Suze Orman SS payments advice

[Perryinva]

There is another small little often unrealized twist to the arcane way SS figures everything. It is published that all projections are always in todays dollars and ignore any predicted inflation. Unfortunately, few people realize that while your actual bend points for calculating your benefit are fixed at 62, with the PIA at your FRA used as the base for calculating your benefit, the PIA number changes every year after the new year, just on COLAs. While it should be a wash, it isn’t if there is a spousal benefit based on that PIA. Once you file, the 50% of PIA used for the base to calculate the spousal is fixed at that dollar amount. The COLA increases only affect your own benefit. So with a larger PIA, your spouse could end up qualifying for spousal or get a larger spousal than planned.

It’s not a lot if course, but in our case, if I file at 63, DW gets no spousal adder, as her own PIA based on her benefit, was barely larger than mine would be. By delaying to 70, assuming 2% COLA, when I file she would get about a $70/M adder. Even with no COLA the whole time, she still comes out getting something.

[SnowballCamper]

Quote:

Originally Posted by jazz4cash ... That corny attempt to be witty obscures the author's point that filing early and investing the payments beats waiting to file even with the 8% increase in payments from FRA to age 70. I'd like to hear some informed opinions from the forum on any holes in that specific point. Eventually I'll take a deep dive into the author's math but for now it is pulling on me to file 30 months ahead of FRA.

Thanks for getting back to the meat. As RunningBum pointed out, there is the market risk for whatever investment you use to try to try to beat the higher SS payments later on. But most of us are not 100% cash and bonds, so we're comfortable with that risk.

I think there is also the solvency risk, but this is rather low.

I think using a break even analysis puts the decision in much more realistic, commonly understood terms. Using future value analysis with a discount rate and so on, while good for actuarial types with that acumen, isn't helpful much for me. I can look at my and my family's health and longevity and make a decision based on how long I think I'll live much easier than evaluating the difference between $420,000 starting at 66 vs $506,000 starting at 70 (provided I live to 100, which has its own uncertainty).

I think it comes down to where do you want to put your risk?

Take SS early. Spend it as it comes in. Probably have higher risk that living expenses exceed SS+other income (now or later in life). This gives you lower risk of leaving money on the table if you're more likely to die at a younger age than average.

Delay SS. Spend it as it comes in. Lower risk that living expenses exceed SS+other income because you have the funds that enable you to delay receipt. There is higher risk of leaving money on the SS table because people are more likely to die when they are older. Potential to receive more later in life without market/investment risk. Don't have access to any SS funds until claim is made (presumably at FRA).

Take SS early. Invest it as it comes in. Trade the risk of leaving money on SS table for market risk. This has the advantage (according to clobber's linked article) of greater upside, but also access to SS funds earlier (depending on the investment tool) in the event of an unforeseen circumstance. Of course this access is subject to investment losses, but not having taken SS early would give you zero access.

So that's how I see the options... I'm still a couple decades from this decision, so maybe there is universal basic income by then

[RunningBum]

Quote:

Originally Posted by SnowballCamper Delay SS. Spend it as it comes in. Lower risk that living expenses exceed SS+other income because you have the funds that enable you to delay receipt. There is higher risk of leaving money on the SS table because people are more likely to die when they are older. Potential to receive more later in life without market/investment risk. Don't have access to any SS funds until claim is made (presumably at FRA).

Let's be clear about this: if you die, it's not your money that's left on the table, because you are dead. Your heirs get less if you die before the breakeven. At least in my own case I figure if I die before the breakeven, I'll have more of my personal investment assets to leave my heirs, so I don't consider it a problem. Certainly I could've left more by correctly guessing I'd die early, but as of now I have no idea.

[Perryinva]

The thing that bothered me most about the article is the glib way that “of course I can make more money by investing my early SS”, essentially equalizing the risk vs the annuity. The discussion is purely academic while SS is far off “decades!!?!” @snoballcampers analysis is as good as any. No mention of spousal benefits or death benefits (maybe not married yet) or room for Roth conversions, etc. Like saying “when I have $10M, in 20years I’ll be married to Y & buying X”. Fun to discuss, but useless this far in advance, when the entire SS system may be different by then. Less useless for those of us that are either at SS doorstep or already there in our mid 60’s. No doubt there is less incentive to delay when single, especially if unhealthy. While in accumulation phase of life, the bottom line makes more sense. When fully retired, the income sources become more important.

Anyone that started collecting later is usually quite pleased they did, especially these past 2 months, with less dependency on their portfolio for income. When talking a $25k/yr ish DIFFERENCE at age 75, (About that for just me, 2 earners could double that) that sounds pretty nice right about now. Especially since the cost to do so is relatively low, and long forgotten by then.

[levindb]

A few folks have already mentioned this, but it bears repeating. The date you select may not just impact you...you need to consider your spouse and heirs.

Rather than just calculate a BREAKEVEN point based in the amount YOU receive from SSA, make sure you include your spouse benefits as well. Then, I would recommend you also include you savings/retirement account balances as well. You can then calculate which age would benefit you most...and where the crossover points would be.

When I did this, I found that my expected Return On Investments (ROI) had a significant impact on when to take SSA benefit. With higher ROI (i.e., 8% or more), it made more sense to take the benefit early because you may never reach a breakeven/crossover point. With lower ROI (about 3%), then taking SSA benefit later made sense. With the middle range of ROI, it is unclear which is the best time to take the benefit, and it really did not matter than much when you take your benefit...which many of you have suggested.

With these learnings in mind, remember that as you age, you may change your asset allocation and therefore reduce your expected ROI because you want to take on less risk...which makes the whole decision even more complicated.

So there you have it...I have just suggested you think more broadly when making the SSA decision, with no suggestion on when you should actually take it.

[pb4uski]

opensocialsecurity.com Advanced Options allows you to input an ROI of your choosing to include the time value of money (but it should be a real ROI and not nominal ROI... so your 8% less inflation).

It also includes inputs for mortality that most people don't factor in as well as spousal benefits.

It also allows one to look at alternative claiming strategies in addition to their optimal claiming strategy. For us, the EPVs don't vary much. We're deferring in part so we can do more low tax-cost roth conversions.... IOW, the tax benefit of low tax-cost Roth conversions exceeds the minor difference in EPVs.

	No haircut	Haircut
Optimal solution	100.0%	100.0%
Both now	97.8%	98.9%
Both 65	99.0%	99.7%
Both at FRA	99.2%	99.2%
Me 70/DW FRA	98.7%	96.3%

[Perryinva]

Interesting. Both at FRA was the best with no haircut. Unfortunately DW already filed @62 and has been collecting for 5+ years.

[Montecfo]

Quote:

Originally Posted by Perryinva Anyone that started collecting later is usually quite pleased they did, especially these past 2 months, with less dependency on their portfolio for income. When talking a $25k/yr ish DIFFERENCE at age 75, (About that for just me, 2 earners could double that) that sounds pretty nice right about now. Especially since the cost to do so is relatively low, and long forgotten by then.

But then the dead seldom complain...

[pb4uski]

Quote:

Originally Posted by Montecfo But then the dead seldom complain...

I suspect that DW will be the exception.

[Rianne]

Quote:

Originally Posted by pb4uski opensocialsecurity.com Advanced Options allows you to input an ROI of your choosing to include the time value of money (but it should be a real ROI and not nominal ROI... so your 8% less inflation). It also includes inputs for mortality that most people don't factor in as well as spousal benefits. It also allows one to look at alternative claiming strategies in addition to their optimal claiming strategy. For us, the EPVs don't vary much. We're deferring in part so we can do more low tax-cost roth conversions.... IOW, the tax benefit of low tax-cost Roth conversions exceeds the minor difference in EPVs. No haircut Haircut Optimal solution 100.0% 100.0% Both now 97.8% 98.9% Both 65 99.0% 99.7% Both at FRA 99.2% 99.2% Me 70/DW FRA 98.7% 96.3%

Great website. I look at survivorship benefits. This gives a clear cut no question evaluation of SS benefits. It's easy to adjust and re calculate many different scenarios.
I must say, a Suzy Orman SS thread with 7 pages of response makes me smile. We are obsessed with SS.

[Caskem]

My FA solved it for me. Are you taking investment funds for living expenses at age 62? If not, wait. If you are, you should take SS so you aren't using investment funds that grow instead of SS funds that are static. Investment funds are also inheritable, when SS funds stop or only go to a spouse upon death. Simplified, but enough to get me to start SS. And we haven't dipped into the investments funds so far this year.

[Montecfo]

Quote:

Originally Posted by Caskem My FA solved it for me. Are you taking investment funds for living expenses at age 62? If not, wait. If you are, you should take SS so you aren't using investment funds that grow instead of SS funds that are static. Investment funds are also inheritable, when SS funds stop or only go to a spouse upon death. Simplified, but enough to get me to start SS. And we haven't dipped into the investments funds so far this year.

Interesting. Is this a fee only FA?

Maximizing investment funds, at least in the shorter term, is a clear benefit it taking early

[jimbee]

Quote:

Originally Posted by Caskem My FA solved it for me. Are you taking investment funds for living expenses at age 62? If not, wait. If you are, you should take SS so you aren't using investment funds that grow instead of SS funds that are static. Investment funds are also inheritable, when SS funds stop or only go to a spouse upon death. Simplified, but enough to get me to start SS. And we haven't dipped into the investments funds so far this year.

If the financial advisor is paid a percentage of assets under management, taking social security early also benefits the financial advisor.

[pb4uski]

Quote:

Originally Posted by Montecfo Interesting. Is this a fee only FA? Maximizing investment funds, at least in the shorter term, is a clear benefit it taking early

and since most FAs are based on AUM, clearly a benefit to the FA and self-serving advice.

[CRLLS]

Quote:

Originally Posted by Caskem My FA solved it for me. Are you taking investment funds for living expenses at age 62? If not, wait. If you are, you should take SS so you aren't using investment funds that grow instead of SS funds that are static. Investment funds are also inheritable, when SS funds stop or only go to a spouse upon death. Simplified, but enough to get me to start SS. And we haven't dipped into the investments funds so far this year.

Could it really come down to being that simple? I'm pretty sure it isn't. But if that is what makes you sleep well, it works for you. And that is worth something.

[Lawrencewendall]

Quote:

Originally Posted by Caskem My FA solved it for me. Are you taking investment funds for living expenses at age 62? If not, wait. If you are, you should take SS so you aren't using investment funds that grow instead of SS funds that are static. Investment funds are also inheritable, when SS funds stop or only go to a spouse upon death. Simplified, but enough to get me to start SS. And we haven't dipped into the investments funds so far this year.

That's not entirely accurate. Delaying SS does produce more income (5%, 6.23% and 8%) but for me, it does not compare to my investment returns.
https://www.ssa.gov/OACT/ProgData/ar_drc.html

[RunningBum]

Quote:

Originally Posted by CRLLS Could it really come down to being that simple? I'm pretty sure it isn't. But if that is what makes you sleep well, it works for you. And that is worth something.

It will not even be a factor for me, much less the only criteria.

[Montecfo]

Quote:

Originally Posted by RunningBum It will not even be a factor for me, much less the only criteria.

OCD: criterion.

[Perryinva]

Seriously. So according to that FA, the only time worth delaying SS is if you are still working? Or have a very large pension? And that didn’t throw up any red flags? Doesn’t mean it’s still not the best answer for you, of course.

[RunningBum]

Quote:

Originally Posted by RunningBum It will not even be a factor for me, much less the only criteria.

OK, criterion.

I suppose this isn't completely true. If my only other option for living money would be to sell very highly appreciated shares out of my taxable account, I would give a lot of thought to taking SS instead. But I'm nowhere near that case. I've got plenty in my tIRA, Roth, and taxable (without CGs) to easily get me to 70, if I decide to delay that long.