Why am I struggling? - Social Security Question

[RetiredHappy]

Quote:

Originally Posted by skyking1 that is not correct. In a nutshell, if your wife draws X amount and you wait till 70 and your benefit is 1.2X, the both of you now have 2.2X. If you pass first, she gets the larger of the two benefits as survivor, in this case 1.2X The key is you have to survive to that 70 number and start drawing for that to work exactly as planned.

ncbill was referring to spousal benefit, which is correct. You are thinking of survivor benefits, which is also correct.

[RetiredHappy]

Quote:

Originally Posted by Bamaman If someone's in good health and they can get by without having to start their Social Security, go for putting it off until later. The effective ROE by delaying the start is very good. If they have a non-working wife that is eligible for 50% their husband's Social Security, they might want to start drawing SS earlier.

If you meant draw earlier, as per before FRA, then the spousal amount is reduced. Spouse has to wait until FRA to get the full 50% spousal benefit (based on husband's FRA/PIA), assuming that the husband starts at FRA or after.

[skyking1]

Thanks RetiredHappy

[pb4uski]

Quote:

Originally Posted by Retiredmajor I'm soon to be 65 and will sign up for Medicare next month. I'm deciding when to take Social Security. I will either do it when I sign up for Medicare or wait until my FRA of 66 and 4 months. ...

An additional thought for you Major. You can also boil down the SS decision to effectively buying a COLA adjusted life annuity from the U.S. government.

Say that your PIA is $1,000/mo. Your age 70 benefit would be $1,293/mo so the difference would be $293/mo.

So if you wait until 70 you will forgo $44,000 (44 months at $1,000/mo) in exchange for receiving $293/mo for the rest of you life (and in some cases both your and your DW's life). That's an 8% payout rate.

The payout rate for a fixed (non-COLA) annuity for a 70yo male according to immediateannuities.com is 6.7%.... so that 8% payout rate, with a COLA is a screaming deal... and $44,000 isn't a huge investment given the benefits.

[Freedom56]

I have to start taking SS at 62 as my level income pension will be reduced by the amount of my SS at age 62. My break-even analysis clearly indicates taking SS at age 62 vs age 66 or later is a smart move. My pension covers all our expenses except for income tax on investment income from taxable accounts.

[Sunset]

Quote:

Originally Posted by Freedom56 I have to start taking SS at 62 as my level income pension will be reduced by the amount of my SS at age 62. My break-even analysis clearly indicates taking SS at age 62 vs age 66 or later is a smart move. My pension covers all our expenses except for income tax on investment income from taxable accounts.

You don't "have to" take SS at 62, just because your pension is reduced by what SS would pay at 62.

The two events are actually separate.
You could have your pension reduced at 62 , and wait until 70 to collect SS.

However, if your Pension is reduced by whatever SS will pay each year, then possibly it does not matter when you take SS. If the pension is much greater than whatever SS would be at any age.

[Sunset]

Quote:

Originally Posted by SnowballCamper IMHO the reason people struggle with this is because the actuaries over at social security have done a fine job of making the decision to take SS early or late irrelevant in the aggregate, meaning there isn't a sure fire way to game the system against SS for personal advantage. There are however personal (emotional) considerations such as what you think your life expectancy is, and how much need you have for current income. So, I don't think it's just math.

When the actuaries made the rules, it was years ago, and people do live longer on avg now, so the table is tilted a little in favor of waiting.

[pb4uski]

I was thinking the same thing.... the pension will reduce whether Freedome starts SS or not... that reduction is built in and is common to both alternative of take or not take so it isn't a relevant factor since it isn't a differential cash flow.

That said, Freedom is pretty savvy financially so if he says that his analysis favors taking at 62 vs 66 or later I suspect that he is correct.

[pb4uski]

Quote:

Originally Posted by Sunset When the actuaries made the rules, it was years ago, and people do live longer on avg now, so the table is tilted a little in favor of waiting.

+1, the discount or premia for taking early or deferring haven't changed for a long time... since the early 1980s I think, but meanwhile longevity has improved dramatically since the early 1980s with medical advances.

[cooch96]

Quote:

Originally Posted by frayne Flip a coin and go with it, not worth worrying over. And besides, do you really think you are going to live until you are 95 or 96 and if you do, I seriously doubt money will be your biggest concern.

+1. If neither option is wrong, then trust the coin to decide.

[MarieIG]

We will take DH SS at age 70 for longevity insurance, and a further (for the most part) reliable income stream.

Does OP have a pension stream which is supporting a couple which will disappear or be reduced upon his death?

With regard to managing a nest egg, one thing I don't see taken into consideration is the ability of both spouses to manage a nest egg. Now, some obviously have very financially savvy spouses, but I suspect that not all here do.

In addition, there have been studies (no I'm not going to look for them) that a percent of people loose the ability to manage their finances as they get older. SS at least, would be an income stream that is on autopilot.

[Sue J]

You say you are struggling with the options of taking it at 65 or at 66 and 4 months. That's only 16 months difference. You don't have to make the decision at 65. You could get to 65, start Medicare and pay for it outside of SS and see how you feel about it. Go a couple of months and at any time you can decide you are ready and start your SS benefit. Every month that you wait your benefit will increase a little. You can check this at your social security site. You may find that it increases enough to make you want to wait a while. Or maybe the increase just isn't worth it and you're ready to start. You can reevaluate every month or every quarter. You may get close enough to your FRA that you reset your goal.

If we only knew our end of life date we could all make better informed decisions about SS and maximize our benefits. I'm glad not to know my expected date of death, I can only hope I planned well enough.

[Exchme]

The tables are also tilted in favor of waiting for couples, since the chance that one out of two will live longer than average is greater than any one person beating the odds. So it often ends up that the one with the larger benefit should wait until 70 since that benefit will continue for the lifetime of the longer lived.

But varying the claim date by a year or so rarely makes a huge difference, if you explore the results at opensocialsecurity.com, you are often within a couple percent of the total lifetime maximum when small changes to claim dates are made.

[Exchme]

Quote:

Originally Posted by Freedom56 I have to start taking SS at 62 as my level income pension will be reduced by the amount of my SS at age 62. My break-even analysis clearly indicates taking SS at age 62 vs age 66 or later is a smart move. My pension covers all our expenses except for income tax on investment income from taxable accounts.

If your pension has a COLA and is from government or a rock solid company that will never give you a haircut on the benefits, then yes, taking SS early sounds better for you as at least 15% of SS is not subject to income tax.

[Time2]

I have run opensocialsecurity.org and it tells me to collect at 70 and my wife at 62. This is so she gets the higher check after I die.
But this leaves out the idea that we want to maximize Roth Conversions.
If we have to add in her SS, that will reduce the amount we can Roth Convert and stay in a lower ta bracket. So I question whether it might be better to delay her SS until 70 so we can keep maximizing Roth Conversions in a low tax bracket.
Someone needs to develop a calculator that will compare taking SS or not, taking vs delaying SS, Doing Roths in 12% and 22% brackets, Doing Roth Conversions or not and RMDs. And output taxable and non taxable networth.
Creating some way to get an answer.

[jollystomper]

After three years of retirement, I have a better handle on our retirement expenses. So I will more likely based when I take SS, in terms of the coverage it adds for our expenses.

I had to redo our expense projections because I realized that going into retirement the projections included a mortgage payment. I decided to pay off the mortgage last year but forgot to take it out of our expense projections until a couple of weeks ago, silly me .

Based on the monthly increase tables at ssa.gov, as it looks now:
- at my age 64 years 6 months, my SS + spousal SS + my pension will cover our projected expenses.
- At my age 69, my SS survivor benefit +my pension will cover the expenses of the surviving spouse.

So, currently, assuming I reach these ages, the earliest I would look to take SS would be at 64 years 6 months. But given our investments + cash, I will more likely delay to at least 69.

This increase the odds of most of the growth and earnings from investments, cash savings (HA!) and RMD after tax amounts to go towards inheritances to others or LTC self-insurance.

[Midpack]

When to take it is actuarially a wash for all beneficiaries collectively of course, so when each of us starts depends on:
- ability to wait, e.g. you have adequate other sources of income while waiting, and
- more importantly, what YOU think your likely longevity will be. Getting hit by a bus or whatever isn't likely, only a remote possibility.

We're both waiting until age 70 to start because well above average longevity (far past any SS breakeven) runs in both our families, so it's likely we'll do better $ benefits wise by waiting. If we were in poor health and/or poor longevity was likely for us, we'd definitely start SS earlier. No one can predict, you can only know your odds...

[W2R]

As everyone has been saying, when to take SS really depends on your circumstances and probably doesn't matter a whole lot in the end.

I took mine at age 70 for several reasons, some of which simply would not apply to most forum members:

1) I am female (and, although the average lifespan for females is longer than that for males, SS is computed the same for females as it is for males). So, there's a slight advantage to waiting, there.

2) I am single with no dependents so I don't have to be concerned with their nest egg size after I pass away.

3) I have genes for extreme longevity, with several ancestors that lived to be over 100. My mother lived to age 98. So, I need to make sure that I will have enough to support myself if I should live to be extremely old. It's not likely, since I am extremely obese and that's been a huge battle for me. But who knows and I know for sure that I don't want to be both old AND broke at the same time.

4) My SS would have been smaller than most, had I taken it at 62, because I did not have to contribute to SS for several years while I was on the faculty at LSU (and stupidly chose not to). I know, that's a rare situation but there are actually a few full time good paying jobs that don't require SS contributions. This was one of them, and I could put that money in my 401K instead, so I did. Bad decision but oh well.

5) Diversification of income sources: Taking it later means that a little more of my income after age 70 is coming from SS and a little less from my portfolio, than if I took it earlier. In my case this helps diversity my income sources so that if the market tanks completely (in an "end of the world as we know it" scenario), I can still survive on just SS. Or, if SS craters (equally unlikely!) I can still survive on just my portfolio.

[Gumby]

Quote:

Originally Posted by LRDave Gumby: There is a GPO timing question I don't think I understand and based on your response, you've must've already sussed the answer. When is the 2/3 government pension minus survivor benefit amount calculated? At the time of your passing? We are in a similar situation as yours, except DW's pension is humbler (retired with about 23 years service) and she is only 2 years younger. We both come from relatively hardy stock and longevity insurance is high on our priorities.

I suspect the application of the GPO to the survivor benefit is calculated when you die. However, I never bothered to dig deeper into it, and here's why:

My social security (which I started at 62) is currently $25,932. At FRA (66 years and 10 months), it would be $36,627. My wife's pension is currently $59,056. 2/3 of that is $39,567 which is greater than my FRA amount, so her survivor benefit would be completely wiped out even if I waited to FRA. And, importantly, her pension is COLA'd at the same rate as social security, so her pension amount relative to my FRA amount won't ever change.

[LRDave]

^^^ Thanks Gumby. You indeed have a lead-pipe cinch scenario. ^^^