverse suspension, then you would go without those benefits they could have earned in their lifetime.
[/FONT]
[FONT=&quot]Spousal benefit does not get bigger by waiting til age 70...it is based on what the other spouse would have received at FRA.
[/FONT]

Have you plugged your numbers into this calculator?
Social Security calculator: retirement planning for you and spouse.


I was going to do the exact as your plan 5 above until I crunched the numbers. It takes into consideration the time value of the money gained in the early(62) Social Security. It may not be as advantages to you due to your kinda low 62 number for yourself, but it sure made a difference in ours.

 

[InParadise]

Have you plugged your numbers into this calculator?
Social Security calculator: retirement planning for you and spouse.


I was going to do the exact as your plan 5 above until I crunched the numbers. It takes into consideration the time value of the money gained in the early(62) Social Security. It may not be as advantages to you due to your kinda low 62 number for yourself, but it sure made a difference in ours.

Thanks for the link. I've bookmarked it for future use.

One problem I see with the calculator is the seeming inability to change life expectancy. I certainly don't envision either of us living to 100, and suspect DH will live less long than I. This is one reason we are looking at maxing out survivor benefit for me.

I ran the calculator assuming 7% ROA. We have done substantially better than that, but since I was bumping it up from the assumed 4%, I was hesitant to bump it up further. This return would indicate it is better for DH to retire at 62 and me at FRA!

Will need to look also at DH's pensions. I know that one of them does back out from your pension what you collect in SS, which I guess would reinforce DH taking the lower SS at 62 since less would then be backed out while we kept our money making money.

Gotta love the internet! Thanks so much.

 

[InParadise]

Thanks for the link. I've bookmarked it for future use.

One problem I see with the calculator is the seeming inability to change life expectancy. I certainly don't envision either of us living to 100, and suspect DH will live less long than I. This is one reason we are looking at maxing out survivor benefit for me.

Actually the nifty side by side comparison chart shows year by year projections, but still not sure how my lower survivor benefit would impact things if DH dies well before me.

 

[Dave J]

Thanks for the link. I've bookmarked it for future use.

One problem I see with the calculator is the seeming inability to change life expectancy. I certainly don't envision either of us living to 100, and suspect DH will live less long than I. This is one reason we are looking at maxing out survivor benefit for me.

If you click on the links on the two you are comparing, It gives you a year by year value.(Accum. real cash flow) I picked these numbers from both scenarios, then found the difference at different ages of my untimely demise. I then compared what my SO would get as a survivor then manually calculated how long to break even and then go ahead. I compared 65,70,75,80,85. For us, the 62...62 one worked out best. until 84 to 87 years old for SO.
YMMV.

 

[ejman]

One feature I find interesting in all of the break even calculations I've seen is that the present payment schedule is assumed to last forever. This is a quote from the SS trustee reports for 2013:

"While the combined OASDI program fails the long-range test of close actuarial balance, it does satisfy the test for short-range (ten-year) financial adequacy. The Trustees project that the combined trust fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2027."

So if nothing changes, there will be a benefit reduction starting in 2028 which is 14 years from now. Sorry but I'd rather not burn up my assets expecting the large payoff at the end starting at age 70. Trustees Report Summary

Note that the shortage year has been creeping closer and closer. It used to be 2035, then 2033, now 2028.

 

[W2R]

One feature I find interesting in all of the break even calculations I've seen is that the present payment schedule is assumed to last forever. This is a quote from the SS trustee reports for 2013:

"While the combined OASDI program fails the long-range test of close actuarial balance, it does satisfy the test for short-range (ten-year) financial adequacy. The Trustees project that the combined trust fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2027."

So if nothing changes, there will be a benefit reduction starting in 2028 which is 14 years from now. Sorry but I'd rather not burn up my assets expecting the large payoff at the end starting at age 70. Trustees Report Summary

Note that the shortage year has been creeping closer and closer. It used to be 2035, then 2033, now 2028.

This worries me too. How are we supposed to know when to claim our benefits, when we don't have the information we need? Gee. Chances are pretty good that I will be alive and kicking long after 2028.

 

[JustCurious]

One feature I find interesting in all of the break even calculations I've seen is that the present payment schedule is assumed to last forever. This is a quote from the SS trustee reports for 2013:

"While the combined OASDI program fails the long-range test of close actuarial balance, it does satisfy the test for short-range (ten-year) financial adequacy. The Trustees project that the combined trust fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2027."

So if nothing changes, there will be a benefit reduction starting in 2028 which is 14 years from now. Sorry but I'd rather not burn up my assets expecting the large payoff at the end starting at age 70. Trustees Report Summary

Note that the shortage year has been creeping closer and closer. It used to be 2035, then 2033, now 2028.

Actually, the "shortage year" as you call it is still 2035 for retirement benefits, unchanged from last year. You are misinterpreting the report and taking that quote out of context. The language that you quoted does not say that the trust fund will be depleted in 2027, or that benefits will be reduced starting in 2028. Rather, the report says that using current intermediate assumptions, the combined OASDI social security trust funds will not be depleted until 2033. Also, if you break down OAS (old age survivor benefits) from DI (disability insurance benefits), you will see that the trust fund has enough to pay retirement benefits at current levels until 2035. See the following quote from the executive summary of the report...

"Long-Range Results

The Trustees project that annual OASDI cost will exceed non-interest income throughout the long-range period under the intermediate assumptions. The dollar level of the combined trust fund reserves declines beginning in 2021 until reserves are depleted in 2033. Considered separately, the DI Trust Fund reserves become depleted in 2016 and the OASI Trust Fund reserves become depleted in 2035. The projected reserve depletion years are unchanged from last year’s report."

OVERVIEW

So even based on current intermediate assumptions, with no changes in the law, retirement benefits (not disability benefits) will not be reduced until 2035, some 21 years from now.

 

[W2R]

So even based on current intermediate assumptions, with no changes in the law, retirement benefits (not disability benefits) will not be reduced until 2035, some 21 years from now.

Thanks. That's a lot better, for me anyway, because if I am still living in 2035 I will be 87 years old with not too many years left to fund.

 

[Dave J]

OVERVIEW

So even based on current intermediate assumptions, with no changes in the law, retirement benefits (not disability benefits) will not be reduced until 2035, some 21 years from now.

And if they keep spending like the last decade, all bets are off.

 

[ejman]

Actually, the "shortage year" as you call it is still 2035 for retirement benefits, unchanged from last year. You are misinterpreting the report and taking that quote out of context. First, the language that you quoted does not say that benefits will be reduced starting in 2028. Rather, the report says that using current intermediate assumptions, the combined OASDI social security trust funds will not be depleted until 2033. Also, if you break down OAS (old age survivor benefits) from DI (disability insurance benefits), you will see that the trust fund has enough to pay retirement benefits at current levels until 2035. See the following quote from the executive summary of the report...

"Long-Range Results

The Trustees project that annual OASDI cost will exceed non-interest income throughout the long-range period under the intermediate assumptions. The dollar level of the combined trust fund reserves declines beginning in 2021 until reserves are depleted in 2033. Considered separately, the DI Trust Fund reserves become depleted in 2016 and the OASI Trust Fund reserves become depleted in 2035. The projected reserve depletion years are unchanged from last year’s report."

OVERVIEW

So even based on current intermediate assumptions, with no changes in the law, retirement benefits (not disability benefits) will not be reduced until 2035, some 21 years from now.

Thank you. I feel much better now. I'm sure there will be no attempts at transfers in the clear cut easy to understand government accounting system between OAS and DI trust funds, that our elected officials will do the right thing and that the trustees projections will be spot on.

 

[34rlsa]

If the SSA invested the trust in an indexed 80/20 AA... wouldn't that provide an adequate ROI over the long term to successfully fund the account?

 

[JerryinPA]

For me, already retired and insurance from wife's former employer.
My figures are when to start SS, not weather to retire early or not.

Also, please clarify your quote. $400 month is not $9600, unless 400 EACH.

Sorry, you're right, you did ask re: when to start the SS... I just read my situation into yours... my mistake.

As to the health insurance quote, the agent said a range of $380 to $430 for each of us... so just rounding to $400 X 12 = 4800/year X 2 persons = $9600. This is a "stop" for me.

Kudo's on being able to retire my friend! I'll be along in a year or few...

Jerry.