Suze Orman SS payments advice

[pb4uski]

It is true that most people claim at 62 or as soon as they stop working because they don't have any other choice.

 

[finnski1]

Well, while it varies based on your year of birth because of the transition of the FRA from age 65 to age 67... for someone whose full retirement age (FRA) is 66 you get 75% of what you would get at your FRA at age 62 and 132% of what you would get at your FRA at age 70 (4 years deferred * 8% a year simple).

So for the first one (x-62)*75 = (x-70)*132.... then 75x - 4,650 = 132x - 9,240... then 4,590 = 57x... then x= 80.52. Proof = (80.52-62)*75 = 1,389 = (80.52-70)*132.

For the second one (x-62)*75 = (x-66)*100.... then 75x - 4,650 = 100x - 6,600... then 1,950 = 25x... then x= 78... 78-66=12 years (not 8 years). Proof = (78-62)*75 = 1,200 = (78-66)*100.

Thank you for finally showing people that it is simple algebra.
I have been telling people this for years and they look at me like I have 2 heads.


This is straight forward from 8th grade. I know people start throwing in all kinds of scenarios of taking it early and getting 'x ' return etc.and therefore show an even longer break even age but my feeling is to do a true comparison you have to keep it as nominal numbers without any what ifs throw in.


I am enclosing a spread sheet I made years ago allowing one to put in thier FRA amounts based on year born and then it spits out breakeven points for a bunch of age scenarios.


hope somebody finds it as useful as I have and lets me know if there any errors

 

[Perryinva]

I still don’t get why anyone cares about the breakeven point. If you want some longevity insurance and a larger amount left to a remaining spouse and can afford to, you delay. If you need the money or just want it now, you don’t.

I agree, the paper referenced by clobber is junk, regardless of which way you want to go. If I knew I could have a fixed account that earned 5% forever, then I would agree and file at 63 (my earliest). But it doesn’t exist, and when my mental state would most likely be the worst, having even more of my money invested vs a COLA annuity as cheap as SS is too risky. Income is the name of the game for many, not bottom line balance. Leaving more to my heirs is absolutely the last thing I would ever consider. You can tell the author is young, when he thinks 70 is old. Wait until you are 65, and see how old 70 feels.

 

[finnski1]

I read an article from Suze Orman who says: "That when you start taking SS at age 70, when you hit your early 80s your total payments will be more than if you started getting a lower benefit at age 62"


I had also heard elsewhere as an example, that if you start taking benefits at age 67, it will take you 8 years to make up for what you missed if you had started to take benefits at age 62.


Unless I am missing something, these seem to contradict each other? Perhaps her statement is misleading or I am misreading it?



Of course we do not know how long we will live and there are other variables, but I thought that generally the idea was that the intent to get about the same amount of benefits no matter when you start taking SS.


Thanks, just thought I would get some additional input.

well I guess 80.5 is early 80's
also it is not " about " 8 years from 67 vs 62 but is actually about 11.5 years depending on your birth year.
Also you are stating one example of 70 vs 62 and another of 67 vs 62 so of course one is a little longer break even.

 

[pb4uski]

I still don’t get why anyone cares about the breakeven point. If you want some longevity insurance and a larger amount left to a remaining spouse and can afford to, you delay. If you need the money or just want it now, you don’t.

I agree, the paper referenced by clobber is junk, regardless of which way you want to go.

+1 I look at deferring to age 70 as a decision to buy a COLA-adjusted annuity benefit. I forgo $75/month beginning at age 62 for 8 years... so I forgo $7,200 ($75/mo * 12 * (70-62) years).

Then beginning at age 70 I receive $57/month (extra) for life, COLA adjusted. That is a 9.5% payout rate. ($57 * 12 months)/$7,200 paid for life annuity. Pretty sweet deal.

 

[RunningBum]

Which is not what you said. He made no statement on the "number of payments."

Like I said, this post would be unpopular in this community.

And for that reason, I'm out.

It was a stupid straw man argument. Make an absurd statement and then strike it down as proof of his point.

 

[SnowballCamper]

I'm curious what article RunningBum or pb4uski would suggest for someone to read about the SS decision (when to claim benefits?).

 

[RunningBum]

I don't have an article to suggest. I've given my opinion on this topic enough times to not repeat it again.

 

[Clone]

I still don’t get why anyone cares about the breakeven point. If you want some longevity insurance and a larger amount left to a remaining spouse and can afford to, you delay. If you need the money or just want it now, you don’t.

This it in a nutshell. If you decide to delay, and then something changes, you can always start claiming. I am doing a bunch of roth conversions before age 70, and not having the SS income leaves more headroom. I view the 'breakeven' discussion with a view that if either one of us lives past 82, then we made the best decision (I am not sure if that is really correct, but it seems like it to me.) But I am not so concerned about breakeven, but more for having a larger amount having COLA protection plus having more room for roth conversions.

There are very few truly wrong decisions to be made here, which is why it always stirs up such a fuss when someone argues that their approach is the definitive correct way for everyone to do it.

Sayre's Law- "In any dispute the intensity of feeling is inversely proportional to the value of the issues at stake." By way of corollary, it adds: "That is why academic politics are so bitter." Also stated- "Academic politics is the most vicious and bitter form of politics, because the stakes are so low."

 

[Ready]

Nothing gets people fired up in this forum more than a new thread with Suze Orman’s name in the title!

Anyhoo...The payment options for SS are supposed to be neutral from an actuarial point of view. The problem with this is that we don’t all live to the exact age of our country’s life expectancy. We have to make an assumption based on our current health and family history on how long we will live.

The longer we are likely to live the better off the waiting until 70 option becomes. The majority of people do take SS at 62. But I remember reading an article somewhere that did a look back of a large set of data points of people who died and determined that the majority of them in retrospect would have earned more money by waiting until 70.

 

[Clone]

The longer we are likely to live the better off the waiting until 70 option becomes. The majority of people do take SS at 62. But I remember reading an article somewhere that did a look back of a large set of data points of people who died and determined that the majority of them in retrospect would have earned more money by waiting until 70.

DW's parents took SS at 62, and then groused about it for the rest of their lives. "I never should have let ____ talk me into drawing SS early, it would have been so much more if I had waited!" The reality was- you were broke, and sinking fast. You could not afford to wait. But I didn't tell them that. They both had major health issues, and did not live into their 80s. So, in hind sight, it was the correct decision from a total payments point of view. But the economic realities had already made the decision for them.

 

[ivinsfan]

I have no comment except that to see a thread with both Suze and SS is like winning the lottery in COVID times....I long for more "normal" threads...

 

[Time2]

If you take SS at 62 and invest it, you will most likely owe taxes, reducing the amount you can invest, and then you need to beat the yearly increase you would have got, if you had waited. 7%/8%

Also, I'm waiting until 70, because my bride is about 5 years younger, and

I want that that larger benefit for her if I die before her.

Clobber left because someone disagreed with him, hmm.

 

[CRLLS]

....
Anyhoo...The payment options for SS [-]are[/-] were supposed to be neutral from an actuarial point of view. The problem with this is that we don’t all live to the exact age of our country’s life expectancy. We have to make an assumption based on our current health and family history on how long we will live.
.....

In addition, life expectancy has increased since those numbers were determined. The chances of living past the breakeven point are greater than they were when the numbers were last adjusted. Just thought I'd add another point in favor of delaying.

 

[CardsFan]

I have no comment except that to see a thread with both Suze and SS is like winning the lottery in COVID times....I long for more "normal" threads...

+1

At least here we can argue about the "normal" stuff

BTW, I liked Suze in the early years, now, not so much. Maybe I have learned more over the years than I knew back then?

 

[SnowballCamper]

In addition, life expectancy has increased since those numbers were determined. The chances of living past the breakeven point are greater than they were when the numbers were last adjusted. Just thought I'd add another point in favor of delaying.

I think this is why the break even point matters for one who doesn’t need the $ at early retirement age, but wants to make an informed decision based on their personal life expectancy.

 

[Perryinva]

I think this is why the break even point matters for one who doesn’t need the $ at early retirement age, but wants to make an informed decision based on their personal life expectancy.

I have to partially take back whatI said. I remember now that someone pointed out to me that there are plenty of people that regard the bottom line balance as more important than income, as they have so much income that the only real objective is to maximize the estate for future generations. Something like that would never be on my mind.

Also, as far as actuarially speaking, it is important to consider that the healthy, fit, non smoking, minor drinking, no hereditary issues, heart disease, cancer, etc person is lumped together with the exact opposite, of which there are way more unhealthy seniors in the US that healthy ones, ie another reason the numbers living past 85 is less in the US as a percentage compared to may other countries. I like those odds for me, personally.

If I really felt my health & family history made little the chances of living to 82, I would file early too.

 

[Markola]

Clobber left because someone disagreed with him, hmm.

Ha. One can just choose to read other strings but some are all “I’m taking my talents to Miami!” Funny.

 

[pb4uski]

I'm curious what article RunningBum or pb4uski would suggest for someone to read about the SS decision (when to claim benefits?).

I think that opensocialsecurity.com is the best tool available that I know of.

What it does is to calculate the expected present value for all possible claiming periods. The expected present value considers the benefit for each claiming strategy, the probability that you will be alive to receive the benefit based on one of six different mortality tables that you can select from and discounts that expected benefit for the time value of money using a real discount rate that the tool provides but that the user can override. The tool then tells you the claiming strategy with the highest expected present value and you can calculate the expected present value of alternative claiming strategies that you provide.

I ran it for a number of scenarios for DW and I (both as early as possible, both at 65, both at FRA and her at FRA and me at 70) both with a haircut in 2034 and without, and the EPVs were not all that different so in our case it isn't a critical decision.

	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%

The creator also has written a book, Social Security Made Simple, which I have read a few years ago, whihc is very good.

 

[RobbieB]

Mother non smoker and non drinker, lived to 87

Father smoked and drank every day, lived to 92

I'm thinkin' me at 90.

 

[ncbill]

Assuming they don't increase FRA, we'll be taking it at full retirement age (67) for both of us...one on their own record plus 50% spouse.

Using various calculators for our specific situation shows there's no point in waiting until age 70, as that adds a trivial amount over our expected lifetimes.

 

[Rianne]

I think the best way to assess your returns is to compare them to a similiar portfolio using Portfolio Visualizer. But the comparisons are only relevant if you have everything at Vanguard and everything is being included in the numbers that you posted above. Such a comparison wouldn't work for me because I have fair and increasing amounts outside of Vanguard.

50/50 Vanguard Total Stock/Total Bond Inv

10 years... Apr 2010 - Mar 2020.... +7.18%
5 years..... Apr 2015 - Mar 2020.... +4.79%
3 years..... Apr 2017 - Mar 2020.... +4.82%
1 year....... Apr 2019 - Mar 2020.... +0.36%

https://www.portfoliovisualizer.com...location1_1=50&symbol2=VBMFX&allocation2_1=50

Probably because of International funds and a few other under performing choices. I'll plug in all our funds, thanks.

 

[pb4uski]

Yes, international would drag it down. What you might do is to plug in yout target AA in Portfolio Visualizer and use the returns from your target AA as a benchmark for comparison with your actual returns.

 

[ShokWaveRider]

One reason NOT to is if it pushes MAGI to high for ACA Subsidies.

 

[ivinsfan]

One reason NOT to is if it pushes MAGI to high for ACA Subsidies.

That issue isn't sexy enough for Suze....