when to collect ss for my wife???

[knucklehead 61]

this may be a bit different than most:
she is 61 & stopped working in 1999.
i am 44 & working (for a couple more years till fire).
my income is high. (well over 200k inc. all sources).
how do we determine if it is best to start collecting ss for her at 62 or not?
the ss pamphlet says $718 at 62, $952 at 66, or $1,256 at 70.
we do not need the cash, but would invest it so i can fire sooner.
(every little bit helps!)

 

[GregLee]

we do not need the cash, but would invest it so i can fire sooner.
(every little bit helps!)

You mean that if she collected SS starting at 62 rather than at 66 or 70, then you could retire earlier? I don't see why, but if that's really true, it seems a reason for her to start collecting SS early.

 

[clifp]

this may be a bit different than most:
she is 61 & stopped working in 1999.
i am 44 & working (for a couple more years till fire).
my income is high. (well over 200k inc. all sources).
how do we determine if it is best to start collecting ss for her at 62 or not?
the ss pamphlet says $718 at 62, $952 at 66, or $1,256 at 70.
we do not need the cash, but would invest it so i can fire sooner.
(every little bit helps!)

The general rule is that in the case of older, higher earning, man, with a younger wife the man should get collect SS as late as possible and the woman should file as early as possible. The wife gets the higher of her benefit or her dead husband after he dies. Plus she can get the higher of 1/2 of his benefit or hers benefit which ever is higher when she turns 62.

Your situation is quite a bit a different since your SS benefit will almost always be larger than hers at any age.

You'll be eligible for about 72% of her benefits starting at age 60 if she dies before you turn 60. Other than this benefit her SS payments have no impact on your SS benefits.

Therefore deciding when to take her social security should be based on her relative health, and your current and future tax liabilities.

My wild ass guess is assuming that you are going to be retiring in a a few years, you'd be better collecting her social security after you retire. Her check will increase and you'll save money on taxes.

 

[knucklehead 61]

You mean that if she collected SS starting at 62 rather than at 66 or 70, then you could retire earlier? I don't see why, but if that's really true, it seems a reason for her to start collecting SS early.

you don't see why? it's like this: take her monthly ss checks & invest them to continue to grow our nest egg. i am 67% of the way to my goals & every dollar invested brings me closer to reaching my goal.

 

[GregLee]

You mean that if she collected SS starting at 62 rather than at 66 or 70, then you could retire earlier? I don't see why, but if that's really true, it seems a reason for her to start collecting SS early.

you don't see why? it's like this: take her monthly ss checks & invest them to continue to grow our nest egg. i am 67% of the way to my goals & every dollar invested brings me closer to reaching my goal.

No, I still don't see why. The size of your nest egg is not what matters -- it's the size of your combined retirement income. If your nest egg is bigger, it will produce a larger retirement income, other things being equal. But here, other things are not equal. If she starts SS earlier and makes your nest egg larger, it's true that that will increase your nest egg, but the problem is that it might decrease your combined retirement income, because her SS payments will be less if she retires at 62 than if she retires later. You've got to compare the positive effect on your retirement income of her earlier retirement (which increases your nest egg) with the positive effect of her larger SS payments if she waits until later to start SS. It's complicated.

 

[clifp]

you don't see why? it's like this: take her monthly ss checks & invest them to continue to grow our nest egg. i am 67% of the way to my goals & every dollar invested brings me closer to reaching my goal.

Greg's point is a good one it isn't the nest egg it is the retirement income.

This might help to put some real numbers. Let's say your desired retirement is 80K, this would require saving of $2 million using the 4% SWR rule of thumb.

If she collection $718/month= $8616/year in income, meaning you only need 2,000,000 - ($8,616*25) = $1,784,600 to get 80K in retirement.
If she wait until 66. You'll need $2,000,000 - ($952/month*12 *25)= 1,714,400. The $70K difference in the size of the nest egg is important.

Of course if she starts collecting at 62 she collect $8616/year for four years, which you can use toward increasing your nest egg. However obviously there is no way that saving $8616 for 4 years is going to let you accumulate an extra $70K without some amazing luck in investing. So strictly from a longevity risk you are better off waiting.

Of course there is a chance that your wife may died at age 70 or even earlier so you would be better taking the money earlier, SS payments are designed to be actuarially even so on average you'll collect the same amount of money no matter when you first starting taking them. This is assuming all things are even.

However, all things aren't even. Right now with 200K+ income it looks like you are in the 33% marginal tax bracket or near the top of the 28% bracket. Add say 7% for state income and your near 40% marginal rate. After you retire the numbers will drop to probably 25% and couple of points less for state income. So roughly speaking you'll pay 10% less tax on her larger check if you wait to collect them when you are retired. You should run the number on your own, but I suspect you'll be better off waiting if you want to maximize your retirement income.

 

[OrcasIslandBound]

One possibility, that I haven't seen mentioned, is for the DW to take her own SS at 62, then switch to 1/2 of DH's SS when he retires. I suspect that 1/2 of DH's SS will be greater than the DWs SS at 62. This way, you all can have the best of both worlds.

 

[martyp]

My understanding is that if your health is relatively poor then you should take SS early. If you think you are going to live a relatively long time then take it later. You have to pick the age you are planning to live to and then do the financial calcs. You have to make some educated guesses about the future.

 

[gerntz]

One possibility, that I haven't seen mentioned, is for the DW to take her own SS at 62, then switch to 1/2 of DH's SS when he retires. I suspect that 1/2 of DH's SS will be greater than the DWs SS at 62. This way, you all can have the best of both worlds.

I think you overlooked the part where he is 17 years younger. She'd be 81-82 when he reaches full retirement age.

 

[gerntz]

I don't see how you beat the inflation-protected, guaranteed 8% return for each year she delays taking the SS benefit unless you think your tax bracket will be higher in nine years. Even then, how much higher?

 

[haha]

I don't see how you beat the inflation-protected, guaranteed 8% return for each year she delays taking the SS benefit unless you think your tax bracket will be higher in nine years. Even then, how much higher?

I sure agree with this. The only question mark is how much will they change SS as we go along.

I intended to wait until 70, then wanted to get the cash flow during the recent crash. I then took advantage of the former provision (not rescinded) to allow you to pay back and refile later.

It was an incredible hassle; SSA is apparently not a very flexible organization. But I am OK and will begin to receive my payments soon. As long as big negative changes are not made soon, I will be happy to have waited.

Ha

 

[OrcasIslandBound]

I think you overlooked the part where he is 17 years younger. She'd be 81-82 when he reaches full retirement age.

Please help me out here: the SS payments are intended to be kind of "revenue neutral" for the average person living to the average age before death. IE if you take SS at 62, you get more smaller payments that effectively add up to about the same amount as you would get if you take it later on at 67, for example.

However, if there is a possibility of getting a significantly greater benefit, even at an age of 81, then the math is still likely to work in favor of taking the smaller benefit right away at 62. This is because the wife could actually live much longer then 81, say 90 or more, and take advantage of the larger benefit at that time by going with 50% of her husbands full retirement benefit.

 

[clifp]

However, if there is a possibility of getting a significantly greater benefit, even at an age of 81, then the math is still likely to work in favor of taking the smaller benefit right away at 62. This is because the wife could actually live much longer then 81, say 90 or more, and take advantage of the larger benefit at that time by going with 50% of her husbands full retirement benefit.

If you do the math you'll see that break even is around 13-14 years (depending on your interest rate assumption.) If she lives to past 76 she will come out ahead waiting until age 66, the figure is 81 or 82 if she waits until age 70. If she is alive by the time the OP collects SS, the wife will be ahead the longer she waits to collects, because she will have won the actuarial lottery. Remember the longer you live the better off you are waiting to collect SS.

 

[chinaco]

You did not provide enough information.

Do you qualify for SS? Do you qualify to get a spousal benefit?

Do you have other pensions?

Assuming you have a portfolio... what is your planned WR%?

What is your planning horizon (for each of you)?

 

[gerntz]

Please help me out here: the SS payments are intended to be kind of "revenue neutral" for the average person living to the average age before death. IE if you take SS at 62, you get more smaller payments that effectively add up to about the same amount as you would get if you take it later on at 67, for example.

However, if there is a possibility of getting a significantly greater benefit, even at an age of 81, then the math is still likely to work in favor of taking the smaller benefit right away at 62. This is because the wife could actually live much longer then 81, say 90 or more, and take advantage of the larger benefit at that time by going with 50% of her husbands full retirement benefit.

I was thinking that trying to project how the world is going to be 22 years from now - DW can't take 1/2 of DH's SS till DH is full reire age of 66 in 22 years (And maybe it's 67 or older for DH by then.) - is not very relevant to what DW does today; i.e., take SS at 62, 66, or 70, and with DW being 83+ (oops, not 81.) when this happens, how many years is the average woman or even a relatively long-lived woman, going to still collect after that? Net, in her case I wouldn't consider what her 1/2 spousal benefit might be after that.

 

[knucklehead 61]

You did not provide enough information.

Do you qualify for SS? Do you qualify to get a spousal benefit?

Do you have other pensions?

Assuming you have a portfolio... what is your planned WR%?

What is your planning horizon (for each of you)?

yes, i will qualify for ss. not sure about spousal benefit though.
no other pension, but have around 900k in my 401k & ira as of today.
(plus another 400k or so in my various taxable accounts, plus 850k or so in various real estate equity)
i plan around 5% wr.
there should be two future inheritances someday. possibly 3m or so combined.
her parents both died in their late 80s. mine are sill alive & fine. my grandparents all died between 86 & 97 years of age.